Peter Elton and Australian Trade Commission
[2013] AATA 133
[2013] AATA 133
Division GENERAL ADMINISTRATIVE DIVISION File Number
2012/3488
Re
Peter Elton
APPLICANT
And
Australian Trade Commission
RESPONDENT
DECISION
Tribunal Egon Fice, Senior Member
Date 14 March 2013 Place Melbourne The Tribunal affirms the decision of the Australian Trade Commission dated
13 August 2012....[sgd Egon Fice].....................................................................
Egon Fice, Senior Member
TRADE AND COMMERCE – Export Market Development Grant – substantiation of expenses – substantiation for amounts claimed – samples given for an eligible purpose – genuinely carrying on a business in Australia – eligibility for a grant – approved promotional purposes – eligible products – eligible goods – exporter of Australian wine – marketing visits – the provision of free samples of wine – claimed travel expenditure
Acts Interpretation Act 1901 (Cth) s 15AA
Corporations Act 2001 (Cth)
Export Market Development Grants Act 1997 (Cth) ss 3, 4, 5, 6, 7, 24, 28, 33, 37, 58, 98, 99, 101
Cooper Brooks (Wollongong) Pty Ltd v The Commissioner of Taxation of The Commonwealth of Australia (1981) 147 CLR 297
Saeed v Minister for Immigration and Citizenship (2010) 84 ALJR 507
1/1997 GCB, Guidelines for forming an opinion whether an applicant is genuinely carrying on a business in Australia (Tim Fischer, Minister for Trade 1 July 1997)
REASONS FOR DECISION
Egon Fice, Senior Member
14 March 2013
Mr Peter Elton was, at all relevant times, a director, secretary and shareholder of Corp di Oro Pty Ltd (Corp di Oro), a company registered in Australia in 1986. Prior to 14 May 1999, it was known as Kastelton Corporation Pty Ltd. Although the applicant in this matter is said to be Mr Elton, the legal person aggrieved by the decision of the Australian Trade Commission (Austrade) is in fact Corp di Oro. Although this was not identified by the parties during the course of the hearing, I have considered the application brought to the Tribunal by Mr Elton as Corp di Oro's application. As a director of that company, he has plainly brought the application on its behalf.
On 30 November 2011 Corp di Oro applied to Austrade for an Export Market Development Grant (EMDG) pursuant to the Export Market Development Grants Act 1997 (the EMDG Act) for the years ended 30 June 2010 and 30 June 2011. It described its core business as a wholesaler engaged in the export of wine in bottled form. The claim was made in respect of expenses incurred on marketing visits to Vietnam, Singapore, Thailand and China; and also for the provision of free samples. The claimed expenses amounted to $19,263 in 2010 year and $33,773 in 2011 year. Those expenses comprised $40,321 for marketing visits and $12,715 in respect of free samples.
On 24 May 2012 the State Manager of Austrade responsible for grants in Victoria and Tasmania advised Mr Elton that his application for an EMDG was unsuccessful. In a letter dated 20 June 2012, which appears to have been received by Austrade on 4 July 2012, Mr Elton on behalf of Corp di Oro sought review of the original decision to refuse an EMDG pursuant to s. 98 of the EMDG Act. In that letter, Corp di Oro revised the amount of grant claimed in respect of marketing visits down to $34,119 and free samples remained at $12,715.
On 13 August 2012 Austrade notified Mr Elton that pursuant to s. 98 (4) of the EMDG Act, it had resolved to confirm its original decision to refuse Corp di Oro an EMDG (. The grounds stated for disallowance were:
·marketing visits – lack of substantiation and acquittal of the expenses and eligibility of the activities undertaken on the overseas trips
·free samples – substantiation of the amounts claimed, including evidence that the samples had been given away for an eligible purpose
·Austrade was not satisfied that Corp di Oro was genuinely carrying on business in Australia as is required by s. 7 (1)(a) of the EMDG Act
Mr Elton lodged an application for review of Austrade's decision on behalf of Corp di Oro on 15 August 2012. Section 99 of the EMDG Act provides for review of a decision of the CEO of Austrade by the Tribunal which has been confirmed or varied under
s. 98 (4).
ELIGIBILITY FOR A GRANT
Part 3 of Division 1 of the EMDG Act defines who is eligible for a grant. Section 5 sets out the underlying principle as follows:
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.
Section 6 sets out those eligible for a grant. Relevantly, it provides:
6 Who is eligible for a grant?
(1) Each of the following:
(a) an individual who is a resident of Australia;
(b) a body incorporated under the Corporations Act 2001;
(c) an Association or co-operative incorporated under an Australian law;
(d) a partnership regulated by an Australian law;
(e) a joint-venture approved by the CEO of Austrade under section 89;
(g) a body corporate established for a public purpose by or under an Australian law;
is eligible for a grant in respect of a grant year if it satisfies the conditions applicable to it under section 7.
The EMDG Act also sets out extensive general rules for eligibility. Those which are relevant to Corp di Oro are:
7 General rules for eligibility
Person other than approved joint venture or trustee
(1)A person referred to in subsection 6(1) (other than an approved joint venture or a person acting in the capacity of trustee of a trust estate) is eligible for a grant in respect of a grant year if the following conditions are satisfied:
(a) the person was, in the opinion of the CEO of Austrade, genuinely carrying on business in Australia during the grant year;
(b)…
(c) the person is not a grantee in respect of 7 or more previous grant years;
(d) the person's income for the grant year is not more than $50,000,000;…
I should also mention that the Minister is required, by s. 101 of the EMDG Act, to determine by legislative instrument, guidelines to be complied with by the CEO of Austrade in forming, for the purposes of paragraph 7(1)(a) or (4)(aa), an opinion whether a person is genuinely carrying on business in Australia.
