FEDERAL COURT OF AUSTRALIA

Australian Trade Commission v Hellay Laboratories Pty Ltd

[2001] FCA 1436

Wilcox, von Doussa and Finkelstein JJ

18 October 2001 - Melbourne

Finkelstein J. 40 I agree that the appeal should be dismissed.

41 The Export Market Development Grants Act 1997 (Cth) enables the payment of grants to encourage the development and expansion of Australian exports. Speaking generally, a grant is payable to a resident of Australia who incurs eligible expenditure in the development of markets for Australian goods and services.

42 The class of eligible expenditure with which this appeal is concerned is that incurred in relation to "eligible promotional activities" . These activities are described in column 2 of the table in s 33 . The expenditure that may be claimed in respect of eligible promotional activities is that described in column 3.

43 The respondent applied for a grant for what it said was expenditure incurred in respect of the activity specified in what was item 6 of column 2: see now item 1B which was introduced by the Export Market Development Grants Amendment Act 2001 (Cth). That activity was "engaging as a consultant on a short term basis (either in or outside Australia) a person that, in Austrade ' s opinion, is not closely related to the applicant [for a grant], to the extent to which the person undertakes market research, or marketing activities, related to an approved promotional purpose" . Column 3 provided that the eligible expenditure for that activity is "all reasonable expenses incurred by the applicant" . Section 4 limits the entitlement to a grant to expenditure incurred in a grant year. There is a definition of grant year in s 107 , and it is only necessary to observe that a grant year is a 12 - month period. Section 70(2) provides that an application for a grant must be made within 5 months after the end of the grant year.

44 The outcome of this appeal depends upon the proper construction of item 6 of the table in s 33 . Its precise meaning is not clear. The important thing to notice about this provision is that the claimable expense is that incurred in respect of "engaging" a person as a consultant to undertake a particular function. Two conditions must be satisfied. The first is that the "engaging" of a person as a consultant must be on a "short term basis" . The second condition is that the consultant must not be closely related to the applicant.

45 Leaving aside the 2 conditions, item 6 directs primary attention to particular conduct of the grant applicant, namely the act of "engaging" ; a nonfinite verb used in its participle form that has a progressive or durative aspect. Because it is progressive the "engaging" is not confined to a single event (one engagement), but may be concerned with an aggregation of events (a series of engagements).

46 I will explain what I mean by reference to an hypothetical case. Let it be assumed that a grant applicant has entered into a number of independently negotiated engagements with an arms - length consultant to undertake work described in item 6. Let it also be assumed that each engagement is "short term" , whatever meaning is to be given to that phrase. Because the act of "engaging" is progressive, to determine whether the amounts paid to the consultant are claimable expenses, it is necessary to decide whether or not the repetitive conduct amounts to "engaging [a person] as a consultant on a short term basis" . It will not be enough merely to ask whether each single engagement was for a "short term" . What must be determined is whether the series of engagements can be regarded as on a "short term basis" . So, if there have been 2 7 - day engagements per month, in each month of a grant year, it will be difficult to conclude that the applicant has been "engaging [a person] as a consultant on a short term basis" when the progressive or continuous nature of the activity is taken into account. Any other conclusion would permit abuse of the statute.

47 The next question is what is meant by "short term basis" ? The adjective "short" is used as a measure. Usually these types of adjectives come in pairs, one for each opposite end of a range or scale. Examples abound - old:young; thick:thin; wide:narrow - to mention but a few. The scale that is to be measured by the use of these adjectives will often be imprecise. Thus the opposites in the range may not be identified easily.

48 In this case, what is to be measured is a "term" which, in the phrase "short term basis" is a period of time. Presumably the term that is to be measured must be either short or long: though some might say that the term may be short, medium or long. Here we must identify what is a short period. Because there is no definitive measurement available, whether a term is short or not will often be a question of degree. How does one determine on what side of the line a particular term will fall?

