Robert Bosch (Australia) Pty Ltd v Secretary, Department of Innovation, Industry, Science and Research

A. Whether Bosch is entitled to duty credits for the OVERSEAS R&D under regulation 13G(5)(c)?

Legislative Framework 14 Section 6(1) of the Act lists various kinds of investment that may be "approved research and development". It sets out that investment directed to the production of automotive components like the electronic control units developed in this case is a "Type E Investment". The expression "approved research and development" is defined in s 6A as requiring two elements. First, that it be "allowable research and development", and second that it only be allowed to a "maximum claimable value". 15 Section 6A(4) provides that the regulations may set out the kinds of R&D that are "allowable research and development" under the Act and provides the method for calculating or fixing the maximum claimable value for that kind of R&D. 16 Regulation 13G sets out what is "allowable research and development" under the Act. Bosch relies on reg 13G(5)(c) as founding its entitlement to duty credits for the offshore R&D. It provides that allowable R&D under the Act includes "offshore research and development conducted by the participant". (emphasis added) 17 Regulation 3 defines Australian-based and offshore R&D as follows: Australian-based research and development means research and development undertaken in Australia; and offshore research and development means research and development that is not Australian-based research and development. 18 The question that falls to be decided is whether the overseas R&D undertaken by Bosch Germany was "conducted by" Bosch within the meaning of reg 13G(5)(c). Regulation 13G relevantly provides as follows: 13G Allowable research and development (1) For paragraph 6A (4) (a) of the Act, the kind of research and development mentioned in subregulation (2) is allowable research and development under the Act. (2) For subregulation (1), the kind of research and development is research and development activities that are: (a) directly related to the design, development, engineering or production of motor vehicles, engines, engine components, automotive components, automotive machine tools or automotive tooling; and (b) undertaken for the purpose of: (i) acquiring new knowledge; or (ii) creating new or improved materials, products, devices, production processes or services. … (5) Also, for a participant, research and development of the kind mentioned in subregulation (2): (a) includes research and development conducted by another person (other than a Co-operative Research Centre) on behalf of the participant under a contract with the participant only if: (i) the research and development is Australian-based research and development; and (ii) the participant contributes to the direction and management of the research and development; and (iii) the participant has a proportionate share in any intellectual property resulting from the research and development; and (iv) the participant is not required to conduct the research and development on behalf of: (A) another person under a contract with the other person; or (B) if the participant is an MVP - another participant under a contract with the other participant; and (b) includes research and development conducted by a Co-operative Research Centre under a contract with the participant only if: (i) the research and development is Australian-based research and development; and (ii) the participant contributes to the direction and management of the research and development; and (iii) the participant has the right to use any intellectual property resulting from the research and development; and (iv) the participant is not required to conduct the research and development on behalf of: (A) another person under a contract with the other person; or (B) if the participant is an MVP - another participant under a contract with the other participant; and (c) includes offshore research and development conducted by the participant only if: (i) the requirements mentioned in subregulation (6) are met; and (ii) the participant is not required to conduct the research and development on behalf of: (A) another person under a contract with the other person; or (B) if the participant is an MVP - another participant under a contract with the other participant; and (d) includes Australian-based research and development conducted by the participant only if the participant is not required to conduct the research and development on behalf of: (i) another person under a contract with the other person; or (ii) if the participant is an MVP - another participant under a contract with the other participant. …

Factual findings 19 The Tribunal made various factual findings. The findings, which were not contested by the parties, are set out below. The questions of law must be answered within the confines of these uncontested facts. (a) The framework governing the relationship between Bosch and Bosch Germany in relation to the sale by Bosch of electronic control units was provided by a contract, into which the two companies entered in 1996; (b) There was a clearly identifiable process that governed the management and budgetary relationship between Bosch and Bosch Germany, which amounted to a contract between the two companies. Under that contract: (i) Bosch engaged Bosch Germany to carry out R&D work for Bosch; and (ii) Bosch paid Bosch Germany an agreed price in consideration for that R&D work, which price was calculated in accordance with the 1996 contract; (c) The contractual arrangements between Bosch Germany and Bosch were commercial in nature; (d) The R&D activities formed part of an integrated process, rather than a set of discrete tasks; (e) Regardless of the location of any particular R&D, all of the management and control of the projects, including the Iveco-MUX project, was undertaken in Australia; (f) Bosch's project manager, based in Australia, was responsible for the overall management of the R&D, regardless of the geographical location of where the R&D was performed; (g) In general, the type of activity which required customer interaction, and which could not be practically or economically carried out in Australia, was undertaken overseas; (h) The European staff were directed in their R&D by Bosch's staff, but they at all times remained the staff of Bosch Germany and were responsible to the line manager of their particular department for the technical quality of their work; (i) Bosch reimbursed Bosch Germany for the use of the latter's employees and contractors on the basis of the actual expenditure incurred (including administrative costs, but not including any profit margin), meaning that Bosch Germany reported a break-even result in relation to Bosch's use of its staff; (j) Bosch billed the full amount (including profit margin) to the customer; and (k) Profits were reported in Bosch results.

Approach to Construction 20 I have construed the meaning of reg 13G(5)(c) having regard to its text, the language used, and the dictionary definition of "conduct". I have had regard to the context of the words "conducted by" in the subregulation and in the regulations as a whole. I have also had regard to the general purpose and policy of the Act and regulations. That this is the appropriate course is established: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [31] and [47]; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381, [69].

The dictionary definition of "conducted" 21 The Court was taken to various authorities that make clear that general words should be given their ordinary meaning unless there are sufficient indications of some other meaning: Cody v J H Nelson Pty Ltd (1947) 74 CLR 629 at 647-648; Maunsell v Olins [1975] AC 373 at 382. 22 The meaning of the verb "conduct" in both the Oxford and Macquarie dictionaries is "to direct, manage or carry on". Neither party argued against this meaning. 23 However, Bosch contends that the concept of "directing and managing" the performance of others is the defining feature of the verb, as exemplified in a conductor "conducting" players in an orchestra. It contends that the appropriate meaning of the verb is "to direct or manage", which does not include meanings such as "to undertake, or to do". The meaning of "to direct or manage" that it ascribes to the word "conduct" is exclusive of this broader meaning. The Secretary accepts that "to conduct" has the meaning of "to direct, manage or carry on", but argues that the meaning includes "to carry out", "undertake", or "to do". 24 I consider that the words "conducted by" are capable of more than one meaning, although the difference in meaning is not marked. Such a difference would be of little significance in most circumstances. In this case, as I set out, the difference is of importance to the effect of the regulations. 25 Bosch argues that to read the words "conducted by" as requiring that there be an element of "carrying out" or "undertaking" is to add an unexpressed requirement to the dictionary definition. I do not agree. "Carrying out" and "carrying on" are essentially the same, and "carrying on" is part of the definition of "conduct". 26 Further, in ordinary usage the verb "to conduct" is often used interchangeably with "to carry out", "undertake", or simply "to do" with no change in the meaning. Its meaning is not necessarily restricted to exclusively "directing", "controlling" or "managing" as contended by Bosch. I consider that the interpretation that Bosch proposes - which is that the words exclude any element of "carrying out" - is a narrow alternative meaning.

