Rix’s Creek Pty Limited; Bloomfield Collieries Pty Limited and Innovation Australia
[2017] AATA 645
•10 May 2017
Rix’s Creek Pty Limited; Bloomfield Collieries Pty Limited and Innovation Australia [2017] AATA 645 (10 May 2017)
Division:GENERAL DIVISION
File Number(s): 2015/2095; 2098
Re:Rix’s Creek Pty Limited; Bloomfield Collieries Pty Limited
APPLICANT
AndInnovation Australia
RESPONDENT
DECISION
Tribunal:Senior Member A Poljak
Date:10 May 2017
Place:Sydney
The decisions under review are affirmed.
........................[sgd]................................................
Senior Member A Poljak
Catchwords
INDUSTRY RESEARCH AND DEVELOPMENT – claims for research and development activities - definition of research and development activity in s73B(1) of the Income Tax Assessment Act 1936 (Cth) – 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 element of appreciable novelty – decisions under review affirmed
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) ss 35(2), (5)
Income Tax Assessment Act 1936 (Cth) ss 73B, (1), (2B)(b)(ii), (2C)
Industry Research and Development Act 1986 (Cth) ss 39S, 39T, as repealed by Tax Laws Amendment (Research and Development) Act 2011 (Cth)Cases
Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503
Docklands Science Park Pty Ltd and Innovation Australia [2015] AATA 973; (2015) 68 AAR 42
Mount Owen Pty Ltd and Innovation Australia [2013] AATA 573; (2013) 137 ALD 88RACV Sales and Marketing Pty Ltd and Innovation Australia [2012] AATA 386; (2012) 57 AAR 268
Secondary Materials
Explanatory Memorandum, Taxation Laws Amendment Bill (No 3) 1996 (Cth)
Explanatory Memorandum, Income Tax Assessment Amendment (Research and Development) Act 1986 (Cth)
REASONS FOR DECISION
Senior Member A Poljak
10 May 2017
These proceedings concern the review of two decisions of the delegate of Innovation Australia (“the respondent”), pursuant to s39T of the Industry Research and Development Act 1986 (Cth) (the “IRD Act”), made under s39S dated 10 December 2013 (Notice dated 11 December 2013), as partly confirmed and partly varied by the decisions of the respondent dated 31 March 2015 under s39L (the “reviewable decisions”).
The reviewable decisions, in effect, find that a number of the activities, which were claimed by Rix's Creek Pty Limited and Bloomfield Collieries Pty Limited (“the applicants”) to be research and development activities, were not “research and development activities” (“R&D”) within the meaning of s73B of the Income Tax Assessment Act 1936 (Cth) (the “ITAA”).
OVERVIEW AND ISSUES
There are three types of projects in which the claimed activities took place, namely:
(a)the Dense Media Sampler device project at Bloomfield (“DMS Project”);
(b)the project to substitute refined recycled waste oil for diesel for use in explosives at both Rix’s Creek and Bloomfield (the two “Explosives Projects”); and
(c)excavator bucket redesign and truck pass matching on two excavators at Rix’s Creek and one excavator at Bloomfield (the three “Excavator Projects”).
There are six projects in total, across three different categories and at two different mine sites. It is uncontroversial that all the claimed activities took place in the context of two working mines. The claimed activities were undertaken at the Rix’s Creek mine in Singleton (operated by Rix’s Creek Pty Limited) and the Bloomfield mine in East Maitland (operated by its related entity Bloomfield Collieries Pty Limited) in the period April 2008 to March 2012 inclusive.
An overview of the projects and issues are as follows:
Rix’s Creek
‘Explosives Project’ – Development of a new process for producing explosives using recycled refined oil from Rix’s Creek machinery
Activity Number
Activity Title
Issue
A1
Preliminary work and background research
Depends on A2 (relationship accepted by respondent)
A2
Design, development and investigation of concept
Whether core activity
A3
Trial and testing
Whether directly related
A4
Feedback and monitoring
Depends on A2 (relationship accepted by respondent)
‘Excavator Project’ – Design and development of an improved bucket for the EX 3600 excavator in order to increase the payload achieved per pass
Activity Number
Activity Title
Issue
B1
Preliminary work and background research
Depends on B2 and B4 (relationship accepted by respondent)
B2
Design, development and investigation of concept
Whether core activity
B3
Testing and analysis
Whether directly related
B4
Feedback R&D – modification and redesign
Whether core activity
B5
Feedback and monitoring
Depends on B2 and B4 (relationship accepted by respondent)
‘Excavator Project’ – Design and development of new processes and devices to increase load haul cycle efficiency in removing overburden at the Rix’s Creek open cut mine (EX 5500 excavator)
Activity Number
Activity Title
Issue
C1
Preliminary work and background research
Depends on C2 (relationship accepted by respondent)
C2
Design, development and investigation of concept
Whether core activity
C3
Testing and analysis
Whether directly related
C4
Evaluation and Feedback R&D
Depends on C2 (relationship accepted by respondent)
Bloomfield
‘DMS Project’ – Design and development of a new heavy-density media sampling device
Activity Number
Activity Title
Issue
A1
Design, development and investigation of concept
Not in issue
A2
Trial and testing
Whether directly related
A3
Analysis and evaluation
Whether directly related
A4
Modification and redesign
Whether directly related (whether core activity not pressed)
A5
Feedback and monitoring
Not pressed
‘Excavator Project’ – Development of new methods for removing overburden to improve mine life and operation efficiency & design and development of new and improved processes and devices for removing ROM product and overburden materials to improve mine life and operational efficiency
Activity Number
Activity Title
Issue
B1
Preliminary work and background research
Depends on B2 and B4 (relationship accepted by respondent)
B2
Design development and investigation of concept
Whether core activity
B3
Testing and Analysis
Whether directly related
B4
Modification and redesign
Whether core activity
B5
Feedback and monitoring
Depends on B2 and B4 (relationship accepted by respondent)
‘Explosives Project’ – Design and Development of a new process for replacing diesel fuel in the manufacture of bulk explosives incorporating recycled refined oil from mine machinery
Activity Number
Activity Title
Issue
C1
Preliminary work and background research
Depends on C2 (relationship accepted by respondent)
C2
Design development and investigation of concept
Whether core activity
C3
Trial and testing
Whether directly related
C4
Feedback R&D -
Modification and redesign
Depends on C2 (relationship accepted by respondent)
The applicants submit that the claimed activities are R&D activities under s73B(1) of the ITAA, and specifically that:
(a) The DMS Project activities (described as Activities A2 to A4) were carried on for a purpose of testing and modifying the successive designs of Prototype 5, which is “a purpose directly related to the carrying on” of the design and development of Prototype 5 within the meaning of paragraph (b) of the s73B(1) definition of R&D activities.
