Australian Broadcasting Authority v Project Blue Sky Inc & Ors

(1996) 71 FCR 465

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(Judgment by: Northrop J)

Australian Broadcasting Authority v
Project Blue Sky Inc WN 610652, Top Shelf Productions Ltd WN 615072, Communicado Limited AK/117463, South Pacific Pictures Ltd AK/383620, Gibson Group Ltd & Frame up Films Ltd

Court:

Judges:
NorthropWilcox
Finn JJ

Subject References:
Foreign Relations
Australia New Zealand Closer Economic Relations Agreement ("CER Agreement") requiring New Zealand services be given no less favourable access to Australian markets
Supply of television programs a service
Broadcasting Services Act 1992 requiring Australian Broadcasting Authority to set minimum Australian Content Standards for television broadcasts
Whether Standard can include New Zealand programs
Effect of inconsistency between Act and CER Agreement
Application of maximum generalia specialibus non derogant
specific requirements of Act prevails over general requirement
Media and Communications Law
Television Australian Content Standard under Broadcasting Services Act 1992
Whether Standard can include New Zealand programs
New Zealand programs not Australian for purposes of Act
Practice and Procedure
Application for admission of new evidence in appeal
Proposed contentious new evidence from intervening party

Legislative References:
Broadcasting Services Act 1992 - 3; 122; 160
Australia New Zealand Closer Economic Relations Trade Agreement, Arts. 2, 3, 4 and 5 -

Hearing date: 1 November 1996
Judgment date: 12 December 1996

Sydney

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Judgment by:
Northrop J

1. The issue and statutory background

The question raised by this appeal is whether a program standard made by the Australian Broadcasting Authority relating to the Australian content of television programs to be observed by commercial television broadcasting licensees is invalid by reason of being inconsistent with a Trade Agreement between Australia and New Zealand and a Protocol on trade in services to that Trade Agreement.

The Australian Broadcasting Authority is a body corporate constituted under the Broadcasting Services Act 1992 ("the Act"). In the Act the Authority is referred to as the "ABA". The primary function of the ABA is to regulate broadcasting services within Australia. One aspect of this function is to grant licences to persons to conduct commercial television broadcasting services. A primary function of the ABA, as specified in paragraph 158(j) of the Act, is to develop program standards relating to broadcasting in Australia. The words "program standards" are defined in section 6 of the Act to mean standards determined by the ABA relating to the content or delivery of programs while the word "program", in relation to a broadcasting service, is defined to mean:-

"(a)

matter the primary purpose of which is to entertain, to educate or to inform an audience; or

(b)

advertising or sponsorship matter, whether or not of a commercial kind;"

Commercial television broadcasting services come within the object of the function conferred on the ABA by paragraph 158(j) of the Act.

In addition to the primary functions of the ABA conferred by section 158, under section 159 the ABA has such other functions as are conferred on it by the Act. PART 9 of the Act, which is headed "Program Standards" and consists of sections 122 to 130, confers specific functions on the ABA one of which is directly relevant to this appeal. Before turning to that, it is helpful to refer at this stage to the statutory provision which, it is submitted by the respondents to the appeal, has the effect of making invalid the program standard the subject of this appeal. Section 160 is set out in full:-

"160.

The ABA is to perform its functions in a manner consistent with:

(a)

the objects of this Act and the regulatory policy described in section 4; and

(b)

any general policies of the Government notified by the Minister under section 161; and

(c)

any directions given by the Minister in accordance with this Act; and

(d)

Australia's obligations under any convention to which Australia is a party or any agreement between Australia and a foreign country."

Section 122 confers a power on the ABA, which the ABA is under a duty to exercise, to determine standards with respect to specified programs. The section is set out in full:-

"122.(1)

The ABA must, by notice in writing:

(a)

determine standards that are to be observed by commercial television broadcasting licensees; and

(b)

determine standards that are to be observed by community television broadcasting licensees.

(2)

Standards under subsection (1) for commercial television broadcasting licensees are to relate to:

(a)

programs for children; and

(b)

the Australian content of programs.

(3)

Standards under subsection (1) for community television broadcasting licensees are to relate to programs for children.

