Rala Information Services Pty Ltd v Australian Trade Commission

[1997] FCA 805

FEDERAL COURT OF AUSTRALIA

ADMINISTRATIVE LAW - Administrative Appeals Tribunal Act 1975 (Cth) s 44 - appeal from decision of Administrative Appeals Tribunal - purported error of law

ADMINISTRATIVE LAW - Export Market Development Grants Act 1974 (Cth) - decision of Australian Trade Commission to refuse grant - whether expenditure incurred “primarily and principally” for the purpose of the development of export markets - difference between “motive” and “purpose”.

Administrative Appeals Tribunal Act 1975 (Cth), s 44
Export Market Development Grants Act 1974 (Cth), ss 11A(1), 11D, 11Z(2)(3), 11ZE, 12, 13, 14(1)(a)

Parker Pen (Aust) Pty Ltd v Export Development Grants Board (1983) 46 ALR 612, cited
Speedo Knitting Mills Pty Ltd v Commonwealth of Australia (1981) 37 ALR 417, cited
Rajski v Carson (1988) 15 NSWLR 84, cited
Crofter Hand Woven Harris Tweed Company Limited v Veitch [1942] AC 435, cited

RALA INFORMATION SERVICES PTY LIMITED v
AUSTRALIAN TRADE COMMISSION
NG 687 of 1996

BRANSON J
SYDNEY
20 AUGUST 1997

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)  NG 687 of 1996
)
GENERAL DIVISION	)

BETWEEN:	RALA INFORMATION SERVICES PTY LIMITED Applicant
AND:	AUSTRALIAN TRADE COMMISSION Respondent

JUDGE:	BRANSON J
PLACE:	SYDNEY
DATED:	20 AUGUST 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The decision of the Administrative Appeals Tribunal of 26 July 1996 be quashed.

1. The matter be referred to the Administrative Appeals Tribunal for further consideration.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)   NG 687 of 1996
)
GENERAL DIVISION	)

BETWEEN:	RALA INFORMATION SERVICES PTY LIMITED Applicant
AND:	AUSTRALIAN TRADE COMMISSION Respondent

JUDGE:	BRANSON J
PLACE:	SYDNEY
DATED:	20 AUGUST 1997

REASONS FOR JUDGMENT

THE APPLICATION

This is an appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) from a decision of the Administrative Appeals Tribunal (“AAT”) given on 26 July 1996.  By its decision, the AAT affirmed a decision of the respondent not to pay to the applicant a grant under the Export Market Development Grants Act 1974 (Cth) (“the Act”) in respect of a sum of $40,128.00 claimed by the applicant to be “qualifying export development expenditure” within the meaning of the Act.

FACTUAL BACKGROUND

The applicant publishes trade and business magazines.  Each magazine, as I understand it, contains technical or educational information specific to a particular industry.  The applicant, as publisher of the magazines, receives income both from subscribers to the magazines and from the selling of advertising space in the magazines.  In the case of each of the magazines, the income from advertisers significantly exceeds the income received from subscribers, and the income received from subscribers was, in each case, less than the cost of production of the magazine.

The sum of $40,128.00 claimed by the applicant to be “qualifying export development expenditure” was expenditure incurred by the applicant in relation to the provision of free samples in Asia of two magazines, namely “Waste Management and Environment” and “Metal Casting and Surface Finishing”.  The free samples were either sent to potential subscribers in Asia by mail, with a covering letter inviting subscription, or given away at overseas trade fairs, exhibitions or conferences held in Asia.

STATUTORY BACKGROUND

The Act makes provision for the Australian Trade Commission (“the Commission”) to pay grants for the purpose of providing incentives for the development of export markets. Section 13 of the Act provides that a person desiring to obtain a grant shall submit a claim to the Commission. Section 12 requires the Commission to consider every claim duly made, determine whether the claimant is entitled to a grant, and, if it determines that a claimant is entitled to a grant, to pay the amount of the grant so determined. Section 14 of the Act deals with eligibility for grants. So far as the present case is concerned, the only relevant criterion is that “the claimant has incurred eligible expenditure” (s 14(1)(a)).

Part 1A of the Act in effect defines “eligible expenditure”. So far as is here relevant, s 11A(1) provides as follows:

“Expenditure is eligible expenditure of a person ...

(a)only if it is incurred by the person; and

(b)only to the extent to which it is claimable expenditure (see Division 2); and

(c)only if it is qualifying export development expenditure for the particular person (see Division 4).”

It is accepted in this case that the expenditure in question was incurred by a person, namely the applicant. Section 3 of the Act defines “person” to include a company.

