Re DBTL and Innovation Australia - [2013] AATA 573

Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
) No: 2010/1153

General Administrative Division )
Re: Mount Owen Pty Limited
Applicant

And: Innovation Australia
Respondent
TRIBUNAL:             The Hon. B J M Tamberlin QC, Deputy President
DATE:   20 November 2013
PLACE:                  Sydney

The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, to alter the text of the decision in this application as follows:

All references to the Applicant’s name as ‘DBTL’ are to be replaced with ‘Mt Owen Pty Limited’.

....................[sgd]...............................................
The Hon. B J M Tamberlin QC, Deputy President
[2013] AATA 573

Division GENERAL ADMINISTRATIVE DIVISION

File Number(s)

2010/1153

Re

DBTL

APPLICANT

And

Innovation Australia

RESPONDENT

Decision

Tribunal
Hon. Brian Tamberlin, QC, Deputy President
Mr Conrad Ermert, FIEAust, Member

Date 16 August 2013

Place Sydney
The decision under review is set aside insofar as it allows any of the Applicant’s claims and is substituted with a decision that none of the Applicant’s claims are accepted as being research and development activities.
...........................[sgd].............................................
Hon. Brian Tamberlin, QC, Deputy President
Catchwords
INDUSTRY RESEARCH AND DEVELOPMENT – claims for research and development activities - definition of research and development activity in s 73B(1) of the Income Tax Assessment Act 1936 – whether claimed activities fall within definition – whether activities are systematic, investigative and experimental – whether activities involve either innovation or high levels of technical risk – whether activities themselves involve high levels of technical risk – purpose of the activities - whether claimed activities carried out as claimed – sufficiency of evidence – whether activities excluded as being routine collection of information or required for compliance with statutory requirements – whether there was valid registration of research and development activities – decision under review set aside and substituted with a decision that that none of the Applicant’s claims are accepted as being research and development activities.
Legislation
Industry Research and Development Act 1986 (Cth): ss 39L, 39T, 39J

Income Tax Assessment Act 1936 (Cth): ss 72(2B)(a), 73B, 73B(1), 73B(1)(a), 73B(2B), 73B(2C)
Coal Mines (General) Regulations 1999 (NSW): 5, 6, 7, 15
Coal Mines (Open Cut) Regulations 1999 (NSW): regs 5, 6, 16, 25

Cases
RACV Sales and Marketing Pty Ltd v Innovation Australia [2012] AATA 26

Industry Research & Development Board v Coal and Allied Operations Pty Ltd (2000) FCA 40
Fermenter and Industry Research & Development Board [2000] AATA 888
SREE v Industry Research & Development Board [1999] AATA 401

HZXD v Innovation Australia [2010] AATA
Secondary Materials
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REASONS FOR DECISION
Hon. Brian Tamberlin, QC, Deputy President
Mr Conrad Ermert, FIEAust, Member

This is an application to review a decision of the Respondent made under s 39L of the Industry Research and Development Act 1986 (the IRD Act), that some of the activities claimed to be undertaken by the Applicant at its open-cut coal mine at Mount Owen in the period from January 2000 to 31 December 2005 were not “research and development activities” as defined in s 73B(1) of the Income Tax Assessment Act 1936 (ITAA).
The initial decision to reject the activities claimed by the Applicant was made by the Respondent on 24 November 2009. Following a request from the Applicant for reconsideration, the Respondent issued a further varied decision on 26 February 2010 which accepted some of the claimed activities as being research and development activities, but otherwise confirmed their initial decision.
On 23 March 2010 the Applicant applied to this Tribunal for review of the Respondent’s decision. This Tribunal has jurisdiction to undertake a merits review of the decision by reason of s 39T of the IRD Act.
the partIes
The Applicant owns the Mount Owen coal mine, which is an open-cut coal mine approximately 25 km north-west of Singleton in New South Wales. Mining operations commenced at Mount Owen in about 1993 and the Applicant purchased the Mount Owen mine in about 1999. The Respondent is an independent board established under the IRD Act. The object of the IRD Act is to promote the development and improve the efficiency and international competiveness of Australian industry by encouraging research and development activities, innovation activities and venture capital activities.
Factual Overview
The claimed activities relate to large open-cut mining operations at Mount Owen open pit coal mine. The mine was established in approximately 1993 by the Applicant, which was then known as Hunter Valley Coal Corporation Pty Ltd, a subsidiary of BHP Ltd.
The deposit at Mount Owen is affected by major regional geological faults which give rise to complex geological and geotechnical difficulties and challenges in the mining process.
The mine has three contiguous areas known as Pit A, Pit B and Pit C. Pit A was mined first, then Pit B and then Pit C. Pit B was commenced while Pit A was still being mined and Pit C commenced while Pit B was still being mined. Due to a number of features of the site and constraints there was very limited space on which to dump the over-burden and inter-burden that is mined out of the Mount Owen pits in order to expose and excavate the coal. In the period 2000 to 2005 the Applicant was required to dump the majority of this over-burden and inter-burden back into the Mount Owen pits themselves.
By approximately 1999 the Applicant had decided to mine Mount Owen to depths of 250m and beyond in order to extract the high quality coal seams located at those depths. In 1998 Pits A and B were being mined, but the maximum depth of extraction was approximately 150m. Increasing the depth of the pit to more than 250m presented a number of challenges for the Applicant in relation to maintaining, for example, the stability and strength of the high wall (which was the intact rock exposed as the mine progressed in depth) and managing the stability and strength of the low wall (which is the mined over-burden dumped in the pits). The Applicant engaged in activities to meet these challenges and operate the mine at greater depths. These activities (as claimed by the Applicant) are detailed in the table at paragraph [18] below.
By 2002 the operations had reached a depth of approximately 270m.
The mining of Pit C commenced in approximately 2004.
In order to mine at a depth of 270m the Applicant claims that it faced a number of challenges associated with the strength and stability of the walls and working with floors of increasing geological complexity. The Applicant claims it experienced failures in the low wall in the period 2002-2005 and developed processes during the period to manage these challenges. For example, the Applicant used a process known as “through-seam blasting” instead of the conventional process of blasting.
ISSUES
The central issue is whether the activities claimed by the Applicant as research and development activities have in fact been carried out as claimed and if so, whether they are research and development activities as defined in s 73B of the ITAA.
There are two further questions, namely:
(i)whether all or any of the claimed activities fall within the exclusions set out in s 73B(2C)(i) and (l) as being routine collection of information other than research and development activities, and/or whether they are activities associated with complying with statutory requirements; and
(ii)whether the Tribunal has power to issue a certificate under s 39L of the IRD Act in respect of activities which the Respondent claims were not duly registered as required by s 39J of that Act.
LEGISLATIVE FRAMEWORk
Section 73B(1) of the ITAA provides:
Research and development activities means:
a)   systematic, investigative and experimental activities that involve innovation or high levels of technical risk and are carried on for the purpose of:
(i)      acquiring new knowledge (whether or not that knowledge will have specific practical application); or
(ii)     creating new or improved materials, products, devices, processes or services; or
b)   other activities that are carried on for a purpose directly related to the carrying on of activities of the kind referred to in paragraph (a)[emphasis added].
Section 73B(2B) elaborates the definition of “research and development activities” as follows:
For the purposes of the definition of research and development activities in subsection (1):
a)   activities are not taken to involve innovation unless they involve an appreciable element of novelty; and
b)   activities are not taken to involve high levels of technical risk unless:
(i)      the probability of obtaining the technical or scientific outcome of the activities cannot be known or determined in advance on the basis of current knowledge or experience; and
(ii)     the uncertainty of obtaining the outcome can be removed only through a program of systematic, investigative and experimental activities in which scientific method has been applied, in a systematic progression of work (based on principles of physical, biological, chemical, medical, engineering or computer sciences) from hypothesis to experiment, observation and evaluation, followed by logical conclusions[emphasis added].
Subsection (2C) of s 73B of the ITAA provides for exclusions as follows:
For the purposes of this section, the following activities are taken not to be systematic, investigative and experimental activities:
…(i) routine collection of information, except as part of the research and development process…
(l) activities associated with complying with statutory requirements or standards, such as maintenance of national standards, the calibration of secondary standards and routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things[emphasis added]…
Applicant’s claimed Reseach and Development activities
The particular activities which are the subject of these proceedings are set out in the table below. They consist of activities claimed under paragraph (a) of the s 73B definition of research and development activities (“core activities”) and further activities claimed under paragraph (b) of the s 73B definition, which are referred to as “directly related activities”.
By way of explanation of the table:
(a)The first column states the identifying number of the claimed activity;
(b)The second column contains a brief description of the activity claimed;
(c)The third column indicates whether the activity claimed is a core activity (Core) or a directly Related (DR) activity; and
(d)The fourth column states the claimed timeframe for each activity.

Activity Number

Description of Activity

Core or DR

Year(s) applicant undertook the activity

3

Mine Modelling and concept design

This included:

·     Collection and review of data from drilling, rock testing and geotechnical analysis;

·     Computer modelling; and

·     Iterative design and development of the mine design model and mine plan, including a plan for dump sequencing.

DR

2000 - 2005

4

Experimentation and trial testing

Experimentation relating to the mining process, preparatory to the mining conducted in Activities 5.3 and 8.3. This involved the development of very specific methodologies to be employed in the mining process and then, the testing of those methodologies on a sub-level.

Testing activities included the following:

·     Trial and error activities in relation to the development of through-seam blasting techniques;

·     The drilling of testing and observation holes in the high wall and the low wall;

·     The undertaking of groundwater management analysis; and

·     The collection of data in-pit.

Core

2000 - 2005

5.1

High wall control system

This system involved the development of geotechnical design and a strata management plan for a high wall monitoring system in relation to the high wall that was exposed during 2000 to 2002. This involved:

·     The visual inspection of the high wall;

·     The conduct of geotechnical analysis of the high wall;

·     Computer modelling and analysis;

·     Rock strength testing;

·     The use of piezometers and telemetry;

·     The use of extensometers;

·     Drilling horizontal holes in the high wall to relieve water pressure;

·     Installing relief pipes in the high wall; and

·     The use of automated prisms.

Core

2000 - October 2002

5.2

Low wall control system

This system involved the development of a geotechnical design and a strata management plan for a low wall monitoring system in relation to the low wall that existed during 2000 to 2002. This involved the following:

·     Low wall floor treatment, including disturbance, keying, locking and trenching;

·     Visual and geotechnical review of the low wall;

·     The use of automated prisms;

·     The use of extensometers; and

·     The use of 3D pit photogrammetry.

Core

2000 - October 2002

5.3

Through-seam blasting

Development of through-seam drilling and blasting techniques to access coal seams in the face of complex geology and steeply dipping strata.

