Australian Tape Manufacturers Association Ltd v Commonwealth of Australia
(1993) 176 CLR 480(1993) 112 ALR 53
(Judgment by: Dawson and Toohey)
AUSTRALIAN TAPE MANUFACTURERS ASSOCIATION LTD; BASF AUSTRALIA LIMITED and TDK AUSTRALIA PTY LTD v THE COMMONWEALTH OF AUSTRALIA
Court:
Judges:
Mason C.J., Brennan, Deane and Gaudron
Dawson and TooheyMcHugh JJ.
Judgment date: 11 March 1993
Judgment by:
Dawson and Toohey
Under s.89 of the Copyright Act 1968 (Cth) ("the Act"), copyright subsists in a sound recording which is made by a qualified person, which is made in Australia or (where the sound recording is a published sound recording) which is first published in Australia. A qualified person is, under s.84, a person who is an Australian citizen, an Australian protected person, a person resident in Australia or an Australian corporation. The nature of copyright in sound recordings is set out in s.85. It is the exclusive right to make a copy of the sound recording, to cause the recording to be heard in public or to broadcast the recording. Notwithstanding the existence of copyright, the private or domestic taping of sound recordings has become widespread and there has hitherto been no practical means by which the owners of the copyright in them could control this practice or obtain compensation for the use of their material. Material ((60) For example, U.K., Report of the Committee to Consider the Law on Copyright and Designs, Copyright and Designs Law, (1977) Cmnd 6732 (the "Whitford Report"); Canada, House of Commons, Second Report of the Sub-committee on the Revision of Copyright, A Charter of Rights for Creators, (October 1985); Dillenz, "The Remuneration for Home Taping and the Principle of National Treatment", (1990) Copyright 186 ; U.S. Congress, Office of Technology Assessment, Copyright and Home Copying: Technology Challenges the Law, (October 1989).) placed before the Court without objection ((61) See Wilcox Mofflin Ltd. v. State of N.S.W. (1952) 85 CLR 488 , at p 507; Australian Communist Party v. The Commonwealth (1951) 83 CLR 1 , at p 196.) indicates that the practice is world-wide and, although there is no evidence before us of its exact extent in Australia, it is clearly the mischief at which the legislation is aimed. In the United Kingdom the practice was described in vivid terms by Lord Templeman in CBS. Songs Ltd. v. Amstrad Consumer Electronics Plc. ((62) [1988] AC 1013 , at p 1060):
"From the point of view of society the present position is lamentable. Millions of breaches of the law must be committed by home copiers every year. Some home copiers may break the law in ignorance, despite extensive publicity and warning notices on records, tapes and films. Some home copiers may break the law because they estimate that the chances of detection are non-existent. Some home copiers may consider that the entertainment and recording industry already exhibit all the characteristics of undesirable monopoly - lavish expenses, extravagant earnings and exorbitant profits - and that the blank tape is the only restraint on further increases in the prices of records. Whatever the reason for home copying, the beat of Sergeant Pepper and the soaring sounds of the Miserere from unlawful copies are more powerful than law-abiding instincts or twinges of conscience. A law which is treated with such contempt should be amended or repealed."
Part VC of the Act, which was inserted by the Copyright Amendment Act 1989 (Cth), represents a scheme to deal with the problem. It will be necessary to refer to the provisions of that Part in some detail, but for the moment it may be said that the scheme allows the home copying of a sound recording on a blank tape for private and domestic use without infringement of copyright. However a levy, described as a royalty, is imposed upon certain vendors of blank tapes in Australia. This royalty is to be paid to an authorized collecting society of which copyright owners may be members and the collecting society is to distribute the funds raised by way of royalty to its members. Those entitled to become members of the collecting society, and so be eligible in the distribution of its funds, include, as well as the owners of the copyright in the sound recordings, other copyright owners such as composers, lyricists and music publishing companies whose copyright is in the literary, dramatic or musical works from which the sound recordings are made.
The plaintiffs attack this legislative scheme in a number of respects. First, they say that it does not fall within the power conferred upon the Commonwealth Parliament by s.51(xviii) of the Constitution to make laws with respect to copyrights. Next they say that it imposes taxation and, since the Copyright Amendment Act and the Act itself deal with matters other than the imposition of taxation, those provisions of the Copyright Amendment Act that are said to impose taxation are of no effect because of s.55 of the Constitution ((63) See Air Caledonie International v. The Commonwealth (1988) 165 CLR 462 .). Then they say that it effects an acquisition of property from the vendors of blank tapes or from the owners of copyright otherwise than on just terms or other than for a purpose in respect of which the Parliament has power to make laws, contrary to s.51(xxxi) of the Constitution. Finally, the plaintiffs submit that the levy upon the sale of blank tapes simply falls outside the power of Parliament, being neither a law with respect to copyrights nor a tax within the meaning of s.51(ii) of the Constitution nor an acquisition of property within the meaning of s.51(xxxi) of the Constitution.
