[1989] FCA 255

Re: AUSTRALIAN TRADE COMMISSION And: FILM FUNDING & MANAGEMENT PTY. LIMITED No. G992 of 1988 FED No. 255 Export Grants - Copyright - Company Law - Cross-Vesting Legislation 87 ALR 49, 14 IPR 461, AIPC para 90-597 24 FCR 595 COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

Gummow J.(1) CATCHWORDS

Export Grants - Export Market Development Grants Act 1974 - whether a sum represented export earnings within the meaning of sub-s. 3A (1)

Copyright - distinction between copyright in relation to works and in relation to subject-matter other than works, namely cinematograph film.

Company Law - company incorporated in ACT - provisional liquidator appointed in the Supreme Court of ACT after commencement of proceedings - leave required under s. 371 of Companies Act 1981 to proceed with the present proceedings against the company - irrelevance of s. 79 of the Judiciary Act 1903 - application of cross-vesting legislation.

Cross-Vesting Legislation - nature of the combined effect of Commonwealth and State laws with respect to the exercise by State Supreme Courts of jurisdiction with respect to the laws of a Territory.

Words and Phrases - "disposition", "supply", "alienation", "devolution".

Judiciary Act 1903

Designs Act 1906

Patents Act 1952

Trade Marks Act 1955

Copyright Act 1968

Supreme Court Act 1970 (NSW)

Export Market Development Grants Act 1974

Administrative Appeals Tribunal Act 1975

Federal Court of Australia Act 1976

Companies and Securities (Interpretation and Miscellaneous Provisions) Act 1980

Companies Act 1981

Australian Trade Commission (Transitional Provisions and

Consequential Amendments) Act 1985

Australian Trade Commission Act 1985

Jurisdiction of Courts (Cross-Vesting) Act 1987

Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW)

Companies (New South Wales) Code 1981 The Constitution

Bond Media Ltd. v John Fairfax Group Pty. Ltd. (1988) 14 ACLR 701

Capital T.V. & Appliances Pty. Ltd. v Falconer (1971) 125 CLR 591

British Medical Association v The Commonwealth (1949) 79 CLR 201

The Commonwealth v The Hospital Contribution Fund of Australia (1982) 150 CLR 49

Spratt v Hermes (1965) 114 CLR 226

Lamshed v Lake (1958) 99 CLR 132

Berwick v Gray (1976) 133 CLR 603

A.-G. (WA) v Australian National Airlines Commission (1976) 138 CLR 492

Davis v The Commonwealth (1988) 63 ALJR 35

The Queen v Duncan; Ex parte Australian Iron & Steel Pty. Ltd. (1983) 158 CLR 535

Nationwide News Pty. Ltd. v Samalot Enterprises Pty. Ltd. (1985) 5 NSWLR 227

Crouch v Commissioner for Railways (Qld.) (1985) 159 CLR 22

Re Ballard; Ex parte Wright (1955) 1 FLR 473

Hella-Australia Pty. Ltd. v Quinton Hazell (Aust.) Pty. Ltd. (1967) 10 FLR 86

R. & A. Bailey & Co. Ltd. v Boccaccio Pty. Ltd. (1986) 4 NSWLR 701

Standard Bank of Canada v Wildey (1919) 19 SR (NSW) 384

Computer Edge Pty. Ltd. v Apple Computer Inc. (1986) 161 CLR 171

Computermate Products (Aust.) Pty. Ltd. v Ozi-Soft Pty. Ltd. (1988) 83 ALR 492

Interlego A.G. v Tyco International Inc. (1988) RPC 343

Telmak Teleproducts Australia Pty. Ltd. v Bond International Pty. Ltd. (1985) 66 ALR 118; (1986) 65 ALR 319

CBS Records Australia Ltd. v Telmak Teleproducts (Aust.) Pty. Ltd. (1987) 72 ALR 270

Zeccola v Universal City Studios Inc. (1982) 46 ALR 189

Nomad Films International Pty. Ltd. v Export Development Grants Board (1986) 11 FCR 67

The Commonwealth of Australia v Sterling Nicholas Duty Free Pty. Ltd. (1972) 46 ALJR 241

The Commissioner of Taxation v St. Helens Farm (ACT) Pty. Ltd. (1981) 146 CLR 336

Federal Commissioner of Taxation v Wade (1951) 84 CLR 105

In re Gaskell and Walters' Contract (1906) 2 Ch. 1

O'Brien v Komesaroff (1982) 150 CLR 310

The Commissioner of Stamp Duties (NSW) v Yeend (1929) 43 CLR 235 HEARING SYDNEY #DATE 26:5:1989

Counsel and Solicitors J.E. Richardson Esq. and for the Applicant: T.S. Murphy Esq. instructed by

Australian Government Solicitor.

Counsel and Solicitors J.D. Heydon Q.C. and for the Respondent: W. Haffenden Esq. instructed by

Messrs. Freehill, Hollingdale & Page.

ORDER

The proceedings stand over to a date to be fixed for the making of final orders.

Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules. JUDGE1

Introduction

This matter comes to the Court under s. 44 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act") by way of an "appeal" from the Administrative Appeals Tribunal ("the Tribunal") on questions of law. The questions of law arise under the Export Market Development Grants Act 1974 ("the Grants Act"), as it stood after the amendments effected by Part VI of the Australian Trade Commission (Transitional Provisions and Consequential Amendments) Act 1985.

