Onco Alert Pty Ltd and Australian Trade Commission
[2006] AATA 582
•3 July 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 582
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2005/595
GENERAL ADMINISTRATIVE DIVISION ) Re ONCO ALERT PTY LTD Applicant
And
AUSTRALIAN TRADE COMMISSION
Respondent
DECISION
Tribunal Ms G Ettinger, Senior Member Date3 July 2006
PlaceSydney
Decision The decision under review is affirmed. ..............................................
Ms G Ettinger
Senior Member
CATCHWORDS
Export Market Development Grant –questions regarding whether Applicant or parent company holds IP – approximately 27 fully owned subsidiaries of which the Applicant, Onco Alert is one - Onco hold no bank accounts and does not trade – Onco found not to hold intellectual property on assignment – no eligible expenditure – expenditure on consultants not substantiated as having been incurred for promotional purposes - decision under review affirmed.
Export Market Development Grants Act 1997 ss 5, 29, 33, 37
Austrade EMDG Administrative Guidelines Paragraph 5.10.1(e)Re Alloy Metal Holdings Pty Ltd and Australian Trade Commission (AAT 13436, 6 November 1998)
Re CDS Pty Ltd and Australian Trade Commission [1999] AATA 640
Re Miller Pohang Coal Co Pty Ltd and Export Development Grants Board (1984) 7 ALD 191
Speedo Knitting Mills Pty Ltd v Commonwealth of Australia (1981) 37 ALR 417
Fletcher Projects Pty Ltd and Australian Trade Commission (AAT 11686, 11 March 1997)REASONS FOR DECISION
3 July 2006 Ms G Ettinger, Senior Member
BACKGROUND
1. This matter deals with the appeal by Onco Alert Pty Ltd (“Onco”), against the decision of the Australian Trade Commission (“Austrade”), to deny Onco an Export Market Development Grant for the years 2002/1 and 2002/3. The underlying principle in regard to Export Market Development Grants is that small or medium Australian businesses that are developing export markets for eligible products and have a prospect of success in their export enterprise, should be eligible for a grant.
2. Onco is a wholly owned subsidiary of Probiomics Pty Ltd which was formerly known as VRI Biomedical Ltd. It was agreed at the hearing that the parent company would be referred to as VRI as a matter of convenience, and I have done so in these Reasons for Decision.
3. Onco claims to have intellectual property in a method for predicting and/or diagnosing the risk of gastric cancer, and applied to Austrade for an Export Market Development Grant for the years 2001/2 and 2002/3, for claimed expenditure totalling $300,072, and for a claimed grant of $142,536. This was rejected by Austrade both at first instance and on review. In summary, Austrade, the Respondent in these proceedings, rejected the application on the basis that:
· Onco is not the owner of all the intellectual property being promoted;
· Onco had not incurred the expenditure claimed; and
· the expenditure claimed in relation to marketing consultants and marketing visits had not been substantiated as having being incurred for approved promotional purposes.
4. At the hearing of Onco’s appeal it was represented by its Company Secretary, Mr P Magoffin, who also gave oral evidence before the Tribunal. He appeared with Mr McGrath of Export Marketing and Consultancy Services who has been assisting VRI for some time. A considerable amount of correspondence involving the Applicant, its parent company and the Respondent Austrade appears in the T-Documents under his hand. Professor P Conway, Chief Scientist of VRI, and Mr K Slatyer, the CEO of VRI also gave oral evidence on behalf of the Applicant.
5. The Respondent did not challenge the veracity of any of the evidence given, and indeed Mr P Ginnane, counsel for Austrade, went out of his way to say that the Respondent accepted the Applicant’s witnesses as witnesses of truth. I concur with that.
6. Austrade called Mr O Felsman, its State Manager for Grants (NSW and the ACT), to give evidence. Various statements and other documents were tendered by both parties, including the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, the T-Documents.
7. I had to decide the issues which follow.
ISSUES BEFORE THE TRIBUNAL
· I had to decide whether the Applicant, Onco, is eligible for an Export Market Development Grant for the years 2001/2 and 2002/3, noting that expenses incurred by the Applicant for a grant in the grant years are eligible expenses pursuant to section 29 of the Export Market Development Grants Act 1997, (“the Act”), if the expenses are claimable expenses (section 33 of the Act) in respect of an eligible promotional activity. Section 37 of the Act specifies when an eligible promotional activity in relation to an applicant is for an approved promotional purpose.
