Nysan Asia Pacific Pty Ltd and Australian Trade Commission
[2015] AATA 208
•7 April 2015
[2015] AATA 208
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2014/3276
Re
Nysan Asia Pacific Pty Ltd
APPLICANT
And
Australian Trade Commission
RESPONDENT
DECISION
Tribunal The Hon. Brian Tamberlin, QC, Deputy President
Date 7 April 2015 Place Sydney The decision under review is affirmed.
........................................................................
The Hon. Brian Tamberlin, QC, Deputy President
CATCHWORDS
FOREIGN AFFAIRS AND TRADE – export market development grants – limitation on number of grants – whether applicant is carrying on a business that is the same or similar to previous business – degree of inter–relationship and continuation of previous activities – decision affirmed
LEGISLATION
Export Market Development Grants Act 1997 (Cth) ss 93(1), 94
SECONDARY MATERIALS
Export Market Development Grant (Changes in Ownership of Business) Guidelines 2006
REASONS FOR DECISION
7 April 2015
The Hon. Brian Tamberlin, QC, Deputy President
Nysan Asia Pacific Pty Ltd (the Applicant) seeks review of a decision made by the Respondent on 20 May 2014 made pursuant to s 94 of the Export Market Development Grants 1997 (the Act) to apply that provision to the Applicant’s claim for a grant.
The consequence of the decision to apply s 94 is that the Applicant is not eligible for an export market development grant under the Act.
Section 93(1) of the Act provides that the limitation on the number of grants that are payable will continue to apply even though there has been a change in ownership of the business. This focus is on the nature of the business activity and not on the identity of the person or entity which carries on the business or “part”
of the business. The provision is designed to prevent “double dipping” whereby additional grants beyond the limit are sought in respect of a continuing business.
Section 94 provides:
(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.
(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.
Turner Bros Furnishings Pty Ltd (Turner) has received a maximum grant entitlement in respect of its export promotion and business of seven grants totalling in excess of $420,000 between 1995–2010 in respect of export related activities.
The Respondent contends that the Applicant is seeking a grant in circumstances where it is carrying on a business that is either the same as or similar to part of the business carried on by Turner to such an extent that the Respondent is satisfied that the “business” of the Applicant should be treated as a continuation of part of the business of Turner when considering the Applicant’s claim for a grant.
In making its determination on the request for a grant the Respondent is required to take into account the Export Market Development Grant (Change in Ownership of Business) Guidelines 2006 (the Guidelines) and relevant heads of consideration are set out and considered below.
The Guidelines list11 matters which must be taken into account as follows:
16.1. the product of the new business and that of the old business; and
16.2. 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
16.3. the customers, including the export market customers, of the new businesses and those of the old business; and
16.4. the directors, shareholders, and management personal of the new business and those of the old business; and
16.5. the suppliers to the new business and those to the old business; and
16.6. the overseas representatives of the new business and those of the old business; and
16.7. the employees of the new business and those of the old business; and
16.8. the markets, including the export markets, of the new business and those of the old business; and
16.9. the premises from which the new business is conducted and the premises from which the old business was conducted; and
16.11. the property and assets, including the intellectural property, of the new business and those of the old business.
THE ISSUE
The question for determination is whether s 94 applies having regard to the business activities carried on by Turner and the Applicant. This is a question of fact and degree as to the sufficiency of any inter-relationship and/or continuation of previous activities.
CONTENTIONS
The Applicant’s case is that the Applicant’s business and that of Turner are completely different. It says that the Applicant’s business is that of a manufacturer, whereas that of Turner is of a sales and contracting company and that these activities are mutually exclusive and separate.
The Applicant accepts that Turner utilises the product of the Applicant but only domestically. It says that none of its products have been the subject of any previous export marketing development claim or grant and that none of its products have been exported at any time by Turner.
The Applicant further contends that on consideration of the Guidelines which must be taken into account, the only conclusion is that there is no sufficient connection between the two businesses such as to disqualify applications by it for an export development grant and that there is no element of “double dipping”.
The Respondent’s case is that during the period between 1996 and 2010 Turner has received export grants amounting to about $420,000 and that during that period it was engaged, as part of its business, in selling overseas the Applicant’s products which were manufactured by the Applicant. The Respondent submits that whilst Turner sold and marketed other products such as soft furnishings, the marketing and sale overseas of the Horiso blinds manufactured by the Applicant was an important part of its overall business, and that therefore the Applicant is now seeking to obtain grants under the Act in respect of activities sufficiently similar to those of Turner and this attracts the application of s 94 of the Act.