The respondent has carried on business under the business name "Burbank Films". It has described its major business activity as film production and distribution, and the "production" of the industrial property rights related thereto. The respondent is incorporated in the Australian Capital Territory and it was placed in provisional liquidation by order of the Supreme Court of that Territory on 10 April 1989. Leave to Proceed

Section 371 of the Companies Act 1981 ("the Companies Act") provides that where a provisional liquidator has been appointed in respect of a company incorporated or deemed to be incorporated under that statute or under any corresponding previous law of the Australian Capital Territory, no action or other civil proceeding may be commenced or proceeded with against the company except by leave of the Supreme Court of that Territory and in accordance with such terms as that Court imposes. Section 371 speaks of "the Court" but the reference is to the Supreme Court of the Territory: see s. 3 of the Companies Act and s. 9 of the Companies and Securities (Interpretation and Miscellaneous Provisions) Act 1980.

The proceedings in this Court were commenced before the respondent was placed in provisional liquidation. However, the question arises as to whether the leave of the Supreme Court of the Territory is required before the matter is further proceeded with against the respondent. This preliminary question was much debated before me.

The submissions of counsel proceeded first on the footing that s. 79 of the Judiciary Act 1903 ("the Judiciary Act") has some relevant application. Section 79 provides:

"79. The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable."

The present proceedings were instituted in the New South Wales District Registry of this Court, and they have been heard in that State. It may be conceded that s. 371 of the Companies (New South Wales) Code 1981 ("the Code") is a law of that State which would be "picked up", according to its terms, by s. 79 of the Judiciary Act and put before this Court; however, the respondent, not being incorporated in that State, is not a "company" for the purposes of s. 371 of that Code: Bond Media Ltd. v John Fairfax Group Pty. Ltd. (1988) 14 ACLR 701. Thus, there is no relevant New South Wales law to be "picked up" by s. 79 of the Judiciary Act.

But in the present case that circumstance is beside the point. Section 371 of the Companies Act is plainly a law of the Commonwealth and the command or requirement of sub-s. 371 (2) that leave be obtained from the Supreme Court of the Australian Capital Territory is addressed immediately to this Court and, indeed, to the courts and judges of every State and of every part of the Commonwealth: The Constitution, Covering Clause 5. Further, s. 3 of the Companies Act makes it plain that whilst the objects of the statute include the regulation of companies formed in the Territory, in its application in relation to such companies the statute applies to natural persons and all bodies, corporate or unincorporate, and extends to acts done or omitted to be done outside the Territory.

Counsel for the applicant then sought comfort from the provisions of the cross-vesting legislation; counsel for the respondent cast doubt upon that legislation insofar as it purported to apply to the present case. An order for the appointment of a provisional liquidator of the respondent was first made by a Judge of the Supreme Court of New South Wales on 20 March 1989. I was told that the order was made on the false footing that the respondent was incorporated in New South Wales, and that the operation of the the Code was attracted. On 21 April 1989, the Prothonotary of the New South Wales Supreme Court made an order granting the applicant leave to proceed with the present proceedings in this Court. The making of that order was not opposed. The respondent now points to the Supreme Court Act 1970 (NSW) ("the Supreme Court Act"), Schedule E Part 2, para. 14, and s. 119, and contends that the Prothonotary lacked power to make such an order in proceedings under the Code. What is clear is that neither order made by the Supreme Court of New South Wales was expressed to be made, or understood at the time as having been made, under the cross-vesting legislation. In particular, no effort was made in respect of either application to comply with the special provisions of Part 74 Rule 6 of the Supreme Court Rules, designed as they are to alert the Supreme Court and the other parties (if any) that what is sought is the exercise of "cross-vested" jurisdiction.

In sub-ss. 4 (1) and (2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 ("the Commonwealth Cross-Vesting Act") a distinction is drawn between "conferring" jurisdiction upon certain courts and "investing" the Supreme Courts of the States with federal jurisdiction. In this latter operation, the law plainly is designed as a law made under s. 77 (iii) of the Constitution, where the term "investing" appears: Capital TV & Appliances Pty. Ltd. v Falconer (1971) 125 CLR 591 at 606. The State Supreme Courts are bound to exercise the federal jurisdiction with which they are invested by such a law: British Medical Association v The Commonwealth (1949) 79 CLR 201 at 236; The Commonwealth v The Hospital Contribution Fund of Australia (1982) 150 CLR 49 at 62, 74.

Sub-section 4 (2) of the Commonwealth Cross-Vesting Act "confers" upon, inter alia, the Supreme Courts of the States the jurisdiction with respect to civil matters of, inter alia, the Supreme Court of the Australian Capital Territory. That jurisdiction is not identified in the sub-section as federal jurisdiction and in this operation the law appears to rest upon s. 122 of the Constitution: Capital T.V. & Appliances Pty. Ltd. v Falconer (supra at 600, 601-602, 609, 612, 614-615, 620, 627-628).

(The power of the Parliament to make laws investing any court of a State with federal jurisdiction extends to matters of the character specified in s. 75 of the Constitution which arise in any Territory. This follows from the reasoning, as to the original jurisdiction of the High Court, in Spratt v Hermes (1965) 114 CLR 226 at 241, 257, 264, 266, 278, 280. It may also be that, as Menzies J. accepted in Falconer's Case supra at 604-606, the words in s. 76 (ii) of the Constitution "any laws made by the Parliament" include laws made by the Parliament under s. 122, with the result that by reason of the inter-relation between ss. 76 and 77, the Parliament may make laws investing any court of a State with federal jurisdiction with respect to matters arising under laws made by the Parliament under s. 122. But, as I have indicated, such a course does not appear to have been attempted with the Commonwealth Cross-Vesting Act, sub-s. 4 (2)).

A question may arise as to whether the State Supreme Courts are bound to exercise jurisdiction "conferred" by a law such as sub-s. 4 (2) in the same way as they are bound to exercise federal jurisdiction with which they are invested by a law of the Parliament pursuant to s. 77 (iii) of the Constitution. The legislative response to this question is illustrated by s. 9 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) ("the State Act"). It states that the Supreme Court "may" exercise jurisdiction "conferred" inter alia by a law of the Commonwealth.