Other judicial considerations of the word "conducted" 27 Bosch referred to 4 previous judicial considerations of the verb "conduct", in which the Courts found that the word had the connotation of "to direct or to manage": Biochem Pharma Inc v Commissioner of Patents (1988) 82 FCR at 92; Coles Supermarkets Pty Ltd v Westley Nominees Pty Ltd (2005) 60 ATR 52 at [74]-[76]; Pioneer Concrete Services Ltd v Galli [1985] VR 675 at 707; Pharmaceutical Society v Fuller (1932) 96 JP 422 at 424. I have considered these authorities, which deal with the meaning of the verb in statutes with different purposes and in different contexts. They were of only limited assistance as it is in the context and purpose of this Act and these regulations, that I must construe the words.

Bosch's arguments regarding inconsistencies 28 Bosch points to a number of anomalous results which it says arise from applying the broader meaning of "conducted by". The first relates to an asserted inconsistency between reg 13G(5) and reg 13H(6)(c). Regulations 13H(5) and (6) relate to expenditure on offshore R&D conducted by the participant that is claimable under reg 13G(5)(c). Regulation 13H(6) sets out 5 kinds of expenses that will be recognised in calculating the claimable value of allowable offshore R&D. The kinds of claimable expenses for offshore R&D relevantly include the following: (a) labour costs, within the meaning of subregulation 13I(1), in respect of employees carrying out, or directly supporting, the research and development; (b) the cost, within the meaning of subregulation 13I(2), of recruiting, training and developing of employees referred to in paragraph (a); (c) if the research and development covers an activity that has been carried out by a person under a contract for services with the participant, the amount payable, under the contract, to the person for the activity; 29 Bosch contends that reg 13H(6)(c) recognises the amount payable to a party conducting offshore R&D under a contract as expenditure claimable by a participant. It submits that such expenditure must arise in the context of a participant directing or managing the contractor. Bosch argues that this illustrates that "conducted by" must mean "directed or managed" only, and not "carried out or undertaken". In Bosch's view, reg 13H(6)(c) is inexplicable and otiose if "conducted by" in reg 13G(5)(c) means that the participant must itself undertake the offshore R&D, rather than only direct or manage it. 30 The better view of the regulations is that reg 13H(6) contemplates that the participant "conducting" offshore R&D can contract out some "activities", and contemplates that the participant carries out some "activities" itself. This is shown by regs 13H(6)(a) and (b) which contemplate that a participant "conducting" offshore R&D can claim the labour costs of its employees carrying out the R&D, and the costs of recruiting and training such employees. For labour costs to be incurred by the participant in "carrying out" offshore R&D work those employees must do more than just "direct and manage" the R&D. 31 An "activity" that can be contracted out by a participant conducting R&D should be read in light of reg 13G(3), which has an inclusive list of the activities comprising allowable R&D. Considered in light of these activities, the reading of reg 13H(6) which is most consistent with the rest of the regulations is that it contemplates that a participant "conducting" offshore R&D carries out these "activities" as well as directing and managing the R&D, and may also contract out discrete "activities" to a contractor. 32 Insofar as any conflict exists in the operation of regs 13G(5) and 13H(6), it is more important that reg 13G be internally consistent rather than consistent with reg 13H. If reg 13H(6)(c) cannot be reconciled with reg 13G(5)(c) when utilising the meaning of "conducted by" that I have found, I take the approach set out in Institute of Patent Agents v Lockwood [1894] AC 347. In that case Lord Herschell LC held that if there is a conflict between two sections which cannot be reconciled it is necessary to determine which is the leading provision and which is the subordinate provision. In my view reg 13G(5)(c) is the leading provision and the provisionally expressed reg 13H(6)(c) is subordinate, and should give way. 33 Bosch also points to the reference to activities "carried out" in the analogous provision reg 13H(2)(c), which relates to expenditure on Australian-based R&D. Bosch argues that this similarly illustrates that "conducted by" does not include "carrying out". The reasons expressed in response in relation to reg 13G(6)(c) also apply to this argument. 34 Bosch further contends that the use of the words "conducted by" in reg 13G is in contradistinction to the use of other expressions dealing with performance of R&D elsewhere in the regulations. It refers to: (a) R&D "carried out" by employees in regs 13H(2)(a) and (6)(a); and (b) Australian-based R&D meaning R&D "undertaken" in Australia in the definition in reg 3. The thrust of this contention is that the legislature used words such as "carried out" or "undertaken" when it wanted to express that meaning, and not the words "conducted by". 35 I do not accept this. I consider that these differences in usage can be largely explained by the fact that the words "conducted by" were introduced into the regulations by the insertion of reg 13G in the 2001 amendments. The words "undertaken" and "carried out" predate the 2001 amendments. In these circumstances I do not ascribe these different usages the significance that Bosch seeks. Further, to the extent there is a presumption that different words used in a piece of legislation are intended to have different meanings, it is a weak one. It is even weaker where the difference in usage has arisen through amendments to the legislation: Pearce DC and Geddes RS, Statutory Interpretation in Australia (7th ed, LexisNexis Butterworths, 2011) p 121.

