Son and Australian Trade Commission
[2005] AATA 227
•16 March 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 227
ADMINISTRATIVE APPEALS TRIBUNAL Nº V2004/23
GENERAL ADMINISTRATIVE DIVISION
Re: HE YEOB (SEAN) SON
Applicant
And: AUSTRALIAN TRADE COMMISSION
Respondent
DECISION
Tribunal: Mr E. Fice, Member
Date: 16 March 2005
Place: Melbourne
Decision:1. The Tribunal affirms the respondent's decision in respect of the M.C. Stuart & Associates distribution agreement.
2.The Tribunal sets aside the respondent's decision in respect of The Creative Content Group distribution agreement and remits it to the respondent for the purpose of determining whether the applicant incurred eligible expenses in accordance with Division 1 of Part 5 of the Export Market Development Grants Act 1997.
(sgd) E. Fice
Member
BOUNTIES AND OTHER SUBSIDIES – Export Market Development Grants Scheme -transfer of business prior to application - person whose interests are affected- copyright in films- disposal of copyright - extrinsic evidence to establish intention of parties to contract
Administrative Appeals Tribunal Act 1975 ss 27, 31, 33(1)(c), 37
Copyright Act 1968 ss 13, 86, 117, 119
Export Market Development Grants Act 1997 ss 26, 37, 94, 97, 98, 99,
Allan v Transurban City Link Ltd (2001) 208 CLR 167
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Australian Trade Commission v Disktravel and Others [1999] FCA 1399
Re McHattan and Collector of Customs (1977) 18 ALR154
REASONS FOR DECISION
16 March 2005 Mr E. Fice, Member
1. This is an application by Mr He Yeob (Sean) Son ("the applicant") seeking review of a decision by a delegate of the Australian Trade Commission ("Austrade") refusing an application made by Mr Son's company, Sean's Distribution Pty Ltd, for an Export Market Development Grant pursuant to the Export Market Development Grants Act 1997 ("the Act").
2. Mr Son was represented by Mr B. Fitzpatrick of counsel and Austrade was represented by Ms L. De Ferrari of counsel.
3. The Tribunal had before it the documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”), three exhibits lodged by the applicant (Exhibits A1 to A3) and one exhibit lodged by the respondent (Exhibit R1).
BACKGROUND
4. On 21 February 2001 Mr Son, trading as Sean's Distribution, entered into what is described as a distribution agreement with M.C. Stuart & Associates Pty Ltd (“M.C. Stuart & Associates”), whereby Mr Son acquired what appeared to be exclusive distribution rights for certain audio visual programs (films) which were listed in Appendix A of that agreement. The distribution rights were for the territory of the Republic of Korea and Japan.
5. On 12 March 2001 Mr Son, trading as Sean's Distribution, entered into another distribution agreement, with The Creative Content Group Pty Ltd (“The Creative Content Group”). This distribution agreement is similar to, but not exactly the same, as the distribution agreement with M.C. Stuart & Associates. It provided that Mr Son was to be exclusive distributor of certain films, the property of The Creative Content Group, in the territories of the Republic of Korea and Japan.
6. On or about 24 June 2002, Mr Son apparently transferred the distribution business to his private company, Sean's Distribution Pty Ltd, which had, by then, been incorporated, but had not been in existence when the distribution agreements were entered into with M.C. Stuart & Associates and The Creative Content Group.
7. On 2 December 2002, Sean's Distribution Pty Ltd made an application to Austrade for an export market development grant under the Act. Sean's Distribution Pty Ltd claimed re‑imbursement of part of its expenditure in marketing and exporting films to Japan and Korea in the 2001/2002 grant year. As far as it is relevant for these purposes, grant year under the Act means "…a year commencing on 1 July during the period from the start of 1 July 1996 to the end of 30 June 2006. At paragraph 22 in that application form, Mr Son indicated clearly that the business, which he previously carried on trading as Sean's Distribution, had been transferred to Sean's Distribution Pty Ltd, his private company. According to the note in paragraph 22 of the application form, where there has been a change in ownership of a particular business activity, but the activity remains the same, or substantially similar, "…Austrade may treat it as a continuation of the business and transfer any previous EMDG [export market development grant] history to the new owner".
8. By Notice of Determination dated 23 May 2003, Austrade rejected the application made by Sean's Distribution Pty Ltd. In a letter dated 22 May 2003, Austrade wrote to Sean's Distribution Pty Ltd, stating that,
...