8. In considering the above, I had to decide:
· whether Onco is the owner of the intellectual property being promoted;
· whether the expenses claimed by Onco are “eligible expenses” in terms of section 29 of the Act;
· if Onco’s expenses as claimed, are, pursuant to section 33 of the Act, claimable expenses in respect of an “eligible promotional activity”.
· whether Onco incurred and acquitted any claimable expenses;
THE LEGISLATIVE CONTEXT
9. The relevant legislation in this matter is the Export Market Development Grants Act 1997, in particular, sections 5, 29, 33 and 37(1), and the definitions in section 107.
10. The Act provides for an assistance scheme for small and medium sizes Australian business seeking export business, and subsidises their expenses incurred in promoting their products.
“5 Object of Part
(1) This Part defines who is eligible for a grant.
(2) The underlying principle is that only small or medium Australian businesses that:
(a) are developing export markets for eligible products; and
(b) have a prospect of success in their export enterprise;
should be eligible for a grant.”
11. To be able to participate, the expenses incurred by an Applicant must be “eligible expenses” in terms of section 29 of the Act, and if the expenses are claimable expenses in respect of an “eligible promotional activity” (section 33 of the Act). Section 37 of the Act specifies what an “approved promotional purpose” should encompass.
12. The following, “eligible expenses”, “ eligible products” and “eligible promotional activity” are defined in section 107 of the Act. As relevant the definitions follow:
“eligible expenses has the meaning given by Division 1 of Part 5.
eligible products means:
(a) eligible goods; or
(b) eligible services; or
(ba) eligible events; or
(c) eligible intellectual property; or
(d) eligible know-how.”
eligible promotional activity has the meaning given by subsection 33(1).”
13. Section 29 of the Act which deals with eligible expenses follows.
“29 Eligible expenses—general
Subject to section 30, 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) if the applicant is an approved trading house or an approved joint venture—the expenses are related to the approved activity, project or purpose of the trading house or of the joint venture (as the case may be);
(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 $15,000 or more.
Note: For grant, grant year and grantee see section 107.”
14. Section 33 and 37 follow as relevant.
“33 Claimable expenses in respect of eligible promotional activities
(1) The activity specified in column 2 of an item in the following table is an eligible promotional activity in relation to an applicant.
(2) The expenses specified in column 3 of an item in the following table, to the extent to which they are not excluded expenses under Subdivision 4, are claimable expenses of the applicant in respect of the activity specified in column 2 of that item.
…
37 Approved promotional purpose—eligible products
(1) 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:
…
(e) if the applicant is not an approved body—eligible intellectual property or eligible know‑how:
(i) owned by the applicant; and
(ii) that the applicant intends to dispose of;
…
Note: For foreign country see section 22 of the Acts Interpretation Act 1901. For export, goods made in Australia and goods made outside Australia see section 107. For sell see section 109 and for dispose see section 111.
…”
FACTS NOT IN DISPUTE
15. Onco was, before its de-registration, a wholly owned subsidiary of VRI, and it is presently one of approximately 27 wholly owned subsidiaries of Probiomics Pty Ltd (formerly VRI). It has been operating since 2000. Onco does not have its own bank account, nor that it has, at any time, traded.
16. Onco applied for an Export Market Development Grant on 1 December 2003, (T2 & T3), for the years 2001/2 and 2002/3, and on the application form, described its product or service as “Biomedical products and intellectual property rights”. That application was refused by Austrade in a Determination dated 16 June 2004. One of the reasons for the refusal was the fact that Onco had, at the same time as applying for the Export Market Development Grant, applied for company de-registration.
17. Onco appealed the Determination, and was further refused the Export Market Development Grant on 4 April 2005 (T20). Onco then appealed to this Tribunal.
18. I noted that the company registration had been resolved, and was not in question at the hearing, in that Onco has been restored to the ASIC Company Register (T18).