The argument that Bosch was in fact "undertaking" the offshore R&D 36 Bosch also argues that even if "conducted by" in reg 13G(5)(c) is found to include the meaning "to perform or undertake" the offshore R&D, it did in fact conduct it. It submits that, as a company, it can only carry out its activities through the agency of a real person, either an employee or a contractor. It notes that reg 13H contemplates employees or contractors performing offshore R&D work. It says that the fact that it was employees of Bosch Germany who were tasked with the overseas R&D is immaterial. They were working at Bosch's expense, under its management and direction, and for its benefit. Bosch used the R&D to develop a product it would later manufacture and sell, and held the beneficial intellectual property rights to it. Bosch contends that it was "undertaking" the R&D. 37 I do not accept this argument. The Tribunal made findings that the offshore R&D was undertaken by Bosch Germany under a contract, and that Bosch reimbursed Bosch Germany for its expenditure in carrying out the R&D. Bosch did not raise a ground of appeal directed at these findings of fact and I am bound by them. If, as found, this R&D was undertaken by another party under a contract it was covered by reg 13G(5)(a) and not by subreg (5)(c). It was not allowable expenditure under subreg (5)(a) as it was offshore R&D. 38 I note that in oral submissions counsel for Bosch conceded that if the joint requirements of direction and activity were elements of "conducting" the R&D, Bosch's claim must fail because it did not carry out the R&D (see transcript p 83 line 43 to p 84). I did not give this concession any weight as it did not seem to fit with the thrust of Bosch's oral and written submissions.

The meaning of "conducted by" found in the legislative context 39 First, I note that I tend to agree with the statement of the Tribunal at [32] of its decision that: There is… a clear distinction between just directing or managing R&D and the wider concept of the carrying out or conducting of R&D. Directing the R&D, in the sense of determining what needs to be researched and developed and setting the terms and conditions pursuant to which that R&D is to be carried out, including the cost, is one part of the conduct of R&D. The conduct of R&D involves both direction and activity. It is a collaborative process which can only be performed by a person directly engaged in doing the R&D. The narrow alternative meaning for the words "conducted by" proposed by Bosch does not meet both elements of the ordinary meaning. 40 Second, I note that to utilise the narrow meaning of "conducted by" proposed by Bosch gives rise to serious conflicts between, and inconsistencies within, the regulations - to a far greater extent than any inconsistencies arising from giving the words their broad ordinary meaning. I will now deal with these potential inconsistencies and conflicts.

Regulation 13G(5)(a) deals with R&D that is "contracted out" 41 Subregulation (5)(a) is a major obstacle to Bosch's proposed meaning of "conducted by" - and to its claim of entitlement to duty credits under reg 13G(5)(c). Regulation 13G(5)(a) expressly deals with R&D which is "contracted out" by the participant to be "conducted by" another party under a contract with the participant - that is a contractor. 42 On the clear words of reg 13G(5)(a), R&D conducted by a contractor on behalf of the participant is allowable expenditure only if the R&D is Australian-based. Its effect is that R&D that is contracted by the participant to be carried out by a contractor is not allowable if it is undertaken outside Australia. 43 It is not controversial that subregulations 13G(5)(a)-(d) are to be read disjunctively - that is as alternatives. (i) Subregulations (5)(a) and (b) deal with R&D "conducted by" a contractor (or a Co-operative Research Centre) under a contract with the participant. Importantly subreg (5)(a) says that R&D that is contracted out to a contractor is only allowable if it is Australian based, (ii) Subregulations (5)(c) and (d) relate to R&D "conducted by" the participant. Subregulation (5)(c) relates to offshore R&D, and requires the participant must meet the extra requirements of subreg (6). Subregulation (5)(d) relates to Australian based R&D. 44 The scheme of reg 13G(5) is such that R&D that is contracted by the participant to another person falls to be dealt with under subregs (a) or (b). These subregulations expressly relate to such a circumstance. 45 However, Bosch seeks to rely on reg 13G(5)(c) for its entitlement to duty credits for R&D contracted to Bosch Germany and performed overseas. Bosch argues that the scheme of reg 13G(5) should be understood differently than as I have set out above. It says that subregs (5)(a), (b) and (d) all relate to Australian-based R&D, while (c) relates to offshore R&D. In doing so Bosch seeks to avoid the fact that subreg (5)(a) clearly deals with the question of whether R&D is undertaken in Australia or overseas and expressly disallows offshore R&D that is contracted out. 46 Bosch's approach gives no effect to the paragraph which most clearly regulates its entitlement under the Act. I consider that subreg (5)(a) and not subreg (5)(c) covers R&D which is contracted out. 47 The relevant R&D has been found to have been undertaken overseas by Bosch Germany under a contract. Subregulation (5)(a) provides that it is only if contracted out R&D is Australian-based that it is allowable. It therefore contemplates and disallows Bosch's expenditure on the overseas R&D.

The meaning of "conducted" in reg 13G(5)(a) 48 Regulation 13G(5)(a) points up another error in Bosch's approach. Subregulation 5(a) plainly contemplates that "conducted" is distinct from "directed and managed". As I have set out, it regulates R&D which is "conducted by" a contractor under a contract with the participant. Because it allows that the participant can contribute to "direction and management" of the R&D even though the participant does not conduct it, it is clear that "conducted by" and "directed and managed" are not synonymous. 49 In subreg (5)(a) "conducted by" cannot be synonymous with sole "direction and management" as Bosch contends, and the words must be given the same meaning in subreg (5)(c). 50 I also note that - if "conducted by" includes an element of "carrying on" or "undertaking" - Bosch's claim of entitlement to duty credits must fail because it concedes that it did not "carry on" the overseas R&D. Bosch's counsel conceded this in oral submissions.

Circularity in reg 13G(5)(a) on Bosch's contention 51 Further, if the meaning of "conducted" in reg 13G(5)(a) is "directed and managed", it leads to circularity in its operation. Importantly, it is the contractor that must "conduct" the R&D for the participant to have an entitlement to duty credits under this provision. On Bosch's definition of "conducted" this requires that the contractor must have "directed and managed" the R&D. However, reg 13G(5)(a)(ii) provides that the participant will only be able to claim for R&D conducted by the contractor if the participant itself "contributes to the direction and management" of it. 52 If "conduct" and "manage and direct" have interchangeable meanings, then by virtue of subreg (5)(a)(ii), by contributing to direction and management the participant would be "conducting" the R&D alongside the contractor. Without further qualification - which is absent from the regulations - a participant claiming duty credits for R&D "conducted by" a contractor under subreg (5)(a) could claim it had "conducted" the same R&D itself, by way of its contribution to direction and management.