(b) In the Explosive Projects:
(i) The design and development (A2/C2) and, at Rix’s Creek, the laboratory testing (A2 or A3) and certain trial blast activities (part of A3), were within the meaning of paragraph (a) of the s73B(1) definition of R&D activities.
(ii) The balance of the trial blast activities (A3/C3) were carried on for a purpose of testing the experimental fuel mixes, which is within the meaning of paragraph (b) of the s73B(1) definition of R&D activities.
(iii) The respondent accepts that activities AC/C1 and A4/C4 are directly related to A2/C2 respectively.
(c) In the Excavator Projects:
(i) The design and development (B2/C2), modification and redesign (B4) and evaluation and feedback (C4) activities were within the meaning of paragraph (a) of the s73B(1) definition of R&D activities.
(ii) The testing and analysis (B3/C3) each project, and activities C1, C3 and C4 for the Rix’s Creek EX 5500 project, were each carried on for “a purpose directly related to the carrying on” of activities B2/C2 and B4/C4 within the meaning of paragraph (b) of the s73B(1) definition of R&D activities.
(iii) The respondent accepts that B1 and B5 of each of the Bloomfield project and Rix’s Creek EX3600 projects are directly related to B2 and B4 respectively, and the same for C1 and C4 of the Rix’s Creek EX5500 project.
The respondent contends that the applicants are seeking to characterise ordinary mining processes as R&D activities and that the claimed activities comprised the routine operation of the Bloomfield coal handling preparation plant (DMS Project), the substitution of one fuel for another, and not the creation of a new product (Explosives Projects), and the customisation of buckets to site-specific conditions (Excavator Projects).
RELEVANT LEGISLATIVE PROVISIONS AND APPLICABLE PRINCIPLES
The respondent, in conjunction with the Commissioner of Taxation, was responsible for the administration of the Commonwealth tax concession scheme for research and development expenditure (“the Concession Scheme”).
The framework for the tax Concession Scheme for research and development expenditure is provided by ss 78B to 73Z of the ITAA and the IRD Act. The applicable legislation is that which was in effect prior to the amendments introduced by the Tax Laws Amendment (Research and Development) Act 2011 (Cth), which came into effect on 8 September 2011.
The objects of section 78B of the ITAA are set out in s73B(1AAA):
Object of this section
(1AAA)The object of this section is to provide a tax incentive, in the form of a deduction, to encourage research and development activities in Australia and make eligible companies more internationally competitive by:
(a) encouraging the development by eligible companies of innovative products, processes and services; and
(b)increasing investment by eligible companies in defined research and development activities; and
(c)promoting the technological advancement of eligible companies through a focus on innovation or high technical risk in defined research and development activities; and
(d)encouraging the use by eligible companies of strategic research and development planning; and
(e)creating an environment that is conducive to increased commercialisation of new processes and product technologies developed by eligible companies.
The benefits of the tax incentive are targeted by being limited to particular expenditure on certain defined activities. [Emphasis added]
Section 73B(1) of the ITAA defines “research and development activities” as follows:
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 a 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).
research and development expenditure, in relation to an eligible company in relation to a year of income, means expenditure (other than core technology expenditure, interest expenditure, feedstock expenditure, excluded plant expenditure or expenditure incurred in the acquisition or construction of a building or of an extension, alteration or improvement to a building) incurred by the company during the year of income, being:
(a) contracted expenditure of the company;
(b)salary expenditure of the company, being expenditure incurred on or after 1 July 1985; or
(c)other expenditure incurred on or after 1 July 1985 directly in respect of research and development activities carried on by or on behalf of the company on or after 1 July 1985;
and includes any eligible feedstock expenditure that the company has in respect of the year of income in respect of related research and development activities.
The definition of “research and development activities” is in two limbs: the first is commonly referred to as “core activities” and the second is commonly referred to as “supporting activities” or “directly related activities”.
For the purposes of the definition of research and development activities in sub-s73B(1); s73B(2B) provides:
(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.
Relevantly, s73B(2C) provides:
For the purposes of this section, the following activities are taken not to be systematic, investigative and experimental activities:
(a)market research, market testing or market development, or sales promotion (including consumer surveys);
(b) quality control;
(c)prospecting, exploring or drilling for minerals or natural gas for the purpose of discovering deposits, determining more precisely the location of deposits or determining the size or quality of deposits;
(d)the making of cosmetic modifications or stylistic changes to products, processes or production methods;
(e) management studies or efficiency surveys;
(f) research in social sciences, arts or humanities;
(g) the making of donations;
(h)pre‑production activities such as demonstration of commercial viability, tooling‑up and trial runs;
(i)routine collection of information, except as part of the research and development process;
(j) preparation for teaching;
(k)commercial, legal and administrative aspects of patenting, licensing or other activities;
(l)activities associated with complying with statutory requirements or standards, such as the maintenance of national standards, the calibration of secondary standards and routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things;
(m) specialised routine medical care;
(n)any activity related to the reproduction of a commercial product or process by a physical examination of an existing system or from plans, blueprints, detailed specifications or publically available information.
Research and development activities (s73B(1) of the ITAA)
Paragraph (a): “core” R&D activities
Systematic, Investigative and Experimental
In RACV Sales and Marketing Pty Ltd and Innovation Australia [2012] AATA 386; (2012) 57 AAR 268, the Tribunal set out at [159] the relevant ordinary meanings of the words systematic, investigative and experimental:
“systematic”: “…1 Making use of, or carried out according to, a clearly worked-out plan or method. 2 methodical…”
“investigative”: “… to carry out a thorough, detailed, and often official inquiry into, or examination of, something or someone…”
“experimental”: “…1 consisting of or like an experiment. 2 relating to, or used in, experiments. 3 trying out new styles and techniques…”
[“experiment”: “…1 trial carried out in order to test a theory, a machine’s performance, etc or to discover something unknown. 2 the carrying out of such trials. 3 an attempt at something original…”]
No particular label or form of words is necessary or required when describing an activity. The question is whether what was done was, in substance, systematic, investigative and experimental. However in saying that, what is done must be carried out in accordance with a system, plan or organised method.