EVIDENCE
Mr Scott Turner in his affidavit states that he is the sole director and secretary of the Applicant which trades as “Horiso”. He states that his brother, Murray Turner, has never been an officer of the Applicant and that Mr Scott Turner and Mr Murray Turner have never been shareholders of the Applicant, nor are they shareholders of Turner. He asserts that the Applicant’s business and that of Turner are completely different and are operated from different premises in Marrickville. The Applicant’s business is operated from premises 22 Myrtle Street, Marrickville and the Turner business is operated from 10 Vincent Street, Marrickville. He contends that the Applicant’s business is one of manufacturing of external shading systems and that Turner is not a manufacturer, has no manufacturing facilities and has never manufactured any product in its existence.
The corporate structure of the Applicant and Turner is set out in the attached diagram, see Appendix A.
This document was produced by the Respondent and the corporate structure set out therein is not disputed.
The Applicant was registered under the Corporations Act 2011 on 6 June 2001 and Turner was registered on 20 February 1959. Mr Scott Turner has been a director since 27 September 1989.
Mr Scott Turner says that the Applicant’s business is to manufacture products on a network basis via a dealer arrangement which operates both nationally and internationally, and includes customers in the United States, Japan, Thailand and other Asian centres. He says that Turner does not sell to customers in the United States, Japan, Thailand, Singapore, Malaysia or Hong Kong. He says that the respective customer base and territories are completely different and are mutually exclusive with no overlapping.
According to Mr Turner, the Turner company is a contract and marketing company which acquires finished products from a variety of manufacturers including the Applicant and other screen and blind companies, including “Verosol”. He says that all of these companies supply Turner and they are competitors.
Mr Turner claims that Turner’s business has remained essentially the same for the last 50 years. It began in 1903 as a general store and developed into a specialist in the supply of soft furnishings and conducted a contracting business. The product range has developed from primarily producing and selling soft furnishings to catering for a wider range of interior products including blinds.
In its first application for a market development grant in December 1996 Turner stated that the company was then owned by two directors, Scott and Murray Turner, and the managing director was Mr Roger Turner. The grant application referred to its products at that time as including “Nysan” motorised blinds and he also stated that it had developed into a “manufacturing and contracting business”. The application also stated that one of its aims was to continue to employ technology and equipment and make manufacturing processes more efficient and more competitive whilst increasing quality.
Also in paragraph 3.4 of that first application for a development grant Turner stated that its main local competitors were able to provide appropriate levels of quality and that their manufacturing costs were substantially lower than “ours”. In paragraph 4.2 of that initial application, for example, it is stated that:
T’Bros’ main weaknesses is in the ability of the competition to improve quality while enjoying relatively low labour rates. To that end they are continually improving their efficiency in order to bring down the manufacturing costs and improve quality. (Emphasis added)
Mr Turner claims that the Applicant’s business is a totally different business and that Turner continues to carry on what it has been doing for the last 50 years.
He also says that the products of Turner are completely different and that the grants paid to it were in respect of roller blinds and curtain tracks, whereas the products of the Applicant are external solar shading systems commonly coupled with solar tracking software motorised systems and computer software.
He also says the customers are different. He says there are no overseas representatives of Turner who also represent the Applicant. The Applicant’s logo is different and has no relationship with the logos and trademarks of Turner. The property and assets of the Applicant have never been those of Turner and that there has not been any commonality. He says the only common feature that exists is that Mr Scott Turner is a director of both the Applicant and Turner.
The Applicant also relies on a statement by Mr James Thomas, a consultant, who has prepared or assisted Mr Turner in the preparation of application forms and schedules for an export grant for Turner. Mr Thomas was employed as an Auditor by the Respondent in 1984 in the export markets development grants division. He has had over 24 years’ experience working as a specialist auditor. In 2008 he resigned and became a private consultant. He has been engaged by Mr Turner to review the decision of the Respondent.
He stated his opinion “that the decision of the Respondent was deficient and incorrect”. He considers that 10 of the 11 criteria in the guidelines in this matter are inapplicable and concludes that there is no similarity or overlapping between the overseas activities and personnel of the Applicant and Turner, other than the fact that Mr Scott Turner is a director of both companies.
Mr Thomas’ statement is basically a series of assertions said to be based on his experience. He considers that information provided by Mr Scott Turner to the Respondent as to the relationship between the businesses of the Applicant and Turner was not given appropriate weight and he states he has visited the premises of both the Applicant and Turner and “observed” that their respective operations, products, businesses and overall setup are distinctively different. It is evidence largely composed of opinion and inference and is of little assistance.
The Respondent relies on documents contained in the T documents together with a series of Supplementary Documents largely concerning previous grants to Turner and on a statement provided by Mr Bruno Seguin.
