Parker Pen (Australia) Pty Ltd v Export Development Grants Board
[1983] FCA 77
•28 APRIL 1983
And: EXPORT DEVELOPMENT GRANTS BOARD (1983) 67 FLR 234
No. G138 of 1982
Administrative Law - Trade and Commerce
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)
Administrative Law - Appeal from Administrative Appeals Tribunal on question of law - Whether expenditure on overseas promotion of well known Parker pen and other Parker products qualifies for grant under the Export Market Development Grants Act 1974 - Whether expenditure primarily and principally for the purpose of creating overseas opportunities for sale and export of Australian made Parker products - Meaning of "primarily and principally" discussed - Whether sufficient nexus between the promotion of local product and expenditure incurred.
Administrative Appeals Tribunal Act 1975, s.44.
Export Market Development Grants Act 1974, ss. 4, 12, 13, 14, 15, 40A.
Trade and commerce - Export market development grants - Eligibility of certain expenditure - Whether expenditure primarily and principally for purpose of creating overseas opportunities for sale and export of Australian made goods - Meaning of "primarily and principally" - Meaning of "purpose" - Export Market Development Grants Act 1974 (Cth), s. 4(1).
The appellant, the Australian manufacturer of "Parker" products, submitted a claim for a grant under the Export Market Development Grants Act 1974 (Cth). Grants under the Act were based upon the claimant's "eligible expenditure" incurred during the relevant grant year, which is defined in s. 4(1) of the Act to mean "expenditure that, in the opinion of the Board, has been incurred by a person primarily and principally for the purpose of creating or seeking opportunities, or creating or increasing demand, for . . . (export of goods manufactured in Australia)." The Board, established to administer the Act, disallowed certain advertising expenditure as not being "eligible expenditure", and its decision was affirmed by the Administrative Appeals Tribunal. The relevant expenditure was paid by the claimant to the advertising agencies with whom the expenditure had been incurred, not by the claimant, but by a related overseas company. Some of the invoices paid by the claimant did not necessarily have any direct relevance to any benefit that might accrue to the sales by it of "Parker" products in countries in which it shared the market for those products with related companies. From the Tribunal's decision the claimant appealed, arguing that the Tribunal had erred in law.
Held: (1) The words "primarily" and "principally" as used in s. 4(1) of the Act do not connote two separate tests. The phrase "primarily and principally" is used in the sense of "chiefly, or mainly."
Speedo Knitting Mills Pty Ltd v. Commonwealth (1981) 57 FLR 74 referred to.
(2) The purpose referred to in s. 4(1) is the subjective purpose of the claimant, but it is for the Tribunal of fact to consider all the circumstances, including objective facts as well as the claimant's own evidence of what its purpose was, and conclude whether the requisite purpose has been established.
(3) Although the expenditure was connected with the advertising of Parker products generally, it did not have the requisite nexus with the promotion of increased sales of "Parker" products of Australian manufacture as opposed to those manufactured overseas by related overseas companies.
1983, March 30; April 28. #DATE 28:4:1983
APPEAL.
Appeal on a question of law from a decision of the Administrative Appeals Tribunal affirming a decision of the Export Development Grants Board that certain expenditure of the appellant was not "eligible expenditure" within the meaning of s. 4(1) of the Export Market Development Grants Act 1974 (Cth).
G.A. Palmer, for the appellant.
P. Fleming, for the respondent.
Cur. adv. vult.
Solicitors for the applicant: Minter Simpson & Co.
Solicitor for the respondent: B.J. O'Donovan, Commonwealth Crown Solicitor.
F.P.C.
1. The appeal be dismissed.2. The appellant pay the respondent's costs of the appeal. Orders accordingly.
This case raises the question whether the expenditure of moneys by Parker Pen (Australia) Pty. Limited ("the appellant") in promoting the sale overseas of the well known Parker pen and related products qualifies for a grant under the Export Market Development Grants Act, 1974 ("the Act").The question arises in an appeal to this Court from a decision of the Administrative Appeals Tribunal which in substance affirmed a decision of the respondent, Export Market Development Grants Board, that certain expenditure of the appellant was not 'eligible expenditure' within the meaning of that expression in the Act. The Tribunal was constituted by a senior member (Mr R.K. Todd). The appeal is brought pursuant to s.44 of the Administrative Appeals Tribunal Act 1975 and is, therefore, limited to an appeal on a question of law.
