CATCHWORDS Administrative law - Administrative Appeals Tribunal - appeal from single judge on question of law - eligibility for export development grant ~ whether manner in which expenditure paid relevant in determining purpose of expenditure - promotional expenditure paid to related company ~ more than one purpose - primary and principal purpose of expenditure not stipulated purpose as in legislation. Export Market Development Grants Act 1974 s. 4(1), (5) Administrative Appeals Tribunal Act 1975 s.44 PARKER PEN (AUSTRALIA) PTY. LIMITED v. EXPORT DEVELOPMENT GRANTS BO No. G 122 of 1983 Coram: Toohey, McGregor and Morling Jv. 30 March 1984 Sydney. 7 tty ") yee " ry Al i 7 'Yt ol vi $i ry] . 1] ral tf 13 ) a 3} ot os mm 1 n rH ! et 1 "y 14 ly tee ia M a | » $4 i] 3) ' ry Shy y) rt ' el wv oH . 4 ' ha . a) 5 - ry F . 4 a ' us n s st 13] a ' . tr fo ' ote u iI 1) tr! On soto mi op . aD Sip 0D nt ry 4 OV ne rd Oy ord Ww si nm x | uw rs) > $3, ad fa] os 0 4 Daal a ve fr BY ms a ah vad (1 iB] q et th It ca alo ost ig] fu " a Oo} i O1 Qs bh 0 ad £1 v Ae mm wm rl G hl ! ny . iy ' ' ef ad , : - ay oe o oe q ne) by $4 ' ben Sr ; ms fx] YD np c) tn?) fan ny t Ww a) fon. 4 : " t fas) Br HI =| Fa Piety | | . Ht =| en or) | mq o) q =) . . Eh i] by *, wy Ww Q ja at kt i al ey fa tq 2, Wy of ite) Ln) en © | (ae) td wd —y ha if i G H [gal Ky it E [onl Pe hey Pa ra ¢ r t t ' t ' A fy ig] nad we t 1 Ics + a ti Rg H [jo] ia az ies, i ¥. MCGREGOR and MORLINS oJ. 30 Macch 1924 Q oO tu iy a ie °a Oo he a] EASONS FOR JUDGMENT? njag THE COURT: Parker Pen -(Australia) Pty. Limited ("the apreilant") manufactures and distributes in Rustcsiia > : - : te writing instruments, including the well mown 'Parses" ren. BO a number of countries, ortncivaliy ain che Bzzan and Pacific region. It is a whelivy cwnea sussiciary ar a Unitad States comrany. ~ The abgesiliant icddecd a tlaam with che reseonaert Tor a grant under the Exxort Market Davelocment Grants Act. 1974 ."the Act") in respect of the 1972-74 arant year. erat nm Act makes provisicen for axrante for the curscse of pe incentives for tne davelopment of expert markets. ' An a applicant desiring to obtain a grant under tne Act is required to submit a claim to the respondent Ecard which then considers it and determines whether the applicant has a "grant entitlement" and, 1f sco, the amount thereof. Where the Board determines that the applicant has a grant entitlement there is payable a'qrant equal to tne amount of the grant entitlement so determined. (Sub-s. 12(2)). The grant entitlement of a claimant in relaticn to a aqrant year is an amount equal to 70% of the "eligible expenditure" incurred by the claimant during that year (s.15). The expression "eligible expenditure" is defined in sub-s. 4(1) as follows: - . " ~* "4(1) Subject to the succeeding provisions of this section, a -reference in this Act to eligible expenditure-is a reference to expend- iture that, in the opinion of the Board, has been incurred by a person primarily and principally for the purpose of creating or seeking opportun- ities, or creating or increasing demand, for - {a) the sale- by that person for export, or the export by that person and sale by him, of eligible goods manufactur- ed, produced, assembled or processed in Australia; (b) in the case of a person who manuract- ured, produced, assembled or process- ed eligible gcods at the time when the expenditure was incurred. the sale for export, or export and sale, —_- of eligible goods manutactured, produced, assembled or process4ad in Australia by that person; but does not include so much of any expenaiturs incurred by that person as - - 'ki' Sas dese ay .z to ce, "ard oF feinsurcsed to sim by anctner cérson, the government of the Icmmonwealtn or of a atate or Tervicvozx7 cr any liner governnent;" fubseacticn 4(5:; provides as follicws: 4. 15) Where the amount cf any expenditure constituting or <fEsrming part of any 2.iidgisie extenditure exceeds the amount that. in the ecinicn of the Beara, s7culi reasonably be szpect- ed to p2 payanla for the curposs of purpcses far whicn the expenditure was incurrec, tne Boara may, Tor the purposes cr thie s2cticn, treat the expenditure as béing reauced Sy the amcunt ar che excess." The apoeliant s claim for a grant in ihe relevant iture. The Board allowed some cf these items and disallowea others. The only items disallowed by tne Beara were tue amounts, one oF »S. $36,134.80 and the cctner af U.S. $22,800.00, paid by the appellant tc Paruer Pen 'Far East. Limited ('Parker Far East"). The first cf tnese amounte2 was in respect of an invoice directed co Facer Far East cy a company znown as Chase-Compton Advectlein Limicves , 'Crnase-Compton"). Parxer Far fast 15 a wnellv cwnec sunsidiary oF the same Uniced States comeany That sims ail the share capital cr the aprelianc. lInasa-Caomecton is alsc & isements in several mawacinés circulating in Asia- and tne Pacific area. -ne Se8ccrda item Vas tne amcunt in 2 teait memo directed to tlhe appeilanz sy Parcxer Fac Eaec. che expressed tc be in cespect cr "Parker advertising debit 15 expenses in the Philippines" incurred during the year enced 25 February 1979. After the Board notified the appellant of its determination to disallow tne two items the appellant cequested it to reconsider its decision under s.40A of tne Act. The Board did this and confirmed its original decision. Thereupon the aopellant sought a review Ly the Administrative Appeals Tribunal of .the Board's decision. The Tribunal affirmed the Board's decision. that the two payments to Parker Far East were not "eligible expenditure" within the meaning of that expression in the Act. From that decision an appeal was brought to _this Court pursuant to s.44 of the Administrative Appeals Tribunal Act 1975 and was therefore -limited _to an appeal on a question of law. 