These two steps have been described as clearly separating two elements, the conferring of jurisdiction of the original court on the cross-vested court and "provisions allowing the exercise of the jurisdiction by the cross-vested court" (Griffith, Rose, Gageler, "Choice of Law in Cross-Vested Jurisdiction: A Reply to Kelly And Crawford" (1988) 62 ALJ 698). This description rather disguises the difficulties.

If the cross-vested court of a State is invested with federal jurisdiction (which is one of the operations of sub-s. 4 (1) of the Commonwealth Cross-Vesting Act) then a State law "allowing" or "authorising" it to exercise that jurisdiction is superfluous because, as I have indicated, the State Court is bound by the Constitution and by federal law to exercise that jurisdiction. Further, if "may" in s. 9 of the State Act means not "hereby is authorised" but "may if it so decides in a particular case", then it would appear to conflict with the operation of the federal law and s. 77 (iii) of the Constitution. Hence the choice of the word "conferred" in s. 9 of the State Act appears, as regards Commonwealth laws, to have been selected to distinguish "invested" federal jurisdiction; what s. 9 is relevantly concerned with is Commonwealth laws which confer non-federal jurisdiction.

If, as is the case here, the cross-vested jurisdiction upon which reliance is placed is "conferred" by a law supported by s. 122 of the Constitution, there will be no constraint upon the State Supreme Courts such as that flowing from s. 77 (iii). But s. 109 of the Constitution applies to a law validly made under s. 122: Lamshed v Lake (1958) 99 CLR 132. Thus, one would not readily construe "may" in s. 9 of the State Act as qualifying or diminishing rights given by the Commonwealth Cross-Vesting Act. Further, perhaps one would have thought it ordinarily was not for a State Parliament to confer jurisdiction on the courts of that State to entertain matters arising under the laws of another legislature, at least where that legislature was not that of a fellow State to whose laws full faith and credit was required by s. 118 of the Constitution. And insofar as jurisdiction is conferred by the national Parliament upon State courts in reliance upon s. 122 of the Constitution, it must be remembered that whilst the term "plenary" is used in relation to it, s. 122 does not confer unlimited legislative power: Berwick Ltd. v Gray (1976) 133 CLR 603; A.-G. (WA) v Australian National Airlines Commission (1976) 138 CLR 492; Davis v The Commonwealth (1988) 63 ALJR 35 at 40, 49.

To speak of the law of one legislature as conferring jurisdiction, and the law of another legislature as allowing it to be exercised, rather suggests a symbiotic relationship between the two laws, neither having its own independent life. The result would be greater than its constituent elements and, to put it metaphorically, a stream rising higher than either of its two sources. In such a case, is it accurate to describe each law as operating merely in aid of the other and thus as operating "concurrently", that is to say each in its own field (cf. The Queen v Duncan; Ex parte Australian Iron & Steel Pty. Ltd. (1983) 158 CLR 535)?

Despite the submissions of counsel for the respondent, this is not the occasion to pursue these aspects any further. The point is that the applicant before the Prothonotary was not seeking to invoke any "cross-vested" jurisdiction.

It was contended by counsel for the applicant that the order of the Prothonotary having been made, it should be treated as valid in this Court, in the exercise of its jurisdiction conferred by federal law, until set aside in the Supreme Court; cf. Nationwide News Pty. Ltd. v Samalot Enterprises Pty. Ltd. (1986) 5 NSWLR 227; Supreme Court Act, s. 81. But this begs the question that the Prothonotary plainly was not purporting to exercise jurisdiction stemming from the companies law of the Commonwealth, namely s. 371 of the Companies Act, and conferred by sub-s. 4 (2) of the Commonwealth Cross-Vesting Act. The command addressed to this Court by federal law (s. 371 of the Companies Act) thus remains.

Finally, it was submitted for the applicant that this Court should now grant the necessary leave to proceed, exercising jurisdiction conferred on it by sub-s. 4

The Parliament may make laws defining the jurisdiction of this Court with respect to any matter arising under "any laws made by the Parliament": Constitution, ss. 76 (ii) and 77 (i). Section 76 speaks of laws "conferring" jurisdiction. If the view taken by Menzies J. in the passage cited above from Falconer's Case as to the width of the expression "any laws made by the Parliament" be correct, then sub-s. 4 (2), in its operation presently under consideration, would be supported in this way.

The applicant ("the Commission") is established by the Australian Trade Commission Act 1985, s. 7. The Minister has power to give certain directions (s. 10). Application for leave to proceed thus may be a matter in which the Commonwealth or a person suing on behalf of the Commonwealth is a party (Constitution, s. 75 (iii); Crouch v Commissioner for Railways (Qld.) (1985) 159 CLR 22 at 29-31, 40-42). If so, in its operation upon such an application, sub-s. 4

However that may be, I would not exercise the jurisdiction in question in the circumstances of this case.

Prima facie, the appropriate forum is that selected by s. 371 of the Companies Act. This is not a special case where urgency or other exigencies call for immediate intervention by this Court. It is agreed that since 12 April 1989, the applicant has known that the respondent is incorporated in the Australian Capital Territory. The hearing before this Court commenced on 26 April 1989. In my view, in Australia it is important that so far as practicable, the liquidation and provisional liquidation of corporations should be conducted by the one administration in the forum primarily selected by the legislature in the situs of incorporation. The history of the present provisional liquidation to date indicates the confusion that can arise when, albeit inadvertently, that precept is not followed.