Inconsistency with reg 13C(3)(b) 53 Bosch's contention that "conducted by" in reg 13G(5)(c) means only "directed or managed" is also inconsistent with reg 13C(3). Regulation 13C(3) sets out when an investment in R&D "undertaken" by a participant is taken to have occurred for the purpose of making a claim under the Act. 54 Significantly, reg 13C(3)(b) deals with R&D "conducted by" another person on behalf of the participant under a contract. It provides that an investment in R&D is taken to have occurred at the time a claim is made by that other person for "work done in relation to the R&D". The wording of reg 13C(3)(b) indicates that the drafters contemplated that "work done" in relation to R&D is part and parcel of "conducting" R&D. It does not sit well with the meaning of "conducted by" contended by Bosch which contains no element of "carrying out" or "doing" the R&D work. 55 Having regard to the overall scheme of the regulations as well as reg 13G, I consider that the words "conducted by" in reg 13G(5)(c) must be given their broad ordinary meaning, and not be read narrowly so as to be restricted to solely "directing or managing".

The legislative purpose apparent from the Act 56 As the words "conducted by" are capable of more than one meaning it is appropriate to go to the legislative purpose for assistance in construing the appropriate meaning: s 15AA(1) and s 15AB(1) Acts Interpretation Act 1901 (Cth); Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 at 109. 57 Section 3 of the Act provides: The purpose of this Act is to provide transitional assistance to encourage competitive investment and innovation in the Australian automotive industry in order to achieve sustainable growth both in the Australian market and internationally, in the context of trade liberalisation. This purpose was further explained in the Explanatory Memorandum which identified that participants in the scheme should have "a long term commitment to the industry in Australia". One aim of it was the furtherance of "continued investment and employment in the automotive and associated industries…": Explanatory Memorandum, ACIS Administration Bill 1999, p 10. 58 That the scheme relates to the Australian automotive and associated industries is clear. The Act required that for eligibility as a participant the company must, relevantly, produce in Australia a minimum number or value of motor vehicles, automotive components, or automotive machine tools: ss 44 and 45. This did not mean though that the scheme necessarily related only to Australian companies, or companies domiciled in Australia. 59 A broad legislative purpose of encouraging investment, innovation and employment in the Australian automotive and associated industries is clear from the Act and the Explanatory Memorandum. I do not find this purpose of assistance in selecting which of the alternative meanings of the words "conducted by" should be utilised. 60 This broad purpose is consistent with each of the alternative meanings. It is consistent with a scheme intended to operate in aid of investment, innovation and employment in the Australian car industry to construe the regulations as disallowing R&D carried out overseas by a non-participant - as contended by the Secretary. It is also consistent with the scheme to allow R&D that is for the benefit of, and directed, managed and paid for by a participant in the scheme, whether or not it is actually undertaken in Australia - as Bosch contends. 61 Bosch seeks to draw from the words "competitive investment", "sustainable growth", "trade liberalization" and "global integration" in s 3 and the Explanatory Memorandum to the Act, that the purpose of the Act should not be read to restrict allowable offshore R&D to only that actually undertaken by the participant. I do not read those general words as indicating this. 62 I note that the Tribunal made an error in its decision with regard to the intention of the legislation. Having made a similar reference at [30], at [32] it described the legislative purpose as "to give credits for R&D carried out by Australian corporations…" The scheme is not limited to Australian corporations, and was open to any corporation that produced a sufficient number or value of motor vehicles, automotive components or automotive machine tools. 63 This error is of no real significance as it did not apparently affect the Tribunal's reasoning as to the construction of the regulations. Further, there was no dispute about Bosch's eligibility to participate in the scheme, or about Bosch Germany's ineligibility. Reading the Tribunal's decision as a whole, it is appropriate to treat this error as no more than a "verbal slip" and not as constituting an error of law: Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] 185 CLR 259 at 291.

The legislative purpose apparent from the regulations 64 The Act was amended in 2001 and the Explanatory Memorandum made clear that its intent was to better define what was allowable R&D expenditure: ACIS Administration Amendment Bill 2000, Revised Explanatory Memorandum, p 3. The Explanatory Memorandum stated: The main change to the Act will be an increased capacity for regulations to define what is approved plant and equipment and approved research and development for the purposes of calculating benefits under the scheme. 65 Amending regulations - the ACIS Administration Amendment Regulations (No. 1) 2001 (No. 82) - came into force on 4 May 2001. The Explanatory Statement mirrored the words of the Explanatory Memorandum extracted above. In the amended regulations former reg 5 was replaced by new regs 13G and 13H. The Explanatory Statement stated that the new reg 13G: … is inserted to replace the former regulation 5 defining 'approved research and development'. It sets out the types of research and development that are allowable for the purposes of calculating benefits for participants under…the Act. 66 While the Explanatory Statement did not identify any intended specific change to the regulations, the new regulations imposed several significant restrictions on allowable R&D. This is a good indication that the intention of the regulations was to restrict what is allowable expenditure. 67 Until 3 May 2001, former reg 5(7) set out what was allowable expenditure on offshore R&D. It provided: Further, for a participant, research and development of a kind mentioned in subregulation (2) does not include offshore research and development unless: (a) the offshore research and development is also of a kind that: (i) is necessary: (A) to tailor the participant's Australian-based research and development to a particular market; or (B) to lever the participant's Australian-based research and development off an offshore research and development program; and (ii) is limited to a proportion, not exceeding 20%, of the value of the investment in Australian-based research and development; and (b) if sub-subparagraph (a)(i)(B) applies: (i) the offshore research and development contributes directly to the offshore research and development program; and (ii) the participant contributes to the direction and management of the offshore research and development program, and has a proportionate share in any intellectual property resulting from the program. 68 Importantly, former reg 5(7) did not require that offshore R&D be "conducted by" the participant for it to be allowable expenditure. The new reg 13G(5)(c) did impose a restriction on allowable expenditure on offshore R&D by providing that it is allowable R&D only if it is "conducted by" the participant. This restriction at least meant that offshore R&D that is not conducted by a participant is not allowable R&D under that subregulation. 69 The amending regulations also introduced the expression "contributes to direction and management" in the new reg 13G(5)(a). The introduction of this expression at the same time as the introduction of the expression "conducted by" supports the view that they are intended to mean different things. If this is so the meaning of "conducted by" includes elements of both direction of and carrying out of the activity. "Direction and management" has a narrower meaning. 70 Another restriction arising from the insertion of reg 13G was the introduction of subregs (5)(a) and (b) which provide that R&D conducted by another person (or by a Co-operative Research Centre) under a contract with the participant is allowable R&D only if it is Australian-based R&D. These restrictions at least meant that overseas R&D that is "conducted by" a person under a contract with a participant is not allowable R&D. 71 The new reg 13G(5)(d) was another new restriction, although not directly relevant in this matter. It provides that Australian-based R&D "conducted by" the participant, is allowable R&D only if the participant is not required to conduct it on behalf of another person under a contract with that other person. 72 These restrictions assist in discerning a legislative intent in the amended regulations to tighten the criteria for allowable R&D. Relevantly, the intent of the changes was to restrict the offshore R&D that is allowable expenditure. The interpretation of reg 13G(5)(c) proposed by the Secretary is more in harmony with this intent than that contended by Bosch.