Part VC is headed "Use of Blank Tapes for Private and Domestic Copying" and comprises ss.135ZZJ to 135ZZZB. Also inserted by the Copyright Amendment Act is s.153E, which deals with the determination of the amount of the blank tape royalty by the Copyright Tribunal. A "blank tape" is defined by s.135ZZJ as a tape, other than an exempt tape, "that is of a kind ordinarily purchased or hired for use for making copies of sound recordings, whether or not any sounds are embodied in the tape". An "exempt tape" is defined by the same section to include a number of kinds of tape that would commonly be used for purposes other than making copies of sound recordings such as "a microcassette of a kind ordinarily used for making sound recordings of dictated material".
Division 2 of Pt VC (comprising s.135ZZM) is entitled "Copying with blank tapes". Its principal provision is contained in sub-s.(1) of s.135ZZM which provides:
"Copyright subsisting in a published sound recording, or in any work included in a published sound recording, is not infringed by making on private premises a copy of the sound recording if the copy is made on or after the proclaimed day on a blank tape for the private and domestic use of the person who makes it."
The scheme has not yet been implemented. A sound recording is a "published sound recording" where "records embodying the recording or a part of the recording have been supplied (whether by sale or otherwise) to the public": s.29(1)(c).
Division 3 of Pt VC (comprising ss.135ZZN to 135ZZT) is entitled "Blank tape royalty". Section 135ZZN(1) (read in conjunction with s.135ZZJ) provides that a royalty is payable for each blank tape first sold (whether by wholesale or retail), let for hire or otherwise distributed by way of trade in Australia on or after the proclaimed day. The royalty is payable by the vendor who first sells, lets for hire or otherwise distributes the tape in Australia (s.135ZZP(1)), a "vendor" being defined as a person who, in the usual course of his or her business, sells, hires or otherwise distributes blank tapes (s.135ZZJ). Under s.135ZZP(2) a vendor is required to pay an amount equal to the sum of the amounts of royalty payable in respect of each quarter of a calender year to a body declared by the Attorney-General under s.135ZZU to be the collecting society for this purpose. The amount so payable is recoverable from the vendor as a debt due to the collecting society: s.135ZZQ(1).
The amount of the royalty payable for a blank tape is prescribed by s.135ZZN(2) as:
"
A * NM
where:
A is the amount per minute determined by the Copyright Tribunal under section 153E; and
NM is the number of minutes of normal playing time of the tape".
The amount designated as "A" in this formula is determinable by the Copyright Tribunal upon application by any person who has an interest in the matter, including the collecting society, a vendor or a relevant copyright owner: s.153E(2), (3). Any person or organization who has an interest in the matter may be made a party to the application: s.153E(4), (5). The Tribunal is to make an order determining, or making provision for determining, the amount designated as "A", and in making its order it is to take into account all relevant matters, including the extent to which blank tapes are used for the purposes of making copies of eligible sound recordings and eligible works for private and domestic use: s.153E(6), (7).
A "relevant copyright owner" is defined in s.135ZZJ to mean the owner of the copyright in an eligible sound recording or in an eligible work. That section defines an "eligible sound recording" as a sound recording the maker of which was, at the time the recording was made, an Australian citizen, an Australian protected person, a person resident in Australia, an Australian corporation or "a citizen, national or resident of a foreign country, or a body corporate incorporated under a law of a foreign country, being a foreign country that was at that time, or afterwards became, an eligible foreign country". An "eligible work" is defined to mean a literary, dramatic or musical work the author of which was, at the time the work was made, an Australian citizen, an Australian protected person, a person resident in Australia or "a citizen, national or resident of a foreign country, being a foreign country that was at that time, or afterwards became, an eligible foreign country". The reference in these definitions to an "eligible foreign country" is a reference to a foreign country declared by regulation to be an eligible foreign country for the purposes of Pt VC (s.135ZZJ) and a foreign country will only be so declared where "the Governor-General is satisfied that adequate payments are, or will be, made to owners of copyright under the Act in sound recordings and in literary, dramatic or musical works as part of a blank tape royalty scheme operating in that country" (s.135ZZZB).