The Act relates to grants for the purpose of providing certain incentives, including those for the development of export markets. A person desiring to obtain a grant under the Act is required to submit a claim to the Board (sub-s.13(1)) which then considers it and determines whether the claimant has a 'grant entitlement' and, if so, the amount thereof (sub-s. 12(1)). Where the Board determines that the claimant has a 'grant entitlement', there is payable to the claimant a grant equal to the amount of the 'grant entitlement' so determined (sub-s. 12(2)). A grant is not payable to a person in respect of 'eligible expenditure' incurred by that person at a time when he was not a resident of Australia (sub-s. 14(2)). The 'grant entitlement' of a claimant in relation to a grant year is an amount equal to 70% of the 'eligible expenditure' incurred by the claimant during that year (s.15).
The expression 'eligible expenditure' is defined in sub-s. 4(1) in these terms:-
'4. (1) Subject to the succeeding provisions of this section, a reference in this Act to eligible expenditure is a reference to expenditure that, in the opinion of the Board, has been incurred by a person primarily and principally for the purpose of creating or seeking opportunities, or creating or increasing demand, for _
(a) the sale by that person for export, or the export by that person and sale by him, of eligible goods manufactured, produced, assembled or processed in Australia;
(b) in the case of a person who manufactured, produced, assembled or processed eligible goods at the time when the expenditure was incurred, the sale for export, or export and sale, of eligible goods manufactured, produced, assembled or processed in Australia by that person;
.....
but does not include so much of any expenditure incurred by that person as _
(k) has been, or is to be, paid or reimbursed to him by another person, the government of the Commonwealth or of a State or Territory or any other government;'
Sub-s. 4(5) provides:-
'4. (5) Where the amount of any expenditure constituting or forming part of any eligible expenditure exceeds the amount that, in the opinion of the Board, would reasonably be expected to be payable for the purpose or purposes for which the expenditure was incurred, the Board may, for the purposes of this section, treat the expenditure as being reduced by the amount of the excess.'
The essential facts for the purposes of the appeal are not in dispute. The appellant manufactures and distributes writing instruments under the name 'Parker' in Australia including the 'Parker' pen. The appellant is a wholly owned subsidiary of a United States company. The appellant exports writing instruments and associated products to various overseas countries, principally in the Asian and Pacific regions.
The appellant lodged a claim in respect of the 1978/79 grant year with the Board. The Board allowed certain items of expenditure referred to in the claim and disallowed others. The only two items disallowed by the Board relevant to this appeal are best described by reference to the documents pursuant to which the expenditure was incurred by the appellant. The first is an invoice directed to Parker Pen (Far East) Limited (to which I shall refer to as 'Parker Far East') by a company Chase-Compton Advertising Limited (to which I shall refer as 'Chase-Compton'). Parker Far East is a wholly owned subsidiary of the same United States company that owns all the share capital of the appellant. Chase-Compton is also a subsidiary of the same U.S. parent. The invoice, so far as relevant, is as follows:-
Parker Pen Far East Regional Advertising
$ ctsTo publication
Time
Date : Dec 11, 18, 1978 US$13,130.00
Far Eastern Economic Review
Date : Dec 15, 22, 1978 6,724.44
Newsweek
Date : Dec 11, 18, 1978 11,850.00
Asia Week
Date : Dec 8, 15, 1978 3,740.00
------------ US$35,444.44Production Cost
------------
US$36,134.80"
------------
The other item of expenditure incurred by the appellant, but disallowed by the Board, is described in a 'debit memo' directed to the appellant by Parker Far East and refers to 'Parker advertising expenses in the Philippines incurred during FY79 ending 25 February 1979 U.S.$22,800'.
It is conceded by the Board that if the expenditure was incurred primarily and principally for the purpose referred to in sub-s. 4(1) of the Act, the amount of the expenditure was a reasonable sum for the appellant to have incurred for those purposes. Hence no issue arises under sub-s. 4(5) of the Act.
After the Board notified the appellant of its determination to disallow the relevant claim the appellant requested the Board to reconsider its decision under s.40A of the Act, which it did, and confirmed its original decision and notified the appellant of the result of its reconsideration of the decision pursuant to sub-s. 40A(5).
During the relevant grant year, the appellant exported its products to 26 countries of which the largest markets in dollar terms were New Zealand, New Guinea and the Philippines.
