Ultimate Vision Inventions Pty Ltd v Innovation and Science Australia
[2022] FCA 606
•24 May 2022
FEDERAL COURT OF AUSTRALIA
Ultimate Vision Inventions Pty Ltd v Innovation and Science Australia [2022] FCA 606
File number(s): VID 836 of 2019 Judgment of: WHEELAHAN J Date of judgment: 24 May 2022 Catchwords: ADMINISTRATIVE LAW – appeal under s 44 of the Administrative Appeals Tribunal Act 1976 (Cth) from a decision of the Administrative Appeals Tribunal which affirmed a decision that activities claimed to have been undertaken by the applicant did not satisfy the definition of R&D activities for the purpose of s 355-20 of the Income Tax Assessment Act 1997 (Cth) – where the Tribunal’s written reasons were in significant part adopted without attribution from the respondent’s written submissions to it – whether unattributed adoption of the respondent’s submissions demonstrates failure to undertake an independent review generally or specifically in relation to particular matters – whether administrative justice must appear to have been done – no jurisdictional error.
ADMINISTRATIVE LAW – whether arguments and evidence advanced by the applicant to the Tribunal were mandatory considerations that were not considered by the Tribunal – claims and assertions about factual matters made by the applicant are not properly characterised as mandatory considerations – whether the Tribunal ought to have sought further evidence from the applicant in the exercise of the Tribunal’s inquisitorial functions, or notified the applicant that its evidence was insufficient – the Tribunal undertook a permissible assessment of the submissions and evidence and made findings of fact on the relevant issues – in the circumstances, there was no obligation on the Tribunal to make further enquiries – no jurisdictional error.
ADMINISTRATIVE LAW – where the applicant made an application that the Tribunal hear claims for the 2014, 2015 and 2016 financial years together and where the Tribunal refused to include the 2016 year – whether the Tribunal failed to take into account a mandatory consideration, denied the applicant procedural fairness or acted unreasonably in excluding the 2016 year from the review – no such errors demonstrated.
Legislation: Administrative Appeals Tribunal Act 1975 (Cth) ss 2, 2A, 2A(b) and (c), 2A(d), 6 and 7, 8(3), 11, 13, 30, 32(1), 33(1A), 33(1AA), 33(1AB), 33(2) and 2(A), 35, 39, 42A(5)(b), 43(1) and (2), 43(2B) and 44
Income Tax Assessment Act 1997 (Cth) ss 355-1, 355-5, 355-20, 355-25, 355-25(1), 355-25(1)(a), 355-25(1)(a)(ii) and (b), 355-30, 355-30(1), 355-35 and 355-705(1)
Industry Research and Development Act 1986 (Cth) ss 6, 27A, 27A(3), 27B and 27C, 27F(1), 27J, 27J(1), 27J(1)(c)(iii), 27K and 27L, 29, 30A, 30D and 30E
Industry Research and Development Amendment (Industry Innovation and Science Australia) Act 2021 (Cth), s 3
Tax Laws Amendment (Research and Development) Bill 2010 (Cth)
Commonwealth of Australia, Parliamentary Debates, Senate, 3 June 1975
Income Tax Rates Amendment (Research and Development) Bill 2010, Explanatory Memorandum
Cases cited: Abebe v Commonwealth [1999] HCA 14; 197 CLR 510
C v B [2006] FamCA 513; 35 Fam LR 285
CNY17 v Minister for Immigration and Border Protection [2019] HCA 50; 268 CLR 76
Coal of Queensland Pty Ltd v Innovation and Science Australia [2021] FCAFC 54; 285 FCR 286
Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd [1994] FCA 1974; 49 FCR 576
Commissioner for Railways (Qld) v Peters (1991) 24 NSWLR 407
Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd [2006] HCA 55; 229 CLR 577
Council of the Municipality of Randwick v Rutledge [1959] HCA 63; 102 CLR 54
DCR19 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCAFC 229
Director General of Social Services v Chaney [1980] FCA 87; 47 FLR 80
Doan v Minister for Home Affairs [2019] FCA 1172
Drake v Minister for Immigration and Ethnic Affairs [1979] FCA 39; 24 ALR 577
Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; 214 CLR 496
Enichem Anic Srl v Anti-Dumping Authority (1992) 39 FCR 458
Fard v Secretary, Department of Immigration and Border Protection [2016] FCA 417
Federal Commissioner of Taxation v Primary Health Care Ltd [2017] FCAFC 131; 252 FCR 496
Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (No 2) [2002] VSCA 189; 6 VR 1
Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; 209 CLR 478
Hossain v Minister for Immigration and Border Protection [2018] HCA 34; 264 CLR 123
Huluba v Minister for Immigration and Ethnic Affairs (1995) 59 FCR 518
James v Surf Road Nominees Pty Ltd [2004] NSWCA 475
Juneja v Tax Practitioners Board [2017] FCA 908; 72 AAR 407
Li v Attorney-General for New South Wales [2019] NSWCA 95; 99 NSWLR 630
LVR (WA) Pty Ltd v Administrative Appeals Tribunal [2011] FCA 1146; 127 ALD 27
LVR (WA) Pty Ltd v Administrative Appeals Tribunal [2012] FCAFC 90; 203 FCR 166
Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48; 244 CLR 427
Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; 162 CLR 24
Minister For Home Affairs v DUA16 [2020] HCA 46; 385 ALR 212
Minister for Immigration and Border Protection v MZYTS [2013] FCAFC 114; 230 FCR 431
Minister for Immigration and Border Protection v Stretton [2016] FCAFC 11; 237 FCR 1
Minister for Immigration and Citizenship v Le [2007] FCA 1318; 164 FCR 151
Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332
Minister for Immigration and Citizenship v SZGUR [2011] HCA 1; 241 CLR 594
Minister forImmigration and Citizenship v SZIAI [2009] HCA 39; 259 ALR 429
Minister for Immigration and Citizenship v SZQHH [2012] FCAFC 45; 200 FCR 223
Minister for Immigration and Citizenship v SZRKT [2013] FCA 317; 212 FCR 99
Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21; 197 CLR 611
Minister for Immigration and Multicultural Affairs v Wang [2003] HCA 11; 215 CLR 518
Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; 206 CLR 323
Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation [1963] HCA 41; 113 CLR 475
Moreton Resources Ltd v Innovation and Science Australia [2019] FCAFC 120; 271 FCR 211
Moreton Resources Ltd and Innovation and Science Australia (Taxation) [2018] AATA 3378
MZZZW v Minister for Immigration and Border Protection [2015] FCAFC 133; 234 FCR 154
Paramananthan v Minister for Immigration and Multicultural Affairs (1998) 94 FCR 28
Prasad v Minister for Immigration and Ethnic Affairs [1985] FCA 46; 6 FCR 155
Pollard v Wilson [2010] NSWCA 68
Public Service Board of New South Wales v Osmond [1986] HCA 7; 159 CLR 656
R v Cockburn (1852) 16 QB 480
Re Control Investment Pty Ltd and Australian Broadcasting Tribunal [No 2] (1981) 3 ALD 88
Re JRL; ex parte CJL [1986] HCA 39; 161 CLR 342
Re Minister for Immigration and Multicultural Affairs; Ex parte Durairajasingham [2000] HCA 1; 74 ALJR 405
Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57; 204 CLR 82
Repatriation Commission v Morris (1997) 79 FCR 455
Rodchompoo v Minister for Home Affairs [2018] FCAFC 215
Rodchompoo v Minister for Immigration and Border Protection [2018] FCA 965
Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic) [2001] HCA 49; 207 CLR 72
Shi v Migration Agents Registration Authority [2008] HCA 31; 235 CLR 286
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Steed v Minister for Immigration and Ethnic Affairs (1981) 37 ALR 620
Sullivan v Department of Transport (1978) 20 ALR 323
Sun Alliance Insurance Ltd v Massoud [1989] VR 8
SZMUV v Minister for Immigration and Citizenship [2009] FCA 205
SZNRZ v Minister for Immigration and Citizenship [2010] FCA 107
SZRBA v Minister for Immigration and Border Protection [2014] FCAFC 81; 314 ALR 146
The News Corporation Ltd v National Companies and Securities Commission (1984) 5 FCR 88
Twentyman v Secretary, Department of Social Services [2018] FCA 1892; 163 ALD 517
Ultimate Vision Inventions Pty Ltd and Innovation and Science Australia (Taxation) [2019] AATA 1633
WAEE v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 184; 236 FCR 593
WAFK v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1293; 133 FCR 209
Wingfoot Australia Partners Pty Ltd v Kocak [2013] HCA 43; 252 CLR 480
Division: General Division Registry: Victoria National Practice Area: Administrative and Constitutional Law and Human Rights Number of paragraphs: 237 Dates of hearing: 29 and 30 March 2021 Solicitor for the Applicant: P. Jayawardena York of Pradeepa Jayawardena York Law Practice Counsel for the Respondent: S. J. Sharpley QC, with M. L. Baker Solicitor for the Respondent: King & Wood Mallesons ORDERS
VID 836 of 2019 BETWEEN: ULTIMATE VISION INVENTIONS PTY LTD
Applicant
AND: INNOVATION AND SCIENCE AUSTRALIA
Respondent
ORDER MADE BY:
WHEELAHAN J
DATE OF ORDER:
24 MAY 2022
THE COURT ORDERS THAT:
1.The appeal is dismissed.
2.The applicant may file and serve any written submissions on costs, not exceeding two pages, by 4.00 pm on 31 May 2022.
3.If the applicant files and serves written submissions in accordance with order 2, the respondent may file and serve written submissions in response, not exceeding two pages, by 4.00 pm on 7 June 2022.
4.Subject to further order, the question of costs will then be determined on the papers.
5.If the applicant does not file and serve written submissions in accordance with order 2, then it is ordered that the applicant shall pay the respondent’s costs of the proceeding, including reserved costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
Introduction
[1]
Background
[3]
The key legislative provisions
[4]
The ITAA 1997
[7]
The IR&D Act
[14]
The applicant’s applications for registration
[22]
2014 year
[23]
2015 year
[30]
2016 year
[37]
The respondent’s findings
[42]
The application to the Tribunal
[44]
Preliminary steps before the Tribunal
[46]
The statements of facts issues and contentions
[66]
The applicant’s written evidence
[71]
The respondent’s written evidence
[79]
The hearing before the Tribunal
[88]
The Tribunal’s statement of reasons
[97]
Activity 1.1
[119]
Activity 1.2
[120]
Activity 1.3
[121]
The appeal to this court
[122]
Question 6 – substantial reproduction by the Tribunal of the respondent’s submissions
[125]
(1) Do the Tribunal’s reasons as a whole give rise to an inference that the Tribunal failed to undertake an independent review?
