Rimslow Global Pty Ltd and Australian Trade Commission

[2008] AATA 555

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 555

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/2612

GENERAL ADMINISTRATIVE  DIVISION		)
Re		RIMSLOW GLOBAL PTY LTD

Applicant

And AUSTRALIAN TRADE COMMISSION

Respondent

DECISION

Tribunal Mr B.H. Pascoe, Senior Member  

Date30 June 2008

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

B.H. Pascoe

Senior Member

export market development grant – eligibility – whether carrying on business similar to previous owner – maximum grants paid to previous owner

Export Market Development Grants Act 1997 – section 94

Re Fairlight.Au Pty Ltd and Australian Trade Commission (2007) AATA 1262

REASONS FOR DECISION

30 June 2008 Mr B.H. Pascoe, Senior Member  

1.      This application is for the review of a decision of 4 June 2007 by the Australian Trade Commission, the respondent, to refuse a claim for a grant in relation to the year ended 30 June 2006 pursuant to the Export Market Development Grants Act 1997 (the Act).  The respondent determined that grant was not available under s 94 of the Act on the basis that the applicant, Rimslow Global Pty Ltd (Rimslow Global) was not carrying on a business activity that was substantially different to that carried on by a previous company, Rimslow Pty Ltd (Rimslow).  Rimslow had received the maximum number of grants available under the Act.

2.      At the hearing Rimslow Global was represented by its managing director, Mr G. Sebek.  The respondent was represented by Ms P. Neskovcin of counsel.  Evidence was given by Mr Sebek and Mr M. Ferguson, a lecturer in textile chemistry and printing.

3.      Section 94 of the Act provides:-

(1)Subsection (2) applies if:

(a)at any time, a person (the previous owner) carried on a particular business (the old business) in Australia; and

(b)at a later time, another person (the new owner) carries on:

(i)     the business or a part of the business (the relevant part); or

(ii)     a business (the new business) that, at that time, is similar to the old business, or a part of the old business (the relevant part), carried on by the previous owner before that time, to such an extent that the CEO of Austrade is satisfied that the new business should be treated as a continuation of the old business; and

(c)the new owner applies for a grant in respect of a grant year.

(2)For the purposes of this Act, the CEO of Austrade must treat particulars of the previous owner as being those of the applicant in the following ways:

(a)     any eligible expenses incurred by the previous owner in the capacity of owner of the business (or of the relevant part) are to be treated as having been incurred by the new owner;

(b)     if the CEO had decided that the previous owner met the grants entry requirements—the new owner is to be treated as if the CEO had decided that it had met the grants entry requirements;

(c)     any grant, or advance on account of grant, paid or payable (whether under this Act or under the repealed Act) to the previous owner in the capacity of owner of the business (or of the relevant part) is to be treated as having been paid, or as being payable, to the new owner;

(d)     any other aspect of the business (or of the relevant part) is to be treated as if it had been carried on by the new owner.

4.      Pursuant to s 101 of the Act, Guidelines determined by legislative instrument govern decisions under s 94(2)(b).  The Guidelines in force at the time of the application for the grant were those gazetted under the previous Act, Export Market Developments Grants Act 1974, and which continued to apply for the relevant period pursuant to s 13 of the Export Market Development Grants (Repeal and Consequential Provisions Act 1997 .  The Guidelines state:-

DECISION-MAKING PRINCIPLES UNDER SECTION 19A

THE AUSTRALIAN TRADE COMMISSION, acting under section 19A of the Export Market Development Grants Act 1974, formulates the principles set out in the Schedule as the decision-making principles to be complied with by the Commission in deciding whether to grant a special exemption under section 19 of that Act.

…

SCHEDULE

The Commission must grant a special exemption in relation to a business activity referred to in paragraph 19(1)(b) (“the previous business activity”), having regard to any differences between:

(a)the product of the current business activity and that of the previous business activity;

(b)what is done in the course of the business of the current business activity and that of the previous business activity;

(c)the customers, including the export market customers, of the current business activity and those of the previous business activity;

(d)the directors, shareholders, and management personnel of the current business activity and those of the previous business activity;

(e)the suppliers of the current business activity and those of the previous business activity;

(f)the overseas representatives of the current business activity and those of the previous business activity;

(g)the employees of the current business activity and those of the previous business activity;

(h)the markets, including the export markets, of the current business activity and those of the previous business activity;

(i)the premises from which the current business activity is conducted and the premises from which the previous business activity was conducted;

(j)the logo of the current business activity and that of the previous business activity; and

(k)the property or assets including the intellectual property of the current business activity and those of the previous business activity.

5.      Rimslow had received eight grants under the Act being the total maximum number of grants available under the Act.  The last grant was in relation to the year ended 30 June 2003.  The company subsequently entered external administration.  Rimslow Global commenced operations on 1 July 2005 and lodged its grant application on 6 October 2006.  It is not in dispute that Mr Sebek purchased the assets of Rimslow and paid out its creditors.  These assets were then transferred to Rimslow Global which commenced operation from the same premises previously occupied by Rimslow.  Rimslow had operated as trustee of the Sebek Family Trust and its shareholders and directors were Mr Sebek and his former wife Mrs L. Sebek.  The shareholder of Rimslow Global is G. & L Sebek Pty Ltd the shares in which are held by Mr Sebek and his current wife Mrs J. Sebek.  Mr Sebek is the sole director of Rimslow Global.  Three former employees of Rimslow, including Mr Sebek, were employed by Rimslow Global.