In Austrade’s opinion, based on the reading of all the clauses in the distribution agreements with these [M.C. Stuart & Associates Pty Ltd and The Creative Content Group Pty Ltd] companies, the agreements do not transfer copyright ownership, or the undertaking of acts of copyright, to the EMDG applicant.
9. By letter dated 17 June 2003, Mr Son, presumably on behalf of Sean's Distribution Pty Ltd, wrote to Austrade acknowledging receipt of the Notice of Determination and confirming his intention to appeal the decision pursuant to s 98(1) of the Act. By letter dated 22 August 2003, solicitors for Sean's Distribution Pty Ltd made further submissions in support of the application for the grant and provided copies of two further agreements which were described as "confirmatory agreements". The first is dated 14 August 2003 and was made between Mr Son trading as Sean's Distribution and M.C. Stuart & Associates. The second is an agreement dated 18 August 2003 between Mr Son trading as Sean's Distribution and The Creative Content Group. It appears that these two so‑called confirmatory agreements were executed in an attempt to clarify the meaning, understanding and agreements reached by the parties under the respective distribution agreements, which had been entered into almost two and a half years previously.
10. After reviewing the application of Sean's Distribution Pty Ltd and following a meeting between the parties on 17 October 2003, Austrade advised Sean's Distribution Pty Ltd, by letter dated 28 November 2003, that it remained of the view that Sean's Distribution Pty Ltd was ineligible for a grant under s 37(1)(e) of the Act on the ground that Austrade did not accept that the applicant owned eligible intellectual property or that he was in a position to dispose of that intellectual property.
PARTIES' CONTENTIONS
11. A preliminary issue arose as a result of the way in which this application was brought to the Tribunal. The applicant is stated to be Mr Son. Austrade contended that, as the application for a grant was made by Sean's Distribution Pty Ltd, Mr Son is not a person whose interests are affected by the decision within the meaning of that phrase in s 27(1) of the AAT Act. It further contended that no evidence had been adduced which might support an argument that Mr Son is a person whose interests are so affected. The applicant refuted that contention, stating that this is not a matter which was raised by Austrade at any stage during the discussions which took place in respect of the application made by Sean's Distribution Pty Ltd. Furthermore, Mr Son contended that he is the sole director and shareholder of Sean's Distribution Pty Ltd and that, when applying for the Austrade grant, he had noted on the application form that there had been a change in ownership of the business activities.
12. Austrade also contended that neither of the agreements confers ownership rights on Mr Son, essentially for the reason that they do not confer an exclusive licence upon Mr Son to distribute the films. According to Austrade, because copyright in the films is personal property, its disposition would require an assignment of that right by the holder of the copyright to the recipient. It was said that the mere granting of a licence, even on exclusive basis, is not a disposal of that right, as the owner would retain a proprietary interest of reversion. Austrade acknowledged that an agreement which does not expressly assign copyright or grant an exclusive licence to deal with any intellectual property comprised in the copyright may, nevertheless, be an agreement which gives a distributor "ownership" of intellectual property rights, for the purposes of the Act. However, Austrade contended that neither of the agreements demonstrates an intention to dispose of any intellectual property rights in the films, the subject of those agreements.
13. Mr Son contended that an agreement which confers an exclusive right to distribute together with the exclusive right to perform at least one act that the copyright owner has the exclusive right to perform pursuant to the Copyright Act 1968 (“the Copyright Act”), would amount to an exclusive licence of the copyright. Furthermore, Mr Son contended that, as far as the agreements are concerned, the Tribunal should look at the substance of those agreements rather than their form in determining whether there has been a transfer of any exclusive rights in the copyright. He contended that, if the agreements confer any of the rights referred to in s 86 of the Copyright Act, then they will confer exclusive intellectual property rights. In examining those agreements, Mr Son contended that the Tribunal should consider whether the agreements would have business efficacy in the absence of such rights.
