Phonographic Performance Company of Australia Ltd v Fitness Australia Incorporated & Anor [2011] HCATrans 132 (13 May 2011)

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Phonographic Performance Company of Australia Ltd v Fitness Australia Incorporated & Anor [2011] HCATrans 132 (13 May 2011)

Last Updated: 18 May 2011

[2011] HCATrans 132

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S19 of 2011

B e t w e e n -

PHONOGRAPHIC PERFORMANCE COMPANY OF AUSTRALIA LTD (ACN 000 680 704)

Applicant

and

FITNESS AUSTRALIA INCORPORATED

First Respondent

COPYRIGHT TRIBUNAL OF AUSTRALIA

Second Respondent

Application for special leave to appeal

FRENCH CJ
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 MAY 2011, AT 11.08 AM

Copyright in the High Court of Australia

MR R. COBDEN, SC: May it please the Court, I appear with my learned friends, MR C. DIMITRIADIS and MR S.J. FREE, for the applicant. (instructed by Gilbert + Tobin)

MR S.B. LLOYD, SC: May it please the Court, I appear with my learned friend, MS K.M. RICHARDSON, for the first respondent. (instructed by Minter Ellison Lawyers)

FRENCH CJ: Yes, Mr Cobden.

MR COBDEN: Thank you, your Honours. As the reports of its decisions reveal, the Copyright Tribunal is frequently called upon to exercise its jurisdiction in large rate setting cases that on one side involve copyright owners, usually represented by a collecting society, and on the other side industry, trade or government organisations, which was the case here – PPCA on the one side for the record companies, Fitness Australia representing fitness centres. As the Full Court observed at paragraph 8 of its reasons at application book 117, it was a very “hard fought and resource intense” fight. It went for a long time, many, many witnesses, a long judgment, including a dozen expert witnesses, several from overseas. Ultimately, what is controversial here, your Honours, is the role that evidence relating to an early survey, called the Roberts Research survey, played in the Tribunal’s judgment. Your Honours will have - - -

FRENCH CJ: This came to the fore after the principal survey was compromised by challenge?

MR COBDEN: The writing was on the wall, certainly, about the principal survey, there is no question about that, your Honour. Your Honours will have gleaned that from the Full Court’s reasons and I will return to it shortly. The point we wish to make here is that the Tribunal is given a mandate by the relevant provisions of the Copyright Act to discharge its functions as a statutory administrative body and produce a result.

FRENCH CJ: You do not deny that procedural fairness applies to - - -

MR COBDEN: No, not at all. Certainly not, your Honour. Procedural fairness applies but one bears in mind it is a primary or essential function as an administrative or rate setting body under a statutory provision, here section 154(4), and in that sense the Tribunal’s role is unlike that of a court. The role is not to accept or reject the case of any particular party. It is not to determine issues joined by the parties in the formal sense of a court. It is to do what it considers reasonable in the circumstances on the basis of the material before it.

FRENCH CJ: Are we talking here about anything more than the content of the requirements of procedural fairness in a particular context and their application to a particular set of facts?

MR COBDEN: We are talking about it. That is the focus of what we are putting to your Honours, of course.

FRENCH CJ: The question is how is a special leave question sort of conjured out of that?

MR COBDEN: “Conjured” is a menacing word, your Honour, but if I can say - - -

FRENCH CJ: It does happen.

MR COBDEN: Yes, your Honour. The reason it arises, first of all, is because the Copyright Tribunal’s jurisdiction itself is very important, and therefore the duty under section 154(4) is of importance in a very important area of endeavour, the Tribunal’s decisions, of course; that is why I emphasise the length of time and the amount of investment and time that goes into these proceedings, the outcome of which it would be unfortunate if that were seen to be, as it were, a stalemate when one could focus back on the Tribunal’s real statutory duty and its obligation to reach a decision as best it can based on the material before it, even if it ultimately rejects the position of both parties, which in a sense to some extent it did here.