[135]
(2) Does the unattributed copying of the respondent’s submissions by the Tribunal give rise to an inference that any particular matter that the Tribunal was required to consider was overlooked?
[168]
(a) The 2016 R&D material
[176]
(b) The applicant’s written closing submissions in reply
[177]
(c) The purpose and objective of the applicant’s R&D activities
[178]
(d) The contemporaneous evidence of the applicant’s R&D activities
[180]
(e) Circumstances that were favourable to the reliability of the evidence of the applicant’s witnesses
[184]
(f) Evidence of a Dr Jessie Hiu Kiu that was favourable to the applicant
[189]
(g) Evidence that the applicant had carried out testing
[194]
(h) Claimed limitations on the expertise of the respondent’s witnesses
[196]
(3) Is there a requirement that administrative justice must appear to have been done?
[198]
Question 1 – activities in the 2016 year
[201]
Question 2 – the totality of the product
[215]
Question 3 – construction of s 355-25(1)(a) of the ITAA 1997
[220]
Question 4 – miscellaneous claims of error
[227]
Question 5 – denial of procedural fairness
[230]
Conclusions
[237]
WHEELAHAN J:
Introduction
The applicant appeals a decision of the Administrative Appeals Tribunal dated 27 June 2019 pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) upon questions of law. Although referred to in s 44 of the Act as an “appeal”, the proceeding is in the original jurisdiction of the court, and is in the nature of judicial review: see generally, Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic) [2001] HCA 49; 207 CLR 72 at [15] (Gaudron, Gummow, Hayne and Callinan JJ).
The Tribunal’s reasons are published: Ultimate Vision Inventions Pty Ltd and Innovation and Science Australia (Taxation) [2019] AATA 1633. The Tribunal affirmed a decision of the respondent which found that none of the applicant’s activities registered under s 27A of the Industry Research and Development Act 1986 (Cth) (IR&D Act) engaged the definition of “R&D activities” in s 355-20 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) for the years ended 30 June 2014 and 30 June 2015. References hereafter in these reasons to years are references to the income years ending on 30 June.
Background
Having regard to the volume of material before the court, and the issues raised by the questions of law and grounds of appeal to which I will refer later, it is necessary to set out the background in some detail.
The key legislative provisions
The following outline of the key legislative provisions draws in part on the outlines given in Moreton Resources Ltd v Innovation and Science Australia [2019] FCAFC 120; 271 FCR 211 at [13]-[25] (Davies, Moshinsky and Steward JJ), and Coal of Queensland Pty Ltd v Innovation and Science Australia [2021] FCAFC 54; 285 FCR 286 at [11]-[24] (Logan, Griffiths and Moshinsky JJ).
Division 355 of the ITAA 1997 provides for tax incentives in the form of a tax offset for research and development activities if they constitute “R&D activities”, which is defined as “core R&D activities” or “supporting R&D activities”, which are themselves defined in Division 355.
The respondent owes its existence to s 6 of the IR&D Act. From 11 September 2021, the respondent has continued in existence under a new name, “Industry Innovation and Science Australia”: Industry Research and Development Amendment (Industry Innovation and Science Australia) Act 2021 (Cth), s 3. The respondent is referred to in the Act as “the Board”, and is constituted by members appointed in writing by the Minister. One of the functions conferred on the respondent is to decide whether to register or refuse to register an entity for one or more specified “core R&D activities” and one or more specified “supporting R&D activities” conducted during an income year. The respondent may make findings about activities that are the subject of an application, which are the subject of a certificate which the respondent is required to give to the Commissioner of Taxation: IR&D Act, s 27B, s 27C. A certificate given to the Commissioner of Taxation under the IR&D Act by the respondent that sets out its findings is binding on the Commissioner for the purposes of assessments for the relevant income years: ITAA 1997, s 355-705(1).
The ITAA 1997
As I have mentioned, the relevant provisions of the ITAA 1997 are contained in Division 355 (Research and Development). Section 355-1 explains that an R&D entity may be entitled to a tax offset for R&D activities. To be entitled to the tax offset, the R&D entity needs one or more notional deductions under the Division. Section 355-1 also explains that there are two kinds of notional deductions: one is for expenditure on R&D activities; the other is for the decline in value of tangible depreciating assets used for R&D activities. A note under s 355-1 states that all of these notional deductions require the R&D entity to be registered for the R&D activities under Pt III of the IR&D Act.
The term “R&D entity” is defined in s 355-35. The definition includes a body corporate incorporated under Australian law.
The object of Division 355 is set out in s 355-5 –
355-5 Object
(1)The object of this Division is to encourage industry to conduct research and development activities that might otherwise not be conducted because of an uncertain return from the activities, in cases where the knowledge gained is likely to benefit the wider Australian economy.
(2)This object is to be achieved by providing a tax incentive for industry to conduct, in a scientific way, experimental activities for the purpose of generating new knowledge or information in either a general or applied form (including new knowledge in the form of new or improved materials, products, devices, processes or services).
The expression “R&D activities” is defined in s 355-20 to mean “core R&D activities” or “supporting R&D activities”.
The term “core R&D activities” is defined in s 355-25. The elements of sub-section (1) in particular are important –
355-25 Core R&D activities
(1) Core R&D activities are experimental activities:
(a)whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:
(i) is based on principles of established science; and
(ii) proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and
(b)that are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).
(2) However, none of the following activities are core R&D activities:
(a)market research, market testing or market development, or sales promotion (including consumer surveys);
(b)prospecting, exploring or drilling for minerals or *petroleum for the purposes of one or more of the following:
(i)discovering deposits;
(ii)determining more precisely the location of deposits;
(iii)determining the size or quality of deposits;
(c)management studies or efficiency surveys;
(d)research in social sciences, arts or humanities;
(e)commercial, legal and administrative aspects of patenting, licensing or other activities;
(f)activities associated with complying with statutory requirements or standards, including one or more of the following:
(i)maintaining national standards;
(ii)calibrating secondary standards;
(iii)routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things;
(g)any activity related to the reproduction of a commercial product or process:
(i)by a physical examination of an existing system; or
(ii)from plans, blueprints, detailed specifications or publically available information;
(h)developing, modifying or customising computer software for the dominant purpose of use by any of the following entities for their internal administration (including the internal administration of their business functions):
(i)the entity (the developer) for which the software is developed, modified or customised;
(ii)an entity *connected with the developer;
(iii)an *affiliate of the developer, or an entity of which the developer is an affiliate.
The term “supporting R&D activities” is defined by s 355-30 –
355-30 Supporting R&D activities
(1)Supporting R&D activities are activities directly related to *core R&D activities.
(2) However, if an activity:
(a)is an activity referred to in subsection 355-25(2); or
(b)produces goods or services; or
(c)is directly related to producing goods or services;
the activity is a supporting R&D activity only if it is undertaken for the dominant purpose of supporting *core R&D activities.
Subdivision 355-D deals with notional deductions for R&D expenditure. In broad terms, the effect of this Subdivision is that an R&D entity can notionally deduct its expenditure on registered R&D activities for which certain conditions are met.
The IR&D Act
Section 4 of the IR&D Act provides that the terms “core R&D activities”, and “supporting R&D activities” have the same meaning as in the ITAA 1997.
Registration of an R&D entity for R&D activities is dealt with in Pt III of the IR&D Act. Under that Part (in particular, Division 2 of that Part) –
(1)the Board may register an R&D entity for R&D activities conducted during an income year;
(2)the Board may make findings about the nature of an R&D entity’s activities, both before and after registration; and
(3)such findings bind the Commissioner for the purposes of any entitlement of the R&D entity to a tax offset under Division 355 of the ITAA 1997 for the activities.
Section 27A of the IR&D Act deals with registering R&D entities for R&D activities. Sub-section 27A(3) provides in relation to the registration of supporting R&D activities –
(3)For each activity registered under subsection (1) as a supporting R&D activity for an R&D entity for an income year, the registration is to also specify:
(a)one or more activities as the corresponding core R&D activities; and
(b)if any of those activities specified as a core R&D activity is not registered under paragraph (1)(a) for the R&D entity for the income year—each income year for which that core R&D activity:
(i)was registered under paragraph (1)(a) for the R&D entity; or
(ii)is proposed to be registered under paragraph (1)(a) for the R&D entity.
Sub-section 27F(1) provides that the Board may conduct one or more examinations of all or part of an R&D entity’s registration under s 27A for an income year for the purposes of making one or more findings under s 27J(1) (set out below). The note under s 27F(1) explains that a finding under s 27J(1) will support the entity’s registration, or cause the variation of that registration.
The key provision of the IR&D Act for present purposes is s 27J –
Findings about a registration
(1)The Board may make one or more findings to the following effect about an R&D entity’s registration under section 27A for an income year (the registration year):
(a)that all or part of a registered activity was a core R&D activity conducted during the registration year;
(b)that all or part of a registered activity was not an activity of a kind covered by paragraph (a);
(c)that all or part of a registered activity was a supporting R&D activity conducted during the registration year and in relation to:
(i)one or more specified registered core R&D activities; or
(ii)one or more specified core R&D activities for which the entity has been registered in an earlier income year; or
(iii)one or more specified core R&D activities yet to be conducted for which the entity could be registered in the registration year if those activities were conducted during the registration year; or
(iv)several specified core R&D activities, each covered by subparagraph (i), (ii) or (iii);
(d)that all or part of a registered activity was not an activity of a kind covered by paragraph (c).
Note 1:A finding is reviewable (see Division 5).
Note 2:The Board could make a finding under paragraph (b) if, for example, the Board has insufficient information to make a finding under paragraph (a). Similarly, the Board could make a finding under paragraph (d) if it has insufficient information to make a finding under paragraph (c).
(2)If the Board makes a finding under subsection (1) in relation to the R&D entity’s registration, the Board may specify in the finding the times to which the finding relates.
Example:A finding under paragraph (1)(a) could specify the times during the registration year that a registered activity was a core R&D activity.
(3)This section has effect subject to section 32B (findings cannot be inconsistent with any earlier findings).