The appellant was the sole supplier of the Parker products to 20 (possibly 21) of the 26 countries. The appellant shared its markets in five countries with other affiliated companies in the Parker Pen group, being companies incorporated outside Australia. The recipient of the largest portion of the appellant's products was a company Duty Free Shoppers Limited which acquired in the relevant period approximately 50% (in monetary terms) of the appellant's exports. The appellant did not export Parker products to Japan. The appellant considered that it supplied a part of the Japanese market indirectly via duty free stores, principally those located in cities outside Japan, but frequented by Japanese tourists. There was a duty free shoppers showroom in Tokyo which was merely a display store. None of the appellant's products were sold from that store but it contributed to advertising expenses there because it believed that Japanese tourists confined their purchases of goods when travelling abroad to duty free stores and, as generally they did not speak English and visited the showroom in Tokyo before departure, they decided then what they wished to purchase duty free after leaving Japan. The appellant believed that in these circumstances it was reasonable that it should bear a share of the promotional expenses in Japan as it gained 'spin-off marketing and export sales benefits'.
The advertising of Parker products in countries where the appellant was the sole supplier was undertaken by the appellant itself and advertising expenses incurred were paid for by it direct to the other contracting parties. In countries where the appellant shared markets for Parker products with other affiliated Parker companies the promotion of Parker products was undertaken by Parker Far East and, although the evidence is rather scanty on the point,it appears that Parker Far East dealt directly with advertising agents or other companies with whom advertising or promotional material was placed by it.
The appellant played no role in determining the allocation of promotional expenditure by Parker Far East in the countries where Parker products were advertised, the amount allocated to each country, the form or extent of advertising, the selection of the appropriate medium for advertising, the choice of relevant publications and so on.
The appellant and apparently each of its affiliates committed itself to Parker Far East for 10% of its estimated sales of Parker products in its 'marketing franchise areas', that is, areas in which it shared franchises with other affiliated Parker companies. It appears that at the beginning of each financial year the appellant and its foreign affiliates each assessed the F.O.B. values of export sales of Parker products by it for the forthcoming year and 10% of that figure was treated within the Parker Group as its commitment to Parker Far East for promotional expenditure in those shared franchise areas. As the appellant and its affiliates achieved sales in the shared franchise areas they sent copies of all invoices for export shipment to Parker Far East.
Although the evidence is far from clear on the point, it appears that the appellant and its overseas affiliates did not pay Parker Far East in respect of the advertising placed by Parker Far East, but in some way Parker Far East divided its overall commitments for advertising between the various affiliates including the appellant, and allocated proportions of expenditure directly related to the 10% commitment of each company. Parker Far East did not itself pay the advertising expenses incurred by it and debit each affiliate with its respective share to be reimbursed by it, but instead arranged for invoices to be sent by the advertising agency, or company with whom the expense had been incurred, direct to the appellant or other affiliate for an amount having some nexus with the 10% commitment of that affiliate, so that at the end of each year each affiliate had paid the 10% commitment to a variety of companies and advertising agencies throughout the franchise areas. In fact some of the invoices paid by the appellant did not necessarily have any relevance to any benefit that might accrue to the sales by the appellant of its products in shared franchise areas. This is borne out by the invoice from Chase-Compton to Parker Far East, the relevant parts of which I set out earlier. Also, so far as the invoice for US$22,800.00 from Parker Far East to the appellant is concerned it related entirely to advertising expenses in the Philippines, but that market was shared by the United States and French affiliates and the appellant, but the appellant's share of the market was only 27%.
The appellant obtained foreign exchange approval to the remission of funds abroad by presenting to the relevant authorities here the invoices sent to it by Parker Far East as apparently evidencing a liability to be discharged by it.
I emphasise that the evidence relating to the machinery adopted for incurring and paying advertising expenses in shared franchise areas is sparse and does not admit of any clear conclusion.
In relation to this advertising Mr Brewer said in evidence:-
'The Hong Kong company has an advertising executive who looks after the advertising and co-ordinates the advertising in the markets they are responsible for, and the supplying countries like Australia and France actually send copies of all the invoices for export shipments to these various countries to the Hong Kong office and we accrue up to 10 per cent of the value of the invoice toward advertising expenditure in the area. The Hong Kong office plans the advertising campaigns in the various countries and allocates the money that is accrued by the exporting countries to these advertising campaigns, and in order to substantiate the expenses they obtain the invoices from the advertising agencies in the various countries and then they send them to the supplying countries for payment, because in order for us to remit money overseas we have to provide the bank with the documents covering the expenditures, and our commitment is a maximum of 10 per cent of our sales.'