Your Honour has, of course, drawn attention to section 154(4) and your Honour knows that the core of it – and it is set out in our submissions in paragraph 17 of our summary of argument at page 146 of the application book – and what that subsection does is to confer on the jurisdiction Tribunal, and indeed invest it with a duty to consider the scheme referred under the section – that was the PPCA scheme – which was, we emphasise, a member per month scheme as referred, and ultimately the Tribunal gave a decision on a per class fee, and it was the shift at the Tribunal’s urging, as it were, towards an emphasis on the per class fee that perhaps lies at the heart of the issue that is in this case. The Tribunal’s duty is to give the parties:

to the reference an opportunity of presenting their cases –

and then it is under a duty to –

make such order, confirming or varying the scheme or substituting for the scheme another scheme proposed by one of the parties -

That latter substitution right was more recently introduced than the variation or confirming possibility, but of course the scheme had to be:

proposed by one of the parties, as the Tribunal considers reasonable in the circumstances.

Of course, it had a duty to act fairly. Of course, it had a duty to involve - - -

FRENCH CJ: The question is did it use the pilot survey to strike a rate in circumstances where it was unfair to do so?

MR COBDEN: Yes, quite so. We respectfully submit that the Full Court has overlooked the need to be closely informed by the duty that is set out in subsection (4) in relation to:

giving to the parties to the reference an opportunity of presenting their cases –

but then the Tribunal’s obligation to go away and make its mind up. The two errors that we point to of the Full Court, with respect, are these – first, that under the guise of procedural fairness it has effectively imposed a requirement on the Tribunal, on this Tribunal, that it conduct itself as a court determining judicial proceedings, and we add not only this Tribunal but, of course, any other statutory tribunal that was under a similar valuation obligation, that the error would possibly flow on to those.

Secondly – this is the factual matter, as it were – if misconstrued, the nature of PPCA’s case in relation to the survey and the consequences of the rate setting issue that flowed from that, that second error requires a little bit of an examination of the course of the proceeding, which I will come to in a moment. What we submit is the effect of the Full Court judgment is that references before the Tribunal would adopt an even greater level of formality and consequently even greater expense and less expedition, and for that reason the question is of considerable importance, not only in relation to this Tribunal but also other tribunals, and that the decision of the Full Court, and with respect erroneously, imposes obligations with respect to the receipt of evidence and the deliberations of tribunals that are at odds with that statutory function and the administrative nature.

For those reasons we submit the special leave questions arise that we have identified, and the question then presents itself, is this case a suitable vehicle for those questions, and secondly, would we enjoy sufficient prospects of success to warrant a grant of special leave? We submit that the answer to those questions is yes, for these reasons. First, as to the errors themselves of the Full Court; we say that paragraphs 21 and 26 of the Full Court’s decision – and they are at pages 121 and 123 of the application book – refer to the notion of the debate being “opened up” about the particular use of evidence, and what we identify there is - - -

FRENCH CJ: The Full Court was saying it was only put in play by Fitness for a methodological critique of the principal survey. Is that right?

MR COBDEN: Yes, that is what they are saying, your Honour. We say that what emerges from that is a proposition that a party may be on notice about evidence relevant to the matters before the Tribunal, evidence that is in before the Tribunal and given an opportunity to say whatever it wants to about the significance of that evidence, that something more has to be done by the Tribunal in bringing that particular use of evidence into play. We say that is an unduly strict standard, and as we have said in our written submissions, could only be met by a tribunal giving advance notice of its reasoning, which it would be submitted is at odds with the notion that a court and, a fortiori, a tribunal should give a running commentary. It should not – and we have referred to the decision in Miah, the decision of Chief Justice Gleeson and Justice Hayne in Miah - - -

FRENCH CJ: There are the statements attributed to PPCA I think at 32, is there not, that it was not to be used to put it - - -

MR COBDEN: Quite so, your Honour, and that is the statement, the particular statement, that needs to be seen in the context of what we say is a further error by the Full Court, which is to paying sufficient attention to the fact, the circumstance, that in this case there were first very extensive written submissions – in our case provided by 28 May – and that the debate, of which paragraph 32 of the Full Court’s decision quotes, is an exchange in oral submissions that took place on 3 July.

