Mainstar's appeal
38 AAT made the following further findings specifically in relation to Mainstar's application:
- No product development briefs were prepared for Company Budplan 2 prior to 30 June 1996. They were not prepared until September 1996 (par 36);
- Preparation of product development briefs for cosmeceuticals was sought from Mr Middleton prior to 30 June 1996, but he declined the invitation, since this was an area outside his expertise (par 36);
- The three product development briefs which were prepared before June 1996 are not available to Mainstar, as they did not deal with the products targeted by Company Budplan 2 (par 42);
- The involvement of Technical Consultancy Services Pty Limited and Mr Staton could not be regarded as a supporting activity because of its timing (par 37).
AAT concluded:
"In the absence of any other supporting activities assisting the second applicant's case, it must therefore fail." (par 36)
39 Mainstar claims that before AAT, it relied on the following activities which were performed in the year ended 30 June 1996, allegedly on behalf of Mainstar, as supporting activities:
"(a) the retaining of an English pharmaceutical consultant, Mr John Cannell, to advise on UK and European regulatory requirements for relevantly, cosmetic treatments and products, comprising a letter dated 14 June 1996 from Mr Priest to Mr Cannell (AB 1655) and his reply dated 25 June 1996 (AB 1657-1667);
(b) the commissioning, and receipt, of a report by Mr Cannell entitled "Medicinal and Cosmetic Products in the EC" (AB 1659) relevantly concerning "allowable" cosmetic claims (AB 1660) and information package requirements for cosmetics (AB 1661);
(c) supporting activities which were common to Company Plan 1 and company Plan 2, in particular the supporting activities relating to tea tree oil's "mode of action" (see the oral evidence of Dr Bell at AB 219.2 and of Mr Priest at AB 353.9) and a preservative system based on tea tree oil (see paragraphs 66-67 of the statement of Mr Priest at AB 1683 and his oral evidence at AB 385.6). These common supporting activities included the product development brief for acne (see Mr Priest's oral evidence at AB 407.5 and AB 409.6) and discussions between Mr Priest and Mr Staton of Technical Consultancy Services Pty Limited and other potential researchers (see Mr Priest's oral evidence at AB 403.1);
(d) the Product Concept Development Report prepared by Mr Robert Jarmyn which was annexed to the letter from Mr Priest to Mr Middleton of 24 April 1996 (AB 1512-1522) on which Professor Brown opined, in evidence which was unchallenged before the Tribunal (AB 2889), that:
'It is plain that the research and development which was, subsequent to the report undertaken under the respective Company Budplans, followed and flowed from this report. That research and development is directly related to the report.'
(e) the attempt to commission Mr Middleton to prepare a product development brief for cosmeceuticals, to which the Tribunal refers in paragraph 36 of its Reasons quoted above (see AB 1489).
(f) the report prepared by Sue Akeroyd and Associates in June 1996 (see AB 1677.1 and AB 2331) which Professor Brown referred to, in his evidence which was relevantly unchallenged, as 'a step in the process of any research and development which any scientist/researcher would usually take' (AB 2883.9)."
40 Mainstar says that AAT was bound to take these matters into account and, except in relation to the activities referred to in par (e), failed to consider them. Mainstar submits that a failure by AAT to take into account relevant considerations which it was bound to take into account in reaching its decision constitutes an error of law: Sullivan v Department of Transport (1978) 20 ALR 323 at 349, 350; Kuswardana v Minister for Immigration & Multicultural Affairs (1981) 35 ALR 186 at 200.
41 Section 43(2) of the Administrative Appeals Tribunal Act 1975 (Cth) obliges AAT to give reasons for its decision. Section 43(2B) of that Act requires those reasons to include AAT's findings on material questions of fact, and a reference to the evidence or other material on which those findings were based. A failure to provide adequate reasons is an error of law which may vitiate the decision: Comcare v Lees (1997) 151 ALR 647; Minister for Immigration and Multicultural Affairs v Singh (2000) FCR 469 at [39] and [55].
