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[2021] AATA 706
Administrative Appeals Tribunal of Australia
2021-03-24
Original judgment source is linked above.
(a) Developing a process to enable the pyrolysis of MSW to produce a synthesis gas ("syngas") with consistent quality, including:
(i) Designing process parameters with capability for the varying MSW inputs, with each component undergoing varying decomposition reaction pathways; and
(ii) Designing methods for MSW preparation to improve consistency of the input;
(b) Developing a process that can switch the syngas between combustion for electricity generation or cleaning and condensing for fuel production;
(c) Developing a process for cleaning the syngas, which could have varying composition, such that sufficient quality fuel or amounts of electricity can be produced; and
(d) Any other services required from time to time by the Applicant.
(a) Phase 1 - provision of a Preliminary Design Report including Technical Summary and Design Overview and technical specifications for key proprietary equipment;
(b) Phase 2 - provision of a Detailed Design Report including technical specifications for the auxiliary equipment; and
(c) Phase 3 - provision of plant Construction Drawings.
(a) A process description, a Mass & Energy balance, and Process Flow Diagrams ("PFD");
(a) reviewing the process design provided to Lycopodium by PLPD and using the engineering drawings to construct a 3D model of the R & D Project Facility plant;
(b) independently validating and providing input into the process using a process modelling software package known as Aspen+. Aspen+ was used for the design, operation and optimisation of process and manufacturing facilities;
(c) modelling various parameters and iterations of calculations; and
(d) using Aspen+ software to work out where the reactions would work and how big the Applicant needed to make the equipment.
(a) Core Activity 1.1, "Process design", being:
(b) Supporting Activity 1.1.1, "Project Evaluation and Documentation", being:
... Undertaken in conjunction with the detailed and concept design phases:
(c) Supporting Activity 1.1.2, "Project management", being:
(a) Activity 1.1 was not a core R & D activity for the purposes of the IRD Act; and
(b) Activities 1.1.1 and 1.1.2 could not be supporting R & D activities.
(a) The Applicant had not demonstrated that Activity 1.1 was a core R & D activity, as:[11]
(i) The Applicant had "not demonstrated that the outcomes of its experiments cannot be known or determined in advance on the basis of current knowledge, information or experience" and that the proposal only involved "optimising...... technology and processes [known to work] to account for different composition of municipal solid waste streams";
(ii) "the project activity relates to operational challenges that a qualified professional could overcome using their experience and knowledge in the field" and the Applicant "has not provided a detailed description of any experiments undertaken to address a scientific theory";
(iii) The Applicant had "not demonstrated that the activity was conducted for the purpose of generating new knowledge..." and "the knowledge being sought does not go beyond validating existing processes and knowledge in its particular circumstances"; and
(b) As Activity 1.1 was not a core R & D activity, Activities 1.1.1 and 1.1.2 (as the claimed supporting R & D activities for Activity 1.1) could not be supporting R & D activities.
"Subdivision 355-A - Object" of the ITA Act provides:
355-5 (1) The object of this Division is to encourage industry to conduct research and development activities that might otherwise not be conducted because of an uncertain return from the activities, in cases where the knowledge gained is likely to benefit the wider Australian economy.
355-5 (2) The object is to be achieved by providing a tax incentive for industry to conduct, in a scientific way, experimental activities for the purpose of generating new knowledge or information in either a general or applied form (including new knowledge in the form of new or improved materials, products, devices, processes or services).
"Subdivision 355-B - Meaning of R & D activities and other terms" includes the following sections which provide:
(1) Core R&D activities are experimental activities:
(a) whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:
(i) is based on principles of established science; and
(ii) proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and
(b) that are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).
(2) However, none of the following activities are core R&D activities:
(a) market research, market testing or market development, or sales promotion (including consumer surveys);
(b) prospecting, exploring or drilling for minerals or *petroleum for the purposes of one or more of the following:
(ii) determining more precisely the location of deposits;
(iii) determining the size or quality of deposits;
(d) research in social sciences, arts or humanities;
(e) commercial, legal and administrative aspects of patenting, licensing or other activities;
(f) activities associated with complying with statutory requirements or standards, including one or more of the following:
(iii) routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things;
(g) any activity related to the reproduction of a commercial product or process:
(i) by a physical examination of an existing system; or
(ii) from plans, blueprints, detailed specifications or publically available information;
(h) developing, modifying or customising computer software for the dominant purpose of use by any of the following entities for their internal administration (including the internal administration of their business functions):
(i) the entity (the developer) for which the software is developed, modified or customised;
(iii) an *affiliate of the developer, or an entity of which the developer is an affiliate.
(1) Supporting R&D activities are activities directly related to *core R&D activities.
(a) is an activity referred to in subsection 355‑25(2); or
(c) is directly related to producing goods or services;
the activity is a supporting R&D activity only if it is undertaken for the dominant purpose of supporting *core R&D activities.
"encourage industry to conduct research and development activities that might otherwise not be conducted because of an uncertain return from such activities, in cases where the knowledge gained is likely to benefit the wider Australian economy." Such object is achieved by "providing a tax incentive for industry to conduct, in a scientific way, experimental activities for the purpose of generating new knowledge or information "in either a general or applied form (including new knowledge in the form of new or improved materials, products, devices, processes or services_)_"".
(a) the activities comprising Core Activity 1.1 were "core R & D activities" within the meaning of s 355-25 of the ITA Act; and
(b) the activities comprising Supporting Activities 1.1.1 and 1.1.2 were "Supporting R & D activities" within the meaning of s355-30 of the ITA Act.
(a) The "T" documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (AAT Act);
(c) An article by Thomas Malkow, "Novel and innovative paralysis and gasification technologies for energy efficient and environmentally sound MSW disposal" (2003);[18]
(d) A reproduction of a series of slides and photographs of "Burgau MW Pyrolysis Plant";[19]
(e) A Vlobe article titled "Air pollutant emissions from Combustion Processes and their Control";[20]
(f) An article titled "The Eddith Thermolysis Process - A ground-breaking solution for clean treatment of wastes";[21]
(g) A bundle of documents entitled "Rotary Kilns: Transport phenomena and Transport Processes";[22]
(h) Documents headed "D18 - D22" referred to in Professor Haynes first report;[23]
(i) An email chain between Paul Morey and Mr A with attached letter dated 20 March 2018 from Lycopodium Pty Ltd and five attached drawings;[24]
(k) Two documents concerning Louisville Dryer Company.[26]
(a) Mr A, the sole director of the Applicant, gave viva voce evidence. Also received in evidence were two witness statements made by him on 12 May 2017 (Mr A's first statement) and 1 November 2017 (Mr A's second statement).
(b) Mr Paul Morey also gave viva voce evidence. He made two witness statements dated 12 May 2017 (Mr Morey's first statement) and 30 October 2017 (Mr Morey's second statement) which were also received in evidence.
(c) Mr G, a project manager, gave both viva voce evidence and made a witness statement dated 30 October 2017 which was also received in evidence.