Accordingly, the making of orders to dispose of the present proceedings in this Court will await the obtaining by the applicant of the necessary leave under sub-s. 371 (2) of the Companies Act from the Court there designated. But I should proceed to consider the merits, both to shorten further delay and to indicate the outcome on the merits of the claim which the applicant pursues in this Court. The Nature of the Proceedings

I turn to the substantive proceedings. The Grants Act provides for the making of grants with the purpose of providing incentives for the development of export markets. Sub-section 13 (1) of the Grants Act provides that a person desiring to obtain a grant shall submit a claim to the Commission. The central provision of the legislation is s. 12. This provides:

"12.

Claims are to be made in respect of a "grant year", a term defined in sub-s. 3 (1). The relevant "grant year" for the purposes of these proceedings was the period commencing 20 May 1985 and ending on 30 June 1986. A grant is not payable to a person in respect of a particular grant year if the "export earnings" of that person in that grant year exceed $20 million or the amount of "eligible expenditure" incurred by that person in that grant year does not exceed $5,000: sub-s. 14 (4). The term "export earnings" is given content by s. 3A and the term "eligible expenditure" by s. 4. I return later to the text of these provisions.

The respondent had received grants in respect of seven previous grant years, commencing in 1978. Accordingly, the application for the period commencing 20 May 1985 was subject to the limiting provisions of sub-s. 16

The respondent claimed the balance of $952,091 was "export earnings" because it answered the description in sub-s. 3A (1) (d) of the Grants Act. I should set out the sub-section in full.

"3A.

It will be noted that para.

"4.

The Commission treated the sum of $952,091 as not answering the description in sub-s. 3A (1) (d) of the Grants Act because, as appears from the Commission's letter to the Managing Director of the respondent dated 29 October 1987, these were "earnings received by the claimant on behalf of the various co-investors in the subject films" with the result that "these earnings are not, and can not be treated as, earnings of the claimant". From this decision an application for review to the Tribunal was made pursuant to sub-s. 40A (6) of the Grants Act. The Tribunal set aside the decision of the Commission and remitted the matter, with the direction that the amount of $952,091 included in the respondent's claim was export earnings of the respondent in respect of the particular grant year, and that an appropriate grant should be made under the Grants Act. From that decision, as I have said, the Commission has appealed to this Court on questions of law, pursuant to s. 44 of the AAT Act. The Facts

The respondent (as the facts were found in the Tribunal, and, that is to say, before the commencement of the provisional liquidation), produces animated films for television. As part of these activities, the respondent receives from potential foreign clients ideas for proposed films and then through its employees and contractors, arranges for the production of the film. Moneys paid to the respondent as consideration for its immediate activities in production were the subject of part of the claim to a grant entitlement under the Grants Act, and were admitted as export earnings within the meaning of the legislation. But, as I have indicated, the Commission denied to the sum of $952,091 the character of export earnings on the ground that it represented amounts received on behalf of other investors in various films. To test this proposition, the Tribunal had regard to three "sample agreements". Apparently, this was on the footing that from an understanding of these documents would come the conclusion as to whether or not the moneys in question had been "received by" the respondent during the grant year in question "for the disposal" by the respondent at any time to persons outside Australia, for use and enjoyment outside Australia of "eligible industrial property rights", thus qualifying as "export earnings" within the meaning of sub-s. 3A (1) (d).

The expression "eligible industrial property rights" is defined in sub-s. 3 (1) of the Grants Act as follows:

"'eligible industrial property rights' means rights in relation to inventions or trade marks, or copyright in relation to works, designs and other things, being -

I draw attention to the expression "copyright in relation to works" and to the use of "works" in para. (a); the significance of the phrase "in relation to works" and of the word "works" will later become apparent.

In its reasons, the Tribunal described the first of the three documents as a typical agreement between the respondent and an investor whereby the investor undertakes to subscribe a specified percentage of the budget cost of a film and the investor "acquires and retains . . . an aliquot part of the copyright of the film". The respondent is empowered to manage the production, marketing and exploitation of the film, and is specifically authorised to enter into a licence agreement with an institutional investor.

The first document is headed "The Adventures of Robin Hood Investment and Production Agreement" ("the first agreement"). It is dated 26 June 1984, and is expressed as being between the respondent, referred to therein as "Burbank", of the one part, and Lanes Motors Pty. Limited which is described as the "Investor". The objective of the investment by the Investor is stated (Part 2.1) as providing finance to enable the production of an animated version of "Robin Hood" and to provide for the marketing and commercial exploitation of "the Copyright" and "the Film" on the terms and conditions contained in the agreement. There are various definitions. They include the following:

"'Copyright' - shall mean and include the copyright subsisting in each part of the world in the Film including the script, storyboard, screenplay, design rights in the Characters and any right to the benefits accruing from holding a trademark, servicemark, adopting a style or business name in respect of all or any of the above. 'Characters' - shall mean and include the characters appearing in the film and in any brochures prepared in relation thereto of 'Robin Hood'. 'Film' - shall mean and include the animated telefeature film entitled 'The Adventures of Robin Hood', including the negatives, sound and voice track, or prints, copies, reproductions, transparencies thereof in the English language and any other language whether identical with each other or differentiated by re-editing, cutting, dubbing, subtitling or re-titling or otherwise made from the characters or substantially made therefrom and produced in accordance with this Agreement and any film made of the production of the Film."

The provisions of the Agreement make it clear that the legal and beneficial interest in the Copyright was vested not in Burbank but in the Investor as to 50% as tenant in common with investors under related agreements. Burbank was to act as agent and representative of the Investor, and Burbank was appointed both to produce the Film and to manage the marketing and distribution of the Film on behalf of and for the benefit of the Investor.