Provided that the vendor supplies certain particulars to the collecting society, he or she is not liable to pay the royalty imposed by s.135ZZN(1) in respect of any blank tapes that he or she sells to a prescribed organisation or to an exempt body: s.135ZZR. A "prescribed organisation" is an organization that is prescribed by regulation and, under the Copyright Regulations 1990 (Cth), includes such organizations as the Australian Broadcasting Corporation and the Special Broadcasting Service. An "exempt body" is a body or organization other than a prescribed organisation that is declared by the collecting society to be an exempt body upon the collecting society being satisfied that that body or organization does not use blank tapes, or make blank tapes available to any of its members, for the purpose of making copies of sound recordings in which copyright subsists unless the body, organization or member (as the case may be) is the owner or licensee of the right to make such copies: s.135ZZT. Further, where a prescribed organisation or an exempt body purchases a blank tape from a vendor who is liable under s.135ZZR to pay the royalty in respect of that blank tape then, on the provision by the prescribed organisation or the exempt body of certain particulars to the collecting society, it is entitled to a payment from the collecting society of an amount equal to the amount of the royalty payable for the tape, whether or not that amount of royalty has been paid: s.135ZZS(1), (2).
Such an amount is also payable by the collecting society to a person or body (other than a prescribed organisation or an exempt body) who purchases a blank tape from a vendor where that person or body provides to the collecting society, amongst other things, a statutory declaration that the person or body will not use the tape, or cause or permit it to be used, or make it available to any person for use, for the purpose of making a copy of a sound recording in which copyright subsists unless the person or body is the owner or licensee of the right to make a copy of the sound recording: s.135ZZS(3).
Division 4 of Pt VC (comprising ss.135ZZU to 135ZZY) stipulates, amongst other things, the requirements which a body must meet before it can be declared to be the collecting society under s.135ZZU. One of these requirements is that all relevant copyright owners or their agents must be entitled to become members of that body: s.135ZZU(3)(b). In addition, s.135ZZU(3)(d) provides that the rules of the body must contain:
"such other provisions as are prescribed, being provisions necessary to ensure that the interests of the collecting society's members who are relevant copyright owners or their agents are protected adequately, including, in particular, provisions about:
- (i)
- the collection of amounts of royalty from vendors;
- (ii)
- the payment of the administrative costs of the society out of amounts collected by it;
- (iii)
- the distribution of amounts collected by it;
- (iv)
- the holding on trust of amounts for relevant copyright owners who are not its members; and
- (v)
- access to records of the society by its members".
The collecting society is given power to inspect such records of a vendor who is liable to pay the royalty imposed under s.135ZZN(1) as relate to the sale, letting for hire or distribution of blank tapes by the vendor or as are relevant to the assessment of the amount of royalty payable by the vendor to the society: s.135ZZY(1).
The plaintiffs contend that the essential operation of the provisions of Pt VC and s.153E of the Act is to impose upon the first seller of blank tapes a liability to pay an amount described as a "royalty" and that, in so doing, these provisions do not constitute a law with respect to copyrights. The fact that the moneys collected are to be paid to the owners of copyright in sound recordings and in the works from which the sound recordings are made does not, so the plaintiffs submit, make the relevant provisions, particularly those imposing the royalty, a law with respect to copyrights.
Even if the amounts levied upon the distribution of blank tapes cannot, with strict accuracy, be called royalties, it is not difficult to discern why the draftsman of the legislation chose the term "royalty". That term in its modern application is apt to describe the payments which the grantees of monopolies such as patents and copyrights receive under licence ((64) See Stanton v. Federal Commissioner of Taxation (1955) 92 CLR 630 , at p 641.) and the scheme of the legislation discloses an intention, however general, to compensate the owners of copyright in sound recordings for a use of the recordings which would, without the dispensation which the legislation confers, be an infringement of their copyright.
Nevertheless, the plaintiffs deny any relevant relationship between the levy and the use of the blank tapes upon the distribution of which the levy is imposed. They point to the fact that the vendors of the blank tapes have no control over the use of the tapes after distribution and submit that the law imposing the levy is no more a law with respect to copyrights than would be a law which sought to impose an exaction on the first sale of paper upon the basis that it could be employed to reproduce a literary work in breach of copyright.
