Muirfield International Group Pty Ltd and Australian Trade Commission
[2002] AATA 506
•25 June 2002
CATCHWORDS – EXPORT MARKET DEVELOPMENT GRANT – expenses incurred by company to which a receiver subsequently appointed – which part of its business in respect of which the expenses were incurred was transferred to second company prior to receivership – whether discretion to refuse payment should be exercised under s. 96 – decision set aside and remitted.
Export Market Development Grants Act 1997 ss. 2, 3, 4, 6, 7, 15, 16, 18, 19, 20, 21, 22, 25, 28, 29, 33, 37, 80, 87, 93, 94, 96 and 107
Corporations Law s. 427
Export Market Development Grants Legislation Amendment Act 1999
Export Market Developments Grants Amendment Act 2001
Export Market Development Grants Act 1974 s. 38
Export Market Development Grants Amendment Act 1997 s. 20
Income Tax Assessment Act 1936 s. 80B
Freedom of Information Act 1982 s. 3
Export Expansion Grants Act 1978
Federal Commissioner of Taxation v Students World (Aust) Pty Ltd (1977-78) 138 CLR 251
Minister For Urban Affairs & Planning v Rosemount Estates P/L & Ors (40127/96; LE40140/95 14 August 1996)
News Corporation Ltd v National Companies and Securities Commission (1984) 52 ALR 277
Searle Australia Pty Ltd v Public Interest Advocacy Centre and Another (1992) 108 ALR 163
Export Development Grants Board v Michell Carbonised Wool Exports Pty Ltd and Others (1985) 59 ALR 729
Australian Trade Commission v Zaknich (1992) 110 ALR 667
Piccolo and McVeigh [2001] AATA 623
Piccolo v McVeigh [2002] FCA 323
DECISION AND REASONS FOR DECISION [2002] AATA 506
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2001/844
GENERAL ADMINISTRATIVE DIVISION )
ReMUIRFIELD INTERNATIONAL GROUP PTY LTD
Applicant
AndAUSTRALIAN TRADE COMMISSION
Respondent
DECISION
Tribunal: Miss S A Forgie (Deputy President)
Mr P J Lindsay (Senior Member)
Date: 25 June, 2002
Place: Melbourne
Decision:The Tribunal:
1.sets aside the decision of the respondent dated 1 February, 2001;
2.substitutes a decision that the respondent must comply with s. 94(3) of the Export Market Development Grants Act 1997; and
3.remits the application to the respondent with a direction that it not make any adjustment pursuant to s. 96 of the Export Market Development Grants Act 1997 to the amount otherwise payable to the applicant under the Act.
S A FORGIE
Deputy President
REASONS FOR DECISION
On 10 July, 2001, the applicant, Muirfield International Group Pty Ltd ("Muirfield International"), applied for review of a decision of an authorised officer of the respondent, the Australian Trade Commission ("Austrade") dated 1 February, 2001. That decision, which had been confirmed by a further decision of a Review Officer dated 8 June, 2001, was to disallow Muirfield's application for a grant for the 1999/2000 grant year.
At the hearing, Muirfield International was represented by Mr Black of counsel and the Commission by Mr Moshinsky. The documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 ("T documents") were admitted in evidence together with a summary of evidence of Mr Muir. Oral evidence was given by Mr Muir.
THE ISSUE
There are two issues in this case. The first is whether part of the business previously operated by Muirfield Agrochemicals Pty Ltd ("Muirfield Agrochemicals") was transferred to Muirfield International within the meaning of s. 94 of the Export Market Development Grants Act 1997 ("the Act"). The second is whether an adjustment should be made pursuant to s. 96 to the amount of grant that would otherwise have been payable to Muirfield International.
BACKGROUND
History of the development of the Muirfield group of companies
The Muirfield group of companies grew from the efforts of one man; Mr Muir. Those efforts were directed to a diverse range of activities including pest spraying, commercial landscaping and golf course construction and maintenance. The Muirfield group of companies reflected that diverse range. They operated as a collection of family discretionary trusts which were not formally linked with each other. There was an informal link in that each company was a beneficiary of the trust conducted by each of the other companies. All commercial transactions effected by each of the companies in conducting its business were processed through the bank accounts of Muirfield Agrochemicals even though they might subsequently be allocated to one of the other companies in the Muirfield group on the basis that it was responsible for the relevant project.
Muirfield Agrochemicals was first registered as a company under a different name but was registered as Muirfield Agrochemicals on 16 August, 1985. Its director is Mr Bruce John Muir and he has held that position since 29 May, 1985. Two shares have been issued in the company and one is held by Mr Ronald John Mellody and the other by Mr Colvin Miles Tempest (T documents, pages 14-20). On the basis of the evidence of Mr Muir, we find that Muirfield Agrochemicals undertook work overseas including work on a golf course and had ongoing contracts.