Part 4 deals with "supplementary rights". This expression is defined as including any grant of financial assistance from any governmental body or entity in relation to "export development assistance". Such moneys are to be divided between Burbank and the Investor in the proportions 75:25, after deducting expenses incurred in relation to obtaining those rights. Part 7.2 provides:

"

7.2 The

Investor hereby appoints Burbank as the sole and exclusive agent of the Investor for his Interest to market and distribute the Copyright and Film throughout the world in accordance with this Part of this Agreement and in particular the Investor authorises and appoints Burbank to enter into the Licensing Agreement as his agent and on his behalf and to do, undertake and execute any and all documents and things referred to if and when required by the parties thereto."

The "Licensing Agreement" referred to is the second document to which I later refer, namely "The Adventures of Robin Hood Licensing Agreement". The first agreement goes on in Part 7.7 to provide for payment of commission to Burbank, and for the recovery of its costs. All moneys received from marketing, selling and hiring or otherwise obtaining commercial benefit from the Copyright in the Film are to be paid into an account defined as "the Production Account" at a branch of a bank consented to by Burbank and the Investor (Part 9). Those moneys "shall thereafter be held on trust and applied and distributed by Burbank for and on behalf of the Investor in accordance with his Interest" in the manner set out in Part 8.1. Part 13.8 provides that the agreement "shall be governed by and performed according to the law (of New South Wales)", which no doubt is to be read as a reference to the body of common law and statute law in force in New South Wales, not merely statute law having the Parliament of the State of New South Wales as its source.

The second document is titled "The Adventures of Robin Hood Licensing Agreement" ("the second agreement"). It is expressed as made on some unstated day in June in 1984. In its reasons, the Tribunal described the second agreement as made with an institutional finance house and as designed to "top up" the cost of production of the film beyond the amount subscribed by the investors. The respondent, having been so authorised by the investors, appoints the institution as sole and exclusive copyright licensee; in turn, the institution authorises the respondent to market and distribute the film throughout the world.

The parties to the second agreement are the respondent (called "the Licensor") of the one part, and The Colonial Mutual Life Assurance Society Limited (called "the Licensee") of the other part. The recitals are as follows:

"WHEREAS:- A. The Licensor was and will be appointed the agent of certain named investors pursuant to Investment and Production Agreements dated the day of June 1984 and also those subsequent to the date thereof between the Licensor as Producer and the aforementioned investors as Investors for the purpose of and with authority to enter into this agreement on behalf of the said investors. B. The Licensor is the agent of the legal and beneficial owners of the Copyright in the animated telefeature produced by the Licensor on behalf of the investors and entitled 'The Adventures of Robin Hood' and the said investors through their agent the Licensor are desirous of licensing the Copyright in the Film to the Licensee to enable the marketing and distribution of the Film in the territories of the world to take place. C. The Licensee has agreed to advance certain moneys hereinafter more particularly described to the Licensor as agent for the investors subject to the Licensee being entitled to be paid certain moneys from the Sale Proceeds from the marketing of the Film on the terms and conditions hereinafter contained. D. The Licensee acknowledges the continuing role of the Licensor in the marketing and distribution of the Film as agent for the abovementioned investors and of the Licensee itself."

There are definitions of "Copyright" and "Film" which generally follow those in the first agreement. In Part 2 of the second agreement, the respondent as agent for the investors warrants they are legal and beneficial owners of the Copyright and the Film; the Licensee covenants to pay to the respondent the sum of A$258,000 upon completion and delivery of the Film as consideration for the grant of the sole and exclusive licence of the Copyright in the Film for the duration of such Copyright, but the Licensee's obligations are conditional upon all investors "agreeing to adopt" the second agreement and "consenting to be legally bound thereby"; the respondent warrants "as their agent that the investors . . . are the legal and beneficial owners of the Copyright and the Film" and that it "on their behalf has the sole, exclusive and unencumbered worldwide right to sell, transfer, assign, licence, hire, lease or otherwise dispose of the Copyright and the Film . . ."

Part 3 involves role reversals by the parties. The Licensee (in truth, not as such but as if it were the principal) acknowledges the respondent as its sole and exclusive agent to market and distribute the Film throughout the world; all methods, mechanics and procedures of and in relation to the marketing and distribution of the Film are to be determined by the respondent in its sole and unfettered discretion "as agent for the Licensee". As agent for the investors, the respondent granted the Licensee an option to purchase all right, title and interest in the Film and the Copyright (Part 7.1); the option was not exercised. The respondent was entitled to fees for these services.

The third document is described as the "'Sherlock Holmes and the Baskerville Curse' Agency Agreement" ("the third agreement"). It is dated 1 July 1983. The parties are the respondent, defined as "the Producer" and Richard Price Television Associates Limited, a company incorporated in the United Kingdom with its registered office in London, which is defined as "R.P.T.A.", of the other part. The agreement deals with the distribution of the film in question, particularly in the United States, Canada, the United Kingdom, Australia and New Zealand. The Tribunal inferred that like arrangements existed in respect of the Film, the subject of the first and second agreements. Recitals A and B of the third agreement are as follows:

"WHEREAS A. The Producer has produced an animated film for television entitled 'Sherlock Holmes and the Baskerville Curse' based on the novel by Sir Arthur Conan Doyle and is desirous of licensing the rights to the Programme to world television and cinema markets and for this purpose of appointing an Agent to represent and effect sales of the Programme and the rights therein on its behalf. B. R.P.T.A. carries on the business of a film video and television agent principally in the United Kingdom and the United States and also elsewhere in the world and is desirous of securing the appointment as the Agent of the Producer and the Producer has agreed to appoint R.P.T.A. as its sole and exclusive agent for the sale of all television broadcasting cinema and videogram rights in the Programme and R.P.T.A. has agreed to accept such appointment on the terms and conditions hereinafter contained."

The third agreement provides for the appointment of R.P.T.A. as the sole and exclusive agent for "the sale" of the rights in the animated film for television entitled "Sherlock Holmes and the Baskerville Curse". R.P.T.A. agrees that it will use its best endeavours to dispose of the rights in that Programme "in the best interests of the (respondent) and the owners of the copyright in the Programme in the countries of the world" (clause 3.1). As remuneration, R.P.T.A. is to receive stipulated percentages of what are defined as "gross sales" in respect of the sale, licence or other disposition to third parties of the Programme or the rights therein. R.P.T.A. is obliged to notify the respondent of the terms of any sale of the rights to the Programme in excess of US$50,000 "so that the (respondent) can be satisfied there will be no breach of any obligations of the (respondent) to all or any owners of the copyright in the Programme pursuant to any Contract or otherwise" (clause 3.7). The third agreement incorporates a set of "Standard Terms and Conditions" (clause 1.1 (c)) which include a warranty (clause 3) by the respondent that all "the Rights" are vested in the respondent absolutely. That term is defined so as to identify the exclusive right to engage in a range of activities which, if committed in Australia, would be infringements of copyright in the film and of copyright in works associated with the film. Nevertheless, the provisions of the third agreement (clause 3.7) make it clear that the parties were proceeding on the basis that the respondent was not necessarily a copyright owner.

The evidence also included agreements to which R.P.T.A. was a party whereby television broadcasting rights were conferred on the operations of television stations in Italy and Iceland, in respect of films the subject of the third agreement. Moneys were paid by R.P.T.A. to the respondent out of receipts by R.P.T.A. from such third parties. The moneys were credited to various bank accounts, there being one account in respect of each film; ultimately there were distributions to investors and to the institution in accordance with the first and second agreement. Were these moneys received by the respondent "export earnings" within the meaning of the Grants Act? The Questions of Law

The Tribunal decided that the disputed sum of $952,091 was the export earnings of the respondent, within the meaning of sub-s. 3A (1) (d) of the Grants Act because it was the amount or value of the consideration received by the respondent during the relevant grant year for the disposal by the respondent at any time to persons resident outside Australia, for use and enjoyment outside Australia, of eligible industrial property rights. There was no doubt that the sum in question had literally been received by the respondent. In the view of the Tribunal, the fact that the moneys were paid to the respondent meant that they were "received" by it for the purposes of the statute. The Commission challenged this before the Court, but in my view the Tribunal on this point plainly was correct. Further, the Tribunal concluded that there had been a "disposal" by the respondent of eligible industrial property rights because the respondent had been authorised by all other interested parties to "dispose" of those rights for them, and the respondent had done so; in the Grants Act, unless the contrary intention appears, "disposal" includes "sale, grant, assignment or supply" (sub-s. 3 (1)). As will become apparent, I disagree with the conclusion of the Tribunal on this issue.

Before this Court the respondent supported the reasoning of the Tribunal. For its part, the Commission sought to rely upon sub-s. 3 (2) of the Grants Act, to which I later refer under the heading "Conclusions". It also submitted that an authority to dispose of industrial property rights is not itself a disposal of those rights within the meaning of the Grants Act; the respondent had no industrial property rights of its own to dispose of, and the investors disposed of nothing until the respondent entered into subsequent agreements with other parties which did not constitute a disposal by the respondent, but a disposal by the investors of part of their copyrights. Accordingly, the Commission submitted, the respondent did not have export earnings in the amount contended for by it, with the result that the Commission had been correct in calculating the grant entitlement of the respondent.

Each side pointed to inconveniences and anomalies in the operation of the legislation in particular cases if the interpretation of the other side were adopted, seeking thereby to fix a balance of inconvenience which favoured its case. The response of the Court must be to endeavour to construe the Act as it applies to these proceedings. In doing so, the interrelation between the Grants Act and industrial property rights is of central importance. Copyright In Relation to Works

As is well known, Australian industrial property rights in inventions, trade marks, copyrights and designs are territorial in character. The relevant legislation and decisions thereon make this clear: Copyright Act 1968, ss. 36, 101; Patents Act 1952, s. 70; Designs Act 1906, s. 30, as previously interpreted in Hella-Australia Pty. Ltd. v Quinton Hazell (Aust.) Pty. Ltd. (1967) 10 FLR 86; Trade Marks Act 1955, ss. 58, 62, as interpreted in R. & A. Bailey & Co. Ltd. v Boccaccio Pty. Ltd. (1986) 4 NSWLR 701 at 709-710.

Sub-s. 3A (1)

This means that in deciding in a particular case whether or not there has been a disposal of an eligible industrial property right, it will be necessary to look to the laws of the countries where the use and enjoyment was to occur pursuant to the disposition, and to ask whether the rights given under the law of that country in respect of the particular subject matter are such that one can characterise them as rights in relation to inventions, trade marks, copyright in relation to works, or designs. That was not attempted in the evidence in this case and I assume any relevant foreign law did not differ from that of Australia: Standard Bank of Canada v Wildey (1919) 19 SR (NSW) 384 at 388.

The identification of "copyright in relation to works" as an "eligible industrial property right" involves a term of art under the Copyright Act 1968 ("the Copyright Act"). That Act does confer copyright in relation to a cinematograph film, but that is not copyright in relation to a work. In s. 10, "work" is defined as meaning a literary, dramatic, musical or artistic work and some of these terms are themselves defined. The Copyright Act distinguishes copyright in original literary, dramatic, musical and artistic works (Part III) from copyright in subject-matter other than works (Part IV). The latter category includes copyright in a cinematograph film; where the maker acted pursuant to an agreement for valuable consideration, the owner of the copyright may be the other party to that agreement but the copyright in the film ordinarily vests in the maker of the film (s. 98). Subject to the other provisions of s. 35, the owner of any copyright in a work will be the author of the work (sub-s. 35 (2)).