Core

2000 - October 2002

5.4

Mining process

Dig, load, haul coal seams in the face of complex geology and steeply dipping strata.

DR

2000 - October 2002

6

Evaluation and feedback

Evaluation and feedback of activities 5.1, 5.2, 5.3 and 5.4.

DR

2000 – October 2002

7

Project management

Project management, involving general project management across the life of the project.

DR

2000 - 2005

8.1

High wall control system

Including the further development of a geotechnical design and a strata management plan for a high wall monitoring system in relation to the high wall that was exposed during 2002 to 2005. This involved most or all of the same activities undertaken in Activity 5.1 above, taking into account the following factors in addition:

·     The high wall was larger and exposed for longer than was the case in Activity 5.1;

·     The high wall had a different shape (included the buttress) than was the case in Activity 5.1;

·     The buttress had an unprecedented design; and

·     Horizontal drilling was not used as extensively as was the case in Activity 5.1.

Core

October 2002 - 2005

8.2

Low wall control system

Including the further development of a geotechnical design and a strata management plan for a low wall that was exposed during 2002 to 2005. This involved most or all of the same activities undertaken in Activity 5.1 above, taking into account the following factors in addition:

·     The use of slope stability radar;

·     The settings of radar parameters and triggers;

·     The development of response management plans involving alarms and response systems or personnel and equipment in the event of a stability failure; and

·     The further development of systems after the 2005 low wall failure.

Core

October 2002 - 2005

8.3

Through-seam blasting

Development of through-seam drilling and blasting techniques to access coal seams in the face of complex geology and steeply dipping strata.

Core

October 2002 - 2005

8.4

Mining process

Dig, load, haul coal and waste in Pit B and transition zone Pit B to Pit C.

DR

October 2002 - 2005

9

Evaluation of results

Evaluation of the results from activities 8.1, 8.2 and 8.3 and feedback of this information into the mine concept design and process methodologies.

DR

October 2002-2005

Evidence

The extensive evidence before us included statements, affidavits, documents and oral testimony in chief and cross-examination from experts in the fields of geology, mining engineering, geotechnical engineering, and blasting, together with detailed evidence as to the means adopted to meet coal mining operations. The General Manager of the Applicant, Mr Walls, gave extensive evidence and produced numerous documents. Evidence was also provided by Ms Kym Knight (who was not required for cross-examination) as to the statutory regulations and controls which applied to the mining operations.
The geologists called were Messrs Whitby and Hanna for the Applicant and Mr Biggs for the Respondent. The mining engineers were Mr Alexander for the Respondent and Dr White and Mr Westcott for the Applicant. The geotechnical engineers were Dr Seedsman for the Applicant and Mr Dugan for the Respondent. In relation to blasting and the issue of through-seam blasting, Dr Hagan was called for the Applicant. On the question of the use of radar technology for slope stability warning, Dr Noon was called for the Applicant.
In addition, there is in evidence an extensive volume of mine records and documents together with photographs relating to the planning and mining activities over the period of the claims.
The members of the Tribunal also had the opportunity to view the site after opening submissions in order to understand the evidence adduced by the parties.
the witnesses
There was no satisfactory evidence from any actual participant in any of the claimed research or development activities as to the specific ways in which such projects were carried out, the basis on which they were carried out, or to explain the factual foundation for a conclusion that such projects were in fact carried out.
As a consequence of this substantial gap in the evidence, this Tribunal and the experts who were called were asked to formulate opinions retrospectively, for example, to infer from the documentation a hypothesis to justify the carrying out of experiments. It is not only the formulation of a hypothesis which is required to be inferred, but also the existence of the factual events which comprised the research and development activities as claimed in this application.
MR WALLS
Mr Walls was the Applicant’s key witness. He was the General Manager in control of the mining operations for DBTL from March 2001 to December 2005. He was responsible for the operation of the mine, including involvement in the preparation of the mine plans and budget, and monitoring the performance of contracts against the objectives of the plan and budget. He was also responsible for reporting on mining and financial progress. It was part of his function to ensure compliance with legislative requirements, including environmental and occupational health and safety issues such as the management of risk in the carrying out of the mining activities. He made several statements and gave oral evidence in chief and under cross-examination.
By virtue of his position, Mr Walls’ evidence is of central importance. He was responsible for the management of all major activities occurring in the mine and was present during the activities subject to this claim. His evidence should be distinguished from that of most of the other experts called for the Applicant because he was actually present at the site. The other witnesses called had no first-hand knowledge of the purpose of the activities or the details as to the ways in which they were carried out, apart from documentary records which were far from complete.
Given the lapse of time and the volume and complexity of the detailed activities, Mr Walls’ recollection was not good. Most of his evidence was based on documents presented to him. For example, his recollection was imperfect in relation to some significant issues in the mines such as slope mapping in the period November 2004 to February 2005, a period which included the failure of the low wall and a proposal to mine to 275m with a slope angle at 65 degrees. He also claimed to lack knowledge of detail of the blasting process, which is surprising because this was an activity critical to the successful and economic operation of the mine. He was also unable to say with any precision what was being done at any particular time with respect to the high and low wall control systems.