49 Quite obviously, whether or not a particular term is a short term, cannot be determined as an abstract question. It is necessary to have regard to the thing that is being measured. For example if the thing is a lease, one might say that a 3 - months lease is a short term lease, but a 3 - year lease is not. If the thing is marriage, a 3 - year marriage might be regarded as of short term, but not if it lasts for 15 years. If the thing is the life of a human being, 15 years may be short, while 100 years would be long.

50 How have I been able to make these observations? They are certainly not a priori propositions. The examples chosen are of matters that fall within the ordinary experience of most people. Having regard to that experience, one is able to observe the usual duration of the thing in question, whether it be a lease, a marriage or a life. Then there exists a yardstick against which it is possible to measure whether the duration of the thing under consideration is short or long. This is not to suggest that the answer will always be obvious. Take for example an 18 - month lease, an 8 - year marriage or a life span of 45 years? For those cases there may not be a "correct answer" . The choice is an exercise of judgment about which reasonable minds may differ.

51 The activity with which we are concerned is the work of a consultant who is undertaking market research or marketing activities to promote overseas sales. Often it will be easy to decide whether or not the grant applicant is engaging such a consultant on a short term basis. For the moment I will assume a single engagement, to keep matters simple. If the engagement is for a week or 2, or even a month or so, it will be short term; if the engagement is for a year or more, most likely it will be long term. I say again that these conclusions have not been arrived at without reference to experience. They are conclusions based upon some knowledge of the designated activities. What is that knowledge? It is of the duration of contracts with consultants performing the 2 categories of work, though not necessarily work in relation to the establishment of overseas markets. I freely admit that my knowledge is limited. That may lead me into error, but not, I suspect, at the extremities of the scale.

52 It follows from what I have said that to decide whether a grant applicant has been "engaging [a person] as a consultant on a short term basis" , it is preferable to contrast the relevant engagement with other engagements to perform like work in like circumstances. Those engagements may be by third parties (the best point of reference) or by the grant applicant in previous years. If no evidence of such engagements is available, the task will be more difficult. A judgment will have to be made whether the engagement or engagements result in the grant applicant "engaging" a consultant on a short term basis having regard to factors such as: (a) if there be one engagement, the duration of the engagement; (b) if there be more than one engagement, the number, frequency and duration of the engagements; (c) the duration of similar engagements, though not entered into for the export market; (d) how a consultant might research or promote the grant applicant ' s goods or services (as the case requires) in the particular market in which the grant applicant operates; and (e) the precise work to be undertaken by the consultant. It may be assumed that in some cases an examination of these factors will not produce a clear answer. That is why I say the resolution of the issue will be a matter of judgment.

53 The trial judge thought that, having regard to the objects of the Export Market Development Grants Act 1997 (Cth), "short term is used to describe the relationship between the activities undertaken and the totality of the time and other factors required for the development of the market for the product in question" . Thus, he said that "what constitutes a long term basis or a short term basis will depend on the features of the market for the product being developed" .

54 It will be apparent that I do not agree with this view. The error in the reasoning of the trial judge is that it resolves the measure of one activity without regard to the different possible periods within which that activity may be performed. In any event, it adopts as a yardstick something which will often not be capable of determination.

55 Did the tribunal fall into error? It did not adopt the approach suggested by the trial judge. The tribunal said that it reached its conclusion after examination of "all relevant factors including (but not limited to) the nature of the relationship between the applicant and the consultant, the particular needs of a business the applicant is developing and the purpose for which the consultant was engaged" .

56 My reading of the tribunal ' s reasons leads me to suspect that it arrived at its conclusion for the substantial reason that the consultant was engaged for a series of projects under a series of separate engagements, and not pursuant to one overarching agreement. If that is the case, its decision would have been in error. But suspicion is not proof. I am not permitted to go behind the tribunal ' s statement that it took other factors into account. Precisely what those other factors were is not clear. But no complaint is made that the tribunal failed to give proper reasons.

57 It is for these reasons that I join in the order that the appeal be dismissed.