Prior to August, 1999, none of the Muirfield group was involved in export. In that month, VECCI (Victorian Employers Chamber of Commerce & Industry) and Business Victoria approached the group and suggested that it might wish to attend a landscape and grass expo in Beijing in October, 1999. Following the expo, the Muirfield group became interested in the potential export market for Australian agricultural and environmental products. By the middle of 2000, it had made several trips to China to follow up trade opportunities. It had planted over 2,000 Australian native trees in four sites in China to demonstrate their suitability for the conditions and for revegetation and environmental regeneration. Letters of intent had been signed between representatives of the Muirfield group of companies and Chinese interests that, provided the trees could survive, the parties would enter joint ventures for substantial revegetation work throughout China's western regions.
The proposed joint venture would require significant capital expenditure by the Muirfield group of companies and it was proposed that this be raised by listing them on the Australian Stock Exchange. In view of that, the loose connections between the companies and the family trusts were no longer appropriate and steps were taken to create a formal structure. The holding company was Muirfield Group Pty Ltd and the two subsidiaries were Muirfield International and Muirfield Australia Group Pty Ltd ("Muirfield Australia").
Muirfield International was first registered as a company on 23 August, 2000. Its directors are Mr Bruce John Muir and Mr James Andrew Taylor (T documents, pages 46-47). On that day, no formal agreements or contracts had been entered by any of the Muirfield group of companies regarding the activities in China but negotiations were in progress at that time.
On 16 November, 2000, notifications of the appointment of a receiver and manager to Muirfield Agrochemicals were lodged with the Australian Securities and Investment Commission pursuant to s. 427 of the Corporations Law. On the basis of the evidence of Mr Muir, we find that the receiver was appointed on 13 November, 2000. There is no statement certifying that it is able to pay its debts as and when they become due and payable.
Registration for a grant for 1999/2000 grant year
On 20 June, 2000, Muirfield Agrochemicals applied for registration with the Commission for a grant under the Act for the 1999/2000 grant year (T documents, page 12). This was at or about the time at which the Muirfield group of companies was planting trees in China. On 23 June, 2000, the Commission acknowledged the application and advised Muirfield Agrochemicals that registration allowed it to claim reimbursement of export promotional expenses it had incurred from 1 July, 1998. It went on to give Muirfield Agrochemicals advice as to the information it should include with its claim (T documents, page 13).
First year application by Muirfield International
On 20 September, 2000 and after the transfer of Muirfield Agrochemicals' export operations to Muirfield International, Muirfield International lodged the first year application and advised that the registration for the claim had been submitted under the name of Muirfield Agrochemicals (T documents, page 21). It went on to advise the Commission that Muirfield Agrochemicals' business had been taken over by a new company (i.e. Muirfield International) and relied on s. 94 of the Act. Muirfield International claimed a total of $300,124 in respect of expenses incurred for overseas representation, marketing visits, communications, free samples, trade fairs, literature and advertising and short-term consultants. Of those expenses, $296,000 had been incurred by Muirfield Agrochemicals in promoting agricultural services in the Peoples' Republic of China and $4,005 in promoting those services in the Philippines (T documents, pages 22-45).
LEGISLATIVE FRAMEWORK
The purpose of the Act
The Act, which commenced on 1 July, 1997 (s. 2), is intended 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." (s. 3)
It was amended by the Export Market Development Grants Legislation Amendment Act 1999 with effect, in so far as the amendments affect this case, in respect of grant years commending on or after 1 July, 1998. Those amendments are applicable in this case. It has also been amended by the Export Market Developments Grants Amendment Act 2001 with effect from 1 July, 2001. Those amendments are not applicable in this case.
Entitlement to a grant in respect of a grant year
A person is entitled to a grant in respect of a grant year if he or she:
"(a) is eligible under Part 3 for a grant in respect of a grant year; and
(b)has incurred eligible expenses in that grant year in relation to eligible products; and
(c)has applied for a grant in accordance with Part 7; ..." (s. 4)
The amount of the grant is worked out under Part 6 of the Act.
The first question is whether Muirfield International satisfies s. 4(a). A person will satisfy s. 4(a) if he, she or it is eligible under Part 3 in respect of the grant year. Those who are eligible are specified in s. 6 of Part 3. In so far as it is relevant in this case, that section provides that "… a body incorporated under the Corporations Law … is eligible for a grant in respect of a grant year if it satisfies the conditions applicable to it under section 7". (s. 6(1)(b))
Section 7 specifies the conditions in relation to four categories of persons. The category of person of concern in this case is a person "other than an approved joint venture, an approved trading house or a person acting in the capacity of trustee of a trust estate". That category is the subject of s. 7(1) and, in so far as it is relevant in this case, provides that such a person:
"… is eligible for a grant in respect of a grant year if the following conditions are satisfied:
…(f)the person is not, when the person applies for the grant, disqualified under section 13 from receiving a grant because the person, or an associate of the person, is under insolvency administration;
…
(h)if Division 5 applies to the person:
(i)the person has been registered under section 19; and
(ii)Austrade has decided under section 20 that the person met the grants entry requirements."