Beneficial purpose 73 Bosch contends that no inferences of support for the Secretary's interpretation of the regulations should be drawn from the legislative history and the extrinsic materials. It contends that the Act is framed to confer a benefit and that both its scope and the ambit of any exceptions should be interpreted in its favour. 74 While I accept that the Act has a beneficial operation it remains for Bosch to satisfy the Court that its claim of entitlement to duty credits falls within reg 13G(5)(c). The Court must still read the language of the statute according to conventional rules of construction. Parliament is concerned to ensure that persons who are eligible to benefits are included, but also to ensure that those who are not eligible are excluded: Luttick Australia Pty Ltd v Export Development Grants Board 5 FCR 589 at 594; Rose v Secretary, Department of Social Security 21 FCR 241 at 243-244. 75 Although the Act confers a benefit, utilising the conventional rules of statutory construction I do not consider that the regulations should be interpreted to give the words "conducted by" the narrow meaning that Bosch contends.

Conclusion re Bosch's entitlement to duty credits under reg 13G(5)(c) 76 On the proper interpretation and application of reg 13G(5)(c), the offshore R&D was not "conducted by" Bosch and it is not entitled to duty credits for it. I affirm the Tribunal's decision in that regard.

B. if not entitled to duty credits for the OVERSEAS R&D, whether Under section 94(1) of the Act, Bosch remains entitled to retain the duty credits it has received? 77 It is common ground that, if the offshore R&D was not "conducted by" Bosch within the meaning of reg 13G(5)(c), Bosch had received duty credits to which it was not entitled. The Tribunal determined that the Secretary was able to recoup these duty credits pursuant to s 94(1)(a) and (b) of the Act. Bosch contends that on a proper interpretation and application of s 94(1) the Secretary cannot recoup duty credits issued because of an erroneous view of legal entitlement to the credits under the regulations.

The legislative framework 78 Part 9 of the Act is headed "Unearned duty credit" and set out the process for recoupment of duty credits by the Secretary. The overview at s 93 provides: (1) This Part provides for duty credit to which a person is not entitled to be recovered. (2) Division 2 sets out the circumstances in which an unearned credit liability arises (section 94) and contains provisions concerning the amount of a liability. (3) To facilitate recovery of unearned credit liability, Division 3 provides for the offsetting of a person's duty credit against unearned credit liability. (4) Division 4 contains provisions concerning the time for payment of an unearned credit liability, a late payment and extensions of time for payment. (5) Division 5 allows the regulations to deal with other matters concerning unearned credit liability. 79 Section 94(1) provided at the relevant time that: A person who has or had duty credit is not entitled to the credit for any of the following reasons: (a) because of the making of an error in calculating the duty credit (including during the modulation process) or a mistake of fact; (b) because information given to the Minister, the Secretary or a delegate of the Secretary was inaccurate or incomplete; (c) because of a clerical error or mistake in the ledger. … 80 Section 95 of the Act provided at the relevant time that: If the Secretary determines that, because of a situation set out in section 94, a person is not entitled to certain duty credit, the person is liable to pay to the Commonwealth an unearned credit liability. Section 96 quantified the participant's unearned credit liability as being the amount of duty credit received to which the participant is not entitled. 81 It is established that Part 9 of the Act is a code dealing with the circumstances in which duty credits can be recouped by the Secretary. Duty credits can only be recouped in one of the circumstances identified in s 94(1): Secretary, Department of Industry, Tourism and Resources v Spicer Axle Structural Components of Australia Pty Ltd (2007) 164 FCR 301 at [32] ("Spicer Axle"). 82 The Act requires participants in the scheme seeking to claim duty credits to make quarterly returns in writing to the Secretary, providing particulars of expenditure on eligible investments: ss 35 and 37. Question 17 of the approved quarterly return form requires the participant to advise the "total claimable value" of any "Type E Investment" in offshore R&D in the specified quarter. The return requires that the participant declare that he or she has read the Act, the regulations and the Customer Guidelines, and that to the best of his or her knowledge the information provided is "true, correct and accurate in all material particulars". 83 The Secretary is required after receiving the quarterly return, to work out the "unmodulated" investment credits for the participant's claimed expenditure using information from the quarterly return in a formula: s 47. The Secretary is then required to work out the "modulated" investment credits to be issued to the participant: s 59. Once the modulated investment credit for the participant is worked out, the Secretary is required to enter that credit into the ACIS ledger in respect of that participant: s 64(3). The credit in the ledger is then issued to the participant as a duty credit: s 65.

