Australian Tape Manufacturers Association Ltd v Commonwealth of Australia
(1993) 176 CLR 480(1993) 112 ALR 53
(Judgment by: McHugh JJ.)
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 Toohey
McHugh JJ.
Judgment date: 11 March 1993
Judgment by:
McHugh JJ.
I agree generally with the reasons which lead Dawson and Toohey JJ. to conclude that Pt VC of the Copyright Act 1968 (Cth) is a valid exercise of the power conferred on the Parliament of the Commonwealth to make laws with respect to copyrights and that it does not constitute an acquisition of property within the meaning of s.51(xxxi) of the Constitution. I also agree with their Honours' conclusion that no tax is imposed by s.135ZZP, which requires a royalty for a blank tape to be paid by the vendor "who first sells, lets for hire or otherwise distributes the tape in Australia".
A compulsory exaction of money by a public authority for public purposes which is enforceable by legal process will be classified as a tax unless the exaction is a reasonable payment for services rendered to or on behalf of the payee or unless the exaction is a penalty for a breach of the law ((93) Matthews v. Chicory Marketing Board (Vict.) (1938) 60 CLR 263 , at p 276; Air Caledonie International v. The Commonwealth (1988) 165 CLR 462 , at pp 466-467.). However, in Air Caledonie International v. The Commonwealth ((94) (1988) 165 CLR, at p 467), this Court said, by way of dicta , that "there is no reason in principle ... 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".
I am unable to accept the proposition that a compulsory exaction of money under a statutory power may be a tax although it is not raised for public purposes. A compulsory exaction of money under statutory authority is not by itself sufficient to constitute a payment of tax. If it was, any compulsory transfer of money from one person to another, pursuant to a statutory scheme, would constitute taxation. Moreover, so far as I am aware, no case has yet decided that a compulsory exaction could be a tax even though it was not raised for public purposes. In Air Caledonie, the amount of the fee imposed on travellers, although collected by the airlines, was a debt due to the Commonwealth by the airlines whether or not the fee had been or could be collected from the traveller. In United States v. Butler ((95) (1936) 297 US 1 , at p 61), the Supreme Court of the United States said:
"A tax, in the general understanding of the term, and as used in the Constitution, signifies an exaction for the support of the Government. The word has never been thought to connote the expropriation of money from one group for the benefit of another."
This passage emphasises that the chief feature of a tax is that it is raised to finance government expenditure. It is raised "for the benefit of the Consolidated Revenue" ((96) R. v. Barger (1908) 6 CLR 41 , at p 82). In a Canadian case ((97) Massey-Ferguson Industries Ltd. v. Government of Saskatchewan (1981) 127 DLR (3d) 513.), which held that a levy imposed on the distributors of farm implements to compensate farmers was not a tax, Laskin C.J.C. said ((98) ibid., at p 528):
"There is here no collection of money to go into a consolidated revenue fund which is then chargeable with satisfying awards of compensation."
Before a compulsory exaction of money under statutory authority can constitute a tax, it must, in my opinion, be raised for some public, that is, governmental, purpose. In the setting of the Constitution, it must be raised for the purposes of the Commonwealth to "be applied to the payment of the expenditure of the Commonwealth" ((99) Constitution, s.82; see also s.81.).
In the context of Pt VC of the Copyright Act, the levy imposed by s.135ZZP does not constitute a tax. It is not paid into Consolidated Revenue, and it is not imposed for the purposes of government or of any public or statutory authority. Neither the Commonwealth nor its agents nor any public authority is involved in the exaction of the payments or, for that matter, the distribution of the funds raised by those payments. The levy is collected by, and is the property of, a private collecting society which is administered and controlled by the copyright owners. It is imposed as part of a scheme which makes lawful the domestic copying of copyright works by the use of blank tapes and provides for the compensation of the copyright owners by means of a fund, financed by imposing a levy on the vendors of blank tapes.
