Pacific Film Laboratories Pty Ltd v Commissioner of Taxation

The respondent Commissioner assessed the appellant to sales tax pursuant to s. 25 of the Act treating the appellant as having sold the prints or duplicates manufactured by it. After an objection to the assessment had been disallowed by the respondent the appellant appealed to a board of review which in part allowed the appellant's appeal. Being dissatisfied with this result, the appellant appealed to this Court and in that appeal the present case has been stated.

It will be convenient to set out the principal sections of the Act with which we are at present concerned.

(1). Subject to, and in accordance with, the provisions of this Act, the sales tax imposed by the Sales Tax Act (No. 1) 1930 shall be levied and paid upon the sale value of goods manufactured in Australia, either before or after the commencement of this Act, by a taxpayer and on or after the first day of August One thousand nine hundred and thirty sold by him or treated by him as stock for sale by retail or applied to his own use.

(2). For the purposes of this section goods manufactured in Australia by a taxpayer and applied to his own use means goods manufactured in Australia in the course of carrying on a business and applied by the taxpayer to his own use whether for the purpose of that business or for any other purpose and whether or not those goods are of a class manufactured by that person for sale.

9a. Where goods are manufactured for a person wholly or in part out of materials supplied by him, the manufacturer of the goods, whether he manufactures those goods himself or procures their manufacture by another person, shall, for the purposes of this Act, be deemed to have sold the goods to the first-mentioned person, at the time of their delivery to him, for the amount charged to him by the manufacturer in respect of those goods.

(1). For the purposes of this Act, the sale value of goods, not being goods to which the next succeeding subsection applies which are sold by the manufacturer to an unregistered person or to a registered person who has not quoted his certificate in respect of that sale shall be -

(a) where the goods are sold by wholesale - the amount for which those goods are sold;

(i) if the goods are of a class which the manufacturer himself sells by wholesale - the amount for which the goods would be sold by the manufacturer if sold by wholesale; and

(ii) in any other case - the amount for which those goods could have been purchased by the taxpayer from another manufacturer if that other manufacturer had manufactured those goods in the ordinary course of his business for sale to the taxpayer; and

(c) where the goods are deemed to have been sold by a manufacturer to another person pursuant to section seventeen a of this Act - the amount charged to that person by the manufacturer in respect of those goods.

1. Was the supply by the appellant of prints and duplicates of colour transparencies manufactured by it in the above circumstances a sale by it of goods within the meaning of s. 17 of the Sales Tax Assessment Act (No. 1)?

2. If the answer to question 1 is "No", is the appellant by virtue of such supply deemed under the provisions of s. 3 (4) of the said Act to have sold goods?

3. If the answer to question 2 is "Yes", does the Act fix or enable to be fixed a sale value for such prints and duplicates?

In Federal Commissioner of Taxation v. Riley [1] this Court by majority decided that photographs taken of and supplied to clients for reward in the course of a photographer's business were goods manufactured in Australia within the meaning of s. 17 of the Act. In Federal Commissioner of Taxation v. Butcher [2] the Court by majority decided that prints made from film which had been exposed by amateur photographers and developed by the taxpayer were goods manufactured in Australia within the meaning of the same section. Formally there was no contest in either of these cases as to whether the prints were sold within the meaning of s. 17. But it was said in Federal Commissioner of Taxation v. Riley [3]

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. Further, it was argued in Federal Commissioner of Taxation v. Riley [1] by the Commissioner and denied by the taxpayer that the transaction between the customer and the photographer could not be regarded as only an agreement for the rendering of services but was an agreement for the production and sale of the photograph; consequently the production of the photograph was relevantly "manufacture". The Court decided that the production of the photographs was "manufacture". In doing so, and as part of its reasoning, the Court perhaps, at least inferentially, expressed the view that the photographs being "vendible articles" were in truth sold by the taxpayer [4] . However that may be I am prepared to treat these cases as not formally deciding that question. 1. (1935) 53 C.L.R. 69. 2. (1935) 53 C.L.R. 82. 3. (1935) 53 C.L.R., at p. 78. 4. (1935) 53 C.L.R. 69. 5. (1935) 53 C.L.R., at p. 79.