WHETHER ONCO IS THE OWNER OF THE INTELLECTUAL PROPERTY BEING PROMOTED
19. A threshold issue to be determined is whether Onco was, at the relevant time, the owner of the intellectual property being promoted. Mr Magoffin who told me he had limited knowledge of some past matters because he has been employed by VRI only since 2003, gave evidence that Onco is a wholly owned subsidiary of VRI, and does not trade or operate any bank accounts. The parent has the beneficial ownership of the issued share capital but does not own the assets of the subsidiary.
20. Mr Magoffin explained that VRI has, since 2002/3, been developing in the following main areas, probiotics, and vaccines and diagnostics. He told me that the company has been seeking interest from multi-national pharmaceutical companies internationally, and accordingly, promotion of the products involved overseas travel. Mr Magoffin said that Probiotic Culture Company Pty Ltd (PCC), another wholly owned subsidiary of VRI, was charged with responsibility for the probiotic areas, and Onco was to be the conduit for the promotion of vaccines and diagnostics. The functions of PCC and Onco in relation to the various VRI subsidiaries is detailed at PT9/128.
21. In his statement (Exhibit A3), Mr Magoffin stated that “although the two applicants, PCC and Onco Alert, did not own the intellectual property rights of the other subsidiaries involved in probiotics and vaccines/diagnostic respectively, I do believe that each of the applicants did hold the intellectual property on consignment (sic) from the respective entities and intended to dispose of such property to overseas residents (as required by Section 37 of the EMDG Act, and by section (sic) 5.10.1(e) of the Austrade EMDG Guidelines).” In his oral evidence and in his written closing summary/submissions, Mr Magoffin asserted that Onco “did own the IP”.
22. I was mindful that Mr Magoffin explained that where he had used “consignment” in his written or oral evidence, he had used the word interchangeably with “assignment”, the word used in Part 5 of the EMDG Administrative Guidelines to give guidance to the interpretation of section 37(1)(e) of the Act. He submitted that he intended the meaning to be that of “assignment”, which I accepted.
23. Mr Magoffin submitted that if the Tribunal did not accept that Onco owned the IP on assignment, it should consider the submission that Onco owned its own IP. The assignment upon which Mr Magoffin relied to interpolate that IP had been assigned to Onco was at T24. That consisted of a Draft Supply Agreement between Zernike Group BV in the Netherlands and Probiotic Culture Company Pty Ltd, and Mr Magoffin submitted that similar assignments were intended to take place between suppliers and Onco.
24. The Respondent, in refusing Onco the Export Market Development Grant as applied for, held that Onco had failed to establish that it was the owner of the IP being promoted to the extent claimed by way of promotional expenses. It accepted that Onco was the owner of the patent for predicting and/or diagnosing the risk of gastric cancer. I accepted that that patent was conferred through the Canadian Intellectual Property Office (PT7/94), and that there was a Deed of Assignment dated 12 November 2001 between VRI and Onco (T23/190), assigning the patent “Methods for Predicting and/or Diagnosing the Risk of Gastric Cancer” subject of International Patent Application PCT/AU00/00441 filed on 15 May 2000 (PT23/190). There was also the grant of a patent by the Registrar of Patents, Singapore, dated 31 December 2003 from Clancy, Robert Llewellyn and Pang Gerard to Onco in respect of the “Methods for Predicting and/or Diagnosing the Risk of Gastric Cancer” (PT7/108).
25. It appeared from similar documents that various of VRI’s wholly owned subsidiaries were formed in order to have patents conferred on those subsidiary companies. At PT9/127, (29 April 2004), Mr McGrath writing on behalf of the Applicant and in response to the question “Please identify the quantum of expenses in the claim to each company in the group as it appears products of companies other than Onco and PCC are being marketed”, wrote:
“The policy of the previous Board was that where a particular technology (“product”) was being developed, a subsidiary company would in most cases be established. That company would hold all R&D expenses related to the particular project – for example, expenses involved in developing the candiasis vaccine technology would be allocated to Candivax Pty Ltd. In addition in many (but not all cases), the respective companies would also own the patents for the respective technologies.
