Preston SuperAccess Pty Limited and Australian Trade Commission
[2013] AATA 537
[2013] AATA 537
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2012/3765
Re
Preston SuperAccess Pty Limited
APPLICANT
And
Australian Trade Commission
RESPONDENT
DECISION
Tribunal The Hon. Brian Tamberlin, QC, Deputy President
Date 2 August 2013 Place Sydney The decision under review is affirmed.
......................[sgd]...............................................
The Hon. Brian Tamberlin, QC, Deputy President
CATCHWORDS
TRADE AND COMMERCE – industry assistance – export market development grants – change of ownership of business – whether the new business is similar to the old business – whether the new business should be treated as a continuation of the old business – decision under review affirmed
LEGISLATION
Export Market Development Grants Act 1997 ss 7, 93, 94, 101
CASES
Re Amlink Technologies Pty Ltd and Australian Trade Commission (2005) 86 ALD 370; [2005] AATA 359
Re Fairlight Instruments Pty Ltd and Australian Trade Commission [2013] AATA 231
Re Magee and Australian Trade Commission (1994) 36 ALD 304
SECONDARY MATERIALS
Export Market Development Grants (Change in Ownership of Business) Guidelines 2006
REASONS FOR DECISION
The Hon. Brian Tamberlin, QC, Deputy President
2 August 2013
The Applicant (Preston SuperAccess Pty Limited) seeks review of a decision by the Respondent Commission of 13 August 2012, which affirmed an earlier decision to refuse an application for an export market development grant for the 2010-2011 year on the ground that the Applicant’s business was a continuation of business activities previously carried out by Mr John Preston, Preston International Pty Ltd, Preston Erection Pty Ltd and Preston Australia Pty Ltd.
The basis for the decision was that Preston SuperAccess was continuing a business previously carried on in respect of which there had been eight prior grants, and the application by Preston SuperAccess was a ninth application and as such was not eligible to receive a grant as the maximum number of grants payable is seven under s 7 of the Export Market Development Grants Act 1997 (the Act).
LEGISLATIVE FRAMEWORK
The Act provides for an assistance incentive scheme under which small and medium Australian exporters, having a total annual turnover of less than $50 million which are committed to and capable of seeking out and developing export businesses, are repaid part of the expenses incurred in promoting their products.
The scheme is capped which means there is a finite amount of money allocated by the Australian government to fund the administration of the scheme and the payment of grants.
The object of the grants is that 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.
Under the general rules of eligibility in s 7 of the Act a person is only eligible for a grant if the person is not a grantee in respect of seven or more previous grant years.
Under s 93 an underlying principle of the provisions is that the rules relating to grants that are payable “in respect of a business” (including the limitation on the number of grants that are payable) continue to apply and a particular grant is payable in respect of a business despite a change in who carries on the business.
Section 94(1) provides as follows:
(1)Subsection (2) applies if:
(a) at any time, a person (the previous owner) carried on a particular business (the old business) in Australia; and
(b) at a later time, another person (the new owner) carries on:
(i)the business or a part of the business (the relevant part); or
(ii)a business (the new business) that, at that time, is similar to the old business or a part of the old business (the relevant part), carried on by the previous owner before that time, to such an extent that the CEO of Austrade is satisfied that the new business should be treated as a continuation of the old business; and
(c) the new owner applies for a grant in respect of a grant year.
(Emphasis added.)
There is a note to the subsection that decisions whether the two businesses are similar are subject to guidelines determined by the Minister under s 101.
Subsection (2) of s 94 provides:
(2)For the purposes of this Act, the CEO of Austrade must treat particulars of the previous owner as being those of the applicant in the following ways:
(a) any eligible expenses incurred by the previous owner in the capacity of owner of the business (or of the relevant part) are to be treated as having been incurred by the new owner;
(b) if the CEO had decided that the previous owner met the grants entry requirements—the new owner is to be treated as if the CEO had decided that it had met the grants entry requirements;
(c) any grant, or advance on account of grant, paid or payable (whether under this Act or under the repealed Act) to the previous owner in the capacity of owner of the business (or of the relevant part) is to be treated as having been paid, or as being payable, to the new owner;
(d) any other aspect of the business (or of the relevant part) is to be treated as if it had been carried on by the new owner.
Section 101 of the Act provides that the Minister must determine by legislative instrument, guidelines to be complied with by the CEO of Austrade, for the purpose of determining whether a business or part of a business that was carried on by a person is similar to the new business being carried on by another person to such an extent that the new business should be treated as a continuation of the old business.