With respect to the blasting and the complexity of the mine, he described the mining sequence and noted that Pit A was much shallower than Pit B which was extremely deep, and this transitioned into Pit C. The geology of parts of Pit B was extremely complex. The coal seams were at a steep angle to the horizontal, necessitating the use of through-seam blasting techniques.
In cross-examination he was taken in detail to a large volume of documents including among others, monthly operation reports, life of mine plans and budgets, monthly summaries, mining schedules, production reports, consultants’ reports and geotechnical reports. However, he still could not say what was being done at Mount Owen at any particular time with any degree of detail or specificity, because he had several mines to look after in this period. Nor did he recall how much money was spent on project planning or preliminary investigations on the site. He also stated that he could only say in general terms what blasting methods were being carried out at any specific time. For example, he recalled that there was a trial of electronic blasting from late 2002 to 2004 but did not recall in detail. However, he did not dispute that through-seam blasting or electronic initiation of blasting was in use before 2000.
Given the critical importance of Mr Walls evidence and his position in relation to the mine, Mr Walls was the person who one would expect to testify as to the purpose of the activities in respect of which the present claims are made and, in particular, as to whether they were made for the purposes of research and development. However, in his evidence there are almost no references to any activities that could be called experimental and he did not particularise any research and development activity. For instance, he did not expressly mention in his detailed statements details of any specific research and development projects. He made it clear that the dominant purpose of the activities was to maintain economic development and production from the mine.
He accepted that the primary aim of the design of the mine and the carrying out of the activities on site was to maximise production and economic return consistently with safety. He said he would not have allowed an advancing high wall, for example, to be implemented if there were any risks to safety of personnel or if failures would impact on production schedules. His evidence was that he considered the risks at the mine site were being satisfactorily controlled, and reported that production targets would be met with no qualifications as to geotechnical risks or a need for experimental activities to resolve such issues.
He agreed that production and output of the mine had been consistently accurately predicted and had met productivity targets for the period, and he expressed confidence that this would continue. This degree of confidence indicates a lack of concern with the degree of risk involved in the operations as a result of the controls in place.
He agreed that the mining operations were carried out in a safe and environmentally satisfactory manner and, on his understanding, in compliance with all laws and regulations, although he was not aware of the detailed provisions. He was confident that risk to personnel and property was minimised so far as possible as a result of the control mechanisms and systems in place. He said he did all he could to manage the probability risk to production targets to 70 per cent.
He considered that as at March 2002 he had a good understanding of the risks at Mount Owen and that the plans to manage those risks were satisfactory. This indicates a situation where risks were known and controllable and where controls were in place. It supports a conclusion that there was a relatively minor degree of uncertainty as to the predictability of the risks involved.
He agreed that the back analysis and stability checks carried out at Mount Owen were good practice. He was confident that at all times the ground water control systems in place were able to accurately predict ground water levels and ground movement. He agreed that measuring instruments such as piezometers were in place before he arrived in March 2001.
At all times he considered that the processes and monitoring controls in place worked effectively, and that he would have implemented extra monitoring if he had felt it was necessary to contain any risks.
Mr Walls agreed that the 2003 budget and five year plan showed that an increase in production to five million tonnes per annum was achievable, with no suggestion that it was not achievable or that it was necessary to assume a higher loss because of the risk of the operations.
CONCURRENT EVIDENCE OF MR HANNA AND MR BIGGS - GEOLOGISTS
Mr Hanna and Mr Biggs were geologists who gave concurrent evidence in this matter. Mr Hanna was called for the Applicant and Mr Biggs for the Respondent.
Neither geologist had been involved with the mine in the period 2000 to 2005. Their expert evidence was based on instructions and documents furnished to them by the parties. Their evidence was in the form of written statements and oral testimony, including further evidence in chief, with cross-examination by each of the parties.
The evidence of these witnesses must be treated with considerable caution because they were not present at the site during the relevant period and based their conclusions on documents which were far from comprehensive.
Geological complexity
Mr Biggs considered that the geological complexity of the site had been largely overstated by the Applicant’s witnesses. He considered that if the site had presented complexities of a high degree, the Applicant would have ensured that there was a full-time geotechnical specialist at the site. It is noted that such a specialist, Mr Pfister, was only engaged at the site in late September 2004.
Mr Biggs considered only two areas of the mine involved special geological and geotechnical risks, namely the two ninety degree turns from Pit A to Pit B and from Pit B to Pit C.
Mr Biggs considered that if the geology on the site had been unknown to the extent claimed then it would not have been possible to prepare mine budgets and plans and he would have expected that the mining would have stopped.
The western part of Pit B appeared to Mr Hanna to have been extremely complex and the geology unknown, as evidenced by the drill spacing. The proximity of the drill spacing indicated to him that this part of Pit B was of greater complexity than normal.
However, Mr Hanna agreed that the resources had been able to be estimated to a high degree of accuracy and that this indicated the geology was therefore predictable.
Both Mr Hanna and Mr Biggs agreed that complexity affects the ability of geologists to predict the location of coal seams and the quality of the coal. Mr Hanna noted that consultant geologists at the mine considered that the quality parameters of the seams at Mount Owen were reasonably consistent throughout the mine area.
Models used at the mine were accepted to have been around 98 per cent accurate. This is a very high order of accuracy. Mr Hanna saw no evidence of significant interruptions to coal production and it appears that there have been no problems of forecasting or the ability to meet production goals. Unpredictability or uncertainty as to outcome, in other words, had not caused difficulty with mine scheduling.
We consider that the weight of the evidence indicates that the site in part presented significant geological complexity with its faults, thrusts and terrain.
However, we consider it significant that the mine was able to produce on a regular, uninterrupted basis in accordance with budgets, plans and resource estimates and this indicates to us that the complexity of the site was not as great as that advanced by the Applicant.
We also consider it significant that the mine manager, taking advice from his advisers, gave no evidence of any complexities sufficient to adversely affect his planned operations, and they were not sufficiently important to significantly require any change to plans for development and operation throughout the mining period as a consequence of uncertainty.
Block model software
Mr Biggs and Mr Hanna agreed that the block model software developed in conjunction with Maptek was delayed and delivered in approximately September 2001. They agreed that the development of the block model software was systematic, investigative and experimental and was innovative with high technical risk.
The evidence indicates that the grid model used to develop the software already existed as of 2000 and there was nothing special about developing grid models. Mr Biggs accepted that the grid model was already used in coal mines for mine planning purposes.
The development of the block model was something special in the view of Mr Biggs who accepted that the work done to develop and create a block model up to August 2001 was innovative.
Both Mr Hanna and Mr Biggs accepted, however, that the block model was used for financial and mine planning purposes and it was common ground that the models are utilised for the assessment of mining resources and reserves.
Mr Hanna did not believe that the innovation had ended by September 2001, but he had not seen documents to substantiate this conclusion, nor had he seen any documentation of further work done on the software after that date.
Mr Hanna and Mr Biggs agreed that between 2002 and 2003 the development of a block model was in the testing phase rather than a further innovative phase. The work at this time was by way of enhancement of the Maptek software. Both agreed that the innovative work in relation to the development of a block model was in respect of the computer software necessary to enable the modelling to be carried out.
We find that the innovation in relation to the software modelling ceased in about September 2001, and thereafter up to August 2003 we consider that the activity had moved on from the innovative stage in relation to that software. From August 2003 we consider that further work on the model was to extend its capabilities and fine tune the software but we do not consider this was innovative. The work done in developing the model was carried out by Maptek and was not in any significant respect the work of the Applicant.
We do not consider that work done by the Applicant was for the purpose of acquiring new knowledge, but consider the dominant and, indeed, only significant purpose was for operational purposes in relation to financial planning, mine scheduling and estimation of resources.
DR WHITE, MR WESTCOTT AND MR ALEXANDER - MINING ENGINEERS
Three mining engineers gave oral and written evidence which took the form of statements and concurrent evidence in chief and cross-examination. Dr White and Mr Westcott were called for the Applicant and Mr Alexander was called for the Respondent.
Their evidence related primarily to the subject of experimentation and testing, the high and low wall control systems, and through-seam blasting during the period 2000-2005. Although well qualified and experienced as experts, they had no direct knowledge of the actual mine operations on site during the period 2000-2005.
They disagreed as to whether the material furnished to them for the activities they assumed to have been carried out indicated any experimental hypothesis, and they also disagreed as to whether the activities involved high levels of technical risk.
Through-seam blasting
In regard to claimed activity 4 (Experimentation and Testing) and the trial and error activity of through-seam blasting they deferred to the greater expertise and experience of Dr Hagan, and were unable to identify any innovative aspect of the drilling and blasting at Mount Owen. The weight of their evidence in relation to the trial and error process involved in through-seam blasting was that it did not involve a high degree of technical risk. They accepted that the evidence before them indicated that some mine managers had a reasonable degree of confidence as to its predictability and its likely prospect of success.
This high level of confidence in achieving a reasonably predictable outcome does not indicate that the requirement of s 73B(2B) is met, namely that the probability of the outcome cannot be known in advance, was satisfied.
They agreed that they had seen nothing in the documentation which indicated that any reason for through-seam blasting was for the purpose of testing an hypothesis.
Their evidence was that the blasting and associated activities were employed generally in the mining industry prior to the period in question.
Dr White considered that there was an experimental process, but he agreed that he had not seen any documents to support a conclusion that through-seam blasting at Mount Owen was innovative or was based on testing any specific hypothesis followed by logical conclusion.
The evidence of these witnesses does not support the submission that through-seam blasting, as claimed, was innovative, experimental or involved a high degree of technical risk at any time in the entire period.
In addition, they accepted that collection of in-pit data was accepted practice in 1993 and that regular feedback of the outcome of monitoring was a routine mining activity.
Groundwater management and analysis
As regards groundwater management and analysis, they had seen no evidence that this was in any way innovative or experimental.
High and low wall maintenance and control systems
These three experts also gave evidence concerning the high and low wall control systems.
They were taken to the particular monitoring activities and analyses set out in claimed activities 5.1, 5.2, 8.1 and 8.2. They accepted that the monitoring activities were essentially to measure ground conditions and give warning of failure of the walls.
They did not point to any high levels of technical risk of the monitoring activities or systems not performing their function of warning and enabling control or protective measures to be implemented.
The weight of the evidence was that it was routine by the late 1990s to have such monitoring systems in place in open-cut mines, including the use of equipment such as piezometers, extensometers and telemetry and the other devices and processes particularised in these claims. Accordingly, the use of the monitoring systems did not involve innovative measures.
The experts also accepted that it was an occupational health and safety requirement that the high and low walls had to be designed to ensure the safety of workers. After being referred to the requirements of the Coal Mines (General) Regulations 1999, they agreed that control systems for the high and low walls were designed and carried out to eliminate risk to health and safety, if possible, or to control risk or, if this could not be done, to minimise risk.
In relation to the use of radar, they did not differ from the views of Dr Noon (discussed below), that the radar was an operational activity and was not for a purpose of acquiring knowledge but to use a proven technology to measure wall movement.
The weight of the evidence also indicated that the watering bores were in place from about 1997 and that their use would have been expected in any well-run mining operation. These elements could not be considered to be innovative.
There was no satisfactory evidence from these witnesses of high levels of technical risk of failure of the claimed control system component activities in the event of failure. For example, there was no evidence as to the risk that the measures of drilling horizontal holes to relieve water pressure or the installation of water relief pipes involved any high technical risk of failure. The weight of the evidence is that they were routine mining activities.
Geological complexity of the mine and impact on risk
As to the geological complexity of the mine site and the impact on risks, the witnesses deferred to the evidence of the mine manager, Mr Walls, who was in charge of the site during the period. His evidence was that the monitoring systems were adequate and that the risks of the mining operation were able to be managed to ensure the safety and economic viability of the mine.
They agreed that all mines have a degree of risk and this cannot be eliminated entirely, but they opined that the mining operations would not have continued if the manager had considered the risks were not sufficiently managed to such an extent to be acceptable. In fact the monitoring system operated effectively enough to provide adequate warning of the low wall collapse in 2005 so as to enable removal of personnel and machinery from the area of collapse.
Formation of an experimental hypothesis
In relation to the formation of an experimental hypothesis, Dr White and Mr Westcott formulated some hypotheses for a number of the activities. Mr Alexander disagreed. However, the hypotheses so constructed by Dr White and Mr Westcott were formulated with hindsight by inference from documentation. They were not set out in any documentation before the Tribunal and the witnesses were unable to refer to any specific documents embodying the hypotheses.
They agreed that Mr Walls, as the on-site manager, was the person best placed to say whether an activity was carried out in order to test an hypothesis and to formulate or elaborate on the hypothesis in issue.
The speculative opinions of the Applicant’s experts in relation to hypotheses is of little or no assistance in this respect. Mr Walls did not point to any formulation of any specific hypotheses which form the basis for a finding of experimental activity. Without an hypothesis it is not possible to meet the requirement for an activity to involve high levels of technical risk.
Purpose of the claimed activities
As in the case of risk, the expert witnesses were not able to give evidence as to the actual “purpose” of each claimed activity. Again this was within the particular knowledge of Mr Walls or, indeed, any person involved in the activities. But no person involved in the formulation or the carrying out of research and development was called to give actual evidence of a contemporaneous nature in relation to the activities and their purpose. Again there is no evidence that the purpose was to acquire new knowledge or create new products, devices, processes or services.
They also accepted that the trial blasting techniques were associated with compliance with these requirements and environmental controls.
DR HAGAN - BLASTING
Dr Hagan is a highly qualified and experienced blast engineer who was called by the Applicant. Other experts called deferred to his opinion where they had expressed a different view in relation to blasting issues.
He explained the use of through-seam blasting where coal seams were at a steep angle, and that it was used at Mount Owen because of the steepness of the slopes, which were between ten to 45 degrees.
He was not present at Mount Owen between 2000 and 2005 and like all other witnesses, apart from Mr Walls, his evidence was an ex post facto view based on hindsight. He had no first-hand knowledge of the reasons why or as to the precise manner in which the claimed blasting activities were carried out by the Applicant.
He agreed that by 2000 there were a significant number of mines using through-seam blasting. The technique had been in use since 1985. He also stated that the use of the Aquila drill to monitor performance had been used before 2000. He could not identify any purely innovative aspect of the drilling and blasting at Mount Owen. He also said that electronic detonators had been used at other mines before they were tried at Mount Owen in 2002. Electronic detonators were not widely used but it was a known technology.
In his view, blasting is a very empirical branch of engineering which involves an iterative process because the rock mass in mines changes continually. Because of its potential dangers, it was essential to effectively monitor and control the risk and to comply with the extensive safety regulations. Mining managers would not normally use blasting techniques unless the outcome was predictable in terms of safety and environmental impact, because blasting had such a high impact on the profitability of the mine. The incentives to not take risks were consequently very strong. Reports of productivity being in-line with predictions was in his view an indicator of the effectiveness of the blasting systems used.