The effect of s 27J is that the Board may make findings as described in paragraphs (a), (b), (c), or (d) of sub-section (1) in respect of registered activities. For example, if an activity is registered for a particular income year, the Board may make a finding pursuant to paragraph (a) that the activity was a “core R&D activity” and that it was conducted during the income year. By way of further example, if an activity is registered for a particular income year, the Board may make a finding pursuant to sub-paragraph (c)(ii) that the activity was a “supporting R&D activity” conducted in the income year, in relation to one or more specified “core R&D activities” for which the entity was registered in an earlier income year. In addition, under s 27J(1)(c)(iii), the Board could make a finding that all or part of a registered activity was a supporting R&D activity conducted during the registration year in relation to “one or more specified core R&D activities yet to be conducted for which the entity could be registered in the registration year if those activities were conducted during the registration year”. If activities were registered as “core R&D activities”, the Board could nevertheless find that they were “supporting R&D activities” pursuant to paragraph (c).
Section 27K deals with notice of the Board’s findings, or of decisions refusing to make findings. Section 27L deals with automatic variations so that an R&D entity’s registration is consistent with the Board’s findings.
Division 5 of Pt III of the IR&D Act deals with the review of decisions of the Board. Section 30D provides for a process of internal review, and s 30E provides for external review by the Tribunal of internal review decisions.
The applicant’s applications for registration
The applicant lodged applications for the registration of R&D Activities for each of 2014, 2015, and 2016. In circumstances that I will explain later, only the respondent’s reviewable decisions in relation to the applications for the 2014 and 2015 years were before the Tribunal in the proceeding the subject of this appeal.
2014 year
In relation to the 2014 year, the applicant’s application to the respondent listed its R&D projects and activities as follows –
1 -UVI001 Design and Development of an integrated Health and Fitness program and Cloud based Decision Support Systems
1.1Design of Fitness management algorithms for calorie consumption measurement
1.1.1 - Supporting
1.2 -Design of Health management algorithms for calorie intake measurement
1.2.1 -Supporting
1.3 -Conceptual design and evaluation of a potential implementation of Cloud based Decision Support Systems
1.3.1 -Supporting
Activity 1.1 which the applicant claimed it had undertaken as a core activity in the 2014 year, being the design of the fitness management algorithms for calorie consumption measurement, was described by the applicant in its application for registration as follows –
HYPOTHESIS
Create a set of Fitness Algorithms (decision software driver modules) capable to personalize a predefined Fitness Program in accordance with the fitness objectives and personal health information of the end user, based on a set of generic rules to be determined – our hypothesis is that the consumption of calories for the same amount of Fitness exercises is dependent upon the age, activity habits and health condition of each individual.
EXPERIMENTS
The experiments targeted groups of individuals of different ages, sex, personal habits and health status, who performed for a predetermined period of time the same type of physical exercises confined to the same number of repeats, w[e]ights and time of the day.
Experiment 1 – Determine the consumption of calories for a set of pseudo-fix parameters such as Inactive people, active people, gym fanatics, same sex, different sex and same age participants, different age groups, overweight and normal weight.
Experiment 2 – Determine consumption of calories for an (sic) set of variable parameters such as time of day for the exercises, relaxed and under stress moods, healthy and sick medical status, and number of repeats for the experiments with the same group type.
OBSERVATION OF THE RESULTS
The outcome of the tests provided us with the basic set of criteria which will be used in the development of Fitness algorithms:
•A static person consumes more calories than an active person for the same amount of physical activity;
•An elderly person consumes more calories for the same amount of physical activity;
•A sick person consume[s] more calories than a healthy person for the same amount of physical activity.
CONCLUSION
The unknown element of this core activity was the process of combining the personal variables listed in Experiment 1 with the time and mental status of the individuals tested with Experiment 2. These results combined with the personal set of Fitness Objectives enabled us to move from empirical observation to mathematical model[l]ing of calorie consumption for each age and sex group and make use of existing fitness measurement devices, programs and libraries containing statistical information.
The supporting activity 1.1.1 that the applicant claimed was carried out in the 2014 year was described in its application for registration as follows –
In order to test our hypothesis that the consumption of calories is dependent upon the personal parameters of each individual we researched an extensive number of Fitness and Medical magazines. In addition, we have reviewed the functional specifications of the latest fitness data capture devices (i.e. Android mobile phones, FitBit smart watches, Up 24 trackers, etc), fitness programs (GOOGLE, SAMSUNG, etc) and Industry problems (potential health hazards and physical body damage).
Our preparation for testing included but was not limited to designing a set of PC based generic interfaces for devices which record the calorie consumption for various activities (i.e. walking, swimming, rowing, gym, etc) and a set of models to determine the outcome of various Fitness activities in relation to the personal health status and personal fitness objectives.
-Define the set of pseudo-fix personal parameters
-Define the set of variable program parameters
-Define a set of most likely Fitness objectives
-Establish sets of Fitness activities for each Fitness objective
-Create a set of tables for calories consumption taking into consideration the parameters listed herein above
This comprehensive set of references has created a[n] intelligence framework for developing the Fitness Algorithms targeted by our hypothesis.
Activity 1.2 which the applicant claimed it had undertaken as a core activity in the 2014 year, being the design of health management algorithms for calorie intake measurement, was described by the applicant in its application for registration as follows –
HYPOTHESIS
Create a set of Health Algorithms (decision software driver modules) capable to personalize a predefined Health Program in accordance with the health objectives and personal health information of the end user, based on a set of generic rules to be determined – our hypothesis is that the retention of calories from the same amount of food and beverages is dependent upon the age, activity habits and health condition of each individual.
EXPERIMENTS
Our objective was to determine a set of generic rules which taking into consideration the personal details and the personal fitness goals will personalize the Dietary program accordingly by performing experiments targeting groups of individuals of different ages, sex, personal habits and health status, who will consume for a predetermined period of time the same amount and types of foods and beverages at the same time of the day.
Experiment 1 – Determine the intake of calories for a pseudo-fix set of personal parameters – inactive people, active people, health fanatics, same sex and different sex individuals, same age and different age groups, overweight and normal weight.
Experiment 2 – Determine the intake of calories for a set of variable parameters – time of day for meals, relaxed and stress moods, healthy and sick medical status and number of experiment repeats with the same groups.
OBSERVATION OF RESULTS
The outcome of the tests provided us with a basic set of criteria which will be used in the development of Health algorithms.
•For a static person the intake of calories is greater than an active person from the same amount of food and beverages;
•For an elderly person the intake of calories is less than for a young person for the same amount of food and beverages;
•For a sick person the intake of calories is less than for a healthy person; ETC
CONCLUSION
The unknown element of this core activity was the process of combining the personal variables listed in Experiment 1 with the time and mental status of the individuals tested with Experiment 2. These results combined with the personal set of Health Objectives enabled us to move from empirical observation to mathematical modelling of calorie intake for each age and sex group and make use of existing calorie measurement devices (i.e. food, beverages, medicines), programs and libraries containing statistical information.
The supporting activity 1.2.1 that the applicant claimed was carried out in the 2014 year was described in its application for registration as follows –
In order to test our hypothesis that the intake of calories is dependent upon the personal parameters of each individual we researched an extensive number of Medical magazines and Dietary programs. In addition, we have reviewed the functional specifications of existing calorie measurement and capture devices (i.e. food scanners, food scales, heart bit monitors, blood pressure monitors, etc), calorie content of prescribed drugs and likely industry problems (potential health hazards).
Our preparation for testing included but was not limited to designing a set of PC based generic interfaces for devices which record the calorie intake for various calories sources (i.e. foods, beverages and drugs) and a set of models to determine the outcome of various Directory programs in relation to the personal Health status and personal Health objectives.
-Define the set of pseudo-fix personal parameters
-Define the set of variable program parameters
-Define a set of most likely Health objectives
-Establish sets of dietary programs for each Health objective
-Create a set of tables for calories contents taking into consideration the parameters listed herein above
This comprehensive set of references has created a[n] intelligence framework for developing the Health control Algorithms targeted by our hypothesis.
Activity 1.3 which the applicant claimed it had undertaken as a core activity in the 2014 year, being the conceptual design and evaluation of a potential implementation of cloud based decision support systems, was described by the applicant in its application for registration as follows –
HYPOTHESIS
Create a “well being” Decision Support System program, Cloud based, which combines 3rd party Health and Fitness programs with personal Health and Fitness objectives with the personal Medical and Fitness status, to ensure a correct interpretation of collision possibilities between such programs and personal objectives.
Since such an integrated program does not currently exist we should build one based on the models resulting from the Core activities 1 and 2 above and the set of decision rules determine[d] by a new set of experiments.
EXPERIMENTS
A set of experiments was defined to determine the validity of our hypothesis and of the proposed decision making process. This has required the careful consideration of certified health programs made available by medical practitioners, the availability of personal details and health status data and the existence of fitness programs developed and made available by professional fitness specialists.
Experiment 1: Design and implement a Cloud based Fitness monitoring program to captures (sic) the results of various Fitness exercises undertaken by the user in accordance with Fitness programs certified by reputable organizations or individual trainers.
Experiment 2: Design and implement a Cloud based Dietary monitoring program which captures the results of Food, Beverages and Pharmaceutical products intake by the user in accordance with personal Dietary programs certified by reputable organizations or individual diet experts.
Experiment 3: Design and implement a Cloud based Decision Support System which will process the inputs received from the Fitness and Dietary programs and of the personal Health and Fitness status and objectives for the purpose of ensuring that the individual’s health is not damaged or endangered by either the personal Fitness program of (sic) by the personal Dietary program and that the personal Health and Fitness objectives are achieved.
OBSERVATION OF RESULTS
Whilst performing the tests it was found that the dynamic tailoring of predefined Health and Fitness programs in accordance with the personal Health and Fitness status and the personal Health and Fitness objectives did not reach our desired accuracy of 100% (as required by the Health Industry) and therefore more mathematical modelling is required. The main obstacle encountered by our experiments was the complexity of mathematical models which required strict observance of the 4 input sets of parameters for the production of one health safe Health & Fitness program.
CONCLUSION
It was found that there are no statistics or comparable models for reference and therefore the outcome of these Cloud based Health and Fitness algorithms and programs is unknown and therefore it represents the greatest risk for us as developers since any errors may endanger the health or even the life of its users.