This is another matter of perhaps some importance; that is to say, what is the role that would be interplayed between written and oral submissions in a large case where there has been so many days of hearing and so much material to put before an administrative tribunal, but also even before a court.

What had happened – going back a step, your Honours, as your Honours will have seen from the Tribunal’s decision and the Full Court decision – was that the case was fought for a very long time on the footing that PPCA sought a per member per month rate. The gym survey, the major survey, which was ultimately almost completely, if not completely, rejected by the Tribunal, was focused entirely on a per member per month rate.

Fitness Australia had always said that is an inappropriate way, we do not wish to pay anything like on a per member per month rate. The appropriate rate ought to be a per class rate. Towards the end of the evidence the Tribunal said, “Yes, we think you should put up an alternative scheme”, thus engaging 154(4), which includes an alternative of a per class rate.

Now, the main gym survey was not apt at all to deal with that and so when PPCA put in its written submissions, although the vast majority of them still sought to support the main survey which was directed to a per member per month rate, also put up a per class rate and identified in a section of those submissions very clearly what factors it would pick from the evidence that would support a per class rate. The debate that was going on at the time I was asked and answered the questions, the Tribunal’s question in the way set out at paragraph 32, was about the continuing submission in support of the per member per month rate, and in relation to that we said, in relation to Roberts Research, no, we did not rely on it for the fixing of the rate. We relied on that for the purposes identified there, the preliminary survey dipped the toe in the water, et cetera. If one reads on, with great respect, towards the end of that few lines, I said:

I think it might have been at the time – was way undervalued, whatever the – when the final proper exploration of value takes place.

That is a reference to the gym survey, the one that was ultimately rejected. Then I said in relation to the quite separate part of the written submissions:

And we point to it as one of a number of factors that might weigh up, if the Tribunal were doing a per-class rate.

The Tribunal has recorded, indeed, the written submissions that we made at paragraphs 42 – I am sorry, I got that wrong – and accepted that we – I am sorry, the Full Court has accepted at paragraph 34 that:

in the closing written submissions which were made PPCA grasped the nettle and suggested that the Roberts Research study could be used to justify certain figures.

There is the submission that is set out there. Now, that is the submission that the Roberts Research could be used to justify figures in the per class rate exercise that the Tribunal had requested we put forward as an alternative, squarely – that is in the written submissions. The written submissions were, of course, adopted and not resiled from orally.

The proper complexion that is to be put on the answer, which is the very one on which the Full Court’s decision in some ways pivots that is reflected at paragraph 32, that was saying, yes, we are in the area of discourse about the per member per month rate. Roberts Research plays no part in that, but because Roberts Research as is recorded in the Full Court’s judgment and indeed in the Tribunal’s reasons did look at the per class rate, albeit that we did not put it forward with anything like the strength on that point that we tried to put forward the gym survey, then it did – it was fairly put in the written submissions with plenty of notice we say, some five weeks or so before the oral hearings, and there is nothing in the passage that is cited at paragraph 32 that robs from that proposition.

So we say that an overemphasis and reliance on that answer and that passage, even though that very passage actually preserves forceful written submissions put on the point, has led the Full Court into an error, and it is an error which we say is of some general significance because setting aside what the Full Court refers to as the four assaults made by Fitness Australia during the evidentiary phase on the gym survey by reference to Roberts Research, Fitness Australia we say did also rely on the value revealed by Roberts Research which was far more centrally engaging than what we ultimately were using it for in relation to the per class rate, and that is recorded in the Full Court’s judgment at paragraphs 42 and onwards.

The Full Court accepts that in its written submissions Fitness Australia did make reference to the figures in the study. The Full Court sets that out on page 128 of the application book. Then the Full Court rejects the argument that having engaged on the notion of the values revealed by Roberts Research, which Fitness Australia did in the written submissions there quoted by saying, “Well, we will take Roberts Research and now compare that to the Hensher or Gyms Survey research, that reveals the Hensher’s or Gyms Survey research number is out of kilter.