42 Whether the activities in question are supporting activities is a question of fact, rather than a matter involving the exercise of a statutory power or discretion. Factual errors are not the subject of judicial review. Thus the issue is not whether AAT failed to take relevant considerations into account in reaching its decision on that factual question, but whether AAT failed to give adequate reasons for its decision so as to vitiate that decision. In Martin v Australian Postal Corporation [1999] FCA 655 at [18] Burchett J suggests that a deficiency in reasoning may also be seen as a failure to consider relevant matters, or as suggesting that irrelevant matters have been considered. With respect, I have reservations as to whether that is so, at least in the present context. However, the matter was not argued, and it is not necessary for me to pursue the question as to whether a deficiency in reasoning may also be characterised in the manner suggested by Burchett J.
43 In Martin at [19] Burchett J said that the essence of the requirement that the Tribunal give reasons is that its decision must be understandable. Two purposes are thereby served. The first is that a party concerned may be able to see the basis of the decision, and whether it is legally sound, or affected by some error. The second is that the discipline of the necessity to render reasons helps to keep any Tribunal on the path of sound reasoning and sound conclusions. These observations were endorsed by Tamberlin J in Chapman v Australian Postal Corporation [2000] FCA 1700.
44 The notes to s 43 in the Butterworths Federal Court Practice (65,685.162) state that a failure to consider a submission worthy of serious consideration constitutes an error of law. The authorities on this topic were reviewed by Heerey J in Comcare v Forbutt [2000] FCA 837. AAT is not obliged to deal with every argument raised and every possibility that could be adverted to. But the reasons must be sufficient to expose why the decision went the way it did: see Minister for Immigration & Multicultural Affairs v Singh (supra) at [62]
45 AAT does not expressly refer to the activities mentioned in pars (a), (b), (c), (d) and (f) above in its reasons for decision. In the Board's submission, it is sufficiently clear from pars [36] and [46] of AAT's reasons that the activities in question were not regarded by AAT as amounting to supporting activities: the production of the product development briefs was the first step along the road to research and development, hence activities antecedent thereto could not qualify as "supporting activities". The further question of whether these activities were carried out on behalf of Mainstar was not addressed by AAT.
46 AAT's reasons are entitled to a beneficial construction, but I am unable to extract from those reasons a finding that activities antecedent to the production of product development briefs are incapable of amounting to supporting activities. If that were so, then why address, on behalf of both Phai See and Mainstar, the involvement of Technical Consultancy Services Pty Ltd prior to 30 June 1996 in par 37 of AAT's reasons?
47 Mainstar submits that par 37 of AAT's reasons addresses only one of a number of matters which were expressly relied upon by Mainstar as constituting "supporting activities" conducted on its behalf prior to 30 June 1996. The case was put to AAT on the basis that whilst those activities were not conducted exclusively for the benefit of Mainstar, they were supporting activities conducted for the common benefit of all of the plans earlier referred to, in circumstances where they satisfied the description, in relation to each plan as, "its research and development" activities. Thus Mr Priest said (at AB 409):
"You've given some general evidence so far but I want to be specific now about cosmeceuticals, were you doing anything about company Budplan number 2 towards developing product development briefs and getting the research there under way in or prior to June of 1996?---I can't be specific, no, other than the work that was being carried out was really being carried out in most cases with a view to all the projects that we were going into."
48 That case might fail, as a matter of fact, for any number of reasons. The so called "common activities" might not be regarded as "supporting activities". AAT might conclude that even if they were supporting activities in the abstract, the activities were not conducted on behalf of Mainstar, even if the activities, or some of them, had some relevance to Mainstar's proposed operations. There is no finding in relation to Mainstar, equivalent to that referred to in par 30 above.