The supporting activity 1.3.1 that the applicant claimed was carried out in the 2014 year was described in its application for registration as follows –
In order to test our hypothesis we have researched a number of typical Cloud based applications, infrastructure services and storage facilities which can be used in conjunction with the proposed Health and Fitness programs (i.e. APPLE, Samsung, Google, etc). The prevention of health hazards was the underlying element of the development of Cloud based Decision Support Systems, accessible by mobile phone users, which MUST ensure compliance between the 6 types of programs (generic health and fitness programs and personal health fitness status and personal health and fitness objectives).
A set of intelligence gathering models have been designed to support the decision support system which combines the Core activities 1 and 2 herein before described. We plan to attract Health and Fitness experts to evaluate the results of our Health and Fitness mathematical models and assist us in offering a reliable Health and Fitness Application for mobile phone users. Further, we will seek acceptance by accredited medical organizations, government agencies and health insurance companies which will also be beneficiaries of a healthy population (i.e. reduced health bills at national level and lower insurance risks).
2015 year
In relation to the 2015 year, the applicant’s application to the respondent listed the R&D Projects and Activities as follows –
1 -UVI001 Design and Development of an integrated Health and Fitness program and Cloud based Decision Support Systems
1.1 -Improvements of Fitness monitoring algorithms and Multi level Search Engine
1.1.1 -Supporting
1.2 -Improvements of Diet monitoring algorithms and Multi level Search engine
1.2.1 -Supporting
1.3 -Improvements of Cloud based anti-collision systems with smoothing algorithms
1.3.1 -Supporting
Activity 1.1 which the applicant claimed it had undertaken as a core activity in the 2015 year, being the improvement of the fitness monitoring algorithms and multi-level search engine, was described by the applicant in its application for registration as follows –
Our hypothesis was that calorie burning is directly dependent on personal fitness and health status and health history. After a comprehensive number of systematic experiments we have found a number of limitations and inaccuracies in our hypothesis. We had to experiment how a set of apparently unrelated factors (i.e. elevation, temperature, humidity, etc) would affect the calorie burning rate and how could the accuracy and speed of search for suitable fitness programs can (sic) be improved.
The outcome of the experiments demonstrated that our original hypothesis was limited and that we have to include in our program search engines and calorie burning calculation algorithms these variables.
The logical conclusion was that we have to modify our fitness program search engine and calorie burning calculation algorithms within the context of user’s fitness objectives, health and fitness status and health history.
The supporting activity 1.1.1 that the applicant claimed was carried out in the 2015 year was described in its application for registration as follows –
In order to test our hypothesis that the consumption of calories is dependent upon the personal parameters of each individual we researched an extensive number of Fitness and Medical magazines, as part of the preliminary preparation of the experimental phase, we have developed a comprehensive testing plan of the experiments to determine the outcome of various fitness activities in relation to the personal health history, health status and personal fitness objectives of the individual.
Determine the accuracy and efficiency of the fitness search engine and auto-correction fitness program:
-Test the effects of pseudo-fix personal parameters (age, height, weight, gender, fat %)
-Test the effects of variable program parameters (blood pressure, cholesterol, sugar level, activity)
-Test the limitations imposed by the Fitness objectives (reduce weight, increase strength, etc)
-Identify and retain sets of Fitness activities for each Fitness objective
-Establish links to tables listing calorie burning rates for various fitness exercises taking into consideration the parameters listed above
This comprehensive set of experiments has resulted in the creation of an intelligence framework which enhances the accuracy and processing speed of the Fitness Algorithm and search engine supporting our revised hypothesis.
Core activity 1.2 which the applicant claimed it had undertaken in the 2015 year, being the improvements of diet monitoring algorithms and multi-level search engine, was described by the applicant in its application for registration as follows –
Our hypothesis was that the calorie intake is directly dependent on personal fitness and health status and health history. After a comprehensive number of systematic experiments we have found a number of limitations and inaccuracies in our hypothesis.
We had to experiment (sic) [demonstrate] how a set of apparently unrelated variables (i.e. elevation, temperature, stress etc) would affect the calorie intake rate and how could the accuracy and speed of search for suitable health programs can (sic) be improved.
The outcome of the experiments demonstrated that our original hypothesis was limited and that we have to include in our program search engines and calorie intake calculation algorithms the new variables.
The logical conclusion was that we have to modify our health program search engine and calorie intake calculation algorithms with the context of the user’s health objectives, health status and health history to obtain a greater degree of accuracy.
The supporting activity 1.2.1 that the applicant claimed was carried out in the 2015 year was described in its application for registration as follows –
In order to test our hypothesis that intake of calories is dependent upon the personal parameters of each individual we researched an extensive number of Fitness and Medical magazines, as part of the preliminary preparation of the experimental phase, we have developed a comprehensive testing plan of the experiments to determine the outcome of various dietary programs in relation to the personal health history, health status and personal health objectives of the individual.
Determine the accuracy and efficiency of the health search engine and auto-correction health program:
-Test the effects of pseudo-fix personal parameters (age, height, weight, gender, fat %)
-Test the effects of variable program parameters (blood pressure, cholesterol, sugar level, activity)
-Test the limitations imposed by the Health objectives (reduce blood pressure, reduce sugar level, reduce cholesterol, etc)
-Expand the setoff variable program parameters (temperature, altitude, stress level, time of day)
-Identify and retain sets of Health diets for each Health objective
-Establish links to tables listing calorie contents of various foods and beverages taking into consideration the parameters listed above
This comprehensive set of experiments has resulted in the creation of an intelligence framework which enhances the accuracy and processing speed of the Health Algorithm and search engine supporting our revised hypothesis.
Core activity 1.3 which the applicant claimed it had undertaken in the 2015 year, being the improvements of cloud based anti-collision systems with “smoothing” algorithms, was described by the applicant in its application for registration as follows –
We have determined from our experiments that our Cloud based anti-collision program elimination hypothesis was unsustainable in extreme cases such as the absence of suitable Fitness and/or Health programs due to user’s personal health restrictions and personal wellbeing Objectives.
To offer end users suitable Health & Fitness programs we have to rethink our strict anti-collision approach and modify the decision support systems logic to accommodate part of, if not all of the end users’ Objectives, without compromising their health. A number of “smoothing” algorithms have been appended to the AI search engines and DSS integration programs with the purpose of offering the most suitable diets and fitness exercises which achieve part of, if not all of the user’s Objectives.
It should be noted that without re-thinking our AI and DSS architectures, the proposed H&F Programs will be singularly relevant to a limited number of end users. The flexibility offered by the proposed “smoothing” algorithms will generalise the outcome and applicability of this project.
Whilst performing the tests it was found that the dynamic tailoring of predefined Health and Fitness programs in accordance with the personal Health and Fitness status and the personal Health and Fitness objectives did not reach our desired accuracy of 100% (as required by the Health Industry) and therefore more mathematical modeling (sic) is required. The main obstacle encountered by our experiences was the complexity of mathematical models which required strict observance of the 4 input sets of parameters for the production of one health safe Health & Fitness program. This complexity was further expanded by the addition of the new sets of environmental parameters listed in the Core activities 1 and 2.
In terms of knew (sic) knowledge it was found that the addition of environmental factors (variables) affecting calorie intake and burning and the extension of our AI algorithms and DSS engines resulted in faster and more accurate calculation algorithms and the provision of at least one suitable H&F program. The extreme case of no suitable programs should be automatically referred in the future to medical and fitness experts for resolution.
The supporting activity 1.3.1 that the applicant claimed was carried out in the 2015 year was described in its application for registration as follows –
In order to test our modified hypothesis we have researched a number of typical Cloud based health and fitness programs offered by leading organizations such as APPLE and Google. A comprehensive test plan was developed including experiments deemed as necessary not only to prevent health hazards but improve the AI algorithms and DSS engines in terms of accuracy and speed through the integration of additional factors affecting the calorie intake and burning and the “smoothing” of end user’s Objectives.
We have tested design test simulation tools to test the accuracy of our AI algorithms and DSS engines for:
-Normal conditions (strict observance of health restrictions)
-Boundary conditions (employing “smoothing” algorithms), and
-Transient conditions (dynamic changes on the health and fitness status)
The outcome of our experiences helped us to clearly define the end users’ choices: discard programs which do not fit, or revise and modify personal objectives, or tailor recommended programs to fit personal objectives and to build the support framework needed by this Core activity.
2016 year
In relation to the 2016 year, in its application for registration the applicant identified two core and two corresponding support activities as follows –
1-1:Design and development of an integrated Health and Fitness program and Cloud based Decision Support Systems
1.1Core 1: Development and testing of Cloud based emulations of payment applications using POE, IKM and tokenisation methods.
1.1.1-SUPPORT 1: Development and testing of several mobile payment applications
1.2Core 2: Development and testing of Cloud based decision support systems and artificial intelligence engines for integrated health and fitness programs
1.2.1-SUPPORT 2: Development and testing of a range of health fitness mobile applications
Core activity 1.1 that the applicant claimed was carried out in the 2016 year, being the development and testing of cloud based emulations of payment applications using “POE”, “IKM” and tokenisation methods, was described by the applicant in its application for registration as follows –
HYPOTHESIS (OF EXPERIMENTS): Our hypothesis was that by tokenising payment transactions, in the same way we do for medical records, we could use non-secure mobile phones to perform local and international electronic fund transfers in a secure manner.
EXPERIMENTS: The difficulty was in finding how to authorize and capture payment transactions from "unknown" end-users' devices and transaction processors.
Experiment 1: determine how EFT transactions can be performed between the accounts of the same user within the same bank and between different banks;
Experiment 2: determine how EFT transactions can be performed between the accounts of two different users within the same bank and between different banks;
Experiment 3: determine how EFT transactions can be performed between the accounts of the same user or of two different users internationally;
Experiment 4: demonstrate how the overall system reacts to the 3 types of testing domains (normal, boundary and transient).
UNKNOWN OUTCOME OF EXPERIMENTS/OBSERVATION: There was no prior known methodology to enable us or other skilled persons to predict the outcome of the experiments in advance since for the first time POE, IKM and TOKENISATION were combined into a unitary CLOUD based Payment System.
EVALUATION: It was determined that tokenised payments can be performed via a CLOUD based transaction processor which is known to a local bank such as a Retail Integrator or as a PayPal user or as a SWIFT client.
NEW KNOWLEDGE/OUTCOME: The positive outcome of this core activity was the creation of a new CLOUD paradigm (POE and IKM) for local and international Electronic Payments.