(4)

Standards must not be inconsistent with this Act or the regulations."

Reference should be made to some of the other provisions of PART 9 of the Act. Section 123 allows codes of conduct to be applied to the broadcasting operations of, among others, commercial television broadcasting licensees. Under section 124, the ABA is required to maintain a "Register" of those codes while under section 125, upon specified events occurring, the ABA has the power, which it is under a duty to exercise, to determine a standard in relation to the relevant matter. Under section 126, before determining a standard or varying or revoking a standard, the ABA is under a duty to seek public comment on the proposal. Under s 127, any determination, variation or revocation must be published in the Gazette and copies must be available for purchase. Section 128 makes provision for amendment of determinations by Parliament while s 129 imposes limitations on powers of the ABA.

By way of comment, it should be noted that a program standard is of the nature of subordinate legislation; see Herald-Sun TV Pty Ltd v Australian Broadcasting Tribunal (1985) 156 CLR 1 at 4-5. A program standard is an instrument under the Acts Interpretation Act 1901 but it is not a disallowable instrument under section 46A of that Act with all the consequences that flow therefrom.

2. The Australian Content Standard

By a determination dated 15 December 1995, the ABA made a program standard named "Australian Content Standard". It was expressed to come into operation on 1 January 1996. It was stated to be made under paragraph 122(1)(a) of the Act namely a standard "to be observed by commercial television broadcasting licensees". Accordingly the standard had to relate to "the Australian content of programs"; see paragraph 122(2)(b).

In making the Australian Content Standard, the ABA was performing the function conferred by section 122 of the Act, see section 159. It had to perform that function in a manner consistent with the objects of the Act and the regulatory policy described in section 4 of the Act; see paragraph 160(a). In conformity with this precept, the ABA, in Clause 3, stated the object of the Standard as follows:-

"3.

The object of this Standard is to promote the role of commercial television in developing and reflecting a sense of Australian identity, character and cultural diversity by supporting the community's continued access to television programs produced under Australian creative control."

This object of the Standard is based on object 3(e) as set out in section 3 of the Act namely:-

"3.

The objects of this Act are:

(a)

.......

(e)

to promote the role of broadcasting services in developing and reflecting a sense of Australian identity, character and cultural diversity; and"

The essence of the Standard is to impose an obligation on commercial television broadcasting licensees to program a quota of Australian programs, described as a transmission quota, for the years 1996, 1997 and 1998 and thereafter. This is illustrated by reference to Clause 9(1):-

"9.(1)

Subject to subclause (3), until the end of 1997, Australian programs must be at least 50% of all programming broadcast between 6.00 am and midnight in a year that was made without financial assistance from the television production fund."

Of necessity, the application of the transmission quota depends upon the meaning to be given to the words "Australian programs". Of necessity, having regard to the provisions of paragraph 122(2)(b) of the Act and the definitions of the words "program" and "program standards", it would be expected that the Standard would be directed to the content of programs to be broadcast. Strangely, this does not seem to be the case since the Standard identifies Australian programs by reference to the citizenship or residence of the producers, directors and actors involved in the program. No issue was raised regarding this.

Clause 7 of the Standard specifies what is an Australian program. In substance, a program is an Australian program if it satisfies two conditions namely 1, if it was made without financial assistance from the television production fund and 2, if it was produced under the control of Australians who ensure an Australian perspective as evidenced by the program's compliance with one or more of these conditions. The Standard is not easy to construe but, for present purposes, it is not necessary to construe it. It is sufficient to set out the whole of Clause 7.

"What is an Australian program?

7.(1)

A program is an Australian program if:

(a)

it is produced under the creative control of Australians who ensure an Australian perspective, as only evidenced by the program's compliance with subclause (2), subclause (3) or subclause (4); and

(b)

it was made without financial assistance from the television production fund.

(2)

A program is an Australian program if:

(a)

the Minister for Communications and the Arts has issued a final certificate under section 124ZAC of Division 10BA of Part III of the Income Tax Assessment Act 1936 in relation to the program; and

(b)

the certificate is in force.