Management realised that whilst such a setup might be suitable for allocating R&D expenses (and for holding intellectual property) it was inefficient from the point of view of marketing and promotion. A decision was therefore made that promotional and marketing expenses would be centralised in 2 entities:
· Onco Alert Pty Ltd (“Onco”)
· Probiotic Culture Company Pty Ltd (“PCC”)
Onco would act as the marketing and promotional entity for all of the VRI’s diagnostic technologies and PCC would act as the entity for probiotic technologies – both therapeutics and vaccines. …”
26. Although Mr Magoffin asserted in his statement Exhibit A3 at paragraph six, that there had been an intention to assign other intellectual property to Onco, he had no personal knowledge of such intention as he had only commenced working with VRI in 2003, and the Applicant acknowledged that due to changes in personnel and head office, records had gone astray. I noted from a Memorandum of Mr McGrath of Export Marketing and Consultancy Services dated 29 April 2004 to Austrade, that due to a “100% change of both management and staff as well as most of the Board, when the VRI office relocated to Sydney …” (T9/115), records had gone astray and relevant documentation was unavailable.
27. In a letter to Austrade dated 19 August 2005 (T21), Mr Magoffin asserted that because there was a draft supply agreement between an external party and PCC in December 2002 which stated that PCC had an exclusive licence from VRI to use the probiotic intellectual property, then it could be inferred that Onco was acting under a similar understanding of an exclusive licence from VRI for the diagnostic IP. Unfortunately there was no documentation, by way of company records or minutes to support the Applicant’s submission.
28. I noted that at T24, there was a “DRAFT (my emphasis) Supply Agreement” between Zernike Group BV in the Netherlands and Probiotic Culture Company Pty Ltd of some 26 pages, of which the relevant parts for this purpose, state that:
“VRI has developed the Intellectual Property resulting in a unique strain of probiotic organisms (“Probiotic”).
The Supplier has an exclusive licence from VRI BioMedical Limited (ACN 084 464 193) to use the Intellectual Property and the Product Specifications to develop, make, use, and sell the Products in the retail channel of distribution.
…”
29. In the definitions section, “VRI” is defined as “VRI BioMedical Limited (ACN 084 464 193) of Level 11, BCG Centre, 28 The Esplanade, Perth in the State of Western Australia.”
30. “Intellectual Property” is defined in the Draft Agreement as follows:
“Intellectual Property means and includes the Supplier’s Trade Mark, the Product Specifications, patent rights and other technology and intellectual property, including inventions, whether patentable or unpatentable, know-how and trade secrets owned by the Supplier or owned or licensed by VRI to the Supplier that relate to the Probiotics which are required for the manufacture of the Products and for the purposes of this Agreement, including rights in respect of or in connection with:
1.12.1 any of the Confidential Information;
1.12.2 copyright; and
1.12.3 inventions (including patents),
and includes any right to apply for the registration of such rights and includes all renewals and extensions;” (PT24/195)
31. The Respondent did not accept the argument that this indicated similar assignments were intended with Onco, and I noted the Respondent’s concern in correspondence at PT17/166. I was mindful that the Draft Agreement referred to above which was a draft only, was between Zernike Group BV and Probiotic Culture Company Pty Ltd, and whilst VRI was mentioned, and PCC is a subsidiary of VRI, as Onco is, there was no final agreement produced to me, and further there was no mention of Onco in the Draft Agreement between Zernike Group BV and PCC.
32. A further Licence Agreement was between VRI and Bamburgh Marsh LLC with no mention of Onco (T7). Accordingly I accepted the argument of the Respondent that it could not be assumed there would be assignments with Onco, and accordingly I find that the only IP owned by Onco for purposes of this matter was that for “Methods for Predicting and/or Diagnosing the Risk of Gastric Cancer”.