We were referred in the argument of this case to cases arising under the Statute of Frauds in connexion with executory contracts such as Clay v. Yates [5] ; Lee v. Griffin [6] and Robinson v. Graves [7] . Whilst one cannot derive any uniformity of application of principle from these and other like cases I think one can derive from them the principle that the question whether or not an agreement is an agreement merely to provide services or an agreement for the sale of goods depends upon the substance of the arrangements between the parties and is not to be resolved by any single criterion. However, in this connexion the circumstance that the services are to produce a chattel in which, but for the agreement and what is done under it, the person to whom it is to be delivered would have had no property is a most potent circumstance. By some it has been thought definitive and to require the conclusion that the agreement is one for the sale of goods: cf. a judgment of Blackburn J. in Lee v. Griffin [1] ; see also Benjamin on Sale, 8th ed. (1950), p. 162; Halsbury's Laws of England, 3rd ed., vol. 2, p. 6 par. 10.

1. (1856) 25 L.J. Ex. 237; 1 H. & N. 73 [156 E.R. 1123]. 2. (1861) 1 B. & S. 272; 30 L.J. Q.B. 252 [121 E.R. 716]. 3. [1935] 1 K.B. 579. 4. (1861) 1 B. & S. 272 [121 E.R. 716]; 30 L.J. Q.B. 252 [121 E.R. 716].

But, once the contract is executed by the production and delivery of the goods, there is no need generally to decide whether the arrangement which preceded the delivery was an agreement to render services or an agreement to produce and sell goods. So far as pleading is concerned, in the days when common law pleading was understood and competently practised the pleader suing for the agreed sum where the agreement had been so executed would not have been troubled as to the nature of the antecedent contract. The common law form of pleading allowed the combination in one count of the common money counts. A competent pleader would necessarily have joined goods bargained and sold with work and labour done so that occasion did not arise for deciding whether or not, even when the initial arrangement may have been for the performance of services, the delivery for an agreed sum of specific goods in which the property passed by the delivery was a sale. It is notable, however, that Pollock C.B. in Clay v. Yates [2] did say that the plaintiff after delivery of the goods could have sued either for goods bargained and sold or for work and labour done.

1. (1856) 1 H. & N., at p. 78 [156 E.R., at p. 1125].

The question in this case is not whether or not a memorandum is required in connexion with an executory contract but whether, when the transaction has been completed by delivery of the chattel, there has been a sale of manufactured goods in the meaning of the taxing statute. The statute as Starke J. said in Federal Commissioner of Taxation v. Riley [3] is framed in comprehensive terms. It has in s. 3 (4) and s. 17A provisions designed to bring within the scope of the section imposing tax, transactions which are not ordinarily or necessarily regarded as transactions of sale but are transactions in which the property in goods forming some part of the goods finally delivered passes from the taxpayer to other persons. The manner in which their Lordships of the Privy Council in Dominion Press Ltd. v. Minister of Customs and Excise [4] dealt with the application of a taxing statute of a like kind to the Act, seems to me to be significant in connexion with the distinction between on the one hand attempting to decide for the purposes of the Statute of Frauds whether an executory contract is one for the rendering of services or one for the sale of goods and deciding whether closed transactions satisfy the description of a sale within the meaning of a taxing statute such as the present Act.

1. (1935) 53 C.L.R., at p. 80. 2. [1928] A.C. 340.

But however that may be, I am of opinion that in this case the substance of the arrangement between the customer and the appellant whether effected directly or indirectly was an agreement for the sale and purchase of goods. The customer did not necessarily know anything about the process by which the print or duplicate was to be produced. Nothing in the case leads me to think that it involved any such personal skill as might in different circumstances persuade me that an arrangement was in substance one for the performance of personal services rather than for the purchase of the ultimate product. No doubt, to produce the print or duplicate some expertise would probably need to be applied. One may suspect that the process of production is largely mechanical though some degree of skill in tending a delicate plant may be involved. But so far as appears the appellant was not selected as the manufacturer of the print or duplicate either because of the personal skill of its corporate self or because of any known skill on the part of any of its employees. In my opinion, the substance of the arrangement constituted by the ordering of the print or duplicate and the delivery of the print or duplicate was an agreement for the sale of the print or duplicate and when delivered, or if because of some term of which we are unaware the property in the print or duplicate passed to the member of the public at an earlier point of time, then at that time, there was a sale of the print or duplicate by the appellant. For my part, I have no doubt whatever on the material before us that when the appellant delivered a print or duplicate either to the member of the public or to an intermediary for delivery to the member of the public it relevantly sold the print or duplicate.

But it is objected that there could not in any case be a sale of a print or duplicate either to the photographer or to any other person because of the provisions of the Copyright Act 1912. It has been assumed in argument that the person ordering the print was the owner of the copyright in the negative or transparency. This may or may not be so, but I am prepared to assume it as fact. Because the negative or transparency was the subject of copyright it is said that the appellant as the producer of the print or duplicate as a reproduction of the negative or transparency could not have any general property in the print which he could transfer by sale to any person including the owner of the copyright. It is submitted that it would have no more than a lien for the amount agreed to be paid for the production of the print or duplicate. The fact that he owned the sensitized paper or the film on which the print or duplicate was made to appear and such of the chemicals as remained on the paper or film at the end of the process of making the print or duplicate did not give him any general property in the print or duplicate as reproductions of the copyright work, the negative or transparency as the case may be.

The Copyright Act 1912 Cth which was in force during the period relevant to the assessment in this case carried the Copyright Act 1911 of the United Kingdom into operation in Australia. Section 1 sub-s. 2 (a) of the Act of 1911 gives to the author of a photograph the sole right to reproduce the photograph and to authorize its reproduction. By s. 2 sub-s. 1, copyright shall be deemed to be infringed by any person who without the consent of the owner of the copyright does anything, the sole right to do which is by the Act conferred on the owner of the copyright. By s. 7, all infringing copies of any work in which copyright exists shall be deemed to be the property of the owner of the copyright who accordingly may take proceedings for the recovery of possession thereof or in respect of the conversion thereof. But s. 8 provides that where proceedings are taken in respect of the infringement of the copyright in any work and the defendant establishes that he was not aware nor had reasonable ground for suspecting that copyright existed in the work the plaintiff shall not be entitled to any remedy other than an injunction.

There are, in my opinion, several clear answers to this submission. In the first place, there is authority for the proposition that the property in a chattel may be in one person and the copyright in another: In re Dickens; Dickens v. Hawksley [1] . In the second place, an authority to reproduce a copyright work given by the owner of the copyright allows the authorized person to produce the copy as his own property and indeed unless the authority to reproduce it provides otherwise, he is free to dispose of the reproduction, cf. Copinger and Skone James' Law of Copyright, 10th ed. (1965), p. 378, s. 1027. In the third place, whilst of course the Copyright Act enables the copyright owner to recover possession of infringing copies of the copyright work or damages for the conversion of such infringing copies there were in this case no infringing copies, the owner of the copyright on the supposition made, authorized the making of the copy and its delivery to himself. It seems to me that even if the agreement between the owner of the copyright and the appellant had been no more than an agreement for the rendering of services the print produced by the appellant could not have been claimed by the owner of the copyright as his own nor could he have recovered it in detinue before it had been delivered to him but if as I think the agreement was an agreement for the sale of the print or duplicate by the appellant to the owner of the copyright it seems to me necessarily to follow that not only was there no property in the owner of the copyright in the print viewed as a chattel at any time before the delivery of the print to the owner of the copyright but that it was intended that property in the print or duplicate should pass on delivery of the print or duplicate.

In my opinion, the appellant had general property in the print or duplicate when produced with the authority of the copyright owner: it was not an infringing copy of the negative or transparency as the case may be though possibly it might have become so if sold to some person other than the owner of the copyright: this was so because of the limited nature of the authority to reproduce given by the owner of the copyright. But the rights given by s. 7 to recover infringing copies, though subject to s. 8, only arise when the copy is the infringing copy: that is to say, it is the sale which attracts the operation of the section in the case supposed. But that conclusion denies that the authorized reproducer had no general property in the print or duplicate. As I have said, the appellant, in my opinion, had the general property in the print or duplicate which it manufactured out of its own materials and none the less so because the copyright in the negative or transparency was in some other person, or as has been supposed in the member of the public ordering the print or duplicate.

In my opinion, the delivery of the prints or duplicates by the appellant for an agreed sum was a sale of those prints or transparencies within the meaning of s. 17 of the Act. Accordingly, in my opinion, the sale value of those sales was rightly included in an assessment by the respondent Commissioner of the appellant. The question whether the sale value assigned by the Commissioner in the assessment was the correct sale value is not a question which is before this Court on the case stated.

In my opinion, the first question asked should be answered in the affirmative and it is unnecessary to answer either of the other two questions.

I agree with the reasons of the Chief Justice and would accordingly decide that the first question be answered - Yes.

Exposed photographic film may be developed for its owner by a person who carries on the business of film developing. The owner pays him for this when the developed film is delivered. There is no sale involved in that. The film remains the property of the owner throughout. He paid to have his film developed, not to buy the negatives thereby produced. But the case we are now considering is not that. It is the common arrangement by which in addition to developing film for its owner positive prints or transparencies are made for him from the negative and delivered to him for a price to be paid by him. The prints or transparencies are then in my opinion properly said to be sold to him. They were made by the use of his negative certainly: but they are new chattels. The contract pursuant to which they were produced was I think "a contract for the sale of future goods by description" within the meaning of the Sale of Goods Act. Presumably the property in them passed when they were made and were in a deliverable state and appropriated to the contract by their maker. However, we do not have to say when the property passed. The question propounded by the stated case is simply, is the supply of prints and transparencies in such circumstances a sale within the meaning of s. 17 of the Sales Tax Assessment Act (No. 1) 1930-1966 Cth? As I have said, in my opinion it is. I agree in the reasons for that conclusion given by the Chief Justice and my brother Owen in their judgments, which I have read. I wish only to make some observations upon the argument that the law of copyright precludes such a transaction being a sale.

Of course a man cannot buy something that is already his. And the Sale of Goods Acts in force in Australia, all copied from the Sale of Goods Act 1893 of the United Kingdom, it being itself a codification of the common law, treat a sale as a transaction effecting a transfer of "the general property in the goods". It was argued that, because the owner of a photographic negative has copyright in it as an artistic work, someone else who makes prints from it for him cannot have the general property in them as goods that he can sell to him. There is I think here a fallacy. It lies in the failure to distinguish between the copyright as incorporeal property and property in the material thing which is the subject of the copyright.

The great case of Jefferys v. Boosey [1] established that copyright in published works had come to depend on statute, the Act of 1709, 8 Anne, c. 19, not on the common law. That view of the Act of 1709 had been anticipated in Donaldson v. Beckett [2] . But, as the protection that that Act gave to an author began with and dated from the publication of his work, rights in respect of unpublished works were still governed by the common law. The question whether copyright was known at all at common law had been a great subject of judicial controversy in the eighteenth century. It continued to be agitated in the courts. Opinions were still divergent. A count of judges' heads, pro and con over the years, appears in Holdsworth, History of English Law, vol. 6, p. 379 n: and see the judgment of Erle J. in Jefferys v. Boosey [1] , also the judgment of the Court of Exchequer, delivered by Pollock C.B., in Chappell v. Purday [3] . An instructive account of the early history of copyright, with the arguments that were adduced in the earlier controversies, in law, and eighteenth-century philosophy, may be found in the Treatise on the Law of Copyright by G. T. Curtis, published in Boston, U.S.A. in 1847. Copyright today is entirely the creature of statute. It is no longer an emanation of common law. It extends to both published and unpublished works. The old controversies are now dead. But, although the debate has died, much that was said lives on, to guide us in reading the statutes.

1. (1854) 4 H.L.C. 815 [10 E.R. 681]. 2. (1774) 4 Burr. 2408 [98 E.R. 257]; 2 Bro. P.C. 129 [1 E.R. 837]. 3. (1854) 4 H.L.C. 815 [10 E.R. 681]. 4. (1845) 14 M. & W. 303, at p. 317 [153 E.R. 491, at p. 497].

The Act now in force in Australia is the Copyright Act 1968 Cth. It now governs all questions of copyright for us. In some cases it may operate in a sense retrospectively: see In re Dickens [4] , in particular the judgment of Lord Hanworth M.R. [5] . But the transactions out of which the present case arises occurred in 1967 and were governed by the British Copyright Act 1911 as in force here, which I shall hereafter refer to as "the Act": see the Copyright Act 1912-1966, s. 8, and Copyright Owners Reproduction Society Ltd. v. E.M.I. (Australia) Pty. Ltd. [6] . It applied, in the manner set forth in s. 1, to both published and unpublished works. Section 31 was as follows:

No person shall be entitled to copyright or any similar right in any literary, dramatic, musical, or artistic work, whether published or unpublished, otherwise than under and in accordance with the provisions of this Act, or of any other statutory enactment for the time being in force, but nothing in this section shall be construed as abrogating any right or jurisdiction to restrain a breach of trust or confidence. It was this that made the statute the sole source of the right, displacing the common law entirely. 1. [1935] Ch. 267. 2. [1935] Ch., at p. 289. 3. (1958) 100 C.L.R. 597.

Section 2 provided that "For the purposes of this Act, "copyright" means the sole right to produce or reproduce the work or any substantial part thereof in any material form whatsoever". What was meant by "the work" was made clear by s. 1. It included "artistic work"; and that was defined by s. 35 (1) to include photographs. Section 21, so far as relevant, was as follows:

The term for which copyright shall subsist in photographs shall be fifty years from the making of the original negative from which the photograph was directly or indirectly derived, and the person who was owner of such negative at the time when such negative was made shall be deemed to be the author of the work The Act of 1911 was a novelty in applying to both published and unpublished works and in many of its provisions. But much of it repeats earlier enactments or echoes pronouncements that throw light on basic concepts reflected in the Act. For example, the definition of copyright in s. 2 recalls that Pollock C.B., delivering the judgment of the Court of Exchequer in Chappell v. Purday [1] in 1845 - that is after the Act 5 & 6 Vict. c. 45 - said [2] , "A copyright is the exclusive right of multiplying copies of an original work or composition, and consequently preventing others from so doing". And in Jefferys v. Boosey [3] , Parke B spoke of "the exclusive right of multiplying copies; the right of preventing all others from copying, by printing or otherwise, a literary work which the author has published". These and many similar statements make plain the essential nature of a copyright. It is not a right in an existing physical thing. It is a negative right, as it has been called, a power to prevent the making of a physical thing by copying. At one time the single word "copy" meant the right or privilege now called copyright. Men spoke of the sale of the copy meaning that an author had sold to a publisher the right to publish an unpublished work. Illustrations of this usage were given by Lord Maugham, then Maugham L.J., in In re Dickens [1] . Thus it was that Lord Mansfield said, "I use the word "copy", in the technical sense in which that name or term has been used for ages, to signify an incorporeal right to the sole printing and publishing of somewhat intellectual, communicated by letters": and later he said that this "incorporeal right" is "detached from the manuscript, or any other physical existence whatsoever". That was in Millar v. Taylor [2] . That was a remarkable case for many reasons. In Burrow's report of it the judgments cover just on a hundred folio pages. The arguments of counsel he did not state, because, he said, they were "all of them so very fully and amply taken up again from the Bench and so elaborately expatiated upon, canvassed, and discussed by the judges in delivering their opinions, and the reasons whereupon they formed them". Today much that was said in their elaborately erudite judgments is still useful, as the judgments in In re Dickens [3] shew. But the interest of the case is perhaps mainly historical, and that for several reasons: one being that as Lord Mansfield sorrowfully observed it was the first occasion on which under him his court had not been unanimous. Yates J. dissented. This was the beginning of his differences from Lord Mansfield, which Junius used in his bitter hostility to Lord Mansfield: Junius' Letters No. 41. The views of Yates J. as to the nature of copyright as property can be disregarded now. It is significant, however, that he discerned a weakness, of which I thought there was an echo in the argument we heard. He said [4] : "But the fallacy lies in the equivocal use of the word "property"; which sometimes denotes the right of the person sometimes, the object itself." Theories of jurisprudence have been refined since the eighteenth century; and the concepts of ownership and of property, corporeal and incorporeal, have been subjected to much analysis. Academic purists in the use of jurisprudential language now say it is a mistake to speak of an incorporeal right. A right, they say, is essentially incorporeal: property is either corporeal or incorporeal. That may be so. Nevertheless the expression, an incorporeal right, can be defended as simply a transferred epithet which is a not uncommon figure of speech. But defence is not necessary for it would be a pedantic presumption to discard an expression that has long been used in connexion with copyright by great lawyers, including Lord Mansfield in the eighteenth century and Lord Maugham in this. 1. (1845) 14 M. & W. 303 [153 E.R. 491]. 2. (1845) 14 M. & W., at p. 316 [153 E.R., at p. 497]. 3. (1854) 4 H.L.C., at p. 920[10 E.R., at p. 722]. 4. [1935] Ch., at pp. 305, 306. 5. (1769) 4 Burr. 2303, at p. 2396 [98 E.R. 201, at p. 251]. 6. [1935] Ch. 267. 7. (1769) 4 Burr., at p. 2362 [98 E.R., at p. 233].

Copyright under the Act is thus properly called an incorporeal right. If copies of a work in which copyright subsists are made in contravention of the Act they are today described as infringing copies: see definition of infringing in s. 35. But it is not the copy that infringes the Act but the copyist who made it. Infringing copies are "deemed to be the property of the owner of the copyright" and he can recover possession of them or obtain damages for conversion. This provision, s. 7, of the Act is aimed at the infringer who made the infringing copies. He can be ordered to deliver up all of them that are in his possession as in Robinson v. Sands & McDougall Pty. Ltd. [1] ; and Sands & McDougall Pty. Ltd. v. Robinson [2] . An innocent infringer, that is a person who when he unlawfully copied was not aware of the existence of copyright with respect to the thing he copied, is not liable except to an injunction against further copying. It is true that copyright in a work is deemed to be infringed by any person who sells any work which to his knowledge infringes copyright, s. 2 (2). But it is only a copy which is made in contravention of the Act which is an infringing copy: see Copinger and Skone James' Law of Copyright, 8th ed. (1947), based on the 1911 Act, p. 320; and 10th ed. (1965), based on the 1956 statute of the United Kingdom, p. 378. A copy of a thing in which copyright subsists is lawfully made if it was made by the licence of the owner of the copyright, because copyright is not infringed by any acts done with the consent of the owner, s. 2 (1). His licence makes lawful the production of copies authorized to be made: it also authorizes doing anything with them that is within the scope of the licence: it may be to sell them or to use them for a particular purpose: see e.g. Beck v. Montana Constructions Pty. Ltd. [3] . But a mere licence to make copies is not an assignment of copyright: British Actors Film Company Ltd. v. Glover [4] . The licence does not authorize the use or disposition of copies in a way that is not within its scope. In the present case the owner of the negatives licensed Pacific Film Laboratories Pty. Ltd. to make prints of them for the purpose of selling them to him. It cannot be said that the owner of a copyright cannot buy a chattel made by his licence. It is not an infringing copy. It is a lawful copy. In this case the contract was for the sale to the owner of the copyright of future goods, namely copies of prints that he by implication licensed to be made for that very purpose. They could only be lawfully sold to him or by his authority because his licence to the copyist to make them was only so that they might be sold to him. His incorporeal right to prevent infringement of his copyright could not prevent his right to have chattels he had agreed to buy delivered to him or absolve him from an obligation to pay for them on delivery as goods sold and delivered. I agree in the order that the Chief Justice proposes.

1. (1916) 22 C.L.R. 124. 2. (1917) 23 C.L.R. 49. 3. (1963) 80 W.N. (N.S.W.) 1578. 4. [1918] 1 K.B. 299, at p. 307. 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 1912-1963 Cth, 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 s. 17 of the Sales Tax Assessment Act (No. 1) 1930-1966 Cth appears to me to have been, in reality, already decided by this Court - and I think, with respect, rightly decided - in Riley's Case [1] . 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 [1] was applied in Butcher's Case [2] where, as here, it was the customer and not the taxpayer who exposed the negatives. The question asked in Riley's Case [1] was whether the prints supplied to the customer were, for the purposes of the Act, goods manufactured by the defendant, 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, realized in Riley's Case [1] 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 [3] 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 [1] : 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 s. 17. In any case, we think the contention cannot prevail. The end of the organized 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. 1. (1935) 53 C.L.R. 69. 2. (1935) 53 C.L.R. 69. 3. (1935) 53 C.L.R. 82. 4. (1935) 53 C.L.R. 69. 5. (1935) 53 C.L.R. 69. 6. (1935) 53 C.L.R., at p. 78. 7. (1935) 53 C.L.R., at p. 79.

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.

The Court is asked by the first question in the case stated to decide whether or not the supply by the appellant of prints and duplicates of colour transparencies manufactured by it in the circumstances set out in the case stated was a sale by the appellant of goods within the meaning of s. 17 of the Sales Tax Assessment Act (No. 1) 1930-1966 Cth (hereinafter called "the Act"). The question is not whether any of the agreements which the appellant made with its customers and under which it manufactured and supplied the prints and duplicates was a "contract for the sale of any goods" within the meaning of s. 9 of the Sale of Goods Act, 1923 NSW (or of other equivalent legislation) or was, on the other hand, a contract for the doing of work and labour and the furnishing of materials. In his judgment in this case the Chief Justice has drawn attention to the distinction between those two questions. But for the appellant it has been submitted that s. 17 of the Act refers to "the sale value of goods" and to goods "sold" and that there are no provisions in the Act which require that those expressions should be understood otherwise than in their ordinary sense. It has been submitted, therefore, that the question raised by the case stated is to be answered by the application of the same considerations and tests as would be applied in answering a question arising under the Sale of Goods Act. Without deciding whether that submission is correct or not but assuming in favour of the appellant that it is, I have reached the conclusion that the first question in the case stated should be answered "Yes".

In Benjamin on Sale, 8th ed. (1950), p. 156, the following statement appears:

There has been much diversity and even conflict of opinion, in relation to the proper principle by which to test whether certain contracts are contracts for the sale of goods, etc., or contracts for work and labour done and materials furnished. After a review of some of the decisions the learned authors at p. 161 refer to the judgment of Blackburn J. in Lee v. Griffin [1] in which his Lordship said [2] : If the contract be such that, when carried out, it would result in the sale of a chattel, the party cannot sue for work and labour; but, if the result of the contract is that the party has done work and labour which ends in nothing that can become the subject of a sale, the party cannot sue for goods sold and delivered. The authors go on to say: From the very definition of a sale, the rule would seem to be at once deducible: - that if the contract is intended to result in transferring for a price from B to A a chattel in which A had no previous property, it is a contract for the sale of a chattel; and unless that be the case, there can be no sale. They add at p. 162: This rule, however, cannot be accepted without qualification; where, for example, the transfer of the property in the materials is only ancillary to a contract for the use of skill and labour and the performance of work such a contract will not become a sale because of such transfer. In Robinson v. Graves [1] , Slesser L.J. referred to the question whether a contract is for the sale of goods or for work and labour done as being a question which "has vexed jurists from the earliest ages". In that case it was held that a contract by which an artist was engaged to paint a portrait for an agreed sum was a contract for work and labour done. The view of Greer L.J. was that the Court had to determine what was the substance of the contract. He expressed the opinion [2] , that in the case before the Court "the substance of the matter was an agreement for the exercise of skill and it was only incidental that some materials would have to pass from the artist to the gentleman who commissioned the portrait". Slesser L.J. expressed the opinion [3] , that "the material, the paint and the canvas, were merely ancillary to the actual technical work of producing the work of art". Therefore, he held it was a contract for work and labour. Roche L.J. referred [4] to "the history and reality of the transaction involved in the painting of a portrait of this kind", and to "the nature of the contract between the parties". 1. (1861) 1 B. & S. 272; 30 L.J. Q.B. 252 [121 E.R. 716]. 2. (1861) 1 B. & S., at p. 277, [121 E.R., at p. 718]. 3. [1935] 1 K.B. 579, at pp. 588, 589. 4. [1935] 1 K.B. 579, at p. 588. 5. [1935] 1 K.B., at p. 591. 6. [1935] 1 K.B., at p. 593.

It may, perhaps, be said of the references in those judgments to the need to determine the substance or the nature of the contract that they are statements of the question which has to be decided rather than statements of a test by means of which it may be decided. It may be suggested, also, that those judgments (see especially the statement of Slesser L.J. [1] that he would decide the case upon its own particular facts) contain indications that a decision that a contract is one for the sale of goods or that it is one for work and labour may often be simply a decision of fact. However, I am of opinion, that even upon the assumption that the terms sale and sold in s. 17 have their "ordinary" meaning, unaffected by the circumstance that the section is contained in a taxing Act which is wide in its scope, the question whether or not upon the agreed facts set out in the case stated there was a sale of goods within the meaning of s. 17 does involve a question of law. I am also of opinion, as I have stated, that it should be answered in the affirmative. Clearly this must be so if the test laid down by Blackburn J. in Lee v. Griffin [2] is applied. I think it is right to say, as is said in a passage cited above from Benjamin on Sale, that that rule cannot be accepted without qualification. But any qualifications which it may require seem to me to be irrelevant in the present case. The customers of the appellant wished to obtain prints and duplicates which were not yet in existence at the time when the orders were given. When they had been produced by the appellant the prints and duplicates were to be handed over to the customers and were to belong to the customers. In the circumstances of this case there is no reason to take the view that the obtaining by a customer of property in a new chattel, in exchange for a sum of money to be paid to its manufacturer, was only ancillary to a contract the substance of which was that skill and labour should be exercised. The case concerns the commercial production of large numbers of prints and duplicates. Although the customer had to supply film or a negative or a colour transparency in order that the prints and duplicates might be made by the appellant, those prints or duplicates were new articles which contained no materials supplied by the customer. I am of opinion that the substance of the agreement between the customer and the appellant was that it was an agreement for the manufacture by the appellant of goods and for the delivery of them to the customer, to whom the property in them would pass at or before the time of delivery and who would pay to the appellant a price for the goods. It was, therefore, an agreement for the sale of goods.

1. [1935] 1 K.B., at p. 591. 2. (1861) 1 B. & S. 272; 30 L.J. Q.B. 252 [121 E.R. 716].

Whether or not a different view of the transactions could be taken without holding that the cases of Federal Commissioner of Taxation v. Riley [1] and Federal Commissioner of Taxation v. Butcher [2] were wrongly decided, it cannot be doubted that the reasons of the majority of the Court in those cases support the conclusion that the transactions were sales of the goods.

1. (1935) 53 C.L.R. 69. 2. (1935) 53 C.L.R. 82.

It is set out in the case stated that when the appellant returned prints and duplicates of colour transparencies to the intermediaries with or through whom the customers dealt in some of the transactions, the appellant "made separate charges with respect to developing, printing and duplicating which were shown on the film bag or docket accompanying the return". From the intermediary the appellant received payment of those charges upon statements of account rendered monthly less a deduction by way of discount or commission to the intermediary. These facts do not require the conclusion that what was paid to the appellant was never a price for goods sold by it but was always a charge for work done by it. If without any dissection a total amount had been fixed by the appellant and paid by the customer, in cases in which the appellant had developed exposed film and had also made prints, it might, perhaps, have been difficult to treat the customer in those transactions as having paid part of that total amount as the price of goods sold to him by the appellant. The fixing of separate charges removes any such difficulty.

It was submitted for the appellant that the effect of the provisions of the Copyright Act 1912 Cth, which was in force at the relevant times, was that the first question in the case stated should be answered in the negative. It was submitted that the appellant when it produced a print or duplicate could not have any general property in it and was, therefore, incapable of transferring property in it to the customer. According to the argument the consequence of this was that the print or the duplicate could not be the subject of an agreement by which the appellant agreed to sell it to the customer. In my opinion, these submissions should be rejected. I am in general agreement with the reasons given by the Chief Justice for rejecting them.

In Robinson v. Graves [3] references were made by Slesser L.J. [4] and by Roche L.J. [5] to the law of copyright. Their Lordships did not assert that as a matter of law there could not be an agreement for the sale of a portrait between the person who commissioned the painting of it and the artist who was to paint it. Therefore, their observations do not support the submission based on the copyright law which has been advanced for the appellant in the present case. Their Lordships did suggest, however, that the fact that the artist would be precluded from selling such a portrait to any one to whom he might choose to sell it, assisted the conclusion that the contract was not a contract for the sale of the portrait. But with respect I do not think that restrictions imposed by law upon the unauthorized reproduction of a copyright work or upon the unauthorized disposition of infringing copies can be regarded either as compelling or as tending towards a conclusion denying the character of a contract of sale to a contract to which the owner of the copyright (or a person acting with his authority) is a party and under which reproductions authorized by him are to be made and when made are to be delivered to him in accordance with his instructions.

1. [1935] 1 K.B. 579. 2. [1935] 1 K.B., at p. 591. 3. [1935] 1 K.B., at p. 593.

The first question should be answered "Yes". The second and third questions do not need to be answered.

The questions asked in the stated case answered as follows:

1. Was the supply by the appellant of prints and duplicates of colour transparencies manufactured by it in the above circumstances a sale by it of goods within the meaning of s. 17 of the Sales Tax Assessment Act (No. 1) A. Yes. 2. If the answer to question 1 is " No ", is the appellant by virtue of such supply deemed under the provisions of s. 3 (4) of the said Act to have sold goods? Unnecessary to answer. 3. If the answer to question 2 is " Yes ", does the Act fix or enable to be fixed a sale value for such prints and duplicates?