(3)

A program is an Australian program if it has been made pursuant to an agreement or arrangement between the Government of Australia or an authority of the Government of Australia and the Government of another country or an authority of the Government of another country.

(4)

Subject to subclause (5), a program is an Australian program if:

(a)

the producer of the program is, or the producers of the program are, Australian (whether or not the program is produced in conjunction with a co-producer, or an executive producer, who is not an Australian); and

(b)

either:

(i)

the director or the program is, or the directors of the program are, Australian; or

(ii)

the writer of the program is, or the writers of the program are, Australian;

and

(c)

not less than 50% of the leading actors or on-screen presenters appearing in the program are Australians; and

(d)

in the case of a drama program - not less than 75% of the major supporting cast appearing in the program are Australians; and

(e)

the program;

(i)

is produced and post-produced in Australia but may be filmed anywhere; and

(ii)

in the case of a news, current affairs or sports program that is filmed outside Australia, may be produced or post produced outside Australia if to do otherwise would be impractical.

(5)

If an Australian program:

(a)

is comprised of segments which, if they were individual programs, would not comply with subclause (4); and

(b)

is not a news, current affairs or sports program;

only those segments that, if they were individual programs, would comply with subclause (4) are taken to be Australian programs.

[Note: Examples of programs to which subclause (5) applies are music video programs that include Australian clips and children's cartoon programs that are presented by an Australian host.] "

By definitions contained in clause 5, in the Standard the word "Australian" in relation to a person, means a citizen or permanent resident of Australia while "Australian program" has the meaning given by clause 7 of the Standard.

The practical effect of the Australian Content Standard is, apart from the technical provisions of paragraphs (2) and (3), to give a preference or protection to Australian producers, directors and actors with the effect that each commercial television broadcasting licensee must each day broadcast for a minimum time Australian programs. This has the effect of limiting the power of the licensee to program non-Australian programs. Of necessity this confers a benefit on Australians at the expense of non-Australians as defined in the Standard.

3. The Trade Agreement and the Protocol

The Australia New Zealand Closer Economic Relations Trade Agreement ("the Trade Agreement") was entered into between Australia and New Zealand and came into force on 1 January 1983. The objectives of the Trade Agreement were expressed in Article 1 as follows:-

"OBJECTIVES

The objectives of the Member States in concluding this Agreement are:

(a)

to strengthen the broader relationship between Australia and New Zealand;

(b)

to develop closer economic relations between the Member States through a mutually beneficial expansion of free trade between New Zealand and Australia;

(c)

to eliminate barriers to trade between Australia and New Zealand in a gradual and progressive manner under an agreed timetable and with a minimum of disruption; and

(d)

to develop trade between New Zealand and Australia under conditions of fair competition."

By Article 2, the free trade area to which the Trade Agreement applied consisted, apart from a few exceptions not presently relevant, of Australia and New Zealand which are the member States of the Trade Agreement.

The Protocol on Trade in Services to the Australia New Zealand Closer Economic Relations Trade Agreement ("the Protocol") was entered into between Australia and New Zealand, as member States, on 18 August 1988 and came into operation on 1 January 1989.

The objectives of the Protocol are set out in Article 1 as follows:-

"OBJECTIVES

The objectives of the Member States in concluding this Protocol to the Agreement are:

(a)

to strengthen the relationship between Australia and New Zealand;

(b)

to liberalise barriers to trade in services between the Member States;

(c)

to improve the efficiency and competitiveness of their service industry sectors and expand trade in services between the Member States;

(d)

to establish a framework of transparent rules to govern trade in services between the Member States;

(e)

to facilitate competition in trade in services."

The Protocol was expressed to apply to the provision of services in the free trade area referred to in Article 2 of the Trade Agreement. As provided by Article 2.3 the Protocol was to apply to:-

".... any measure, in existence or proposed, of a Member State that relates to or affects the provision of a service by or on behalf of a person of the other Member State within or into the territory of the first Member State."