Because of the varying geology and geography of each mining site, each blast is usually designed on an individual basis. He said that the first aim of blasting is to blast safely and make sure that the coal can be dug easily, rapidly and economically. He accepted that producing a bank of knowledge was not the main aim of blasting, but it was a subsidiary aim.
On his examination of the blasting reports he noted that a number of blasting trials were one off and others were non-conclusive. When asked whether he thought there was a hypothesis involved, he said “Yes, we know what we want and can we get there and have we got there.”
In our view, this approach does not evidence the existence of any hypothesis which would indicate an experimental testing process was used. The pragmatic trial and error iterative process in the documentary evidence does not show any formulated hypothesis or systematic testing process. The blasting was “tweaked” from time to time during this period. He agreed that between 2002 and 2005 through-seam blasting was controllable, effective and reliable as a process and that it had a success rate of nine on a scale of 10.
He drew a distinction between a production blast and a trial production blast on the basis that in a production blast the mining company had a high degree of confidence so it was no longer a trial.
Although there were some unpredictable results from some of the trials they were the result of unknown and variable geology and not an uncertainty of the methodology used to carry out the trial activities claimed.
DR NOON - RADAR
Dr Noon was called by the Applicant. He is an electrical engineer. His evidence concerned the use of his company’s slope instability radar system. It was used at Mount Owen between January 2005 to November 2005 in order to monitor the low wall by picking up precursor warning movements and to alert personnel of a wall failure.
A major objective of this technology is to assist in the safe operation of the mine and serve as an integral part of the occupational health and safety systems at mines.
Dr Noon’s evidence is that slope instability technology such as this was a proven technology in use before 2002. Dr Noon was confident that the radar system that he and his company developed worked and could effectively monitor high and low wall stability. It was not new or innovative technology as at 2005 when used at Mt Owen, nor was it technology developed by the Applicant.
We consider the radar system used in the limited period between January 2005 and November 2005 was an operational mining activity, which involved the use of a well-established commercial technology designed to measure ground movement on site and not to obtain new knowledge. It assisted in the reduction of the safety and environmental risks inherent in routine mining of the site. It was not an experimental activity in character.
DR SEEDSMAN AND MR DUGAN - GEOTECHNICAL ENGINEERS
Dr Seedsman was called for the Applicant and Mr Dugan for the Respondent. They each furnished witness statements and gave oral evidence in chief and by way of cross-examination. They are both experienced in the area of geotechnical engineering, which is a different discipline to that of a mining engineer, and involves the assessment of the likely stability of high and low walls at mine sites.
Dr Seedsman had particular expertise in the assessment of geotechnical risks.
Dr Seedsman confirmed that there was nothing unusual when mining in using an iterative process in order to reach conclusions as to stability of high and low walls. He did not accept that there is a recognised scientific method that you apply in reaching a conclusion as to stability but he said that an “engineering method” was appropriate as opposed to a scientific method. For this process, one applies tried and tested engineering analysis to come up with a conclusion as to slope stability.
Among the remedial measures that can be taken if there is a geotechnical risk, is the buttressing of a low wall slope, for example, to reduce the risk of slope instability and changing the angle of the low wall.
Monitoring is a standard well recognised control mechanism when geotechnical risk is identified. He considered that it was quite conventional to mine where there is a degree of geotechnical risk, provided adequate control mechanisms are in place in terms of monitoring or other control techniques. Dr Seedsman was not aware of the intensity or nature of the monitoring of the high and low wall which took place.
Dr Seedsman agreed with the proposition in relation to the January 2005 failure that it only led to minimal business interruption, as a result of the controls that were put in place. He accepted that in order to say whether instability was appropriately managed he would need more extensive knowledge of what happened on the site.
Both experts were taken to the strategic geotechnical review of August 2003, which referred to a high risk of the low wall slope being prone to slab sliding and slab buckling modes of failure. Both agreed that in construction on an adverse level of slope floor which is prone to instability there could be some uncertainty as to the extent to which the mine operator could continue to build in-pit dumps on the low wall steeper than 25 degrees having regard to the residual friction angles.
Mr Dugan agreed that the low wall had the greater risk of failure.
However, this agreement was in relation to the risks of slope failure itself and not to the risks of failure of procedures used to control that risk.
The two witnesses expressed differing opinions as to the claimed activities they were asked to consider. Both witnesses agreed that they were given different briefs as the basis of expressing their opinions. Dr Seedsman accepted that both experts would probably have written the same report if they had been given the same definitions of geotechnical risk within their briefs.
Dr Seedsman was asked to consider claimed Activities 5.2 and 8.2 as a whole and to answer the question as to whether there was a high level of technical risk in the system which comprised activity 5.2 or 8.2, whereas Mr Dugan was instructed to do a staged process looking at each component of 5.2 and 8.2 separately and form a view about levels of technical risk in relation to the constituent activities.
Mr Dugan addressed the component activities or discrete activities within the overall activity and then, having done that, he addressed briefly the impact of combining them all as one system in relation to the low wall control system. He then carried out similar exercise for Activities 5.1 and 8.1, whereas Dr Seedsman addressed it simply by reference to the combination of all activities. Mr Dugan agreed that Dr Seedsman was looking at the technical risk according to the statutory definition from a broad point of view of the activities as a combination.
Dr Seedsman and Mr Dugan agreed that activity 5.2 considered as a whole was a systematic activity conducted in a systematic manner. However, Mr Dugan said that he did not see much evidence for some of the activities but he inferred what was happening or assumed what had taken place. He did not have a clear picture of exactly what happened.
Dr Seedsman viewed the “experiment” as being the excavating or the formation of the low wall because that was done, in his view, to determine how the wall would behave.
Mr Dugan did not agree with this view. He said that all the documents he went through gave no evidence in terms of the experiment claim, that there wasn’t any hypothesis or testing done. He saw the geotechnical activities as having been done because they had to be done. He said that most geotechnical activities have an element of investigation in them. His conclusion was that while most of the inferred activities were investigative they were not experimental. He said that in order to evidence an experiment, there should be some documentation which expresses terms that there was an experiment. Mr Dugan expected to see some internal documents early on in the history of the operations but did not see them.
Dr Seedsman accepted that if you break down the activity into its component parts what was done was standard.
Dr Seedsman saw the scientific hypothesis as being the proposition that if the mining operations proceeded in a certain way the wall would be stable. The excavation then would test whether the hypothesis was correct. This was the proposition that was tested in his view.
Mr Dugan did not see any documents in relation to the operations to indicate that there was any express formulation of any such hypothesis or of the necessity to do any trial. Mr Dugan’s view was that if individual activities are not experimental they are hardly going to be experimental as to combination.
Mr Dugan considered that in order for there to be evidence of an experiment in a mine it is necessary to identify a document which indicates the hypothesis and the steps taken to test it.
Dr Seedsman was also unable to point to any documents which formulated any such hypothesis. He saw difficulty in carrying out experiments away from the site because of the constraints at Mount Owen. He expressed the view that the only way to test the low wall control system was to do so at the mine site as part of the ongoing mining operation. He accepted that what he was saying about experiment was that the reality is that “you do not know for sure until you have done it.” He considered that if a test was being carried out he would have expected it to be reflected in documents.
There was some discussion as to whether a report of Mr Baczynski indicated the formulation of a hypothesis for the testing of a hypothesis. Under cross-examination however, Dr Seedsman accepted that it was an expression of opinion and a recommendation was not on its face a hypothesis.
Both experts agreed that the definition of monitoring was that it was the activity of sensing, observing, measuring and recording changes over a period of time.
Dr Seedsman said that measures taken as part of activities 5.2 and 8.2 to control the risk of the low wall were about risk to miners and others in the workforce. He considered that the monitoring was there for protection and safety. He did not consider that the control measures meant that there was no risk of the low wall failure itself.
Dr Seedsman accepted that the risk to the “business” of there being a low wall failure despite control measures was significant. Mr Dugan agreed with this. In expressing that view that there was a high risk that the low wall could fail despite the control measures, both experts were concerned with “business” or “commercial” risk and not with technical risk.
In response to the question whether the fact that the mine operator had assessed the risk as being acceptable, low or controlled affected the assessment of the geotechnical risk of the failure occurring, Mr Dugan agreed that it did not. However, the question is not whether a failure of a wall could occur but whether the system of control, which is the claimed activity, and said to constitute research and development, would fail.
Dr Seedsman accepted that the risk was not high throughout the entire period, although there were some periods where there was a high level of geotechnical risk associated with the low wall. They also accepted that provided ground failure is anticipated and occurs in a controlled manner or does not unduly impact on mining operations, it is not necessarily a hazard in terms of mine design.
Both experts also accepted that the aim of the low wall control system, including the low wall design, was to anticipate failures or areas of instability and ensure they occurred in a controlled manner and did not impact on mining operations. Dr Seedsman accepted this and said that this was normal good mining practice.
Mr Dugan said that it was not the aim of the low wall control system to eliminate any instability per se, but the aim was to ensure that instability was appropriately managed. Dr Seedsman did not agree with that. He said that the aim of the low wall control system was to safely mine the coal without unanticipated impacts on safety or the business. Both experts agreed, however, that the low wall control system was designed to ensure that Mount Owen remained a safe place to work, bearing in mind that trucks were going up and down the low wall. It was a necessary system to have in place at Mount Owen to comply with obligations to ensure that Mount Owen had a safe system of work.
Mr Dugan agreed in cross examination that he did not know the extent to which the wall slope instability was being managed at any particular time where mining operations were taking place. Dr Seedsman also agreed.
Both experts agreed that mine design was an iterative process generally comprising reviewing existing data, undertaking new investigations, developing conceptual models as to stability and risk, assessing the proposed workings predicting likely ground responses during mining, and monitoring ground behaviour. This was a typical design cycle for a geotechnical engineer at a mine.
They accepted that the inherent attributes of the site impact on all mine design and these include topography, regional and local geological and structural sighting of the deposit, the shape and depth of the target deposit, hydrology, the tectonic stress regime and regional and local seismic activity. These are the kinds of factors that are geotechnical considerations at each mine site.
Both experts agree that the low wall control system was not innovative. Both experts also agreed that the high wall did not have a high level of geotechnical risk.
Mr Dugan drew a distinction between knowledge which was able to be applied on the particular site and new knowledge which was typical for most mines. In his words “you find out more as you keep mining”. He did not consider the activities on site gave rise to any new knowledge of general application outside the mining site at Mt Owen.
Dr Seedsman expressed a view as to the meaning of the words “directly related” but this was on the basis of his understanding of the statute and is not binding as to the statutory meaning.
We consider that the above evidence supports the view that individual activities on the low and high wall control systems were not innovative and did not give rise to high level of technical risk. We prefer the evidence of Mr Dugan to the effect that there is not sufficient material to support a conclusion that there was any hypothesis formulated and/or tested in the mining operations. The evidence supports the conclusion that no significant purpose of the activities was to obtain new knowledge in respect of products, services or other matters. Where there is a conflict we prefer the evidence of Mr Dugan as to the non-existence of any experimental element in the activities. We approached the evidence on the basis that both parties had different briefs on which to express opinions, and we note that there is really insufficient documentation to substantiate details as to what occurred on the site during the operation. The views of the witnesses are expressed on the basis of inferences and assumptions as to what actually occurred from an interpretation of documents prepared for them. In weighing the evidence we have taken this into account.
MS KNIGHT - EXCLUSIONS
Ms Knight was one of the Applicant’s witnesses, however her evidence was relied on by the Respondent in support of its submission that many of the claimed activities were carried out as a necessary result of, or as an appropriate measure in order to comply with, the statutory obligations imposed on the Applicant in operating the mine at Mount Owen.
Ms Knight was the health and safety officer for the Applicant in the period 2000-2005. She gave evidence as to the statutory requirements with which the Applicant was required to comply and, in particular, she referred to the provisions of the Coal Mines (General) Regulations 1999, particularly regulations 5, 6, 7 and 15 and to regulations 5, 6, 16 and 25 of the Coal Mines (Open Cut) Regulations 1999.
Ms Knight provided a statement to the Tribunal and was not required for cross-examination by the Respondent. In her statement, she outlines the ways in which risks to health and safety were dealt with at the mine. She noted that all the activities undertaken on site were subject to risk assessment procedures.
Ms Knight details the elaborate and comprehensive measures taken by the Applicant to comply with the statutory health and safety and environmental requirements in order to either eliminate, control or minimise any risks to health and safety at the mine’s site.
Ms Knight refers to mine safety management plans used at the site and refers to the identification of risks and the actions to be taken.
In her statement, she gives details as to the inspection system in place at the mine in relation to the stability of the high walls and low walls, the stability of waste dumps, conditions of haul roads, signage, conditions of access roads and the layout of blast areas.
The evidence of Ms Knight also refers to the need to continually review and update the control of blasting activities on site.
We note that the relevant exclusion provision s 73B(2C) is cast in wide terms thereby indicating a broad area of intended exclusion. It is also significant that the exclusion in relation to statutory provisions was inserted at the same time as the previous requirement for technical risk was narrowed to require a “high level of technical risk” in 1996.
Subsection 73B(2C)(l) refers to activity “associated with” complying with statutory requirements. This is broad language. The language is not limited to activities which, for example, are “necessary” or “essential” in order to comply, but it extends to cover activities “incidental to” or “for the purposes of compliance”.
The 21 annexures to the affidavit of Ms Knight, which set out the plans and regulatory procedures in detail, provide extensive evidence as to all aspects of measures implemented at the site in order to comply with requirements as to environmental impact, risks and work place safety. They do not appear to be part of the research and development projects, but rather were directed to ensuring compliance with coal mine regulatory requirements.
Legal Principles
Guidance as to the approach to characterisation of the activities is given by the Tribunal reasons in RACV Sales and Marketing Pty Ltd v Innovation Australia [2012] AATA 26 at [22] where it was pointed out that the activities claimed should satisfy a series of requirements. Most of these are cumulative but some are in the alternative:
·each particular activity must be: (i) identified and (ii) shown to have been carried out. It follows, for example, that if the evidence indicates that the activities claimed were only “proposals” and the evidence does not indicate that they were carried out, then the activity does not qualify;
·the activities must be: (i) systematic, (ii) investigative and (iii) experimental;
·they must not be “excluded activities” under s 73B(2C);
·they must involve innovation or high levels of technical risk;
·innovation requires an “appreciable element” of novelty under s 73B(2B)(a);
·a “high degree of technical risk” requires that the probability of obtaining the technical outcome of the activities cannot be known or determined in advance and this uncertainty is such that obtaining the outcome can be removed only through activities using scientific method and proceeding from hypothesis to experiment, observation, and evaluation followed by logical conclusions; and
·the activity must be carried on for the purpose of either acquiring new knowledge, or creating new or improved materials, products, devices, processes or services: s 73B(1).

