Troozi Pty Ltd and Australian Trade and Investment Commission

[2018] AATA 4360

Troozi Pty Ltd and Australian Trade and Investment Commission [2018] AATA 4360 (31 August 2018)

Division:GENERAL DIVISION

File Number:           2016/7046

Re:Troozi Pty Ltd

APPLICANT

AndAustralian Trade and Investment Commission

RESPONDENT

DECISION

Tribunal:Mrs J C Kelly, Senior Member

Date:31 August 2018

Date of written reasons:        4 September 2018

Place:Sydney

For the reasons given orally after the conclusion of the hearing of this matter, the Tribunal affirms the reviewable decision.

...............[sgd].........................................................

Mrs J C Kelly, Senior Member

CATCHWORDS

TRADE AND COMMERCE – industry assistance – export market development grants – eligible services – eligible expenses – whether eligible promotional activity was for an approved promotional purpose – online dating services – free membership – fee not to be charged until critical mass of membership reached – eligible promotional activity must be directed to selling of service during the grant year – decision affirmed

LEGISLATION

Export Market Development Grants Act 1997 (Cth) ss 3, 29, 33, 37, 70

CASES

Parker Pen (Australia) Pty Ltd v Export Development Grants Board (1983) 46 ALR 612

Rala Information Services Pty Limited and Australian Trade Commission [1998] AATA 969

Rala Information Services Pty Ltd v Australian Trade Commission (1997) 46 ALD 555

SECONDARY MATERIALS

Australian Trade and Investment Commission, Export Market Development Grants Administrative Guidelines (Updated July 2018) para 5.10.4.1

REASONS FOR DECISION

Mrs J C Kelly, Senior Member

4 September 2018

1. In January 2016, Troozi Pty Ltd (the Applicant) applied for a grant under the Export Market Development Grants Act 1997 (Cth) (the EMDG Act) for promotional expenses of $90,152 incurred during the 2014-2015 grant year (the grant year).

2. On 22 May 2016 a delegate of the Chief Executive Officer of Austrade refused the application. On 5 December 2016 the Australian Trade and Investment Commission (Austrade) confirmed that decision. The Tribunal is reviewing the latter decision.

3. The issue is whether the applicant’s promotional expenditure, which is an eligible promotional activity under the EMDG Act, is for an “approved promotional purpose” as defined in s 37(1)(d) of the EMDG Act.

4. The facts are not in dispute. In the application for the grant, the Applicant described its core business as providing export services in the form of “online dating services” for the Indian market, based in Australia.

5. During the 2014-2015 grant year, the membership of the online dating service increased from about 24,446 to 114,313. Membership was free. The Applicant intended to charge a subscription fee for membership when it had a critical mass of members, which meant a membership of at least 250,000, or optimally 500,000, and a particular ratio of men to women. That critical mass has not been reached as of the date of the hearing.

   A PRELIMINARY MATTER

6. Before considering the issue in dispute, it is necessary to refer to a matter that arose during the hearing. Ms Wilson for the applicant gave evidence to the effect that criteria for the grant had changed between the time the applicant applied for the grant and the delegate refused the application. She appeared to believe that Austrade had misled the applicant about qualifying for the grant because at all times the applicant intended to develop its online service by offering free membership until it reached the critical mass and could not have qualified if Austrade had taken the view it has about the operation of s 37(1)(d).

7. The relevant legal criteria have not changed. This Tribunal is bound by the law. Ms Wilson’s evidence was that the applicant and its adviser had relied on the “EMDG Eligibility Checklist for the 2013-14 Grant Year”. Austrade offered to search for and provide copies of any other Checklist that had been available on the website during the relevant period. Such a search would have taken some weeks. The Tribunal has no jurisdiction to address claims of maladministration or administrative error. Therefore, the Tribunal did not pursue that matter.

   THE STATUTORY SCHEME

8. Section 3 of the EMDG Act provides:

   The object of this Act is to bring benefits to Australia by encouraging the creation, development and expansion of foreign markets for Australian goods, services, intellectual property and knowhow. It does so by providing for an assistance scheme under which small and medium Australian exporters committed to and capable of seeking out and developing export business are repaid part of their expenses incurred in promoting those products.

9. Part 4 of the EMDG Act defines eligible goods, services, events, intellectual property and know-how. The online dating service is an eligible service.

10. Part 5 of the EMDG Act defines what eligible expenses are.

11. Section 29 provides relevantly:

    Subject to section 30, expenses incurred by an applicant for a grant in respect of a grant year are eligible expenses if the following conditions are satisfied:

    (a)the expenses are, under section 33, claimable expenses in respect of an eligible promotional activity;

12. Division 2 of Part 5 of the EMDG Act sets out what is an eligible promotional activity and what are claimable expenses in respect of such an activity (s 31).

13. Section 33 sets out a table which specifies what an eligible promotional activity is and what are claimable expenses for that activity.

