Australian Trade Commission v Isaac Jewellery Pty Ltd

FACTS 5 ABJ Australia Pty Limited ('ABJ') conducted a business as a designer, manufacturer and wholesaler of jewellery in Sydney for approximately 25 years. Its directors were Mr Isaac Atakliyan ('Mr Atakliyan') and his brother Aram. The business exported substantial quantities of manufactured jewellery and received grants under the EMDG Act. 6 In 2004 following a disagreement each brother formed new companies and commenced separate businesses both engaged in the manufacture of jewellery. The equipment and the stock used in the business of ABJ were divided between the two brothers. In July 2005 Isaac Jewellery Pty Ltd ('Isaac Jewellery') was incorporated and Mr Atakliyan became its sole director and share holder. In around September 2005 Mr Atakliyan purchased a property in Market Street, Sydney and conducted the operations of Isaac Jewellery from that premises. The purchase price was partly met using a portion of the proceeds of the sale from the property which had been formerly owned by himself and Aram, and had been used by ABJ for the conduct of its business. 7 On 6 July 2007 Isaac Jewellery lodged an application form with Austrade for a grant under the EMDG Act in respect of claimed expenditure incurred during 2006/2007 in the amount of $120,114. 8 Section 101(1)(d) of the EDMG Act empowers the Minister for Trade ('the Minister') to determine, by legislative instrument, 'guidelines to be complied with by the CEO in determining, for the purposes of subparagraph 94(1)(b)(ii), whether a business or part of a business (the old business) that was carried on by a person is similar to a business (the new business) being carried on by another person to such an extent that the new business should be treated as a continuation of the old business'. 9 The Export Market Development Grants (Change in Ownership of Business) Guidelines 2006 (Cth) ('the Guidelines') in respect of s 94 were made by the Minister on 19 July 2006. Section 4(2) of the Guidelines specifies eleven criteria which must be considered by Austrade in determining whether the new business is similar to the old business. 10 Austrade, having applied the criteria, rejected the application for a grant by Notice of Determination of Grant dated 27 July 2007. Austrade considered Isaac Jewellery to be a continuation of the business previously conducted by ABJ. Since ABJ had exhausted its entitlement to grants, Isaac Jewellery's application for a further grant was refused. 11 Isaac Jewellery thereafter sought a review by Austrade of the decision. The review was duly held but it concluded that Isaac Jewellery was ineligible upon the following grounds: Section 94 of the EMDG Act applies if a person is carrying on a business (new business) which is similar to one carried on previously by another person (old business) and the two businesses are similar to such an extent that Austrade is satisfied that the new business should be treated as a continuation of the old business. We note that in your case the old business, ABJ Australia Pty Ltd, has been the recipient of the maximum entitlement of seven grants up until the 2003-04 grant year.

Austrade has carefully examined and taken into account the criteria set out in the Ministerial Guideline EMDG (Change of Ownership Guideline) 2006 in deciding whether Isaac Jewellery P/L should be treated as a continuation of the old business. Accordingly, Austrade has concluded that there are too many similarities NOT to warrant the application of Section 94 and that Isaac Jewellery P/L therefore be treated, for EMDG purposes, as continuing the old business thus inheriting the grant history of ABJ Australia P/L. As ABJ Australia P/L has received 7 prior grants, I regret to advise that Isaac Jewellery P/L are [sic] no longer eligible for a grant.

12 Isaac Jewellery sought judicial review of Austrade's review decision before the Tribunal. The Senior Member, in determining the review in favour of Isaac Jewellery said: I have identified the two questions that I must consider as whether Isaac Jewellery carries on:

(a) the business, or part of the business, carried on by ABJ : section 94(1)(b)(i); or (b) a business similar to the business, or part of the business, carried on by ABJ, to such an extent that the new business should be treated as a continuation of the old business: section 94(1)(b)(ii); The questions are most conveniently addressed together.

In applying section 94, I, as the decision-maker standing in Austrade's shoes, am required to take into account the Export Market Development Grants (Change in Ownership of Business) Guidelines 2006 (the "Guidelines"): s 101(1)(d).

13 Having taken into account the criteria specified in the Guidelines, the Senior Member concluded: I have therefore come to the view, having regard to the factors identified in the Guidelines, that Isaac Jewellery is [sic] neither carries on the same business, or part of the same business, carried on by ABJ, nor does it carry on a business similar to the business, or part of the business, carried on by ABJ to such an extent that the new business should be treated as a continuation of the old business.

QUESTIONS OF LAW 14 Austrade submits that the Tribunal made two errors of law in reaching its decision. 15 Firstly, Austrade submits that the Tribunal misconstrued and misapplied s 94(1)(b) of the EMDG Act by conflating the matters to be considered under ss 94(1)(b)(i) and 94(1)(b)(ii). 16 Secondly Austrade submits that the Tribunal erred in applying the Guidelines to s 94(1)(b)(i) of the EMDG Act. The Guidelines only apply to s 94(1)(b)(ii) of the EMDG Act and require the decision-maker to have regard to the similarities (if any) and the differences (if any) between the eleven aspects of the old and new businesses specified in the Guidelines. Austrade submits that those similarities and differences are irrelevant to any consideration arising under s 94(1)(b)(i) of the EMDG Act. 17 Austrade submits that by such errors, the Tribunal misdirected itself concerning the relevance of the Guidelines as evidenced by the Tribunal's finding that 'having regard to the factors identified in the Guidelines… Isaac Jewellery… neither carries on the same business or part of the same business, carried on by ABJ…'. Such reason was the only basis which the Tribunal gave for its decision under s 94(1)(b) and Austrade submits that the Tribunal accordingly failed to correctly apply s 94(1)(b).

SUBMISSIONS OF ISAAC JEWELLERY 18 Isaac Jewellery submits that s 94(1) of the EMDG Act constitutes a precondition to the operation of s 94(2). The facts which must be proved to the satisfaction of the decision-maker or which must be proved objectively in s 94(1) are jurisdictional facts which must exist before the operation of s 94(2) is enlivened. It is submitted that the determination under s 94(1) does not turn on the satisfaction of the CEO of Austrade or, on review, of the Tribunal. Accordingly, the criteria for the application of s 94(1)(b)(i) can be determined conclusively only by a court of competent jurisdiction. 19 Isaac Jewellery submits that no question of law is involved in the appeal and accordingly the appeal is incompetent under s 44 of the AAT Act. 20 Isaac Jewellery also submits that Austrade did not contend that any of the matters advanced by Isaac Jewellery under s 94(1)(b)(i) of the EMDG Act were irrelevant to the consideration of the matters in that subparagraph and refutes the submission of Austrade that the Tribunal conflated its task by considering ss 94(1)(b)(i) and 94(1)(b)(ii) together.

NATURE OF APPEAL 21 In Comcare v Etheridge and Others (2006) 149 FCR 522 at 527 the Full Court considered the nature of an appeal under s 44(1) of the AAT Act and determined that an appeal 'on a question of law' is narrower than an appeal 'that merely involves a question of law'. The Court at 527 referred to the observations in Birdseye v Australian Securities and Investments Commission (2003) 38 AAR 55 which expressed approval of the observation of Ryan J in Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515 at 527 where his Honour said: If the question, properly analysed, is not a question of law no amount of formulary like "erred in law" or "was open as a matter of law" can make it into a question of law.

22 Order 53 rule 3(2)(b) of the Federal Court Rules (Cth) requires a notice of appeal to state the question or questions of law to be raised on the appeal. The question of law raised by Austrade's Notice of Appeal requires the Court to determine whether the provisions of the EMDG Act have been properly applied. The question asked in Austrade's notice of appeal is stated as follows: Whether the Tribunal misconstrued and misapplied section 94(1)(b)(i) of the Act when it determined whether Isaac Jewellery Pty Ltd fell within that provision by having regard to the Guidelines that apply to a d [sic] subsection of the Act, namely section 94(1)(b)(ii).

23 The Court concludes that, since no factual questions are involved in such determination, the question as submitted is one solely of law 'directing the Court's attention to the manner in which the Tribunal failed to discharge its obligations according to law…': see Collins v Administrative Appeals Tribunal and Another (2007) 163 FCR 35 at [55].

JURISDICTIONAL FACT 24 In Corporation of the City of Enfield v Development Assessment Commission and Another (1999) 199 CLR 135 at [28] the High Court of Australia observed: The term "jurisdictional fact" (which may be a complex of elements) is often used to identify that criterion, satisfaction of which enlivens the power of the decision-maker to exercise a discretion.

25 In Gedeon v Commissioner of New South Wales Crime Commission (2008) 82 ALJR 1465 at [43] the High Court said: The expression "jurisdictional fact" was used somewhat loosely in the course of submissions. Generally the expression is used to identify a criterion the satisfaction of which enlivens the exercise of the statutory power or discretion in question. If the criterion be not satisfied then the decision purportedly made in exercise of the power or discretion will have been made without the necessary statutory authority required of the decision maker.

26 Section 94(1) of the EMDG Act provides that the provisions of subsection (2) thereof apply if the requirements specified in ss 94(1)(a) and 94(1)(b) are satisfied. The fulfilment of the requirements in s 94(1)(b)(ii) is conditional upon the satisfaction of the CEO of Austrade, and such satisfaction is to be determined by the application of the Guidelines. Once a determination has been made that the requirements are met, s 94(2) then directs Austrade to treat the particulars of the previous owner as being those of the applicant. Such determination requires a judgment to be made by the CEO of Austrade. As was observed in Australian Postal Corporation v Forgie and Another (2003) 130 FCR 279 at [40] of a decision making process: '[t]his intellectual process involves matters of judgment and degree'. That is, a decision is required. 27 In the application of both s 94(1)(b)(i) and (ii) a value judgment must be made by the decision-maker. Under s 94(1)(b)(i) a decision is required to be made in respect of the question whether the new owner is carrying on the old business or a part thereof. It follows that there has been adecision made by Austrade in respect of which an appeal may lie to this Court pursuant to s 44 of the AAT Act. 28 Accordingly, the Court rejects the submission that the requirements of s 94(1) constitute jurisdictional facts, and that s 94(1)(b)(i) is capable of determination by objective facts.

DID THE TRIBUNAL ERR? 29 The statement by the Tribunal that the questions arising under ss 94(1)(b)(i) and 94(1)(b)(ii) 'are most conveniently addressed together' could mean that the decision-maker was saying no more than it was expedient to consider the facts giving rise to Isaac Jewellery's application for a grant when considering both subparagraphs. So construed, the Tribunal's decision would be unremarkable. However, the challenged statement is also consistent with another interpretation, namely that the issues arising under both subparagraphs were to be determined against the same criteria. Such a construction would be erroneous since the issues to be determined under each subparagraph require the application of different criteria. 30 The Court infers from the next statement of the Tribunal, namely '[i]n applying s 94, I, as the decision-maker… am required to take into account the Export Market Development Grants (Change in Ownership of Business) Guidelines 2006', that the Tribunal approached the interpretation of ss 94(1)(b)(i) and 94(1)(b)(ii) as if the Guidelines applied to both subparagraphs. By virtue of s 101(1)(d) of the EMDG Act the Guidelines are applicable to s 94(1)(b)(ii) but not to s 94(1)(b)(i). 31 Such construction is reinforced when the Tribunal's findings are considered. Although the issues to be considered under ss 94(1)(b)(i) and 94(1)(b)(ii) are distinct, the Tribunal did not attempt to consider the requirements of the two subsections separately. The Tribunal, in stating that 'I have therefore come to the view, having regard to the factors identified in the Guidelines, that Isaac Jewellery is [sic] neither carries on the same business, or part of the same business, carried on by ABJ…', indicated that it considered that the Guidelines were relevant in determining the question under s 94(1)(b)(i). 32 Further, the Court considers that the Tribunal should not have considered s 94(1)(b)(i) of the EMDG Act in its review of Austrade's decision. The test under s 94(1)(b)(i) requires a factual consideration of whether the new owner is carrying on the business or part of the business. This does not require an investigation of the similarities between the old business and the new business, as subparagraph (i) does not anticipate a new business being in existence. The only question to be considered under such subparagraph is whether the business, previously conducted by its former owner, is being conducted by the new owner. 33 Since there is no issue that the old business, namely ABJ, had ceased to operate, the Tribunal had no reason to consider s 94(1)(b)(i). The issue for determination was whether the new business was similar to the old business as provided for in s 94(1)(b)(ii). This distinction appears to have been overlooked by the Tribunal. 34 The Court therefore concludes that the Tribunal misconstrued and misapplied s 94 of the EMDG Act by failing to perceive that the circumstances to which s 94(1)(b)(i) applied were not relevant to the review before the Tribunal, and further by considering that the Guidelines applied to both ss 94(1)(b)(i) and 94(1)(b)(ii). 35 Isaac Jewellery referred to the fact that Austrade had not drawn such distinctions before the Tribunal. However, the conduct of Austrade before the Tribunal cannot operate as a constraint upon the consequences which flow from a misinterpretation of s 94 of the EMDG Act. 36 The appeal is allowed. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy.

Associate: Dated: 3 February 2009 Counsel for the Appellant: Ms Henderson

Counsel for the Respondent: Mr Lloyd SC with Mr Reynolds