14 November 2018 (Professor Haynes' second report) were in evidence. 3. A joint expert report of Mr Bland and Professor Haynes dated 24 April 2018 (Joint Expert Report) was also in evidence. 4. The evidence of Mr Bland and Professor Haynes at the hearing of the application was given in accordance with the "concurrent evidence procedure" articulated in paragraph 4 of the Administrative Appeals Tribunal "Use of Concurrent Evidence in the AAT" Guideline issued by the then President on 30 June 2015.[27]
OBJECTIONS TO VARIOUS PARTS OF THE EVIDENCE OF PROFESSOR HAYNES AND MR MOREY
12 months before the hearing. Further, Professor Haynes was open to
cross-examination, in which he could be challenged on any opinion expressed in such report. Finally, it was open to the Applicant to make any submission as it may be advised concerning the contents of Professor Haynes' report. 10. The third ground of resistance from Respondent to the Applicant's challenges to the relevant portions of Professor Haynes' first report is prefaced on the fact that in all relevant Australian jurisdictions the "ultimate issue" rule has been abolished by the advent of the Uniform Evidence Acts. By reason of this fact, the appropriately qualified expert may express an opinion about a fact in issue, or as noted earlier the "ultimate issue". Naturally, this does not mean that the court, or in this case the Tribunal, is bound to accept such evidence. For that matter, it is not obliged to give it any particular weight. The point being it is not inadmissible as noted earlier. Therefore, this is not a ground for rejecting such evidence, or otherwise ruling it inadmissible. 11. The fourth ground relied upon by the Respondent to resist the Applicant's challenges to several portions of Professor Haynes' first report concerns the application of the reasoning of Heydon J in Dasreef referred to earlier. To some extent the grounds as articulated in the Respondent's submission on this topic overlapped with that of the third ground. It is that paragraph 56 of Heydon J's decision in Dasreef does not represent, as it was described, "an exclusionary rule" but the role of, and perhaps more accurately, the approach to be adopted concerning expert evidence. It was repeated that the rules of evidence (or more precisely the applicable Uniform Evidence Acts that have been introduced in most Australian jurisdictions) have abolished the "ultimate issue" rule, and permit an expert in certain circumstances to express an opinion on matters that ultimately must be determined by the court or tribunal, as the case may be. To do so requires the expert's evidence to explain how the field of specialised knowledge in which such witness is expert by reason of training, study or experience, and on which the opinion is wholly or substantially based, applies to the facts assumed or observed so as to produce the opinion propounded.[30] As the Respondent contends (properly relying upon paragraph 56 in Dasreef), frequently this requirement can be met very quickly and easily with little articulation or amplification once the expert witness has identified his qualifications and experience and identified the subject matter about which their opinion is proffered. 12. The fifth ground of resistance articulated by the Respondent is prefaced upon the question actually asked of Professor Haynes as an expert. It is contended that this question, and the response of Professor Haynes, contained an appropriately identified subject matter about which the opinion was proffered in, as it may be called, the Dasreef sense. This contention is amplified by the Respondent noting that in its view, the evidence available to Professor Haynes at the time he produced his first report was limited in some ways to ways what it described as a level of generality approaching vagary. It also contended that on the information available at the time Professor Haynes prepared his report it was not clear what activities in fact had been undertaken by the Applicant. Therefore, it is contended that once it is accepted that the matters on which Professor Haynes opines were properly the subject of expert evidence, it follows that the opinions are relevant. It was readily conceded that the assessment of evidence is ultimately a matter for the Tribunal. However, given the technical nature of such evidence, it is contended by the Respondent that Professor Haynes' description of what was done, and what was not done, is of considerable weight.
Ruling on the objections to Professor Haynes' evidence
R & D Activities.[33] 9. Finally, another reason for accepting the contention of the Applicant that those portions of Professor Haynes' witness statement are of limited utility or weight, arises from the findings that are made by the Tribunal based on the evidence of the Applicant's witnesses that the activities, or work, were carried out within the relevant financial year, which are addressed further in these reasons below. Therefore, the Tribunal accepts the contention of the Applicant that, in response to the first question contained in the letter of instruction to him of 25 July 2017,[34] several of the paragraphs objected to contain little more than commentary on documents produced to Professor Haynes, his personal and subjective non-expert observations on their evidentiary value, together with arguments concerning when such documents may have been created.[35] However, it must be stressed that this consideration whilst an important one, is by no means the determining factor. 10. The Tribunal finds that it is not assisted by an expert such as Professor Haynes conducting a review of the documents and expressing an opinion on their evidentiary status.
(a) That the evidence is opinion evidence and it has not been shown that Mr Morey has relevant expertise; and
(b) That Mr Morey purports to give expert evidence outside procedures envisaged by the Tribunal's Persons Giving Expert and Opinion Evidence Guideline 2015 in circumstances where the independent experts have prepared a joint report and have given concurrent evidence.
Ruling on objections to the evidence of Mr Morey
(a) The first document was a plant layout drawing showing a dual train configuration and bearing the date 12 July 2013. The evidence before the Tribunal was that a dual train configuration was first considered in late 2014.[53] In cross-examination it was put to Mr A that such document was produced by Techtrade during the design of the soil treatment plant. He expressly denied this suggestion.[54]
(b) The second document referred to was a process diagram dated 21 September 2010 which is the Applicant submitted contained elements specific to the proposed MSW facility (including separate course and waste inflow streams). Once again, Mr A in the witness box denied that such a document was produced by on behalf of the Applicant in 2010.[55]
(a) The Applicant found that by combusting the syngas for additional heat and electricity generation, the plant could improve its cost efficiency, but there was insufficient energy remaining in the gas to produce a quality fuel;
(b) The Applicant observed the kiln experienced expansion of up to one metre. Consequently, the Applicant devised new support structures that could accommodate such expansion and contraction of the kiln. This required a determination of which materials to use and which operating temperatures were optimal to minimise kiln expansion. It also observed that the kiln does not expand uniformly as it acts as a combustion chamber. To counter this, the support had to be devised in a way that accommodated for this non-uniform expansion;
(c) The Applicant concluded that a hybrid facility was not currently economically feasible due to the higher capital expenditure required to produce a sufficient quality fuel, but that it may be possible for the MSW treatment facility to generate electricity in a manner that is cost effective;
(d) That rotary kilns used in "slow pyrolysis" situations produce lower yields of condensable vapours. It could not be determined if the low proportion of condensable vapours produced by slow pyrolysis could be condensed by the "quench" method used in fast pyrolysis;
(e) The extent of expansion of the kiln was surprising and not what was expected on the basis of existing knowledge at the time;
(f) The non-uniform expansion of the kiln covered as a result of the experimental work undertaken by the Applicant was certainly new knowledge and the design of the support required to accommodate it may also be new knowledge, given the lack of similar previous experience elsewhere;
(g) It generated knowledge of the specific processes proposed, in particular how the pyrolysis process responded to changes in feed composition, feed moisture content, processing temperature and residence time, and the impact on operations and yields. Such knowledge would allow process improvements such as information that would enable the capacity of the kiln to be determined under a range of operating conditions, and enable the economic value of the kiln to be assessed; and
(h) It generated knowledge of how heat was distributed through the kiln, and how this heat affected the shape of the kiln now. This resulted in an improved device, in particular by the development of new means for supporting the kiln as referred to earlier.
(a) well supported by very similar examples, with a good history of reliable operation at a similar scale, using similar feedstock; or
(b) investigated thoroughly to ensure the process could produce the required outcomes as to specific product deals, reliability and operating costs, from the expected feedstocks.
(a) whether the required outcomes are likely to be achieved; and
(b) whether further work, in the form of laboratory or pilot scale work, is required to investigate any uncertainties that cannot be addressed completely by computer simulation.