Mr Seguin was an employee of Turner Bros Group for a period of about seven years ending in May 2013. He became the General Manager of that Group and Turner was his employer and paid his salary. He says that there are various companies within the Turner Bros Group including Turner and the Applicant which trades as “Horiso”. He describes Turner and the Applicant, as vertically integrated companies.
As General Manager for the Turner Bros Group he worked both in relation to Turner and the Applicant. He says that each company in the Group had its own export strategy and the Applicant has a specific export strategy of its own.
During the period from mid-2009 to December 2012 when he was General Manager employed by Turner Bros Group he spent approximately 70 per cent of his time in relation to the Applicant’s export strategy. He acquired a 20 per cent shareholding in the Applicant in May 2013, following a period of two years when he had been working on developing the strategy of the Applicant.
In cross-examination Mr Seguin agreed that the Applicant and Turner were two different companies and that they had different strategies.
His evidence was challenged in cross-examination on the basis that he is involved currently in a dispute in relation to his 20 per cent shareholding in the Applicant. He was also challenged on the statement that he spent approximately 70 per cent of his time in relation to the Applicant’s export strategy in the two and a half years to December 2012 whilst on the payroll of Turner.
Notwithstanding this cross-examination, I do not consider that the substance of his evidence has been significantly diminished, and I am satisfied that he spent a very significant part of his time in relation to the export strategy of the Applicant during the period when he was employed by Turner. His evidence indicates that Turner was paying Mr Seguin over several years while he was performing work overseas in relation to Nysan.
In oral testimony he said that his work in relation to the Applicant comprised not only work overseas but also involved work in Australia in maintaining relationships and following through on the overseas promotion activities for the Applicant.
The Tribunal notes that no evidence was called by the Applicant from Mr Murray Turner who at all material times was the CEO of Turner and who, no doubt, would have been in a position to give first hand evidence as to the activities of Turner during the relevant period and the role of Mr Seguin, the company’s General Manager.
The evidence is that the Applicant conducts a manufacturing and marketing operation comprising the design and manufacture of speciality blinds and venetians for the architectural and building industries.
Turner was engaged in the design, supply and installation of internal and external shading systems, internal window furnishings and soft furnishings.
Although Mr Scott Turner states that Turner is not a “manufacturer” and that it has no manufacturing facilities and has never manufactured any product in its existence, there is evidence in the form of a brochure taken down from the web on 16 February 2006 wherein it is stated that Turner is a specialist shading system and furnishings contractors with manufacturing facilities which designs and manufactures light control systems and specialised electronic control systems for internal and external shading. This is the difficult to reconcile with the evidence of Mr Scott that Turner was not engaged in manufacturing. The brochure further states that Turner manufactures and distributes venetian blinds systems and that as well as their own range of manufactured products, Turner exclusively distributes shading systems including “Nysan Horiso” external vent systems.
The brochure recommends the use of Nysan blinds. The brochure also says that as well as their own range of manufactured products, Turner exclusively distributes Nysan shading systems, specialist internal roller and shading systems and Nysan Horiso external venetian blind systems. The brochure directed enquiries about the Applicant’s products to a Mr Jason Turner at “Turnerbros.com.au”. No evidence was adduced from Mr Jason Turner as to the activities of the Applicant and Turner.
In addition, there is an email from Mr Scott Turner dated 4 June 2007 regarding a project in Hong Kong, which promotes the marketing of systems of the Applicant for non-venetian blind requirements and which next refers to discussion about the Applicant’s capabilities. It states that the Applicant will provide a control system for the proto-type blinds directly from Australia.
This email was sought to be explained away by Mr Scott Turner on the basis that it was a proposal which never came to fruition and that it was a one-off proposal and did not result in any orders. I consider that this email is evidence of the marketing and promotional strategy of Turner during the grant years.
In a brochure, taken from the web on 29 April 2010, published by Turner, there is a further assertion that Turner designs and manufactures lighting control systems and specialised electronic control systems for internal and external shading systems. The record goes on to say that as well as their own range of manufactured products, Turner exclusively distributes the Applicant’s specialist internal roller and shading systems. In the same document the Nysan logo appears in conjunction with the logo of Turner and a number of logos of other businesses which are not related to Turner.
The evidence includes the 2006-2007 application form for a grant by Turner which refers to the provision of samples by the Applicant in the Maldives amounting to $4,735.00 in the form of blinds, drapery and soft furnishings.
Also taken down from the website on 15 February 2011 are extracts from a Turner Bros document which refers in detail to the Horiso dynamic façade control system and the Horiso external venetian blinds.