The guidelines must be complied with by the CEO of Austrade and they are binding on the Tribunal on this review.
ISSUE
The principal issue for determination on this review is whether, under s 94(1)(b)(ii) of the Act, the previous business (the old business) that was carried on by an entity or person is similar to a business (the new business) being carried on by another entity or person to such an extent that the new business should be treated as a continuation of the old business.
It was also argued for the Respondent that the Applicant could not obtain a grant by virtue of s 94(1)(b)(i) which refers to a continuance of the same business or part of the same business. However, in view of the conclusion under s 94(1)(b)(ii) it is not necessary to decide this question.
The question is one of fact and degree involving a consideration of the factors set out in the relevant guidelines, the Export Market Development Grants (Change in Ownership of Business) Guidelines 2006 (the Guidelines).
THE GUIDELINES
The Guidelines apply in respect to a grant application made under the Act on or after 1 July 2007.
Paragraph 4 of the Guidelines provides as follows:
(1)In determining, for the purposes of subparagraph 94 (1) (b) (ii) of the Export Market Development Grants Act 1997, whether a business or a part of a business (the old business) that was carried on by a person is similar to a business (the new business) being carried on by another person to such an extent that the new business should be treated as a continuation of the old business, Austrade must comply with these Guidelines.
(2)In determining whether the new business is similar to the old business, Austrade must have regard to the similarities (if any) and the differences (if any) between:
(a) the product of the new business and that of the old business; and
(b) the activities that are carried out in the course of the business of the new business and the activities that were carried out in the course of the old business; and
(c) the customers, including the export market customers, of the new business and those of the old business; and
(d) the directors, shareholders, and management personnel of the new business and those of the old business; and
(e) the suppliers to the new business and those to the old business; and
(f) the overseas representatives of the new business and those of the old business; and
(g) the employees of the new business and those of the old business; and
(h) the markets, including the export markets, of the new business and those of the old business; and
(i) the premises from which the new business is conducted and the premises from which the old business was conducted; and
(j) the logo of the new business and that of the old business; and
(k) the property and assets, including the intellectual property, of the new business and those of the old business.
OVERVIEW
John Preston was the founder and director of Preston Erection Pty Ltd which commenced trading in 1980 in traditional tube and fitting scaffolding and some system scaffolding. Mr Preston was its founder and director. Preston Erection Pty Ltd also traded in other activities including mobile crane hire, structural fabrication, rigging and scaffolding.
In 1985 Mr Preston invented the Preston Folding Scaffold, which was designed for use as a scaffold and could not be used for anything else. Mr Preston commenced export of the Preston Folding Scaffold in 1987-88. It was a very successful product to such an extent that the business was purchased with its stock, contracts, employees and vehicles in 1988 and settlement took place in 1989. Preston Erection Pty Ltd had entered into a number of contracts, including option agreements and first right of refusal arrangements, and after the sale in 1989 these contracts had to be finalised. This took a number of years to complete due to distance and negotiations.
Subsequently, Mr Preston invented and patented a loading platform which developed into a product known as SuperDeck, which also was a market success.
Mr Preston effectively managed, controlled and was part-owner of all relevant companies. His inventions, control and management connect the companies, and under his guidance and control the companies obtained eight export grants. Mr Preston claims that his present business relating to SuperAccess has no connection, association or interest with previous Preston companies.
Mr Preston says that in 2010 he began to conceive of the invention which became known as SuperAccess boxes which could build many things including, but not limited to, “bridges, walkways, hoardings, stages, propping, scaffolds, stair ways” and so on. This product, he says, is a “Greenfield” or new product developed as a multi-use, multi-function product which is versatile and flexible.
Mr Preston says that technically, in appearance, and in end use function, the SuperAccess box is completely different from the Preston Folding Scaffold and SuperDeck. It was, he says, reinvented from the ground up and uses different materials, concepts and “manufacturing assembly”. He claims that none of the drawings, intellectual property, ideas, hardware or software of the Preston Folding Scaffold or SuperDeck could be reused in relation to the new product. He says that the only intellectual property of any continuing value was the use of the name “Preston”, but he claims the diagrammatic logo used in relation to the name is completely different in respect of each of the three Preston products.
Mr Preston agrees that the Preston entities have made claims for 10 export market development grants in all.