Professor Haynes' first report of 7 September 2017
(a) The claimed Core R & D Activities did not generate new knowledge and could have been determined in advance on the basis of existing knowledge, information or experience.
(b) The outcome of the claimed Core R & D Activities reveals that the Applicant's activities did not proceed logically to test the hypothesis and were not substantially directed towards testing the hypothesis.
(c) The documents provided by the Applicant failed to demonstrate that it had applied a systematic progression of work towards testing the hypothesis.
(d) No new knowledge was created through the claimed Core R & D Activities.
(e) The claimed Supporting R & D Activities appeared for the most part either to have been indistinguishable from the claimed Core R & D Activities, or without evidence that the activity was actually undertaken.
(a) The claimed Core R & D activities did generate new knowledge. He opined that this was described principally in the second witness statement of Mr A, including annexures MA-15 to MA-18. Further, he opined that it was quite clear from the documents provided to him that the Core R & D activities were undertaken;
(b) The claimed Core R & D Activities did proceed logically to test the hypothesis and were substantially directed to testing this hypothesis;
(c) The documents provided by the Applicant evidence that a systematic approach was used for Supporting Activities;
(d) New knowledge was created through the claimed Core R & D Activities and is documented in the Applicant's application to Innovation and Science Australia;
(e) The claimed Supporting R & D Activities are distinguishable from the Core R & D Activities, and additional documentation provided by the Applicant also evidences that these were carried out; and
(f) Modelling using Aspen+ and Excel was definitely carried out.
Joint experts' report of Mr Bland and Professor Haynes of 24 April 2018 (joint experts' report)
(a) A process description, a mass and energy balance and PFD;
(b) Their outcome was only determinable by applying a systematic progression of work that:
(i) is based on principles of established science; and
(ii) proceeds from hypothesis... to logical conclusions.
(b) did have an outcome that could not have been determined in advance;
(c) did have an outcome determinable only by application of a systematic progression of work based on the principles of established science, and which proceeded from hypothesis to logical conclusions; and
(a) The Burgau plant recirculates clean flue gas, whereas the Applicant's design recirculates dirty flue gas. This would mean that the Applicant's "baghouse filter" could be smaller than it would otherwise have been. Mr Bland considered this to be an improvement, though not a particularly innovative one; and
(b) The Burgau plant uses "gas from landfill" as supplementary fuel. Carbonaceous material can normally be pyrolysed without the use of supplementary fuel, unless it is extremely wet. Therefore, he assumed that the use of "gas from landfill" enabled Burgau to generate more steam/electricity at low incremental cost and was not done because of any technical issue relating to the MSW feedstock.
Professor Haynes' second report 14 November 2018
cross-examination from Mr Bland's evidence to contend that the basic operational diagrams prepared by the Applicant simply involved an adaptation of existing engineering processes.[100] Professor Haynes, on the other hand, stated that they were an adaptation within the scope of what would be expected from a competent chemical engineer, without what he would describe as innovation. Whilst strictly that submission does record some aspects of the evidence given by Mr Bland and Professor Haynes on this topic, Mr Bland prefaced his observation by stating that the differences between what the Applicant wanted and what the Burgau plant achieved were "significantly different" such as to make quite an amount of work required. The Tribunal does not see this passage of Mr Bland's evidence as derogating from what he consistently contended throughout the course of his written and oral evidence, namely, that the significant differences between the two designs were such that the development of Applicant's design did lead to the creation of new knowledge within the meaning of the applicable section of the ITA Act. The Tribunal does not take his "concession" in that section of his evidence to be otherwise. 23. Professor Haynes touched on the Burgau plant in parts of his first report, particularly in part 11. In paragraph 11.5 of that report, he stated that the heating of the dryer by flue gases was standard practice. When questioned in cross-examination, he stated that this was an error, notwithstanding that when he was affirmed at the commencement of his evidence, he stated that the opinions expressed in his reports were accurate. Upon further probing in cross-examination, he stated that there is no standard practice at that level and that a separate dryer is in the minority. He further conceded, when examining the schematic flowsheet for the Burgau plant, that the burner was partly fuelled with landfill gas which is a difference between it and the plant proposed by the Applicant. When further pressed on this topic he conceded that there were significant differences between the Burgau plant and that of the Applicant.[101] This acknowledgement of the differences between the two plants by Professor Haynes was, to the Tribunal, consistent with the observations of Mr Bland made earlier. 24. It should also be repeated, as observed above at paragraph 186, that Professor Haynes, in his second report of 14 November 2018, made concessions concerning Mr Bland's identification of the distinctions between the Applicant's proposed plant and that at Burgau. 25. There were several other differences between the two plants conceded by Professor Haynes in cross-examination. They included the fact that the composition of the MSW treated by each plant was different. The Burgau plant had a composition of MSW that included sewage sludge. The Applicant's does not. It was also conceded that there was no use of steam in the pyrolysis process at Burgau. The Applicant's plant uses steam to produce electricity. 26. When it was specifically put to him in cross-examination that, overall, the configuration of the design of the Applicant's plant is very different to that at Burgau, Professor Haynes conceded that there are significant differences between the plant at Burgau and that of the Applicant.[102] 27. These concessions made by Professor Haynes are an important factor in the Tribunal preferring the evidence of Mr Bland on this topic and his evidence overall to that of Professor Haynes. 28. The Tribunal should make some observations concerning this portion of the evidence from Professor Haynes. It is surprising indeed that the error in paragraph 11.5 of his first report exposed in cross-examination did not see the light of day much earlier. Professor Haynes, in response to a question from counsel for the Applicant, stated he was presuming it would come up and that he would say so. This indicates that he had been aware of, and alive to, the error in that paragraph of his report for some time. It seems quite unfortunate, to say the least, that he did not correct this error at the earliest opportunity. One would have expected an eminent expert such as Professor Haynes to have corrected the error at the earliest opportunity after he realised that an error had been made, or, at the very latest, by the time he prepared his second report. The failure to correct this error by Professor Haynes is also amplified by reason of the fact that Mr Morey, at paragraphs 29 and 30 of his second witness statement made on 30 October 2017, reproduced the contents of paragraph 11.5 of Professor Haynes' first report and disagreed with its contents, providing the reasons for doing so. The Tribunal therefore concludes that Professor Haynes must have been familiar with these paragraphs of Mr Morey's second statement by the time he prepared his second statement on 14 November 2018. In the face of this reasoned and rational explanation by Mr Morey for disagreeing with Professor Haynes' opinion expressed at paragraph 11.5 of his first report, it is telling that Professor Haynes did not correct his error until he was cross-examined. 29. Another matter referred to in Professor Haynes' first report was also exposed as being wrong in cross-examination. In paragraph 11.3, he stated that the Applicant's process shown in the PFD includes shredding, drying, pyrolysis, combustion of the pyrolysis vapours and steam generation. He opined that these operations are common to all MSW plants. It was put to him that such an opinion was wrong insofar as steam generation applies and he agreed that it was. As with the observations concerning the incorrect portions of paragraph 11.5 referred to above, it is surprising to the Tribunal that this portion of his report that was conceded by him to be wrong also did not see the light of day earlier. 30. Even if one were to give Professor Haynes the benefit of the doubt in relation to the two errors identified, it seems inconceivable that these matters were not clarified when he adopted his report at the commencement of his evidence and stated that he believed the opinions expressed in it to be accurate. Overall, his approach to these errors do not reflect well on him as an expert witness. It does not assist the Tribunal. 31. The other aspect that emerges from this portion of Professor Haynes' evidence is that it does, the Tribunal finds, identify significant differences between the Applicant's design and that of the Burgau plant. The Applicant's design does have the hallmarks of new knowledge as contemplated by section 355.25(1)(b) of the ITA Act. 32. For these reasons, the Tribunal cannot accept the contention of Professor Haynes that the "additional considerations" and the knowledge sought to be obtained by the Applicant only involved a simple progression of knowledge contained in existing studies. The significant differences between the design of the Burgau plant and that of the Applicant is consistent with Mr Bland's evidence that such activities can provide new knowledge, and so too can the application, integration and optimisation of these processes' building blocks. The Tribunal accepts his contention that a sophisticated process plant is not something built by simply taking pieces of pre-existing equipment 'off-the-shelf' and bolting them together, not that the Tribunal considers that occurred in this case. 33. Another matter that should also be raised concerning the differences between the Burgau plant and that proposed by the Applicant, arises from the evidence of Mr Morey. He visited the Burgau plant and inspected it. His evidence concerning what he observed of the differences between the two has been recorded at paragraph 135 above. That evidence has been accepted by the Tribunal. It does, to some considerable extent, corroborate the opinions expressed by Mr Bland and, insofar as it does so, provides another reason for preferring his evidence on this topic over that of Professor Haynes. 