In addition to the above considerations there is the evidence of Mr Seguin that he spent over two and a half years whilst General Manager of Turner working in relation to the Applicant’s export strategy involving travel and other activities in relation to the Applicant’s export strategy.
The Applicant sought to contend that any of the Applicant’s products referred to in the records were products not supplied by the Applicant. I do not consider that the weight of the evidence supports this suggestion.
When this evidence of Mr Seguin is taken into account in conjunction with the statement of Mr Scott Turner, that Turner’s business has remained essentially the same for the last 50 years or more, I consider that there are strong indications that during the relevant seven grant year periods in respect of which Turner received substantial export grants totalling over $429,000 it also carried on as part of its business the promotion and marketing overseas of some of the Applicant’s products. Therefore the activities for which the Applicant now seeks grants can properly be characterised as the carrying on of a business which is sufficiently similar to part of the business carried on by Turner, namely the marketing of the Applicant’s products overseas, to such an extent that the CEO of Austrade should be satisfied that the export business presently carried on by the Applicant should be treated as a continuation of part of the business previously carried on by Turner.
I now turn to a consideration of the matters to be taken into account under para 4(2) of the Guidelines.
Product
The evidence indicates that the products of the Applicant and that of Turner are different, but that Turner has promoted products of the Applicant overseas as part of its export business activities.
Activities
The activities carried out in the course of business of the Applicant and the activities carried out by Turner are substantially similar in part to the activities carried out by Turner in that Turner has been involved in promotion overseas of goods manufactured by the Applicant. There is sufficient evidence in the statement and testimony of Mr Seguin and the statements, records and documents referred to earlier in relation to the previous seven grants to Turner, to demonstrate extensive substantial similarly in the exact activities of Turner and the Applicant.
Customers
It is reasonable to conclude, having regard to the evidence of Mr Seguin and the records in evidence, that the activities carried out by the Applicant, being the promotion of the Applicant’s products will be directed at the persons and entities to which the previous promotion by Turner were directed since these customers have previously been the target of promotion by Turner in relation to the Applicant’s products.
Directors, shareholders and management personnel
Mr Scott Turner is the common director of both companies and, as the Corporate Structure Chart (Appendix A) indicates, he is clearly in a position to indirectly control the activities of the Applicant. He and his brother, Murray, are also in a position to control through their voting power the operations and activities of Turner at all material times. In order to reach this conclusion it is not necessary to pierce the corporate veil. The ability to control is apparent from the diagram in Appendix A. There is no indication of any lack of co-operation between Mr Scott Turner and Mr Murray Turner.
Suppliers
The supplier to the marketing activity of Turner included the Applicant and the Applicant will continue to be a supplier in respect to the export of its own products.
Overseas representatives
There is no evidence that the overseas representatives of the businesses are identical or similar.
Employees
There is no indication that employees of the Applicant’s business and those of Turner are common in any respect, except that Mr Seguin whilst paid by Turner was involved in the export strategy of Turner to a significant extent.
Export Markets of the Applicant and those of Turner
The markets maybe different to some extent but there is no basis to find that they did or will not overlap.
Premises
The premises on which the Applicant’s business is conducted is different from that of Turner, although they are in the same suburb and postcode.
Logo
The logo of the Applicant and Turner are different but they appear together on a number of promotional documents. In some cases other logos of other businesses also appear. However, given the context of the other linkages and close associations between those controlling the Applicant and Turner the joint use and juxtaposition or association of the logos on marketing documents carries some weight in favour of the Respondent’s case.
Property and Assets
On the material before me the property and assets, including intellectual property, of the Applicant and Turner are in different corporate ownership. However, the ultimate control of both the Applicant and Turner and the property of both are within the power of Messrs Scott and Murray Turner.
CONCLUSION
For the above reasons I conclude that within the meaning of s 94(1) Turner carried on a particular business in Australia and that at a later time the Applicant carries on part of that business and now seeks a grant in respect of that business. I am satisfied that the export business of the Applicant is similar to part of the export business of Turner to such an extent that I am satisfied that the Applicant’s business should be treated as a continuation of the Turner business.
DECISION
The decision under review is affirmed.
I certify that the preceding 63 (sixty- three) paragraphs are a true copy of the reasons for the decision herein of The Hon. Brian Tamberlin, QC, Deputy President ...............................[sgd].........................................
Dated 7 April 2015
Date(s) of hearing 2 December 2014, 21 January 2015 Solicitors for the Applicant Mr T Price, Price & Company Solicitors Solicitors for the Respondent Mr L Leerdam, DLA PIPER AUSTRALIA APPENDIX A CORPORATE STRUCTURE
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