Can the Secretary "revisit" the assessment of entitlement to duty credits? 84 Bosch argues that the Act obliged the Secretary, not the participant, to assess legal entitlement to credits before they were issued. It contends that having made such an assessment, s 94 did not allow the Secretary to revisit it. It argues that the scheme did not involve any self assessment by the participant. 85 It is surprising that Bosch contends that the scheme does not involve self assessment by participants. In the Revised Explanatory Memorandum to the 2000 amending Act, the purpose of the better definition of allowable expenditure was set out as: …to assist participants to determine what is and what is not eligible expenditure, in what is largely a self-assessed scheme. (emphasis added) 86 Similarly the Explanatory Statement to the 2001 amending regulations state that: The purpose of the regulations is to enable participants in ACIS to determine the maximum claimable value of investments in different kinds of plant and equipment and research and development for the purpose of making claims for ACIS duty credits in what is largely a self-assessed scheme. (emphasis added) 87 This was confirmed in 2007 by the Minister for Industry, Tourism and Resources, on the second reading of the Bill which became the ACIS Administration Amendment (Unearned Credit Liability) Act 2007 (Cth) ("2007 Amendment Act"). The Minister said: Assistance is provided up-front - that is, duty credits are issued on receipt of quarterly claims by a registered ACIS participant. A subsequent audit process ensures that claims are legitimate and that they relate to eligible expenditure. If items of ineligible expenditure or other errors are identified, an unearned credit liability (UCL) is issued to the participant and this is offset against their future ACIS credits. … The up-front assessment of all claims would result in lengthy delays in the issuing of duty credits - delays which could impose significant financial hardship on members of the automotive industry. The industry has long accepted that the approach of issuing credits up-front then issuing UCLs should ineligible expenditure be identified is the best way for them to receive credits in a timely manner and the Commonwealth is keen to ensure that approach can continue. 88 Finally, I note that the Full Court in Spicer Axle held at [30] that the scheme operated this way, and stated: The speech of the Minister for Industry, Tourism and Resources, on second reading of the Bill which became the ACIS Administration Amendment (Unearned Credit Liability Act 2007, reveals that, when the ACIS was established, it was agreed by all participating parties that duty credits would be issued on receipt of quarterly claims. If, during the subsequent audit process, a reason disqualifying a participant from entitlement to a credit identified under s 95 should emerge, the relevant credit would be recouped. The process whereby recoupment was to be effected is set out in Part 9 of the ACIS Act. 89 Bosch contends that Spicer Axle is authority for the proposition that the Act did not establish a self assessment scheme. I do not agree. The Full Court did not expressly deal with this question. It was noted in Robert Bosch (Australia) Pty Ltd v Fice (2009) 175 FCR 258 ("Bosch v Fice") at [70] by Ryan J (who was a member of the Full Court in Spicer Axle) that: the term self assessment scheme does not appear to find expression in the ACIS Act or the Regulations. Nor did the Full Court in Spicer Axle find it necessary to express a view about its effect on the analysis to which [the Tribunal] referred… It is apparent that the Full Court in Spicer Axle, and Ryan J in Bosch v Fice, were not taken to the Explanatory Memorandum and Explanatory Statement in 2000 and 2001. Nor was Ryan J taken to the Second Reading Speech from 2007. 90 It could not be clearer from the Explanatory Memorandum, the Explanatory Statement and the Second Reading Speech, that the scheme involves "self assessment". It was for each participant to determine any entitlement to duty credits and claim that entitlement through its quarterly return. The Secretary would then mechanically calculate any entitlement to duty credits based on that information and issue them accordingly. Subsequently an audit could be performed and duty credits wrongly issued could be recouped pursuant to the code constituted by s 94 of the Act. 91 The Act clearly contemplates that the Secretary is able to recoup duty credits that are wrongly issued, and the only question is whether s 94(1) allows recoupment in the circumstances of this matter.

Can duty credits issued because the claimant had an erroneous view of legal entitlement be recouped? 92 Bosch completed quarterly returns advising of its total claims and lodged these with the Secretary. In its quarterly returns it set out the "total claimable value" of its "Type E Investments". An example of a quarterly return completed by Bosch is contained in Annexure 1 to these reasons. It is agreed that this quarterly return is representative of others submitted. 93 The Secretary has not contested Bosch's submissions that its quarterly returns were made in good faith pursuant to its interpretation of the regulations. Bosch contends that duty credits issued because of an erroneous view of legal entitlement do not fall within s 94(1), and therefore could not be recouped by the Secretary. It relies on the decision of the Full Court in Spicer Axle which held at [32] that: … the Act, at the relevant time, did not mean that an absence of legal entitlement to a credit entailed a liability to make a payment to the Commonwealth under s 95 of the ACIS Act. 94 The 2007 Amendment Act amended the Act to expressly provide for recoupment of duty credits by the Secretary in any case where there was a lack of entitlement to them. In Spicer Axle at [32] the Court held that the amendment supported its view as to the meaning of the Act at the relevant time. I agree that it does, as it is to a degree indicative of an acceptance by Parliament that the former Act had a gap in that regard. 95 The question is whether prior to the amendment - which is the relevant time - duty credits issued because of an erroneous view of legal entitlement could be recouped under any of the 4 grounds of s 94(1).

Recoupment under s 94(1)(a) - error in calculation or a mistake of fact 96 At the relevant time s 94(1)(a) of the Act enabled recoupment of duty credits if they were issued because of "an error in calculating the duty credit…or a mistake of fact". 97 Bosch argues that duty credits issued because of an erroneous claim of entitlement under the regulations is a mistake of law, not a mistake of fact. It relies on Spicer Axle at [32] where the Court held: The calculation of the duty was based on information given to the Department by Spicer Axle on the assumption of an entitlement to duty credits. There was no error in calculating the duty credits. There was no mistake of fact. There was no mistake or clerical error in the Secretary's ledger. The ledger merely reflected information given by Spicer Axle to the Department. The only mistake (if there was one) was as to the legal entitlement of Spicer Axle to receive credits. 98 I am bound by Spicer Axle to find that credits issued because of an erroneous claim of legal entitlement by a participant are not issued because of a mistake of fact under s 94(1)(a). It is relevantly on all fours with this case. 99 However, the Secretary also pursues a different argument to that apparently pursued in Spicer Axle. He contends that he made an error in calculating the duty credits - because he wrongly assumed that Bosch's answers accurately disclosed its allowable expenditure on "Type E Investment" - which was a mistake of fact. He argues that the error did not arise because of an incorrect interpretation by him of reg 13G, or because of a misapplication of the regulation to the facts. 100 The Secretary also argues that the factual background of this matter is different to that in Spicer Axle. In particular he argues that in Spicer Axle the duty credits were issued because of a misunderstanding of the regulations, or a misapplication of the regulations to the facts as disclosed by the participant. The Secretary notes that in Spicer Axle all of the facts were known to him. The difference in this matter, he says, is that Bosch did not disclose that the offshore R&D was conducted under a contract with Bosch Germany and so he did not have all the facts. 101 The Court in Spicer Axle found at [32] that there was no mistake of fact within the meaning of s 94(1)(a) in the factual circumstances of that matter. Those facts involved a claim for allowable expenditure based on an erroneous view of the regulations. I consider that the relevant facts in Spicer Axle are essentially the same as the facts before me - notwithstanding the factual difference that the Secretary contends exists. It was not submitted that Bosch's failure to inform the Secretary about its contract with Bosch Germany was for any reason other than its erroneous view about the regulations, and this does not relevantly distinguish the case from Spicer Axle. 102 I consider that I am bound to follow the decision in Spicer Axle. In that case no mistake of fact was found against the factual backdrop that a participant made an incorrect claim for duty credits based on its erroneous view of its entitlement under the regulations. I find that on a proper interpretation and application of s 94(1)(a) the Secretary is able to recoup the duty credits for the overseas R&D issued to Bosch. I set aside the Tribunal's finding in that regard.