But it is apparent that in imposing a royalty upon the sale of blank tapes, the legislation has a sharper focus. Whilst it may be accepted that not all blank tapes which are purchased are used for the purpose of the private copying of sound recordings, it is obvious that those which are used for this purpose must result in loss to copyright owners because of the loss of sales of sound recordings which would otherwise have taken place. The royalty imposed by the legislation is imposed only upon the sale of blank tapes which are ordinarily used for the purpose of copying sound recordings and sales of blank tapes of a type which are ordinarily used for other purposes are excluded from the levy. And the vendor upon whom liability to pay the royalty is imposed is restricted to a person who sells, hires or otherwise distributes blank tapes of the specified kind in the course of his or her business. Moreover, a mechanism, cumbersome though it may be, is provided for persons who purchase blank tapes which are not in fact used for the purpose of copying sound recordings to recover any royalty payable upon the sale of the tapes to them.
True it is that, notwithstanding the efforts of the legislature, royalties may in some instances be paid upon the sale of blank tapes which are not used for the purpose of copying sound recordings, but having regard to the obvious practical difficulty in attempting to attach obligations to the use of blank tapes in the hands of the user, the selection of the first point of distribution as the point at which to impose the levy does not, in our view, sever the connection between the imposition and the use of blank tapes for the purpose of copying sound recordings. The net is not cast so wide that the connection ceases to be plainly discernible.
It may also be safely assumed that the levy imposed upon the vendor of blank tapes will enter into the price of the product to the extent that market forces allow it to be passed on. This assumption is to be seen in the provision for repayment of the royalty to the purchasers of blank tapes who do not use them for copying sound recordings. But apart from that, the likely use of the tapes is a sufficient connection between the royalty and the copying of sound recordings.
In addition, the method laid down for the calculation of the royalty and the use to which the funds generated are to be put by the collecting society provide a clear connection between the legislation and copyright in sound recordings. As we have said, the amount of the royalty depends on the normal playing time of the tape, and the extent to which blank tapes are used for the purposes of making copies of eligible sound recordings and eligible works for private and domestic use is to be taken into account in the calculation by the Copyright Tribunal of the amount per minute of normal playing time of a blank tape.
Further, the royalties are to be paid to the collecting society declared by the Attorney-General. Copyright owners' organizations or collecting societies are a recognized means by which the individual owners of copyright, particularly where performing rights are involved, may combine to negotiate terms with those wishing to use their works, to license the use of those works and to collect the fees payable ((65) See generally Ricketson, The Law of Intellectual Property, (1984), ch.15.). It is, therefore, not surprising that the legislation provides for a collecting society to collect the royalty which it imposes and to distribute the amounts raised to the relevant owners of copyright in sound recordings. Protection is afforded by the legislation to the relevant copyright owners in that the Attorney-General may only declare a body to be the collecting society if its rules adequately protect the interests of the copyright owner members by providing for, amongst other things, the collection of royalties and the distribution of the amounts so collected. The method by which the distribution of royalties is to be effected is otherwise left to the collecting society and must presumably entail some form of sampling or other form of analysis of the relative frequency with which individual sound recordings are copied so as to be related in some way to the infringement of copyright in those sound recordings that is, but for s.135ZZM, presumed to occur through the use of blank tapes. The legislation provides that the Attorney-General may revoke the declaration of a body as a collecting society if he is satisfied that it is not functioning adequately or is not acting in accordance with its rules or in the best interests of those of its members who are relevant copyright owners or their agents: s.135ZZV(a), (b). And clearly a collecting society which did not equitably distribute an adequate proportion of the royalties collected to the relevant owners of copyright would not be acting in their best interests.
Moreover, the rules of the collecting society must provide for a proportion of the royalties collected to be held on trust for those copyright owners who are not members of the collecting society: s.135ZZU(3)(d)(iv).
In affording a fair measure of compensation to those owners of copyright in sound recordings whose copyright would, apart from s.135ZZM, be infringed by copying, the legislation no doubt fails to achieve an exact correlation between the copying which occurs, the royalties which are levied and the compensation which is paid. But it is apparent that it is the practical impossibility of doing so which has led to the adoption of the scheme embodied in the legislation. The legislation nonetheless, in our view, constitutes a law having a clear "relevance to or connection with" ((66) See Grannall v. Marrickville Margarine Pty. Ltd. (1955) 93 CLR 55 , at p 77.) the subject of copyrights. Divisions 3 and 4 of Pt VC and s.153E of the Act therefore constitute a law with respect to copyrights within the meaning of s.51(xviii) of the Constitution.