APPLICATION OF SECTION 37(1) OF THE ACT
33. I have already decided in the paragraphs above that in terms of this application, Onco owns only the IP for “Methods for Predicting and/or Diagnosing the Risk of Gastric Cancer”. In deciding, pursuant to section 37(1)(e) of the Act, which is the relevant sub-section in this case, whether the Applicant meets those tests, I have taken into account how VRI and its subsidiaries were operated. That appeared in various places in the T-Documents, and is clearly enunciated in particular at T9, which is a Memorandum dated 29 April 2004, prepared by Mr McGrath regarding Onco and PCC in reply to queries by Austrade. In it Mr McGrath gave a rundown on how the company used to operate, explaining that where a particular technology or product was being developed, a subsidiary company would usually be established to hold all R&D expenses e.g. candidiasis vaccine technology would be allocated to Candivax Pty Ltd, and each company would own the patent for its technology. He explained that whilst that was suitable for allocating R&D expenses and holding intellectual property, it was inefficient as to marketing and promotion. Therefore, a decision had been made to centralise marketing and promotional expenses in Onco and PCC, the former acting as the entity for all of VRI’s diagnostic technologies, and the latter for probiotic technologies (therapeutics and vaccines). A further change was to de-register most of the subsidiaries, rationalise ownership of IPARs, relinquish certain patents, transfer others to VRI, and hold expenses in the holding company. He gave the example of a proposed licence agreement with Bamburgh-Marsh, an American company, based on technology previously held by subsidiaries Onco and Helirad, which was to change to an agreement between VRI and Bamburgh-Marsh.
34. I was satisfied from the evidence of Mr Magoffin and Mr Slatyer, (the current CEO of VRI who gave evidence by telephone link), that it was the Group’s practice at the relevant time, to pay all expenses through the parent company, and then for costs to be allocated to the various subsidiaries for reporting and taxation purposes. There is of course nothing wrong with this practice for accounting purposes provided it accurately reflects what has occurred. Here it was evidenced in annual reports to shareholders, and in tax returns which form part of the T-Documents. However for these purposes, I needed to consider the practices in light of the requirements of the Export Market Developments Grants Act.
35. Accordingly I have considered section 37(1)(e), and paragraph 5.10.1(e) of the Guidelines issued by Austrade which assist in the application of the Act.
“37 Approved promotional purpose—eligible products
(1) 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:
…
(e) if the applicant is not an approved body—eligible intellectual property or eligible know‑how:
(i) owned by the applicant; and
(ii) that the applicant intends to dispose of;
…”
36. IP ownership by the Applicant has been explored above, and I note that disposal is intended to be property that is disposed of for reward to a person who is not a resident of Australia for use or enjoyment outside Australia.
37. Paragraph 5.10.1(e) states as follows, and assists by clarifying the situation in relation to section 37(1)(e) of the Act.
“If the applicant is not an approved body-eligible intellectual property or eligible know-how:
(i) owned by the applicant; and
(ii) that the applicant intends to dispose of;
The intellectual property or know-how must be owned by, or held on assignment by the applicant.
Disposal includes sale, grant, assignment or supply. Intellectual property and know-how must be disposed of for reward to a non-resident of Australia for use or enjoyment outside Australia …”
38. Unfortunately the Applicant has not demonstrated to my satisfaction that it owns all the IP, or that it has held it on assignment. I accept that Onco was assigned the IP for “Methods for Predicting and/or Diagnosing the Risk of Gastric Cancer”, but I could not be satisfied that this indicated as submitted by the Applicant that an assignment of other IP occurred or was intended. As noted above, I was not satisfied with the submissions of the Applicant that one Draft Agreement between two different legal entities demonstrated the intention of the Company at the relevant time regarding the assignment of IP to Onco.
39. This means that Onco does not pass the threshold tests in that it does not own all the IP which was being promoted or for which expenditure was claimed. However I have gone on to consider the application of sections 29 and 33, and decide whether the expenditure as claimed by Onco was eligible expenditure in respect of an eligible promotional activity at least in terms of the “Methods for Predicting and/or Diagnosing the Risk of Gastric Cancer”.