The marketing philosophy of the appellant was described by Mr Brewer in a letter of 22 June 1981 in these terms:-
'...the international image of Parker Pen prestige and quality, which has been established and accepted over a period of many years, has resulted from the development of a marketing philosophy which focuses on the quality of the Parker Pen product range rather than the countries of origin or manufacture. This marketing philosophy has equal application to similar products which are manufactured and marketed on a trans-national basis by other companies.
Whilst it is acknowledged that overseas promotional activity undertaken by our Company would lead to some spin-off marketing benefits for other Parker Pen companies located outside Australia, we wish to assure you that marketing benefits also accrue to our Company which are commensurate with the considerably greater promotional expenditure undertaken by our overseas affiliates.
...
Parker Pen products have gained a prestigious status in virtually every available market throughout the world and it is for this reason that all promotional expenditure is directed towards the promotion of the international status of the products themselves rather than the country of their origin or manufacture.
Whilst this marketing philosophy dominates the promotion of Parker Pen products it is achieved by making it incumbent on individual Parker Pen manufacturing and exporting affiliates to support on a pro-rata basis (namely up to the maximum of 10% of projected sales) the promotion of their product range in their respective franchise marketing areas.'
A typical advertisement in Time magazine and Newsweek magazine during the relevant time featured a picture of a well groomed and well dressed man of Asiatic appearance using a telephone. Underneath the picture there is a caption: 'He deserves a Parker". The advertisement then states without more (except for a picture of the top of a pen and the Parker 'arrow' logo):-
'There is a Parker pen to commemorate any important occasion. Parker offers more styles and finishes, in more writing modes, over a wide range of prices. And because Parker makes only writing instruments, every one is the product of specialists who are expert in their field. Let a Parker express congratulations for you, and keep saying it over years of superb performance.
PARKER
World's most wanted pens'The invoice from Chase-Compton to Parker Far East refers to advertising in the Far East edition of Time, the Far East edition of Newsweek, the Far East edition of Economic Review and Asia Week. The circulation of these publications at the relevant time was in various countries, some of which were supplied with Parker products solely by the appellant, some by the appellant and its affiliated companies where they shared franchises and some by the appellant's affiliated companies but not by the appellant. In some of the countries no Parker products were supplied by any of the companies in the Parker group. I need not set out the list of countries comprising the above categories. They are referred to sufficiently in the reasons of the Tribunal.
An appeal to this Court from the Tribunal's decision is, by the express terms of s.44 of the Administrative Appeals Tribunal Act 1975, limited to an appeal on a question of law. The question of law said to arise in this case is:-
'Whether, and if so, how far, the fact that advertising expenditure was paid by the Appellant to a related company which advertised on behalf of the Appellant as well as on behalf of itself and other associated companies of the Appellant was relevant in determining the purpose for which the Appellant expended such moneys;'
The grounds of appeal included the following:-
'The Tribunal erred in holding that
(i) it was of any relevance that the Appellant did not itself directly make the expenditure referred to in annexures 'B' and 'D';
....
(iii) the fact that Parker Pen (Far East) Limited expended moneys paid to it by the Appellant for advertising goods of the same description as eligible goods of the Appellant in areas supplied by other associated companies of the Appellant as well as by the Appellant resulted in the Appellant's purpose in expending the moneys being other than primarily and principally an eligible purpose within the meaning of section 4(1) of the Act.'
The reference to the expenditure referred to in annexures 'B' and 'D' is to the two items of expenditure, the subject of this appeal and described in the invoice and debit memo mentioned earlier.
I have some doubt as to whether the alleged question of law is a question of law at all, but on balance I think it is.
Other matters were characterised in the notice of appeal as questions of law and grounds of appeal, but they were based on findings said to have been made by the Tribunal which were not in fact made. In the result they were not pressed.
It is, of course, important to keep in mind that the question before the Board was not whether the expenditure was incurred primarily and principally for the stipulated purpose but whether, in the opinion of the Board, it was so incurred. The Board confirmed its earlier decision disallowing the expenditure on the ground that in its opinion the appellant had failed to satisfy it that it was incurred primarily and principally for the stipulated purpose. The question for the determination of the Tribunal was whether the Board's decision was the correct one on the material before the Tribunal.