GENUINELY CARRYING ON BUSINESS IN AUSTRALIA
The guidelines determined by the then Minister for Trade (1/1997 GCB) set out the following:
1. In forming an opinion whether a person is genuinely carrying on business in Australia, Austrade shall give weight to the following considerations:
(i) what activities the person claims constitute the activities of the business;
(ii) where each of those activities is conducted, and whether those activities are conducted substantially in Australia;
(iii) whether any income is earned by the applicant and if so where that earning of income takes place, and whether that earning of income takes place substantially in Australia;
(iv) the length of time the activities of the business have been carried on;
(v) any intention that those activities should be profitable;
(vi) the degree of repetition of the activities said to constitute the activities of the business;
(vii) the continuity of those activities;
(viii) whether there is a possible commercial return from those activities;
(ix) the nature and size of the assets of the business and whether those assets are located substantially in Australia;
(x) the terms of any business or marketing strategy which relates to those activities;
(xi) the extent of which those activities are the independent activities of the applicant or whether they are instead activities of a person associated with the applicant.
2. In taking into account each of the matters listed in 1 above Austrade shall consider the substance and not merely the form of each matter.
Corp di Oro is a proprietary limited company with a paid-up capital of $2. It has two issued shares, one held by Mr Elton and the second held by Jouton Pty Ltd. Mr Elton is a director and secretary of the company. Mr Michael Elton is also a director.
In cross-examination, Mr Elton confirmed that his brother Michael was not involved in the day to day operations of Corp di Oro. He explained that the company obtained a licence to export wine from 2006. In fact, I had in evidence a copy of what is described as a Licence to Export Wine, Brandy and Grape Spirit dated 26 August 2011 which indicates that the licence period commenced on 6 September 2006, expiring on
6 September 2012. Mr Elton also testified that in addition to himself, the company had another person who essentially worked as a bookkeeper although not apparently employed by the company. He agreed that effectively, in the grant years the subject of the claim, he was the only employee.
Mr R Knowles of counsel, who appeared on behalf of the Commission, also noted that Corp di Oro acted as trustee. When Mr Elton was asked what the trust did, he explained it managed property. That property is situated in Melbourne. He said that it was responsible for getting in rental receipts and paying the mortgage. He agreed that apart from exporting wine and managing the property, the company did not conduct any other commercial activities.
I had in evidence a number of tax invoices from various wineries in South Australia issued for the sale of various wines throughout 2009, 2010 and 2011. While most of the invoices are addressed to Corp di Oro, there are some which are addressed to an entity called Kangaroo Indochine. According to Mr Elton, the name Kangaroo Indochine is a registered business name in Victoria. A business name extract for the business name Kangaroo Indochine discloses Corp di Oro as the corporation carrying on the business under that name. However, Mr Elton also explained that there is a corporate entity in Vietnam, the country to which the wine is exported, which is called Kangaroo Indochine Trading Services Co Ltd or, in Vietnamese, Chuot Tui Dong Duong. While Mr Elton maintained that this entity's business was discrete from that of Corp di Oro, as will become apparent presently, there is a very close relationship between the two entities. According to Mr Elton, Corp di Oro is the wine exporter while Kangaroo Indochine is its distributor in Vietnam.
I had in evidence a number of bank statements from the Commonwealth Bank for a Premium Business Account in the name of Corp di Oro Pty Ltd. Those bank statements evidence Internet transfers to various wineries in payment of invoices. While I have not attempted to match all of the invoices to the Internet transfers stated in the account, there is one invoice from Rathbone Wine Group Pty Ltd dated 21 September 2010 for $4800 which was clearly paid by a transfer from Corp di Oro's bank account to the winery on
7 February 2011.
I also had in evidence a number of shipping documents indicating that Kangaroo Indochine was the consignee of the number of cases of various wines from the wineries which had invoiced Corp di Oro during the relevant period. There were also a number of e-mails from the Australian Wine and Brandy Corporation and Wine Australia indicating approval to export those wines to Vietnam.
In my opinion, Corp di Oro, which is clearly a body incorporated under the Corporations Act2001, is a person which was genuinely carrying on business in Australia during the two grant years in question. The evidence establishes that Corp di Oro regularly purchased commercial quantities of wine from a number of Australian winemakers in South Australia. The bank statements in evidence also indicate that Corp di Oro paid for the purchase of wine. It held a permit to export wine to Vietnam and save for two documents which refer to Kangaroo Indochine as the shipper, it is named as the shipper or exporter on all of the shipping documents. The apparent anomaly can be explained by the fact that Corp di Oro traded in Australia under the registered business name Kangaroo Indochine. All of those activities plainly took place in Australia. Mr Elton testified that Corp di Oro had its office in Melbourne. He also said that the business of exporting wine to Vietnam commenced in September 2006. There was no evidence which contradicted that statement.