CONCLUSION: We demonstrated that non-secure devices can perform sensitive tasks such as payments in a secure manner is operating in conjunction with Cloud based token security.
The supporting activity 1.1.1 for the 2016 year was described by the applicant in its application for registration as follows –
Cloud based International payments (via SWIFT)
•Deposits - Prior to any fund transfers the user will be required to transfer from his/her bank the intended transfer amount plus the transfer fee or a larger amount to be used for multiple transfers into GSS trust account. The funds are managed by a "trusted" bank and used for international fund transfers via SWIFT.
•Withdrawals - Members may withdraw at any time their funds held by GSS in the trust account, since GSS maintains a real-time account balance for each member.
•Balance Enquiries - Members may get at their discretion, at any time, their balances of their accounts held by GSS in the trust account, since GSS maintains a real-time account balance for each member.
•Fund Transfers - Members will be able to transfer funds internationally to pre-defined overseas accounts (repetitive-line accounts list) subject to funds availability by requesting GSS CLOUD APP to process their request under the strict security rules mentioned above.
Cloud based Local payments (via PayPal)
•Requesting Funds (REQUEST) -This function will enable the end-user to get certified value TOKENS from the CLOUD based Service Provider APP (GSS). Several certified TOKENS may coexist. GSS will validate the end-user credentials (ID, PSW and DEVICE) and get the requested amount from the end-user's bank account, in case the “virtual” account balance held by GSS is insufficient. GSS will then send a certified value TOKEN representing the amount and flag the TOKEN as “issued”.
•Transferring Funds (TRANSFER) - APP users will be able to transfer funds (value TOKENS) to other APP users who will accept the funds and provide the goods or services or cash upon receiving confirmation from the GSS Service Provider that the value TOKEN certificate is valid. RECIPIENT DEVICES are smart-phones, EFTPOS devices and ATMs. GSS will validate the value TOKEN certificated and in accordance with AMLCTA act, will save the transfer trace for future audit.
Core activity 1.2 that the applicant claimed was carried out in the 2016 year, being the development and testing of cloud based decision support systems and artificial intelligence engines for integrated health and fitness programs, was described by the applicant in its application for registration as follows –
HYPOTHESIS (OF EXPERIMENTS): Our hypothesis was that we could integrate 3 generic dietary, fitness and drug prescription programs with the personal health and fitness status within the context of personal health and fitness objectives in an interactive manner within strict safety and security regulations.
EXPERIMENTS: The challenge was how such a complex framework of parameters can be integrated into a safe personal well-being program in order to develop the decision support engines required to select the most adequate health and fitness programs and build the artificial intelligence engines required to eliminate collision of such programs and adjust the end-user’s goals and objectives within pre-determined safety boundaries.
•Experiment 1: determine how a fitness program is impacted by the other 5 programs.
•Experiment 2: determine how a dietary program is impacted by the other 5 programs.
•Experiment 3: determine how a medical program is impacted by the other 5 programs.
•Experiment 4: demonstrate how the overall system reacts to the 3 types of testing domains (normal, boundary and transient).
UNKNOWN OUTCOME OF EXPERIMENTS/OBSERVATION: After in-depth research we could not find any system or known methodology to enable us or other skilled persons to predict the outcome of the experiments in advance since for the first time DIETARY and FITNESS programs were combined with the personal HEALTH and FITNESS STATUS, OBJECTIVES and PROFILE of the end-user into a unitary CLOUD based Health and Fitness system.
EVALUATION: It was determined that the interaction of the generic and personal programs can be merged into a satisfactory level of safety through the implementation of “smoothing” of the anti-collision algorithms.
NEW KNOWLEDGE/OUTCOME: The positive outcome of our experiments was the creation of a CLOUD based paradigm (H&F) for integrated Health and Fitness programs.
CONCLUSION: We demonstrated that it was possible to integrate the 6 types of programs and resolve the safety and security problems encountered by specialised health and fitness programs available at the time on the market.
The supporting activity 1.2.1 for the 2016 year was described by the applicant in its application for registration as follows –
Test Plan considerations:
The variable nature of the amount of calories received from food and beverages intake and the amount of calories spent as a result of various fitness exercises must be combined with the personal information of the individual (Profile and H&F Status).
Since we have introduced another variable in the form of Medical Prescriptions monitoring we have to rethink the Test Plan of the DSS and A1 engines in order to ensure compatibility across the entire spectrum of H&F algorithms.
R&D focus – Fitness DSS algorithm
The DSS Fitness algorithm identifies the most suitable Fitness programs which fit the end-user’s Fitness Objectives within the limitations of the end-user’s Personal Profile and H&F Status.
R&D focus – Diet DSS algorithm
The DSS Diet algorithm identifies the most suitable Dietary programs which fit the end-user’s Health Objectives within the limitations of the end-user’s Personal Profile and H&F Status.
R&D focus – Anti-collision A1 engine
The Anti-Collision A1 engine ensures that the Fitness and Diet programs, when integrated, do not exclude each other within the context of end-user’s Personal Profile and H&F Status
R&D focus – H&F program smoothing A1 Engine
The Smoothing A1 engine ensures that the end-user’s Objectives are revised when all the selected fitness and Diet programs have been excluded by the Anti-Collision A1 engine in order to enable the end-user to participate to an H&F program within realistic Objectives.
The respondent’s findings
On 3 November 2016, the respondent notified the applicant of findings that had been made in relation to the 2014 and 2015 years, namely that the applicant’s registered activities for those years were ineligible as core R&D activities, or as supporting R&D activities. The applicant then sought an internal review of the findings.
On 3 March 2017, the respondent advised the applicant of the result of the internal review, which was to confirm the decision that the applicant’s registered activities for 2014 and 2015 were not eligible. On the same day, the respondent also notified the applicant of findings made at first instance in relation to the applicant’s registered activities for the 2016 year, namely that those activities also were not eligible. The respondent’s decision upon its internal review in respect of the 2014 and 2015 years was reviewable by the Tribunal at this stage, but not the findings in relation to the 2016 year because at that stage there was no reviewable decision following internal review: IR&D Act, s 30A, s 30E.
The application to the Tribunal
On 9 March 2017, the applicant lodged an application with the Tribunal seeking review of the decision of the respondent upon internal review relating to the applicant’s registered activities for 2014 and 2015. The application also referred to the 2016 year and attached a copy of the respondent’s certificate dated 3 March 2017 containing its findings in respect of the 2016 year, notwithstanding that at that point in time the respondent had not made a reviewable decision in relation to the 2016 year.
Subsequently, on 25 April 2017, the applicant sought an internal review of the respondent’s findings in relation to the 2016 year.
Preliminary steps before the Tribunal
There was evidence before the court about the progress of the applicant’s applications before the Tribunal, and about two telephone directions hearings before the Tribunal conducted on 14 September 2018 and 23 October 2018. This evidence was tendered with leave, and was relevant to those grounds of appeal that complained that the Tribunal had erred in failing to consider the application for review in respect of the 2014 and 2015 years together with an application for review in respect of the 2016 year. The evidence on these matters was extensive. It included affidavits of Mr Werner Nicolau, the sole director of the applicant, and his father Mr Mark Nicolau about what occurred at the directions hearings, in circumstances where there was no transcript available to the court. The evidence also included an affidavit of the respondent’s solicitor sworn 26 October 2020 which comprised 456 pages, including its 60 annexures.
In relation to the review before the Tribunal, there were communications between the solicitors for the respondent and the solicitors then acting for the applicant, Halperin & Co. In a letter from the respondent’s solicitors to the applicant’s solicitors dated 3 May 2017, it was specifically put to the applicant’s solicitor that he had advised that the applicant would not seek to stay the proceedings before the Tribunal pending the outcome of the respondent’s internal review in respect of the 2016 year. Draft timetabling orders were proposed by the respondent consistently with this position.
On 30 June 2017, new solicitors for the applicant, Portfolio Law, filed a statement of issues with the Tribunal. The reviewable decision that was referred to at [10] of that statement was the respondent’s decision of 3 March 2017 to uphold the respondent’s decision of 3 November 2016, which was in respect of the 2014 and 2015 years.
There is evidence that on 31 October 2017, the respondent notified the applicant of the result of its internal review for the 2016 year, which was to confirm the decision. The evidence is in the form of a copy of an email produced by the respondent dated 31 October 2017 to Mr Werner Nicolau, which attached the respondent’s decision upon internal review for the 2016 year. The copy email is accompanied by a read receipt from what appears to be the email address of Mr Werner Nicolau, which would support an inference that the email was read on 31 October 2017 at 9.26 pm. However, it is a curiosity that the read time is precisely the same as the send time, down to the second. The way the read receipt was generated, and its significance, were not explained by the evidence. As I indicate below, there was a dispute on the evidence as to whether that notification was received by the applicant.
On about 16 November 2017, the applicant filed and served a statement of facts issues and contentions before the Tribunal. That statement at [2] referred only to the 2014 and 2015 years as being the relevant income years in issue.
On about 1 February 2018, the Tribunal listed the matter for hearing on 16 and 17 May 2018.
On 7 March 2018, the respondent filed and served its statement of facts issues and contentions before the Tribunal. The respondent referred to the applicant’s application for internal review of the decision in respect of the 2016 year, but not to the fact that the review had been determined, or to the notification dated 31 October 2017. However, the statement squarely advanced the contention that the respondent’s application to the Tribunal did not extend to a reviewable decision in respect of the 2016 year.
There were delays by the applicant in filing evidence in reply, and on 26 April 2018, its solicitors withdrew. At a directions hearing on 27 April 2018 the Tribunal directed the applicant to file its reply evidence by 4 May 2018, and confirmed the hearing dates, which were then 16 and 17 May 2018. At a further directions hearing on 11 May 2018, the time for the applicant to file reply evidence was further extended to 16 May 2018, and the May hearing dates were vacated.
On about 17 May 2018, the applicant, which by now was not legally represented, filed and served a statement of facts issues and contentions in reply.
A further directions hearing was conducted by the Tribunal on 19 June 2018 at which the matter was referred to a listing clerk. On about 1 August 2018, the Tribunal issued notices advising that the proceeding was listed for hearing on 29 and 30 October 2018.
On 7 August 2018, the applicant filed and served a brief further witness statement of Mr Werner Nicolau. The material substance of that statement was that Mr Nicolau had not received a response from the respondent to its request to review its decision in respect of the 2016 year.