In its review of an administrative decision, the Tribunal
'....is subject to the general constraints to which the administrative officer whose decision is under review was subject, namely, that the relevant power must not be exercised for a purpose other than that for which it exists (Water Conservation and Irrigation Commission v. Browning (1947) 74 C.L.R. 492 at 496, 498, 499-500, 504), that regard must be had to the relevant considerations, and that matters 'absolutely apart from the matters which by law ought to be taken into consideration' must be ignored: R v. Cotham (1898) 1 Q.B. 802 at 806; Randall v. Northcote Corp. (1910) 11 C.L.R. 100 at 109-110; Shrimpton v. The Commonwealth (1945) 69 C.L.R. 613 at 620; R. v. Anderson; Ex parte Ipec-Air Pty. Ltd. (1965) 113 C.L.R. 177 at 189;'
per Bowen C.J. and Deane J. in Drake v. Minister for Immigration and Ethnic Affairs (1979) 24 A.L.R. 577 (at p.589).
Sub-s. 4(1) uses the adverbs 'primarily' and 'principally'. It is a curious use of language. The words have different derivations and sometimes different connotations. For example, one meaning of 'primarily' is at first or originally. 'Principally' does not bear this meaning. I have looked at various dictionaries. They all define the adjectives 'primary' and 'principal' and some define the adverbs 'primarily' and 'principally'. The modern meanings given in the dictionaries to these words is much the same. For example, Collins Dictionary of the English Language, Australian edition edited by G.A. Wilkes, defines 'primarily' so far as relevant, as 'principally; chiefly; mainly'. The Macquarie Dictionary defines the adverb 'principally' as 'chiefly; mainly'. It is in this sense that the words are to be understood in sub-s.4(1). Notwithstanding the tractability of the English language I do not think that the two adverbs have separate work to perform in the sub-section. In my view the draftsman used both words to emphasise that it is only where the Board is satisfied that expenditure has been incurred mainly or chiefly (to use neutral adverbs) for the required purpose that the expenditure answers the description of 'eligible expenditure'. It is important to remember that the task of deciding whether expenditure is 'eligible expenditure' is vested in the Board, and it is its opinion that is determinative of a claimant's entitlement to a grant. The Board comprises people who qualify for appointment by virtue of their knowledge of or experience in commerce or industry (sub-s. 23(3)). They need not be lawyers. To propound a highly sophisticated test to determine a practical question of someone's entitlement to a grant under the Act would tend to confuse not assist those who must determine the question. I do not think it matters, however, whether the two adverbs are treated as synonymous or have some subtle difference in meaning. The essential intention of the draftsman is clear enough.
The Tribunal said:-
'Each of the words 'primarily' and 'principally' must be given its due weight. I do not doubt, and I do not understand the respondent to have argued otherwise, that amongst the purposes of the applicant's advertising expenditures was the purpose of promoting the sale by export of its own products as opposed to the products of its affiliated companies. The issue at hand is whether that purpose was both a prime and a principal purpose. That is, whether the purpose was not only first in importance but also whether it was predominant to the degree that the expenditure could, on the whole, be said to be attributed to it.'
There is an apparent difference in approach between the Tribunal and myself because the Tribunal attributed some difference in meaning and weight to each of the words 'primarily' and 'principally'. The Tribunal used the word 'predominant'. 'Predominant' may be understood in the sense of mainly chiefly, primarily or principally. If 'predominant' is understood in its other sense of having a controlling or ascending influence so that in the present context not only must there be the stipulated purpose but every other purpose, if any, must be infused with some element of the stipulated purpose, then for all practical purposes this amounts to saying that the stipulated purpose must be the sole purpose. This could not be correct because the section itself does not require that the stipulated purpose be the sole purpose. I do not think the Tribunal used the word 'predominant' in this lastmentioned sense. Any differences between the Tribunal and myself on the meaning of 'primarily and principally' are essentially of language rather than approach. Upon analysis there is no material difference between our views. I do not think that the Tribunal would have come to any different conclusion as to the outcome of the appeal if it had expressed the test in my terms.
I was referred in argument, as was the Tribunal, to some cases where the word 'primarily' was used including Sonter v. Commissioner of Land Tax (N.S.W.) (1976) 7 A.T.R. 30 and Abbott v. Commissioner of Land Tax (Vic.) (1978) (1979) V.R. 297. The word was used in those cases in very different contexts to sub-s. 4(1), so they are not helpful here.