EVIDENCE
The evidence took the form of documents submitted by both sides, including the T-documents; material submitted by Mr Preston together with oral evidence in chief and by way of cross-examination of Mr John Preston and Mr Crawford, who was an expert witness called by Mr Preston whose field of expertise and experience is in scaffolding and formwork. Mr Crawford has been involved in the scaffolding industry since 1982 and he is a qualified civil engineer from both the University of New South Wales and the Sydney Technical College.
APPROACH
It is clear from ss 93 and 94 of the Act that the limitation on the number of grants requires consideration of the similarities and differences between the businesses carried on, notwithstanding a change in ownership. Under the Guidelines, consideration must be given to the directors, shareholders and management personnel of the new and old businesses. Businesses can be substantially similar notwithstanding that there has been a development or variation in the range or type of product or service provided in the course of the business. A variation in the nature or type of product or in the manner in which the business is carried on is, of course, a relevant factor to be taken into account under the Guidelines.
Limited guidance can be obtained from decided cases because in each case the question is essentially one of fact and degree.
The considerations that products sold are more technically advanced, or the business is conducted on a larger scale, do not of themselves necessarily mean that the new business is not to be treated as a continuation of the old business: see Re Amlink Technologies Pty Ltd and Australian Trade Commission (2005) 86 ALD 370; [2005] AATA 359 at [66].
Nor does the fact that the new business evolves or develops as a result of a competitive market pressures mean that the business cannot be treated as a continuation of the old business: see Re Magee and Australian Trade Commission (1994) 36 ALD 304 at 311. The comparison of the degree of similarity between the businesses requires a balancing and weighing of the considerations required to be taken into account by the Guidelines, in the light of the evidence, and forming a degree of satisfaction based on an evaluation of the relative weight to be assigned to the relevant considerations. It is not a mathematical exercise, but one of factual evaluation and weight: see Re Fairlight Instruments Pty Ltd and Australian Trade Commission [2013] AATA 231 at [55].
I now turn to the question whether the new business of the Applicant is similar to the old business, or part of it, to such an extent that I am satisfied that the new business should be treated as a continuation of the old business.
GUIDELINE (a) – PRODUCT – COMPARISON
This requires consideration of the similarities between the products of the old and new businesses.
The original product of the business carried on under the management of Mr Preston at the earliest stages involved the fitting of scaffolding and some system scaffolding. In and after 1985 Mr Preston’s business involved the exploitation and development of the intellectual property and rights arising from his invention of the Preston Folding Scaffold. This was a very successful business because it was fast to erect and saved money.
The business as at 1988-1989 when it was sold involved the exploitation of intellectual property, know-how and ideas of Mr Preston, together with hardware and software through overseas and local contracts, option agreements and rights of first refusal. A number of contractual commitments and arrangements remained to be carried out by Mr Preston’s company after the business was sold by Mr Preston so that the business continued to be carried on for some time after the same.
The evidence is that these commitments were met over ensuing years. Mr Preston in his submissions states that there was some continuation of the business after 1988 and that this is supported by applications and statements in evidence. Mr Preston described his Folding Scaffold as a vast improvement in the scaffolding business.
The “new” business, in respect of which the present application is made, is based on SuperAccess boxes which can build many things including, but not limited to, “bridges, walkways, hoardings, stages, propping, scaffolds [and] stairways” and other uses. By way of example, he refers to the use of SuperAccess boxes in the Tough Mudder obstacle course which is not a use to which normal scaffolding is put.
In the Patent Application lodged on 25 February 2011 in respect of the SuperAccess box, the primary claim is made for an “invention which relates to scaffolding” which has been developed “especially but not exclusively for, use in multistorey scaffolding for use in the construction, renovation or maintenance of buildings and other structures”.
Each of the 43 Patent claims in the application relates either to scaffolding modules or scaffolding assemblies or methods of erecting scaffolding.
The first section of the Specification of the Patent product is headed “SCAFFOLDING”.
Notwithstanding this detailed and persistent reference to scaffolding throughout the patent, Mr Preston claims that the “SuperAccess” product is not scaffolding.
Mr Crawford, the scaffolding expert called on behalf of Mr Preston, says that the SuperAccess product performed the same functions as Folding Scaffold or any other scaffold. He described a scaffold as “a temporary work platform to enable work to be carried out”. Mr Crawford agreed that the similarities between the Preston Folding Scaffold product and the SuperAccess included the following:
·provision of a working platform on the side of a building;
·assembly on the ground;
·provision of a continuous walkway;
·both have a protective barrier;
·both can be fitted with stairs and other means of access.