34. In response to Professor Haynes' opinion on the question that the choice, design and integration are essential to the technical and commercial success of the project, much has already been stated about the sizing of the kiln. Mr Bland observed that sizing of the kiln to ensure that required residence times and heating areas were both met would normally be considered one of the most important things to be checked. He described this as a significant difference, given that the Applicant required a scale up of its kiln when compared with that at Burgau by a factor of nearly 6. He stated that it would have been vital for PLPD and Lycopodium to research a wide variety of variables. Such variables might include residence time, heat transfer area, wall thickness, rotational speed, materials of construction and kiln filling factor.[103] Mr Bland further opined that there can be a considerable amount of work required and new knowledge generated to achieve this end. The Tribunal prefers this contention. Further, in the course of his subsequent evidence before the Tribunal, Professor Haynes did not rebut this aspect of Mr Bland's evidence either in his several reports or in the witness box. 35. Mr Bland's evidence was the subject of robust criticism from the Respondent by reason of his high level or "top-down" approach, as opposed to that of Professor Haynes who adopted, as he described it, a "low-level" approach which broke the activities down into individual steps, or as he put it on one occasion during the course of his evidence, "digging down into detail". When Professor Haynes did undertake this step, he felt there was a lack of evidence. 36. The Respondent contended that Mr Bland's assessment and conclusion was not based upon an analysis of contemporaneous documentation, but rather a willingness to assume the accuracy of statements made in documents, including the application and the several witness statements filed in this proceeding. Alternatively, the Respondent argued that Mr Bland focused on outcomes, which caused him to make assumptions as to the work undertaken to achieve such an outcome. Indeed, the Respondent produced Schedule A to its closing submission which was a table containing examples of assumptions or inferences made by Mr Bland as to the nature of the work performed. The Respondent contended that inferences drawn by Mr Bland and/or those assumptions made by him could not be used to fill gaps in the contemporaneous documentation setting out the conduct of the claimed experimental activities. 37. The Applicant tackled this contention of the Respondent largely by submitting that, if the evidence of the Applicant's lay witnesses is accepted, the Tribunal should conclude that the assumptions made by Mr Bland are established. Therefore, many of Professor Haynes' criticisms fall away. The Tribunal accepts this submission. Findings of fact have been made earlier in these reasons after having had the opportunity of hearing the several witnesses called by the Applicant as well as considering the contents of the documentary evidence that was tendered. Having accepted the evidence adduced, the Tribunal agrees that the assumptions made by Mr Bland by and large were correct.[104] Therefore, it is open to it to accept the "top down" approach adopted by Mr Bland. 38. It should be repeated that Professor Haynes' report and, to some degree, his evidence from the witness box is, as contended by the Applicant, irrelevant. The reasons for reaching this conclusion are that the question is one of purpose, rather than the approach that he relied upon which was resolution of fundamental uncertainty or even novelty. On its proper construction and in the light of the decision in Moreton Resources, as observed several times already in these reasons, the words used in the relevant section of the ITA Act are capable of applying, depending on the circumstances, to activities that have the purpose of generating new knowledge with respect to the application of existing technology at a new site. The Tribunal accepts this contention of the Applicant is a further reason for preferring the evidence of Mr Bland over Professor Haynes. 39. The Tribunal also accepts the contention of the Applicant that Professor Haynes was prepared to express unqualified opinions in his reports that he later corrected in cross-examination. Several of these were highlighted by the Applicant in closing submissions. In his first report, he stated that it could not have been known in advance that there would be insufficient energy in MSW to produce liquid fuel, run the plant and generate electricity. In cross-examination he conceded that there was evidence that this had been achieved in China. However, there was little evidence of this claim. He then sought to argue his evidence that, notwithstanding this concession, the process would not be commercially viable. When further probed, he conceded that there were potential revenue streams but no reliable data costs. Ultimately, both experts agreed that it was not known or determined whether the process would be commercially viable or otherwise. This is another reason for preferring Mr Bland's evidence or opinions over those of Professor Haynes. 40. Another feature of Professor Haynes' evidence which leads the Tribunal to prefer that of Mr Bland arose from his observations in the first report concerning the Burgau plant. There were errors in this report in stating that heating the feed in a dryer using flue gases was standard practice and steam generation is common to all pyrolysis plants. Professor Haynes did not alert the Tribunal to these errors until such time as he was carefully probed in cross-examination by counsel for the Applicant. This is surprising. Experts from time to time for all sorts of reasons make errors. It is usual for them to, upon realising this, alert all people concerned, not leave it till cross-examination. Professor Haynes stated in the course of his cross-examination that he was "presuming it would come up, and I was presuming I would tell you". This is quite remarkable and does not demonstrate an appreciation of an expert's obligations under the Tribunal's Persons Giving Expert and Opinion Evidence Guideline 2015 and in particular his obligation to assist the Tribunal as a responsible expert should. 41. Some further comments should be made about the contents of the joint experts' report. The Respondent contends that for the activities for which there is agreement between the experts in the joint experts' report that they do not meet all of the statutory requirements to be core R & D activities, the Tribunal should find accordingly.[105] 42. The Tribunal accepts the submissions of the Applicant concerning this report and that it has its limitations. It should be considered in the light of what the decision-maker's statutory task is. The Applicant contends, and the Tribunal agrees, that the language of section 355-25(1) allows for a set of related experimental activities to be registered and evaluated against the statutory criteria. Therefore, a consideration of a single outcome arising from a set of related experimental activities is permitted. 43. The statutory criteria should be applied having regard to the activities as a related set of activities directed at testing the viability of creating a commercial scale plant that could convert MSW into electricity, fuel and char, which had not previously been successfully achieved. 44. Two passages from Mr Bland's evidence reinforce this conclusion. In one passage he held that the Applicant had undertaken the work at a high level, developed concepts, and then evaluated those concepts using established principles of engineering to see whether they will work in a technical or commercial sense, and then to see whether there is a better way of doing the same thing to get a better outcome.[106] 45. In another passage he describes how one can compare it with the development of an aero engine. The Applicant has had an idea to develop the business and examine what has already been done in that space. They found examples of some relevance which they have then tested to determine whether such examples can be used. Where they have been found lacking, the Applicant has sought to address those deficiencies and to improve the process. Whilst they may not have developed a process that meets their commercial goals with sufficient technical reliability it shows several improvements over what has been done before.[107] 46. The Tribunal also considers that the joint report has limited utility because Mr Bland and Professor Haynes were not requested to address, as contended by the Applicant, any relevant question. That question they were asked to address was whether the activities could "reasonably be expected" to generate new knowledge. Correctly, the Applicant contends that the question posed by the statute is whether the Applicant had the necessary purpose of generating new knowledge, not whether the relevant activities could reasonably be expected to generate new knowledge. 47. There was another ground that the Applicant relied upon to justify its contention that such report had its limitations. This contention centred around the fact that many of the "activities" addressed were not in fact activities as such. By way of example, the Applicant contended, and the Tribunal agrees, that the inclusion of documents in the preliminary Project Scope Report were not an "activity" in any relevant sense. By way of contrast, referring to the production of the Technical Summary and Final Design Overview Report, a single activity tends to overlook the collective activities undertaken that resulted in the production of the report concerned.