Recoupment under s 94(1)(b) - provision of inaccurate or incomplete information 103 At the relevant time s 94(1)(b) of the Act enabled recoupment of duty credits if they were issued because the information provided by the participant was "inaccurate or incomplete". 104 The Tribunal found that s 94(1)(b) enabled the Secretary to recoup the duty credits issued. Bosch contends that s 94(1)(b) does not enable the Secretary to recoup duty credits issued because of an erroneous view of entitlement under the regulations.

Meaning of "accurate" and "inaccurate" 105 In my view the meaning of section s 94(1)(b) is clear. The meaning of the adjective "accurate" in the Oxford English Dictionary includes "exact, precise, correct, as the result of care, … in exact conformity to a standard or to truth." In the Macquarie Dictionary the meaning includes "in exact conformity to truth, to a standard or rule, or to a model; free from error or defect." 106 "Inaccurate" is defined in the Oxford English Dictionary as "not accurate; inexact, incorrect, erroneous". In the Macquarie Dictionary it is defined as "not accurate". 107 The word "inaccurate" in s 94(1)(b) has the ordinary meaning of " not accurate, incorrect, or not free from error". There is nothing to suggest that there is a mental element or intent required for there to be an "inaccuracy". Whether information provided is accurate or not is to be objectively determined.

Bosch's contention 108 Bosch typifies the information provided by it in its quarterly return as a "claim". It points to the fact that the relevant heading in the quarterly return is "Type E Investment Claims". It contends that the figure set out in relation to question 17 accurately records its claim for that quarter as to its allowable expenditure - based on its understanding of the regulations. It also says that the information it supplied accurately recorded the amounts it spent on overseas R&D. 109 Bosch argues that - if in seeking information through question 17 as to the "total claimable value" of the Type E Investments the quarterly return is seeking a legal opinion as to the proper operation of the regulations - this is not a fact or information within the subsection. In its submission, that legal opinion is not "information given" within the meaning of s 94(1)(b), except as to the fact of the expenditure and the holding of the opinion. 110 In Bosch's view the only inaccuracy or error, if any, is in its understanding of the application of the regulations. It submits that an error or an inaccuracy in an opinion expressed to the Secretary does not enliven s 94(1)(b) as it is not information which is "inaccurate or incomplete" as required by the section.

Operation of s 94(1)(b) 111 In my view, if information is provided by a participant that is not correct or contains errors, and duty credits are issued by the Secretary as a result, s 94(1)(b) is enlivened. Credits issued because of inaccurate information provided can then be recouped by the Secretary. The reason which lies behind the provision of inaccurate information by the participant is not relevant to the Secretary's right to recoup under the section. The question is whether the information provided was objectively incorrect or inaccurate. 112 The facts are uncontroversial. Bosch provided quarterly returns to the Secretary. In each of these returns its authorised officer declared that "I/the participant have/has read the ACIS Administration Act 1999, the regulations made under it and the ACIS Customer Guidelines and understand my/its/their obligations under each of them." He or she also declared that to the best of his or her knowledge that "the information provided is true, accurate and correct in all material particulars". 113 The information in the quarterly return included a statement at question 17 as to the "total claimable value of [Bosch's] Type E investment in overseas Research and Development in the specified quarter." "Total claimable value" is not defined in the Act or regulations, but is referred to in Part 5 of the ACIS Customer Guidelines which deals with allowable R&D expenditure. 114 The information provided by Bosch to the Secretary as to the "total claimable value" of its "Type E Investment" was objectively incorrect. Its allowable expenditure on "Type E Investments" was substantially less than it set out. The reason for this inaccuracy was its interpretation of reg 13G(5) - but its reason is irrelevant. 115 It was not contested that the reason that the duty credits were issued was "because" of the information provided. That it was "because" of the information provided was plain in any event.

The importance of accurate information 116 That the Act and regulations require that information supplied by participants be accurate or correct is, of course, unremarkable. The scheme involved expenditure of $7 billion of Commonwealth monies. The ability to recoup duty credits that were issued because of inaccurate information is plainly important for proper financial management: Second Reading of the ACIS Administration Amendment (Unearned Credit Liability) Bill, 7 February 2007. 117 Various provisions of the Act indicated the importance to the operation of the scheme of providing accurate information: (a) The participant was required to declare in the quarterly return that he or she had read and understood the Act and regulations and that the information provided was accurate; (b) Part 8 of the Act allowed for subsequent audits of participants to be performed so that any information provided could be substantiated; (c) Broad powers were provided to authorised officers to compel provision of information by participants, and to substantiate that information: ss 81 to 83; and (d) The Act provided that it was an offence for a person to refuse to answer questions or produce documents, or to knowingly give false or misleading information: s 83. 118 The information provided by Bosch was "inaccurate" on the proper interpretation and application of s 94(1)(b) - whether or not Bosch knew of the inaccuracy. 119 Although not an important consideration in my decision, I note that other Commonwealth legislation operates in the same way. For example, full and complete disclosure of material facts to the Commissioner of Taxation has been found not to have occurred, regardless of whether the taxpayer knew the facts were wrong: Federal Commissioner of Taxation v Levy (1961) 106 CLR 448 at 464 per Dixon CJ. Under the Social Security Act 1947 (Cth) a statement made in support of a claim for a benefit was treated as false under the Act where the statement was untrue in fact - whether or not deliberately untrue: McAuliffe v Secretary, Department of Social Security (1991) 23 ALD 284 at 296. 120 Bosch's interpretation of s 94(1)(b) would mean that duty credits with a significant value - issued because a participant misunderstood its entitlements and made an incorrect claim - are not able to be recouped. Counsel for Bosch concedes that "this is all rather strict and unattractive to the revenue" and describes it as "tough luck or tough love" for the Commonwealth, but argues that it is the result of the plain words of the section. I do not consider that the words of the section require this reading.