CONSIDERATIONS
14. According to Mr Son, Austrade raised a threshold issue for the first time at this hearing, that being whether Mr Son was the appropriate person to bring this application. Mr Son made it clear in his application that, on 24 June 2002, the business of distributing the films in question was transferred to Sean's Distribution Pty Ltd, a company of which he is the sole director and shareholder. Section 94 of the Act, in so far as it is relevant, provides:
94(1) This section applies if:
(a)at any time a person (previous owner) carried on a particular business in Australia; and
(b)at a later time:
(i)the previous owner sold or transferred the business or any part (relevant part) of the business; or
(ii)…
(iii)…; and
(c)as a result of the sale, transfer, change in membership or other arrangement, another person (new owner) carries on:
(i) the business or the relevant part of the business; or
(ii)a business that is, to any extent, similar to the business, or any part of the business, carried on by the previous owner.
(2) If:
(a)the new owner applies for a grant in respect of a grant year; and
(b)Austrade does not exempt the new owner from the operation of this section;
subsection (3) has effect.
(3) Austrade must:
(a)treat any eligible expenses incurred by the previous owner in the capacity of owner of the business, or of the relevant part of the business, as having been incurred by the new owner; and
(b)…;
(d)treat the new owner as if Austrade had decided that the new owner had met the grants entry requirements if Austrade had decided that the previous owner met the grants entry requirements; and
(e)…; and
(f)treat any other aspect of the business, or of the relevant part of the business, as if it had been carried on by the new owner.
15. There was no evidence before me that Austrade had exempted Sean's Distribution Pty Ltd from the operation of s 94 of the Act. That being the case, Austrade must treat Sean's Distribution Pty Ltd as if it had decided that Sean's Distribution Pty Ltd met the grants entry requirements, provided that Mr Son met the grants entry requirements.
16. Ms De Ferrari submitted that no documentary evidence of transfer of goodwill or other rights from Mr Son to Sean's Distribution Pty Ltd was produced to Austrade. She further submitted that it was not necessary for Austrade to turn its mind to whether Sean's Distribution Pty Ltd, as the grant applicant, may have taken a transfer or an assignment of the rights granted by Mr Son under the agreements. However, any requirement imposed by Austrade on a new owner of a business to take a formal assignment of any rights granted by the former owner of the business is without foundation. Clearly, applying s 94 of the Act, provided that Austrade does not exempt the new owner of the business from the operation of the section, given that Austrade is satisfied that the business has been transferred to Sean's Distribution Pty Ltd, and given that Austrade is satisfied that the business is similar to the business or any part of the business previously carried on by Mr Son, then Sean's Distribution Pty Ltd is an eligible applicant for a grant. That is of course not to say that Mr Son meets the grants entry requirements under the Act, but merely that, if Mr Son meets the grants entry requirements, then Sean's Distribution Pty Ltd can be taken also to have met those requirements.
17. The application made to Austrade by Sean's Distribution Pty Ltd was rejected on the grounds that it did not satisfy the requirements of s 37 of the Act, and in particular, it did not own any copyright, being the relevant intellectual property rights, in the films in question. Presumably, because of the effect of s 94 of the Act, Austrade was of the view that Mr Son did not meet the requirements of s 37 of the Act.
18. The application for review to the Tribunal is brought by Mr Son rather than Sean's Distribution Pty Ltd. Under s 97 of the Act, any decision relating to an application for a grant is regarded as a reviewable decision for the purposes of the Act. In so far as it is relevant, s 98 of the Act provides:
98(1) A person who is affected by a reviewable decision may, if dissatisfied with the decision, request Austrade to reconsider it.
(2) …
(3) …
(4) After receiving the request, Austrade must reconsider the decision and may confirm or vary the decision in such manner as Austrade thinks fit.
19. By letter dated 17 June 2003, Mr Son wrote to Austrade stating, amongst other things:
…
This letter is to confirm our intention to appeal the decision contained in the notice of determination No: 196242 as per our right under section 98(1) of the Export Market Development Grants Act.
The entire letter is couched in the plural and it seems that Mr Son is writing on behalf of Sean's Distribution Pty Ltd.
20. By letter dated 24 June 2003, Austrade acknowledged receipt of Mr Son's letter of 17 June 2003. At that point at least, it is clear that Austrade either acknowledged that Mr Son was a person affected by the reviewable decision and was therefore entitled to a review pursuant to s 98 of the Act, or alternatively, it understood the application for review, which was written by Mr Son, to have been made on behalf of Sean's Distribution Pty Ltd. There is certainly no suggestion in Austrade’s letter, written by Mr Paul Stead, State Manager, Victoria & Tasmania, Export Market Development Grants, that the application for review was made by Mr Son and, as he was a separate entity to Sean's Distribution Pty Ltd, he was not a person who was affected by the reviewable decision.