Under s.55 of the Constitution it is provided that "(l)aws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect". Section 53 also refers to proposed laws imposing taxation and provides that a proposed law shall not be taken to impose taxation "by reason only of its containing provisions for the imposition ... of fines or other pecuniary penalties, or for the demand or payment ... of fees for licences, or fees for services under the proposed law". Clearly, the phrase "laws imposing taxation" must mean the same thing in s.53 and s.55 ((67) See Air Caledonie International v. The Commonwealth (1988) 165 CLR, at p 468.) and for that reason, if for no other, a law requiring the payment of a royalty properly so-called is not a law imposing taxation. A royalty may be a fee for a licence; indeed, as we have already pointed out, the term "royalty" embraces fees paid to the owners of copyright for licences granted by them ((68) See McCauley v. Federal Commissioner of Taxation (1944) 69 CLR 235 , at pp 243-244; Stanton v. Federal Commissioner of Taxation (1955) 92 CLR, at pp 639-642.).
Under the legislation in question the owners of the copyright in sound recordings do not grant a licence for the copying of the recordings. Section 135ZZM(1) renders a licence unnecessary. Nor is any fee extracted compulsorily from those who copy sound recordings in an exercise which, apart from s.135ZZM, would be an infringement of copyright. No doubt, as we have observed, to the extent that market forces allow it to be done, the amount of the levy imposed upon the first distribution of a blank tape will be passed on in the cost to the ultimate purchaser, who is likely to be the user of that tape. But that is the only relationship between the levy imposed and the person who performs the copying authorized by s.135ZZM(1). For these reasons it is clear that the levy imposed by the legislation is not a royalty properly so-called and does not constitute a fee for a licence within the meaning of s.53 of the Constitution. This does not, however, lead to the conclusion that the levy is a tax.
The three features generally held to impart the character of a tax to a levy are that it is a compulsory exaction of money by a public authority for public purposes, that it is enforceable by law and that it is not a payment for services rendered ((69) See Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd. [1933] AC 168 , at p 175; Matthews v. Chicory Marketing Board (Vict.) (1938) 60 CLR 263 , at p 276.). In addition, it must not be by way of a penalty or be arbitrary ((70) See MacCormick v. Federal Commissioner of Taxation (1984) 158 CLR 622 , at p 639; Deputy Federal Commissioner of Taxation v. Truhold Benefit Pty. Ltd. (1985) 158 CLR 678 , at p 684.). But these features do not provide an exhaustive definition of a tax and some of them are not indispensable. It was observed in Air Caledonie International v. The Commonwealth ((71) (1988) 165 CLR, at p 467.):
"(T)here is no reason in principle why a tax should not take a form other than the exaction of money or why the compulsory exaction of money under statutory powers could not be properly seen as taxation notwithstanding that it was by a non-public authority or for purposes which could not properly be described as public".
However, that observation cannot be taken too far. Even putting to one side penalties and fees for services, not every exaction enforceable by law is a tax. If it were, there would be no need to point to other identifying features. Those characteristics of a tax which require it to be levied by a public authority for public purposes are important in that they reflect the general conception of a tax as a means of raising revenue for government (even if the aim of the tax is also to encourage or discourage behaviour of a particular kind). In consequence, the fact that an exaction is to be paid into a consolidated revenue fund is sufficient indication that the exaction is for a public purpose, hence a tax ((72) See R. v. Barger (1908) 6 CLR 41 , per Isaacs J. at p 82; Moore v. The Commonwealth (1951) 82 CLR 547 , per Latham C.J. at p 561; Parton v. Milk Board (Vict.) (1949) 80 CLR 229 , per Dixon J. at p 258.). By inference, the strongest indication that an exaction does not constitute a tax is that the moneys raised do not form part of such a fund. However, as we point out later, the fact that moneys are not paid into such a fund is not necessarily conclusive.
Under s.81 of the Constitution all revenues or moneys raised or received by the Executive Government of the Commonwealth form one Consolidated Revenue Fund to be appropriated for the purposes of the Commonwealth. If an exaction is a tax, the moneys which it raises are revenue and must form part of the Consolidated Revenue Fund by reason of s.81. That is to say, if in the present case the royalty constitutes a tax, the legislative provisions which make it payable to the collecting society to be distributed by it fail for reasons more fundamental than are to be found in s.55 of the Constitution. They fail because the moneys raised must form part of the Consolidated Revenue Fund and can only, under ss.81 and 83 of the Constitution, be received by the collecting society after appropriation by law for the purpose of payment to it.