During cross-examination Mr Crawford accepted that it was fair to say that the SuperAccess product was an improvement on the Folding Scaffold because it was more versatile. He also accepted that the SuperAccess product performed the same functions as any other scaffold.
Mr Preston gave evidence that the products he invented, including the Folding Scaffold and the SuperAccess product, would be able to work together on the same site. That is to say as a functionally integrated unit on the building site. This capacity and adaptability to combine and integrate the use of the products points to a close functional relationship and connection between the products marketed in the old and new business as between the Folding Scaffold and the SuperAccess box product.
Having regard to these considerations, I am of the view that the similarities between the Folding Scaffold system and the SuperAccess box are sufficiently extensive to point in favour of a conclusion of a continuity of business. The fact that the SuperAccess product may have some other uses does not substantially detract from that satisfaction as to similarity.
In relation to the comparison between the SuperAccess product and the SuperDeck product, I am also satisfied that there were strong similarities.
Mr Crawford gave evidence that the SuperDeck product related to scaffolding in that it would provide a firm base so that there could be an integrated use of the SuperDeck platform and a scaffold. Products could be combined for a particular purpose so that there was support for the scaffolding. In other words, the two products could be combined in function.
The SuperDeck Patent Application of August 1993 relates to a construction platform for use in a “multi-storey building construction” comprising a “stationary support structure”.
The evidence of Mr Crawford, and the Patent Application itself, supports the conclusion that the SuperDeck product is a product which is used in construction of a building, and that it can and does operate in conjunction with scaffolding and that its use and exploitation is closely related to the use and exploitation of the scaffolding which is comprised in the SuperAccess product.
GUIDELINE (b) – ACTIVITY
The old business involved the development, exploitation and marketing, internationally and domestically, of intellectual property and know-how in relation to products used in the course of and to support multi-storey building construction, involving the obtaining of patents and the licencing of intellectual property rights. The property sought to be marketed in relation to the SuperAccess product is described as intellectual property in relation to the SuperAccess system. The old business activities are clearly similar in character in that it involved the exploitation of intellectual property rights arising from scaffolding inventions made by Mr John Preston which are used in the construction industry.
All the business activities have focused on the extensive inventive ability of Mr Preston over the years in improving and developing scaffolding products in the sense described by Mr Crawford. Mr Preston refers to the fact that he had sold his business of the Folding Scaffolding in 1989. I note that the restraint of trade covenant in that agreement is limited to a period of four years.
There is some evidence to the effect that Mr Preston continued to carry out activities relating to scaffolding after that period arising from the arrangements which he had made prior to takeover in 1989.
In an industry publication, Overseas Trading (October 1994), which refers to the business activities of Mr Preston, it is stated that “[a]s a measure of this success, look no further than Preston’s bottom line. Since 1989 the company has achieved revenue totalling $15 million”. This indicates that a substantial amount of the scaffolding and related business continued in this period.
According to internet pages on the Preston Australia website which appear to have been created in 2002 entitled “PRESTON – PERFORMANCE THROUGH INNOVATION” the Preston Group has been engaged in product development activities for the local and international construction industry for many years prior to 2002.
The pages were printed on 12 October 2005 from the internet site. One page contains an assertion that the Preston Group “is at the forefront of providing construction sites the very best of scaffoldings, materials handling & access systems” (emphasis added). The products are stated to include the Preston SuperDeck and the Preston Folding Scaffold. Another page of this printout solicits partners for the hiring of scaffolding equipment and joint ventures and promotes the availability of licences to manufacture and to hire and sell equipment to others.
Among the products described as Preston products are products relating to bridges, ramps, propping, scaffold support, overhead protection, street hoardings and other auxiliary products. A number of these products involve the same uses, which Mr Preston claims were unique or new to the SuperAccess product invented in about 2010 and for which he sought a patent in 2011.
In relation to the activities I am satisfied that the Folding Scaffold business and the SuperDeck business carried on for many years after 1988 and that this points to a continuous engagement in similar business activities.
GUIDELINE (c) – CUSTOMERS
It is clear from the extensive documents and oral evidence that the old business was directed to local and overseas customers involved in the building construction industry, and the provision of scaffolding and other support systems necessary or incidental to such construction. The claims for expenditure in evidence relate to promotions at trade fairs and publicity of the products in overseas markets particularly in Asia.