'The appeal was heard by a singie judge of the Court. The learned judge .was of the opinion that the Tribunal had-not fallen into error in reviewing the Board's decision and accordingly dismissed the appeal. This appeal is brought from his Honour's decision. The facts out cf which the appeal arises are not in dispute. The following account of them is taxen sukstant~ rally from the judgment under appeal. During the cslevant grant year, the appellant exported 1ts products to 26 ' countries. Its largest markets were New Sealand, New Guinea 5. and the Philippines. The appellant was the scle suppizer oO mh Parker products to some 20 or 21 of the 26 countries. shared its markets in 5 countries with other affiliated countries in the Parker Pen group, being companies h or a incorporated outside Australia. The advertising of Parker Products inf countries where the appellant was che sole supplier was undertaken by the appellant | itself. Advertising expenses incurred in those countrtes-vere paid for by the appellant direct to the advertisers. In yr Parker re] countries wheres the appellant shared markets f products with other affiliated countries the promotion of Parker products was undertaken by Parker Far East. Parker Far. East dealt directly with_ advertising agents or other companies with whom advertising. or promotion material was placed by it. . . - The appellant played no role in determining the allocation of promotional expenditure by Parker Far East in the countries where Parker products were advertised, the amount allocated to eacn country, the form cr axtent of advertising, the selection of the appropriate medium for advertising or the choice of relevant publications~- The appellant (and each of its affilia®ess._ committed itself for promotional expenditure cto Parker Far Fast for 10% of 1ts estimated saies of Parrer products in the marketing franchise areas, tnat 25 to say. _areas in Po 6. which it snared franchises with other affiizated » Parker companies. At the beginning of each finaricial year the ed the W appellant and its foreign afriliates each asses re) F.O.B. values of export sales of Parker products by it tf o the forthcoming year and 10% of that figure was treated within the Parker group as its commitment te Farzer Far East for promotional expenditure in those snared franchise areas. As the appellant and its affiliates achieved sales in the shared franchise areas they sent copies of all invoices for export shipments to Parker Far East. i Although the evidence before the Tribunal was apparently far from clear, it appears that the appellant and its overseas affiliates did not pay Parker Far East in respect of the advertising placed by Parker Far _East. Instead, in. some way, Parker Far East divided its overall commitments for advertising between the various affiliates including the appellant, and aliocated proportions of expenditure directly - related to the 10% commitment of each company. Parker Far East did not itself pay the acvertising expenses incurred by it and debit each affiliate with its respective share to be reimpursed by it. Instead, it arranged for invoices te be sent by the advertising agency, or a company with whom the expense had been incurred, airect to the appellant or other affiliate for an amount having some mexus with the 10% commitment of that affiliates. in the result, at the end of each year, each affilrate had ocaid tae snared $22,800.00 is concerned,- it related entirely to advertising expenses in the Philippines: That market was shared oy the United States and French affiliates anc tne apreilanc. one appellant's share of tne market being cnly 17%. In relation ta the Parser group's acavertising Strategy an executive oF the appellant wave tne re.lcwing exacut 7 WHO LOCKS 2 a3ing anc co-crdadinates the advert mers chev are responsible ftir, an countries like Austraiza and Fra send rotiss of ali che invoices shimments co these various countries coh r iftices ana we accrus up ts is roc Falue ct the invoice towara aavertisi cused on the arsa. She Hong sng Lanz wne advertising campaigns in tne countries Ye wo and aliccates th TLAT LS BROcKUaS Sxpoccing c zs unese aa.2 x ay ta suo Tua the anvil raid 2 the vari co end chem tc 3 ' Tor payment, Secause in cerca money overseas we have ic pers th the ascumsnts ccvering tne and cur commicmenc 15 a mazimun . or cur sries.' ' 5) The cams ezecutive deseribed The MAY -l8Ting philosophy of the appellant in tne foLlawing terms: ",,.one international -image oF rarscer Psn erestige and quality, which has been estanlisred and accepted over a perisd of many years. has yesuited from the aevelopment cf a .marxating Philosophy which focusés on tne quality oF the Parker Pen product range rathef" <cnan che ; countries of origin or manufacture. This. Tar keting philosophy nas equal application tc ~ similar products which are manufactured ani marketel on a trans- national basis by otnes ccmpanies. Whilst it 125 acknowledged that overseas pro- metionai activity undertaken by sour Company d would lead to some spin-off marketing nenerits . for cther Parker comganies Licated sutside Australia, we wish to assure you tract marsteating pensfits aise accrue to sux Company 'cwaich are Commensurate With the censicaras.y gxraatesr : promotional expenditures undertaken sy tur overseas affiliates. Parker Pen products have Jsinea a <sre8 status in vircoShic_ «= RVAlLASIS throughout the werls ro: ta. . that all promotiona ture 22 2 towards the promet ae n status of tne prod. cheas s the ccuntry or thaie origin of manure WHiLSt Chis mMareeting pniicseray itminactss tis promotion of Frarker Pen croducts it is echaveves ' Dy making it incumdéenc cn incivitual Faraes Pen 9. manutacturing and exporting a ates" to support on a pro-rata basis (namely ur to the Maximum or 10% of projected sales) the promotion of cheir wsroduct range in their resrective franchise marketing ar2as." When the matter was before the Administrative 'Appeals Tribunal it was agreed between the parties that in the' event that the Tribunal heid that the amounts expended by the appellant were incurred primarily and principally for the ourpose of creating or seeking opportunities for creat- ing or increasing demand for the export and sale of the appellant's products, the Board would concede that the amount of the expenditure incurred by the appellant Was incurred in the ordinary course of business and was a4 reasonable sum for the appellant to have incurred for, those Paros ' purposes. Before this court on appeal, counsel for the appellant contended that "this agreement amounted to a concession by the Board that the amounts which the appellant was called upon to pay to Parker Far East were no more than the reasonable value of the advertising and promotion work undertaken By that company on behalf of the appellant. In ovtner words, 1t was ardqued that the concession was tantamount to a concassion thet the appellant_received full value in the way of advertising and promotion of its products in-return for the relevant expenditures. Counsel for the Board disagreed with tnis contention. She submittea that any agreement as to che appropriateness of the appellant's expenditure was sub 10. first being determined that the exrenditure was to it incurred primarily and principally for one or other of the purposes referred to in sub-s. 4{1)(a) or (Dp). We aqres with the submission of counsel for the respondent in this regard. Accordingly, we think it was obligatory for the appellant to persuade the Tribunal of all matters necessary to cause it to form the opinion that the relevant expend- iture was incurred by the appellant fcr the stipulated purpose. Obviously, the question whether in return for the expenditure the appellant received fair value by way of advertising and promotion of its products was a matter to be considered by the Tribunal in deciding whether it should form the requisite opinion. It appears not to have made a positive finding. in favour of the appellant on this question. - ~ As we have already observed the appeal fram ct rt 2) Tribunal's decision to the Federal Court, by 'he express terms of s.44 of the Administrative Appeals Tribunal Act 1975, was limited to an appeal on a questicn of iaw. SBefere his Honour the questien of law which was said to arise in the case was: "Whether, and if so, how far, nme fact that advertising expenditure was paid by the Appeilant to a related company which advertised on behalf of the Appellant as well as on behalf cf itself and other associated companies of the Appellant was relavant in determining che purpose for Which the Appellant expended such moneys:" ll. H - As the matter was arqued on appeal we doubt whether this question adequately covers alli the arguments put Sy the appellant in support of its contention that the Tribunal erred in law in arriving at its decision and that the learned trial judge erred in not so finding. However, in cr o ad by ct) the light of the' opinion that we have formed as , proper outcome of the appeal, we do nct think this is of any consequence. It could scarcely be contended that the fact that advertising expenditure was paid by the appellant to one of its related companies which advertised on behalf of it as well as on behalf of other companies in the Parker grour was irrelevant in determining the purpose for which the appellant undertook such expenditure. The relationship between the appellant, Parker Far East