6.      Mr Sebek migrated to Australia in 1983 from Czechoslovakia where he had qualified as an electrical engineer in 1966.  He became a designer of machines for use in the textile industry and, initially was employed by a textile company in Australia.  He formed Rimslow in 1987.  Mr Sebek said that the major products of Rimslow were the Steam-X 1850 RDA (Steam-X) machine and the Precoat-X machine.  He described the Steam-X as a printing machine which was later patented by another person and could no longer be manufactured.  The Precoat-X was described as a machine for fabric spraying by chemicals.  Mr Sebek said that only one machine of this type was manufactured and sold in France.  The machine failed and Rimslow was sued for compensation.  It is noted that the advertising material produced by Rimslow describes the Steam-X  as a machine that has allowed for the continuous inkjet printing and curing of fabrics and can be used with any digital inkjet printer available.  It was said to be designed to provide continuous process of printing and fixing dyes to the fabric.  The Precoat-X was described as an all in one fabric coating system.  The coating system includes a feeder, spraying unit, an infra red drying oven and a batching unit.

7.      Mr Sebek maintained that the machines manufactured by Rimslow Global are different from those manufactured by Rimslow.  One machine, Steam-XL was described by him as an ink fixation machine and not a printing machine as was Steam-X.  In the advertising material produced by Rimslow Global, the Steam-XL was said to be designed to provide continuous process of fixing dyes to the fabric that has been printed by any type of inkjet printer available on the market.  Another machine manufactured by Rimslow Global is the Precoat-W described as designed to provide continuous process of fabric preparation for the digital printing.  Could be also used as post treatment machine or for colorization of fabrics. A further machine is Wash-X which was designed and patented by Mr Sebek and said to be a machine for washing fabric printed by digital printers or traditional printing.  In its advertising, the Wash-X is described in almost identical terms as the Precoat-W with the words and fabric washing after the words fabric preparation.  It is relevant to note that the Wash-X also appeared on the web site of Rimslow although it is not clear whether any such machines were actually manufactured by that former company.

8.      From the evidence of both Mr Sebek and Mr Ferguson that the Precoat-X and the Precoat-W do the same thing for pre or post chemical treatment of fabric to be printed or colourised but using different technology and the Precoat-W being a smaller machine.  As described by Mr Ferguson, the Precoat-X applied chemicals by spray whereas the Precoat-W uses rollers and pressure to so apply the chemicals.  Similarly the differences between Steam-X and Steam-XL are in the technology used and the omission of a printer in the Steam-XL process and a difference in speed and resolution.

9.      The primary arguments developed by Mr Sebek and Mr Ferguson was that the machines manufactured by Rimslow and Rimslow Global were different.  However, it would seem clear that both companies have concentrated on machines for use in the textile industry for fabric preparation and fixing dyes where the fabric is printed or dyed.  The differences are in the technology and the concentration on such preparation and fixing and excluding a printing machine from incorporation within the process performed by the machines.  Much of the technical change was said to be due to the growth of digital printing as compared with screen printing and the larger number of small businesses requiring machines for fabric preparation and fixing.  As such it could be readily seen as a natural progression in the technology used in such machines.  The test required by s 94 is not whether the goods manufactured by Rimslow Global are identical to those manufactured by Rimslow but whether they are sufficiently similar.  The evidence clearly demonstrates that the predominant business of both companies has been the manufacture and supply of similar machinery for the textile industry the difference being primarily the use of improved technology and adapting to a changing market.

10.     Mr Sebek acknowledged that his business cards for both Rimslow and Rimslow Global were virtually identical.  He accepted that the use of Rimslow name continued so as not to be seen by his overseas customers as being a new company.  While he maintained that the logo of each company differed in colour and shape it has to be said that they are remarkably similar.  It is clear that Mr Sebek controlled Rimslow and continues to control Rimslow Global and the overall management is very similar.  The use of the name Rimslow is relevant as is the use of the same premises by both companies.  The technical know-how of both companies has been provided by Mr Sebek.

11.     Mr Sebek maintained that, while the market effort of Rimslow was predominantly in Asia, the marketing effort of Rimslow Global was mainly directed at U.K. and Europe.  However, it is noted in the evidence of Mr Ferguson that Rimslow Global is actively selling equipment in Thailand and Singapore.  Mr Sebek stated, also, that Rimslow had an overseas representative in U.K. but Rimslow Global has no overseas representative.

12.     The question posed by s 94 of the Act is whether Rimslow Global is carrying on a business similar to that of Rimslow to the extent that it should be treated as a continuation of that business.  It is clear from the evidence of Mr Sebek that Rimslow ceased business as a result of the cost of the failure of the Precoat-X and subsequent action by the customer, a loss of some $200,000 with the disappearance of a Sydney distributor and problems with the Asian market.  Effectively, Rimslow Global then commenced business using the same know-how of Mr Sebek, was similarly controlled by Mr Sebek, used the same word Rimslow in its name, operated from the same address and manufactured and sold machines to customers in the textile industry.  As said previously much of the argument by Rimslow Global stressed that the machines it manufactured were not printing machines. While the machines of Rimslow may have incorporated a printer in the processer, the printer was not itself manufactured by Rimslow.  Other than the printing, the Rimslow Global machines perform the same function in fabric preparation and fixing using improved technology and adapting to changing markets.  I am unable to distinguish the appropriate end result of this application from that in ReFairlight.Au Pty Ltd and Australian Trade Commission (2007) AATA 1262.

13.     On balance and having regard to the foregoing findings I am satisfied that s 94(2) applies to Rimslow Global and the decision under review should be affirmed.

I certify that the thirteen [13] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr B.H. Pascoe, Senior Member

Signed:         Dianne Eva
  Clerk

Date/s of Hearing  13 February 2008
Date of Decision  30 June 2008
Self Represented  Mr G. Sebek
Counsel for the Respondent     Ms P. Neskovcin
Solicitor for the Respondent    Ms Emily Nance, AGS