If the activities do not satisfy the above criteria they must be directly related activities for a purpose directly related to the carrying on of those core activities which satisfy the definition of research and development in s 73B(1)(a).
It can be seen that the above specific requirements are extensive, and in some cases cumulative and stringent. They are directed to the characteristics of the claimed activities. They are not directed to the activities involved in carrying out the mining activities or operations generally.
In Industry Research & Development Board v Coal and Allied Operations Pty Ltd (2000) FCA 405 Lindgren J considered the research and development criteria in the ITAA as it stood prior to the amendments in 1996 in relation to a coal mining operation. The 1996 amendments, which came into operation later that year, significantly changed the requirements for qualification as a research and development activity. Sections 73B(2B) and 73B(2C) were inserted and the requirements for high levels of technical risk and consideration of a broad range of exclusions were introduced. Accordingly, the decision in the Industry Research Case is of limited assistance in the present matter.
Another reason why the Industry Research Case provides little guidance in the present matter is because the decision of the Court was based on the Tribunal’s specific factual findings which were heavily dependent on the particular evidence and circumstances in that case. In his reasons Lindgren J applies these particular factual findings in upholding the decision of the Tribunal.
“Purpose” of the claimed activities
In this case there is an important dispute between the parties as to whether the reference to “purpose” in paragraph (a) of the definition of research and development in the ITAA is to the dominant purpose of the activities claimed or, as the applicant contends, to a significant purpose which may be one of a number of different purposes but not necessarily dominant.
In his reasoning in relation to paragraph (b) of the definition of research and development activities in the Industry Research Case, Lindgren J concluded that the expression “a purpose” does not require that there should be a sole dominant or primary purpose but that it is sufficient if one of a number of purposes of the activity is the carrying on of one or more of the core activities. In reaching this conclusion His Honour focused on the use of the word “a” in that provision. He contrasted this with the use of the word “the” in paragraph (a) of the definition where reference is made to “the purpose of” acquiring new knowledge or creating new processes.
The reasoning of His Honour in respect of the difference in expression between the two paragraphs of the definition in s 73B in our view supports the Respondent’s contention that the words “the purpose” impose a requirement that the purpose be at least a dominant purpose.
For reasons given below, we do not think the distinction between dominant and significant purpose is determinative in the present case because we are not satisfied that it has been shown in respect of any of the claimed activities that they were carried on for any significant purpose of acquiring new knowledge or for creating new or improved materials, products, devices, processes or services.
With respect to non-core activities, in order to qualify as research and development the claimed activity must be carried on for a purpose “directly related” to the carrying on of core activities. This requires a direct and close relationship between the related activity and the carrying on of the core research and development activity. It is important to note that reference in paragraph (b) is to carrying on of the core activities and not a reference to the purpose of the core activities: see Fermenter and Industry Research & Development Board [2000] AATA 888.
The “purpose” of the claimed research and development activity is not to be determined by means of a retrospective reconstruction, inference or attribution of purpose after the activity has been carried out, but rather it directs attention to the aims and objectives of the activity before and during the carrying out of the research activity. In this case the applicant has scope to construct and attribute a purpose to the activity which is not supported by the evidence at the time.
The purpose of a research and development activity may be established, for example, by oral testimony or contemporaneous documentation which shows that the activity was carried out pursuant to a plan or formulated program: cf. SREE v Industry Research & Development Board [1999] AATA 401.
The authorities also indicate that the fact that activities are carried out in the course of and in relation to a working mine operation of itself does not preclude the activity from qualifying as research and development under the IRD Act.
High levels of technical risk
In order to find that there were “high levels of technical risk” it is clear that there must be a significantly greater chance or possibility that the technical processes or means involved in the research and development activities will fail than would normally be the case. In answering this question it is necessary to look at levels of technical risk involved in the research activity. In reaching a conclusion on this point, regard may be paid to the technical and expert evidence. There must be uncertainty in ascertaining the outcome. The technical or scientific outcome of the activity in the light of current knowledge and experience must be such that there is a need for experimental activities in which scientific method is applied proceeding from hypothesis to logical conclusion: see RACV at [22].
Further, when considering the level of technical risk involved it is important to focus on the technical risk of the activity in respect of which the claim is made as constituting the research and development and not on the mining operations. The actual mining operations may give rise to numerous and different types of risks of failure which are additional to and distinct from the technical risks inherent in the claimed research and development activities. For example, where a claim is made in relation to “monitoring” as being a research and development activity, the assessment of technical risk is directed at the risk of failure of the monitoring activity and not at the consequences which may ensue operationally in the carrying on of the mining operations, for example, of the collapse of a wall. The question posed by the legislation is what is the technical risk of the monitoring activity failing in this example.
Approach to the Issues
We propose to deal firstly with the questions of characterisation of the core activities as claimed. This will also involve consideration of the exclusions relied on by the Respondent. This examination will be on the assumption that each of the activities claimed in the table in paragraph [18] above have in fact been shown to been carried out.
Then we will address the question of whether the claims are ineligible by reason of the alleged non-compliance with the registration provisions.
Finally, we will address the question whether we are satisfied that the activities were in fact carried out in regard to the documentation and oral testimony.
We now turn to the first question, namely characterisation.
Characterisation
Is the activity as claimed “research and development”?
This question involves two general broad questions. The first is whether the activities qualify as “core” research and development activities and the second is whether the non-core activities as defined in s 73B(1)(b) as claimed are directly related to the purpose of the carrying on of the activities in s 73B(1)(a).
ACtivity 3 – Mine modelling
Activity 3 relates to the mine modelling and concept design during the period 2000-2005, including collection and review of data from drilling, rock testing, and geotechnical analysis, computer modelling, iterative design, and development of the mine design model and mine plan.
This activity was originally claimed by the Applicant as a “directly related activity” and later it also sought to claim it as a “core activity”.
The main evidence in relation to the modelling involved in this claim was given by Mr Whitby, a geologist called by the Applicant, and there was also reference to these activities in the evidence of Messrs Biggs and Hanna set out above.
As at 2000 there was a grid model of the site at Mt Owen based on proprietary software. Mr Whitby developed this in conjunction with a software development company called Maptek in an attempt to create a three-dimensional (3D) block model. Mr Whitby described the complexity of the geology at Mount Owen, however his primary involvement was limited to the estimation of resources and reserves at the site. He could not recall what was actually happening on the site on a regular basis, so far as mining activities were concerned. He said that he had very little involvement in the mine plans or the day-to-day activities in the period 2000 to 2005.
He continued to use a number of grid models during the period 2000 to 2005 and attempted to link the two-dimensional (2D) models together to obtain a 3D block model. These attempts were not successful for some time and it was not until 2007 that it became possible to satisfactorily model the geological faults on the site.
As to the purpose of the grid model, Mr Whitby said that his job was primarily to construct geological models and continue to improve them so that the mining engineers could optimise the mine scheduling and planning.
Mr Whitby’s evidence does not support a conclusion that there was any innovative activity except in relation to the development of the software of Maptek. He does not point to any proposition which could be tested by way of verification of any hypothesis. Rather, he refers to exploratory activity in relation to some drilling where additional data was required for the model.
In our view, merely because an activity is exploratory as to resources it does not follow that the activity can be referred to as experimental. We are not satisfied that these activities could amount to research and development, or that they had the essential purpose necessary to come within the definition of research and development. The only significant purpose of this work in relation to the development of a block model was in order to achieve a reliable estimation and measurement of resources and reserves and enable the effective economic exploration of the coal resource.
Having regard to the evidence of Mr Whitby, and that of Mr Biggs, Mr Hanna and Mr Walls, we are not satisfied that any of the activities of the applicant in respect of the mine modelling amounted to a core activity. Nor are we satisfied that any of the activities were directly related activities.
Core Activities
Core Activity No. 4 - Experimentation and Trial Testing (2000 – 2005)
This claim is for experimentation relating to the mining process preparatory to the mining conducted in through-seam blasting, involving the development of specific methodologies to be employed in the mining process and the testing of those methods on a sub-level. The test activities claimed included:
·trial and error activities in relation to the development of through-seam blasting techniques;
·the drilling and testing of observation holes in the high wall and the low wall;
·the undertaking of ground water management analysis; and
·the collection of data in-pit.
Development of through-seam blasting techniques
It should be noted that there is included in this claim, and several other claims, the activity of Advanced Electronic Blasting Technology (AEBT).
The documentation on this claim in respect of blasting is relatively detailed and it is common ground that the blasting was systematic and investigative in nature. We consider that the degree of detail in this documentation in relation to this claim is indicative of the type of fundamental documentation which should have been available in respect of other claims. However, such information has not been provided.
There were 43 drill and blast reports dealing with a limited number of trial blasts between late May 2002 and May 2004. Mr Alexander for the Respondent stated that the documentation in relation to AEBT is what he would have expected to see of a trial in such a well-run mine. He referred to the need for provision of a formalised structural program which would be implemented to enable findings and feedback from earlier blasts undertaken in the program to be applied to subsequent blasts. This process was one of gaining increasing levels of confidence according to the mining engineers.
We accept the evidence that the use of AEBT was merely an enhancement of an already routine application of through-seam blasting at Mount Owen. We also accept that other aspects of the through-seam blasting were an application of the known technology to the special features of a particular mine site.
Dr Hagan, who had extensive experience generally with through-seam blasting, was not able to identify any purely innovative aspect of the drilling and blasting at Mount Owen, including the use of AEBT. He observed that electronic detonators had been used in other blasting operations in the world before they were used at Mount Owen.
Dr Hagan agreed that he had made no direct observation and had no direct knowledge of what had taken place on the site and therefore he proceeded, as did the other experts, on the basis of the documentation.
Dr Hagan did not provide any useful informed comment as to the level of technical risk involved in the application of AEBT on the site.
Mr Westcott and Dr White both accepted that there was a high level of technical risk associated with the trial of that technique. However, both these witnesses incorrectly, in our view, directed their attention to the uncertainty as to whether the blast techniques claimed would lead to reduced costs, which is an economic rather than a technical risk.
We prefer the evidence of Mr Alexander, that AEBT was only an enhancement of the through-seam blasting and that the only uncertainty lay in whether the method would lead to reduced costs. This cannot be described as uncertainty with respect to a “technical” outcome: cf. HZXD v Innovation Australia [2010] AATA 879 at [37]. In that case a distinction was drawn between experiments which go to the efficiency and practicality of a chosen method and an activity which has innovation or a high level of technical risk. Section 73B(2B) is directed to whether there is certainty in relation to technical or scientific outcome and not as to costs.
We do not consider that the evidence before us is sufficient to show in relation to through-seam blasting that the requisite purpose existed. Mr Walls gave evidence which indicates that the dominant aim of activities on site was the commercial nature of the mining operation and that that the overriding objective was to maximise productivity and do that safely. His evidence and the evidence generally is not sufficient to satisfy us that any significant purpose of the claimed activities was to acquire new knowledge or create new or improved materials, products, devices, processes or services. Nor does it satisfy us that the dominant purpose satisfies the definition of research and development. The mining engineers accepted that Mr Walls was the person best placed to give evidence as to the purpose of the activities.
The consequence that some new knowledge about the efficiency and utility of mining methods may have incidentally resulted as an outcome of an activity does not mean that this was a purpose of the activity, or that it involved research and development, or that it was pursuant to or resulted from an experiment, or tested any hypothesis.
Drilling of Test and Observation Holes
We accept the evidence of Mr Alexander that this activity was not “experimental” but was rather a well-established mining procedure and that it has not been shown to have been undertaken to make a discovery or test a hypothesis. The evidence of Mr Biggs in this regard was to a similar effect.
We consider that drilling of testing and observation holes is correctly described as part of the routine collection of information in the pit and is thereby an excluded activity. There is no satisfactory evidence to the effect that the drilling of holes in carrying out this activity involved innovation or high level technical risk. We are not satisfied on the evidence particular to this case that the application of accepted techniques to new site circumstances can be claimed as innovative, nor do we consider that the uncertainty of obtaining the outcome was so uncertain that there could be said to have been a high level of technical risk.
In our consideration of this activity, and the other activities claimed under this head, we do not think it is appropriate to aggregate this activity with the other trial activities in an attempt to fabricate a high degree of technical risk. We consider the appropriate course is to look at these activities as claimed and to then form a view based on each component activity relied on. It has not been satisfactorily explained as to how any consideration of the combined activities is research and development when the component activities as claimed do not individually amount to research and development.
Ground Water
On the evidence of Mr Alexander, Mr Biggs and Mr Dugan, we do not consider that the analysis of groundwater can properly be characterised as involving innovation or a high level of technical risk. Furthermore, on a proper characterisation the groundwater analysis is clearly part of the routine collection of information and is thereby excluded under s 73B(2C)(i).
Finally, we are not satisfied that the evidence is sufficient to establish that the purpose of carrying out the activity is to acquire new knowledge or create anything or any process new or improved.
Collection of Data in Pit
We consider that the collection of in-pit data is not experimental nor can it properly be described in any way as innovative or involving any significant technical risk and again fails on the purpose test. It falls squarely within the exclusion as to routine collection of data.
Accordingly, we conclude that this claimed core activity does not satisfy the requirements of the definition.
Core Activity No. 5.1 - High Wall Control System (2000 – October 2002)
This claim is for a “system” which involves the development of a geotechnical design and a strata management plan for a high wall monitoring system.
This “system” as claimed “involved” the following activities:
·Visual inspection of the high wall;
·Conduct of geotechnical analysis of the high wall;
·Computer modelling and analysis;
·Rock strength testing;
·The use of piezometers and telemetry;
·The use of extensometers;
·Drilling horizontal holes in the high wall to relieve water pressure;
·Installing water-relief pipes in the high wall; and
·The use of automated prisms.
Although the application claims that the activities must be considered in an integrated way it is not explained how the combined involvement of these activities creates an overall process or system which satisfies the criteria even where the individual components of the system do not.
The weight of the evidence of the mining engineers is that the specific activities referred to above were systematic and investigative. They did not say that taken discretely the activities satisfied the definition of research and development. The weight of the evidence indicates that the individual activities were standard operating procedures already implemented in mining operations. The use of “controls” comprising the measures described in the claim are, on the evidence of the mining engineers, consistent with good practice at an open-cut mine and were known and applied prior to the year 2000.