In the present case the parties have agreed that the provision of television programs for broadcasting within Australia by a commercial television broadcasting licensee is the provision of a service under the Protocol. Having regard to the definitions contained in the Protocol, this appears to be in conformity with the Protocol. It should be noted that by Article 3, the phrase "Person of a Member State" is defined to mean:-

"(a)

a natural person who is a citizen of, or ordinarily resident in, that State;

(b)

a body corporate established under the law of that State;

(c)

an association comprising or controlled by:

(i)

persons described in one or both of sub-paragraphs (a) or (b); or

(ii)

persons described in one or both of sub-paragraphs (a) or (b) and persons so described in relation to the other Member state."

The proper construction and application of Article 4 and Article 5.1 of the Protocol is crucial to the determination of this appeal. They are set out in full:-

"Article 4

MARKET ACCESS

Each Member State shall grant to persons of the other Member State and services provided by them access rights in its market no less favourable than those allowed to its own persons and services provided by them.

Article 5

NATIONAL TREATMENT

1.

Each Member State shall accord to persons of the other Member State and services provided by them treatment no less favourable than that accorded in like circumstances to its persons and services provided by them."

4. The Court Proceedings

The respondents to this appeal are a group of companies connected with New Zealand and involved in the production of programs suitable for television. They are persons of a member state within the meaning of the Protocol and providing services as defined in the Protocol. They considered the Standard was inconsistent with the provisions of Article 4 and Article 5.1 of the Protocol and thus, by reason of the effect of paragraph 160(d) of the Act, was invalid. The Court proceedings are described in some detail in the reasons for judgment of Wilcox and Finn JJ under the headings "The proceeding at first instance" and "The appeal" and need not be repeated.

5. Conclusion on the question of inconsistency

In my opinion the provisions of the Standard are inconsistent with the provisions of Article 4 and Article 5.1 of the Protocol. To some extent the question has been made more difficult by the provisions of clause 7 of the Standard defining what is meant by an Australian program. Paragraph 122(2)(b) confers the power on the ABA to make standards that relate to "the Australian content of programs". The Standard, with the exception of paragraphs 7(2) and (3), does this by reference to persons. I agree with the opinion of Wilcox and Finn JJ that the meaning to be given to the term "Australian content" connotes that which is contained in the program namely the Australian element in the content of a program. In this context, the object expressed in paragraph 3(e) of the Act, namely to promote the role of broadcasting services in developing and reflecting a sense of Australian identity, character and cultural diversity, cannot control the meaning to be given to the power to make standards contained in paragraph 122(2)(b). The parties have accepted that the Standard does relate to the Australian content of programs. On that basis I agree with the reasons expressed by Wilcox and Finn JJ under the heading "Conclusion" that the Standard and Article 4 and Article 5.1 of the Protocol are inconsistent. This conclusion, in my opinion, depends upon the nature of the provisions of the Standard and upon the provisions of the Protocol. Both of those provisions relate to persons and of necessity, to persons of a member State as defined in the Trade Agreement. This is not to deny that a Standard relating to the Australian content of programs could not be devised in a manner which does not lead to any inconsistency between the standard relating to the Australian content of programs and the Protocol.

Unfortunately, however, I do not agree with the view that the principle generalia specialibus non derogant (general things do not derogate from special things) has any application to this appeal. If anything, the direction contained in paragraph 160(d) is the more specific. It is a direct command that obligations undertaken by Australia under an international convention or agreement must be applied with respect to domestic law. Here, the validity of paragraph 122(2)(b) is not in issue. That paragraph empowers the ABA to exercise a function as specified. The method by which that function has been exercised is the subject matter of this appeal. The inconsistency arises because of the provisions of the Standard and the provisions of the Protocol. Like Davies J, in my opinion, it does not necessarily follow that the ABA could not perform its function under section 122 in a manner consistent with Australia's obligations under the Protocol. It is not for me to express a view as to how this could be done. However, attention should be directed to a consideration of the proper construction of paragraph 122(2)(b) of the Act and Object 4(j). If this were done, it is possible that a standard based upon different criteria to that adopted in the Standard, could result in no inconsistency. It should be noted that paragraph 122(2)(b) refers to standards that relate to the Australian content of programs, not the Australian content or delivery of programs; compare definition of the words "program standards" in section 6 of the Act.

Having formed the opinion that the Standard is inconsistent with the Protocol, it is necessary to consider the orders to be made.