14. Relevantly, Item 6 of the Table provides that an eligible promotional activity is the

    provision by the applicant or its agent of promotional literature or other advertising material (whether the literature or material is in electronic form or any other form) to the extent to which this is done for an approved promotional purpose

    and the claimable expenses are

    all reasonable expenses incurred by the applicant in payments to persons that, in the opinion of the CEO of Austrade, were not closely related to the applicant

15. Section 37(1)(d) provides:

    For the purposes of section 33, an eligible promotional activity in relation to an applicant is for an approved promotional purpose if it is carried out for the purpose of creating, seeking or increasing demand or opportunity in a foreign country for any of the following:

    …

    (d) if the applicant is not an approved body—eligible services that the applicant intends to sell to persons that are not residents of Australia;

16. An application for a grant must be made within five months of the end of the grant year (s 70 of the EMDG Act).

    CONSIDERATION

17. The Applicant argued that its eligible promotional activity is for an approved promotional purpose because it was carried out for the purpose of creating, seeking or increasing demand or opportunity in a foreign country for eligible services that it intends to sell to persons that are not resident of Australia because during the grant year it intended to sell the services when the membership reached the critical mass.

18. Austrade argued that the Applicant had to intend to sell eligible services to persons that are not resident of Australia during the grant year to satisfy s 37(1)(d).

19. The Tribunal was referred to and has taken into account the following cases: Rala Information Services Pty Ltd v Australian Trade Commission,[1] Parker Pen (Australia) Pty Ltd v Export Development Grants Board[2] and Rala Information Services Pty Limited and Australian Trade Commission.[3] Those cases deal with a different statutory regime. However, the Tribunal finds guidance from the discussion of the meaning of “purpose” in those cases, taking into account the different statutory context in this case.

    [1] (1997) 46 ALD 555

    [2] (1983) 46 ALR 612

    [3] [1998] AATA 969

20. Relevantly, in Parker Pen (Australia) Pty Ltd, Lockhart J said at 621:

    The word “purpose” is, of course, susceptible of a variety of meanings depending on its context. … The purpose must be someone’s purpose. It is the purpose of the person mentioned in the sub-section. To ignore subjective elements is wrong. There is, of course a difference between the essential elements in the notion of purpose and the means whereby purpose is ascertained. Purpose may be gleaned either from subjective or objective elements or, more usually, both. A person may say what his purpose is, but the objective facts may cast doubt upon the credibility or reliability of his statement. It is for the Tribunal of fact to consider all the circumstances and conclude whether the requisite purpose has been established.

21. In Rala Information Services in the Federal Court, Branson J said at 558:

    In some contexts it is appropriate to distinguish between “purpose” and “motive”. In such contexts an individual’s purpose is his or her desired result; such individual’s motive is that which prompts him or her to act with the intention of achieving that result. In other contexts, particularly where the character of an individual’s objectives is to be determined, no hard and fast distinction between “purpose” and “motive” can be drawn …

    In construing the word “purpose” in the context of s 11Z of the Act, it is necessary to ascertain the objective of parliament as reflected in the language of s 11Z of the Act understood in the context of the Act as a whole.

22. Section 37 requires that the applicant’s eligible promotional activity is for an approved promotional purpose when it is carried out, that is, during the grant year.

23. Therefore, the eligible promotional activity must be carried out for “the purpose of creating, seeking or increasing demand or opportunity in a foreign country” for “eligible services that the applicant intends to sell to persons that are not residents of Australia” during the grant year.

24. The introductory language in s 37, “for the purpose of creating, seeking or increasing demand or opportunity in a foreign country” is broad in scope. However, taking into account the object of the Act, that a grant is for expenditure during a grant year, and an application for a grant must be made after the grant year has ended, the Tribunal finds s 37(1)(d) requires that the eligible promotional activity must be directed to the selling of the service.

25. The Tribunal finds that the applicant did not have an intention to sell its service through subscription during the grant year because its membership did not reach critical mass during that time. It accepts that it did intend during the grant year to sell its service through subscription when its membership reached critical mass, sometime in the future.

26. The Tribunal finds that the promotional expenditure incurred during the grant year was for the purpose of increasing membership of the online dating service at no cost to the member. There was not the necessary nexus between the promotional expenditure and the selling of the eligible service. This finding is consistent with the non-binding Administrative Guidelines, at 5.10.4.1.

27. The Tribunal finds that s 37(1)(d) is not satisfied. The eligible promotional activity in relation to the applicant was not for an approved purpose pursuant to s 37 of the EMDG Act.

28. The reviewable decision is affirmed.

I certify that the preceding 28 (twenty-eight) paragraphs are a true copy of the reasons for the decision herein of Mrs J C Kelly, Senior Member

...............[sgd].........................................................

Associate

Dated: 4 September 2018

Date of hearing:	30-31 August 2018
Solicitors for the Applicant:	TdK Law
Solicitors for the Respondent:	DLA Piper