Whether Spicer Axle is authority in relation to s 94(1)(b) 121 Bosch contends that Spicer Axle is authority for the proposition that s 94(1)(b) of the Act does not provide for recoupment of duty credits issued because of an erroneous view as to legal entitlement. I do not agree. That case dealt only with the recoupment of duty credits under ss 94(1)(a) and (c), and not under s 94(1)(b): Spicer Axle at [23]. That Spicer Axle did not deal with s 94(1)(b) was also noted by Ryan J in Bosch v Fice at [64] to [65]. 122 In the alternative Bosch argues that the decision in Spicer Axle supports an interpretation of s 94(1)(b) that does not allow for recovery of duty credits by the Secretary where they were issued due to a mistake of law. I do not accept this argument. Spicer Axle relates only to s 94(1)(a). Under that section the distinction between a mistake of fact and law is central. In s 94(1)(b) the question is whether the information provided is inaccurate or incomplete, which is quite different. 123 I can find no error in the approach taken by the Tribunal in relation to the interpretation and application of s 94(1)(b). I affirm its decision in that regard and the appeal fails.

Is Bosch precluded from making its contentions as to the operation of s 94 because of issue estoppel or abuse of process? 124 The Secretary argues that Bosch has previously unsuccessfully advanced the argument that, on a proper interpretation and application of s 94, the correctness or otherwise of a claim for duty credits is irrelevant. He contends that Bosch is precluded by an issue estoppel from arguing it again. In the alternative, he contends that relitigating the argument is an abuse of process. 125 Given the findings that I have made, whether Bosch is so precluded is now of no import. Further, Spicer Axle is binding on this Court whether Bosch is precluded from its submissions or not. Nevertheless, I note that no issue estoppel or abuse of process arises. 126 The argument as to the proper operation of s 94(1) was first made before the Administrative Appeals Tribunal. In resisting an application by the Secretary for an order for a factual investigation, Bosch requested determination of the preliminary issue that duty credits issued in the factual circumstances that they were could not enliven s 94(1)(a), (b) or (c). In reliance on the decision in Spicer Axle Bosch contended that the matter could be determined without deciding the facts at all: Robert Bosch(Australia) Pty Ltd v Secretary, Department of Innovation, Industry, Science, and Research, Interim Decision of Member E Fice of AAT, 16 April 2008 at [22]. 127 The Tribunal held in an interim decision that Spicer Axle did not compel a finding that s 94(1) was not enlivened in the existing circumstances, and allowed the factual investigation to proceed. 128 Bosch applied for judicial review of the Tribunal's decision pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 39B of the Judiciary Act 1903 (Cth). It contended that the Tribunal had wrongly construed ss 94 and 95 of the Act, and that those sections rendered irrelevant any factual investigation as to whether the offshore R&D was allowable under reg 13G(5). It again relied on Spicer Axle as authority for the proposition that the correctness or otherwise of a claim for duty credits was not relevant to an issue arising under s 94(1): Applicant's outline of submissions in Robert Bosch (Australia) Pty Ltd v Fice and Anor, VID 333 of 2008 at [45a], [57]-[59]. 129 In Bosch v Fice Ryan J determined the application for judicial review. The Secretary relies on this decision to argue that either an issue estoppel or an abuse of process has arisen. For an issue estoppel to exist, the issue determined in Bosch v Fice must be a fundamental issue in that case, that issue must have been finally and conclusively determined, and the same issue must be before this Court: Blair v Curran (1939) 62 CLR 464 at 532-3. 130 The issue that arises in these proceedings is whether s 94(1) provides for recoupment of duty credits that were received because of a mistake as to legal entitlement. In my view, Bosch v Fice did not finally and conclusively determine that issue. Instead, the Court held that there was no error of law in the Tribunal deferring consideration - until after the factual investigation - of the issue as to whether the factual background to a claim for duty credits was irrelevant. 131 Ryan J held at [ 57] that: it was entirely open to the Tribunal and consistent with the principles governing the exercise of the discretion... to defer consideration of the application of s 94(1) until after an investigation of the facts said to support the claim for duty credits. At [65] his Honour held: It follows that it is necessary for the Tribunal to make findings of fact directed to that issue and appropriate for it to give directions, including those for the production of documents, to enable those findings to be made. 132 His Honour held at [72] that the interim decision of the Tribunal had not "foreclosed any argument which might otherwise have been open." Although Ryan J found no error of law in the Tribunal's treatment of Spicer Axle, his Honour did not finally determine the proper operation of s 94. 133 Further the Secretary accepted in Bosch v Fice that the Tribunal's determination was not final, and should not be allowed to now advance a different position. Ryan J noted at [53] that the Secretary: …contended that the views expressed by the Tribunal did not constitute an ultimate determination of the issue arising under ss 94 and 95 but were merely by way of interim decision. 134 I am not satisfied that an issue estoppel has arisen. 135 In the alternative, the Secretary contends that Bosch is attempting to relitigate an issue previously litigated, which is an abuse of process. State Bank of NSW v Stenhouse Ltd [1997] Australian Tort Reports 64,077 (81-423), BC9700254, at 64,089, which was approved in Rippon v Chilcotin (2001) 53 NSWLR 198, identifies a number of factors tending to support a finding of abuse of process. Having regard to those factors I do not consider that any abuse of process has arisen. 136 I do not consider that Bosch v Fice finally determined the issue litigated in that matter. Instead it deferred consideration of it so as to allow a factual investigation to occur. The question in these proceedings is whether s 94(1)(a) or (b) provides for recoupment of duty credits received because of a mistake as to legal entitlement. I can see no oppression of or unfairness to the Secretary, or any damage to the integrity of the system of administration of justice, in allowing this issue to be determined by the Court. The balance of justice referred to in State Bank of NSW v Stenhouse Ltd is in favour of Bosch. 137 I am not aware of any reason why costs should not follow the event. If the question of costs is agreed the parties should file consent orders. If not, the orders provide for short submissions. I certify that the preceding one hundred and thirty-seven (137) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy.