RAINSONG HOLDINGS PTY LIMITED v AUSTRALIAN CAPITAL TERRITORY & ANOR

Judges:
Mason CJ
Brennan J
Deane J
Dawson J
Toohey J
Gaudron J
McHugh J

Court:
Full High Court

Judgment date: Judgment handed down 7 December 1993

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Mason CJ, Brennan, Deane and McHugh JJ

This case concerns the validity of the Business Franchise (``X'' Videos) Act 1990 (A.C.T.) (``the Act'') as amended by the Business Franchise (``X'' Videos) (Amendment) Act 1993 (A.C.T.). Brennan J. reserved for the consideration of the Full Court pursuant to s. 18 of the Judiciary Act 1903 (Cth) questions substantially the same as those reserved in Capital Duplicators Pty. Ltd. v. Australian Capital Territory (No 2) ^[1] Capital Duplicators Pty. Ltd. v. Australian Capital Territory (No 2) 93 ATC 5053 . . Those questions are as follows:

• (1) Are any, and if so which, of the provisions of the Business Franchise (``X'' Videos) Act 1990 (A.C.T.) as amended by Act No. 15 of 1993 invalid as imposing, in any respect, either a duty of excise or a duty of customs or both within the meaning of s. 90 of the Commonwealth Constitution?
• (2) Are any, and if so which, of the provisions of that Act invalid under the Australian Capital Territory (Self- Government) Act 1988 (Cth) as being a law with respect to a ``classification of materials for the purposes of censorship''?
• (3) If the answer to any part of questions (1) or (2) is ``yes'', are any, and if so which, further provisions of that Act incapable of being severed from those provisions and therefore invalid?

The parties agreed, and Brennan J. ordered, that the submissions of the parties and interveners in Capital Duplicators made to the Court in that case be accepted mutatis mutandis as submissions made to the Court in this matter. The Court has also considered further written submissions filed by the parties.

The 1993 Amendments

The relevant provisions of the Act prior to its amendment are set out and discussed in the judgments in Capital Duplicators . It is unnecessary to repeat them here. The effect of the amendments to the Act is as follows.

The primary amendment to the Act involves the replacement of the ``advance fee'' with (i) an ``initial fee'', in relation to the grant of a licence; and (ii) an estimated franchise fee, in relation to the second renewal of a licence.

The initial fee is, on its face, assessed more subjectively than the advance fee; it comprises ``such an amount as is assessed by the Commissioner as being fair and reasonable in the circumstances'' ^[2] s. 19(1), as amended. . In making a decision as to a fair and reasonable fee, the circumstances the Commissioner is required to consider include ^[3] s. 19(2), as amended. :

``(a) the wholesale value of the total stock of `X' videos -

• (i) held by the applicant for the purpose of trading on the date of the application; and
• (ii) estimated as likely to be acquired by the applicant in the month in which the licence is to be granted and the following month for the purpose of trading;

(b) the estimated value of that portion of the stock referred to in subparagraphs (a)(i) and (ii) in relation to which a franchise fee would become payable if the licence were to be renewed for the second and third month after the month in which it is granted;

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ATC 5089

(c) the gross income from trading `X' videos estimated as likely to be received by the applicant in the month in which the licence is to be granted and the following month;

(d) initial fees assessed in relation to other applications.''

The initial fee is in effect the fee for the first and second months of a licence, as it is calculated by reference to the value of and gross income from trading in the videos in the first two months of the licence and, under s. 9(2)(c), an application for renewal of a licence for the month following the month in which the licence was granted need not be accompanied by the franchise fee or estimated franchise fee. The initial fee, unlike the previous ``advance fee'', need not accompany the application for the grant of a licence but must be paid before the licence is granted ^[4] s. 5(1), (2), as amended. .

An application for renewal of a licence for the second month following the month in which the licence was granted must be accompanied by an estimation of the franchise fee. The estimated franchise fee is to be calculated under s. 20A, a new section which sets out an independent formula to calculate the franchise fee for renewal in relation to the second month following the initial grant. The estimated franchise fee is calculated on the same basis as the franchise fee for subsequent renewals, but is based on the Commissioner's estimation of the likely trading in ``X'' videos under the licence for a typical month instead of being based upon actual trading in the two months prior to the month for which the licence is renewed.

The 1993 amendments amend the definition of ``wholesale value'', thereby minimizing the impact of the initial and franchise fees on the tariff differential between local and imported goods. The amendment makes it clear that the licence fees are imposed on the price of the videos after any Commonwealth duties are imposed.

The 1993 amendments also clarify an ambiguity that existed in the Act as originally enacted in relation to the fee payable for the third and fourth months of a licence. However, the resolution of the ambiguity is not relevant to the question whether the Act as amended is invalid as a result of s. 90 of the Constitution.

The 1993 amendments do not alter the character of the fees payable under the licensing scheme established by the Act. The ``initial fee'', although assessed by the Commissioner as a fee that is ``fair and reasonable in the circumstances'' ^[5] s. 19(1). , is, by virtue of s. 19(2), assessed on the basis of the wholesale value of the ``X'' videos held and likely to be held during the first two months of the licence. The gross income likely to be received from trading in the videos in the first two months of the licence is also to be taken into account under s. 19(2). The calculation of the franchise fee payable upon every renewal subsequent to the first two renewals remains unchanged.

Thus, the Act, as amended, remains one directed to the raising of revenue, rather than to the creation of a regulatory scheme designed to protect the public. For the reasons given in Capital Duplicators , we would answer the questions reserved as follows:

• (1) Sections 5(2)(b), 9(2)(c), 9(2A), 19, 20 and 20A of the Business Franchise (``X'' Videos) Act 1990 (A.C.T.) as amended by Act No. 15 of 1993 are invalid as imposing duties of excise.
• (2) Does not arise.

The parties did not address full argument to the Court in relation to those provisions of the Act which might not be severable from those provisions found to impose an excise and which therefore may be invalid. It would be appropriate for the parties to address argument on this point to the Court before any decision is reached as to severance of other provisions of the Act. Accordingly, we shall not deal with that issue now.

The defendants should pay the plaintiff's costs of the questions reserved.