I am satisfied that the evidence indicates that many of the types of customers targeted for the new product would overlap with customers of the earlier businesses.
Accordingly, I consider this factor weighs in favour of a conclusion that there is a continuance of the businesses.
GUIDELINE (d) – DIRECTORS, SHAREHOLDERS AND MANAGERS
The entities carrying on the businesses since the 1980s have been under the substantial control by Mr Preston and his family at various times with periodic changes. He has been a shareholder and managing director over that period. The relevant entities are all or were under the control of Mr Preston. His wife has been a director and shareholder over a large part of the period from 1982 onwards. The new business is in the process of starting up and there is continuity in the fact that Mr Preston continues to be director and control the activities.
The history of continued control and management by Mr Preston supports an inference of continuity in the business.
GUIDELINE (e) – SUPPLIERS
In relation to the new business there is no detailed evidence as to the suppliers. Basically the business will turn on the exploitation of intellectual property. It is not possible to say at this time on the evidence who the suppliers will be, if any. I do not place any significant weight on this consideration either way.
GUIDELINE (f) – OVERSEAS REPRESENTATIVES
There is no detailed evidence as to overseas representatives in respect of the new business. There were certainly, at various stages, representatives of the old business. In light of the limited evidence I give no significant weight to this consideration either way.
GUIDELINE (g) – EMPLOYEES
At present there are no employees of the new business and it is not reasonably possible to predict the number of employees the new business will employ if it is successful. Given the nature and stage of the development of the new business it is not possible to meaningfully assess the similarities and differences in this respect. The major product is the intellectual property arising from the invention of Mr Preston of the SuperAccess box system and its exploitation. There does not appear to be any manufacturing intended. In view of the limited evidence I give no significant weight to this consideration.
GUIDELINE (h) – MARKETS, INCLUDING EXPORT MARKETS
Having regard to the general nature of the new business, being the intended exploitation of intellectual property in respect of the product, and the history of the exploitation of similar products in relation to the old businesses I consider the markets and users targeted by the old and new business will be substantially similar, including mainly those in the building construction industry. However, in view of the limited evidence I give no significant weight to this consideration.
GUIDELINE (i) – PREMISES
All businesses are carried on at premises at 196-200 Silverwater Road. Mr Preston says the premises are divided into two self-contained separate office/factory areas, and that the SuperAccess product is built in a totally separate area with a separate title. He says these businesses are carried on side by side as a result of a deliberate choice because it improves efficiency and saves money. In my view, the close geographic nexus between the locations of the two businesses, notwithstanding they are separate buildings, suggests a degree of communication and integration between the businesses. For practical purposes, it can be said they operate in the same geographical location. I therefore consider this factor points in favour of a conclusion that the businesses should be treated as continuous in nature.
GUIDELINE (j) – LOGO
The logo of each of the businesses displays the name “PRESTON” which is set in bold uppercase. On each logo there is also a symbol or design. These are different. The logo is, however, clearly designed to draw attention to the Preston name and its reputation for quality products and inventiveness over the years.
I consider this substantial identity in promotion supports an inference of continuance.
GUIDELINE (k) – PROPERTY AND ASSETS
The intellectual property which is at the heart of the three businesses is similar in nature, namely in each case, an invention by Mr Preston in the area of multi-storey construction, scaffolding and decking. Apart from the intellectual property the evidence does not indicate what other assets the Applicant has. As the new business is in a very early stage of development it is dependent on assistance from existing Preston entities. Although Mr Preston has produced a number of other inventions, the central business of the three relevant inventions in this case is that they relate to exploitation of his intellectual property in multi-storey supporting structures for the building construction.
CONCLUSION
Having regard to the above considerations in the light of the evidence, I am satisfied that the business in respect of which the grant is sought is sufficiently similar to the Preston Folding Scaffold and SuperDeck businesses to such an extent that the new business of SuperAccess should be treated as a continuation of the old businesses which concern Super Scaffold and SuperDeck. I therefore affirm the decision of the Respondent of 13 August 2012.
I certify that the preceding 69 (sixty nine) paragraphs are a true copy of the reasons for the decision herein of The Hon. Brian Tamberlin, QC, Deputy President .......[sgd]...........................................................
Associate
Dated 2 August 2013
Dates of hearing 6-7 May, 18 June 2013 Date final submissions received 27 June 2013 Advocate for the Applicant Mr J Preston Solicitors for the Respondent Mr L Leerdam, DLA Piper Australia
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