CONSIDERATION OF SPECIFIC ISSUES RAISED BY THE RESPONDENT
Use of Aspen+ and other computer modelling software
Similarities and differences between the project design and other projects
The description adopted by Mr Bland of the experiment is referred to. It includes calculations, such things as testing equipment reaction times and processing inputs, experimenting with different volumes of MSW feeds to determine what volumes can be processed, trialling various equipment sizing and designing general plant input and output section. These tasks or activities are experimental according to the ordinary meaning of the term. They surely are based upon untested ideas or techniques which had not yet been established or finalised. As contended for by the Applicant there is an element of scientific procedure involved in these tasks for the purposes of making a discovery, testing a hypothesis, or demonstrating facts without certainty as to outcome.
WERE THE CORE R & D ACTIVITIES EXPERIMENTAL ACTIVITIES WHOSE OUTCOME COULD NOT BE KNOWN OR DETERMINED IN ADVANCE ON THE BASIS OF CURRENT KNOWLEDGE, INFORMATION OR EXPERIENCE?
COULD THE OUTCOME ONLY HAVE BEEN DETERMINED BY APPLYING A SYSTEMATIC PROGRESSION OF WORK THAT PROCEEDED FROM HYPOTHESIS TO EXPERIMENT, OBSERVATION AND EVALUATION, LEADING TO LOGICAL CONCLUSIONS WITHIN THE MEANING OF SECTION 355-25 OF THE ITA ACT?
(b) did have an outcome that could not have been determined in advance;
(c) did have an outcome determinable only by application of a systematic progression of work based on the principles of established science, and which proceeded from hypothesis to logical conclusions; and
WERE THE ACTIVITIES COMPRISING SUPPORTING ACTIVITIES 1.1.1 AND 1.1.2 "SUPPORTING R & D ACTIVITIES" WITHIN THE MEANING OF SECTION 355-30 OF THE ITA ACT?
R & D activities" within the meaning of section 355-30 of the Income Tax Assessment Act 1997 conducted during the income year ended 30 June 2015 in relation to the activities comprising Core Activity 1.1.
I certify that the preceding 355 (three hundred and fifty-five) paragraphs are a true copy of the reasons for the decision herein of R. Cameron Senior Member
...[sgd].....................................................................
[1] This background, which is not controversial, is largely derived from the evidence given by Mr A in the two witness statements made by him on 12 May 2017 and 1 November 2017 (together with annexures) that were tendered in evidence during the hearing of this application, together with the viva voce evidence he gave from the witness box.
[2] The definitions or descriptions from this paragraph are taken from the report of Professor Brian Haynes (an expert called by the Respondent) dated 7 September 2017 at paragraphs 4.1 and 5.13. Mr Morey at paragraph 41 of his second witness statement agreed that pyrolysis technology is very old.
[3] Char apparently has the potential to be used as a soil conditioner or fertiliser additive. The evidence was that there is a growing market for it. Additionally, there are also environmental considerations because it represents a form of carbon capture from the waste stream which can be then converted into an inert and useful product (see Mr Morey's first statement at paragraph 23).
[4] Paragraphs 38, 39 and 40 of the first witness statement of Mr A. The consultancy agreement is exhibit "MA-8" to that statement.
[5] Exhibit "MA-8" to the first witness statement of Mr A.
[6] That report is exhibit "MA-10" to the first witness statement of Mr A. It is a relatively detailed report divided into "Part A. Basic data of the plant and assumptions", "Part B. Plant outlet data" and "Part C. Process description". Part C is divided into 15 subsections which provide significant detail concerning the design and operation of the proposed waste to energy pyrolysis plant which had been designed by PLPD.
[7] Paragraph 44 of the first witness statement of Mr A is referred to for this evidence.
[8] Paragraph 33 of the first witness statement of Paul Morey made on 12 May 2017.
[9] The Project Scope Report is exhibit "MA-11" to the first witness statement of Mr A and exhibit "PM-3" to the first witness statement of Mr Morey.
[10] The "Application: Registration of R & D Activities" of 19 August 2015 is document T14 of the T documents.
[11] The following quotes are taken from the Respondent's summary Closing Submissions. It is an accurate summary and there is no reason not to adopt it in this part of these reasons.
[12] Paragraph 66 of the "Respondent's Closing Submissions" is referred to. In that paragraph reference is made to the decision of this Tribunal in RACV Sales and Marketing Pty Ltd v Innovation Australia [2012] AATA 386; (2012) 129 ALD 32 at [24]. In paragraphs 40 and 41 of the Applicant's submissions it was contended that there was nothing in the text of the relevant sections or the extrinsic materials for which the Tribunal is permitted to refer, that suggests the language used in the definitions of "core R & D activities" and "supporting R & D activities" should be used in any sense other than their ordinary meaning. Reference was made to a decision of the Full Federal Court of Australia in Industry Research and Development Board v Unisys Information Services Australia Ltd (1997) 77 FCR 552 at 560G - 561.
[13] Moreton Resources Limited v Innovation and Science Australia [2019] FCAFC 120 at [151] to [153]. The parties to this application filed closing submissions before the Full Court decision in Moreton Resources. The Applicant contended by reference to the Explanatory Memorandum to the bills that introduce this legislation (at paragraph 36 of its final submissions) and the Tribunal agrees, particularly in the light of the Full Court's decision in Moreton Resources, that activities within the meaning of the section can include technology sought to be developed that is not wholly new, and may include technology that does something that has been done before in a different way. The fact that MSW pyrolysis has been attempted previously, does not exclude or prevent a party seeking to develop a way of using it which is more advanced than previously.
[14] Moreton Resources v Innovation and Science Australia [2019] FCAFC 120 at [148].
[15] [2016] AATA 23 at [52].
[16] [2018] AATA 3378 at [201] to [203].
[19] Exhibit "A-3". Reference will be made throughout these reasons to this plant as it was the subject of considerable attention throughout the evidence before the Tribunal concerning the similarities and differences between it and the MSW treatment plant proposed by the Applicant.
[27] In addition to the current evidence procedure identified in the guideline referred to, the observations made by Rares J in Strong Wise Limited v Esso Australia Resources Pty Ltd [2010] FCA 240 at [95] were referred to and followed in the course of their evidence. Paragraph 6.15.80 "Procedures for concurrent expert evidence" of Chapter 6.15 "Concurrent Expert Evidence" of Expert Evidence, Freckelton & Selby, Fifth Edition is also referred to.