We say the Full Court has misconstrued that passage and it is a use of the Roberts Research material for the purpose of value, but most importantly as what the – and that Mr Nicholas, as his Honour then was, who was representing Fitness Australia, does not really resile from that in the passage that is quoted on page 129. The error that emerges, in our respectful submission, in relation in particular to the activities of an administrative body engaged in the task that I emphasised at the outset of these oral submissions is to be found in paragraph 45, because first of all, the Full Court accepts:

there may be some ambiguity about the position of Fitness Australia –

I am reading from paragraph 45 on page 129 –

on the nature of its attack on Professor Hensher with the Roberts Research study. However, even allowing that to be so, that ambiguity is not germane to the resolution of this case because the position of both parties was that the study was not to be used to fix a rate.

First of all, that is not correct, as I have sought to demonstrate with some rapidity, but that was not so in relation to PPCA and had not been so at the time of the oral addresses for some five weeks. Secondly - - -

FRENCH CJ: .....a sort of ebb and flow of nuance here and one wonders whether in the end you are in a penumbral area of evaluative application of procedural fairness on which reasonable minds might differ but which do not necessarily give rise to a strong question of principle.

MR COBDEN: We would respectfully submit, yes, and particularly in relation to – that it would, particularly in relation to the fact that we had made a strong case in written submissions that there might be what the Full Court describes as a subtle or elusive answer in relation to a different issue – in written submissions on the question of the per class rate a subtle or elusive answer in relation to a matter on a different aspect of the case which is answering the.....still support the per member per month rate. Perhaps I am saying there just was not the elusiveness or subtlety that is involved. Then we say that that really leads the Full Court into the error that we submit is to be found in paragraph 45 that:

It was procedurally unfair for the Tribunal to use the study to fix a rate in light of that clear position –

It debates clear position –

and that is so even if both parties sought to use the study in other more limited fashions.

This is the sentence with which we take issue:

Those contests have to be seen in the light of the parameters of the debate which had been set and those limits included, according to both parties, a prohibition on the use of the study to derive a rate.

First of all, in relation to the per class rate we strongly dispute that, but as a matter of principle, your Honours, we would say that there is an error in there, that is to say that in an administrative case of this kind where the Tribunal is mandated with a function ultimately to come to a decision on what is a reasonable rate, whether it accepts or rejects the cases put before it by the parties, and has a lot of material in evidence before it upon which no limitations have been placed in any formal sense, is not confined by pleadings, that the parties in a sense cannot place a prohibition on the use of

particular evidence which informs the Tribunal’s ultimate task, and in any event it did not happen here.

So, in our respectful submission, where that leads us to is that a review of the factual material in the form of the submissions and some reference to the evidence which would all be before this Court on an appeal, once the principles are correctly applied, that is to say be informed by the statutory content of 154(4), a consideration of factual material, which is really the record, would demonstrate that we would have strong prospects of success.

The special leave questions are of importance for the reasons that I submitted to your Honours earlier in relation particularly to the Copyright Tribunal, which is of considerable importance, administrative evaluation tribunals generally, and the presentation of cases by means of a combination of written and oral submissions, the error by the Full Court and good prospects of success in an appeal lead us to submit to your Honours that there ought to be a grant of special leave. May it please the Court.

FRENCH CJ: Thank you, Mr Cobden. We will not need to trouble you, Mr Lloyd.

Although the applicant sought to infuse its application with questions of general importance relating to the function of the Tribunal, we are not satisfied that any such question arises. The decision of the Full Court turned upon whether the requirements of procedural fairness, undoubtedly applicable to the Tribunal’s proceedings, had been breached. That decision turned on matters of fact in relation to the conduct of proceedings before the Tribunal. There is no reason, in our opinion, to doubt the correctness of the Full Court’s decision. No question of general importance arises. Special leave will be refused with costs.

The Court will now adjourn to reconstitute.

AT 11.28 AM THE MATTER WAS CONCLUDED