I also had in evidence the 2010 and 2011 financial statements for Corp di Oro. While there are a number of significant problems with the accuracy of those statements, which I deal with in more detail below, its trading statements for the year ended 30 June 2011 (incorrectly described as 30 June 2010 in the document), which also contain comparative figures for 2010, disclose income from wine sales of $101,099 in 2010 and $172,012 for 2011. Although I am not able to reconcile those figures with the bank statements in evidence, I did have before me statements for the premium business account held by Corp di Oro with the Commonwealth Bank between 3 July 2009 and 3 June 2011. Those documents disclose the payment of invoices to various wine producers for what can only properly be described as commercial quantities of wine. There are also significant deposits in that account from Kangaroo Indochine, which must be a reference to the entity based in Vietnam. In fact, in later statements, the descriptions in the accounts against those deposits refer to CTY TNHH TMDV CHUOT (also referred to as: Cty TNHH TM-DV Chuot Tui Dong Duong). Over that period, the account appears to have maintained a credit balance throughout. That indicates that the export activities have certainly been conducted over a number of years and at least on an operating cash basis, Corp di Oro has operated at a profit.
Mr Knowles submitted that the fact that the company only had one employee, Mr Elton, who spent considerable periods of time during the grant years outside of Australia, should cause me to not be satisfied that Corp di Oro was carrying on business in Australia during the grant years. With respect to Mr Knowles, I cannot agree. The business conducted by Corp di Oro does not require the presence of Mr Elton in Australia. I have no doubt that he can submit orders to wineries over the Internet and, as is apparent from the bank statements in evidence, payments for those orders are made over the Internet. The shipping of the wine in general seems to have been arranged by the wineries and, in any event, it could also be done over the Internet by Mr Elton from wherever he has access to a computer. I should also point out that Corp di Oro's income in each grant year was significantly less than $50,000,000. Accordingly, I find that Corp di Oro was an entity eligible for a grant under the EMDG Act and that it met the general rules for eligibility in s. 7.
CLAIMED TRAVEL EXPENDITURE – AIRFARES AND GENERAL EXPENSES
In its application for an EMDG, Corp di Oro claimed for marketing visits conducted by Mr Elton naming the countries visited as Vietnam, Singapore, Thailand and China. The description given in Schedule 2 of the application form describes the activity as: promote & distribute table wines to Vietnam, China, Singapore, Thailand.
Part 5, Division 1 of the EMDG Act deals with the eligible expenses of an applicant for a grant. The underlying principle is set out in s. 28 (2) which provides:
(2)The underlying principle is that only expenses relating to specific promotional activities genuinely incurred by applicants for the purpose of marketing eligible products in foreign countries should qualify.
Division 2, Subdivision 2 of Part 5 defines eligible promotional activity and claimable expenses. The table under s. 33 of the EMDG Act sets out the activities which are described as eligible promotional activities and the expenses which are claimable in respect of those activities. Item 2 provides:
Item
Activity
Expenses
2
any visit (marketing visits) made by the applicant or its agent to any place in or outside Australia to the extent to which the visit is made for an approved promotional purpose
all expenses:
(a) incurred by the applicant in payments to persons that, in the opinion of the CEO of Austrade, were not closely related to the applicant; and
(b) that are allowable expenses under section 34
The expression, eligible products, is defined in Part 4 of the EMDG Act. In this case, we are dealing with goods and s. 24 defines the expression eligible goods as:
Goods are eligible goods if:
(a) they are made in Australia; or
(b) the CEO of Austrade is satisfied, in accordance with guidelines determined under paragraph 101(1)(baa) brackets, that Australia will derive a significant net benefit from the sale of the goods outside Australia.
Note: Decisions under this section are subject to guidelines determined by the Minister under section 101.
There can be no doubt that wine made in Australia satisfies the definition of eligible goods. The expression approved promotional purposes is defined in Subdivision 3 of Part 5 of the EMDG Act. In so far as it is relevant to this matter, s. 37 provides:
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:
(a) eligible goods owned by the applicant and that the applicant intends to sell for export or to export and sell;…
Section 34 of the EMDG Act sets out the allowable expenses in respect of the marketing visit. Insofar as it is relevant, it provides:
34 Expenses relating to a marketing visit
(1)…
(2) Subject to subsection (6), an airfare for any air travel reasonably undertaken by the applicant or its agent is an allowable expense.
Note: Only 65% of the first class airfare is to be taken into account as a claimable expense. See subsection 33(3).
(3)…
(4) If the visit is made to a place outside Australia:
(a) the applicant is taken, for the purposes of this subsection, to have incurred general expenses of $300 in respect of each day (working day) during the visit that was primarily devoted to furthering the approved promotional purpose to which the visit was made; and
(b) subject to subsections (5) and (6), those expenses are allowable in respect of each working day in the visit.
(5) Expenses are not allowable under subsection (4) in respect of more than 21 working days.…
In the Schedule 2 submitted with his application for an EMDG, Mr Elton claimed for four airfares as well as for what he described as accommodation on 18 July 2009. He also claimed the $300 general allowance for each working day for a maximum of 21 days. However, when seeking review of the initial decision to refuse a grant, Mr Elton submitted a revised schedule 2 which only included a claim for four airfares and the $300 general allowance, as follows:
·19 August 2009 – 9 July 2010 for marketing in Thailand, Vietnam and Singapore
·5 September 2010 – 29 October 2010 for marketing in Vietnam
·17 November 2010 – 3 February 2011 for marketing in Vietnam
·29 March 2011 – 11 July 2011 for marketing in Vietnam
In the course of cross-examination regarding the accommodation Mr Elton claimed in July 2009, Mr Knowles put to him that there was no evidence of any trips to China or Singapore. He accepted that claim was incorrect. However, he claimed that this was done by his agent, Mr Douglas Mildren, who I understood assisted him in completing the claim for an EMDG. Mr Elton maintained it was a simple error and did not intend to mislead. In fact when it was pointed out to Mr Elton that this was not claimed in the revised schedule, he said he changed it because it was incorrect. However that does not explain why China and Singapore appeared as destinations on all of his trips on the original Schedule 2 lodged with Austrade. Furthermore, Mr Elton agreed that he gave the information to his agent but that the errors were not picked up.