In response, on 20 August 2018 the respondent’s solicitors wrote to the applicant and to the Tribunal drawing attention to the respondent’s decision on 31 October 2017, to which I referred at [49] above. The letter attached a copy of the internal review decision for the 2016 year, the covering letter to the applicant, the email attaching those documents and a copy of the read receipt from Mr Nicolau. The respondent’s solicitors foreshadowed that the respondent would resist any attempt to bring the reviewable decision for the 2016 year into the proceeding on the basis that it may require additional evidence and a further delay in the proceedings. The solicitors for the respondent invited the applicant to approach the Tribunal for directions if it intended to press the Tribunal to consider the 2016 year.
Mr Werner Nicolau stated in an affidavit before this court affirmed 8 December 2020 that he did not receive the respondent’s reviewable decision dated 31 October 2017 in relation to the 2016 year until the respondent emailed a copy on 20 August 2018. Mr Nicolau was not cross-examined on this evidence, and to the extent that it is relevant to this appeal I accept that Mr Nicolau was not aware until 20 August 2018 that the respondent had made reviewable findings in relation to the 2016 year. Mr Nicolau’s direct affidavit evidence on this point is supported by the surrounding circumstantial evidence. If Mr Nicolau had become aware of the findings for the 2016 year when they were apparently sent to him by the respondent, it is likely that he would have taken steps earlier than he did to apply to have the findings reviewed. The issues on appeal do not call for any findings to be made about whether the respondent succeeded in sending the findings for the 2016 year to Mr Nicolau by email as its business records would indicate, and if the email had been sent on 31 October 2017, the reasons why Mr Nicolau did not become aware of the email at about that time.
In the applicant’s reply submissions to the court the applicant claimed that the respondent’s statement of facts issues and contentions before the Tribunal dated 7 March 2018 had omitted to state that that a reviewable decision had been made in respect of the 2016 year, as a result of which the applicant remained unaware of the decision until 20 August 2018 which led to the application at the directions hearing on 14 September 2018. The evidence does not support any inference that the respondent consciously omitted in its statement of 7 March 2018 to draw the applicant’s attention to its reviewable decision of 31 October 2017 in respect of the 2016 year. This is for three reasons. First, the business records of the respondent in the form of the copy email dated 31 October 2017 would have indicated to the respondent that the decision was sent to the applicant. Second, there is no inference to be drawn that the respondent had any knowledge prior to 20 August 2018 that the applicant was unaware of the decision. The third reason is that when it became apparent in August 2018 that the applicant was unaware of the decision, the respondent’s solicitors provided a copy of the decision to the applicant: see [57] above.
At a telephone directions hearing before the Tribunal conducted on 14 September 2018, the applicant sought to have the review of the decisions for the 2014 and 2015 years heard together with a review of the respondent’s decision in respect of the 2016 year. Mr Mark Nicolau set out in his affidavit affirmed 8 December 2020 his account of what occurred at the directions hearing on 14 September 2018 –
9.At the hearing, amongst other things, I recall that I asked the Tribunal to include the review of the Respondent’s decision in respect of the 2015/2016 year. I made submissions to the Tribunal setting out 6 points as to why the Tribunal should include the Respondent’s 2015/2016 year’s decision in its review. I made submissions to the Tribunal based upon notes that I had with me, which stated as follows:
“Why Should the Tribunal include an external review of the Respondent’s R&D decision in the 2015/16 year?
1.BECAUSE the UVI Application for Review to the Tribunal on 9 March 2017 was in respect of three years that is the RD incentives for the years ended 30 June 2014 30 June 2015 and 30 June 2016.
2.BECAUSE: the R&D decisions in each year that are the subject of our Application for review arise out of the RD activities into the development of the Health and Fitness System Application.
3.BECAUSE: UVI’s complaints and application to review in respect of each year arise from the same facts relating to the conduct and decisions of the Respondent. Each of the years raise common questions of law or fact.
4.BECAUSE: reviewing all three years is necessary to ensure that all questions in the proceeding are effectively and completely determined and decided upon
5.BECAUSE: it is just and convenient and in the interests of justice to determine the issues in respect of all three years in one proceeding rather than having UVI commence separate proceeding which may not even be possible in respect of 2015/16.
6.We did not know until about three weeks ago on 20 August 2018 that a review decision had been made in the 2015/16 year. That does not change the fact that our Application for Review to the Tribunal sought a review of the RD decision for the 2015/16 year.
10.I recall that Counsel for the Respondent said that the Respondent opposed the inclusion of the decision in the 20152016 year in the review.
11.The Tribunal agreed with the Respondents position
(Emphasis in original.)
Mr Nicolau’s account was not challenged, and is not inconsistent with the account of the solicitor for the respondent, Ms Rebekha Pattison, in her affidavit of 26 October 2020 –
73The parties appeared for a directions hearing on 14 September 2018 before Member Maryniak QC. Ms Melanie Baker of Counsel appeared for the Respondent, instructed by myself. The Member decided that the Applicant would not be allowed to rely on the evidence of Mr Surdut in the absence of a witness statement. The parties then agreed that the Applicant could rely upon the Third Mark Nicolau Statement despite the late service.
74The parties also discussed the 2015/16 income year during that directions hearing. The Member decided that the 2015/16 income year was not a part of the Application for Review before the Tribunal.
I find that at the 14 September 2018 directions hearing the Tribunal determined that any review of the respondent’s findings for the 2016 year would not be considered as part of the extant application for review that the Tribunal had fixed for the hearing, and which was due to commence on 29 October 2018. I find that the Tribunal came to the same conclusion at a further telephone directions hearing on 23 October 2018. That finding is supported by the direct evidence of Ms Pattison in her affidavit –
76.The parties appeared for a further directions hearing by telephone before Member Maryniak QC on 23 October 2018. Ms Melanie Baker of Counsel appeared for the Respondent, instructed by myself. Member Maryniak QC again decided that the 2015/16 income year would not be addressed in the upcoming hearing.
Ms Pattison’s evidence is corroborated by an email to the Tribunal dated 23 October 2018 from Mr Mark Nicolau which stated –
Today at the hearing we have been informed by Member Marinyak that our application to include the review of AusIndustry’s decision alongside the reviews of AusIndustry’s decision for years 2013/2014 and 2014/2015 is rejected since it was lodged too late and that the Respondent is opposing such inclusion in our action (2017/1319) listed for trial on 29 and 30 October 2018.
No date was given to us to lodge this application for review.
We have been forced to represent ourselves [due] to financial constraints.
We get limited pro-bono assistance and the finalisation and lodgement of our request for review was delayed due to the busy schedule of our pro-bono lawyer.
We respectfully ask AAT to consider the attached application signed by the principal of the Applicant for a review as a new application and list it for hearing in due course.
With this email, the applicant submitted out of time an application to the Tribunal to review the findings of the respondent upon the internal review relating to the 2016 year. Subsequently, the applicant applied for an extension of time to commence the application, which the respondent did not oppose, and on 3 January 2019 the extension was granted by a Deputy President of the Tribunal.
I also record here that the affidavit of Mr Werner Nicolau affirmed 8 December 2020 that was before the court annexed almost 2,000 pages of documents relating to evidence that the applicant filed with the Tribunal in its separate application to the Tribunal for review of the respondent’s decision relating to the 2016 year. I admitted this evidence on the limited basis that its use was confined to the identification of what evidence might have been available to the applicant to place before the Tribunal but for the alleged errors of law that it raised by its notice of appeal. The affidavit’s admission into evidence on that basis was not opposed by the respondent.
The statements of facts issues and contentions
I have referred already to the parties’ statements of facts issues and contentions that were filed ahead of the hearing before the Tribunal. The applicant’s statement of facts issues and contentions, which was prepared by its then solicitors, was brief, framing the issues in succinct terms, and identifying the conclusions that were contended for.
The respondent, by its statement of facts issues and contentions, put in issue whether there was any evidence to establish that the activities that were claimed for the 2014 and 2015 years were conducted, and submitted, amongst other things, that even if they were, there was insufficient material to conclude that the activities were experimental activities whose outcome could not be known or determined in advance on the basis of current knowledge, information or experience so as to engage the definition of “core R&D activities” in s 355-25 of the ITAA 1997. The respondent submitted, inter alia, that the applicant’s descriptions of claimed supporting R&D activities were too vague to allow the Tribunal to understand the precise nature of the activities claimed to have been undertaken, and further that if the applicant did not demonstrate activities that engaged the definition of “core R&D activities”, then there could not be any associated “supporting R&D activities” as defined in s 355-30(1) of the ITAA 1997. In the alternative, the respondent submitted to the Tribunal that there was insufficient evidence that the dominant purpose of the supporting R&D activities was to support the core R&D activities.
The applicant’s statement of facts issues and contentions in reply was prepared by the applicant itself. Many of the contentions appeared to critique the respondent’s processes in arriving at the decision under review, and alleged errors in the respondent’s reviewable decision as if on an application for judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act) claiming (inter alia) that the respondent had “breached principles of administrative law”, took irrelevant considerations into account, failed to take account of relevant considerations, failed to act in good faith, failed to act without bias, and acted contrary to law. To the extent that there was reference to evidence, it was generally high-level, such as “the evidence provided by the Applicant of thousands of pages of supporting documents substantiate the research and development carried out, including in great detail the tasks and steps in respect of each Activity”.
The applicant’s statement of facts issues and contentions in reply also purported to bring the 2016 year into the Tribunal’s review, referring to each of the 2014, 2015, and 2016 years as the “relevant years”. Paragraph [25] of the reply statement claimed that the respondent had made findings in respect of the 2016 year “arbitrarily without a proper basis”, referring to the respondent’s findings in respect of the 2016 year issued on 3 March 2017. The applicant also claimed in its reply statement to the Tribunal at [25] –
…
(c) Although the Applicant’s research and development activities were different in the 2015/2016 income year from the 2013/2014 income year and the 2014/2015 income year, it appears the Respondent cut and pasted the wording in the certificate of findings as the wording was virtually the same in the 2015/2016 year as it was for the previous year.
(d) The Respondent's findings in respect of the 2015/2016 year is probative in relation to the Respondent’s process of decision making to make the findings in the 2013/2014 and 2014/2015 years. Accordingly, the Applicant seeks that the Tribunal have regard to the Respondent’s 2015/2016 decision when considering the Respondent's findings on the previous years, whether or not the Respondent’s 2015/2016 decision will be reviewed by the Tribunal.
