Pacific Film Laboratories Pty. Ltd. v. Federal Commissioner of Taxation.

Members: Barwick CJ
McTiernan J
Windeyer J

Owen J
Walsh J

Tribunal:
High Court (Full Court)

Decision date: Judgment handed down 9 October 1970.

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Owen J.: In my opinion the first question asked in the Stated Case should be answered ``Yes''. Leaving on one side for the moment a submission put on behalf of the appellant and which is based upon the Copyright Act 1912, the question whether the supply by the appellant to its customers of prints and duplicates of colour transparencies made by it were sales of goods within the meaning of sec. 17 of the Sales Tax Assessment Act ( No. 1) appears to me to have been, in reality, already decided by this Court - and I think, with respect, rightly decided - in
Riley's case (1935) 53 C.L.R. 69 . It is true that in that case it was the defendant who, in the course of his business, took photographs of his customers, produced prints from the negatives and supplied them to the customer, while in the present case it is the customer and not the appellant who takes the photograph. But what was said in Riley's case was applied in
Butcher's case (1935) 53 C.L.R. 82 where, as here, it was the customer and not the taxpayer who exposed the negatives. The question asked in Riley's case was whether the prints supplied to the customer were, for the purposes of the Act, goods manufactured by the defendant,

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ATC 4112

but the submissions made on the latter's behalf were that the production and supply of the prints was ``more in the nature of a service than of a sale'' and ``approximated more closely to that of a contract for work and labour than to the sale of an actual photograph''. This is the principal submission made on behalf of the appellant in the present case. The Court, as it seems to me, realised in Riley's case that the defendant's argument raised two problems, the first being whether the defendant was the manufacturer of the prints supplied to the customer, the second whether the supply and delivery of the prints to the customer for reward constituted a sale of goods. It was, I think, for this reason that in the course of their joint judgment, Rich, Dixon and McTiernan JJ., after saying at p. 78 that -

``The special case raises no question as to the sale or sale value of the photographs, and this, no doubt, accounts for the economy of statement in reference to the terms upon which the clients' requirements are supplied. That the transaction is a sale is not, and doubtless could not, be disputed. What is in question is whether photographs are goods manufactured in Australia.''

went on, on p. 79 -

``In the present case, it is the element of `manufacture' or `production' which the taxpayer says is not present. The argument in support of his contention is, in effect, that the photographer is employed to exercise his art to obtain a portrait possessing the qualities that are demanded by the taste it is his purpose to consult, and that the end of his labours is not the production of so many material objects regarded as vendible articles. The contention is open to the observation that it does not strictly adhere to the question in the special case, which assumes the sale of the photographs as goods, and inquires, are they produced or manufactured? But it is right, perhaps, that the taxpayer should not be tied down to that question as one isolated from the remainder of sec. 17. In any case, we think the contention cannot prevail. The end of the organised business of a portrait photographer is to produce as many copies of a picture as his customer will buy, and to sell them to him with a view to profit. It differs from many other productive arts in the fact that its products must be designed in each case for one individual, and in its attempt to secure some aesthetic value. But it is a process practised commercially to produce an article which will be bought.''

Thus it seems to me that their Honours took the view that the defendant's argument raised, in substance if not in form, not merely the question whether the prints were ``manufactured'' by the defendant but also whether the transaction under which it delivered the prints to and was paid for them by the customer constituted, at least for the purposes of sales tax, a sale of goods and that it was for that reason that the passages from their judgment which I have quoted above were directed not only to the ``element'' of ``manufacture'' but to the question whether or not the defendant had sold the prints when, in return for payment, he delivered them to the customer who had ordered them. If, however, the passages I have quoted are to be regarded as obiter dicta, I accept them as correctly laying down the law applicable to the present case.

As to the submission based upon the Copyright Act 1912, I am of opinion that it fails. I am unable to see any reason, in the light of the facts set out in the Stated Case, which would justify the conclusion that by reason of the provisions of the Copyright Act the appellant had no property in the prints or copies of the transparencies which it could pass, by way of sale, to the customer for whom they were manufactured and to whom they were delivered.