An examination of Mr Elton's travel records discloses that all of the trips claimed as visits overseas, to which I have referred in paragraph [26] above, originated from an overseas destination and included a return ticket to Vietnam. I had in evidence a copy of Mr Elton's American Express account which records a payment of $915.61 to Thai Airways International on 30 July 2009. Immediately prior to that entry are two entries indicating purchases made in Chiang Mai in Thailand and one at the international airport on 10 July 2009. The reasonable inference to be drawn is that the Thai Airways International expenditure related to travel from Thailand to Australia. I also had in evidence an e-mail Mr Elton sent to Mr David Parker, the EMDG State Manager, on
29 July 2009 in which he said that he hoped to be back in Melbourne on 7 August 2009. In cross-examination Mr Elton appeared to agree that between 7 August 2009 and
19 August 2009 he was in Australia. In other words, he only spent 12 days in Australia before departing once again. In fact, when it was put to Mr Elton that during the two grant years, he spent almost 600 days outside of Australia, Mr Elton agreed stating that that was his job. As Mr Knowles submitted, it appeared Mr Elton was living in Vietnam and visiting Australia rather than going to Vietnam on a marketing visit. I also had in evidence a boarding ticket stub disclosing that Mr Elton travelled from Melbourne to Bangkok on 19 August 2009.
The travel component claimed by Mr Elton for the cost of air tickets on the first claimed trip was $916. In addition to that, he claimed $6300 ($300 per day for 21 days) for general expenses over the maximum permitted number of working days. Division 3 of Part 5 deals with when expenses are incurred. The general rule is stated as follows:
58 General rule
(1)Subject to section 59, an expense is taken to have been incurred by an applicant only at the time when the amount of the expense is acquitted.
(2)For the purposes of subsection (1), the amount of an expense incurred by an applicant is taken to have been acquitted at the time when that amount:
(a) is paid off; or
(b) is set off, with the written consent of the person (creditor) to whom it is payable, against money owed by the creditor or another person to the applicant.
(3) For the purposes of subsection (2), if an amount is paid by cheque or payment order, the amount is taken to be paid when the bank or financial institution on which the cheque or payment order is drawn debits the drawer's account.
(4) For the purposes of subsection (2), the transfer or issue to a person of shares in a company does not constitute an acquittal.
Mr Elton did put into evidence an itinerary receipt from Thai Airways International for flights between Bangkok and Melbourne on 7 August 2009 and return to Bangkok on
19 August 2009. The booking date on that document is 30 July 2009 and it was paid for by Mr Elton's American Express as it has the last four digits of his account number appearing on the itinerary receipt. The problem with the claim for expenditure incurred regarding the airline ticket which Mr Elton appears to have paid on his American Express account on 30 July 2009 is that there is no clear association between that expenditure ($915.61) and travel between Australia and Vietnam for the purpose of a marketing visit. In fact, that expenditure, in my opinion, was incurred in travelling between Thailand and Australia and return to Bangkok. There was no evidence that it relates to a marketing visit and is not therefore expenditure in respect of an eligible promotional activity.
I did have in evidence an electronic ticket itinerary receipt issued by Thai International Airways on 26 May 2010 for a trip from Vietnam to Perth via Bangkok on 9 July 2010; from Melbourne to Bangkok on 15 August 2010; and from Bangkok to Vietnam on
18 August 2010. Mr Elton has altered the dates for the flights between Melbourne and Bangkok to 5 September 2010 and from Bangkok to Vietnam to 8 September 2010. I also had in evidence an electronic ticket receipt & itinerary from Singapore Airlines for Mr Elton's trip to Australia via Singapore on 28 and 29 October 2010. Mr Elton purchased a return ticket to Vietnam via Singapore, travelling on 17 November 2010.
Mr Elton also put into evidence a Thai Airways electronic ticket passenger itinerary receipt indicating he travelled from Ho Chi Minh City to Bangkok on 2 February 2011 and then from Bangkok to Melbourne on 3 February 2011. That document also indicates Mr Elton had booked return flights to Vietnam via Bangkok travelling, to Bangkok on
21 February 2011 and from Bangkok to Ho Chi Minh City on 22 February 2011. Those return dates were apparently altered to 29 March 2011 and 13 March 2011 respectively.
The final trip claimed by Mr Elton was evidenced by another Thai Airways electronic ticket passenger itinerary receipt for travel from Ho Chi Minh City to Melbourne via Bangkok on 10 and 11 July 2011 respectively. That document also discloses a return booking to Vietnam via Bangkok on 13 August 2011 and 20 August 2011 respectively.
Given the time that Mr Elton spent in Vietnam or in Thailand during the grant years, it is understandable why Austrade contended that Mr Elton was living in Vietnam and simply visiting Australia from time to time. Between August 2009 and July 2010, Mr Elton was in Vietnam for a period of some 11 months. He then spent about two months in Australia before returning to Vietnam via Bangkok in September 2010. He then spent a little under two months in Vietnam prior to returning to Australia at the end of October 2010. After spending some 19 days in Australia, Mr Elton returned to Vietnam in November 2010, remaining for some 10 weeks until February 2011. He returned to Vietnam at the end of March 2011 remaining in that country for almost 4 months before returning to Australia in July 2011. Although Mr Elton claimed that it was cheaper to purchase tickets in Vietnam, it is difficult not to conclude from the itinerary schedules and bookings that Mr Elton was primarily resident in Vietnam, returning to Australia for relatively brief periods of time. In fact, between 19 August 2009 and 11 July 2011, which is the period of the claim, Mr Elton spent 559 days overseas and 131 days in Australia. The flights in fact appear to originate in Vietnam or Bangkok and return to Vietnam. This clearly raises the question posed by Austrade regarding whether Mr Elton was in fact primarily residing in Vietnam rather than simply visiting for marketing purposes.
In order to determine whether the time Mr Elton spent in Vietnam was in respect of an eligible promotional activity, that is, on a marketing visit for an approved promotional purpose, I need to examine in some detail the activities Mr Elton conducted when in Vietnam.
I had in evidence a video of an interview Mr Elton did with a Vietnamese television station in about December 2011. The television presenter introduced the program by saying:
This program, we interview overseas business persons who live and work in Vietnam and they share their own interesting experiences both work and daily activities in Vietnam.
Please welcome Peter Elton, CEO of Kangaroo Indochine. Peter has feeling for Vietnam for a long time. He has decided to live and work here since 2006 when there was a business opportunity for an Australian man, who loves drinking and travelling. Peter is CEO of Kangaroo Indochine, a company specialising in import and export and distribution of Kangaroo Indochine wines in Vietnam and Australia.
As to the establishment of Kangaroo Indochine Co Ltd, Mr Elton said:
So I came back on another trip to do research and thought there’s an opening and we got some agencies for the winery in Australia, came back looking for a distributor, couldn't find one we wanted and my business partner Hoa [his wife Ms Nguyen] said why don't we do it ourselves. And six years later here we are.
Mr Elton explained his role in the Vietnamese company and the role of the Australian company (Corp di Oro) in this way:
… Kangaroo Indochine Vietnam is a wholly owned Vietnamese company, which I helped out with. We have the same name, basically we are the same people, we are the same people. Just one's based in Australia with the export and the other one here does the import and distribution.
Mr Elton went on to describe the employees who worked for Vietnamese company indicating that he was responsible for hiring them.
In cross-examination Mr Elton was asked a number of questions about whether he in fact was the CEO of Kangaroo Indochine in Vietnam and his role in that company. Mr Elton responded by saying that he was gilding the lily in the course of the interview because he was there to promote the business. He described himself as an actor in a movie. He acknowledged training staff which were employed by the Vietnamese company. In the interview, he referred to providing substantial training to employees and that the Vietnamese company had policies and procedures including a procedures manual. In his cross-examination he said Corp di Oro provided the training manual.
In the course of his oral evidence, Mr Elton insisted that he lived in Melbourne and simply travelled to Vietnam. He said he stayed there because he was working there.
I also had in evidence documents described by Mr Elton as agency agreements. Those documents purport to create an exclusive export agency for a number of wine producers and the appointment of the Vietnamese company as the importer and distributor of the wines in Vietnam. For example, one such agreement dated 1 June 2011 states:
We confirmed that Corp di Oro P/L, of … Vic, Australian Government export licence number 2695, is a registered Associate exporter of our wines with the Australian Government & the only approved & exclusive exporter of our wines to Vietnam.
Further, Corp di Oro P/L has exclusive rights to authorise the Importer/distributor in Vietnam.
Corp di Oro has appointed Kangaroo Indochine Trading Services Co Ltd, of …, Ho Chi Minh City, as exclusive Importer/distributor by virtue of their enduring contract dated 1st June, 2010.
The document was signed by a representative from the wine producer as well as Mr Elton and a director of the Vietnamese company. I also had evidence a document signed by Mr Michael Elton which confirmed the appointment of Kangaroo Indochine Trading Services Co Ltd as sole importer and distributor in Vietnam of a number of Australian produced wines.
There was ample evidence before me that Mr Elton's relationship with the Vietnamese company is very close. The website printout under the name Peter Elton refers to Mr Elton as a director, Kangaroo Indochine & Peter Elton and Co. It refers to Import & Distribution of wine in Vietnam. It also states: Kangaroo Indochine are Vietnam's Australian wine specialists, with the largest range of Australian premium wine in Vietnam. In the course of his cross-examination, Mr Elton said: sometimes I act as their [Vietnamese company] salesman. He also denied being a partner in Kangaroo Indochine Trading Services Co Ltd and said the two entities were simply jointly trying to sell some wines.
In fact I had in evidence an invoice from Corp di Oro to the Vietnamese company for the provision of services. That invoice apparently related to a contract for marketing assistance, procurement and shipping support. The contract was between Corp di Oro and the Vietnamese company and it provided for Corp di Oro to provide to the Vietnamese company, amongst other things, training, sales, marketing assistance and business advice. The contract fee was said to be $6000 per month payable into an account nominated by Corp di Oro. In a statement made by Mr Mildren on 25 October 2012, he explained that Mr Elton was more successful than most because of the time and effort he has put into developing the Market for his agent in Vietnam. Quite plainly, the agent is a reference to the Vietnamese company. In an e-mail dated 20 February 2009 from Mr Elton to Mr David Parker, the EMDG State Manager of Austrade in Melbourne, Mr Elton said: My business, in Vietnam, of both myself & Ms Nguyen, is also well known by Austrade here. When asked in cross-examination whether he assisted the Vietnamese company by acting on their behalf, Mr Elton said he found customers for the company who purchased their wine from it.
With respect to Mr Elton, the evidence before me discloses that he has a far closer relationship with Kangaroo Indochine Trading Services Co Ltd than he was prepared to admit. I have little doubt that the company was established by him and his wife but that it is required to have Vietnamese shareholders, which it has. Regardless, the evidence is also clear that Corp di Oro is the exporter of Australian wines and Kangaroo Indochine Trading Services Co Ltd is the wholesale outlet in Vietnam. While I accept Mr Elton's evidence that he spends much of his time in Vietnam working on improving and increasing Australian wine sales in that country, that cannot be marketing work conducted for Corp di Oro. Although I accept that Corp di Oro benefits from his activities in Vietnam, those activities are conducted on behalf of Kangaroo Indochine Trading Services Co Ltd. While Mr Elton denied being paid by the Vietnamese company for consultancy services, there are plainly invoices which indicate that was the case. Mr Elton attempted to explain in cross-examination that this was a means of getting money out of Vietnam, which he suggested was very difficult. However, the number of deposits in Corp di Oro's Commonwealth Bank account directly from the Vietnamese company would suggest the opposite.
Although Mr Elton referred to the statements he made in the course of the television interview in Vietnam as gilding the lily, the documents in evidence tend to support those statements. In any event, the Vietnamese company is a discrete entity and it is that entity for which Mr Elton was conducting marketing. As far as Corp di Oro was concerned, it had already established a wholesale outlet in Vietnam by 2010 and it was not seeking to establish any further wholesale outlets. There was no evidence that Corp di Oro conducted any marketing in Vietnam or that it incurred any expenditure in doing so. The financial statements for the 2010 and 2011 income years, despite obvious defects, only disclose expenses for advertising and promotion in the amount of $90 in 2010 and nil in 2011.
When interpreting a statute, I am mindful of what is set out in the Acts Interpretation Act 1901 and in particular, s. 15 AA, which provides:
15AA Regard to be had to purpose or object of Act
(1)In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.
I should also have regard to the common law principles of statutory construction, and in particular, contextual considerations. The High Court of Australia has restated these principles on a number of occasions. In Cooper Brooks (Wollongong) Pty Ltd v The Commissioner of Taxation of The Commonwealth of Australia (1981) 147 CLR 297, Gibbs CJ said, at 304:
It is an elementary and fundamental principle that the object of the court, in interpreting a statute, "is to see what is the intention expressed by the words used": River Wear Commissioners v. Adamson (16). It is only by considering the meaning of the words used by the legislature that the court can ascertain its intention. And it is not unduly pedantic to begin with the assumption that words mean what they say: cf. Cody v J. H. Nelson Pty. Ltd. (17). Of course, no part of a statute can be considered in isolation from its context-the whole must be considered. If, when the section in question is read as part of the whole instrument, its meaning is clear and unambiguous, generally speaking "nothing remains but to give effect to the unqualified, words": Metropolitan Gas Co. v. Federated Gas Employees' Industrial Union (18). …
It is also of some assistance to refer to the High Court decision in Saeed v Minister for Immigration and Citizenship (2010) 84 ALJR 507 where French CJ, Gummow, Hayne, Crennan and Kiefel JJ said, at 515:
As Gummow J observed in Wik Peoples v Queensland, it is necessary to keep in mind that when it is said the legislative "intention" is to be ascertained," what is involved is the 'intention manifested' by the legislation". Statements as to legislative intention made in explanatory memoranda or by Ministers, however clear or emphatic, cannot overcome the need to carefully consider the words of the statute to ascertain its meaning.
It is clear from what is set out in the preamble explaining the purpose of the EMDG Act that the grants of financial assistance are for the purpose of developing export markets. It states:
This Act provides for the grant of financial assistance by the CEO of Austrade to small and medium Australian enterprises to provide incentives for them to develop export markets. The underlying principle is that…
they are seeking to export products that are substantially Australian; and
they are being encouraged to undertake additional promotional activities.
In fact, the object of the EMDG Act is stated in s. 3 which provides:
The object of this Act is to bring benefits to Australia by encouraging the creation, development and expansion of foreign markets for Australian goods, services, intellectual property and know-how. It does so by providing for an assistance scheme under which small and medium Australian exporters committed to and capable of seeking out and developing export business are repaid part of their expenses incurred in promoting those products.
The expression used in s. 37 of the EMDG Act is anticipatory. It describes an eligible promotional activity being for an approved promotional purpose if it is carried on for the purpose of creating, seeking or increasing demand or opportunity in a foreign country for… eligible goods owned by the applicant and that the applicant intends to sell for export or to export and sell;…
I find that Mr Elton's travel to Vietnam in the grant years was not for the purposes of marketing visits on behalf of Corp di Oro. It was not for the purposes of an approved promotional activity being that of creating, seeking or increasing demand or opportunity in a foreign country for eligible goods owned by Corp di Oro. Corp di Oro had already sold those goods to Kangaroo Indochine Trading Services Co Ltd. In fact the business was established in 2006 and by 2010, it had been exporting and selling Australian wine for some years. I find that Mr Elton's activities in Vietnam were for the purposes of assisting Kangaroo Indochine Trading Services Co Ltd in marketing the Australian wines it had purchased from Corp di Oro. There was no evidence that Mr Elton's activities involved developing additional wholesale outlets in Vietnam or, for that matter, in Singapore or Bangkok to which he also travelled during the grant years.
Even if my reading of the purpose of the Act is too narrow and should in fact include ongoing activities concerned with expanding an existing market, I would nevertheless find that Mr Elton's activities in Vietnam do not satisfy the requirement for eligible promotional activity set out in Subdivision 2 of Part 5 of the EMDG Act. That is because Mr Elton was conducting those activities not as agent for Corp di Oro, which is the applicant, but as agent for Kangaroo Indochine Trading Services Co Ltd. That is consistent with the time Mr Elton spent in Vietnam during the grant years (559 days) compared with the time he spent in Australia (131 days). The times he spent in Vietnam cannot properly be described as promotional visits. It is also consistent with Mr Elton's evidence regarding locating and employing persons for the Vietnamese company and providing training for them. Therefore, even if the expenditure on airfares can be substantiated, it is not expenditure in relation to an eligible promotional activity and should be disallowed. I would also disallow the claimed general expenditure of $300 per day for a maximum of 21 working days for the same reason.
THE PROVISION OF FREE SAMPLES
The table under s. 33 (2) of the EMDG Act which sets out the claimable expenses in respect of eligible promotional activities, at Item 4, provides as follows:
Item
Activity
Expenses
4
The provision, primarily for an approved promotional purpose, of free samples to a person that is not a resident of Australia, as follows:
(a) provision outside Australia of samples relating to any eligible product of the applicant;
(b) provision in Australia of samples relating to eligible tourism services supplied by the applicant
all reasonable expenses incurred by the applicant that are attributable to the actual cost of providing the samples
I have already set out the meaning of the expression approved promotional purpose – eligible products, which is found in s. 37 of the EMDG Act. Given that I have found that Mr Elton's activities while in Vietnam in the grant years in question did not satisfy the description of the expression eligible promotional activity as that expression is used in the EMDG Act, any wine samples which he offered while in Vietnam during that time cannot be a claimable expense of Corp di Oro.
However, in the event that I am wrong about that, I would nevertheless conclude that the provision of free sample bottles of wine by Mr Elton in Vietnam did not constitute claimable expenses of Corp di Oro. There are a number of reasons for arriving at this conclusion.
As I have already mentioned above, Corp di Oro issued invoices to Kangaroo Indochine Co Ltd for wines which it exported to Vietnam. During the grant years, there are a number of credit entries in Corp di Oro's CBA bank account which indicate payment by Kangaroo Indochine Co Ltd. In fact, on a number of the invoices which were in evidence, Mr Elton noted the date on which those invoices were paid. Those invoices appear to have been paid in full without any deduction, although there are slight variations in the amounts, possibly due to exchange rate fluctuations. For example, Corp di Oro invoiced Kangaroo Indochine Co Ltd on 15 August 2010 in the amount of $6206.64 and on 26 May 2010 in the amount of $6265.20. Mr Elton indicated that those invoices were paid on 24 November 2010. There is a credit entry in the CBA bank account of Corp di Oro on 24 November 2010 indicating a payment from CTY TNHH TMDV CHUOT in the amount of $12,472. There is another invoice issued on
3 December 2010 in the amount of $15,382. Mr Elton has noted that invoice was paid on 25 January 2011. There is a credit entry in Corp di Oro's bank account on 27 January 2011 in the amount of $15,374.50. In cross-examination, Mr Elton agreed that these appeared to be payments in respect of the invoices mentioned. He certainly did not dispute that. In fact Mr Elton did not dispute that Kangaroo Indochine Co Ltd paid Corp di Oro for all of the consignments of wine exported to Vietnam. It necessarily follows that, without other evidence, it is reasonable to infer that the wine Corp di Oro exported to Vietnam became the property of Kangaroo Indochine Co Ltd on arrival in that country.
Therefore, if free samples were in fact provided to potential customers in Vietnam, those samples must have been the property of Kangaroo Indochine Co Ltd. If Corp di Oro intended to pick up the expense for those free samples, logically, I would expect to see some discount given to Kangaroo Indochine Co Ltd on its invoices. Either that, or Corp di Oro would have specifically marked portions of consignments as being for the provision of free samples and not invoiced for that wine. There was no evidence of either course being taken by Corp di Oro. In fact, the only evidence before me was that Corp di Oro was paid in full on the invoices issued to Kangaroo Indochine Co Ltd. The conclusion which I draw from this is that Corp di Oro did not incur the expense if free samples were given to intending retail customers in Vietnam. That expense was obviously incurred by Kangaroo Indochine Co Ltd. Given that s. 58 of the EMDG Act provides that an expense is taken to have been incurred only at the time when the amount of the expense is acquitted, and it is acquitted when that amount is paid off or set off against money owed, it cannot be said that Corp di Oro incurred any expense if free samples were provided to intending customers by Kangaroo Indochine Co Ltd.
Also, logically, if Corp di Oro incurred an expense in providing free samples to intending customers, I would expect to see that expense recorded in its financial statements. One of the problems with its accounts is the fact that Corp di Oro has not recorded in its accounts its income from trading activities. Ordinarily, businesses which conduct trading activities account for those activities in their own right, recording such things as cost of goods sold, total sales, purchases, discounts, returned goods and the like. In this case, Corp di Oro simply records income from wine sales. Its accounts record numerous expense items, many of which quite clearly do not relate to wine sales. Its accounts do not permit an outsider reading those accounts to determine whether its trading activities are profitable. There is no mention at all of any discount by way of free samples or any reimbursement to Kangaroo Indochine Co Ltd for giving away sample bottles of wine. The only conclusion I can draw from the evidence is that Corp di Oro did not incur an expense as a consequence of sample bottles of wine being provided by Kangaroo Indochine Co Ltd in Vietnam.