(e)[T]he Respondent did not act in good faith and did not properly consider the merits of the case in respect of the income year ending 30 June 2016.
The heading above [30] of the reply statement claimed, that “[t]he correct or preferable decision on the facts is that the R&D activities of the Applicant in the income years ending 2014, 2015 and 2016 are core R&D Activities and Supporting R&D Activities”.
The applicant’s written evidence
The parties filed statements of evidence with the Tribunal. The applicant filed two witness statements of Mr Werner Nicolau and three witness statements of Mr Mark Nicolau. The first witness statement of Mr Werner Nicolau, which was prepared by the applicant’s then solicitors, was accompanied by 330 pages of annexures. The annexures included conceptual diagrams, flow charts, and spreadsheets. A significant number of documents comprised “Test Plan” forms identifying the tester as “N Nicolau”, some of which were completed by hand, and others entirely in print. These forms appeared to record things such as diet, exercise, and observed weight loss in the tester. By way of example, one form that was expressed to cover the five week period from 26 May 2014 to 29 June 2014 had written in hand under the heading “test actions” –
Eliminate take-away food i.e. Indian, Chinese, Pizza as well as any other processed i.e. Mexican and/or sweets dairy à ice cream and cakes.
Overall [loss] of weight since start in Nov ‘13 (135.5 kg) is 20 kg which indicates that the objective of 5 kg per period was unrealistic.
Resume proper walking distances i.e. 5-6 km 2 times a day and some exercises.
Under the heading “test results” the following was completed –
Weight [loss] was at the same pace as before although increased exercises were introduced.
Other documents appeared to record what was described as a “personal diet”, presumably of the tester. Amongst the annexures was a document of 45 pages described as “User Requirements & Feasibility Study” for “Health Fitness Clubs transaction processing system” prepared by Mr Mark Nicolau. Another document was described as an index of research and development manuals, noted as “Version V5 – 15/11/2017”. A document titled “Health & Fitness Systems existing service providers” was produced and identified as “draft V.2”. Finally, there was included a copy of a spreadsheet that was described as a “Daily Activities Log” spanning the period to 1 July 2013 to 30 June 2016 and comprising 155 pages.
The respondent submitted that the Tribunal’s statement at [39] of its reasons that s 355-25(1)(a) requires “objectively, a high level of uncertainty about the outcome of the activities” is consistent with the text, context and extrinsic materials, and submitted that the applicant had not advanced any alternative construction. The respondent further submitted that, moreover, even if the Tribunal did misconstrue s 355‑25(1)(a) of the ITAA 1997, it was not material to the Tribunal’s conclusions that the applicant’s registered activities were ineligible. That was because the principal reason for the Tribunal’s conclusion that the applicant’s registered activities were ineligible was that the Tribunal was not satisfied that the activities as registered were conducted in the relevant years. The applicant submitted in addition that at [80], [88], and [97] of its reasons the Tribunal had also held that the requirements in s 355‑25(1)(b) of the ITAA 1997 had not been satisfied, being the requirement that there be experimental activities that are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).
I am not persuaded that the Tribunal misconstrued s 355-25(1)(a) of the ITAA 1997 in any way that was material to the outcome of the review. It is important to read the whole of [36] to [41] of the Tribunal’s reasons together: see the extracts at [107] above. The Tribunal was correct to observe at [37] that the phrase “cannot be” in s 355‑25(1)(a) is absolute. To equate this with “a high level of uncertainty” is to introduce a gloss on the statutory language that is not found in the extrinsic material or any authority. I am not persuaded that it was necessary to introduce a gloss to explain s 355‑25(1)(a), but I do not think the gloss was material. If anything, a “high level of uncertainty” is a slight retreat from the absolute terms of the text of the provision. Further, the first limb of s 355-25, which is a negative stipulation, is not to be read in isolation but is to be read in conjunction with the positive condition in the second limb that the outcome of the experimental activities “can only be determined by applying a systematic progression of work” based upon principles of established science and the staged processes referred to in s 355‑25(1)(a)(ii). I do not consider that there was any material error at [39] of the Tribunal’s reasons in drawing together the conditions of s 355‑25(1)(a) and concluding that they indicated a requirement that objectively there had to be a high degree of uncertainty about the outcome of experimental activities.
Moreover, I accept the submissions of the respondent that even if the Tribunal had misconstrued s 355-25(1)(a) of the ITAA 1997, it was not material to the outcome of the review for the fundamental reason that owing to what the Tribunal considered was the unsatisfactory state of the evidence, the Tribunal was just not satisfied that any experimental activity of the type described by the applicant in its registrations was carried out: see [218] above. Further, I also accept the submission of the respondent that the Tribunal was not satisfied that the separate and necessary condition in s 355-25(1)(b) had been engaged, that is, at [80], [88], and [97] of its reasons the Tribunal was not satisfied that in relation to the registered activities the applicant had a purpose of generating new knowledge.
Question 4 – miscellaneous claims of error
Question 4 is in the following terms –
Did the Tribunal make an error of law by taking irrelevant considerations into account, or by not taking relevant considerations into account, or by acting with want of jurisdiction, or acting in excess of jurisdiction, including as follows:
a.The Tribunal, in determining if the experimental activities qualified as core R&D activities, did not take into account the relevant consideration of the purpose and objective of the experimental activities, which was to scientifically develop algorithms for information technology products that could be used by a consumer. The Tribunal wrongly impugned the experimental activities directed towards making new pioneering algorithms and information technology products and that applied existing scientific advances in physiology made by others, for not producing those scientific advances in physiology made by others.
b.The Tribunal, in deciding that there was not contemporaneous evidence of registered core R&D activities, did not take into account the relevant consideration that the different iterations of the functional specifications and detailed design documents were contemporaneous evidence of registered R&D activities in the relevant years.
c.The Tribunal, in impugning the experimental activities on the basis of inconsistencies between the oral testimony of the Applicant and the oral testimony of the Applicant’s research service provider, did not take into account the relevant consideration that the research service provider, and not the Applicant, had carried out the experimental activities and had detailed knowledge of the experimental activities that the Applicant did not.
d.The Tribunal failed to take into account the relevant consideration of the evidence of Dr Jessie Hiu Kiu that was favourable to the Applicant’s case, only taking into consideration the evidence of Dr Jessie Hiu Kiu that could go against the Applicant’s case and reading Dr Jessie Hiu Kiu’s assessment solely as negative to the Applicant.
e.The Tribunal, in deciding that the Applicant had not carried out testing, failed to take into account the relevant consideration that there was evidence that the Applicant had carried out testing, including desktop testing, and that the product specifications and documents were a product of that testing.
f.The Tribunal, in deciding that the testing was inadequate for not having a sufficiently large number of test participants and not having female test participants, failed to take into account the relevant consideration that the type of R&D activity that is appropriate to an information technology product depends on the stage at which the product is in the product development process; the early testing in relation to the Health & Fitness System product was suited to the early stage of the product development process.
g.The Tribunal accepted the Respondent’s expert witness Dr Kerr’s view that the applicant had not developed algorithms and did not take into account the relevant consideration that the Respondent’s software engineering expert, Dr Schneider had accepted that the Applicant had developed algorithms, whereas Dr Kerr is a dietician and is not an expert in algorithms.
The applicant’s submissions in support of its claims relating to Question 4 included submissions that the claimed errors were a product of the Tribunal’s adoption of the respondent’s submissions. In considering for the purposes of Question 6 whether the Tribunal’s adoption of the respondent’s submissions resulted in any specific error, I have already addressed most of the submissions made in relation to Question 4: see [175].
All of the claims raised by Question 4 are rejected on the global basis that they do not raise any questions of law, but seek to cavil with factual findings made by the Tribunal on the alleged ground that the Tribunal failed to accept evidence that is claimed to have been favourable to the applicant’s case and which is wrongly characterised by the applicant as “relevant considerations”. I have already referred to and explained this flaw in the applicant’s approach to the appeal at [122], [170]-[172], [179], [188], and [196].
Question 5 – denial of procedural fairness
Question 5 is in the following terms –
Did the Tribunal, in a proceeding involving an Applicant without legal representation, make an error of law, including in:
a.not informing the Applicant at the hearing, nor at any stage before making its decision, of the Tribunal’s assessment that the Applicant’s documentary evidence was insufficient;
b. not seeking relevant evidence from the Applicant’s research service provider in respect of matters for which documentary evidence was perceived by the Tribunal to be deficient;
c.refusing to consider the Applicant’s R&D activities and accomplishments in the 2016 year, which the Applicant contended could not have been achieved without the completion of those registered R&D activities in question in the 2014 and 2015 years;
d. declining to review the Respondent’s reviewable decision in respect of the Applicant’s registered R&D activities in the 2016 year concurrently with the review of the 2014 and 2015 years;
e.then making a decision against the Applicant on the basis that “insufficient evidence exists to indicate that any of the registered core R&D activities were conducted” (at [62] of the Tribunal’s decision),
thus failing to afford the Applicant the fairness required under section 2A of the Administrative Appeals Tribunal Act 1975 (“AAT Act”), procedural fairness and a fair trial?
The components of Question 5 raise two issues. The first issue is whether the Tribunal erred by failing to warn the applicant that its evidence was insufficient, and by failing to seek further evidence. The second issue is whether there was an error of law by the Tribunal in refusing to consider the applicant’s claimed R&D activities for the 2016 year.
As to the first issue, the Tribunal was not required to give the applicant a running appraisal of its claims, or to warn the applicant that it might not succeed. It should have been obvious to the applicant from the respondent’s submissions to the Tribunal and from the conduct of the hearing that its claims were contested, particularly on the ground that the applicant’s evidence was insufficient, which was specifically raised at [39] of the respondent’s statement of facts issues and contentions that was filed and served months before the hearing. Further, the expert reports filed and served on behalf of the respondent months before the hearing gave the applicant ample notice of claimed deficiencies in its material, and the applicant had a reasonable opportunity to respond to that material. There was no requirement on the Tribunal as an incident of its obligation to accord procedural fairness to state what was obvious: see, Minister for Immigration and Citizenship v SZGUR [2011] HCA 1; 241 CLR 594 at [9] (French CJ and Kiefel J, Heydon J and Crennan J agreeing), citing Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd [1994] FCA 1074; 49 FCR 576 at 591–2. The fact that the applicant corporation was not represented at the hearing before the Tribunal by legal practitioners does not affect this conclusion.