[29] Section 33(1)(c) of the Administrative Appeals Tribunal Act 1975 (Cth) was relied upon.
[31] There are several reasons justifying the rationale of the rule against hearsay. Its inherent unreliability is one. The reporting of what another said, or for that matter a third person, has been said to carry with it "the seeds of distortion". An out-of-court statement made is also objected to on the grounds that it is not the best or original evidence. It is not made on oath. Therefore, its truthfulness or accuracy cannot be tested in the way that evidence given in the witness box can be.
[32] The letter of instruction to Professor Haynes is to be found at page 1380 of the court book. The first question concerning this issue is at page 1386. The precise terms of the question asked in the letter of instruction to Professor Haynes are referred to for their full force and effect. The question of whether the activities concerned were conducted between 1 July 2014 and 30 June 2015, as described in the witness statements of Mr A and Mr Morey dated 12 May 2017, occupied considerable debate between the parties in the course of the hearing of the application, including whether Professor Haynes' opinions on the topic were admissible or otherwise carried any weight. This issue will be addressed later in these reasons.
[33] Such concession made by Senior Counsel for the Respondent is to be found at pages 111 and 116 of the transcript.
[35] Reference was made by the Applicant to paragraphs [9.1]-[9.22].
[36] The Tribunal observes that in the "Statement of Agreed Facts and Assumptions Between the Parties" furnished to Mr Bland and Professor Haynes (page 1454 of the court book) prior to the preparation of the joint expert's report on 24 April 2018 specific reference was made to the second witness statement of Mr Morey. Also, for that matter, reference was made to the second witness statement of Mr A. Presumably, and the Tribunal infers, copies of these witness statements were furnished to the experts with the Statement of Agreed Facts together with the document entitled "Questions for Mr James Bland and Professor Brian Haynes" (page 1463 of the court book).
[39] The passage of cross-examination is found at page 184 the transcript, lines 9 to 19. As will be observed later in these reasons when referring to the issue of errors in the work performed, he also gave evidence in this part of his cross-examination that the time span for the entire project could be over 5 to 10 years.
[41] Paragraphs 50 to 56 of his first witness statement.
[42] This was put at page 26 of the transcript of the final day of the hearing.
[43] Transcript of the final day of the hearing at page 49 line 26.
[44] This contention can be found on page 48 at lines 30 to 33 of the transcript of the final day of the hearing. Senior Counsel for the Respondent also stated on page 49, at lines 42-45 of the transcript of the final day of the hearing, that, to use her words, she wished to put to bed very emphatically any suggestion of any allegation of fraud in relation to the evidence that was given in the Tribunal.
[45] [1938] HCA 34; (1938) 60 CLR 336. Particularly the well-known passage from Dixon J at page 361 is referred to. The transcript at page 25 on the final day of the hearing is referred to. Whilst of course the Tribunal is not bound by the rules of evidence (section 33 (1) (c) of the AAT Act) it does not entirely disregard them, and there is no prohibition upon applying those rules if it is appropriate to do so. It should be recalled that the rules of evidence are fundamentally a refined form of procedural fairness. Where findings of fact have serious consequences for a party, the Tribunal may exercise greater caution when engaging in the fact-finding process to reach the decision concerned (Sullivan v Civil Aviation Safety Authority (2014) 226 FCR 555 [114]-[121]).
[46] Paragraph 156 of the Respondent's Closing Submissions are referred to.
[47] Specific details of the three-step process were referred to in paragraphs 17 to 43 of Mr A's second witness statement. It is found at Tab 2 (c) of the Court Book.
[48] "MA-13" is found at Vol 2 Tab 2A page 478 of the court book.
[49] This document is contained in document T 24 of the T documents (Vol 2, page 1073).
[50] Transcript page 155 lines 12-16 and page 156 lines 26-27. In the last transcript reference he stated that the activities were undertaken on behalf of the Applicant in the 2014/15 financial year to his knowledge.
[58] The Applicant, at paragraph 58 of its written submissions dated 2 May 2019, suggested that
cross-examination of Mr A concerning his explanation of the three-step design process in his second witness statement was directed towards establishing that it was a "recent invention" or a "fabrication". Whilst this is probably a correct categorisation of the effect of such cross-examination, it was never specifically put to Mr A that his description of the three-step process contained in his second statement was indeed a recent invention, or a fabrication as such. At its highest it was put that everything in his second statement about undertaking a three-step process does not reflect work actually undertaken. His response was that the work was not undertaken by him, but certainly undertaken, nonetheless. However, his evidence on this topic may be described, the Tribunal does not find the explanation in his second witness statement of a three-step design process as either a recent invention or a fabrication.
[60] The Applicant contended in closing submissions that this line of cross-examination was tantamount to alleging that the spreadsheets were fabricated after the event. Whether or not one categorises cross-examination in these terms, the Tribunal finds that such spreadsheets came into existence on the dates they bear.
[62] It should be observed that the "Application: Registration of R & D Activities", document T 14 of the T documents, dated 19 August 2015, identifies the "Nominated Contact Person" as Dr Marcus Tierney, Partner Price Waterhouse Coopers. Dr Tierney is described in a letter from PWC to the Respondent of 10 September 2015, being a response to a request for information made by it, as "Partner Tax & Legal" (document T 24 of the T documents). Indeed, Senior Counsel for the Respondent during submissions to the Tribunal in the hearing submitted that the Tribunal should be satisfied that assistance was provided by a highly accomplished, experienced professional in preparing the application (page 118 of the transcript).
[63] This evidence is to be found at pages 163 to 167 of the transcript. It is also consistent with the evidence given by Mr A in his first witness statement concerning the production of the Construction Drawings in January 2015.
[64] Paragraph 158 of the Respondent's closing submissions are referred to. In fairness to the Respondent it should be specifically noted that it did submit that Mr Morey's evidence was not deliberately dishonest. In her closing submissions from the bar table to the Tribunal (at page 49, lines 23 to 25, of the transcript of the last day's hearing), Senior Counsel for the Respondent specifically eschewed the suggestion that Mr Morey was "guilty of fraud". She put it that the Respondent's contention is that his evidence might be mistaken.
[65] It should be noted that Lycopodium is a subsidiary of an ASX listed company. It provides process engineering and process management consulting services. Such services provided include customised process, manufacturing and renewable energy facilities throughout Australia and South East Asia. Its clients are derived from a variety of industries including, chemical, pharmaceutical, manufacturing, renewable and alternative energy, food and beverage, and research and development industries. The services it provides involved project development from original concept phase to complete operational handover.
[66] He has an extensive CV which was Exhibit "PM-1" to his first statement.
[67] The transcript of his cross-examination at page 370 is referred to by way of example. There were other occasions in the course of his cross-examination where such flaws or errors were put to him and he also readily conceded same. Some will be addressed further in the course of these reasons.
[68] Paragraphs 206 and 207 of the Respondent's submissions are referred to.
[69] He also referred to and identified what he called "key people".
[70] The evidence on this topic also given by him identified five categories or classes of documents prepared by Lycopodium during the course of its retainer for the MSW project.
[71] Mr Morey obtained an Engineering Degree with Honours, from Monash University in 1995 specialising in mechanical and computer engineering. He commenced work as a mechanical engineer in 1996.