If these considerations involve practice rather than principle then the observation in Air Caledonie International v. The Commonwealth that there is no reason in principle "why the compulsory exaction of money under statutory powers could not properly be seen as taxation notwithstanding that it was by a non-public authority or for purposes which could not properly be described as public" may stand. But we doubt whether s.81 of the Constitution can in this context be regarded as a machinery provision and, consequently, it now seems to us that the passage which we have cited may be too wide. Read in its widest sense that passage does suggest that any exaction enforceable by law may be a tax in the constitutional sense and that is, as we have said, to regard as dispensable that feature of a tax which is, in truth, indispensable, namely, that the moneys raised be government revenue. Indeed, if all that is required for a tax is that there be an exaction enforceable by law, s.51(ii) assumes unforeseen proportions. Any compulsory exaction of money under statutory power would need no other constitutional warrant.
The notion that taxes involve the raising of revenue by government is not confined to the Commonwealth Constitution. In the United States the distinction probably still exists between a revenue measure which may be validly contained in a federal statute under the constitutional power to lay and collect taxes (Art.1, s.8) and a regulatory measure which does not fall within the power to tax even though it may achieve its purpose by the exaction of money ((73) See, e.g. Bailey v. Drexel Furniture Co. (1922) 259 US 20 ; Hill v. Wallace (1922) 259 US 44 ; United States v. Constantine (1935) 296 US 287 ; United States v. Butler (1936) 297 US 1 ; cf. United States v. Munoz-Flores (1990) 109 LEd.2d 384.). The distinction has little if any practical relevance in the United States today because the Supreme Court has in more recent decisions held that a tax may, as well as being designed to raise revenue, have a purpose which is plainly regulatory and has refused to inquire into congressional motives ((74) See Sonzinsky v. United States (1937) 300 US 506 , 514.). Moreover, an expansive modern interpretation of the commerce clause has produced the result that even if a measure is regulatory it is likely to be within power without reliance upon the power to tax ((75) See Tribe, American Constitutional Law, 2nd ed. (1988), pp 319-320.). But the distinction which has been drawn nevertheless emphasizes that a revenue-raising function is an important element of a tax.
In Canada it has from time to time been necessary for constitutional purposes to determine whether an impost is or is not a tax (and, if a tax, whether it is direct or indirect). Again, the revenue-raising function of a tax - identified by whether the moneys raised form part of consolidated revenue - has been a decisive consideration in that exercise. In Massey-Ferguson Industries Ltd. v. Government of Saskatchewan ((76) (1981) 127 DLR (3d) 513) the Supreme Court of Canada upheld the validity of the Agricultural Implements Act 1968 (Sask.) which gave power to a board to pay compensation to farmers out of a fund for losses suffered "due to an unreasonable delay in the availability of a repair" of a farm implement and gave power to the same board to impose levies upon distributors of farm implements upon the basis of a percentage of gross sales in order to constitute and maintain the fund. Laskin C.J.C., who delivered the judgment of the Court, made the following observation ((77) ibid., at p 528):
"I am not persuaded that the assessments to create and maintain a compensation fund should be characterized as taxes within s.92(2) of the British North America Act, 1867. The levies, as monetary exactions, are liquidating premiums to satisfy farmers' claims under s.6D and the policy of the Act is to relate the assessments to the compensation awards and to administrative expenses. They are designed to support a limited form of insurance for the benefit of farmers who purchase agricultural implements, related to their use of such implements. There is here no collection of money to go into a consolidated revenue fund which is then chargeable with satisfying awards of compensation. Although the scheme is a public one, created under a public statute, its beneficiaries and obligors are circumscribed by the particular activity or enterprise in which they are engaged." (emphasis added)
The royalty imposed by the legislation in this case is not an exaction by a public authority for public purposes. The moneys exacted do not form part of the Consolidated Revenue Fund and understandably so because they do not form part of government revenue. They are to be collected by the collecting society and distributed or retained by it in accordance with its rules. The collecting society is not a public authority but a private organization, albeit endowed with certain statutory powers. The royalty is not exacted by way of penalty. Conversely, it is enforceable by the collecting society as a debt.
If the mechanism which the legislation sets up were merely a colourable device with which to by-pass the Consolidated Revenue Fund with what was, in truth, government revenue, then the royalty would, if it could survive at all, be properly characterized as a tax and s.81 would nonetheless apply. But the actual purpose of the royalty shows that it is part of a scheme, designed to compensate copyright owners for the use of their copyright material, which does not involve the raising of government revenue. Rights and obligations are imposed by statute as part of the scheme and in that sense the scheme is a public one. But is not sufficient in our view to constitute the moneys raised by way of royalty under the legislation public moneys, which they would of necessity be if the royalty were a tax.