The applicant submitted that the hearing was conducted in an inappropriate and adversarial manner, characterised by frequent interjections from the Tribunal which hindered the applicant’s presentation of its case. The applicant also submitted that the Tribunal “did not seek the required evidence” from the applicant’s witnesses.
In footnote (81) of the applicant’s written submissions to the court, the applicant referred to 41 transcript references in support of these submissions. I have read all of these references, and they do not support the applicant’s submission that the Tribunal acted inappropriately. The transcript reveals that the Tribunal questioned the relevance of some of the questions put by Mr Mark Nicolau in his cross-examination of witnesses. The Tribunal intervened to ensure that documents to which the cross-examiner referred a witness were properly identified and available. The Tribunal dealt with a number of objections to questions when objections were raised on behalf of the respondent. On a number of occasions the Tribunal was concerned to have what appeared to be comments by the cross-examiner formulated into questions for the witness. Other questions were considered by the Tribunal to be too lengthy, and the Tribunal required that they be re-formulated. On some occasions, the Tribunal intervened to require that a witness be allowed to complete an answer to a question. The Tribunal at one point sought to have Mr Mark Nicolau clarify some evidence that he gave in cross-examination that the Tribunal evidently thought was inconsistent with other evidence. As I mentioned earlier, at one point the Tribunal allowed Mr Werner Nicolau to continue the cross-examination of Dr Kerr, which had been commenced by Mr Mark Nicolau. Yet this was relied on by the applicant as one of its transcript references to support a submission that the Tribunal hindered the applicant in the presentation of its case.
I am left with the impression that the applicant included in footnote (81) of its submissions transcript references to statements made by the Tribunal during the course of evidence, without regard to their context or content, or the occasion for the Tribunal’s intervention. What the applicant relied on as hindering interjections can be reasonably viewed as part of the normal course of a hearing process, and included assistance provided by the Tribunal to the applicant’s representatives. Further, while the Tribunal assisted the representatives of the applicant from time to time by, for instance, encouraging them to frame questions properly, and to focus on the review as a fresh determination, rather than one concerned with the identification of error in the decision under review, the Tribunal was not obliged to make its own inquiries, or to conduct the applicant’s case on its behalf with a view to improving its evidentiary foundation. The applicant was given a reasonable opportunity to prepare its evidence, and there were no special circumstances of this case that made it legally unreasonable for the Tribunal not to make some inquiry of its own, still less to undertake some large-scale investigation into the applicant’s claims so as to improve their evidentiary basis. Rather, the position was the conventional position described by Hill J in Enichem Anic Srl v Anti-Dumping Authority which I cited at [173] above, namely that the Tribunal had to do its best on the material available.
In relation to the second issue, the applicant submitted that its R&D activities for the 2014 and 2015 years were part of a multi-year project, that the applicant had carried out conceptual design, functional specifications, detailed design and test planning in the 2014 and 2015 years, and in the 2016 year conducted testing and prototyping. The applicant submitted that “the Tribunal refused to admit evidence of the 2016 year’s R&D activities which proved the Applicant conducted the 2014 and 2015 years’ registered R&D activities”. In support of that submission, the applicant relied on what occurred at the directions hearings on 14 September 2018 and 23 October 2018 where the Tribunal determined that the findings for the 2016 year were not part of the review in circumstances where no valid application to review the respondent’s findings in respect of the 2016 year had been filed. I have addressed those submissions in the course of considering Question 1, and for the reasons I have given, I do not accept them.
Conclusions
The appeal will be dismissed.
I certify that the preceding two hundred and thirty-seven (237) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wheelahan. Associate:
Dated: 24 May 2022
SCHEDULE
GROUNDS OF APPEAL
1.The Respondent made an incorrect original decision in denying that the Applicant had conducted any of the registered core and supporting R&D activities in the 2014 and 2015 years. The Applicant is entitled to have the decision set aside, and to obtain R&D tax incentives in respect of the Applicant’s expenditure on registered R&D activities, on the basis that:
a.The Applicant conducted R&D activities that were registered, and were core R&D activities within the meaning of section 355-25 of the Tax Act and supporting R&D activities within the meaning of section 355-30 of the Tax Act, in the 2014 and 2015 years.
b.The Applicant conducted experimental activities that were required to develop new pioneering algorithms and information technology products, whose outcome could not be known or determined in advance on the basis of current knowledge, information or experience, but could only be determined by applying a systematic progression of work that was based on principles of established science and proceeding from hypothesis to experiment, observation and evaluation, and leading to logical conclusions, that were conducted for the purpose of generating new knowledge in the form of new products, devices, processes and services.
c.There is contemporaneous documentary evidence proving the R&D activities were carried out, and there is corroborative evidence showing that the Applicant’s 2016 year’s accomplishments could not have been made without the completion of the 2014 and 2015 years’ registered R&D activities.
2.The Tribunal incorrectly affirmed the Respondent’s decision, as a consequence of the following conduct that amounts to errors of law.
a.The Tribunal made an error of law by refusing to admit the Applicant’s evidence of the 2016 year’s R&D accomplishments.
b.The Tribunal made an error of law by failing to take into account relevant considerations, including the relevant consideration of the Applicant’s R&D accomplishments in the 2016 year.
c.The Tribunal made an error of law by acting with Wednesbury unreasonableness in failing to take into account relevant considerations, including the relevant and probative consideration of the Applicant’s R&D accomplishments in the 2016 year.
d.The Tribunal made an error of law by failing to take into account relevant considerations for the purpose of applying section 355-25 of the Tax Act, including in failing to consider the totality of the product being developed and thereby denying that the necessary precursor R&D activities in the individual registration years were part of the overall broader R&D activities necessary to develop the total product.
e.The Tribunal made an error of law by acting with Wednesbury unreasonableness, including in failing to consider the totality of the product being developed and thereby denying that the necessary precursor R&D activities in the individual registration years were part of the overall broader R&D activities necessary to develop the total product.
f.The Tribunal made an error of law by applying the wrong test to the Applicant’s R&D activities, in that the Tribunal incorrectly construed section 355-25(1) of the Tax Act, which states that core R&D activities were experimental activities “whose outcome cannot be known or determined in advance”, to mean “there must be a high level of uncertainty as to whether the outcome can be known or determined in advance” (at [39] of the Tribunal’s decision), causing the Tribunal to conclude that the Applicant’s experimental activities were ineligible as their outcome could have been known in advance, under that wrong test.
g.The Tribunal made an error of law in determining if the experimental activities qualified as core R&D activities, by not taking into account the relevant consideration of the purpose and objective of the experimental activities, which was to scientifically develop algorithms for information technology products that could be used by a consumer. The Tribunal wrongly impugned the experimental activities directed towards making new pioneering algorithms and information technology products, and that applied existing scientific advances in physiology made by others, for not producing those scientific advances in physiology produced by others.
h.The Tribunal made an error of law in deciding that there was not contemporaneous evidence of registered core R&D activities, as it did not take into account the relevant consideration that the different iterations of the functional specifications and detailed design documents were contemporaneous evidence of registered R&D activities in the 2014 and 2015 years.
i.The Tribunal made an error of law in impugning the experimental activities on the basis of inconsistencies between the oral testimony of the Applicant and the oral testimony of the Applicant’s research service provider, as it did not take into account the relevant consideration that the research service provider, and not the Applicant, had carried out the experimental activities and had detailed knowledge of the experimental activities that the Applicant did not.
j.The Tribunal made an error of law in failing to take into account the relevant consideration of the evidence of Dr Jessie Hiu Kiu that was favourable to the Applicant’s case, only taking into consideration the evidence of Dr Jessie Hiu Kiu that could go against the Applicant’s case, and reading Dr Jessie Hiu Kiu’s assessment solely as negative to the Applicant.
k.The Tribunal made an error of law in deciding that the Applicant had not carried out testing, in that the Tribunal failed to take into account the relevant consideration that there was evidence that the Applicant had carried out testing, including desktop testing, and that the product specifications and documents were a product of that testing.
l.The Tribunal made an error of law in deciding that the testing was inadequate for not have a sufficiently large number of test participants and not having female test participants, in that it failed to take into account the relevant consideration that the type of R&D activity that is appropriate to an information technology product depends on the stage at which the product is in the product development process; the early testing in relation to the Health & Fitness System product was suited to the early stage of the product development process.
m.The Tribunal made an error of law in that it accepted the Respondent’s expert witness Dr Kerr’s view that the applicant had not developed algorithms and did not take into account the relevant consideration that the Respondent’s software engineering expert, Dr Schneider had accepted that the Applicant had developed algorithms, whereas Dr Kerr is a dietician and is not an expert in algorithms.
n.The Tribunal made an error of law in a proceeding involving an Applicant without legal representation by failing to afford the Applicant procedural fairness, the fairness required under section 2A of the AAT Act, and a fair trial, including in declining to review the Respondent’s reviewable decision in respect of the Applicant’s registered R&D activities in the 2016 year concurrently with the review of the 2014 and 2015 years.
o.The Tribunal made an error of law in a proceeding involving an Applicant without legal representation by failing to afford the Applicant procedural fairness, the fairness required under section 2A of the AAT Act, and a fair trial, including in not informing the Applicant at the hearing, nor at any stage before making its decision, of the Tribunal’s assessment that the Applicant’s documentary evidence was insufficient.
p.The Tribunal made an error of law in a proceeding involving an Applicant without legal representation by failing to afford the Applicant procedural fairness, the fairness required under section 2A of the AAT Act, and a fair trial, including in not seeking relevant evidence from the Applicant’s research service provider in respect of matters for which documentary evidence was perceived by the Tribunal to be deficient.
q.The Tribunal made an error of law in a proceeding involving an Applicant without legal representation by failing to afford the Applicant procedural fairness, the fairness required under section 2A of the AAT Act, and a fair trial, including in refusing to consider the Applicant’s R&D activities and accomplishments in the 2016 year, which the Applicant contended could not have been achieved without the completion of those registered R&D activities in question in the 2014 and 2015 years.
r.In substantially reproducing the Respondent’s written submissions, without attribution, as the Tribunal’s reasons for decision, the Tribunal made errors of law in:
(i)failing to exercise its jurisdiction;
(ii)failing to exercise independent judgment;
(iii)acting unreasonably;
(iv)failing to take into account relevant considerations;
(v)taking into account irrelevant considerations; and
(vi)failing to carry out its statutory functions in a way that would promote public trust and confidence in the decision-making of the Tribunal.
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