[72] Mr Morey's evidence on this topic is found at pages 382 to 384 of the transcript.
[73] Transcript page 357 at lines 24 to 38.
[75] Transcript page 265, lines 22-35. It is apparent from an examination of the CVs of Professor Haynes and Mr Bland that Mr Bland has considerably more experience in an industrial environment. This is also a factor relied upon by the Tribunal in referring to Mr Bland's evidence on the specific topic.
[76] Mr Morey also observed in this passage of evidence that the Burgau plant wasn't focused on generating electricity. He thought that generating maximum steam from flue gas to generate maximum performance from the turbine should be the focus. The Applicant he believed was heading in this direction which he described as the right direction.
[77] Part of this cross-examination explored whether Mr G's evidence concerning the engineers he worked with on the MSW facility may have been incorrect, and that his "deliberations" with them earlier were in fact deliberations about the soil treatment facility. He denied this suggestion. The Tribunal accepts this evidence from him.
[78] Indeed, this evidence from Mr G was consistent with evidence given by Professor Haynes. When questioned concerning the Applicant's process having a separate steam-heated indirect rotary dryer stage (item 14 of Table 1 "Responses to Questions", page 1471 of the court book, to the joint report of the experts), Professor Haynes gave evidence to the effect that the design response typically is often a case of trial and error. As he put it, one approaches the process application one way, and then learning from that approach another is undertaken. He described it as an important experimental design approach proceeding by trial and error (page 236 of the transcript).
[80] However, the composition of the MSW feedstock used at Burgau, Germany is different from that to be used in the plant proposed by Applicant. The Burgau plant as will be discussed later in these reasons has a significant quotient of its MSW feedstock comprising of sewage sludge.
[81] The Tribunal observes here that this statement misconstrues the statutory test, about which more will be said later in these reasons.
[84] An example of this approach is the response to paragraph 8 (b) "Outcome could not have been determined in advance, on the basis of existing info?" (page 1470 of the court book).
[86] It should be recalled here that these activities were the subject of careful consideration in the evidence of Mr Morey referred to above.
[87] Paragraph 230 of the Respondent's Closing Submissions.
[88] Helpfully, annexed to Mr Bland's third report were two drawings, one of the Burgau plant and one of the Applicant's design which contains annotations that assist the reader identifying these differences that he described in his third report.
[89] This is contrary to the findings of the Tribunal as to when the drawings were created which is addressed earlier in these reasons. It is an example of Professor Haynes venturing into areas that are not for an expert but for the Tribunal to determine.
[90] The document Professor Haynes refers to as "D7" is the first witness statement of Mr A dated 12 May 2017 and document "D8" is the first witness statement of Mr Morey also dated 12 May 2017.
[92] This view was also expressed by Professor Haynes concerning the "Plant Layout Construction Drawings" and "Plant Construction Drawings" concerning the Rotary Tube Dryer in his second report in paragraph 2 (b).
[94] Paragraph 34(f) of the Applicant's Closing Submissions are referred to.
[95] Transcript, page 217, lines 30 to 45 and page 218, lines 1 to 39.
[96] In this context one is also minded to repeat the observations in Moreton Resources made earlier that depending on the circumstances, activities that have the purpose of generating new knowledge with respect to the application of an existing technology at a new site may fall within the statutory definition. This does not conform with notions of fundamental uncertainty, novelty or surprise.
[97] Paragraph 220 of the Respondent's Closing Submissions.
[98] The differences identified in his first report are found at paragraph 8.2.
[100] Paragraph 226 of the Respondent's closing submissions.
[101] The passage of cross-examination concerning this topic is referred to in its entirety for full force and effect. It is found at pages 277 to 291 of the transcript.
[102] Transcript page 282, lines 38 to 42.
[103] A summary of the evidence relied on by the Applicant of these activities being undertaken, amongst others, was contained in "Core activity 1.1-Process design" of Appendix A to the Applicant's closing submissions. The Tribunal accepts this evidence.
[104] In closing submissions, counsel for the Applicant submitted that there were several reasons for preferring Mr Bland's evidence to that of Professor Haynes, including the following (which is found on page 37 of the transcript of proceedings of 9 May 2019):
"Secondly, Professor Haynes' report and his conclusions as to lack of new knowledge are irrelevant as the question is one of purpose and the approach that he took to assessing new knowledge is unhelpful and irrelevant. His concept of new knowledge was that of resolution of fundamental uncertainty, which is wrong, when the Act plainly says that new knowledge can include improvements on existing processes. He wouldn't even accept an improvement on existing processes new knowledge unless he said it was surprising.
Thirdly, Professor Haynes was prepared to express unqualified opinions in his reports that assisted the respondent, but which did not bear scrutiny, even when compared to documents that he said that he had read and that he had in fact referenced in his own reports. As to the objective of producing liquid fuel, Professor Haynes stated unambiguously in his first report that it could've been known in advance that there wouldn't be enough energy in the MSW to produce liquid fuel, run the plant and generate electricity."
[105] Paragraph 230 of the Respondents Closing Submissions.
[106] Transcript page 213, lines 42-214, line 5.
[107] Transcript page 214, lines 45-48 and page 215, lines 1-8.
[108] The "Specific Issues Arising" are addressed in paragraphs 160 to 226 of the Respondent's Closing Submissions.
[109] Paragraphs 11.16.1, to 11.16.3 for the first of the "features", 11.16.4 for the second feature and 11.16.5 for the third feature.
[110] These references are contained in paragraph 11.16 of Professor Haynes' first report.
[111] In one portion of his evidence concerning errors identified in Activities 8 (a), (b) and (c) referred to in the joint experts' report, Mr Bland stated that within the timeframe under consideration there was considerable checking of this work by Lycopodium. Subsequently, its report issued in March 2015 corrected quite a few of those errors. Mr Bland opined that this was part of a systematic approach to scientific work. Also see transcript page 251.
[112] Mr Bland's evidence on page 214 and 215 of the transcript is referred to.
[113] Mr Morey's evidence to this effect is found at pages 357-358 of the transcript. Indeed, Mr Morey was searchingly cross-examined concerning the 3D model a copy of which was contained in a USB stick, exhibit "PM-5" to his Second Witness Statement. Such cross-examination is found at pages 360 to 365 all the transcript. The substance of his evidence was that the USB stick exhibit "PM-5" to his Second Witness Statement was the version current as at the date that he made such statement namely 30 October 2017, not 30 June 2015 being the financial year for which the Applicant seeks registration. In the course of his
cross-examination (page 361, line 26 of the transcript), he stated that the 3D model contained in the USB stick is the design drafting of the proposed plant.
[115] This passage of Mr A's cross examination is found at page 184, lines 9 to 12 of the transcript.
[116] This evidence also should be considered with his evidence noted in paragraph 131 above concerning the differing approach of engineers compared to entrepreneurs or commercial people to taking risks in order to have projects, such as the one proposed by the Applicant, get to market as quickly as possible.
[117] This evidence is found on pages 366 to 368 of the transcript. It perhaps should be recorded that throughout Mr Morey's evidence, when confronted with errors or flaws concerning such matters as fine fractions and heat value, high energy values, mass and energy balance calculations, and the turbine generation system output being grossly overstated, in the most part he readily conceded them. Consistently, he stated that, with respect to most of those errors or flaws, more work needed to be undertaken to address them.
[118] Pages 1273, 1274 and 1276 in particular.
[119] The evidence of Professor Haynes is at page 220 of the transcript.