21. Having reviewed the original decision, Austrade provided the decision review report, dated 26 November 2003, to Sean's Distribution Pty Ltd. In essence, Austrade confirmed that the applicant was not considered to own copyright or to have undertaken acts of copyright.
22. Section 99 of the Act provides that an application may be made to the Tribunal for review of a decision of Austrade that has been confirmed or varied under s 98(4). However, for unexplained reasons, that application was made by Mr Son rather than Sean's Distribution Pty Ltd. One might have expected the application to have been made by Sean's Distribution Pty Ltd as it was certainly the party directly affected by the reviewed decision under s 98(4) of the Act. In order to determine whether Mr Son is a person who may apply to the Tribunal for a review, one needs to examine the provisions in s 27(1) of the AAT Act, which provides:
27(1) Where this Act or any other enactment (other than the Australian Security Intelligence Organisation Act 1979) provides that an application may be made to the Tribunal for a review of a decision, the application may be made by or on behalf of any person or persons (including the Commonwealth or an authority of the Commonwealth) whose interests are affected by the decision.
23. It was submitted by Ms De Ferrari that no evidence had been adduced which might support an argument that Mr Son is a person whose interests are affected by Austrade’s decision. However, Mr Son gave evidence that he was the sole director and shareholder of Sean's Distribution Pty Ltd. He also said in evidence that he met all the expenditure incurred in the promotion of the films in Korea.
24. In Allan v Transurban City Link Ltd (2001) 208 CLR 167, the High Court examined the meaning of the expression "affected by" in the context of s 27(1) of AAT Act. The High Court indicated that it was necessary to refer to the subject, scope and purpose of the statute in question, rather than to apply concepts derived from decisions under the general rule regarding "standing". The majority said, "…What serves to identify a person as one affected by a reviewable decision will vary having regard to the nature of the reviewable decision itself".
25. Section 98 of the Act refers to "A person who is affected by a reviewable decision" as the person who may request reconsideration. Section 27 of the AAT Act requires that the person or persons seeking review must be persons "whose interests are affected by the decision". As Kirby J pointed out in Allan's case, because the expression used in the AAT Act requires a person's interests to be affected by the decision, he was of the view that this constituted a narrowing of the range of persons who can initiate statutory action for review. Kirby J referred to what Brennan J said in Re McHattan and Collector of Customs (1977) 18 ALR 154 where he acknowledged that use of the word "affected" described a zone of connection. Brennan J went on to say: "Across a pool of sundry interests, the ripples of affection may widely extend. The problem which is inherent in the language of the statute is the determination of the point beyond which the affectation of interests by a decision should be regarded as too remote for the purposes of s 27(1). The character of the decision is relevant, for if the interests relied on are of such a kind that a decision of the given character could not affect them directly, there must be some evidence to show that the interests are in truth affected."
26. Kirby J also explained that the fact that the Parliament elected to afford review in the broad language that was used in s27 of the AAT Act suggests that the general purpose of the Parliament in this area of decision making was to permit access to the beneficial facility now common across a broad spectrum of federal administrative decisions. It follows that review is available to a broader class of persons than was traditionally the case under common law rules of standing. His Honour was of the view that because the AAT Act has a very broad operation across the board of federal administrative decisions, its language should not be narrowly construed.
27. I am satisfied that Mr Son, as the sole director and shareholder of Sean’s Distribution Pty Ltd, is a person who is affected by the reviewable decision. Although he is not directly affected, there is no restriction in either the Act or the AAT Act compelling a direct effect. If there were such a limit in the Act, one could reasonably have expected a right to seek review under s98 to be made available only to the applicant for a grant. That is not the case. Furthermore, I am satisfied that Mr Son is a person whose interests are affected by the reviewable decision, because, according to his evidence, he provided the money which was spent in attempting to distribute film rights in South Korea. I have no doubt that if the company were successful in recovering some of its expenses Mr Son would be reimbursed.