As we have said, the legislation is plainly prompted by the practical impossibility of controlling the copying of sound recordings or of obtaining any fee directly from those who engage in that practice. The provision in s.135ZZM(1) that the copying of a sound recording on to a blank tape for private and domestic use does not constitute an infringement of copyright has the effect of authorizing the making of such a copy. It is not practically possible to require the person making the copy to pay a royalty to the owner of the copyright for the exercise of the right to do so without infringement, but it is possible with reasonable certainty to identify at the first point of distribution those blank tapes which will be used for copying sound recordings. At that point a levy is made which will have the tendency to be passed on in the price of the blank tape. The moneys raised by the levy are payable to a collecting society comprising relevant owners of copyright in sound recordings. A collecting society is a conventional vehicle for the collection and distribution of royalties where it is possible to charge royalties for rights such as performing rights. The moneys raised are to be distributed by the collecting society amongst the relevant copyright owners in such a way as to provide adequate recompense for the loss suffered by them by reason of what would, apart from s.135ZZM, be an infringement of their copyright. The legislative scheme is such as to ensure that, within reasonable limits, the amount, the incidence, the collection and the distribution of the moneys exacted are all referable to the copying of copyright material. Whilst the imposition cannot, strictly speaking, be regarded as a royalty, it is exacted in lieu thereof and for the same ultimate purpose, namely, the payment to copyright owners for the use of their copyright material.
Accordingly, the essential similarities are with fees for licences rather than with a tax and we would not regard the legislation as a law imposing taxation within the meaning of s.55 of the Constitution.
The plaintiffs also submitted that the royalty was incontestable and hence arbitrary and beyond the taxation power of the legislature (s.51(ii)) because of the wide discretion given to the Copyright Tribunal to determine the value of "A" in the formula set out in s.135ZZN(2). But the discretion vested in the Tribunal is not so unlimited as to render the liability to pay the royalty incontestable. The royalty is payable only in the circumstances specified in the legislation and, even in determining "A" as an essential component in the amount of the royalty, the Tribunal is not at large but is required to take into account all relevant matters. The imposition of the royalty is by reference to ascertainable criteria with a sufficiently general application and is not the "result of some administrative decision based upon individual preference unrelated to any test laid down by the legislation" ((78) See Deputy Federal Commissioner of Taxation v. Truhold Benefit Pty. Ltd. (1985) 158 CLR, at p 684.). Accordingly it is not arbitrariness which precludes the royalty from being a tax.
Section 51(xxxi) of the Constitution provides that the Commonwealth Parliament may make laws for the acquisition of property on just terms for any purpose in respect of which the Parliament has power to make laws. That paragraph must be treated "as abstracting from other heads of power (including the incidental power) all content which would otherwise have enabled the compulsory acquisition of property, and as subjecting the power with respect to the acquisition to an obligation to provide just terms" ((79) Trade Practices Commission v. Tooth and Co. Ltd. (1979) 142 CLR 397 , at p 445.). And it is now settled that the paragraph may apply where the compulsory acquisition of property is by some person other than the Commonwealth or an agency of the Commonwealth ((80) See Jenkins v. The Commonwealth (1947) 74 CLR 400 , at p 406; McClintock v. The Commonwealth (1947) 75 CLR 1 , at pp 23, 36; PJ. Magennis Pty. Ltd. v. The Commonwealth (1949) 80 CLR 382 , at pp 401-402, 411, 423; Trade Practices Commission v. Tooth and Co. Ltd. (1979) 142 CLR, at pp 427, 451-452.). The argument that Pt VC and s.153E of the Act involve an acquisition of property otherwise than on just terms is put by the plaintiffs in two ways. First, it is said that there is an acquisition of property from the vendors of blank tapes. Secondly, it is said that there is an acquisition of property from the owners of copyright in sound recordings.
We do not think that the first argument can be sustained. It has never been thought that the imposition of a tax amounted to the acquisition of property ((81) See Moore v. The Commonwealth (1951) 82 CLR 547 , at p 549; Commissioner of Taxation v. Clyne (1958) 100 CLR 246 . at p 263; Federal Commissioner of Taxation v. Barnes (1975) 133 CLR 483 , at pp 494-495, 500.). Whilst the levy imposed by s.135ZZN is not a tax, the principle which leads to the conclusion that a tax does not entail an acquisition of property also leads to the conclusion that the imposition of the levy in this case is not the acquisition of property. As Aickin J. said in Trade Practices Commission v. Tooth and Co. Ltd. ((82) (1979) 142 CLR, at pp 453-454.):
"Taxation involves the compulsory payment of money to the Commonwealth according to prescribed criteria applicable to persons who fall within the specified categories in a manner capable of testing in the courts. Its imposition creates a debt but does not compulsorily acquire property. No doubt when payment is made property in the cas(h) or cheque passes to the Commonwealth but it is not a process capable of being categorized or described as 'acquisition of property', save in a very unusual sense of that expression."