6. Whether the Standard is invalid

In the reasons for judgment of Wilcox and Finn JJ, under the heading "The appeal", reference is made to the submissions of Mr Gageler on behalf of the intervenors that even if the ABA had failed to comply with paragraph 160(d) of the Act, nevertheless the Standard was not invalid. In support of this submission he referred to Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454 and Yates Security Services Pty Ltd v Keating (1990) 25 FCR 1 . Having come to the conclusion they did, it was not necessary for their Honours to express a view on those submissions. However, it is necessary for me to consider them.

It will be recalled that under paragraph 160(d) of the Act, the ABA is to perform its functions in a manner consistent with Australia's obligations under any agreement between Australia and a foreign country. Mr Gageler contended that a failure by the ABA to perform its function under section 122 in a manner consistent with the "general obligations" set out in section 160 did not of itself give rise to an invalidity of a program standard which was inconsistent with an agreement between Australia and a foreign country. Taken to its logical conclusion this contention would lead to the view that the ABA could, in performing its functions under section 122 (and possibly under other provisions) ignore the obligation imposed upon it by section 160. The only resolution would be by political or administrative action, for example by action taken under section 128, directions by the Minister under section 162 or by the replacement of the members of the ABA, if that were possible. Because of the role of the ABA, its counsel declined to make submissions on this issue. This course is to be commended but it is noted that in Australian Broadcasting Corporation v Redmore Pty Ltd the statutory corporation constituted under the Australian Broadcasting Corporation Act 1983 had no similar inhibitions.

Counsel for the respondents opposed the submissions made by counsel for the intervenors.

Counsel for the intervenors submitted that the requirements of paragraph 160(d) of the Act were directory only. As a result, it was submitted a contravention did not make a program standard invalid even if it was inconsistent with such a convention or agreement. Counsel relied upon the opinions expressed by the majority of the Justices of the High Court in Redmore's case . There, the Australian Broadcasting Corporation had been incorporated under the Australian Broadcasting Corporations Act (the " ABC Act "). Under subsection 25(1) the corporation had "power to do all things necessary or convenient to be done for or in connection with the performance of its functions" including a number of specific powers one of which was the power to enter into contracts. Subsection 70(1) provided that the corporation "shall not, without the approval of the Minister .... enter into a contract under which the Corporation is to pay or receive an amount exceeding $50,000.00".

The corporation had entered into a contract with Redmore involving an amount in excess of $500,000.00. It had not obtained the approval of the Minister to enter into that contract. Redmore claimed the corporation was in breach of the contract and sought declaratory relief and damages against the corporation. One of the defences raised by the corporation was that the contract was unenforceable by reason that it had failed to obtain the prior approval of the Minister as required by the ABC Act . In the High Court, a majority, Mason CJ, Deane and Gaudron JJ, upheld this defence. At 457 their Honours said:-

"As the judgments in the courts demonstrate, the question whether s. 70(1) should be construed as confining power or as directory of the manner of its exercise is a finely balanced one. The words of the sub-section are not compelling either way. In strict terms, they are directory. They speak of the exercise ("shall not ... enter into a contract"), rather than the existence, of power. Their direction is to the A.B.C. and not to an innocent outsider having contractual dealings with the A.B.C., who would be likely to act on the basis that the A.B.C. would have complied with any statutory duty to obtain the approval of its responsible Minister before purporting to enter into a contract of a kind which required such approval. In that regard, it is relevant to note that the sub-section neither requires that the Minister's approval be in writing nor establishes any procedure by which a person dealing with the A.B.C. can ascertain whether the Minister has given his approval to the precise terms of a particular contract. Nor do the words of s. 70(1) either spell out the effect on third parties of a failure by the approval or speak in terms which would be appropriate to refer to a purported or ineffective entry into a contract. If the statutory direction to the A.B.C. not to enter into a contract of the specified kind without the approval of the Minister has the effect either of confining the actual powers of the A.B.C. or of invalidating any contract with an innocent outsider entered into otherwise than in compliance with its terms, it must be by reason of a legislative intent to be discerned in the words of the sub-section construed in the context of the Act as a whole."