Taking first the condition in s. 7(1)(f), a person who is a body corporate is "under insolvency administration" only if any of the "situations under the Corporations Law" specified in s. 15 apply. In this case, the relevant situation was that "the body corporate is under administration or official management" (s. 15(1)(a)(iii)). If the person administering the body corporate were to provide a certificate stating that the body corporate was able to pay all of its debts as and when they become due and payable, it is taken not to be under insolvency administration (s. 15(2)).
Taking the second condition specified in s. 7(1)(h), provided the person is not an approved body (which it is not relevant to explore in this case), an approved joint venture or an approved trading house, Division 5 applies to any person who:
"… intends to apply for a grant in respect of a grant year unless:
(a)the person is a grantee in respect of any previous grant year; or
(b)the person's application for a grant in respect of the immediately preceding grant year is pending." (s. 18(1))
Such a "… person must, before the end of the grant year, apply to Austrade to be registered for the purposes of this Act." (s. 19(1)). The application must be in a form, and must be made in a manner, approved by Austrade (s. 19(2)). The application is taken not to have been made until it has been received by Austrade or a person appointed by Austrade to receive applications under s. 19 (s. 19(3)). Austrade must notify the person who has made an application in this manner and must notify that person of the registration (s. 19(4)).
Section 20(1) requires Austrade to consider whether a person who has been registered meets the grants entry requirements at a time it considers appropriate. The grants entry requirements must be relevant to the prospects of success of exports enterprises in relation to which grants are being sought (s. 21(2)). Austrade must decide whether or not the person meets the grants entry requirements and notify the person of any he or she has not met (s. 20(2)). A person meets the grants entry requirements if he or she has passed the grants entry test under the Export Market Developments Grant Act 1974 ("the 1974 Act") or the Act prior to its amendment in 1999 (s. 20(3)).
What are eligible expenses?
It is not in dispute at this stage of the proceedings that "eligible expenses" have been incurred during the grant year in respect of eligible products within the meaning of s. 4(b). Even so, to understand the scheme, it is necessary to understand what they are. The term "eligible expenses" referred to in s. 4(b) of the Act is defined in s. 107 to have the meaning given to it by Division 1 of Part 5. Section 28(1) provides that the Part defines those expenses which are eligible expenses. Section 28(2) provides that:
"The underlying principle is that only expenses relating to specific promotional activities genuinely incurred by applicants for the purpose of marketing eligible products in foreign countries should qualify."
General provisions relating to eligible expenditure are found in s. 29. In so far as it is relevant to this case, that section provides:
"... expenses incurred by an applicant for a grant in respect of a grant year are eligible expenses if the following conditions are satisfied:
(a)the expenses are, under section 33, claimable expenses in respect of an eligible promotional activity;
(b)...
(c)the expenses were incurred (within the meaning of Division 3) by the applicant:
(i)if the applicant is not a grantee in respect of any previous grant year – during the grant year or the immediately preceding year; or
(ii)in any other case - during the grant year;
(d)the expenses, together with other expenses of the applicant that satisfy paragraphs (a) to (c), add up to $20,000 or more."
The activities which are regarded as coming within the expression "eligible promotional activity" in s. 29(a) are specified in column 2 of the table which forms part of s. 33. Column 3 of that table specifies certain expenses and those expenses:
"... 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."
The table was amended by the Export Market Development Grants Amendment Act 1997 with effect from 1 July, 2001 but this amendment and others effected by that legislation are not relevant in this case. The table provides:
"Claimable expenses in respect of eligible promotional activities
Column 1Column 2 Column 3
Item Activity Expenses
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 purposeso 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
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 purposeall 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
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 purposeall reasonable expenses incurred by the applicant in payments to persons that, in Austrade's opinion, were not closely related to the applicant
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 applicantall reasonable expenses incurred by the applicant that are attributable to the actual cost of providing samples
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 purposeall reasonable expenses incurred by the applicant in payments to persons that, in Austrade's opinion, were not closely related to the applicant
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 purposeall reasonable expenses incurred by the applicant
An "approved promotional purpose" has the meaning given by Subdivision 3 of Division 2 of Part 5 of the Act. Section 37 provides that:
"For the purposes of section 33, an eligible promotional activity in relation to an applicant is for an approved promotional purpose if it is carried out for the purpose of creating, seeking or increasing demand or opportunity in a foreign country for any of the following:
..."
eligible goods, eligible services, eligible intellectual property or eligible know-how which were then specified in paragraphs 37(a)-(g). "Eligible services" are defined in s. 107 to include "eligible external services", which in turn is defined in terms of a "… service … supplied outside Australia to a person that is not a resident in Australia" unless Austrade has determined in writing that the Australian input in the service is not sufficient to ensure that Australia would derive a significant net benefit from the service (ss. 107, 25(3) and (4)).
How to apply for a grant and when the grant is payable
Part 7 of the Act is concerned with the manner in which a person applies for a grant and the manner in which it is paid and its terms must be complied with if an applicant for a grant is to meet s. 4(c) and so be entitled to a grant. In general terms, Austrade must decide if the person is entitled to a grant and, if so entitled, must determine the amount of the grant as soon as practicable (s.80(1)).