In determining the intended meaning of ‘systematic, investigative and experimental’ regard must be had to the relevant extrinsic material. While the relevant extrinsic material does not, of course, replace the statutory language, it informs the proper construction and meaning of the statutory text. The High Court said in Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503 at [39]:
The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself.
The Explanatory Memorandum, Taxation Laws Amendment Bill (No 3) 1996 (Cth) (the “Explanatory Memorandum 1996”) at [9.52], states that “the definition of ‘research and development activities’ will be made more explicit by importing concepts from the Explanatory Memorandum to the Income Tax Assessment Amendment (Research and Development) Act 1986” (the “Explanatory Memorandum 1986”), which, at page 14, explains:
For the purposes of the definition of “research and development activities”, the reference to systematic, investigative or experimental activities means that the scientific method is applied in a systematic progression of work from hypothesis to experiment, observation and evaluation, followed by logical conclusions.
This explanation in the Explanatory Memorandum 1996 was given statutory force in s73B(2B)(b)(ii) of the ITAA, which defines ‘high levels of technical risk’ by referencing part to the notion of systematic, investigative and experimental activities and provides:
…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]
It appears to be common ground between the parties that the words systematic, investigative and experimental together connote application of the scientific method in a systematic progression of work from hypothesis to experiment, observation and evaluation, followed by logical conclusions. Senior counsel for the applicant accepted at hearing that activities were not systematic, investigative and experimental, unless one can find a systematic process which is that of a hypothesis followed by experiment, followed by observations and evaluation of the results. Evidence must be available to satisfy to satisfy this requirement. Vague, generalised description of the claimed activities is not sufficient to establish that a hypothesis was formulated and that the activities claimed were carried out to test that hypothesis. An ex post facto attempt to construct or discover a hypothesis with the benefit of hindsight after the workers can carried out will not satisfy the requirement that the activities be “systematic, investigative and experimental”; see Mount Owen Pty Ltd and Innovation Australia [2013] AATA 573; (2013) 137 ALD 88 at [197], [209], [229] and [241].
While the creation and provision of documentation is not a statutory requirement to substantiate the R&D activities, I agree with the submissions of the respondent that documentary evidence is an expected feature of an activity that is systematic, investigative and experimental. Documentation is necessary to record the activity undertaken, its purpose, progress and, of course, the results of the activities and the evaluation of those results. Without such documentation, it is near impossible to establish the progression of the activities undertaken and that the purpose of the activities was to generate new knowledge in the form of new or improved materials, products, devices, processes or services. It follows, that without such documentation, the experimental activity would have limited application or future use.
This is consistent with what the Tribunal has previously said in Docklands Science Park Pty Ltd and Innovation Australia [2015] AATA 973; (2015) 68 AAR 42 at [63]:
…documentation is necessary to substantiate the R&D activities claimed by an applicant. It is the absence of documentation which has resulted in [the Tribunal’s] findings. Such documents are required for the purpose of evidencing experimental activities whose outcome cannot be known or determined in advance but can only be determined by applying a systematic progression of work based on established science; and which proceeds from hypothesis to experiment, observation and evaluation and leads to logical conclusions. That process will establish that the purpose of conducting the activities is to generate new knowledge in the form of new or improved materials, products, devices, processes or services. An applicant cannot succeed in establishing those requirements in the absence of detailed documentation recording the process of each activity as it develops. [Emphasis added]
The applicants appear to rely on R&D Project Plans in order to prove the existence of documented plans to substantiate that the claimed activities were systematic, investigative and experimental. No occasion arises in these proceedings for me determine the question of whether the applicant’s complied with the statutory requirement to have a plan in accordance with certain Guidelines formulated under s73B(2BA) of the ITAA and s39KA of the IRD Act. However, it is accepted by the parties that the content and form of the R&D Project Plans complied with the Guidelines.
At hearing, Mr Booth admitted that, although his name appeared on several of the R&D Project Plans, he had not seen the documents until they were shown to him at hearing. In explanation of why his name appeared on the documents, Mr Booth advised that “we- that is Terry Brown and myself, formed the research and development – or R and D section of the business and whilst I did not write this and haven’t seen it…because I am part of the team, my name is on there but I have definitely not seen this document”. He said that R&D Project Plan documents were “a standard document…recording the information needed to substantiate that project and that was a moving document. It was a document you could pull that up on the screen a month or a year later and add to it”.
I am not convinced that the R&D Project Plans were created to inform and guide the claimed activities. The documents are vague and highly generalised in nature and contain both broad and high-level, undifferentiated descriptions of the activities over a period of several years, some prospective and some apparently after the event. It is also not clear who prepared and updated the R&D Project Plans and to what extent they may be attended by the risk of retrospective reconstruction, inference, attribution or purpose. Mr Booth said at hearing that the R&D Project Plans were not necessarily prepared for the purpose of substantiating the R and D projects but rather to “submit…for appraisal, inspection or authorisation to our higher authorities or our – or the consultants that were overviewing any of our R and D projects”. Accordingly, I am not satisfied that the R&D Project Plans are sufficient to substantiate that the claimed activities were systematic, investigative and experimental.
Involving Innovation
Pursuant to s73B(2B)(a) of the ITAA, activities are not taken to involve innovation unless they involve an appreciable element of novelty.
The Explanatory Memorandum 1996 at [9.56], explains:
Innovation is to involve an appreciable element of novelty. This means that a fairly large constituent part of the activity must involve novelty. [Emphasis added]
This explanation is consistent with the ordinary meaning of the word “appreciable” being “large or important enough to be noticed”, “Noticeable; significant; able to be measured or noticed” and “significant in some way”.
Given the statutory context, including the extrinsic material, an element of novelty that is not a fairly large constituent part of the activity would not suffice as innovation.