Separate provision is made as to the range of activities within the ambit of the copyright and thus as to infringement of copyrights in works and of copyrights in other subject matters (ss. 31, 36, 37, 38, 39; ss. 86, 101, 102, 103, 110, 111).

The differences in the nature of copyright in original works and in cinematograph films appear from a comparison of s. 31 and s. 85 of the Copyright Act, given particularly the presence in sub-s. 31

"31.

An act shall be deemed to have been done with the licence of the owner of a copyright if the doing of the act was authorised by a licence binding the owner of the copyright: s. 15. Exclusive licensees of any species of copyright have special rights in respect of infringement (ss. 119-123). The term "exclusive licence" is defined in s. 10 in terms that do not necessarily correspond with the ordinary usage of that term because the licensee may be given authority, to the exclusion of the owner, to do any of the various acts which the owner otherwise has the exclusive right to do; see Computermate Products (Aust.) Pty. Ltd. v Ozi-Soft Pty. Ltd. (1988) 83 ALR 492 at 495. All species of copyright are personal property (s. 196) and may be assigned as provided in ss. 196, 197.

To qualify as a work, the material in question must be "original" in the statutory sense: Interlego A.G. v Tyco International Inc. (1988) RPC 343. But it is not an essential condition for the subsistence of copyright in a film that the film was "original"; the copyright subsists in the collage of visual images and sounds which together constitute the film: Telmak Teleproducts Australia Pty. Ltd. v Bond International Pty. Ltd. (1985) 66 ALR 118; (1986) 65 ALR 319; CBS Records Australia Ltd. v Telmak Teleproducts (Aust.) Pty. Ltd. (1987) 72 ALR 270 at 281-282.

Where copyright subsists in any subject matter by virtue of Part IV, such copyright is in addition to and independent of any copyright subsisting in a work by virtue of Part III. But the consequence of the differing periods for duration of copyrights, specified in ss. 33 and 93, may be that copyright in a film expires before the copyright in a work which is reproduced in the film; in such cases, the work is not infringed by subsequent public display of the film: sub-s. 110 (2).

So it is that the scenario or script for a film may be protected as a dramatic work (as the definition of "dramatic work" in s. 10 makes plain) and each of the drawings used in an animated film may be protected as artistic works (Laddie Prescott & Vitoria, "The Modern Law of Copyright", 2'7.32). Music composed for use on the sound-track would be protected as musical work. In Australia, it is uncertain whether each single frame of the film would be treated as a "photograph" and as such protected as an artistic work (see Ricketson, "The Law of Intellectual Property", 2'9.143).

The result is that in copyright infringement suits, it may be alleged that the defendant's film infringes copyright both in a film and in works, and the plaintiff may hold in its hand the title to all these rights; e.g. Zeccola v Universal City Studios Inc. (1982) 46 ALR 189. But, as I have indicated, the species of copyrights conferred by Part III and Part IV are distinct and the distinction is fundamental to copyright law.

I mention this in such detail because the distinction does not appear to have been drawn to the attention of the Full Court in Nomad Films International Pty. Ltd. v Export Development Grants Board (1986) 11 FCR 67. That decision was relied on before the Tribunal and before me. Undoubtedly, it is authority for the proposition that a dealing by an exclusive licensee of copyright, for example, by granting a sub-licence, may be disposal of an eligible industrial property right within the meaning of the Grants Act. This is because the exclusive licence is a right in relation to copyright (per Smithers J.) or because the copyright itself is but a collection of exclusive rights (per Northrop J.).

But the copyright in question must be copyright in relation to a work. The definition of "eligible industrial property rights" in sub-s. 3 (1) of the Grants Act so stipulates. Copyright in a cinematograph film is not a copyright in relation to a work, but the Full Court in the Nomad Case proceeded as if the only relevant copyright in the case was that in the film. In fact, the appellant was beneficial owner of the copyright in the script and held the sole and exclusive right to its reproduction by means of film (see 11 FCR at 69). Therefore, the result in the case possibly may be understood on that basis. It is unnecessary in this case to reach any conclusion on that question. The point is that the dealings with which I am concerned did include rights in relation to the scripts for the films in question, and the balance of the reasoning in the Nomad Case is readily applicable to that situation.

The definition of "Copyright" in the first agreement includes copyright subsisting in each part of the world in the Film including the script and screenplay. The expression "the Film" is then defined as including the negatives, sound and voice track and all prints, copies, reproductions and transparencies thereof. Here again, copyright in relation to works could be involved. The agreement goes on to specify that the legal and beneficial interest in the Copyright and the Film shall be owned by the Investor, and it contemplates a plurality of investors with ownership as tenants in common in designated undivided shares. Recital A indicates that Burbank has commissioned the script and the other recitals indicate that as between the parties to the agreement, copyright in the relevant works was to vest in the investors as first owner. What is not made clear is whether this would take place by virtue of assignment from the authors concerned, or by virtue of one of the other provisions of s. 36 of the Copyright Act. At all events, it was not disputed either before the Tribunal or this Court that such copyrights as existed in works in relation to the Film were vested in the investors as owners. Accordingly, I proceed on that footing. No Disposal by the Respondent of Eligible Industrial Property Rights

The respondent was not the owner of any copyright; title was vested in the investors. The respondent was appointed sole and exclusive agent of the investors "to market and distribute" the relevant copyrights, and in particular it was specifically authorised to enter the second agreement as agent of the investors. Pursuant to the second agreement, the institution was granted the sole and exclusive licence of the copyrights. That grant was, in my view, a disposition by the investors of eligible industrial property rights within the meaning of the Grants Act: Nomad Films International Pty. Ltd. v Export Grants Development Grants Board supra at 75-76, 102-103. The disponee was the institution. The disponee, as the holder of relevant eligible industrial property rights, then granted to the respondent a sole and exclusive agency, but also acknowledged the "continuing role" of the respondent in marketing and distribution of the film as agent for the investors and of the institution (Part 3, Recital D). This, in my view, was not a disposition by the institution of eligible industrial property rights.