WHETHER ONCO INCURRED AND ACQUITTED CLAIMABLE EXPENSES - ELIGIBLE PROMOTIONAL ACTIVITY – SUBSTANTIATION OF THE EXPENDITURE CLAIMED IN RELATION TO MARKETING CONSULTANTS AND MARKETING VISITS
40. I have considered whether Onco incurred and acquitted any claimable expenses, and what substantiation there has been in relation to overseas representation, marketing consultants and marketing visits. Marketing visits can of course be found to be eligible promotional activity if they are made for an approved promotional purpose. In that regard I am mindful of the evidence of Professor Conway, the chief scientist, who told me that she is employed and paid by VRI, and that she made several overseas visits on behalf of the various companies in the group. Professor Conway’s statement dated 30 March 2006 was Exhibit A1 before the Tribunal. She gave evidence that she was not required to keep separate accounts or financial details of visits separately on behalf of the various companies, and was unable to distinguish between them. I was mindful of Professor Conway’s evidence which I accepted, that she was making her visits as a scientist, and was not required to have regard to particular accounting practices. That did not however assist the Applicant with its claims.
41. Mr K Slatyer whose statement dated 31 March 2006 was before the Tribunal as Exhibit A2, gave oral evidence by telephone link from Perth. He is a founder of VRI, and was a non-executive director at the relevant time. He said that he had undertaken two overseas trips on behalf of VRI during 2001/2002. He said that he was paid consulting fees by VRI on behalf of Onco over and above his director’s fees. For these purposes, I was mindful that VRI was the entity which paid the fees, and not Onco, once again of no assistance to the Applicant in relation to its claim for an export market development grant.
42. I have also noted the claims made by the Applicant regarding the work of Dr M Hauck in Germany, on behalf of the Applicant. In that regard, in a document marked as MFI(1) there was a series of emails recording communications in 2002 between Dr Hauck, John Frame and Leon Ivory, the latter former VRI directors, regarding Dr Hauck’s appointment and his work for VRI. It is clear from those that Dr Hauck did carry some work for VRI. However, there was no formal contract, or letter of appointment available to me, neither marketing reports or indeed any other evidence from Dr Hauck. I was mindful that Austrade officers, including Mr Felsman, visited Dr Hauck unannounced on 25 March 2004 and conducted an interview, the report of which is at Exhibit R4 and T6. The conclusion the officers drew was that Dr Hauck was involved in product development for VRI, and not marketing or sales. There was however a submission made by the Applicant that Dr Hauck did not fully understand the questions he was asked. In that regard, I have noted an email at T17/164 from Dr Hauck to Leon Ivory dated 17 August 2004 in which he refers to the Austrade report of the interview and states: “Reading the report, I missed 20% of the discussion … especially the part with our ‘go to market’ activities …” In what appeared to be a direct contradiction as to not understanding the discussion, there is at T17/165 what appears to be a memo by Mr McGrath headed “File Note – Discussions with Michael Hauck” dated 21 April 2004 in which the writer states:
“Hauck said that about 4 weeks ago he had been visited by 2 Austrade staff…. They had arrived at his office without any appointment but he had spoken to them for about 1 1/2 hours and fully explained his role with VRI; if Austrade had any queries they could either speak to Owen or Les, or could fax or email him directly in Germany.”
43. There were other documents regarding the visits to Dr Hauck which I do not find it necessary to detail here. I have made no findings in regard to whether he understood the conversation with Austrade in full.
44. I was told that Dr Hauck has ceased working with VRI, and he did not give oral or written evidence before this hearing. There was no formal contract with him which detailed how much he would be paid, and what his duties included, and as he did not report formally in writing, there are few written records of his activities, which in any case were on behalf of VRI, and not Onco in particular. The Applicant submitted that if the Tribunal should find that Dr Hauck was, in addition to marketing activities, involved, in other non-eligible, non-marketing activities, then the expenses could be apportioned between marketing/promotion and product development and other activities. That is certainly an option, and I was mindful that in Re Alloy Metal Holdings Pty Ltd and Australian Trade Commission (AAT 13436, 6 November 1998), the Tribunal held that:
“In the course of business an agent may perform a variety of activities but not all may qualify for eligibility. It is necessary to determine the true character of the expenditure:” Export Market Development Grants Board v Geoffrey Thompson & Growers Co-Operative Company Pty Ltd (1985) 6 AAR 276
45. Unfortunately I did not have sufficient information or evidence to satisfy me that I could apportion any expenditure, neither that any of the expenditure was specifically related to Onco rather than VRI or its other companies. I was not satisfied that Dr Hauck’s activities, and any expenditure on those, related to an approved promotional activity rather than product development or other activities.