Involving High Levels of Technical Risk
Activities are not taken to involve high levels of technical risk unless they meet the specific criteria set out in s73B(2B)(b) of the ITAA:
(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.
In RACV the Tribunal said at [221]:
It is not enough that the outcome cannot be known or determined in advance. Section 73B(2B)(b)(ii) is addressed to the criterion in s 73B(2B)(b)(i) that the outcome cannot be known or determined. It effectively defines the only means by which uncertainty of obtaining an outcome can be removed. It requires that the uncertainty of obtaining the outcome can only be removed through a program of activities that must meet the description it sets out. That means that the not knowing or not being able to determine, and so the uncertainty, of obtaining the technical or scientific outcome can be removed only through that program of activities. Removing that uncertainty does not mean ensuring that a particular technical or scientific outcome is assured. It has nothing to do with a particular outcome and everything to do with being able to assess whether a particular technical or scientific outcome can be obtained at all. [Emphasis added]
Carried on for the purpose of acquiring new knowledge or creating new or improved materials, products, devices, processes or services
To qualify as a research and development activity, an activity must be carried on for the purpose of acquiring new knowledge or creating new or improved materials, products, devices, processes or services. The “purpose” is to be determined by reference “to the aims and objectives of the activity before and during the carrying out of” the activities; Mount Owen at [154]. It is not determined according to “a rationale developed at a later time to explain why…those activities were carried on”; RACV at [227].
In Mount Owen, the Tribunal said at [184]:
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.
There is disagreement between the parties about whether the “purpose” requirement in the definition of ‘research and development activities’ in s73B(1)(a) refers to the dominant purpose or a significant purpose.
When considering the intention of the statutory language, it is helpful to look at the context. The objects of s73B of the ITAA are to provide a tax incentive which encourages research and development in Australia; the benefits of which are targeted by being limited to particular expenditure on certain defined activities.
The Tribunal has previously dealt with the point-in-time legislation applicable in these proceedings. In Mount Owen, the Tribunal said (in obiter dicta) at [149]-[151]:
[149] 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.
[150] 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.
[151] 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.
In any event, it will only be necessary to resolve the construction dispute in this case if I am satisfied that it has been shown, in respect of any of the claimed activities, that they were carried on for at least a significant purpose of acquiring new knowledge or for creating new or improved materials, products, devices, processes or services.
Paragraph (b): “directly related” activities
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 pursuant to s73B(1)(b) of the ITAA. This requires a direct and close relationship between the related activity and the carrying on of the core research and development activity; Mount Owen at [153]. This is common ground.
CONSIDERATION
DMS PROJECT – ACTIVITIES A1 TO A5
The DMS project is the design and development of Prototype 5 of the DMS device and its testing within the coal handling and preparation plants (“CHPP”) at the Bloomfield mine. The DMS device measures the density of the medium used to separate coal from non-coal material in the CHPP.
Mr Booth, an employee of the applicant, Bloomfield Collieries Pty Limited (“Bloomfield”), invented the DMS device and holds the patents for the invention in Australia, the United States and South Africa. Mr Booth started the process of inventing the DMS at Bloomfield in 2006. In the period 2006 to April 2008, Bloomfield successively designed and tested prototypes 1, 2, 3 and 4. The respondent has accepted that the work on the DMS in the period 2006 to April 2008 was within the s73B(1) definition of ‘research and development activities’.
The respondent has accepted that the design, development and investigation of the concept for Prototype 5 of the DMS device from 2008-2012 (Activity A1) was a paragraph (a) (core) research and development activity.
Bloomfield no longer contends that the modification and redesign of Prototype 5 (Activity A4) is a paragraph (a) (core) activity. Further, Bloomfield does not press its claim in respect of feedback and monitoring (Activity A5).
Accordingly, the issues in dispute in these proceedings is whether the trial and testing (Activity A2), analysis and evaluation (Activity A3) and modification and redesign (Activity A4) activities were carried on for a purpose “directly related” to the carrying on of the design, development and investigation of concept for Prototype 5.
I have carefully read and considered the witness statements (including exhibits) of Mr Robert Booth filed in these proceedings dated 16 November 2015, 18 February 2016 and 4 October 2016. I have also carefully considered his oral evidence given at hearing.
I have also carefully read and considered the expert reports (including exhibits) of Mr Andrew Swanson dated 1 February 2016 and 26 September 2016, and the expert report (including exhibits) of Dr Andrew Vince dated 31 August 2016. I have also carefully considered the joint memorandum prepared on 27 October 2016 and the oral evidence given by both Dr Vince and Mr Swanson at hearing.
Activity A2 – Trial and Testing (“directly related”)
As already outlined above, in order for me to be satisfied that the trials and testing were necessary to carry on the design, development and investigation of Prototype 5, I must be satisfied that there is a direct and close or immediate relationship between the purpose of the claimed trials and testing and the carrying on of the design, development and investigation of Prototype 5.
The respondent contends that there is a disparity between the extent of the trialling and testing claimed in the design activities encapsulated in the accepted paragraph (a) activity and contends that the claimed trial and testing activities amounted in substance to running the Bloomfield coal plant as it would normally be run for a period of some years. The respondent further contends that the activities claimed as trial and testing were, on any view, carried out for a commercial purpose; but accepts that there may be the possibility of there being a parallel purpose that is directly related to the carrying on of the design, development and investigation of Prototype 5.
It is agreed between the experts that extended testing of instruments in the CHPP is required to ensure that they can perform reliably under challenging conditions, with predictable wear lives for key components. However, Dr Vince is of the opinion that wear life increase is a commissioning/maintenance activity; Mr Swanson is of the view that extended testing/monitoring is essential to the development of a reliable device.
In any event I think it is plain on the evidence that the so-called “trial and testing” activities coincided with the normal operations of the CHPP. At hearing, Mr Booth agreed and said that it was “opportunistic” to “take…advantage” of the running of the plant to test the device. He conceded that in the period 1 April 2008 to 31 March 2012, the coal plant was going to run “in any event”.