Nor are we persuaded that the activities claimed can be individually or collectively said to be “experimental”. The applicant asserts that the activities comprising the claim were aimed at making a discovery or testing a hypothesis as to whether it was possible to safely and effectively develop and maintain the high wall once the mine reached a depth of 270m. This is a vague, generalised description which in our view does not give due weight to the fact that the definition is concerned with activities and not with a loosely described “system”, the composition and work of which are not explained with any precision or in any meaningful way.
The evidence does not satisfy us that any “hypothesis” was ever formulated, or that the activities in question were carried out to test any such “hypothesis”. The experts for the Applicant in our view engaged in an ex-post facto attempt to construct or discover a “hypothesis” with the benefit of hindsight after the work had been carried out.
As to purpose there is no satisfactory evidence that the high wall control system had any other purpose at or before the time it was carried out other than to extract coal at depth in a safe, efficient and economic manner. There is no testing or proving of any hypothesis or proceeding from hypothesis to testing, evaluation and conclusion. Mr Walls in particular did not give any evidence of any formulation of any hypothesis or any testing process. Some reliance was sought to be placed on the research and development applications submitted by the Applicant. However, these are really in their nature submissions and assertions and do not provide any evidence of antecedent events and purposes. The expert witnesses relied on by the Applicant had no direct contact with the operations at or before the time they were carried out, were reliant on documentation and instructions and they proceeded on the basis of an inferred retrospectively formulated hypothesis. The evidence of Mr Walls is not consistent in any way with the high wall control system or any of its components being experimental in character.
We also consider that the activities claimed under this head are included in the exclusions set out in s 73B(2C) as being routine collection of information or activities associated with complying with statutory requirements or standards. In this respect we rely on the evidence of Ms Knight who provided material as to the applicable safety and risk management requirements or standards.
We consider that the use of the word “associated” indicates that the provision is intended to have a broad operation and the term can be contrasted with a requirement, for example, that excludes activities “carried out in order to comply with statutory requirements”. Also, the evidence does not establish the activities or system involved in activity 5.1 is innovative or that it involved any appreciable element of novelty. The evidence was that the components of the system were well-known and had been used in other mines before 2000.
Nor does the evidence satisfy us that this activity involved a high level of technical risk. The evidence from Mr Walls was that had there been a significant geotechnical risk he would have included it in a Mine Planning Report and that he would not have allowed the high wall to be designed or implemented if he considered there was any risk to safety associated with the wall. In his view the control mechanisms in place were sufficient to manage geotechnical risk. The evidence from Mr Alexander and Dr White was also that the mining industry is generally conservative and generally will not operate at high levels of risk.
Mr Westcott, for the Applicant, emphasised the difficulty of the working room constraints and the dump space constraints on the operation, but conceded that these matters did not increase the risk of high wall control system failure.
In view of the oral evidence of Mr Walls and the highly unsatisfactory nature of the documentary evidence we are not persuaded that uncertainty as to the outcome of the research activity as claimed was such as could only be removed through a program of systematic investigative and experimental activities as required by s 73B(2B). We further note that the geotechnical engineers did not consider that the high wall control system involved a high degree of technical risk.
In relation to “purpose”, the evidence does not establish that the activity was carried out for any purpose of acquiring new knowledge or creating new or improved materials, products, devices, services or processes. On the contrary the evidence of Mr Walls and the engineers taken together with the documentary material is that this activity was not carried out for any such purpose.
Accordingly, we find that the activity whether committed as a whole or by reference to individual specified activities as claimed is not “research and development”.
Core Activity 5.2 – Low Wall Control System (2000 – October 2002)
The low wall control system was said to involve the development of a geotechnical design and strata management system for monitoring of the low wall between 2000 to October 2002 which involved:
·Low wall floor treatment including disturbance keying, locking and trenching;
·Visual and geotechnical review of the low wall;
·The use of automated prisms;
·The use of extensometers; and
·The use of three-dimensional (3D) pit photogrammetry.
The weight of the evidence is that the particular activities referred to above were systematic and investigative but they did not satisfy the other necessary requirements of the definition.
The evidence, including that of Mr Walls and the mining engineers, is that low wall floor treatment was an established technique of low wall management at open-cut mines in use before the year 2000.
For reasons given in relation to the high wall control system claim we are not satisfied that there was any hypothesis or that work was carried out in order to test any hypothesis formulated or evidenced prior to or during the course of carrying out the activities claimed. The applicant attempts to retrospectively find a hypothesis from the documentary material. This inference is not borne out in the documents and we do not accept that there was any such hypothesis. Nowhere in the documentation is there any formulation of a hypothesis in relation to this activity.
Furthermore, we consider that the activities and the claimed “system” are excluded by s 73B(2C) because they involve the routine collection of information and other activities associated with compliance with statutory requirements and standards.
The weight of the evidence in relation to innovation was that none of the specific aspects of the low wall control system were innovative in character.
In relation to the requirement for a high degree of technical risk, we are not persuaded that this requirement has been satisfied. The evidence from Mr Walls as to the safety and economic productive capacity of the mine, together with his confidence in the ability of the control system to achieve the scheduled production targets and the fact that it did so, serves to reinforce our conclusion. Mr Walls considered that the use of more regular monitoring, deeper penetrative drilling below the floor, and the control mechanisms in place in relation to the angle of the slopes met these requirements. Although the control system could not eliminate instability completely, it did significantly reduce the risk of the activity to a level well below that which could be described as a high level of technical risk. The evidence does not establish that the activities which comprised the low wall control system were subject to a high technical risk of achieving the outcome.
The geographical and time constraints on the mining operations did not increase the technical risk of the control system in our view. They may have led to a risk of a slowdown in the rate of production or the economics of the mining operations but that is not reflective of a technical risk to the operation of the control system.
Finally, the evidence does not establish that the “purpose” of this activity comes within the definition of research and development. We again note the evidence of Mr Walls and Dr Seedsman to the effect that the aim of the control mechanisms was to enable the coal to be safely mined without adverse impacts on safety, economics, or production. The primary purpose of the control system was to enable the optimum extraction of the coal resource at depth.
For the above reasons, we do not accept that the low wall control system satisfies the requirements of the definition of research and development.
Core Activity 5.3 – Through-Seam Blasting (2000 to October 2002)
This claim is for the development of through-seam drilling and blasting techniques to access coal seams in the face of complex geology and steeply dipping strata.
By 2000 through-seam blasting to deal with dipping seams and difficult geology was in routine use as a well-established technology. Dr Hagan gave evidence that it was used at Mount Owen because the geology did not suit conventional blasting and the operators knew it worked well. This supports the view that there was no real risk that the activity would fail and hence no high level risk of technical risk of failure of the claimed activity can be said to exist.
The economic viability of the technique was in doubt to some extent but the technical feasibility was not. Although its operation was iterative and involved some trial and error, it could not be said to be “experimental” in character. There is no evidence of the formulation of any hypothesis to be tested by engaging in this activity.
The evidence does not indicate that this methodology or activity was innovative or involved any appreciable element of novelty. It involved the application of well-known methods to a new mining site and operation.
The use of electronically initiated blasting was also not new. It had been used at Mount Owen before Mr Walls came to the site in 2000 and it was adjusted over time.
Mr Walls was satisfied that the risk from the blasting was acceptable and he had a reasonable degree of confidence in the efficacy of the blasting process. This does not indicate any reasonable uncertainty as to the outcome of the blasting process.
The production of coal with a small amount of loss when compared to estimates indicated to Dr Hagan that the blasting techniques appeared to have been successful. The production records indicated that predictions as to production amount were relatively accurate and this provided a reasonable basis for confidence in the predictability of the outcome of activities carried on at the site, including the blasting activity.
The blasting process in our view on the evidence did not give rise to the required high degree of technical risk in its methodology, implementation or planning.
The blasting process is also the subject of extensive detailed regulatory control. For example, there is a requirement in the regulations which required that there should be a blast management plan in place. As a consequence of the controls any residual risk of blasting in our view was well below the required threshold as a consequence of the control and monitoring measures used at the site.
Furthermore, we do not consider that the evidence is sufficient to make good the claim that any significant purpose, and certainly not the dominant purpose of the through-seam blasting, was to obtain new knowledge or create new or improved procedures or services.
In our view the only significant purpose of the blasting technique was to facilitate the effectiveness of the coal extraction economically and efficiently.
Accordingly, we find that claimed activity 5.3 does not qualify as a research and development core activity under the definition.
Core Activity 8.1 – High Wall Control System (October 2002-2005)
This claim is largely a repetition of claim 5.1 and the activity is essentially a continuum of that activity, with an addition of some further elements and documentation. The reasoning in relation to this claim incorporates the matters raised in relation to claim 5.1.
We are not satisfied that the continued activity over these years is based on the formulation of hypotheses or the testing of any hypotheses formulated before or during the carrying out of the activity or act. The documentation does not refer to any such hypotheses and, therefore, the Applicant has failed to show that there was any experimental element in this later period. The evidence does not indicate that the activities claimed involved any appreciable element of novelty or innovation.
For reasons given earlier, the evidence does not disclose any high level of technical risk over this period in relation to any of the activities. The same types of operational risks are relied on in relation to this activity as in the case of activity 5.1.
The evidence of Mr Walls does not support the assertion that the high wall was exposed for any greater time in this period than earlier. In any case, the exposure of the high wall or its size in this period does not vary the nature of the high wall control system.
The design of the buttress did not relevantly alter the nature of the high wall control system. The fact that its design may have been unprecedented is not sufficient to bring the control system activity within the definition. There is no evidence that the design of the buttress involved innovation or high technical risk in the development of the control system.
We do not think that the decrease in the use of horizontal drilling, either considered alone or in conjunction with other activities, satisfies the definition of research and development. It is not innovative nor has it been shown to have involved a high technical risk.
There was evidence that the mining operation became more complex in this period, particularly in relation to the faults and thrusts in areas B4 to B7 and in the transition to Pit C, but this does not mean that the technical risks of the claimed activities were increased to the required level of a high degree of technical risk. The volume of coal extracted in this period was in accordance with production schedules, which indicates predictability of the operations. In his evidence, Mr Walls agreed in relation to this point.
In its final submissions the Applicant sought to rely on additional matters and activities involving changes to wall designs, dealing with thrust faults, mediation after a wall failure in 2005 and a change in the angle of the wall.
However, the evidence in relation to the above matters is vague and inconclusive. It does not establish that the activities were carried out as alleged. They are outside the claimed activities and were not shown as specific issues which needed to be addressed by the Respondent in its evidence.
However, notwithstanding this, we have considered these additional claims and we are not satisfied that they advance the Applicant’s case for the reasons discussed in relation to the notified claims.
For reasons given above, we are not satisfied that any of the claimed activities in this period in relation to the high wall control system were carried out for any specific purpose of acquiring new knowledge or creating a new or improved process, service or product.
We therefore reject the claims in respect of the activities concerning the high wall in the later period in claimed activity 8.1.
Core Activity 8.2 – Low Wall Control System (October 2002 to 2005)
This claim includes further development of a geotechnical design in the strata management plan for a low wall monitoring system in relation to the low wall exposed in the period October 2002 to 2005. It repeats the activities claimed in activity 5.2 and refers to the use of slope stability radar, setting of radar parameters and triggers, the development of response management plans, including alarms and response systems, and the further development of systems after the 2005 low wall failure. The claim fails for the same reasons we did not accept the activity in 5.2.
There is no satisfactory evidence which supports the conclusion that there was any hypothesis or testing of a hypothesis in the documentation. The import of the evidence was that the control systems in place in this period were consistent with what one would have expected from any well-run mine. The techniques which are referred to in this activity are activities which on the evidence had been applied at other mines prior to this period.
In relation to the radar monitoring, the evidence of Dr Noon was to the effect that the technology was directed to measure movement and it had been in use prior to implementation at Mount Owen.
Having regard to the evidence of Mr Walls, Dr White, Messrs Westcott and Alexander and the statements of Ms Knight on this matter, we consider that the use of radar monitoring in respect of the low wall control system comes within the occupational health and safety statutory requirements necessary to protect personnel and property on the site.
While the Applicant asserts that this activity is innovative, on the basis that it involved an original use of existing technologies in a new way, we are not satisfied that the evidence discloses any details or particulars as to how combination of the activities amounted to innovation and involved a high degree of technical risk. Dr Noon gave clear evidence that before 2005 the radar’s ability to monitor stability of high and low walls at open-cut mines had been demonstrated, and that there was no real risk or uncertainty as to the radar being able to perform that function. The fact that the failure of the low wall in January 2005 was predicted with such a degree of accuracy indicates the lack of uncertainty as to outcome of the use of this technology and the limited extent of any risk of its failure.
We are not persuaded that any of the measures taken in this period in relation to the low wall management system had any purpose of acquiring new knowledge or creating new or improved products, processes or services. The only operative purpose was to ensure compliance with statutory requirements and to enhance the efficiency of the coal extraction process to obtain maximum economic benefits.
Core Activity 8.3 - Through-Seam Blasting (October 2002 to October 2005)
This activity is essentially the same as activity 5.3 referred to above. However, it adds to that description claims in respect of trials and developments including through-seam wedge blasting, software and advanced electronic blasting methods.
We are not satisfied that the through-seam blasting using electronic initiation can be said to be experimental or innovative or carried out for the purposes of research and development as defined for reasons given earlier.
For the reasons given earlier and, in particular, having regard to the evidence of Dr Hagan, we are not satisfied that this activity in the period October 2002 to October 2005 amounted to a core activity or came within the definition of research and development.
DIRECTLY RELATED ACTIVITIES
The Respondent accepts that claimed activity 6 relating to feedback and activity 9, which relates to an evaluation of results from claimed core activities, could be activities directly related to the carrying on of activities 5.1–5.3 and 8.1 –8.3 respectively.
However, as none of the core activities claimed are accepted by the Tribunal then none of the other activities claimed at the hearing come within the definition. Their characterisation as directly related activities depends on a finding that the core activities, in respect of which they are claimed to have a direct relation, are accepted as research and development activities.
It is common ground that “a purpose” in relation to the directly related activities as claimed means that the definition will be satisfied if any significant purpose of the activity directly relates to the carrying on of the core activity. As noted earlier at [151] this is to be contrasted with the language of the definition of “research and development” which refers to “the” purpose of acquiring new knowledge or creating new or improved materials, products, devices, processes or services.