When the respondent dealt with R.P.T.A. in the third agreement, it did so, as Recital D of the second agreement indicated it would, as agent both of the investors and of the institution, to bind them for their respective rights evinced by the first and second agreements. R.P.T.A. was appointed agent to effect the "sale" of rights.

The evidence indicates that R.P.T.A. then entered into licence agreements with television stations for transmission of the films. Those activities were, in my view, dispositions of eligible industrial property rights. However, the disponor was not R.P.T.A., but the investors and the institution, they having either as owner or exclusive licensee the right to seek redress for those television transmissions as infringements, unless they took place with their consent. That consent flowed through the three agreements to what I might describe as the "end-users". I appreciate that in the third agreement the respondent did not disclose the existence or identity of the investors or the institution, but the agreement plainly recognised that there could be third parties with copyright titles.

Accordingly, the moneys in question were not amounts received by the respondent for the disposal by it to persons resident outside Australia of eligible industrial property rights. The respondent did not sell, grant or assign eligible industrial property rights. It acted as agent under the first and second agreements to achieve a result (involving the engagement by it of R.P.T.A.) whereby the "end-users" obtained the licences to make the television transmissions which they needed were they not to infringe the copyright rights of the investors and the institution. The respondent relied on the statement by the Tribunal:

"(The respondent) was authorised by all other interested parties to 'dispose' of (sub-rights to reproduce the film under certain conditions). None of the investors themselves, nor the finance house, disposed of rights to an ex Australian resident. They disposed of their rights (in this limited sense) by authorising the applicant to do the disposing for them."

It follows from what I have said that I find the vice in this reasoning to be revealed in those concluding words "to do the disposing for them".

The respondent submitted that even if this conclusion be accepted, that was not the end of the matter. Counsel pointed to the inclusion of "supply" in the definition of "disposal" in sub-s. 3

"Know-how" and "eligible know-how" are defined in sub-s. 3 (1) as follows: "'know-how' means scientific or technological knowledge or information in relation to industrial operations, and includes drawings, models or other material things, or services, supplied for the purpose of enabling or facilitating the use or enjoyment of such knowledge or information, of rights in relation to inventions or trade marks or of copyright in relation to works, designs or other things; 'eligible know-how' means know-how that, in the opinion of the Commission, has to a substantial extent resulted from research or other work performed in Australia;"

Thus, the supply of services enters into the definition of "know-how", and may include services supplied for the purpose of enabling or facilitating the use or enjoyment of, inter alia, industrial property rights. Such a provision of services would be a disposal of eligible know-how within the sense of s. 3A (1) (d), the use of "supply" in the definition of "know-how" being consistent with its inclusion in the definition of "disposal". In this case, no reliance was placed on the know-how provisions.

"Disposition" is a term that has given rise to much litigation, particularly in reference to definitions in revenue legislation where it has meanings extended to include such things as releases of rights, creation of new rights, and the moving of property from the sole ownership of A to the co-ownership of A and B, and the exercise of general powers of appointment. The saga culminating in The Commissioner of Taxation v St. Helens Farm (ACT) Pty. Ltd. (1981) 146 CLR 336 is a striking example. "Disposition" is not a word with a technical legal meaning, although it frequently is used in legal instruments; speaking generally, it covers all forms of alienation: Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 at 110. "Alienation" indicates a transaction whereby property is transferred to another person otherwise than by involuntary operation of law; see In re Gaskell and Walters' Contract (1906) 2 Ch 1 at 10. "Devolution" indicates the involuntary passing of property: O'Brien v Komesaroff (1982) 150 CLR 310 at 320-321. Entry into an executory contract thereby creating personal rights, to which an obligation of specific performance would not attach, usually would not be classified as an alienation or disposition of property; see The Commissioner of Stamp Duties (NSW) v Yeend (1929) 43 CLR 235. Ordinarily, one disposes of industrial property by dealing with it so as to transfer or create interests of an incorporeal proprietary character. To grant an exclusive licence of a copyright, within the meaning of s. 10 of the Copyright Act, would ordinarily be so regarded, given the special status afforded such licences by that Act. The grant of a bare permission or licence may not be a disposition of the relevant industrial property itself. But a bare licence is a right, albeit a personal right, "in relation to" a copyright. Consistently with Nomad Films International Pty. Ltd. v Export Development Grants Board (1986) 11 FCR 67 at 75-76, this may be enough to meet the Grants Act meaning of "disposal" of "eligible industrial property" rights. What is disposed of in all these instances are rights to do some or all of those acts, the monopoly in respect of which is conferred by the law as part and parcel of the invention, trade mark, copyright or design. In my view, a person who facilitates the grant by another of a licence to a third party of that other's industrial property rights, by seeking out that third party does not thereby dispose of the licensor's industrial property rights. He does not do so either in ordinary legal parlance, or within the meaning of sub-s. 3A (1)

Conclusions

Accordingly, the Tribunal fell into error in construing the Grants Act, and the decision of the Tribunal should be set aside.

A declaration should be made that the amount of $952,091, which was included as export earnings in the respondent's claim dated 27 November 1986 for a grant under the Export Market Development Grants Act 1974, in respect of the period commencing 20 May 1985 and ending on 30 June 1986, was not export earnings within the meaning of that Act.

The respondent should pay the costs of the applicant.

The declaration and orders will be made if and after any leave necessary under sub-s. 371 (2) of the Companies Act has been obtained. I will stand the matter over for a sufficient time to enable such leave to be sought from the Supreme Court of the Australian Capital Territory.

In the meantime, I make no other orders.