28. The question that remains is whether Sean's Distribution Pty Ltd satisfies s 37(1) of the Act, which, so far as it is relevant, provides:
37(1) For the purposes of section 33, an eligible promotional activity in relation to an applicant is for an approved promotional purpose if it is carried out for the purpose of creating, seeking or increasing demand or opportunity in a foreign country for any of the following:
(a)…
(b)…
(c) …
(d)…
(da)…
(e)if the applicant is not an approved body—eligible intellectual property or eligible know-how:
(i)owned by the applicant; and
(ii)that the applicant intends to dispose of;
(f)…
(g)…
29. There is no dispute that rights in a film for the purposes of the Export Market Development Grants Scheme are regarded as intellectual property. If there were any doubt, this is so stated in paragraph 4.7.1 of the Export Market Development Grants Administrative Guidelines (“the administrative guidelines”) which deal with eligible products. Furthermore, paragraph 4.7.3 of the administrative guidelines describes copyright in a film as eligible intellectual property only where the film has resulted wholly or substantially from work performed in Australia. There is no question that the films concerned resulted wholly or substantially from work performed in Australia. The nature of copyright in cinematograph films is described under s 86 of the Copyright Act 1968 (“the Copyright Act”) as follows:
86 For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a cinematograph film, is the exclusive right to do all or any of the following acts:
(a)to make a copy of the film;
(b)to cause the film, in so far as it consists of visual images, to be seen in public, or, in so far as it consists of sounds, to be heard in public;
(c)to communicate the film to the public.
30. Section 13(2) of the Copyright Act confers on the owner of copyright the exclusive right to authorise a person to do an act comprised in the copyright in a work or other subject matter. Section 117 of the Copyright Act defines the phrase "if the licence has been an assignment". Essentially, what the phrase means is that if, instead of the licence, there had been granted an assignment of the copyright, subject to conditions corresponding as nearly as is practicable with those subject to which the licence was granted, the assignment of the copyright would authorise the acts authorised by the licence. That phrase is used in s 119 of the Copyright Act, which provides
119 Subject to the succeeding sections of this Division:
(a)except against the owner of the copyright, the exclusive licensee has the same rights of action as he or she would have, and is entitled to the same remedies as he or she would be entitled to, by virtue of section 115 if the licence had been an assignment, and those rights and remedies are concurrent with the rights and remedies of the owner of the copyright under that section;
(b)except against the owner of the copyright, the exclusive licensee has the same rights of action as he or she would have, and is entitled to the same remedies as he or she would be entitled to, by virtue of section 116 if the licence had been an assignment; and
(c)the owner of the copyright does not have any rights of action that he or she would not have, and is not entitled to any remedies that he or she would not be entitled to, by virtue of section 116 if the licence had been an assignment. .
31. In effect, s 119 of the Copyright Act grants to an exclusive licence holder the same rights of action and remedies in respect of breach of copyright to which the owner of the copyright would be entitled. It is for this reason that paragraph 4.7.5 of the administrative guidelines provides:
4.7.5…
To be eligible for an EMDG grant in terms of section 37(e)(i), film industry applicants must demonstrate that they are promoting the disposal of rights in relation to work or things set out in the Copyright Act where they either:
(a)own the copyright or
(b)have an exclusive licence to undertake any of the acts of copyright in relation to a particular territory.
The issue then to be decided is whether the M.C. Stuart & Associates and The Creative Content Group distribution agreements, properly construed, constitute an exclusive licence to undertake any of the acts of copyright (which are set out in s 86 of the Copyright Act) in relation to a particular territory. The two distribution agreements are not exactly the same and therefore they need to be considered individually.
32. The Creative Content Group distribution agreement is intended to be a legally binding document between The Creative Content Group and Mr Son, trading as Sean's Distribution. It has been executed by the parties and they appear to have initialled each page of the agreement.
33. The Recitals state that The Creative Content Group owns the rights to audio- visual programmes (the films) which are those audio visual programmes set out in the Schedule to the agreement. The Recital also states that Mr Son, trading as Sean's Distribution, would like to be "…the exclusive distributor for the programmes owned by CCG in the territory of the Republic of Korea and Japan subject to the terms and conditions of this contract".
34. The agreement then provides that The Creative Content Group grants to Mr Son the right to act as the exclusive distributor of the films set out in the schedule for a period of three years from the date of the agreement. The Creative Content Group warrants that it owns the copyright in the films contained in the Schedule. The Creative Content Group is required to supply audition and transmission material to Mr Son. Also, Mr Son is required to perform and observe all obligations and covenants to be performed or observed by him under any licence agreement that he enters into with any licensees of the films. Licensee is defined under the agreement as "any person, firm or corporation who enters into an agreement for the exploration [sic] [exploitation] of the rights in the territory or any part thereof…” Although not expressly stated in the agreement, it must necessarily be implied that Mr Son is authorised to enter into a licence agreement.
35. The agreement also provides that all licence agreements are to be issued by Mr Son and that The Creative Content Group gives Mr Son the right to sign all licence agreements in the territory. All licence agreements entered into by Mr Son are said to be done with the full knowledge of The Creative Content Group. Furthermore, the delivery of any items for any licence agreement in the territory set out in the agreement is to be the sole responsibility of Mr Son.
36. Mr Son is required to advise The Creative Content Group about his promotion, marketing and sales activities undertaken while distributing the films. Given that the object of the agreement is to distribute the films set out in the Schedule, it must necessarily be implied that Mr Son is authorised by the agreement to sell some rights in the course of distributing the films. Just what those rights are is not stated. At the end of the term of the agreement, Mr Son is required to reassign what is described as "the rights" to The Creative Content Group. "The rights" is defined as the rights to deal with or represent the copyright in the films. Mr Son is required to notify The Creative Content Group of any breach of rights by any licensee and is required to issue legal proceedings seeking damages or other relief as the legal representatives of The Creative Content Group might advise.
37. Mr Son is required to pay The Creative Content Group its share of licence fees derived by him as a result of his activities in the territory. Furthermore, Mr Son is entitled to use sales agents or other third parties to assist in the sales activities. Mr Son is responsible for all actions taken by any sales agents or third parties that he uses. The agreement also provides that it does not create a partnership or joint venture between the parties.
38. Mr Son gave evidence that the agreement was not drafted by a lawyer. That much is evident from the way in which the agreement is constructed. It is certainly not as clear as it could be. However, the intention of the agreement seems sufficiently clear from the words used. In my opinion, the agreement does convey to Mr Son the right to deal with the copyright in the films set out in the Schedule; and, because he is described as the exclusive distributor in the territories referred to in the agreement, that right must be exclusive. The agreement contemplates that he will undertake sales activities and at the conclusion of the term, he is required to reassign the copyright in the films to The Creative Content Group. Although it is not expressly stated that he has been assigned those rights, that must necessarily follow. Mr Son has also been granted the right to enter into licence agreements in the territory and to use sales agents to assist him in sales activities. Again, although not expressly stated in the agreement, it must necessarily be implied that the licence agreements into which Mr Son is authorised to enter in the territory, must involve the assignment of at least one of the acts of copyright in the film, probably the right to cause the film to be seen or heard in public or to communicate the film to the public so that the film can be seen in the prescribed territories. Accordingly, it is my opinion that The Creative Content Group distribution agreement, in fact, creates an exclusive licence to undertake one or more acts of copyright in relation to a particular territory.
39. Although Mr D. Cobb, who is a director of The Creative Content Group, gave evidence of what was intended by the distribution agreement and he executed a further agreement on 18 August 2003 for the purpose of attempting to clarify what was described as the meaning, understanding and agreements reached between the parties under the distribution agreement, for the reasons I have set out above, it is unnecessary for me to rely on that evidence.
40. Mr Son, trading as Sean's Distribution, also entered into The M.C. Stuart & Associates distribution agreement. The Recital to that agreement states that M.C. Stuart & Associates owns "the distribution rights of the copyright to audio visual programmes (the films)". Although the term "the rights" is defined to mean the rights to deal with or represent (sic) the distribution rights of the copyright in films, and copyright means copyright within the meaning of the Copyright Act, it is unclear what is meant by ownership of the distribution rights of the copyright. The Recital also states that Mr Son wishes to be appointed the exclusive distributor in the territory of the Republic of Korea and Japan for the programmes owned by M.C. Stuart & Associates.
41. In the body of the agreement, M.C. Stuart & Associates warrants that it owns the distribution rights of the copyright or the exclusive distribution rights to the films listed in Appendix A of the agreement. M.C. Stuart & Associates is required to supply audition and transmission material to Mr Son. Mr Son is required to perform and observe all obligations and covenants to be performed or observed by him under any licence agreement that he enters into with any sub‑licensees of the films. Once again, it must be implied that Mr Son has been granted the right to enter into a licence agreement with sub‑licensees of the films. Mr Son is restricted when entering into licence agreements with sub‑licensees, in that any such sub‑licence agreements require prior approval by M.C. Stuart & Associates. Mr Son is required to pay any share of licence fees due to M.C. Stuart & Associates within seven days of fees being received by Mr Son. Also, Mr Son is required to keep M.C. Stuart & Associates informed about his promotion, marketing and sales activities undertaken in the course of distributing the films.
42. At the end of the term of the agreement, Mr Son is required to reassign the distribution rights of the copyright to M.C. Stuart & Associates. He is required to notify M.C. Stuart & Associates of any breach of distribution rights by any sub‑licensee and is required to promptly issue legal proceedings seeking damages or other relief as the legal representatives of M.C. Stuart & Associates may advise. Mr Son is entitled to use sales agents to assist in the sales activities undertaken by him in territory. He is fully responsible for any and all actions of any sales agents he employs.
43. Although this agreement contains many terms which are the same as those in The Creative Content Group distribution agreement, its focus is on the distribution of the rights of copyright, whatever that phrase may mean. In fact, the operative provision only refers to Mr Son acting as the exclusive distributor of the films. However, later clauses in the agreement make it clear that the exclusive distribution rights are the distribution rights of copyright to the films set out in Appendix A.
44. The clause which requires M.C. Stuart & Associates to approve any sub‑licence entered into by Mr Son seems to be at odds with the notion that an exclusive licence has been granted to Mr Son to undertake any acts of copyright in the films. If such a licence had been granted, there would surely be no need for approval by M.C. Stuart & Associates in respect of each and every sub‑licence entered into by Mr Son.
45. In an attempt to provide a clearer understanding of what was intended by the parties under the distribution agreement, they entered into what is described as a confirmatory agreement on 14 August 2003. In addition, Mr Stuart gave evidence regarding the intention of the parties.
46. Ms De Ferrari submitted that the confirmatory agreement and the evidence given by Mr Stuart should not be admitted because there was no ambiguity in the distribution agreement and, therefore, evidence of surrounding circumstances should not be considered. She relied on Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 by way of authority. Furthermore, she submitted that, even if the words of the distribution agreement create ambiguity, post-contractual conduct or statements should not be accepted as surrounding circumstances which might assist interpretation of the contract.
47. In my opinion the submissions regarding the admissibility of the confirmatory agreement and the subsequent oral statements made by Mr Stuart are not well‑founded in the context of a hearing before the Tribunal. The basis for the submissions undoubtedly is that where parties have recorded the terms of their contract in a document, the so‑called parole evidence rule excludes the use of evidence of extrinsic terms which subtract from, add to, vary or contradict the language of a written instrument. The exclusion of such evidence is merely an evidentiary rule. It is not a rule of law. What the respondent has overlooked is the fact that the Tribunal is not bound by the rules of evidence, but may inform itself on any matter in such manner as it thinks appropriate (s 33(1)(c) of the AAT Act). Clearly, the Tribunal can give whatever weight it deems fit to any such extrinsic material.
48. The confirmatory agreement expressly states that its purpose is to clarify the meaning and understanding contained in the distribution agreement. It states that M.C. Stuart & Associates is the sole proprietor and owner of the distribution rights of the copyright in the films for the term and in the territory, which is set out in the distribution agreement. The confirmatory agreement also expressly states that M.C. Stuart & Associates granted and assigned to Mr Son, on an exclusive basis, the rights of M.C. Stuart & Associates as copyright holder, to do the following:
(a)make or grant the rights to make copies of the films;
(b)cause the films to be seen in public;
(c)communicate the film to the public;
(d)have the exclusive right to undertake or licence third parties to undertake the rights to reproduce and copy the films;
(e)distribute the films on an exclusive basis within the territory;
(f)enter into licences with third parties on terms and conditions as may be determined by Mr Son;
(g)protect the copyright in the films by issuing legal proceedings to seek damages or other relief; and
(h)otherwise undertake all acts that M.C. Stuart & Associates, being the owner of the distribution rights of the copyright would, but for the rights granted to Mr Son by the confirmatory agreement, had the exclusive right to do.
49. However, there is nothing in the confirmatory agreement which alters the fact that Mr Son is required to obtain the approval of M.C. Stuart & Associates before entering into a sub‑licence agreement with persons in the territory wishing to cause the film to be seen in public. This is so even though the confirmatory agreement states that Mr Son is to have the exclusive right to procure, negotiate, enter into and sign any licence agreements with the parties. That right remains subject to the restriction set out in the distribution agreement.
50. Under cross‑examination and re‑examination, Mr Stuart was asked whether, despite M.C. Stuart & Associates having entered into the distribution agreement with Mr Son, it could continue to make copies of those films set out in Appendix A, in Australia or anywhere else for the purpose of sale and distribution in Korea. Mr Stuart answered "Yes".
51. In my opinion, the clear evidence in respect of the distribution agreement is that M.C. Stuart & Associates did not grant an exclusive right to Mr Son to make a copy of the films as set out in Appendix A. Furthermore, the restriction set out in the distribution agreement regarding sub‑licences is the antithesis of ownership rights whether they are by way of assignment or exclusive licence. As his Honour Kiefel J said in Australian Trade Commission v Disktravel and Others [1999] FCA 1399 (at para 107:
…
When one comes then to consider the word "ownership", which appears in s 11Z(8) [Copyright Act 1968] as attaching to the eligible right it may be taken to refer to rights in this sense, which is to say, rights held to the exclusion of others and which are capable of sale or grant or assignment or supply. Attributing that meaning to ownership in my view sits most comfortably with the wider definition of "disposal" of the rights.
If the disposal rights granted by M.C. Stuart & Associates to Mr Son were rights held to the exclusion of others, then those rights would not contain a restriction requiring Mr Son to obtain the approval of M.C. Stuart & Associates prior to the disposition of any of those rights.
CONCLUSION
52. This application has been made to the Tribunal on the basis that the Tribunal should determine the characterisation and construction of the distribution agreements entered into between The Creative Content Group and Mr Son and M.C. Stuart & Associates and Mr Son, for the purpose of determining whether Mr Son has carried on an eligible promotional activity in accordance with s 37 of the Act. The Tribunal has not been asked to examine whether Mr Son has incurred eligible expenses as that term is defined under Division 1 of Part 5 of the Act.
53. A preliminary issue was raised by Austrade regarding the standing of Mr Son to bring this application. For the reasons I have set out above I find that Mr Son is a person affected by the decision. Under s 31 of the AAT Act, that is a decision solely for the Tribunal and that decision is conclusive.
54. I have arrived at the view that The Creative Content Group distribution agreement does convey rights to Mr Son which are held to the exclusion of all others and which are capable of sale, grant or assignment or supply. No restrictions are placed on Mr Son in undertaking those acts. There is no dispute that those rights constitute eligible intellectual property as is defined under s 26 of the Act. As the distribution agreement with The Creative Content Group conferred on Mr Son the exclusive right to do one or more of the acts in relation to copyright specified in s 86 of the Copyright Act, I must conclude that, in respect of this agreement, Mr Son meets the requirements of s 37(1)(e) of the Act.
55. The distribution agreement entered into with M.C. Stuart & Associates is significantly different to the one entered into with The Creative Content Group. In my opinion, the prior agreement does not grant exclusive rights to Mr Son to do any one of the acts specified in s 86 of the Copyright Act. M.C. Stuart & Associates has retained the right to make copies of the films set out in Appendix A to the agreement and any sub‑licensing agreements must first be approved by M.C. Stuart & Associates before they are executed by Mr Son. In my opinion, the rights granted by this agreement are not consistent with ownership of the intellectual property rights. Therefore, any activity conducted by Mr Son in respect of the M.C. Stuart & Associates distribution agreement is not an eligible promotional activity as defined by s 37 of the Act.
56. The decision of Austrade in respect of the M.C. Stuart & Associates distribution agreement must be affirmed. However, the decision of Austrade in respect of The Creative Content Group distribution agreement should be set aside and remitted to Austrade for the purpose of determining whether Mr Son has incurred eligible expenses in accordance with Division 1 of Part 5 of the Act.
I certify that the fifty‑six [56] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr E. Fice, Member
(sgd) Catherine Thomas
Clerk
Date of Hearing: 24 January 2005
Date of Decision: 16 March 2005
Counsel for the applicant: Mr B. Fitzpatrick
Solicitor for the applicant: Zaitman Associates
Counsel for the respondent: Mr L. De FerrariSolicitor for respondent: Collins House Legal
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