In the period 2008 to 2012, Mr Booth’s work on the device was “focused particularly upon the design of the sampling element and the collection chamber, including the screen component and the orifice used in these respective components”. The specific design improvements to Prototype 5 during this period; as accepted by the respondent were:
·valve and orifice development including investigation into orifice design and materials and development of the ceramic orifice (2009/2010);
·density measurement chamber development including investigation of the flow patterns through the media sampler, removal of proud welds, shape of the element (2008/2009 and 2010/2011);
·collection chamber development including investigation into the relationship between the collection jacket and the live flow between the self-relieving wedge wire screen and the outer pipe (2010/2011); and
·element refinement and assessment of effects of feed quality (2011/2012).
At hearing, Mr Booth conceded that despite the evidence in his witness statement, the alleged changes to the shape and material of the orifice in Prototype 5, namely the shape (circular) and material (ceramic), were in fact developed in Prototype 4.
Mr Booth asserted that the “testing and trialling” of Prototype 5 in the CHPP was “fundamental to the ultimate design of the Dense Media Sampler”. He said that by 2008, the beginning of the relevant period for which the deduction is claimed “the general concept of the design was sufficiently developed to allow the device prototype to be incorporated into the Bloomfield plant for testing on a real flows and refinement of the design using the data from testing”. He said that “whilst the basic concepts of the design had been established and the results were promising, Prototype 5 was not yet fully operational.” In his witness statement dated 16 November 2015, Mr Booth says at paragraph [103]:
In order to commercialise the Dense Media Sampler and to make it fully operational, I knew that further design work on the components of the Dense Media Sampler was required such as: orifice operating range for each feed pressure, effects of particle size analysis within the pulp feed, aspects of the screen design, effects of multiple installations within a processing circuit, the reason for the apparent density reading offset and how to rectify this error.
The respondent contends that the alleged design activities were modest advances involving improvements to the materials, shape and size of known elements of the device. Dr Vince opined in his expert report dated 31 August 2016, that “the changes that occurred were peripheral and non-core in nature and as such only tinkered with the overall design outcome”. [Emphasis added]
The respondent further contends that the evidence does not establish the requisite purpose. I agree for the following reasons.
In regards to the modifications to the lining of the collection chamber, Mr Booth’s evidence at hearing was that the DMS devices were installed in the processing plant with a particular lining and left to wear “to failure”, and were not removed until “catastrophic failure” (in the case of the basalt lining), or until it was “decommissioned” (in the case of the ceramic lining). Mr Booth did not have any records of how long the trial went for, nor any records of comparisons in the performance of the basalt, ceramic or steel linings.
At hearing Dr Vince opined that the scale and time period of testing the collection chamber was that a “maximum one circuit, initial period of one week between maintenance” was appropriate.
In regards to the testing of the wear on the wire screen element, Mr Booth says in his witness statement dated 16 November 2015, at [129]:
For each change made to the physical designs of the element, I needed to assess the pattern of wear of the edges of the screen and the wedge wire. The wear data produced allowed the next design iteration of the element to be developed. This testing had to occur over a period of months, in a real feed environment, as the critical data required for the development of the screen was the wear rate of the edge of the wire. The screens being tested or inspected regularly and observations made with regard to wear, aperture size and any other related operational problems. [Emphasis added]
There is no record of the “wear data” or how it informed the design. At hearing, Mr Booth’s evidence was that there were periodic measurements taken; but not recorded. The only report before me is a Density Media Report prepared by Terry Brown of the screen element being replaced in circuits 1A and 1B during the period 2010 to 2011.
In regards to the development of the size of the orifice in the so-called “blockage trial”, there is no documentary evidence of that trial. It is Mr Booth’s evidence that “specific trials” were conducted in a one-week period from 14 January 2009 to 20 January 2009. The only document alleging to contain the results of the trial is dated 4 September 2009, after the dates of the claimed trials. There is also a spreadsheet recording the cyclone pressure observed during the test in the calculations of the flow rates through the orifice; however this document is undated.
Mr Booth’s evidence is that the blockage trial provided boundaries within which there would be flow through the orifice but it did not test the functionality or effectiveness of the orifice which need to be tested over a longer term. Mr Booth states in his witness statement dated 16 November 2015 at [151], “in the subsequent longer term trials, we also tested different designs of the orifice (shape, materials, etc), not just the size”. In contrast, Dr Vince’s opinion in relation to the blockage trial was that preliminary work could be done “very cheaply and very straightforward, very measurably without having to run it in very large multi-million-dollar operation called a coal preparation plant”. He opined at hearing that you could “do it in the laboratory. You could get a university to do similar tests...it’s small scale”. He further opined at hearing that “most of the work – 80 per cent of the work would be small-scale work in 20 per cent would be the big scale work so you’ve got it under control, you’ve worked out what your prime variables are that you need to consider before you go and play with the big machine – multimillion dollar coal preparation plant”. He said that “jumping in and seeing if it holds out” is not an approach he would use.
The evidence does not establish a relationship between the routine operations of the CHPP said to double as “trial and testing” in the development of the orifice, other than the assertion that long term large-scale testing was needed. In regards to the claimed trial of different size orifices with screen area variations; evidence suggests that the trial took at most two days.
The respondent contends that the claimed design and development of Prototype 5 was modest, and the claimed ancillary activities, said to have been carried on for a “purpose of testing and modifying the successive designs of Prototype 5”, were manifestly excessive.
While the question of whether or not the activities were “excessive” is not a question that the Tribunal must determine, it is relevant to look at the nature and extent of the activities undertaken to determine whether there is a direct and close relationship between the related activity and the carrying on of the core research and development activity. In other words, the factual question of the extent of the claimed paragraph (b) (directly related) activities is one which plainly bears upon the question of the characterisation; whether the requisite relationship exists.
Bloomfield contends that the trial and testing activities for Prototype 5 were not excessive; they were the activities that Mr Booth in his professional judgement considered necessary for the proper design of the device. In his witness statement dated 16 November 2015 at [190] and [193], Mr Booth says that it was important to test the DMS in real life conditions as he “needed to test each design iteration of the dense media sampler over a sufficient period of time to assess the impact of different conditions in the CHPP in terms of wear on components and other factors, such as susceptibility to blockages”, then incorporated the results into his design work and “changed to testing a different feature or function”.
Dr Vince opined in his report dated 31 August 2016 at pg. 32(d), that:
…the trials and testing and subsequent A&E activities were grossly excessive not only in extent but also in time. That is, in my opinion, trials and testing could have been conducted over a shorter timeframe and utilised a fraction of the plant rather than the whole. They were also unnecessarily highly repetitive in nature. The excessive level of testing in my opinion is disproportionate to the level of risk it attempts to mitigate. [Emphasis added]
At hearing, Dr Vince reiterated that in his opinion, the period and scale of testing was “manifestly” and “vastly” excessive.
The claimed design and development of Prototype 5 was relatively modest, and the claimed ancillary activities, said to have been carried on for a “purpose of testing and modifying the successive designs of Prototype 5”, were excessive. I am not convinced the evidence demonstrates the requisite direct relationship.
Additionally, Bloomfield has claimed for activities conducted on four devices installed in the parallel circuits at Bloomfield (that is in circuits 1A, 1B, 2A and 2B). Mr Booth says in his witness statement dated 16 November 2015 at [104], that installing Prototype 5 in four different locations across the plant allowed comparisons to be made between the same prototypes operating with different parameters and parts, although conceded that “the main focus of our testing was in the first two circuits, 1A and 1B”.
Mr Booth’s evidence (at [105]) is that having four devices allowed variables to be tested simultaneously across two different types of circuit, “involving as they did different feed material”. Mr Booth states that testing variants of the screen element in different feeds is an example of simultaneous testing across different types of circuits. In his reply evidence witness statement dated 4 October 2016, Mr Booth states at [7] that “testing the DMS on multiple circuits within the dense medium circuit meant that we could test two different iterations of Prototype 5 simultaneously, or one new iteration and a control at the same time”.
Dr Vince opined in his expert report at [4.4.1 (b) and (e)], “80% of the outcome could have been achieved by only doing the work on one of the [dense medium circuit (DMC)] modules. I would have selected one of the high density modules” and considered “trialling in all four circuits simultaneously to be excessive with the result at least doubling the work in this activity”. In his reply evidence witness statement dated 4 October 2016, Mr Booth states at [7] that “had we been testing only one DMS device prototype, i.e. installed in only one quarter of the circuit, we would have had to test the design changes sequentially and the trial would have taken longer”.
Although conceding that some information may be lost by doing the work on one of the DMC modules, Dr Vince says at [4.4.1(k)]:
…the Bloomfield plant comprises a high density dense medium circuit followed by another high density dense medium circuit. These two circuits are duplicated in the plant, i.e. there are four dense medium circuits. It is my opinion, that at most only two circuits should have been included in the trial as they would have given the same information at half the cost. [Emphasis added]
While I accept that the use of one circuit as the ‘control’ against which changes can be measured, I am not convinced that the evidence before me substantiates the use made of the four circuits during the period 2008 to 2012 to sufficiently justify the claim.
Activity A3 – Analysis and Evaluation; Activity A4 – Modification and Redesign: (“directly related”)
It appears to be agreed between the parties that there is potential for overlap between the categories, and arbitrariness about whether lines are to be drawn between the categories of activity. Accordingly, the same considerations apply to Activities A3 to A4 as applied to Activity A2.
On that basis, I am satisfied that these activities are not “research and development activities” for the same reasons as in relation to Activity A2.
EXPLOSIVES PROJECTS – ACTIVITIES C1 TO C4
During the period 2008 to 2012, the mines at both Rix’s Creek and Bloomfield comprised open pit coal mines. It is not contested that the geology of Rix’s Creek and Bloomfield mines are very different. The rock geology at Rix’s Creek consists predominantly of sandstone, whereas Bloomfield consists predominately of mudstone and siltstone.
The coal pit is mined through the process of blasting material above coal seams (overburden), removing that overburden with trucks and excavators and then extracting the coal. The overburden is fragmented to allow it to be effectively removed and loaded into trucks. This is done by blasting. The process of fragmenting the overburden involves drilling holes of sufficient diameter to allow for the loading of explosives in sufficient quantities to blast.
During the period 2008 to 2012, Mr Tony Laing was responsible for the explosives project undertaken at Rix’s Creek and Mr Brendon Clements was responsible for, or involved with, the explosives project undertaken at Bloomfield. Prior to 2010, the explosives project at Bloomfield was under the guidance of Mr Luke Murray and Mr Neil McLennan.
The objective of the explosives projects were to determine the maximum percentage of recycled oil that could be used in each ‘shot’, or explosives charge, without compromising energy levels in the blast or the properties of the explosive.
The claimed activities involved the replacement, in the fuel component of the explosive used to blast the overburden at Rix’s Creek and Bloomfield, of diesel fuel with “refined waste oil”. Replacement was carried out in ratios of 10% increments, starting at 50%, and increasing over time to 100%. In the case of Rix’s Creek, each replacement increment was tested in the laboratory, and then a series of trial blasts, with the early trial blasts only using the new fuel mix in a small proportion of holes, then on a large scale.
In the case of Bloomfield, there was no laboratory or small-scale testing; the claimed trial and testing activities commenced on the large-scale.
Overview of Explosives Projects and Relevant Evidence
I have carefully read and considered the witness statements (including exhibits) of Mr Laing filed in these proceedings dated 17 November 2015, 19 February 2016 and 30 September 2016, and the witness statements (including exhibits) of Mr Clements filed in these proceedings dated 13 November 2015, 19 February 2016 and 30 September 2016. I have also carefully considered the oral evidence given by both Mr Laing and Mr Clements at hearing. Aspects of their evidence are relevantly summarised below.
Rix’s Creek
It is Mr Laing’s evidence that he presented his proposal for the claimed explosives activities at Rix’s Creek to the Board during a meeting in early 2008. He described the meeting as a “relatively informal discussion”, but nevertheless, says that the Board approved his proposal. There are no documents recording the minutes of the Board meeting.
In around March 2008, a ratio of 50% refined waste oil and 50% diesel was purportedly successfully tested in the laboratory. There are no records before me detailing the results of the laboratory test.
Field trials commenced at Rix’s Creek of the 50/50 mix in July 2008.
The first blast of the first trial was shot number 1387 and was conducted on about 24 July 2008. Out of 399 holes within the blast pattern, only 10 holes were loaded with a 50/50 refined waste oil and emulsion mix. The other holes were loaded with 100% diesel and emulsion.
Mr Laing’s evidence in his witness statement dated 17 November 2015 is that he “prepared at the time of that initial trial blast a document that sets out the details of that blast”. He says he “did not prepare such a document for each blast. This document was for the purposes of documenting the trial”. A Shotfirer’s Report listing details of the shots location, shots fired, explosive type, certain statutory information, any personnel being supervised and other comments was completed for the first blast undertaken on 24 July 2008.
At hearing, Mr Laing gave evidence during cross-examination that in relation to the first 50/50 trial on 24 July 2008, the result of the trial was “my visual assessment of the shot and that’s what I do”. In regards to Shotfirer’s Reports, Mr Laing accepted that they were a statutory requirement, and a normal report that would be completed for any blast.
The trial of the 50/50 refined waste oil and emulsion mix continued from July 2008 to March 2009. Mr Laing states in his witness statement dated 17 November 2015, that the trial involved increasing the number of holes using the 50/50 mix and that he “needed several months of data to trial the 50/50 ratio in the field before moving on to the next stage of the project” because he “needed to feel confident with the stability of the mix and its performance across a realistic range of variables” [Emphasis added]. Such variables included: geography, fragmentation, and weather variables, amount of blast fumes and noise and vibration.
A document summarising the results of the first phase of trials with a 50/50 mix was prepared by Mr Laing and is dated 18 May 2009. The applicant relies on this document is evidence that the first phase of trials was completed successfully and that Mr Laing was “satisfied that a 50/50 mix performed well across a realistic range of different conditions”. I fail to see how this document provides any such detail. It is bereft of any details of variables allegedly considered during the trial (see [88] above). For example the document does not contain any data collected, details of blasts undertaken, geography, moisture levels, depth of shots, effectiveness of the explosives, fragmentation of the overburden, impacts of weather variables, recordings of blast fumes and recordings of noise and vibration performance. I would expect to see this type of data given that it is Mr Laing’s own evidence that these variables affected the stability of the mix and that the implied success of the trial was measured on the effectiveness and/or safety of the explosive.
The only variable discussed in the document dated 18 May 2009, is the productivity rate of earthmoving machines used to excavate the blasted material. Mr Laing’s conclusion is that “when comparing the dig rate of the same machine in the same blasted material there has not been any discernible change in the rates. The rates have been similar and so the use of the refined oil has not been to the detriment of the explosive energy produced in the bulk explosive products”. The findings in regards to this variable are not substantiated by documentary evidence. The same can be said in regards to fume. Mr Laing states in the document dated 18 May 2009, that “another issue being investigated is fume that is generated by the blast”. He concludes that “the use of refined oil and ANFO [Ammonium Nitrate/Fuel Oil] does appear to have a benefit on the generation of fume. There is still some generated but it does appear to have a reduction in intensity”. On what basis he makes this conclusion is unclear.
In around July-August 2008, a ratio of 60% refined waste oil to 40% diesel was purportedly successfully tested in the laboratory. There are no records before me detailing the results of the test.
Field trials commenced at Rix’s Creek of the 60/40 mix. The first blast was shot number 1418 and was conducted on 8 April 2009. It is Mr Laing’s evidence that out of 350 holes within the blast pattern, 50 holes were loaded with the 60/40 refined waste oil mix and emulsion. Trials of the 60/40 mix continued up until October 2009 and as the trials progressed, the proportion of holes using the experimental fuel mix was increased. Mr Laing states in his witness statement dated 17 November 2015 that in October 2009 he was satisfied that a 60/40 mix performed well across a realistic range of different conditions. It is unclear how this conclusion was reached. There is no documentary evidence before me detailing the blasts conducted, including the stated range of different conditions and the impact, if any, of variables such as those discussed above at [88] (geography, moisture levels, depth of shots, effectiveness of explosives, fragmentation of the overburden and the impact of weather variables, recordings of blast fumes and recordings of noise and vibration performance).
This can also be said for the third phase of the trial, testing the ratio of 70% refined waste oil to 30% diesel. The laboratory testing was successful and field trials commenced at Rix’s Creek on 28 October 2009. Unlike the previous two phases, the first blast pattern had 230 holes, all of which were loaded with the 70/30 refined waste oil mix. A Shotfirer’s Report was created for this blast.
The trials of the 70/30 mix continued up until about February 2010. Mr Laing’s evidence is that the trials continued because he “felt it was important to obtain data across a range of variables that could affect the stability and performance of the mix”. In about February 2010 he was “satisfied that the 70/30 mix performed well across a realistic range of different conditions”. Consistent with the previous phases of the trial, there is no documentary evidence before me detailing the blasts conducted after the first initial blast.
In his witness statement dated 17 November 2015, Mr Laing says that in February 2010, laboratory tests were successfully undertaken on a sample of refined waste oil with a ratio of 80% refined waste oil to 20% diesel. At hearing, Mr Laing was challenged in cross-examination about when the laboratory tests were undertaken on the 80/20 mix. Mr Laing conceded that in accordance with his notes, as at 18 May 2009, the laboratory had already confirmed that the 80/20 mix was ready to be trialled in the field. Field trials were not commenced however until March 2010 with the 80/20 mix.
The first blast was shot number 1468 and was conducted in March 2010. All holes were loaded with an 80/20 mix. Bizarrely there is no evidence before me confirming the outcome of the trial of the 80/20 mix. I assume that it was successful because the trial progressed to the next phase.
In March 2010 the laboratory successfully tested a sample of refined waste oil with a ratio of 100% refined waste oil. The first blast was shot number 1473 and all holes were loaded with refined waste oil. There is no document recording the details of the first blast or its outcome.
Field trials continued of the 100% refined waste oil ratio until October 2010. Mr Laing’s evidence is that the continuation of the trial allowed for the analysis of nine separate locations in ten different seam locations. Consistent with the conduct of the alleged explosives activities undertaken thus far, there is no documentary evidence before me detailing the blasts undertaken with the 100% refined waste oil ratio.
Solvent washed refined waste oil
Mr Laing’s evidence is that by October 2010, Australian Waste Oil Refineries (“AWO”) were supplying solvent-washed refined waste oil and as such, it became necessary to recommence the trials.
Field trials of the 50/50, 60/40 and 70/30 mix of solvent-washed refined waste oil occurred during the period October 2010 to August 2011.
The first blast was conducted on 13 October 2010. A Shotfirer’s Daily Report was created for the first blast.
Mr Laing’s evidence is that a full range of ratios were tested and 100% was reached in October 2011. The trials of the 100% mix continued up until 27 March 2012. A spreadsheet containing the details of the trial performance is in evidence. The spreadsheet appears to contain data recorded from blasts conducted from 24 July 2008 to 14 March 2011.
At hearing Mr Laing gave evidence that he created the spreadsheet in “probably 2013, maybe 2014 when all this process started”. When questioned about where in the document the results of the solvent-washed trials were recorded, Mr Laing said “there’s no recording. It’s my personal observations and driving the project”. He accepted that there was no evaluation or assessment of the results recorded in the documents.
Velocity of detonation (“VOD”) tests were undertaken on the explosive containing 100% refined waste oil. In evidence is a document containing the results of three trials undertaken on dated 27 August, 12 September and 8 October 2012.
Bloomfield
In about 2010, it was decided that a similar project to the Explosives Project undertaken at Rix’s Creek, was to be carried out at Bloomfield. Mr Clements’ evidence is that the differences in the geology of the Rix’s Creek and Bloomfield mines impacted upon the explosives used at each site, how these explosives were used and the properties of the explosives when shot. Mr Clements felt it was necessary to undertake field trials of the refined waste oil at Bloomfield to confirm that the differences did not affect the volatility of the use of the different ratios of refined waste oil. The trials were initially conducted under the guidance of Mr McLennan and Mr Murray and in about late 2010, Mr Clements took over the running of the trials.
As already stated above, I am not satisfied that the method used in conducting the Excavator Projects was appropriate in the circumstances and as such, the claimed activities were incapable of producing meaningful or logical results consistent with the stated hypothesis. Accordingly, I am not convinced that the claimed activities were carried on for the purpose of acquiring new knowledge or creating new or improved materials, products, devices, processes or services.
Trial, Testing and Analysis - Directly Related
The applicants submit that the trial, testing and analysis activities were “necessary” to assess modifications to the buckets over the course of the trials. Since the core activity claim fails, is not necessary for me to determine this question.
DECISION
For all of the reasons set out above, I affirm the decisions under review.
DISCLOSURE OF PARTIES AND EVIDENCE
At the conclusion of the hearing in this matter, Senior counsel for the applicants requested that in the publication of these reasons, to the extent that is necessary for the Tribunal to identify one or more of the two mine sites and the four lay witnesses by name, those names be replaced by pseudonyms pursuant to s35(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”). The application was opposed by the respondent and the parties subsequently provided brief written submissions.
On 18 August 2015, the Tribunal made orders, including as relevant Order 1:
In accordance with section 35(2) of the Administrative Appeals Tribunal Act 1975 (Cth), the publication of the names of the applicants in relation to these proceedings is prohibited; the names of the applicants are to be replaced by the following pseudonyms:
(a)in application 2015/2095, SVDW;
(b)in application 2015/2098, YMWK
The applicant contends that the order made on 18 August 2015 would be ineffective if the names of the two mine sites were not replaced by pseudonyms in the published reasons for decision given that the names of the mine sites coincide with the applicant’s names. The applicant further submits that the publication of the mine site names would indirectly reveal the applicant’s names, the very thing prohibited by Order 1. Similarly, if the names of the four lay witnesses were published, this would reveal the identity of the applicants to readers of the decision who are familiar with the industry.
The respondent contends that because the order was made on 18 August 2015, it was made under s35(2) of the AAT Act as it has stood since 1 July 2015. Section 35(2) of the AAT Act deals with the making of orders for hearings to be heard in private.
Even though the terms of the order appear to correspond with s35(2) of the AAT Act as it stood before amendments effective 1 July 2015; the corresponding provision of the current AAT Act is s35(3); I do not believe that the intention was to make a non-publication order that applies to the published reasons for decision.
The background to the Tribunal’s order stemmed from a request by the applicants, made on 3 August 2015, to be assigned a pseudonym. It was not a request for a broader non-publication order.
The fact that the hearing of this matter was conducted in private pursuant to s30E(4) of the IRD Act (the provision in force during the income years under review by the Tribunal, being s39T(4)), and that pseudonyms were allocated to the applicant companies leading up to and during the proceedings does not preclude the disclosure of identifying information published in the reasons for decision.
In considering whether to make a non-disclosure/non-publication order, s35(5) of the AAT Act provides:
…the Tribunal is to take as the basis of its consideration the principle that it is desirable:
(a) that hearings of proceedings before the Tribunal should be held in public; and
(b) that evidence given before the Tribunal and the contents of documents received in evidence by the tribunal should be made available to the public and to all the parties
…
However (and without being required to seek the views of the parties), the Tribunal is to pay due regard to any reasons in favour of giving such a direction, including, the purposes of subsection (3) or (4), the confidential nature (if applicable) of the information.
No cogent reasons for any non-publication or non-disclosure order have been asserted by the applicants.
I agree with the respondent that the details sought to be made confidential, being the names of the applicants, the names of the two mine sites and the names of the four lay witnesses, do not include any confidential or sensitive information and, in those circumstances, there is no justification for retaining confidentiality of such details.
The application is refused. For the avoidance of doubt, I vacate the Order made pursuant to s35(2) of the AAT Act on 18 August 2015.
I certify that the preceding 215 (two hundred and fifteen) paragraphs are a true copy of the reasons for the decision herein of Senior Member A Poljak
..............................[sgd]..........................................
Associate
Dated: 10 May 2017
Date(s) of hearing: 31 October, 1-3 & 17 November 2016 Date final submissions received: 28 November 2016 Counsel for the Applicant: Mr M Richmond SC & Ms C Burnett Solicitors for the Applicant: KPMG Law Counsel for the Respondent: Ms S Pritchard SC & Mr B Lim Solicitors for the Respondent: Clayton Utz
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