Subdivision 2 of Division 3 of Part 7 determines when the grant is payable. Subdivision 3 determines when the grant is not payable even though the person is entitled to it. In particular, s. 87(1) provides that:
"… a grant, or an advance on account of a grant, is not payable to a person if, at the time when, or at any time after, the person becomes entitled to the grant or advance:
(a)if paragraph (b) does not apply-the person or (where applicable) an associate of the person; …
(b)…
is under insolvency administration."
A payment of a grant or an advance on account made when neither the person nor any associate of the person was under insolvency administration is not affected (s. 87(2)).
The effect of a change of ownership of the business
Division 2 of Part 8 is concerned with the effect of a change in ownership of a business on the manner in which Austrade must treat the new owner of the business in relation to matters affecting the previous owner under the Act. Section 93 sets out the object of the Division:
"This Division deals with cases where, because of certain specified business arrangements, an applicant for a grant is carrying on a business that is to any extent similar to the business, or any part of the business, of another person who has already received grants under this Act or under the repealed Act. The Division empowers Austrade to treat particulars of the other person for the purposes of this Act as being those of the applicant."
Section 94 provides that:
"(1) This section applies if:
(a)at any time a person (previous owner) carried on a particular business in Australia; and
(b)at a later time:
(i)the previous owner sold or transferred the business or any part (relevant part) of the business; or
(ii)in the case of a business carried on by a partnership-there was a change in the membership of the partnership that carried on the business; or
(iii)the previous owner entered into any other arrangement relating to that business; and
(c)as a result of the sale, transfer, change in membership or other arrangement, another person (new owner) carries on:
(i)the business or the relevant part of the business; or
(ii)a business that is, to any extent, similar to the business, or any part of the business, carried on by the previous owner.
(2)If:
(a)the new owner applies for a grant in respect of a grant year; and
(b)Austrade does not exempt the new owner from the operation of this section;
subsection (3) has effect.
(3)Austrade must:
(a)treat any eligible expenses incurred by the previous owner in the capacity of owner of the business, or of the relevant part of the business, as having been incurred by the new owner; and
(b)treat any export earnings derived by the previous owner from the business, or the relevant part of the business, as export earnings of the new owner; and
(c)treat any registration of the previous owner under section 19 or under section 13I of the repealed Act as a registration of the new owner; and
(d)treat the new owner as if Austrade had decided that the new owner had met the grants entry requirements if Austrade had decided that the previous owner met the grants entry requirements; and
(e)treat 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 of the business, as having been paid, or as being payable to the new owner; and
(f)treat any other aspect of the business, or of the relevant part of the business, as if it had been carried on by the new owner."
Adjustments that may be made by Austrade
Division 3 is concerned with adjustments that Austrade may make to an applicant's export earnings, eligible expenses or provisional grant amount. Section 96 provides that:
"If Austrade is satisfied:
(a)that an applicant for a grant in respect of a grant year has done, or has been party to, any act or thing (as, for example, the making of an agreement or payment, the forming of a company or the allocation of income or expenses between different persons or different years); and
(b)that as a result the applicant is likely to obtain a grant, or an increase in the amount of the grant, in respect of that year;
Austrade may, for the purposes of this Act:
(c)make such adjustments to:
(i)the amount that, part from this section and section 12, would be the applicant's export earnings; and
(ii)the amount that, apart from this section and section 30, would be the applicant's eligible expenses;
as it thinks necessary; and
(d)work out the amount that is the applicant's provisional grant amount for the grant year because of section 64."
CONSIDERATION
We will begin with the situation of Muirfield Agrochemicals. There is no question that it was registered by Austrade on 23 June, 2000. There is also no question that, had it applied for the grant in respect of the grant year on 20 September, 2000, a grant would not have been payable to it. That would flow from the application of s. 87(1) for, by the time a decision came to be made that a grant was payable to Muirfield Agrochemicals, Muirfield Agrochemicals was in receivership and so was "under insolvency administration" with effect from 13 November, 2000.
Muirfield Agrochemicals was not, however, the applicant for the grant. Muirfield International was that applicant and it was not an associate of Muirfield Agrochemicals as that term is defined in s. 107. That takes us to s. 94 for it is said that there was a change in the ownership of the business within the meaning of that section. We find that Muirfield Agrochemicals carried on a business of providing agricultural services in Australia within the meaning of s. 94(1)(a). Part of its business was to provide agricultural services to overseas countries.
Mr Muir said that, on 23 August, 2000, all of the export operations of the Muirfield group, including Muirfield Agrochemicals, were transferred to Muirfield International. At that time, negotiations were taking place with interests in China. Although no formal notice was given to them of the transfer, business cards and brochures in the name of Muirfield International were given to those interests. Muirfield Agrochemicals had assets in Australia but none of those was transferred to Muirfield International. As Muirfield Agrochemicals owned its own premises, there was no lease of those premises to be transferred and no leases of any kind were transferred. There was no assignment of goodwill from Muirfield Agrochemicals to Muirfield International and no payment made for goodwill by Muirfield International. Muirfield International entered into contracts with overseas interests after 23 August, 2000, Mr Muir said, but Muirfield Agrochemicals had not entered any such contracts.
On the basis of Mr Muir's evidence, we find that there was no written agreement of any type between Muirfield Agrochemicals and Muirfield International regarding the "sale, transfer … or other arrangement" of the overseas activities carried out by Muirfield Agrochemicals in China or elsewhere overseas. On the basis of the evidence of Mr Muir, though, we are satisfied that on and after 23 August, 2000, all previous overseas activities carried out by Muirfield Agrochemicals were thereafter carried out by Muirfield International. This, we find, was a part of the business previously carried on by Muirfield Agrochemicals. Mr Muir's evidence is consistent with the incorporation of Muirfield International on 23 August, 2000 and with his uncontroverted evidence that, after that date, all brochures and documentation were in the name of Muirfield International. We find that the change from Muirfield Agrochemicals to Muirfield International was a deliberate decision by the two companies to redistribute their activities in this way. It was part of a wider deliberate decision by the Muirfield group of companies to restructure the group in order to position themselves for a public float to gain capital to fund their proposed activities in China.
Did the redistribution of activities amount to a "transfer" of part of the business or an "arrangement relating to that business" of Muirfield Agrochemicals? Neither expression is defined in the Act. Taking first "transfer", its ordinary meanings, in so far as they are relevant, are:
"…1 Law. Conveyance of property, esp. of stocks or shares, from one person to another. … 2 gen. The action of transferring or fact of being transferred; conveyance or removal from one place, person, etc., to another. …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993)
Inherent in the word is the movement of property from one person or place to another. There is a suggestion of some form of action to mark the movement but there is no suggestion that there be any consideration passing between persons to mark it.
The ordinary meanings of the word "arrangement" include:
"… 1 The action of arranging; the fact of being arranged. … 2 A manner of being arranged; an orderly disposition. … 3 A disposition or preparation for a future event (freq. in pl.); something planned or agreed; a settlement or agreement between parties …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993)
Having regard to the context in which they are used, it seems to us that the words "transfer" and "arrangement" encompass not only formal agreements or instruments but also the informal. While there would need to be consideration if there were to be a "sale" of a business or any part of it, there need not be any if there is to be a transfer or arrangement relating to it. In the case of a transfer, though, there must be some movement of the business from the previous owner to the new owner for such movement is inherent in the word "transfer" itself. That movement may be evidenced by a formal document of conveyance and it may be that the law requires such a document and for stamp duty to be paid. Where no formal document is required, it may be evidenced in other ways such as by passing property from one person to another. An "arrangement" has at its heart the notion of a plan or an agreement as to present or future action. It does not carry any connotation of formality about the agreement or any suggestion that there be consideration paid to enter the arrangement. When taken in the context of a section intended to extend the benefit of the Act to those who have, to use a general expression, taken over the conduct of a business, it seems to us that the ordinary meaning should be attributed to the word "arrangement". As Mason J concluded in considering the word in the context of s. 80B of the Income Tax Assessment Act 1936:
" The word 'arrangement' in s. 80B(5) is sufficiently comprehensive to catch within its sweep a plan or understanding which is not enforceable at law. It may also include acts or transactions undertaken in execution of the plan or understanding. A beneficial owner of shares in a company may enter into an arrangement by giving his assent to a plan formulated by others. …" (Federal Commissioner of Taxation v Students World (Aust) Pty Ltd (1977-78) 138 CLR 251, Mason, Jacobs and Aickin JJ at 259-260)
It follows, in our view, that the deliberate decision among the Muirfield group of companies that, from 23 August, 2000, Muirfield International conduct the overseas activities previously conducted by Muirfield Agrochemicals is a transfer of that part of the business from one to the other. The property that was transferred was personal property in the form of what may generally be described as goodwill. It is also an arrangement relating to the business previously carried on by Muirfield Agrochemicals in that it would thereafter be conducted by Muirfield International. On the basis of Mr Muir's uncontroverted evidence, we find that it was conducted by Muirfield International in that it proceeded to rely on the goodwill, public relations work and contacts built up by Muirfield Agrochemicals. The goodwill, public relations work and contact were the property that was transferred. Together they formed the part of the business that was transferred from Muirfield Agrochemicals to Muirfield International. Muirfield International built upon the business when it entered contracts with overseas interests.
Having reached that conclusion, Austrade must comply with s. 94(3). It must, for example, treat Muirfield Agrochemicals' registration under s. 19, eligible expenses and successful completion of the grants entry test as those of Muirfield International. It must also treat "… any grant … payable … to the previous owner in the capacity of owner of the business, or the relevant part of the business … as being payable, to the new owner" (s. 94(3)(e)). By the time that consideration was being given to whether the grant was payable, Muirfield Agrochemicals was under insolvency administration. Had it still been the owner on 13 November, 2000 of that part of the business now operated by Muirfield International, s. 7(1)(f) would have meant that a grant was not payable to it. That provision does not lead to the conclusion that a grant is not payable to Muirfield International though. Section 94(3)(e) has at its foundation what was paid or payable to the previous owner in the capacity of owner of the business. The consequence is that the entitlement of Muirfield International is determined by reference to what was paid or payable to Muirfield Agrochemicals up to the time that it transferred the overseas part of its business to it i.e. up to the time that it ceased to have the capacity of owner of that part of the business.
Before leaving s. 94, we note that there appears to be an inconsistency between ss. 93 and 94. In expressing the object to be achieved by Division 3 of Part 8, s. 93 refers to the previous owner's having already received a grant. There is no such limitation in s. 94. It seems to us that the particular words of s. 94 should not be limited by the more restrictive concept of entitlement expressed in s. 93. The role of an objects clause in the interpretation of statutory provisions has been considered in a number of cases in various jurisdictions. In Minister For Urban Affairs & Planning v Rosemount Estates P/L & Ors (40127/96; LE40140/95 14 August 1996), for example,
the Supreme Court Of New South Wales (Court Of Appeal, Handley JA, Sheller JA, Cole JA) stated:"The exercise of the statutory power to publicise must be considered, but there remains a discretion whether it be exercised. Further, whilst regard may be had to an objects clause to resolve uncertainty or ambiguity, the objects clause does not control clear statutory language, [See Pearce and Geddes: Statutory Interpretation in Australia 4th edition section 4.34] or command a particular outcome of exercise of discretionary power."
The passage in Pearce and Geddes is repeated in the 5th edition at 4.40.
Similar principles have been adopted in interpreting the objects clause (s. 3) in the Freedom of Information Act 1982. In News Corporation Ltd v National Companies and Securities Commission (1984) 52 ALR 277 (Bowen CJ, St John and Fisher JJ), the Full Court of the Federal Court considered a submission that the form of s. 3 is such that, when considering rights of access, the Court should lean towards a wider interpretation but, when considering exemptions, should lean towards a narrower approach. In rejecting the submission, Bowen CJ and Fisher J said:
"In construing our Act we do not favour the adoption of a leaning position. The rights of access and the exemptions are designed to give a correct balance of the competing public interests involved. Each is to be interpreted according to the words used, bearing in mind the stated object of the Act." (page 279)
This passage was expressly approved by the Full Court in Searle Australia Pty Ltd v Public Interest Advocacy Centre and Another (1992) 108 ALR 163 at 168 (Davies, Wilcox and Einfeld JJ).
That brings us to s. 96 of the Act. It corresponds with s. 16(1) of the Export Expansion Grants Act 1978 ("1978 Act") when it provided:
"Where the Board is of the opinion that an act or thing (including the making of an agreement, arrangement or payment, the forming of a corporation or partnership or the distribution of income or activities as between different persons or different years) has been done that, if the powers of the Board under this section were not exercised, would result in an increase in the total of the amounts paid as grants without there being a corresponding increase in the total of the amounts of the export earnings of persons in the grant years, the Board, to the extent that it thinks it necessary to do so to prevent or limit that result, may, for the purposes of this Act, disregard or adjust all or any of the following amounts, that is to say, the amount of the export earnings, the amount of the export earnings increment, or the amount of the incentive grant entitlement, of a claimant for a year, being an amount that, in the opinion of the Board, has been affected by, or is an amount of anything resulting from, that act or thing."
This section was considered by the High Court in Export Development Grants Board v Michell Carbonised Wool Exports Pty Ltd and Others (1985) 59 ALR 729 (Gibbs CJ, Mason, Wilson, Brennan and Deane JJ). The export business of a group of companies was reorganised so that it was undertaken by 8 companies rather than 1 as had previously been the case. They claimed that, as reorganised, they were collectively entitled to a larger amount under the 1978 Act than if they had continued to undertake the export business through only one company.
In their joint judgement, Wilson, Brennan and Deane JJ, described the operation of the scheme:
"The Act is an Act relating to grants for the purpose of providing incentives for the expansion of exports. The sections to which we have referred establish a scheme whereby a trader who achieves an increase in export earnings over a pervious period is credited with an export earnings increment which entitles him to a grant as determined in accordance with s 13. Section 16 confers a discretion on the Board, in the circumstances therein described, to adjust the grants in order to achieve, inter alia, the result that a mere change in the corporate structure of an export enterprise will not produce an entitlement to a grant in excess of that which corresponds to the actual increase in exports which is achieved." (page 737)
A related provision, s. 38, appeared in the 1974 Act. Section 38(1) permitted the Commission to re-allocate expenditure or income to adjust a grant entitlement where:
"Where the Commission is of the opinion that:
(a)an effect of an act done on or after 20 May 1985 is to distribute or transfer expenditure or income among some or all of the persons (in this subsection referred to as the "participants") affected by the doing of the act; and
(b)as a result, the Commission would, but for this section, be liable to pay to such of the participants as are claimants, in respect of the grant year commencing on 20 May 1985 or a subsequent grant year, a total amount by way of grant that exceeds the total amount (if any) by way of grant that would have been payable to the participants if:
(i)the act had not been done; and
(ii)such of the participants (if any) who ceased to exist had not ceased to exist;
the Commission may, for the purposes of this Act and to the extent it thinks necessary to prevent or limit that result, treat the whole or any part of any expenditure or income that has been so distributed or transferred as if it were re-allocated among some or all of the participants in such manner as the Commission determines."
Section 38 was considered by Hill J in Australian Trade Commission v Zaknich (1992) 110 ALR 667 when he considered the ways in which the quantum of a grant payable could be increased in the absence of an anti-avoidance provision such as s. 38. He continued:
" First it must be noted that s 38, like its predecessors, is concerned with the effect of the act done, not the motive or purpose of the act, or the motive or purpose of the person doing the act. Secondly, the section will only come into operation if there is an act done which produces the relevant effect. The identification of the relevant 'act' will be of utmost importance to the practical application of the section. Thirdly, the relevant effect must be the distribution or transfer of expenditure or income among the persons affected by the doing of the act." (pages 679-680)
An examination of s. 96 of the Act in the context of the current scheme shows that some of these principles continue to be applicable. It is concerned with the effect of an act or thing to which the applicant for a grant has done or been a party and not with the intention of that applicant. If the likely effect of that act is that he, she or it is likely to obtain a grant, or an increase in the amount of that grant, in respect of the grant year, then Austrade has a discretion to make adjustments to the amount of the grant as it thinks necessary and to the applicant's provisional grant amount. In precise terms, it must be the case that "as a result" of the act or thing, the applicant is likely to receive that increase.
The meaning of the expression "as a result of" was considered in Piccolo and McVeigh [2001] AATA 623 (unreported, 2 July, 2001), Deputy President Forgie, appeal allowed on other grounds in Piccolo v McVeigh [2002] FCA 323:
"171. What is meant by the words "as a result of" in that provision? I have looked first to the dictionary definitions of "result". In the Macquarie Dictionary "result" is defined as:
'1. that which results; the outcome, consequence, or effect ... 3. to spring, arise, or proceed as a consequence from actions, circumstances, premises, etc.; be the outcome...'
The Shorter Oxford English Dictionary defines 'result' to mean:
'1. To rise as a consequence, effect or conclusion from some action, process, etc.; to end or conclude in a specified manner.'
172. The meaning of the phrase 'as a result of' was considered by Hayne J in the Australian Securities Commission v Kavanagh and Others (1993) 11 ACSR 148 (Hayne J). The Australian Securities Commission commenced proceedings pursuant to s. 542 of the Companies (Vic) Code against the former directors and auditor of the company seeking a declaration that each of the respondents was guilty of negligence, default, breach of trust or breach of duty in relation to the company and that the company suffered loss and damage of $14,994,560. His Honour at page 153 stated:
'Before an order can made under s 542 for payment of the amount of loss and damage, the section requires the court to be satisfied that a person is guilty of wrongdoing of the kind described and that `the corporation has suffered or is likely to suffer loss or damage as a result of' that wrongdoing. I was told that there is no reported case which deals directly with what 'as a result of' means in s 542 and in that sense the precise nature of the causal link that must be established under the section awaits judicial determination.
However as the High Court said in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; 99 ALR 423 in relation to the tort of negligence, causation is essentially a question of fact to be answered by reference to common sense and experience and one into which considerations of policy and value judgment necessarily enter. There seems no reason to think that it is not at least arguable that similar considerations should apply in considering the nature of the causal link prescribed in s 542. Again, it may be accepted that it would follow from the adoption of such an approach that the "but for" or "sine qua non" test would not be a definitive test of causation. However, what is clear is that the inquiry would in large measure be a factual inquiry.'
173. The meaning of the phrase 'results from' in s. 9 of the Workers' Compensation Act 1926 was discussed by Moffit J sitting as President of the New South Wales Court of Appeal in Pickersgill v Freightbases Pty Ltd [1983] 3 NSWLR 117 (Moffit P, Samuels and Priestley JJA). His Honour at page 118 comments:
'In order to apply to a case the word "results from" in the phrase "incapacity for work (or death) results from the injury" (s9 (s8)), it serves no useful purpose to substitute some other words. The words "results from", long used in workers compensation legislation here and elsewhere, must speak for themselves as the remarks of Windeyer J in Commonwealth v Butler (1958) 102 CLR 465, at 479, 480, demonstrate.
It is somewhat easier, however, to say some of the things that the words do not mean. Thus they do not mean simply "is caused by" or "is causally related to", although considerations of causation are obviously involved in the determination of whether an incapacity resulted from a particular injury. The words "results from" are not appropriate to be applied to an injury which gives rise to a bodily condition which merely predisposes the worker or makes him more vulnerable to later injury. The phrase imports some elements of proximity in the causative links between injury and incapacity. It imports some element of precipitation. In the factual field the necessary proximity can or can normally be expected to be temporal.'
174. It is clear from the ordinary meaning of the word 'result' and from the cases that the words 'as a result of' carry with them elements of consequence and precipitation. …"
That brings us back to the question that we must consider. Is Muirfield International likely to obtain a grant, or an increase in the amount of a grant, as a result of the act or thing that it has been party to? Apart from making an application under the Act at all, the act that Muirfield International has done or has been a party to is the transfer of part of Muirfield Agrochemicals' business to it. Was Muirfield International likely to obtain a grant or an increase in the amount of the grant as a result of part of Muirfield Agrochemical's being transferred to it? That question must be answered in the affirmative for, without the transfer, Muirfield International would not have received a grant at all. As a consequence of the transfer, it is likely to receive a grant. The transfer precipitated the application for a grant and so the likelihood of Muirfield International's getting a grant.
The next question then arises. Once that conclusion has been reached Austrade "may" make adjustments prescribed in ss. 96(c) and (d). The word "may" is not a prescriptive word but indicates that Austrade has a discretion. That means that the circumstances of the transfer must be considered and not simply the fact that the transfer has occurred. As is clear from the passages of the judgements to which we have referred and particularly that from the judgement of Hill J in Australian Trade Commission v Zaknich, those circumstances and so the exercise of the discretion must be construed in the context of the object of the Act (see paragraph 12 above) and the object of s. 96 to circumvent abuse of the scheme.
Mr Muir's evidence was that Muirfield Agrochemicals went into receivership after it could not find $500,000 to pay the Commonwealth Bank of Australia ("CBA") within a three week period. At the time, it had enjoyed a relationship with the CBA for the previous three or four years and had an overdraft limit of $1.6M. The CBA advised Muirfield Agrochemicals of its requirement to reduce the amount of its borrowings approximately three months before the receiver was appointed. Mr Muir's evidence was that, given the cash flow, the company could have found the money within three months but not within three weeks or a month that it was given. Muirfield Agrochemicals was not insolvent, though, until the CBA called for repayment of the whole of the debt.
Mr Muir's evidence was not contradicted by other evidence and not successfully challenged in cross-examination. On its basis, we find that the call from the CBA for reduction in Muirfield Agrochemicals' debt came at or about the time that Muirfield International was registered as a company i.e. about three months before a receiver was appointed for Muirfield Agrochemicals. We also find that the timing of the requirement to reduce the debt was coincidental with the incorporation of Muirfield International. The latter occurred as a result of the increasing overseas activities undertaken by the Muirfield group of companies and those activities had their origins much earlier in 1999 with the landscape and grass expo in Beijing in October, 1999. There were tangible results of those activities by June, 2000 when trees had been planted in China. We are further satisfied, on the evidence available to us, that the transfer of part of Muirfield Agrochemicals' business did not have any effect upon its ability to meet CBA's call for repayment of $500,000 in a three week period. On the evidence, we find that the overseas business activities of the Muirfield group of companies had yet to generate an income stream.
In view of the findings that we have made above, we are satisfied that the act of transfer was not a deliberate act to ensure that one of the companies in the Muirfield group of companies was able to obtain the grant when it was likely that Muirfield Agrochemicals would not obtain it because it was likely to go into receivership. As we have found, the timing of the transfer and the call for the money were coincidental and receivership came some three months later. The transfer came about because of the restructuring of the activities of the Muirfield group of companies and that restructuring took place to prepare it to raise capital for its overseas activities. Muirfield International continued the work begun by Muirfield Agrochemicals to create an overseas market for its agricultural services. Putting to one side that Muirfield Agrochemicals would not have received a grant due to its being placed in receivership, the transfer to Muirfield International did not entitle it to any greater amount of grant than that which would have been payable to Muirfield Agrochemicals. Taking all of the circumstances into account, we consider that the discretion should not be exercised to make an adjustment to deny or reduce the amount of the grant otherwise payable to Muirfield International.
For the reasons we have given, we:
1.set aside the decision of the respondent dated 1 February, 2001; and
2.substitute a decision that the respondent must comply with s. 94(3) of the Export Market Development Grants Act 1997; and
3.remit the application to the respondent with a direction that it not make any adjustment pursuant to s. 96 of the Export Market Development Grants Act 1997 to the amount otherwise payable to the applicant under the Act.
I certify that the fifty-four preceding paragraphs are a true copy of the reasons for the decision herein of
Miss S A Forgie (Deputy President),
Mr P J Lindsay (Senior Member)Signed: …………………………………..
Paul Paczkowski AssociateDates of Hearing 19 February, 2002
Date of Decision 25 June, 2002
Counsel for the Applicant Mr Black
Solicitor for the Applicant James Taylor
Counsel for the Respondent Mr Moshinsky
Solicitor for the Respondent Tuckers, Lawyers
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