21 Counsel for the Board submitted that a second error in par 126 from the Tribunal's reasons arises by way of implication. The argument was to this effect: having satisfied itself, as a matter of fact, that the Australian subsidiary had achieved some change to the terms of the TALA as originally presented by the Japanese holding company, the Tribunal incorrectly assumed that the achievement of these changes satisfied the test that the contract or transaction had been entered into by persons dealing with each other from positions of comparable bargaining power.
22 Although, as a matter of fact, it might be difficult for a subsidiary to satisfy the Board that the necessary measure of independence was present so that the Board could be satisfied that there had been comparable bargaining power, Mr Basten did not suggest, for the purpose of his argument, that there never could be "comparable bargaining power" when a holding company was negotiating with its subsidiary; Mr Basten's attack came from another direction. He submitted that the Tribunal had overlooked the evidence that the Australian company was desperate for the Japanese technology: indeed it was so desperate that it ran the risk of going out of business if the technology was not forthcoming. This meant, according to his submissions, that the persons who represented the Australian interests were in such a supplicant situation that there could not be any "comparable bargaining power". In response to an inquiry from me, Mr Basten said that the situation so described could exist even when two companies were unrelated. In other words, if the information that the licensor was willing to licence was so important to the licensee, the needs of the licensee could mean the absence of comparable bargaining power.
23 In par 5 of the Explanatory Memorandum that accompanied the Bill when it was introduced in the House of Representatives, an emphasis was placed on the expression "exploitation otherwise than on normal commercial terms":
"The Board's powers are to be broadened so as to ensure that large claims may not be made for projects which have an insufficient Australian content. The Bill also tightens up existing provisions which are designed to enable the Board to cause the loss of tax benefits where a company fails, in any significant way, to exploit the results of revenue subsidised R&D on normal commercial terms and to the benefit of the Australian economy."
24 That emphasis was stressed when the Explanatory memorandum discussed the proposed s 39C:
"Proposed section 39C defines the expression 'exploitation otherwise than on normal commercial terms'. The expression applies to the situation where the terms of a contract or transaction are different from those that would have been included if the parties had been dealing at arm's length and from positions of comparable bargaining power. This provision will prevent the loss of the return that should result from successful research and development. The taxation consequence of exploitation of an activity otherwise than on normal commercial terms is set out in proposed section 39N of the IR&D Act and clause 5 of this Bill (proposed subsection 73B(33) of the ITAA)."
25 Mr Basten submitted that the Tribunal did not address the terms and conditions of the TALA because of its findings that the TALA had been entered into by persons who were dealing with each other at arm's length and from positions of comparable bargaining power. This approach by the Tribunal was, so he claimed, an error. It was his submission that the task of the Tribunal was to examine the substance of the TALA - that is, the Tribunal should not have looked at the dealings or the negotiations that had preceded the making of the TALA, but at the terms of the TALA.
26 I cannot accept that submission; I do not see how a reading of s 39C could allow for such an interpretation.
27 Some might think, for example, that a licensing arrangement, under which the licensor granted an exclusive, non transferable, right in return for the payment of royalties and also in return for a undertaking from the licensee to grant to the licensor a non-exclusive, irrevocable, worldwide, royalty free licence in respect of any technical information that the licensee might acquire, could possibly classify as an exploitation on normal commercial terms. The obligation that was on the Board, was, in my opinion, an obligation to have regard to commercial standards as they applied in the relevant industry. In performing that exercise, it would not have been sufficient for the Board to limit its inquiries to the terms of the contract or transaction that was under scrutiny if the Board, as a result of such a scrutiny, formed the opinion that one or more of the terms suggested that the parties were not dealing at arm's length or from positions of comparable bargaining power. In such a case the Board had a further obligation to examine the history of the matter, for that history, which would involve an examination of the early dealings and negotiations between the parties might confirm or refute the initial opinion of the Board. Only by an examination of the terms of the contract or transaction in conjunction with the history of the parties' earlier dealings and negotiations could the Board properly form the opinion to which s 39C of the Act refers.
28 Mr Basten submitted that the effect of the Tribunal's decision was that any change in the original terms of a proposed contract or transaction that were implemented at the request of one party, would indicate that the parties were in "positions of comparable bargaining power". Such a proposition would be incorrect, but I do not think that such a statement fairly reflects the decision of the Tribunal. It would be a question of fact for the Tribunal to investigate. All that could be said at this level is that the greater the effect of the changes, the more it points to "positions of comparable bargaining power". Having said that however, it must not be overlooked that, in the particular circumstances of a particular case, an appropriate inquiry might legitimately reveal "positions of comparable bargaining power" even though the supplicant party does not seek any alterations to the proposed contract or transaction or, conversely, is denied its request for an amendment. It is a task for the Tribunal of fact to investigate and to adjudicate upon all the relevant material.
29 Counsel for the Board was critical of the Tribunal's reliance on the contents of other agreements that were received into evidence; he commented, for example, that there was no evidence before the Tribunal about the various licensee's bargaining power. This criticism was, in my opinion, a derivative of the Board's principal argument that s 39C strikes down those contracts and transactions where a supplicant Australian company must have the technology that is in the hands of the licensor. I cannot accept that argument. It assumes, wrongly in my opinion, that the needs of the supplicant can be the determining factor. In my view, the proper approach is to remind oneself that the needs of the supplicant may be one of many determining factors in ascertaining whether the persons were dealing with each other from positions of comparable bargaining power.
30 The Tribunal undertook the task of examining, in some detail, the history of the negotiations; counsel for the Board criticised aspects of that examination. It is not the province of this Court to adjudicate on the Tribunal's fact finding procedures unless, of course, those procedures reveal an error of law on the part of the Tribunal. The fact that the Tribunal might draw a particular conclusion from its inquiry is not readily open to review by this Court. In this case the Tribunal, in my opinion, correctly examined the evidentiary material that had been placed before it. It examined the history of the negotiations that preceded the execution of the TALA; it compared the contents of the TALA with other like agreements between unrelated parties; it formed an opinion on these facts that was reasonably open to it.
31 Counsel for the Board acknowledged that it was not open to this Court to engage on a fact finding exercise; he explained that his purpose in seeking a review of the Tribunal's inquiry into the facts was to establish that the Tribunal had proceeded down the wrong path; it had, so it was claimed, diverted itself from the statutory test in that it failed to consider whether the respective positions of power of each company was such that they could be described as comparable. Comparable, in the statutory context, so it was argued, required that the parties have "a level of similarity". It was not necessarily "equality" but it was, according to the Board's submission, "such a level of similarity as would allow the positions of power to be compared". The fact that the Tribunal was able to identify three areas where the Australian company successfully negotiated changes to the proposed TALA might have been an indication that the Australian company had some input into the final document but that did not mean, so the argument concluded, that the persons had been dealing with each other from positions of comparable bargaining power. It was then submitted that this translated into an error of law when the Tribunal assumed that, because it had identified three changes that had been made to the proposed TALA at the instigation of the Australian company, it had identified positions of comparable bargaining power.
32 If the Tribunal were to do no more than observe the presence of changes to a draft agreement and thereafter conclude that the changes, because they were made at the instigation of the licensee, established positions of comparable bargaining power, that would be wrong. But that does not do merit to exercise that was undertaken by the Tribunal. It assessed the nature of the changes, the circumstances under which they were made during the course of the negotiation process and then compared the end result with the contents of like agreements that had been entered into by unrelated companies; in fact the Tribunal made a very detailed analysis of all relevant facts before coming to its conclusions that the nature of the changes aided it in reaching its conclusion that the persons dealt with each other from positions of comparable bargaining power. That exercise was a fact finding exercise; that this Court might have reached a different conclusion if it had been charged with the responsibility of examining the facts is not to the point; it was a finding that was reasonably open to the Tribunal on the material that was before it. Some might say that the Tribunal's finding was inconsistent with its earlier findings in par 96 that Bridgestone "had no other option but to get this technology from the parent company" and in par 125 that it "did not have a strong bargaining power from which to manoeuvre". Indeed counsel for the Board went so far as to submit that the Tribunal dismissed them as immaterial. There is obvious merit in this proposition, but the answer must lie in recognising the role of the fact-finding Tribunal. It had pointed to weaknesses in Bridgestone's position, yet, despite those weaknesses, it felt able to conclude that the parties dealt with each other "from positions of comparable bargaining power". In my opinion, that finding was open to the Tribunal on the evidence that it had before it.
33 Although the word "comparable" is found in s 39C of the Act, the legislation uses the word "commensurate" in s 39D - the provision that deals with exploitation otherwise than for the benefit of the Australian community. Subsection 39D(1) reads as follows:
'The exploitation of a particular result of an activity shall be taken for the purposes of this Part to be an exploitation otherwise than in a manner that is for the benefit of the Australian economy if, in the opinion of the Board, the profits or gains to residents of Australia accruing directly from the exploitation of a significant aspect of that result are not commensurate with the amount expended in the carrying on of that activity in Australia."
34 The Macquarie Dictionary (Rev Ed) defines "comparable" as meaning "capable of being compared" or "worthy of comparison"; it then attributes several meanings to "comparison", one of which is "that function of any adverb or adjective used to indicate degrees of superiority or inferiority in quality, quantity or intensity". "Commensurate", on the other hand has a measure of equality: thus its first meaning is "having the same measure; of equal extent or duration". "Compare" has been described by some writers as a "troublesome" word. Much depends on whether one is asked to "compare with" or asked to "compare to". The former notes similarities whereas the latter calls for an examination and discussion about points of similarity and dissimilarity.
35 The Tribunal, in my opinion quite correctly, drew attention in its reasons to the presence of these two words - "comparable" and "commensurate". It then said:
"The Tribunal considers that, on its understanding of the ordinary usage of the word, 'comparable' cannot be said to mean 'equivalent' or 'commensurate'."