Activity 7 as claimed, which is project management involving general project management across the level of the mine, is a broad sweeping claim in respect of all mining, planning and extraction activities directed to scheduling and the extraction of coal from the mine. In our view this has not been shown to have a direct and close relationship with the carrying out of any research and development activity.
The evidence does not support any inference that the whole general project management during the life of the mine was in any sense for a purpose of research and development or for a purpose directly related to a research and development activity.
The Applicant says that the digging, hauling and loading of coal over five years was for a purpose directly related to the construction of the low wall, the exposure of the high wall or to expose the results of through-seam blasting. We do not accept this. There is no contemporaneous documentation or other evidence which indicates any such purpose as being the purpose for which these generalised mining activities were carried on.
The converse is true having regard to the evidence in particular of Mr Walls. The purpose of the planning activities was the efficient and economic extraction of the maximum amount of high quality coal. This purpose was clearly achieved having regard to the budgets and mine planning schedules and the outcome of the operations.
Similar reasoning applies in respect of activity 8.4, which is the mining process itself, including the digging, transport, loading and hauling of coal and waste, and the carrying out of mining work in the transition from Pit B to Pit C.
In our view, in its very nature, these activities are for the purpose of extracting the coal. There is no indication that there was any significant purpose of acquiring new knowledge in relation to these activities. The loading and hauling of coal is the outcome of the mining operation generally and does not have any direct relationship with or any purpose of carrying out research and development activity.
We reach the same conclusion in respect of activity 3, concerning the through-seam blasting and monitoring and the preparation of the geological model. In our view this was a reserve resource and planning tool for the purpose of extracting coal.
REGISTRATION
The requirement under s 39J of the IRD Act is for an eligible company to apply for registration in relation to activities in respect of the year of income.
There is no specific statutory level of detail required for registration in respect of particular activities, so long as the project is defined sufficiently. The Industry Research and Development Board (the ‘Board’) has power under s 39J to seek such further information as it reasonably requires in order to carry out its functions. In this case it did not require further information under this section. The information required is basic information about the project in which the company’s activities are carried out, together with sufficient detail to enable the Board to evaluate the activities against the criteria in the definition. In our view it was not necessary to provide a description of each activity claimed in the application for registration form.
The Respondent submits that the Tribunal does not have power to issue a certificate under s 39L of the IRD Act in respect of activities which the Applicant claims were not duly registered as required by s 39J of that Act in relation to the income periods in which they are sought to be claimed.
The basis for this submission is that the activities claimed are not included or sufficiently described or specified in detail in the registration applications in respect of the period from 2000 to 2005. The submission is directed to some of the claimed activities namely 4, 5.1, 5.2, 5.3, 5.4, 7 and 8.1 to 8.4.
We do not accept the Respondent’s submission in respect of registration. The registration process requires registration “in relation to research and development activities”, but the prescribed forms and provisions do not require detailed description of all the individual activities to a highly particular level. The expression “in relation to research and development activities” is in the broadest terms, and the requirement should not be read in a narrow, restrictive manner.
In this case the Applicant was registered in respect of the “project” which referred to the project at Mount Owen.
We have considered the material furnished in relation to the registration and the evidence relating to the way in which it was treated by the Board and we reject the submission that the claimed activities cannot be considered by the Tribunal on the ground that they were not covered by the registration application requirements of the IRD Act or the ITAA.
WEre THE claimed ACTIVITIES carried out – Sufficiency OF EVIDENCE
The oral testimony and documentary evidence in this matter is most unsatisfactory in that it does not provide any sufficient basis in respect of most claims for a determination that any of the claimed activities were in fact carried out as asserted, or in some cases, were carried out at all. The contemporaneous material and other records do not approach the level of precision which would be expected of a systematic investigative process or a well-documented research and development program. In many cases the experts agreed that they had not seen documentary evidence to support the fact on which they had based their opinions.
In relation to the claims for mine modelling and mine design, for example, there is no satisfactory evidence as to the way in which this activity was carried out so as to constitute a systematic experimental process nor is there evidence that any detailed plan was followed or hypothesis formulated. The mining plans form part of the budgets and do not document the development of any process.
In relation to activity 4 the evidence, apart from some of the trial blasting, does not specify the methodology employed to enable tests to be carried out. The evidence does not show or refer to detailed records of the drilling, trials of drilling holes, groundwater management trials, or the collection of data and analysis of that data and results. There was some evidence of trials in relation to some through-seam blasting activities for a limited period only.
In respect of activity 5.1, concerning the high wall control system, there was a lack of detail in relation to the strata management plan and little evidence as to rock strength testing or water relief pipe installation and placing. There was an abandonment of the horizontal hole drilling according to Mr Walls.
The modelling in this period did not relate to geotechnical analysis but rather to geological characteristics.
There was insufficient evidence of major component activities said to “constitute this system”. Because the component parts of the control system had not been established on the evidence then the system as a whole cannot be accepted as a research and development activity overall. It has not been shown how the whole system can operate as a claimed activity when essential ingredients of it have not been established. There is a substantial lack of evidence in respect of individual specified activities within the system as to how each was constituted or how it worked or constituted a component of a “system”. Therefore the activities as claimed as a “system” must be rejected. There is no satisfactory explanation available to us as to the way in which the parts of the system operated in combination to function as a system amounting to a core research and development activity as a whole.
Activity 5.2 concerns the low wall control system. The evidence is insufficient to make good a number of the components of this activity. In particular, the evidence is that the use of the photogrammetry is not in evidence until late 2004. For example, there is no specific evidence of a strata management plan or as to the way in which prisms were used.
In relation to activity 7, namely project management, there is no detailed evidence on which the Tribunal can determine which components were research activities. This is a broad-sweeping generalised ambit claim. Accordingly, it is not possible on the evidence to separate out any management or other plan which can be related to the carrying out of a core activity.
The details of any alleged close and direct relationship is not found in the evidence. There is no breakdown, for example, as to what specific expenditure or times were spent in relation to this vaguely described overall activity.
In respect of activity 8.1 relating to the high wall for the second period, there is no satisfactory evidence that there was a strata management plan in respect of this activity. There is unsatisfactory evidence of horizontal drilling or the monitoring system as functioning throughout this period.
Furthermore, evidence concerning activity 8.2 does not indicate that there was any strata management plan. There is a reference to slope stability radar but this was only used for a short period.
conclusion
For the reasons given above we set aside the decision under review insofar as it allows any of the Applicant’s claims and we substitute the decision that none of the Applicant’s claims should be accepted as being research and development activities.