[120] Mr Bland's evidence at pages 251-252 of the transcript is referred to.
[121] It should also be borne in mind with respect to the Project Scope Report issued on 18 May 2015 evolved from several revisions; initially it was Rev A on 27 April 2015 and Rev B on 9 May 2015. Presumably, in accordance with Mr Morey's evidence, the Tribunal infers that errors would have been progressively addressed throughout such a process.
[122] Exhibit "PM-4", paragraph 38 of his first witness statement.
[123] Mr Morey's cross-examination on this topic is to be found at pages 372 to 379 of the transcript.
[124] See paragraphs 182 to 189 of the Respondent's Closing Submissions.
[125] The decision of Deputy President Tamberlin and Member Ermert in Re: DBTL v Innovation Australia [2013] AATA 573; (2013) 137 ALD 88, particularly at [154] was referred to by both parties in the course of their written and oral submissions.
[126] The evidence given by Mr A on this topic was considered earlier in these reasons in the section referring to his evidence as a lay witness at paragraphs 90 to 94 above. It is referred to and repeated. The Tribunal reiterates that it accepts his evidence about what the objective, or as he put it "aim", on the part of the Applicant was. It will be recalled he referred to it in various ways including beyond what was recorded in the documents relied upon such as the Consultancy Agreement with PLPD as "a broader hypothesis".
[127] Mr A's evidence concerning this matter is found at page 181 of the transcript.
[128] Moreton Resources Ltd v Innovation and Science Australia [2019] FCAFC 120 at [152].
[129] Paragraphs 225-226 of the Respondent's Closing Submissions.
[130] Page 282, lines 38-42 of the transcript.
[131] Page 275, lines 12-22 of the transcript.
[132] Page 292, lines 39-44 of the transcript.
[133] Paragraph 16 of the Respondent's Closing Submissions.
[134] Paragraph 232 of its Closing Submissions are referred to.
[135] The Applicant's Submissions at paragraph 109, the Respondent's Closing Submissions at paragraph 66 and the decision of Deputy President Forgie in Moreton Resources Ltd v Innovation and Science Australia [2018] AATA 3378 at [177] are referred to. The Explanatory Memorandum for the Bill that introduced "Division 355-Research and Development" at [2.11] described an experiment as entailing the investigation of "causal relationships among relevant variables to test the hypothesis or determine the efficacy of something previously untried."
[137] Pages 219-220 of the transcript.
[139] The questions and the responses are to be found at page 246 of the transcript.
[140] Pages 235-236 of the transcript.
[141] Items 20 to 22 of Table 1 under the sub-heading "(i) General matters", should also be referred to.
[142] Appendix E is to be found at page 1328 of the court book (page 31 of Mr Bland's First Report).
[143] RACV Sales and Marketing Pty Ltd v Innovation Australia [2012] AATA 386; (2012) 129 ALD 32 at [24] (6) (d) (i).
[144] Mr Bland's observations at paragraph 3.3.1.1 of the Joint Report with Professor Haynes at page 1478 of the court book are referred to.
[147] Paragraphs 225 to 226 of the Respondent's Closing Submissions.
[148] As noted in paragraph 207 above this is more than three times the design capacity of each of the Burgau kilns. The contents of paragraph 207 are referred to and repeated concerning the differences between the two plants.
[149] There are several other matters referred to by the Applicant at paragraph 113 of its closing submissions which should be referred to. They are accepted by the Tribunal as justifying a finding that the outcome could not have been known on the basis of current knowledge or experience. To some extent these do overlap the observations already made in the last few paragraphs. They will be repeated in full as follows:
"(b),.. There are no examples of a successful application of indirect heated pyrolysis rotary kiln technology for the processing of MSW on the scale envisaged by the applicant;
(c)... The applicant is not merely "optimising" indirect heated pyrolysis rotary kiln technology and processes. The R & D Project Facility is unique, in that:
(i) unlike the Burgau plant, which is probably the most comparable, it features an innovative rotary steam drum pre dryer which has segmented zoned of drying for which the heat is supplied by low pressure steam;
(ii) it takes the low pressure steam from the turbine and uses it to heat the pre-dryer;
(iii) it takes low-pressure gas from inside the pyrolysis kiln and uses it to generate steam to generate electricity and to produce the heat which is used to heat the kiln itself;
(iv) it features an innovative kiln design developed specifically for MSW, having the ability to vary residence time, temperature embed depth;
(v) it recycles and re-burns flue gas, before cleaning it;
(vi) unlike the Burgau plant, it has two Tandem trains; and
(vii) unlike the Burgau plant the which the fuel is a homogenous mixture that includes sewerage sludge and landfill gas, the Applicants facility is intended to be able to operate solely on MSW and without the addition of external energy such as landfill gas, other than when starting up."
[150] Transcript page 275, lines 12-22.
[151] Transcript page 292, lines 39-44.
[152] Appendix E is to be found at page 31 of Mr Bland's First Report (page 1328 of the court book).
[153] It should be recalled that the Project Scope report prepared by Lycopodium materialised from two previous revisions, namely Rev A on 27 April 2015 which was revised to Rev B on 9 May 2015.
[154] The application to Innovation Australia has been referred to previously. It is document T 14 of the T documents commencing at page 1019.
[155] Pages 1441-1443 of the court book.
[156] Concerning this topic the Tribunal should also record that in paragraph 5.2.1 of Mr Bland's second report (page 1403 of the court book) he observes that the work undertaken to test the hypothesis by the Applicant was described in more detail in paragraphs 18 to 43 of Mr A's second witness statement. He opines that the second witness statement of Mr A details a very logical sequence of investigations broken into three steps where a series of plant configurations were tested until a satisfactory conclusion was reached. Mr Bland further states that each new configuration was a logical improvement on, and a response to the shortcomings of its predecessor. The Tribunal accepts this assessment both by reason of the opinion expressed by Mr Bland but also for the reasons articulated in this paragraph.
[159] Pages 251-252 of the transcript.
[160] In particular paragraphs 90 to 94, 99 and 120 are referred to. However, the section of these reasons under the heading "Mr A" should be considered on this question. Lest it needs to be repeated, his evidence on these topics was accepted.
[161] The contents of his first witness statement under the heading "Development of the MSW Treatment Facility" at paragraphs 31-36, and his second witness statement under the heading "Overview of the Activities" at paragraphs 8-16 are referred to for evidence to this effect.
[162] (1991) 201 ATR 1410 at 1423-1424.
[163] [2018] AATA 3378 at [201] to [203].
Briginshaw v Bringinshaw [1938] HCA 34; (1938) 60 CLR 336
Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588
DBTL v Innovation Australia [2013] AATA 573; (2013) 137 ALD 88
Industry Research and Development Board v Coal & Allied Operations Pty Ltd [2000] FCA 979; (2000) 101 FCR 405
JSLP and Innovation Australia [2016] AATA 23
Moreton Resources and Innovation and Science Australia [2018] AATA 3378
Moreton Resources Limited v Innovation and Science Australia [2019] FCAFC 120
RACV Sales and Marketing Pty Ltd v Innovation Australia [2012] AATA 386; (2012) 129 ALD 32
Strong Wise Limited v Esso Australia Resources Pty Ltd [2010] FCA 240
(1938) 60 CLR 336
(2011) 243 CLR 588
(2000) 101 FCR 405
(1997) 77 FCR 552
(2014) 226 FCR 555