Pacific Film Laboratories Pty Ltd v Commissioner of Taxation - [1970] HCA 36 - HCA 1970 case summary — Zoe

CTHHCA

Pacific Film Laboratories Pty Ltd v Commissioner of Taxation

[1970] HCA 36

High Court of Australia|1970-07-01|Before: Walsh JJ

View original source

At a glance

Source facts

Court

High Court of Australia

Decision date

1970-07-01

Before

Walsh JJ

Source

Original judgment source is linked above.

Judgment (59 paragraphs)

[1]

High Court of Australia Barwick C.J. McTiernan, Windeyer, Owen and Walsh JJ. Pacific Film Laboratories Pty Ltd v Commissioner of Taxation (Cth) [1970] HCA 36

[2]

ORDER Appellant to pay respondent's costs of the case stated.

[3]

By a case stated pursuant to s. 18 of the Judiciary Act 1903-1966 Cth the Court is asked certain questions which arise in the application of the Sales Tax Assessment Act (No. 1) 1930-1966 Cth (the Act). Pacific Film Laboratories Pty. Ltd. (the appellant) at relevant times carried on the business of developing photographic colour and colour reversal film and of black and white film, of making prints from such film and of making duplicates of colour transparencies. We are told that the appellant in the course of this business received either directly or indirectly from members of the public (a) exposed film to be developed and for the manufacture of prints therefrom, (b) developed negatives and colour transparencies for the manufacture of prints therefrom and (c) colour transparencies for the manufacture of duplicates therefrom. We are not told anything about the process by which prints or duplicates are made but it is conceded that however they are produced the appellant manufactures the prints and duplicates within the meaning of the Act. We have no information as to the documents, if any, prepared in connexion with what I shall call the order by the members of the public for the manufacture of prints or duplicates whether given directly to the appellant or indirectly through an intermediary: but we are told that where the order comes by post to the appellant the amount payable in respect of the print or duplicate is pre-paid and that in other circumstances payment is made by members of the public on delivery of the print or duplicate if the order has come directly to the appellant but that where there are intermediaries between the members of the public and the appellant the intermediary pays the appellant on receipt of the print or duplicate the amount to be paid by the member of the public less a percentage and recovers the full amount from the member of the public when the print or duplicate is delivered. We are not told anything as to the scale of charges for the prints or duplicates except that I gather from what was said at the Bar table that there is a scale of charges.

[40]

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].

[41]

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.

[44]

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.

[48]

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.

[49]

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.