49 In relation to items (a) and (b) in par 39 above, it was submitted by the Board that it was "quite clear" that the communications in question did not include the subject matter of Company Budplan No 2, with which Mainstar alone was concerned. The communications do deal with "cosmetic products", which are the subject of Budplan No 2. I cannot exclude the possibility, merely by reading the letters, that a trier of fact might conclude that, at least in part, the communications were relevant to Budplan No 2. Relevance to Budplan No 2 is not of itself sufficient to characterise the communications as supporting activities, still less as activities conducted by or on behalf of Mainstar. But I do not accept that a trier of fact must necessarily exclude the communications in question when considering whether supporting activities were conducted on behalf of Mainstar in the relevant year on the ground that the communications have nothing to do with Budplan No 2.
50 No specific submissions were put by the Board in relation to item (c) above. There was some evidence before AAT capable of supporting a conclusion that work of a systematic, investigative or experimental nature was carried out which was not specific to either Company Budplan 1 or 2, because the work was relevant to both plans. See for example Dr Bell (at AB 219).
51 In relation to item (d) above the Board contends that the Product Concept Development Report is in respect of Acne Treatment, Hospital and Antiseptic Products and Oral Hygiene - products with which Mainstar was not concerned. The report preceded any product development brief. But the report contains specific reference to cosmeceuticals, and there was evidence from Professor Brown, which, if accepted, linked subsequent research and development to that report.
52 As to item (e) above it is clear from par 36 of its reasons that AAT had the unsuccessful attempt to commission Mr Middleton well in mind. Whilst there is no express statement to this effect, a fair reading of AAT's reasons is that it did not regard this unsuccessful attempt as a supporting activity.
53 As to item (f), in June 1996 Sue Akeroyd and Associates prepared a report for Xanadu styled "Acne Treatment Options". In Mr Priest's statement, this report was cited as a consultants' report into the state of the industry for acne treatment dated June 1996. Presumably this report is relied upon as an illustration of the commonality of activity between the various Budplans, as its relevance to Mainstar's application otherwise escapes me. So far as I can see, this report was not the subject of specific submission to AAT in the paragraphs of the written submission to which my attention was directed. Nor is it the subject of specific reference in par 4 of Mainstar's notice of appeal. I am not satisfied that item (f) adds anything to item (c).
54 I have earlier rejected the Board's submission that an activity will only be carried on by or on behalf of a particular company if conducted on behalf of that company alone. I did not understand the Board otherwise to submit that the case outlined in par 47 above was one which, as a matter of law, was incapable of resulting in a decision in Mainstar's favour, except to the extent that a submission to that effect was inherent in the specific submissions dealt with in pars 49-53 above.
55 I have earlier rejected the Board's principle submission that AAT declined to recognise the activities in question as supporting activities because they antedated the product development briefs, the production of which was the first step in research and development. That only leaves the statement in par 36 of AAT's reasons: "In the absence of any other supporting activities assisting [Mainstar's] case, it must therefore fail", as constituting AAT's reasons for rejecting Mainstar's claim.
56 That statement contains at least the seeds of ambiguity. It might convey that unless there are other supporting activities the claim must fail, or it might convey that because AAT has adjudged that there are no other supporting activities the claim fails. The fact that AAT, in par 37, went on to consider an alleged supporting activity relied by Phai See and Mainstar suggests that the former is the case.
57 Whichever construction be placed on par 36 of AAT's reasons, there has been, in my view, a substantial failure by AAT to state its reasons for rejecting the case put by Mainstar that activities conducted for the common benefit of all the plans in the year to 30 June1996 were supporting activities which satisfied the description, in relation to Mainstar, of "its" research and development activities. Whilst one can speculate about the matter, AAT does not explain why it rejected the case which was articulated by Mainstar. AAT does not indicate the path which it followed in coming to its conclusion. At least on the current state of the authorities, a failure to give adequate reasons is an error of law, and the matter must be remitted to AAT for further consideration.