and other companies in the Parker group was plainiv one of the circumstances to be considered in identifving the purpose for whicn the expenditure was primarily and principally incurred. Indeea, we did not understand counsel for the appellant to contend to the contrary. His argument was scather thac in determining what was tre purpose both the Tribunal and tne learned judge undertook a wrong approach. It was submitted vo w fu ry) u ct wy tb y that they regarded what was deseri characterisation of the transaction in which the money was paid" as determining the purpose for which the aprsilant aid the money. It was arqued that in so doing, they faried a gS re primary and principal purpose was che pusccse stipulated in subs. 4(1) ci the Act. The appellant sought the remz1ssion of the matter to the Tribunal to be determined upon the basis that the question whether the appellant had the requisite purpose in making the expencitures was not concluded hy the form of the transaction under which the mcney was paid. In substance, the appellant's argument was that both the Tribunal and the learned judge had fcemed the opinion that the mere fact that the appellant had made the expenditures through a_ pooling' arrangement supervised oy Parker Far East rather than dicectiy to the advertisers of its products was destructive of 1ts claim for a grant. "Before considering- whether the learned judge erred in his decision it is helpful to consider what ccnclusions were ceascnably open on the evidence before the Tribunal. in our opinicn a finding was plainly open that the appellant had two purposes when it made the relevant expenditure. One purpose may have been to ensure that gqoods exported by the appellant to countries in the Asian and Pacific areas were advertised and promoted. The other purpose may have been to ensure the appellant's continued membership of the Parker international group with the consequential benefits flowing from such membership, the price of such membership being payment of a sum equivalent to 10% of the value of its exports to some markets. ~ eee a — In cur opinion it is clear from the decisions of the Tribunal and the learned judge that they both recognised that included amongst the appellant's purposes in marking the relevant expenditures was the purpose of advertising its own products in export markets as distinct from promoting the interests of the Parker group. Thus in its decision the oD Tribunal said: "Bach of the words 'primacily' and 'principally' must be given its due weight. I do not doubt, and I do not understand the respondent to have argued otherwise, that amonast the purposes of the applicant's advertising expena- itures was the purpose of promoting the sale by export of its own products as opposed to the products of its affiliated comranyies (sic). The issue at hand 1s whether that purpose was both a prime and a principal purpose. That is, whether the purpose was not only first in importance but also whether it was predominant to the degree that the expenditure could, on the whole, be said to be attributed to it." (emphasis added) It appears from this passage in the Tribunai's reasons that it did not regard the fact that the appellant made payments to Parker Far East as demonstrating that sucn payments were not made for the purposes stipulated in the Act. The Tribunal accepted that one cse ot the "5 it ny ct * ¢ a (Tt payments was the purpose referred ¢23 in did not fall into the errcr attributad to it b ocunsel Ior bq a the appellant. It was of the cpinion that the spreltlant had more than one purpose in making the vayments, and that its om primary and principal purpesa was not the stipulated ~2 ots ~~ ~ purpose. "ar oy 14. - t We are satisfied from an examination of the judgment under appeal that the learned judge did not fall into the same error as was attributed to the Tribunal. It is true: that he referred in some detail to some aspects of the manner in which the relevant payments were made. For aunstance, he pointed out that it was not the appellant which directly undertook the advertising. But having expressed the opinion that it was plain from the evidence that the advertising was carried out internationally to promote the image of Parker products rather than the country of manufacture, he said, in terms, that he did not regard this as fatal to the appellant's- case. Thus it cannot be said that his Honour regarded the payment of the moneys to Parker Far East as necessarily showing that they were not made for go tae eee ee a the purposes stipulated in-the Act. : It was not for his Honour to determine the primary and principal purpose for which the relevant expenditure was incurred. That was a matter for the Tribunal. Unless an error of law was shown to have been made by the Tribunal in forming its opinion on that matter there was no warrant for interfering with its decision. His Honour corrrectly held that no such error had been demonstrated. The appeal should therefore be dismissed with costs. tCérn ate. fon 13 Precesleg ORwat ure. . enrean tor : « " an / I - - 7 a. oe { cd SU sctabe ' \