Australasian Performing Right Association Limited v Federation of Australian Commercial Television Stations

[1995] ACopyT 2

COW R I G H I

T R ~ B W A L

2 , 9 5

JUDGMENT NO. ........ ........ .. mooo.oooe.

CATCHWORDS

COPYRIGHT - application pursuant to s.160 of the Co~vriaht Act 1968 for interim order pending final decision of Tribunal on reference under 6.154 of CoDvriaht Act and application made pursuant to s.157 thereof - principal applications concern proposed licence agreement licensing commercial television stations to broadcast music in the APRA repertoire - consideration of principles to be applied in determining application for interim order - consideration of evidence in support of application - determination of terms upon which interim order be made.

Co~vriaht

Act 1968, ss. 154, 157, 160

AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LIMITED V FEDERATION

OF AUSTRALIAN COMMERCIAL TELEVISION STATIONS & Anor

PLACE :

Sydney

DATE :

7 October 1994 and 3 March 1995

NO. CT 2 of 1993 NO. CT 3 of 1993 NOS. CT 1-44 of 1994

2 9 MAR 1995

TRIBUNAL: Sheppard P, Professor S. Ricketson, Mr L.J. Curtis

COMMONWEALTH OF AUSTRALIA

COPYRIGHT ACT 1968

JN THE COPYRIGHT TRIBUW

NO. 2 of 1993 Reference bv:

Australasian Performing Right Association Limited

under section 154 of the ~ovvriaht

Act 1968

NO. 3 OF 1993

Aw~lication

bv:

Federation of Australian Commercial Television Stations

under section 157(4) of the Covvriaht Act 1969

NOS. 1 TO 44 OF 1994

Aw~lications

bv:

Tasmanian Television Limited and others

under section 157(2) of the Cowvriuht Act 1968

TRIBUNAL: Sheppard P

MINUTES OF ORDER

Professor S. Ricketson (Member)

M r L.J. Curtis (Member)

m

3 March 1995

PLACE :

Sydney

THE TRIBUNAL MAKES THE FOLLOWING ORDER:

ORDER that until further order of the Tribunal including interim order, the licence scheme which is the subject of the Reference before the Tribunal in proceedings CT2 of 1993 is varied as follows:

(a)

by deleting sub-clause 6 and inserting the following in lieu thereof:

"The licence hereby granted shall commence on 1 July 1994 and, subject to the terms and conditions of this scheme shall remain in force until such further order, including any interim order, of the Tribunal in proceedings CT2 of 1993, CT 3 of 1993 and CT1-44 of 1994".

(b)

by deleting sub-clauses 7(a) and 7(b) and inserting the following in lieu thereof:

"an amount equal to 0.9% of the licensee's gross

advertising revenue whilst this licence is in force".

COMMONWEALTH OF AUS-IA

COPYRIGHT ACT 1968

IN THE COPYRIGHT TRIBUNAL

N0.2 OF 1993

Reference bv:

Australasian Performing Right Association Limited

under section 154 of the Co~vriaht

Act 1968

N0.3 OF 1993

ADDlication bv:

Federation of Australian Commercial Television Stations

under section 157 (4) of the Co~vriaht

Act 1968

NOS.l TO 44 OF 1994

ADDlications bv:

Tasmanian Television Limited and others

under section 157(2) of the co~vriaht

Act 1968

TRIBUNAL :

Sheppard P

Professor S. Ricketson

Mr. L.J.Curtis

7 October 1994

Sydney

REASONS FOR DECISION

THE TRIBUNAL: The three application to be dealt with are made pursuant to S. 160 of the Co~vriaht Act 1968 ( "the Act") which provides: -

"160.

Where an application or reference is made to

the Tribunal under this Act, the Tribunal

may make an interim order having effect until

the final decision of the Tribunal on the

application or reference."

The applications are made in matters Nos.2 and 3 of 1993 and 1 to 44 of 1994 inclusive. Each of the matters, that is Nos. 2 and 3 of 1993 and 1 to 44 of 1994 is related to each of the others. The applications raise identical matters for decision and may be considered as one application.