Section 11D (1) of the Act provides, amongst other things, that expenditure is claimable expenditure if:

“(a)it is incurred by way of expenses (including costs of delivery) that, in the Commission’s opinion, are directly attributable to providing, without charge, samples or technical information to a person outside Australia ...”

No issue in this case arises directly under s 11D of the Act.

Section 11Z contains the provisions relevant in this case to a determination of whether the relevant expenditure incurred by the applicant was “qualifying export expenditure”.

The AAT acted on the basis that the relevant subsection of s 11Z was subs (2). It would appear that subs (3) was equally open to be invoked by the applicant. The two subsections read as follows:

“(2)Expenditure is qualifying export development expenditure of a person to whom this section applies if, in the Commission’s opinion, it is incurred primarily and principally for the purpose of:

(a)       creating or seeking opportunities for; or

(b)       creating or increasing demand for;

the sale by that person for export, or the export and sale by that person, of eligible goods manufactured, produced, assembled or processed in Australia.

(3)Expenditure is qualifying export development expenditure of a person to whom this section applies if, in the Commission’s opinion:

(a)the person manufactures, produces, assembles or processes eligible goods at the time the expenditure is incurred; and

(b)the expenditure is incurred primarily and principally for the purpose of:

(i)creating or seeking opportunities for; or

(ii)creating or increasing demand for;

the sale for export, or export and sale, of eligible goods manufactured, produced, assembled or processed in Australia by that person.”

Section 11ZE of the Act provides that certain qualifying export expenditure is to be ignored. So far as is here relevant, expenditure which is to be ignored is expenditure which -

“(a)     has been, or is to be, paid or reimbursed to the claimant by:

(i)        any other person ...”.

REASONS OF THE TRIBUNAL

The argument put on behalf of the respondent to the AAT was that the primary purpose for which the respondent provided free samples of its magazines in Asia was to give Asian exposure to its advertisers and thus obtain more Australian sourced advertising revenue.  The Tribunal noted in its reasons for decision that in respect of each of the two magazines with which it was concerned, the applicant received considerably more advertising revenue than subscription revenue. 

After outlining the evidence before it, and referring to decisions of this Court in Parker Pen (Aust) Pty Ltd v Export Development Grants Board (1983) 46 ALR 612 and Speedo Knitting Mills Pty Ltd v Commonwealth of Australia (1981) 37 ALR 417, the Tribunal reached its conclusion in the following paragraphs:

“19.     The figures adduced from the Applicant company’s accounts show that if the magazines were dependent upon subscription revenue they were simply not viable.  I therefore cannot accept, as an objective fact, that the drive for subscriptions in Asia was primarily to increase subscriptions.  No doubt an increase in subscriptions was a very welcome addition to the company’s revenue base, however, the titles in question were dependent upon advertising revenue for their viability and thus I find that the primary purpose of the Applicant company was to increase its advertising revenue by holding out to would be advertisers an exposure to Asia.

20. As s 11Z has not been satisfied, the decision under review must be affirmed and it is not necessary for these reasons to go further and consider s 11ZE or the actual cost of production.” [emphasis in original]

CONTENTIONS

The contentions advanced on behalf of the applicant stressed that s 11Z of the Act is concerned with the purpose for which the relevant expenditure was incurred and not the purpose for which the relevant goods were produced. It was argued that the Tribunal sought to answer the wrong question, namely “why did the applicant produce the magazines?” rather than “why did the applicant incur the relevant expenditure?”.  It was further argued that the Tribunal confused the issue of the “purpose” of the relevant expenditure with the benefits expected to flow from such expenditure.

On behalf of the respondent it was submitted that the finding made by the Tribunal was one open to be made on the evidence before it, and that there is no reason to conclude that the Tribunal sought to answer the question “why did the applicant produce the magazines?”.

CONCLUSIONS

I see no reason to conclude that the Tribunal posed for its own consideration the question of why the applicant produced the magazines, as opposed to the question of what was the applicant’s primary purpose in incurring the expenditure claimed as “qualifying export development expenditure”.

Section 11Z of the Act requires the commission to form an opinion as to whether a person incurred expenditure “primarily and principally” for one of the purposes specified. In the context of s 11Z these two adverbs do not have separate work to perform; they invite consideration of whether the person has incurred the expenditure mainly or chiefly for the required purpose (per Lockhart J in Parker Pen (Aust) Pty Ltd v Export Development Grants Board at 620).

However, as this case illustrates, the task of forming an opinion as to a person’s main or chief purpose for incurring certain expenditure may involve considerable complexity.  As Lockhart J pointed out in Parker Pen (Aust) Pty Ltd v Export Development Grants Board at 621:

“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.”