I certify that the preceding 277 (two hundred and seventy -seven) paragraphs are a true copy of the reasons for the decision herein of The Hon. Brian Tamberlin, QC, Deputy President, and Mr Conrad Ermert, Member.

.............................[sgd]...........................................
Associate
Dated 16 August 2013

Date(s) of hearing
27 - 30 August 2012, 3 - 7 September 2012,
8 November 2012, and 14 December 2012

Counsel for the Applicant Mr M Richmond SC, Ms C Burnett

Solicitors for the Applicant King & Wood Mallesons

Counsel for the Respondent Ms K Stern SC, Ms A Mitchelmore

Solicitors for the Respondent Clayton Utz

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2010/1153
Re	DBTL
APPLICANT
And	Innovation Australia
RESPONDENT

Tribunal	Hon. Brian Tamberlin, QC, Deputy President Mr Conrad Ermert, FIEAust, Member
Date	16 August 2013
Place	Sydney

Activity Number	Description of Activity	Core or DR	Year(s) applicant undertook the activity
3	Mine Modelling and concept design This included: · Collection and review of data from drilling, rock testing and geotechnical analysis; · Computer modelling; and · Iterative design and development of the mine design model and mine plan, including a plan for dump sequencing.	DR	2000 - 2005
4	Experimentation and trial testing Experimentation relating to the mining process, preparatory to the mining conducted in Activities 5.3 and 8.3. This involved the development of very specific methodologies to be employed in the mining process and then, the testing of those methodologies on a sub-level. Testing activities included the following: · Trial and error activities in relation to the development of through-seam blasting techniques; · The drilling of testing and observation holes in the high wall and the low wall; · The undertaking of groundwater management analysis; and · The collection of data in-pit.	Core	2000 - 2005
5.1	High wall control system This system involved the development of geotechnical design and a strata management plan for a high wall monitoring system in relation to the high wall that was exposed during 2000 to 2002. This involved: · The visual inspection of the high wall; · The conduct of geotechnical analysis of the high wall; · Computer modelling and analysis; · Rock strength testing; · The use of piezometers and telemetry; · The use of extensometers; · Drilling horizontal holes in the high wall to relieve water pressure; · Installing relief pipes in the high wall; and · The use of automated prisms.	Core	2000 - October 2002
5.2	Low wall control system This system involved the development of a geotechnical design and a strata management plan for a low wall monitoring system in relation to the low wall that existed during 2000 to 2002. This involved the following: · Low wall floor treatment, including disturbance, keying, locking and trenching; · Visual and geotechnical review of the low wall; · The use of automated prisms; · The use of extensometers; and · The use of 3D pit photogrammetry.	Core	2000 - October 2002
5.3	Through-seam blasting Development of through-seam drilling and blasting techniques to access coal seams in the face of complex geology and steeply dipping strata.	Core	2000 - October 2002
5.4	Mining process Dig, load, haul coal seams in the face of complex geology and steeply dipping strata.	DR	2000 - October 2002
6	Evaluation and feedback Evaluation and feedback of activities 5.1, 5.2, 5.3 and 5.4.	DR	2000 – October 2002
7	Project management Project management, involving general project management across the life of the project.	DR	2000 - 2005
8.1	High wall control system Including the further development of a geotechnical design and a strata management plan for a high wall monitoring system in relation to the high wall that was exposed during 2002 to 2005. This involved most or all of the same activities undertaken in Activity 5.1 above, taking into account the following factors in addition: · The high wall was larger and exposed for longer than was the case in Activity 5.1; · The high wall had a different shape (included the buttress) than was the case in Activity 5.1; · The buttress had an unprecedented design; and · Horizontal drilling was not used as extensively as was the case in Activity 5.1.	Core	October 2002 - 2005
8.2	Low wall control system Including the further development of a geotechnical design and a strata management plan for a low wall that was exposed during 2002 to 2005. This involved most or all of the same activities undertaken in Activity 5.1 above, taking into account the following factors in addition: · The use of slope stability radar; · The settings of radar parameters and triggers; · The development of response management plans involving alarms and response systems or personnel and equipment in the event of a stability failure; and · The further development of systems after the 2005 low wall failure.	Core	October 2002 - 2005
8.3	Through-seam blasting Development of through-seam drilling and blasting techniques to access coal seams in the face of complex geology and steeply dipping strata.	Core	October 2002 - 2005
8.4	Mining process Dig, load, haul coal and waste in Pit B and transition zone Pit B to Pit C.	DR	October 2002 - 2005
9	Evaluation of results Evaluation of the results from activities 8.1, 8.2 and 8.3 and feedback of this information into the mine concept design and process methodologies.	DR	October 2002-2005

Date(s) of hearing	27 - 30 August 2012, 3 - 7 September 2012, 8 November 2012, and 14 December 2012
Counsel for the Applicant	Mr M Richmond SC, Ms C Burnett
Solicitors for the Applicant	King & Wood Mallesons
Counsel for the Respondent	Ms K Stern SC, Ms A Mitchelmore
Solicitors for the Respondent	Clayton Utz