The background of the matter is as follows. For many years there has been in existence a licence by the Australasian Performing Right Association ("APRA") licensing the commercial television stations throughout Australia to broadcast music in the APRA repertoire on television stations. The licensing agreement which was in force until 30 June 1994 was made in 1972 or 1973 with each of the then existing commercial television stations. Over the years similar agreements have been entered into with new stations as they have come into existence. On 14 May 1993 the Federation of Australian Commercial Television

pursuant to clause 9 of the Agreement, that the Agreement would

Stations ("FACTS"), on behalf of its members, advised APRA,

terminate on 30 June 1994. Under the 1973 Agreement each FACTS member paid a Licence fee to APRA calculated at 1.5 per cent of the member's gross advertising revenue less a deduction for total expenditure on programs up to a maximum deduction of 40 per cent of total gross advertising revenue. For reasons which need not be gone into, this has in fact resulted in an effective licence

3

fee of 0.9 per cent of each member's gross advertising revenue.

On 22 June 1994 FACTS and AF'RA entered into an arrangement in respect of the period commencing on 1 July 1994 and continuing until these applications were dealt with. The agreement reflected the fact that the parties were unable to reach agreement on the licensing terms to apply from that date. FACTS advised APRA that it intended to apply to the Copyright Tribunal for interim orders under s.160 of the Act. In the meantime the two agreed that each FACTS member would pay 0.9 per cent of the member's gross advertising revenue from 1 July 1994 subject to any interim and final orders of the Tribunal in the proceedings.

By the applications, members of FACTS are seeking interim licence arrangements from 1 July 1994 whereby each member will isntinue to pay effectively 0.9 per cent of gross advertising revenue until the final determination of the proceedings. If the Tribunal determines that FACTS members should pay an amount greater than 0.9 per cent, they have agreed to pay such greater

Tribunal determines that the licence fee payable by the FACTS

amount dated back to 1 July 1994. On the other hand, if the

members, once calculated, amounts to less than 0.9 per cent, then the difference between that amount and 0.9 per cent from 1 July

1994 is to be credited in respect of future payments under the

new scheme. It is said that a licence fee less than 0.9 per cent of gross advertising revenue could be determined by the Tribunal in its final orders either pursuant to the scheme proposed by

4

FACTS and its members in their applications or the scheme proposed by APRA in its reference as varied, if it be varied, by the Tribunal.

It is desirable to refer to the principal matters which are before the Tribunal in a little detail. The first of these in point of time is a reference by APRA under s.154 of the Act. That reference is matter No.2 of 1993. Section 154 provides that, where a licensor proposes to bring a licence scheme into operation, he may refer the scheme to the Tribunal. The expression "licence scheme" is defined in S. 136 of the Act to mean a scheme formulated by a licensor setting out the classes of cases in which the licensor is willing to grant licences and the charges (if any) subject to payment of which, and the conditions subject to which, licences would be granted in those classes of cases. "Licenc~" is defined in s.136 to mean a licence granted by or on behalf of the owner of the copyright in a literary, dramatic or musical work being, relevantly, a licence to broadcast the work or an adaptation of the work.

The licence scheme which is in question provides in clause 2 that, subject to the following terms and conditions, APRA grants to the licensee a licence to broadcast by television within Australia works in APRA's repertoire. It is unnecessary to refer to the detail of the terms and conditions.

Sub-section 154(2) of the Act provides that the parties to

5

a reference under the section are the licensor referring the scheme and such organisations or persons as apply to the Tribunal to be made parties to the reference. Sub-section 154(4) of the Act provides that the Tribunal shall consider a scheme referred under the section and, after giving to the parties to the reference an opportunity of presenting their cases, make such order, either confirming or varying the scheme, as the Tribunal considers reasonable in the circumstances. The issue in the case brought by APRA pursuant to s.154 is whether the licence scheme should be confirmed or whether it should be varied by substantially reducing the licence fee provided for. The licence fee proposed in the licence scheme is an amount equal to 1.2 per cent of the licensee's gross advertising revenue for the period of 12 months commencing on 1 July 1994 and a similar amount for each succeeding period of 12 months during the currency of the licence. The expression "gross advertising revenue" is defined. It is unnecessary to refer to the definition. Effectively the licence scheme provides for an increase of 0.3 per cent of gross advertising revenue on what has been paid in the past, namely 0.9

per cent of that revenue.

The next application is the application made by FACTS

pursuant to subsec. 157(4) of the Act.

It is matter No.3 of 1993.

Sub-section 157(4) of the Act, so far as it is relevant, provides that an organisation that claims that it is representative of persons requiring licences in cases to which a licence scheme does not apply and the licensor proposes that licences should be

6

granted subject to the payment of charges, or to conditions, that are unreasonable, may apply to the Tribunal under the section. Sub-section 157(6) provides that, in such a case, the Tribunal shall make an order specifying the charges and the conditions that the Tribunal considers reasonable in the circumstances in relation to persons or classes of persons specified in the order being persons who are represented by the applicant or were parties to the application. The purpose of the application under subsec. 157(4) is to achieve a licence fee which is substantially less, not only than the 1.2 per cent of gross advertising revenue specified in the APRA licence scheme, but a licence fee which is substantially below the 0.9 per cent of gross advertising revenue which has been the basis of the fee in the past. In financial terms the difference between the parties is many millions of dollars per annum.

The remaining applications (Nos.1 to 44 inclusive of 1994)

are applications made pursuant to subsec.157(2) by each of the

Australian commercial television stations. Sub-section 157(2)

of the Act provides that a person who claims, in a case to which

a license scheme applies, that he requires a licence but that the

grant of a licence in accordance with the scheme, would, in that case, be subject to the payment of charges or to conditions that are not reasonable in the circumstances of the case may apply to the Tribunal under the section. In such a case the Tribunal is to make an order specifying the charges, if any, and the conditions that the Tribunal considers reasonable in the

7

circumstances, in relation to the applicant; see para.l57(6)(b)

of the Act. Applications Nos.1 - 44 of 1994 raise the same

questions as are raised in the application made by FACTS pursuant

to subsec.157(4) of the Act. They were filed because of doubts

whether the application by FACTS pursuant to subsec.154(4) was

well-founded, APRA having brought its licence scheme into

operation. Subject to some questions which may be raised

concerning the ambit of the Tribunal's powers under s.154 (see

Reference by Australasian Performina Riaht Association Limited;

Re Australian Broadcastina Cor~oration (1985) 5 IPR 449 at 457-

g), the applications under subsecs.157(2) and (4) also raise the

same issues as are raised in the reference under that section.

Despite the apparent complexity of the various applications which have been filed and i: 9 terms of the provisions of the Act pursuant to which they are brought, the essential matter in respect of which the parties are in dispute is the amount of the licence fee which should be paid by commercial television

television stations for the period which began on 1 July 1994 and

stations in Australia for the right to broadcast music over

will come to an end when the matters are finally determined.

Although the issue between the parties may be simply stated as the question of what the amount of the licence fee for the broadcast right should be after 1 July 1994, there are issaas of fact and law between the parties which give rise to difficulty.

8

The cases are not yet ready for hearing. It is unlikely that they will be ready for hearing before April 1995. We think a more realistic assessment of the situation is that they are unlikely to be completely ready before the end of June 1995. The hearing is likely to occupy several weeks. It may last as long as two months. It is unlikely that the Tribunal will be able to give a decision immediately. Realistically it seems that the Tribunal's decision is unlikely to be announced until towards the end of 1995.

There are some aspects of the matters in question between the parties, particularly matters connected with the claimed applicability of some of the provisions of Part IV of the Trade Practices Act 1974 to the licence scheme propounded by APRA, which make it not improbable that the matters may be the subject

of an appeal to the Full Court of the Federal Court on one or more questions of law. If this were to occur, it would be unlikely that there would be finality in the matter until the middle of 1996.

The amounts involved in the applications are not inconsiderable with the consequence that these applications for interim orders under s.160 of the Act have important consequences for the parties.

The way that FACTS and its members have approached the

matter has an attractive simplicity about it. They suggest

9

maintaining the status quo until the matter is finally decided. In other words, the television stations would go on paying 0.9 per cent of their gross advertising revenue during the interim period. But this is subject to the condition that there be a reassessment of the position after the Tribunal gives its final decision. If the amount of the licence fee is increased beyond

0.9 per cent of gross advertising revenue, the television

stations will pay to APRA the shortfall which in that case there would be, if the matter were taken back to 1 July 1994. On the other hand, if the Tribunal determines a licence fee which is less than 0.9 per cent of gross advertising revenue, FACTS claims that there should be an adjustment the other way. The way this will be done is to deduct the overpayment from future payments due to APRA under the licence scheme as determined by the Tribunal. Another suggestion, which was not eventually pursued, was that APRA could overcome the problsm by retaining 50 per cent of the moneys received during the period from 1 July 1994 to the final determination of the matter. APRA resists these suggestions because of substantial difficulties it would

would have to bring to account if the final determination by the

encounter in relation to the distribution of moneys which it

Tribunal were adverse to it. In opposing the applications, APRA relied, firstly, on an absence of jurisdiction in the Tribunal to do what FACTS sought and, secondly, on a submission that the Tribunal, assuming it had jurisdiction, ought not, as a matter of discretion, exercise that jurisdiction in favour of the FACTS applications.

10

We deal first with the question of jurisdiction. It is to be observed that there is no express provision either in 6.154 or 6.157 of the Act which empowers the Tribunal to act retrospectively. So far as the Language of the sections discloses, it would appear that Parliament proceeded upon the basis that the Tribunal would act prospectively. Counsel for FACTS did not concede this point, but they put no argument to the contrary effect and said that we should proceed to determine this application on the assumption that neither s.154 nor 6.157 provided for the making of a final decision which would operate retrospectively. We propose to proceed on that basis, but in the circumstances express no concluded view on the question.

Counsel contended that the presence of S.

160 in the Act

indicated that the Tribunal was to be able to deal effectively and comprehensively with the situation that would be likely to arise in many cases of there being an interval of time between the bringing into effect of a licence scheme, the reference of that scheme to the Tribunal, or the making of applications under

applications. They said that s.160 was expressed in language

s.157, and the final determination of the reference or the

which did not suggest that the ambit of the Tribunal's jurisdiction or power to deal with the position between reference or application and hearing should be in any way limited or fettered. The intention was that the Tribunal should act to achieve a satisfactory and practical solution to provide reasonably for the period up to the final decision of the Tribunal

Counsel said that it was by no means an unusual or unreasonable position for parties in dispute, such as the parties here, to agree upon a situation which would involve a monetary adjustment of periodical payments made by one to the other in respect of a continuing obligation to supply goods or services or the like. One can envisage such a situation in relation to leases for periods of years where there is a regular review of the rent. Theoretically, at least, the rent may be determined upwards or downwards. In those circumstances it is not unusual for appropriate clauses in leases to provide for a retrospective adjustment after an arbitrator or mediator has made a decision on what the new rent will be.

Counsel for APRA did not contend that s.160 ought not to be construed as conferring a wide jurisdiction on the Tribunal but, in his submission, the terms of the section were such as to enable the Tribunal only to make an interim order which, until

did not provide for retrospective adjustments to be made once

the final decision, would operate in a final way. The section

that final decisionwas known. In other words, counsel contended that the power which s.160 conferred on the Tribunal was to enable it to make in an interim way an order though interim, having a similar effect to orders which may be made pursuant to s.154 or s.157. The section widely expressed though it may be, was subject to this limitation.

12

Having reflected on the competing submissions of the parties in relation to this matter, we have reached the conclusion that the submissions made on behalf of APRA should be rejected. APRA has particular problems about the course which FACTS proposes. That no doubt accounts for its opposition, based both on an absence of jurisdiction and on discretionary grounds, to the application which is being made. But it would not be difficult to imagine a different kind of case where complications associated with distributing moneys by a collecting society were not present. In such a case it would unquestionably be reasonable and appropriate to make the kind of order for which FACTS contends unless the language of the section made it clear that that course was not open. We do not find such language in 6.160. We see no reason in principle why the legislature would have intended such a consequence. The whole thrust of Part V1 of the Act, which is entitled "The Copyright Tribunal", is to enable the Tribunal to achieve an appropriate balance between the interests of copyright owners, whose work is to be the subject of a licence, and the interests of those who wish to make use of

conditions. We see no reason why the ambit of s.160 should be

that work for a reasonable fee and on reasonable terms and

circumscribed by the provisions of ss.154 and 157 assuming that it is correct to say that those sections do not authorise a final decision which has a retrospective effect.

In the course of the argument, we were referred to the

provisions of subsecs. 158(2) and 159(2) of the Act. Sections

13

158 and 159 deal respectively with the effect of a licence scheme being continued in operation pending the order of the Tribunal and the effect of the order of the Tribunal in relation to licences. Having considered the provisions which were relied upon, we do not find in them anything which suggests we should take a narrower view of s.160 than we have done.

We have also considered the provisions of subsecs.154(5) and

155(4). 'These provisions make it clear that interim orders in matters brought before the Tribunal pursuant to ss.154 and 155 are not to have an indefinite duration. The presence of the sub- sections may be thought to lend some support to the argument that orders under s.160, although interim in character, are to be regarded as orders made under the particular provision of the Act from which stems the Tribunal's jurisdiction to make orders or grant other relief finally determining the proceeding before it. However, we are of opinion that the better view is that the provisions of subsecs.154(5) and 155(4) are intended only to make it clear that an interim order may not be of indefinite duration.

We do not construe them as limiting the wide words of s.160

which, in our opinion, empower the Tribunal to make an order which, in a practical and commonsense way, will provide appropriately for the period up to final determination.

For these various reasons we reject the submissions made on behalf of APRA in relation to the jurisdiction which s.160 confers on the Tribunal and uphold those made by FACTS.

14

The nextmatter which requires consideration is the question of the way in which the Tribunal's discretion should be exercised. In relation to this matter, we should refer to the affidavit of M r B.R. CottLe who is the chief executive officer of APRA. Mr Cottle said that the licence scheme providing for payment of a percentage of gross advertising revenue has been effectively at the rate of 0.9 per cent of gross advertising revenue since 1 July 1972. At no time, until the dispute now before us was foreshadowed in 1993, had it ever been asserted during the period of 20 years or so which is involved, either by FACTS or any commercial television licensee, that the payment of licence fees at the rate of 0.9 per cent of gross advertising revenue had caused hardship. Furthermore, Mr Cottle said that at no time between 1972 and the commencement of negotiations which led to these proceedings in 1993 did APRA ever receive advice or information from FACTS that the rate of licence fee was considered to be unreasonable.

Mr Cottle said that APRA makes distributions of television royalties to members and affiliated collecting societies for

distribution to overseas owners of the broadcast right in music

twice per year, i.e in June and November of each year. Distributions during the current financial year and the following year would be conducted as follows. For performances in the period July 1994 to December 1994 a distribution would be made in June 1995. For performances in the period December 1994 to June 1995 a distribution would be made in November 1995. The

position would be similar in respect of distributions to be made in June 1996 and November 1996. Mr Cottle said that, because of the nature and complexity of the analysis of performance information, payments for performance are made in arrears. It should, perhaps, be explained that the distribution to be made in November 1994 will be in respect of performances in the period up to July 1994 with the consequence that that distribution will give rise to no problem, it being based upon the licence fee which was due under the former licences which were in force until 30 June 1994.

In relation to technical difficulties concerning distribution, Mr Cottle said:

"16.1 APRA's computerised system of recording performances has a number of characteristics which would make it extremely difficult, costly and time consuming to distribute monies released from escrow. The computer system is designed to enable distribution by a system of accumulated performance credits during a defined 'current' period. Once a distribution has been effected, the performance credits are removed from the system and are stored in a different data base. The performance information cannot be

retained on the mainframe because the

computer is not able to distinguish between

information relating the then 'current' period and information of a 'historical' nature.

Historical performance information has never previously been required to distribute monies relating to a prior distribution period but rather has to date only been required for the purpose of enquiry. If the information were stored on the mainframe, the computer would cause the performances to be paid again even though no performance credit points had been accumulated during the then current distribution period. -RA,

however, does need to refer to the historical information from time to time. For instance, members frequently call APRA to enquire about the amounts earned by them during a particular distribution period. Such information is most readily accessed by reference to the historical information, which is stored in a convenient format.

If, at the end of these Tribunal proceedings, it was found that monies held in escrow should be wholly or partially released to APRA, it would not be possible to simply restore the historical information to the mainframe computer and re-run the distribution because the historical data cannot be readily restored to the mainframe. The programs developed for use on the mainframe to effect a distribution are not designed to run against the data base on which the historical information is stored i.e. the system on which the historical information is stored is unable to process information in order to effect a distribution."

Mr Cottle also said:

"16.5 I am informed by APRA's Information Technology Manager, Gus Jansen, that APRA would neeti 12-18 months to develop the software necessary to overcome the difficulties caused by the need to make an extraordinary distribution of monies released from escrow. As will be seen from paragraph 18 below, the delay caused by the need to develop additional software programs

would exacerbate the prejudice to members

affected by post termination payment

provisions.

The need to restore such information for the purposes of an extraordinary distribution would have an ongoing impact on APRA's information systems. The entire platform would require modification not only to distribute the information but also to enable enquiry functions described in sub- paragraphs 16.2 and 16.3 to be carried out accurately on completion o f the distribution.

The technical difficulties would not be

alleviated by reducing the size of the

escrow from 50% to any lesser percentage."

The evidence given by Mr Cottle in relation to the matters mentioned in the last quoted paragraphs was given as a response to suggestions that APRA could overcome its problems by retaining, say, 50 per cent of the money which it had received from FACTS members calculated at the rate of 0.9 per cent on gross advertising revenue.

Other difficulties mentioned by Mr Cottle concern a distortion in voting rights and catalogue changes. We have taken these matters generally into account but do not find it necessary to refer to the detail of the evidence about them. Mr Cottle also referred to a number of practical difficulties. Amongst other things he said:

"19.3

For the purpose of assessing the impact of an extraordinary distribution, if one assumes that monies could not be released from escrow until December, 1996, this would involve checking the entitlements to 109,731 titles (based on 36,577 titles per six month distribution period) involving 274,327 sharers. Given that normal distribution

procedures would still need to be followed

in respect of distributable revenue for the

then current distribution period, the additional workload imposed by the necessity to manually check the entire records for all intervening distributions in order to make an extraordinary distribution would be enormous and would undoubtedly further exacerbate the loss of pipeline monies by publisher members."

Mr Cottle also referred to affiliation changes. This was a reference to the fact that much of the distribution which APRA makes is to overseas composers and publishers. These are represented by collecting societies in other countries. Moneys are sent to these affiliated societies for distribution to the publishers and composers specified by APRA. In relation to this matter, Mr Cottle said:

"19.4

Affiliation Changes

In the case of APRA's affiliates, it is not

uncommon for writers to change society

affiliation. For instance, in the United

States, ASCAP and BM1 vigorously recruit

writers, both "new" writers and those who

have previously been affiliated with another

US society. In addition when writers change

residence, all societies in CISAC permit

changes of affiliation on grounds of

convenience with as little formality as

possible. Again all titles subject to an

extraordinary distribution would have to be

manually checked to ensure that the correct

society was paid. Errors in payments to

such societies can seriously delay the time

of payment to creators/publishers because

many societies, rather than passing on the

monies paid in error, return such monies to

APRA for it to establish entitlement."

In para 20 of his affidavit, Mr Cottle dealt with the problems likely to be suffered by APRA's members and affiliates if moneys are withheld. He said that withholding payments would significantly reduce the earnings of many thousands of writers

calculations appear in his af f idavit which con£ irm what he says.

and publishers both in Australia and elsewhere. Some

He also said that, while some publishers and sub-publishers are large successful organisations, such anorder would significantly impair cash flow, whilst at the same time permanently depriving many local publisher members of revenue. In the case of composers and authors, such an order would undoubtedly cause hardship to many. The affidavit was drawn at a time when it was

19

proposed by FACTS that there should be a term of the order that there be moneys held in escrow pending the outcome of the proceedings. FACTS no longer suggests that the order contain such a term. However, the evidence remains relevant because to do what FACTS requires would involve APRA in making a decision whether it would distribute the full amount or not. It would seem to the Tribunal that it would almost certainly have to be cautious about the matter and withhold moneys against the possibility that there would need to be an adjustment.

There are other matters in Mr Cottle's affidavit which we have taken into account which need not be referred to in detail. There is also the matter of income tax to which reference was earlier made. This was a matter mentioned by Mr Cottle in his oral evidence. The problem is that, although moneys may not be c!istribr~ted, the Commis:imer of Taxation regards them as assessable income in the year of income in which an allocation is made by APRA. This, so the purport of Mr Cottle's evidence suggests, could impose very serious hardship in some cases.

Counsel for FACTS suggested that the Commissioner of Taxation may

not be correct in taking this course in numbers of cases. There

may well be something in that view but it would not be very satisfactory if any order made by the Tribunal created a situation in which large numbers of composers and publishers were forced into a dispute with the Commissioner of Taxation over whether allocations were to be treated as income in a particular year of income or whether income tax would be assessed only upon

2 0

the basis of what had in fact been received.

Counsel for APRA relied heavily on the past history of the matter. He emphasised that the rate of 0.9 per cent on gross advertising revenue had been in force without complaint for 20 years. There was therefore every reason to maintain the status quo pending the outcome of the proceedings. But FACTS does not quarrel with this. It agrees that the rate ought to remain the same. Its purpose is to achieve a retrospective adjustment after the final decision has been made so that, in effect, the licence fee which will be payable will be that determined by its operating, not only prospectively, but from 1 July 1994 after the old licences expired.

Counsel for FACTS submitted that the matters relied upon by

Mr Cottle in relation to aistribukion were extraneous to the

Tribunal's proper consideration of the matter. They were matters which pertained to APRA which was, by assignment, the owner of the broadcast right in all music comprised in its repertoire.

any other person or body. The peculiar problems associated with

It should not, so counsel said, be treated any differently from

its need to distribute to members were for it to work out as best

it could.

We do not regard that as realistic. Collecting societies,

particularly performing right societies, have existed for a very

long time. Certainly they were in existence prior to the

2 1

enactment of the Co~vriaht

Act. In amendments to the Act in

later years collecting societies are expressly referred to. This occurs in the educational areas dealt with in Parts VA and W3 of the Act. Furthermore, some of the provisions of Part V1 contemplate that there will be cases in which parties before the Tribunal will be representative parties; see subsec.157(4) itself and ss.155 and 156. In the cases there provided for, such parties are unlikelyto be collecting societies, butthe sections disclose a recognition by the legislature that copyright is an area where it will be likely that persons interested in the outcome of a particular dispute will be represented by an organisation representative of all or many persons having similar interests.

It is well known that distributions of licence fees to members of collecting societies is a complex exercise. The regulatory provisions provided for in Parts VA and VB of the Act in relation to the collecting societies there dealt with reflect the legislature's concern about the matter. Many members of

We should infer that they have a degree of familiarity with the

FACTS have been dealing with APRA for approximately 30 years.

way it operates. During certain periods, they are obliged to keep records of all music which is broadcast. The returns are forwarded to APRA which uses them as guides, not only to check on the music which is broadcast, but also as part of the material needed to make a fair distribution to its various members. FACTS and its members may not have a close knowledge of the complexity

2 2

of APRA's distribution task, but we should infer that they have a general appreciation of the nature of what is involved. It would not be correct to treat television stations as being in some way ignorant of APRA's problems.

The exercise of the Tribunal's discretion is unfettered in the sense that s.160 of the Act does not specify the bounds of it nor provide criteria or guidelines for its exercise. As Mason

J said in Minister for Aboriainal Affairs v Peko-Wallsend Limited

(1986) 162 CLR 24, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except insofar as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard (see at 40).

The various matters to which we have referred suggest that

the discretion is intended to be a wide one. We are satisfied,

take into account the particular difficulties which will be

that in the circumstances of this case, it is relevant for us to

encountered by APRA if the interim solution contended for by FACTS and its members is adopted. We reject the submission that APRA's particular problems are matters irrelevant to our consideration of the matter.

Our task, therefore, becomes a balancing one as it so often

23

is when interim or interlocutory relief is sought. The problem is not solved by saying that the practical course is to maintain the status quo. Both parties agree that the status quo is to be

l

l

I

maintained in the sense that there is no issue between them that

l

the licence fee payable during the interim period should remain

l

at 0.9 per cent of gross advertising revenue. The difference between them lies in the question whether there should be a retrospective adjustment of the licence fee once the Tribunal's

I

final decision is known. In many situations the requirement that

1

l

there be such an adjustment is reasonable and sensible. A common case where that occurs is where a party sued for an infringement of an intellectual property right gives the Court an undertaking to keep an account of profits in return for which it is permitted to continue the conduct which constitutes the alleged infringement. If the applicant for relief is ultimately successful, the infringer zust bring to account the profits derived from its wrongful conduct during the period up to the final decision of the Court. All things being equal, that is regarded as an appropriate way of accommodating the rights and

obligations of each party in respect of the period between the

interim or interlocutory hearing and final outcome.

This case, however, is not so straightforward. That is because the licensor of the broadcast right is a collecting society. Many thousands of composers and publishers depend on the regular distributions they expect to receive for broadcasts of their work. The evidence establishes that, whilst many of

2 4

those entitled to distributions are financially well-off, many are not. A sudden and unexpected loss of income to them would be quite disastrous. Moreover there are the various technical and administrative difficulties referred by Mr. Cottle including the complications arising from distributions of funds to associated collecting societies in other countries. And pervading the whole matter is the threat of the imposition of substantial liabilities for income tax on income which, though accrued, has not in fact been received.

It should be observed that all these problems exist because of the uncertainty which there is concerning the ultimate outcome of the proceedings and the period which must perforce elapse before the outcome is known. If the television stations are ultimately successful those entitledto share in the licence fees paid to APRA for the broadcast right will suffer hardship. But at least there will then be certainty in relation to the amount to be distributed and the actual distributions to be made. There will not be any income tax problem, nor will there be the

difficulties mentioned by Mr. Cottle in relation to payments to

overseas composers and publishers. There will be certainty and

finality on all sides.

AB previously said, the exercise we must engage in is a balancing one. Our task is not without difficulty. There is much to be said on both sides. Having reflected oii the matter, we have decided that the more appropriate course is not to accede

2 5

to the applications made by FACTS and its members. The more

l

l

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appropriate and convenient course, although we acknowledge that it is not entirely satisfactory, is to refuse the application for interim orders provided, of course, that the licence fee payable

I

I

remains at 0.9 per cent of gross advertising revenue and not 1.2

l

per cent of it as is provided for in APRArs new licence scheme. We should add that fairness dictates that there be no retrospective adjustment upwards in the event that the Tribunal eventually decides to accede to APRA's claim for a licence fee greater than 0.9 per cent of gross advertising revenue.

We do not now make formal orders. The matter will be adjourned for a short time to enable the parties and their legal advisers to consider these reasons. When the matter is next in the list, counsel are to bring in short minutes of order to give effect to the Tribunal's decision. Tn preparing those minutes the parties should bear in mind that the licence scheme propounded by APRA is in force. A satisfactory way of overcoming the problem may be for APRA to undertake to the Tribunal and to

calculated at 0.9 per cent of gross advertising revenue pending

FACTS and its members that it will continue to accept royalties

the outcome of the proceedings.

I certify that this and the 24 preceding pages are a true copy of the reasons for decision herein of the Copyright Tribunal.

Dated 7

D W

1994-

Counsel for the Applicant:

Mr D.K. Catterns, QC

Solicitors for the Applicant:

Phillips Fox

Counsel for the Respondent:

M r P.G. Hely, QC

Mr M.R. Ellicott

Solicitors for the Respondent:

Boyd House & Partners

. . Dates of Hearing:

26 September 1994 and

7 October 1994

Place of Hearingr

Sydney

Date of Decisionr

7 October 1994