It is true that a number of features of the "royalty" imposed by s.135ZZP are indicative of a tax. Thus, it subjects the vendor of blank tapes to a compulsory exaction of money and it is not imposed as a penalty for any breach of the law. Furthermore, the vendor receives no service or other consideration for the payment. Although the Act describes the payment exacted by s.135ZZP as a "royalty", it is not a royalty as that term is ordinarily understood((100) Stanton v. Federal Commissioner of Taxation (1955) 92 CLR 630 , at pp 641-642; Federal Commissioner of Taxation v. Sherritt Gordon Mines Ltd. (1977) 137 CLR 612 , at p 626. A royalty is a payment "made in consideration of the grant of a right" ((101) Federal Commissioner of Taxation v. Sherritt Gordon Mines Ltd. (1977) 137 CLR, at p 626.)). The levy imposed by s.135ZZP is not a payment made in consideration of the grant of a right to the vendor to copy or to authorise the copying of copyright works onto a blank tape, and the sale of a blank tape to a person who subsequently uses it to record copyright material is not itself an authorisation of the copying((102) CBS. Songs Ltd. v. Amstrad Consumer Electronics Plc. [1988] AC 1013 , at pp 1053-1055; Sony Corporation of America v. Universal City Studios Inc. (1984) 464 US 417 .). A common feature of a tax is that it is a compulsory exaction of money, enforceable at law, which does not purport to be a penalty imposed for a breach of the law and for which the payee receives no service or other consideration. Nevertheless, this feature is not enough, in my opinion, to characterise the "royalty" exacted by s.135ZZP as a tax. This is because the payment is exacted to finance the private scheme of compensation which Part VC authorises and is not imposed for public purposes.
Unauthorised recording of copyright works by the use of tape recordings has been a worldwide phenomenon which has reduced the sales of those works and the royalties which would otherwise be earned from them((103) U.K., Report of the Committee to Consider the Law on Copyright and Designs, Copyright and Designs Law, (1977) Cmnd 6782 , p 75; US Congress, Office of Technology Assessment, Copyright and Home Copying: Technology Challenges the Law, (1989), p 3; C.B.S. Songs Ltd. (1988) AC, at p 1060.). Although, prior to the enactment of Pt VC, the owner of the copyright had a right of action against the copier for infringement, for practical purposes the right was worthless. The widespread nature of the copying and the cost and difficulty of obtaining evidence of infringement meant that in practice the copyright owner could neither restrain the infringements nor receive compensation for the breach of his or her rights. In CBS. Songs Ltd. v. Amstrad Consumer Electronics Plc.((104) ibid.), Lord Templeman commented that, from society's point of view, the position was "lamentable", with "(m)illions of breaches of the law" being committed each year by domestic copiers. Part VC remedies this state of affairs by making the domestic copying of recordings lawful and by providing a mechanism to compensate the owners of copyright for the loss of revenue arising from the decline in sales of copyright works as the result of domestic copying.
Thus, the purpose of the payment exacted by s.135ZZP is not to raise revenue to meet the expenses of government or public authorities. It is to compensate the owners of copyright for the loss of revenue which they suffer as a result of the widespread use of blank tapes to record copyright material. The end for which the payment is imposed is private, not public. Furthermore, the scheme enacted by Pt VC is a private scheme controlled, administered and enforced by a private collecting society. The "royalty" exacted by s.135ZZP is a debt payable to the collecting society which is recoverable from the vendor by the society in the Federal Court of Australia((105) s.135ZZQ). The "royalty" forms no part of the revenues of the Commonwealth. Nor, after collection, is it paid to or at the direction of the Commonwealth. Amounts payable to the society in accordance with the provisions of Pt VC are the property of the society, which holds or distributes those amounts in accordance with its rules((106) s.135ZZU(3)(d)).
The government's role in the scheme enacted by Pt VC is supervisory. The Attorney-General is empowered to declare a body named in the Gazette to be the collecting society((107) s.135ZZU) and to revoke the declaration on one or more of four specified grounds((108) s.135ZZV.). The collecting society must also prepare a report of its operations at the end of each financial year and send a copy of the report to the Attorney-General who is required to lay it before each House of Parliament((109) s.135ZZW.). A copy of the rules of the society must also be sent to the Attorney-General within 21 days of any alteration to the rules together with a statement setting out the effect of the alteration and the reasons why it was made((110) s.135ZZX). However, the Commonwealth neither collects nor distributes the payments. Nor does it determine how or to whom they are to be distributed.
It is true that Pt VC has been enacted in the public interest to make lawful the previously unlawful activities of domestic copiers and to raise funds to compensate the owners of copyright works for the loss of revenue brought about by domestic copying. Part VC thus serves a public purpose. But the money exacted by s.135ZZP is not raised for a public purpose as that concept is understood in the context of determining whether or not a compulsory exaction of money is a tax for the purpose of the Constitution. In that context, public purpose is synonymous with the "purposes of the Commonwealth".
I agree with the orders proposed by Dawson and Toohey JJ.