In Speedo Knitting Mills Pty. Limited v. Commonwealth of Australia (198 37 A.L.R. 417, Woodward J. of the Supreme Court of New South Wales, considered the meaning of the words 'primarily and principally' in the context of sub-s. 4(1) of the Act. I do not think that my view is in essence different from that taken by his Honour.
The word 'purpose' is, of course, susceptible of a variety of meanings depending on its context. In the context of sub-s. 4(1) the enquiry must be to ascertain whether the expenditure was incurred by the person primarily and principally for the purpose of creating or seeking opportunities or creating or increasing demand for the stipulated objects, including the sale by that person for export of eligible goods manufactured in Australia. This involves a subjective element. The purpose must be someone's purpose. It is the purpose of the person mentioned in the sub-section. To ignore subjective elements is wrong. There is, of course, a difference between the essential elements in the notion of purpose and the means whereby purpose is ascertained. Purpose may be gleaned either from subjective or objective elements or, more usually, both. A person may say what his purpose is, but the objective facts may cast doubt upon the credibility or reliability of his statement. It is for the tribunal of fact to consider all the circumstances and conclude whether the requisite purpose has been established. Objective facts are usually more reliable than mere protestations of purpose, intent or state of mind, which, although susceptible of testing in cross-examination, are intrinsically impenetrable and inscrutable.
There are difficulties in the path of the appellant's assertion that the relevant expenditure was incurred by it primarily and principally for the requisite purpose. It was not the appellant which directly undertook the advertising. This was done by Parker Far East. Yet the material before the Tribunal concerning the terms of the arrangement between the appellant and Parker Far East and between the foreign affiliates of the appellant and Parker Far East, and the terms of the franchises granted to the appellant and to its affiliates in areas where franchises were shared between them, was sparse and unclear. There is an absence of material from which the Tribunal could ascertain with any confidence the true legal and commercial relationship of the companies involved in the complex of arrangements which together constituted the structure for the intended promotion of Parker products. The absence of relevant material substantiating its claim made it difficult in my view for the Tribunal to be satisfied that the appellant had the specified purpose. It is plain that this difficulty was realised by the Tribunal. Indeed, it was also a difficulty that confronted the Board, because as early as 27 April 1981 the Board drew the appellant's attention to the absence of certain material to enable it to determine the claim for the relevant grant year. Yet throughout the proceedings the material has remained general and vague. This does not assist the appellant.
What is plain from the evidence is that the advertising of Parker products was carried out internationally to promote the image of Parker products themselves rather than the country of manufacture. I do not regard this as fatal to the appellant's case. Doubtless sound business judgment lies behind it and I accept that its implementation probably promoted the sale of Parker products manufactured in this country.
The Tribunal said that it did not consider that it mattered if the advertising was placed in publications destined in part for places to which the appellant did not supply Parker products. The Tribunal said:-
'I do not accept the argument that the requisite purpose could not have been present simply because the advertising, in a geographical sense, went beyond, albeit that it included, places to which the applicant was a supplier. To so argue is to confuse the purpose of the expenditure and the benefits flowing from it. I am not concerned, nor do I consider it to be required of me by the EMDG Act, to attempt to assess the actual benefits of the expenditure. Such an assessment would involve the exercise of a commercial judgment which is not in my opinion called for.'
I agree with those remarks.
The appellant submitted that, by expending moneys on advertising Parker products, it promoted the sale for export of those products manufactured in Australia and that this was the primary and principal purpose of the relevant expenditure. In a broad commercial sense I understand why the appellant might think that the expenditure in question promoted increased export sales of Parker products manufactured here. But that is not the relevant question. Parliament has prescribed the tests for determining what constitutes 'eligible expenditure' and they must be satisfied. There must exist the requisite nexus between the incurring of the relevant expenditure and the purpose specified by the Act. That is the crux of the problem in this case.