In some contexts it is appropriate to distinguish between “purpose” and “motive”.  In such contexts an individual’s purpose is his or her desired result; such individual’s motive is that which prompts him or her to act with the intention of achieving that result.  In other contexts, particularly where the character of a individual’s objectives is to be determined, no hard and fast distinction between “purpose” and “motive” can be drawn (see Rajski v Carson (1988) 15 NSWLR 84, particularly per Kirby P and Hope JA at 93; Crofter Hand Woven Harris Tweed Company Limited v Veitch [1942] AC 435 at 468-469).

In construing the word “purpose” in the context of s 11Z of the Act, it is necessary to ascertain the objective of Parliament as reflected in the language of s 11Z of the Act understood in the context of the Act as a whole. The Act, as its long title reflects, is concerned with the provision of incentives for the development of export markets. There is little reason to conclude from the Act as a whole, or from the language of s 11Z, that Parliament was concerned with the motivation behind the development of any particular export markets. Motives in business, as in life generally, can be complex and confusing. In deciding to seek to increase sales by the development of an export market, those in control of a company might be motivated by one or more of a range of considerations. Ordinarily one would expect the primary consideration to be the opportunity to increase return or shareholders’ funds. However, other, and more specific, considerations might come into play. These could include:

(a)       reducing the unit cost of production of its goods generally;

(b)maintaining the financial viability of an Australian manufacturing plant in the face of reduced Australian demand or a loss of Australian market share; and

(c)reducing exposure to a risk, which it might otherwise carry, of foreign currency fluctuations adverse to the Australian dollar.

Nothing in the language of the Act, or s 11Z in particular, suggests that Parliament was concerned with motive in the above sense for the incurring of export development expenditure. Its concern rather appears to be with the objective fact of the development of export markets. Of course, issues of bona fides could arise.  Expenditure prima facie incurred for the purpose of developing an export market might, on analysis, be seen to have little, if any, genuine connection with such a purpose.  An example would be expenditure incurred not in a genuine endeavour to develop an export market but rather in an attempt to attract a veneer of legitimacy to an overseas holiday claimed as a tax deductable business trip.

It seems to me, however, that where the evidence demonstrates a bona fide intention to achieve the result of creating or seeking opportunities for, or creating and increasing demand for, sales for export of eligible goods produced in Australia, s 11Z does not call for the Commission to have regard to the considerations which prompted the making of the decision to seek to achieve such result.

In the circumstances of the present case, the above analysis, in my view, indicates as follows. If the Commission were of the opinion that the applicant distributed free samples of its magazines in Asia, not in a genuine endeavour to develop an export market in such magazines, but to enable it to assert to advertisers that a significant number of such magazines was distributed in Asia, the Commission might well form the opinion that the related expenditure was not incurred primarily and principally for the purpose prescribed by s 11Z. In my view, it would be open to the Commission to form this opinion notwithstanding that it accepted that the applicant appreciated that the distribution might result in some Asian subscriptions and that some subscriptions did in fact result from the distribution. It would be open to the Commission to conclude that the primary and principal purpose of the expenditure was to put the applicant in a position to make the assertion referred to above. However, if the Commission were of the opinion that the applicant distributed free samples of its magazines in a genuine endeavour to develop an export market in such magazines, it would not, in my view, be open to it to conclude that the related expenditure was not incurred primarily and principally for the purpose prescribed by s 11Z solely on the ground that the applicant’s motive in seeking to achieve the prescribed purpose was to increase the advertising revenue generated by it in Australia.

The reasons of the Tribunal, and in particular par 19 set out above, suggest that the Tribunal failed to distinguish between the applicant’s purpose and the applicant’s motive in pursuing its purpose, in the sense discussed above.  This amounts to an error of law and the decision of the Tribunal must be quashed.

I was invited by counsel for the applicant to give consideration in these reasons to the proper construction of s 11ZE of the Act, which is set out above. The Tribunal did not give consideration to s 11ZE. Full argument on the section was not addressed to me. I do not consider that it is appropriate to accede to the above invitation.

The orders of the Court will be that the decision of the Administrative Appeals Tribunal of 26 July 1996 is quashed and the matter referred to the Administrative Appeals Tribunal for further consideration.

I certify that this and the preceding five
(5) pages are a true copy of the Reasons
for Judgment of the Honourable
Justice Branson.

Associate:

Date:

Counsel for the applicant:  Mr E. Strasser
Solicitor for the applicant:  Jennifer E. Darin

Counsel for the respondent:  Miss R.M. Henderson
Solicitor for the respondent:  Australian Government Solicitor

Date of hearing:  8 August 1997