See also MacCormick v. Federal Commissioner of Taxation ((83) (1984) 158 CLR, at pp 638, 649.).
Of course, it is possible to go on and say, as Dixon C.J. did in Commissioner of Taxation v. Clyne ((84) (1958) 100 CLR, at p 263.), that the very purpose of the taxation power (s.51(ii)) "is to acquire money for public purposes", but it remains true to say that the effect of the imposition of a tax is to create a debt which is met by the payment of money. The debt itself is a chose in action the creation of which does not involve the acquisition of property from any person. Nor does the discharge of the liability by the payment of money, which is not transferred in specie but as a medium of exchange, involve the acquisition of property in any relevant sense.
The royalty which is payable upon the first distribution of blank tapes is a debt due to the collecting society ((85) See s.135ZZQ(1)). And payment of money in discharge of the debt by the vendor to the collecting society does not amount to the acquisition of property by the collecting society. Accordingly, the law creating the debt is not a law with respect to the acquisition of property.
Nor do we think that there is any force in the plaintiffs' second argument. Copyright consists of the exclusive right to do all or a number of acts with respect to the subject-matter of the copyright ((86) See ss.31, 85). For present purposes the most important is the right to make a reproduction or a copy. Copyright is capable of ownership ((87) See ss.35, 97.) and is designated by the Act as personal property which is transmissible by assignment, by will and by devolution by operation of law ((88) See s.196(1)). There can be no doubt that copyright constitutes property within the scope of s.51(xxxi) of the Constitution ((89) See Pacific Film Laboratories Pty. Ltd. v. Federal Commissioner of Taxation (1970) 121 CLR 154 , at pp 165-166.). Section 135ZZM(1) provides that copyright is not infringed by the copying of a sound recording on to a blank tape for private and domestic use. The effect of that section is to diminish the exclusive rights conferred elsewhere in the Act by way of copyright but it does not result in the acquisition of property by any person. All that the section does is to confer a freedom generally to do something which previously constituted an infringement of another's proprietary right. Moreover, s.135ZZZA provides that despite any other provision of the Act, "the making of a copy of a sound recording that is not an infringement of copyright under (Pt VC), does not vest copyright in any work or other subject-matter in any person".
Whilst the word "property" in s.51(xxxi) is to be construed liberally so that it extends to "innominate and anomalous interests" ((90) Bank of N.S.W. v. The Commonwealth (1948) 76 CLR 1 , at p 349.), for the paragraph to apply it must be possible to identify an acquisition of something of a proprietary nature. The mere extinction or diminution of a proprietary right residing in one person does not necessarily result in the acquisition of a proprietary right by another ((91) See Reg. v. Ludeke; Ex parte Australian Building Construction Employees' and Builders Labourers' Federation (1985) 159 CLR 636 , at p 653; The Commonwealth v. Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 , at pp 145, 181, 247, 283; Australian Capital Television Pty. Ltd. v. Commonwealth (No.2) (1992) 66 ALJR 695 , at pp 714, 728; 108 ALR 577 , at pp 615, 640.).
Section 135ZZM(1) confers nothing upon any person which may be described as being of a proprietary nature. If the immunity which the section confers can correctly be described as a right, it is a right which is applicable to all but arises only on the occasions upon which copying takes place. It is not a right which is of a permanent character or capable of being assigned to third parties, those being usual characteristics of a right of property ((92) See National Provincial Bank Ltd. v. Ainsworth [1965] AC 1175 , at pp 1247-1248; Reg. v. Toohey; Ex parte Meneling Station Pty. Ltd. (1982) 158 CLR 327 , at pp 342-343; Australian Capital Television Pty. Ltd. v. Commonwealth (No.2) (1992) 66 ALJR, at pp 714-715, 729; 108 ALR, at pp 615-616, 641-642.). It is not a right which can be described as being by way of copyright or of a licence under copyright since it entirely lacks exclusivity. It does not, in our view, amount to an interest in property. Section 135ZZM(1) is not, therefore, a law with respect to the acquisition of property.
In the light of these reasons, it is sufficient to say in answer to the questions reserved for the consideration of the Court that Divs 2, 3 and 4 of Pt VC and s.153E of the Copyright Act are validly enacted by the Parliament of the Commonwealth.