46. In order to further consider whether Onco incurred and acquitted claimable expenses, I was mindful that Onco did not operate bank accounts or trade. Mr McGoffin’s evidence was that VRI paid all of Onco’s expenses, and that these were not repayable. This question was discussed in Miller Pohang Coal Co Pty Ltd v Export Development Grants Board (1984) 7 ALD 191, where the RW Miller Group of Companies was involved as a parent company, as VRI is in the present case. In that case Miller Pohang which was wholly owned by The Group, was found to have incurred expenditure through money advanced by The Group. The Tribunal in that case indicated that the legislation “is directed to ensuring that the applicant has a legal obligation to pay the expenditure in question.” As already stated, Onco had no such obligation, and cannot therefore be held to have incurred the expenditure and have complied with the definition of eligible expenditure pursuant to section 29 of the Act (CDS Pty Ltd and Australian Trade Commission [1999] AATA 640). I noted that that obligation to repay formed the basis for a decision in favour of the Applicant in Fletcher Projects Pty Ltd v Australian Trade Commission (AAT 11686, 11 March 1997). However Onco had no such obligation.
47. As noted in the paragraphs above, the breakdown of any promotional expenditure attributable to the individual companies in the VRI Group was unable to be ascertained, (moneys paid to Dr Hauck, Professor Conway’s evidence). I have noted the requirement for an applicant for an Export Market Development Grant to identify activities undertaken by it which are eligible activities. Speedo Knitting Mills Pty Ltd v Commonwealth of Australia (1981) 37 ALR 417 is relevant, notwithstanding that case having been decided pursuant to earlier legislation. I was not satisfied that the expenditure as claimed by Onco was substantiated as an eligible expense. If Dr Hauck’s activities were in product development, and there is not sufficient information before me to be satisfied, then that was, by definition, not an eligible expense for an approved promotional purpose. In any case, it was not in dispute that the expenditure was made by VRI, and of course some part of it may have been for approved promotional purposes, but unless that can be substantiated, no export market development grant can be paid. I was not satisfied from the evidence before me that it was. Further, I could not be satisfied from the evidence of the intention of the Applicant in regard to disposing of its intellectual property.
48. I am mindful that the Respondent submitted that if I were to accept the Applicant’s argument, then I should remit the matter for consideration of the substantiation issue and calculation of the grant. I accept this would have been a suitable course upon which to proceed, but in the circumstances, it does not apply.
49. In summary:
· I was satisfied that in regard to this application, Onco has shown itself only to be the owner of intellectual property relating only to “Methods for Predicting and/or Diagnosing the Risk of Gastric Cancer”. The assignment/consignment argument of the Applicant in regard to other IP fails, as discussed above.
· I find that the Applicant did not incur or acquit claimable expenses as required by the Act. It did not have any bank accounts or trade, which is not fatal to the claim, but it received its funds from the parent VRI, and they were not required to be repaid.
· Any expenditure that Onco may have incurred in respect of the intellectual property it owns cannot be identified, isolated or substantiated to have been made for an approved promotional purpose, and I was not satisfied pursuant to section 37(1)(e) of the Act, that there was evidence before me which demonstrated that the Applicant had intentions of disposing of the IP.
50. Accordingly the application must fail.
EFFECTS OF AMENDMENTS TO THE LEGISLATION
51. A further issue is for noting only, namely submissions by the Applicant, and the concession made by the Respondent that pursuant to amendments to the Act, currently the Export Market Development Grants Legislation Amendment Bill 2006, Applicants may be held as being eligible even where they do not technically meet the Export Market Development Grants current principal status requirements. It is anticipated that this will apply in respect of a grant year commencing on or after 1 July 2006, and may at a future date be of assistance to companies such as Onco.
DECISION
52. The decision under review is affirmed.
I certify that the 52 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member
Signed: .....................................................................................
AssociateDate/s of Hearing 8 & 9 May 2006
Date of Decision 3 July 2006
Representative for the Applicant Mr P Magoffin, Company SecretaryRepresentative for the Applicant Mr M McGrath, Export Marketing and Consultancy Services
Counsel for the Respondent Mr P Ginnane
Solicitor for the Respondent Mr C Tucker, Collins House Legal
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