The moneys paid by the appellant in this case were connected with the advertising of Parker products generally, but the payments did not have the requisite nexus with the promotion of increased sales of Parker products of Australian manufacture. There are vital missing links in the connecting chain. To make this point I must repeat some of my earlier remarks, but the repetition is unavoidable. The advertising arrangements were made by Parker Far East with overseas advertising agencies and others. The appellant played no part in making or implementing those arrangements. It had no control over the expenditure of any of the moneys spent on the advertising of Parker products in the relevant areas where franchises were shared with its affiliates. That control was vested in Parker Far East which also was a wholly owned subsidiary of the U.S. parent company. Liabilities for promotion of Parker products were incurred by Parker Far East without the necessity of obtaining the concurrence of the appellant. Indeed, they may have been incurred without the knowledge of the appellant. The evidence does not enable the conclusion to be drawn that the liabilities incurred by Parker Far East with the advertising agencies or others were incurred in circumstances that bound the appellant to pay for the services rendered or entitled it to sue for non-performance or negligent performance of those services. What the evidence does establish is that the appellant paid overseas advertising agencies for services that had already been rendered by them. The invoices paid by the appellant had no relevant nexus with the promotion of Parker products made here by the appellant. They related, whether in whole or in any part, to advertising in countries where the appellant's market share was small in proportion to the share of other franchised affiliates or where it had no market share.
The 10% of the appellant's projected sales was not assessed with reference to specific individual countries to which Parker products manufactured by the appellant were exported, or to actual sales of Australian made Parker products. Nor was any provision made for reimbursement to the appellant of any of its expenditure on advertising.
The invoice and the debit memo involved in this appeal speak eloquently of the problems confronting the appellant. The debit memo dated 19 February 1979 for $US22,800 was sent by Parker Far East to the appellant for payment. It related to _ 'Parker advertising expenses in the Philippines incurred during FY79 ending 25 February 1979', yet the appellant supplied only 27% of the Philippines market for Parker products, the balance being shared by its U.S. and French affiliates. Why the appellant was required to pay the whole of that money is unclear, yet it is impossible to characterise the expenditure by the appellant without reference to the debit memo as it was the very document which the appellant paid, and it is the Australian equivalent of $US22,800 ($A20,252) which is the foundation of the appellant's claim to be entitled to a grant under the Act.
The invoice from Chase-Compton addressed to Parker Far East and sent by the latter to the appellant was for $US36,134.80 ($A31,983.00). It related to advertising in magazines or periodicals circulating in a large number of countries in some of which the appellant had no market share and in others varying market shares. The appellant paid the whole of that invoice. Again, there is no relevant nexus between that payment and the purpose required by the Act.
Whether the incurring of the relevant expenditure by the appellant was constituted, for the purposes of sub-s. 4(1), by its commitment to Parker Far East to pay 10% of the appellant's pre-estimate of projected sales by value or by its payment on presentation of invoices, the result is the same. The requisite nexus between the incurring of the expenditure and the specified purpose has not been established.
Counsel for the appellant challenged the correctness of the Tribunal's view that the purposes of Parker Far East were a relevant consideration. The Tribunal said:-
'To begin with, in relation to those Annexures, the Tribunal is not faced only with evidence of the purposes of the applicant, because it was not the applicant which directly undertook the advertising. Inferentially, the Tribunal has become involved also with the purposes of Parker Pen (Far East) Limited. Of course, if the purposes of the latter could be considered to have been coincident with the applicant's purposes then the position would be no different from that which would obtain as between an advertiser and its advertising agent. But I am unable to find that the purposes of Parker Pen (Far East) Limited were coincident with those of the applicant. Parker Pen (Far East) Limited was responsible not only for the applicant's advertising but also for that of those of the applicant's affiliates, including Parker Pen (Far East) Limited itself, which were involved in the supply of the same markets as the applicant.'
In my view it is the purposes of the appellant that are relevant under sub-s. 4(1) and the enquiry must be as to its primary and principal purpose. On the facts of this case, the activities of Parker Far East and its relationship to the appellant and to affiliated companies in the Parker group are plainly relevant to the question of the purposes of the appellant. They are part of the objective facts to be examined and from which conclusions may be drawn as to the appellant's purpose or purposes. But I do not regard the purposes of Parker Far East as being in themselves relevant. If the evidence could support a finding that Parker Far East acted as agent for the appellant then the purposes of Parker Far East may properly be regarded as the purposes of its principal, the appellant. But the evidence could not support an affirmative finding of the relationship of principal and agent. Indeed, it points in the contrary direction. When fairly analysed, I do not think that the Tribunal had regard to any purposes of Parker Far East other than in the sense of its activities and conduct being part of the overall complex of facts from which conclusions may be drawn as to the purposes of the appellant.
It has not been established that the Tribunal fell into error. I would dismiss the appeal with costs.
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