Their Honours then referred to the general structure and provisions of the ABC Act . Section 25 was contained within PART IV which was headed "Powers and Duties of the Corporation". Section 25 also contained provisions limiting some of the powers of the corporation. Section 70, however, was in a different PART of the ABC Act , namely PART VI which was headed "FINANCE". That PART contained no express reference to the grant or confinement of powers. After developing this line of analysis, their Honours concluded at 459-460:-

"It follows from the foregoing that the preferable construction of s 70(1) is that which was favoured by Bryson J at first instance and by a majority of the Court of Appeal. That construction of s 70(1) does not reduce the sub-section to the status of a pious admonition. The sub-section imposes a statutory duty upon the ABC and its officers which the ABC Board is required to enforce (the Act, s 8). Failure to observe the directive of s 70(1) could, depending upon the circumstances, constitute misconduct for the purposes of disciplinary proceedings under Pt V Div 4 of the Act (see s 64(10(f)(i)) and would, at the least call for a report by the Auditor-General to the responsible Minister whose approval to the relevant contract had not been obtained. On that construction of s 70(1), the failure of the ABC to obtain the prior approval of the Minister did not have the effect that the making of the contract was ultra vires the ABC. Nor did it have the effect that the contract was illegal or unenforceable. That being so, the courts below were correct in resolving the remaining issue in the appeal against the ABC."

The minority, Brennan and Dawson JJ came to a different conclusion. At 463 their Honours said:-

"Prima facie, a statutory direction to one party not to enter into contracts of a particular class must be construed as having some legal effect. If contravention of the direction is not an offence and if there be no other penalty for contravening the direction, the only legal effect which can be attributed to the direction is that contracts entered into in contravention of the direction are void. If it were otherwise, the parties could with impunity enter into the contract with full knowledge of the contravention and the contract would none the less be valid. The direction would be nugatory."

That passage, with necessary adaptations, has direct application to the statutory provision contained in section 160 of the Broadcasting Services Act .

Counsel referred also to the opinion expressed by Pincus J in Yates Security Services Pty Ltd v Keating at 24-28 relating to the nature of and differences between mandatory and directory statutory provisions. The provisions of the statutory provisions applicable to the facts of that case are so different from those of the present that those expressions of opinion do not assist in the resolution of the matter before the Court.

It is accepted that in many cases a fine balance exists in determining whether a statutory provision is mandatory in the sense of confining or limiting a power or is directory in the sense of not affecting the exercise of a power. In the present case, a consideration of the content of the relevant provisions leads to the conclusion that the legislative intention was that the provisions of paragraph 160(d) of the Act be mandatory.

PART 12 of the Act is headed "The Australian Broadcasting Authority". Division 1 contains provisions relating to the establishment and constitution of the ABA. Division 2 of PART 12 is headed "Functions and power of the ABA" and consists of sections 158 to 164. Section 158 lists the primary functions of the ABA. Reference has been made earlier in these reasons to paragraph 158(j). Sections 159 and 160 have been set out in full earlier in these reasons. One of the functions expressly conferred upon the ABA is the power, coupled with the duty, to determine program standards referred to in subsections 122(1) and (2). In this context the provision of subsection 122(4) is of importance. The whole of section 122 has been set out earlier in these reasons but it is helpful to repeat subsection 122(4):-

"(4)

Standards must not be inconsistent with this Act or the regulations."

Paragraph 160(d) is a clear and direct statement of the intention of Parliament. The ABA is to perform its functions in a manner consistent with Australia's obligations under any convention to which Australia is a party or any agreement between Australia and a foreign country. That provision is in the same PART of the Act as the provisions conferring powers, and duties, of the ABA. It is in mandatory form. It should be construed as limiting or confining the power of the ABA to make a program standard.

In my opinion these provisions make it clear that the requirements of paragraph 160(d) are to be treated as being mandatory with the result that if not complied with a program statement which is inconsistent with that provision is invalid. This conclusion is reached without considering whether a domestic law which is inconsistent with an obligation of Australia under a convention or agreement with a foreign country is invalid by reason of that inconsistency.

In the result I would dismiss the appeal with costs.