In the course of his cross-examination Mr Elton was asked whether there was any written acknowledgement between Kangaroo Indochine Co Ltd and Corp di Oro acknowledging reimbursement for free samples given away in Vietnam. Mr Elton responded there was no such document and that it was a matter of trust between the two entities. When asked whether there was evidence of a credit for goods returned, such as samples, he attempted to explain that there was a set-off against the payments made and although he claimed to have documents which disclosed that, he said he did not have them with him. No such documents have been produced by Mr Elton since the hearing concluded.
Mr Elton was also taken to a document described as Schedule 9A which dealt with export earnings. That document sets out the identifying number of invoices of goods shipped by Corp di Oro to Vietnam, the date of the invoice and the invoiced amount. While there is also provision on that schedule for freight and insurance expenses, those columns are a blank. The final column is described as the FOB amount which is calculated by subtracting from the invoiced amount the freight and insurance. Given that there are no entries at all in the freight and insurance columns, the FOB amount corresponds with the invoiced amount. As I have already indicated above, the few examples which I have examined regarding payment of invoices indicates that Kangaroo Indochine Co Ltd paid invoices in full. There is no documented allowance for free samples.
Mr Elton was taken to an e-mail from Mr Mildren to Mr Chiodo in Melbourne dated
23 April 2012 in which is set out a schedule of free samples provided in Vietnam. The schedule sets out the name of the customer, a description of the wine provided including the number of bottles, the FOB price per bottle and the total cost. He was asked whether there were any payments made for those samples and he said there were not, but that there were credits. When asked if there was any evidence of this his answer was: no. It was also pointed out to Mr Elton that the schedule of free samples did not adequately describe the promotional event at which the samples were provided. Some simply have the name Hoa (who is Mr Elton's wife) and others have Peter and Peter birthday. I agree with Mr Knowles's submissions that the documentary evidence is insufficient to prove, on the balance of probabilities, that the amount of the expense claimed for the provision of free samples of wine was acquitted in accordance with s. 58 of the EMDG Act.
CONCLUSION
To be eligible for a grant under the EMDG Act, Corp di Oro needed to satisfy the CEO of Austrade and on hearing, this Tribunal, that it was genuinely carrying on business in Australia during each grant year. Contrary to the contentions of Austrade, I have found that Corp di Oro was genuinely carrying on the business of exporting bottled wine to Vietnam during the grant years. Therefore, I have found that Corp di Oro was eligible for a grant.
Corp di Oro claimed that it incurred expenses arising out of marketing visits made by Mr Elton as its agent because the visits were made for an approved promotional purpose. While the evidence certainly substantiated the Travel between Australia and Vietnam as described by Mr Elton, it disclosed that his flights originated in Vietnam and returned to Vietnam. Mr Elton spent 559 days during the grant years overseas and 131 days in Australia. The evidence also disclosed that while Mr Elton conducted substantial marketing activities while in Vietnam, those activities were to assist Kangaroo Indochine Trading Services Co Ltd market wine it had purchased from Corp di Oro. Kangaroo Indochine Trading Services Co Ltd, a discrete legal entity, was Corp di Oro's distributor/wholesale outlet for Australian wines in Vietnam. Although I accept that Corp di Oro benefited indirectly from the marketing work Mr Elton conducted in Vietnam, Mr Elton's presence in Vietnam was not the result of visits made for the purpose of marketing. In fact, given the length of time Mr Elton spent in Vietnam over the two grant years in question, it is more accurate to describe Mr Elton as residing in Vietnam where he worked for Kangaroo Indochine Trading Services Co Ltd, most likely as a consultant. There were invoices for Mr Elton's consultancy services. His presence in Vietnam was not for the purposes of an approved promotional activity, that is, seeking or increasing demand or opportunity in a foreign country for eligible goods owned by Corp di Oro. The goods were the property of Kangaroo Indochine Co Ltd when they arrived in Vietnam. Accordingly, the claimed expenditure for marketing visits should be disallowed.
Corp di Oro also claimed for expenses it incurred attributable to the cost of providing free wine samples in Vietnam. The problem with accepting this claim is that any samples which were given to customers in Vietnam were the property of Kangaroo Indochine Trading Services Co Ltd. There was no evidence before me which disclosed Corp di Oro incurred expenditure in relation to those free samples. In fact, the evidence disclosed that Corp di Oro was paid in full by Kangaroo Indochine Trading Services Co Ltd for the wine it exported to Vietnam. Therefore, this claimed expenditure should also be disallowed.
For the reasons I have set out above, I have formed the view that the decision made by Austrade on 13 August 2012 regarding Corp di Oro's claim under the EMDG Act in respect of the 2010 and 2011 grant years was correct. I affirm that decision.
I certify that the preceding 68 (sixty -eight) paragraphs are a true copy of the reasons for the decision herein of
Egon Fice, Senior Member
.....[sgd]...................................................................
Associate
Dated 14 March 2013
Dates of hearing 4-5 December 2012 Representative for the Applicant Self-represented Counsel for the Respondent Mr R Knowles Solicitors for the Respondent DLA Piper Australia
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