Mcveigh and Another v Willarra Pty Ltd [1984] FCA 379; (1984) 2 FCR 587; 57 ALR 344 Administrative Law - Income Tax (11 December 1984)

FEDERAL COURT OF AUSTRALIA

McVEIGH AND ANOTHER v. WILLARRA PTY. LTD. [1984] FCA 379; (1984) 2 FCR 587
No. NSW G202 of [1984] FCA 379; 1984
57 ALR 344
Administrative Law - Income Tax

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Toohey J.(1), Wilcox(1) and Spender(1) JJ.

CATCHWORDS

Administrative Law- judicial review - income tax - Australian films - issue of provisional certificate - decision of Minister to refuse final certificate and to revoke provisional certificate - appeal - evaluation of "significant Australian content" of film - matters to be considered - wide discretion vested in Minister - meaning of "subject matter of film" - meaning of "persons who took part ... in the making of the film" - whether open to Minister to make further decision to refuse final certificate - applicability of rules of natural justice - extent of obligation of Minister to give notice of matters to be relied upon by him

Administrative Decisions (Judicial Review) Act 1977 s.5

Income Tax Assessment Act 1936 ss.124ZAA, 124ZAC, 124ZAD

Copyright Act 1968

Federal Court Rules O.52 R.22

Administrative Law - Judicial review - Decision of the Minister for Home Affairs and Environment not to issue a final certificate under s 124ZAC(3) of the Income Tax Assessment Act 1936 (Cth) - "Qualifying Australian Film" - "Significant Australian content", evaluation of, by Minister - "Persons who took part in the making of a film" - When appropriate to include authors - Extent of Minister's obligation to give details of matters relied upon in refusing to issue certificate - Natural Justice - Administrative Decisions (Judicial Review) Act 1977 (Cth), ss 5, 13 - Income Tax Assessment Act 1936 (Cth), ss 124ZAA(1), 124ZAB, 124ZAC(3), 124ZAD - Copyright Act 1968 (Cth) - Federal Court Rules, O 52, r 22.

Income Tax - "Qualifying Australian Film" - Refusal to issue a final certificate under s 124ZAC(3) - Judicial review - Evaluation of "significant Australian content" - Persons who took part in the making of the film - When appropriate to include authors - Minister's obligation to give details of matters relied on in refusing to issue certificate - Relevance of provisional certificate - Income Tax Assessment Act 1936, ss 124ZAA(1), 124ZAB, 124ZAC(3), 124ZAD. In an appeal against a decision of McGregor J who upon review under the Administrative Decisions (Judicial Review) Act 1977 set aside a decision of the appellant (the Minister) not to issue a final certificate under s 124ZAC(3) of the Income Tax Assessment Act 1936 in respect of a film The Return of Captain Invincible and to revoke a provisional certificate issued under s 124ZAB(3) of the Act on the ground that the film was not a qualifying Australian film within Div 10BA of the Act.

Held: (1) Under s 124ZAD, even though the Minister finds in a film under consideration significant non-Australian elements, it is still possible for the film to have a significant Australian content. "Significant" means "important", "notable", "of consequence" and the task of the Minister is to examine the Australian elements with a view to determining whether in the light of those elements, the film does have significant Australian content. It is not a question of weighing up the Australian elements against the non-Australian elements, and reaching a decision according to the side on which the scales come down. Although the Minister is entitled to say whether he regards one of the matters specified in s 124ZAD as more or less important than another matter specified therein, he must not place undue emphasis on non-Australian elements, as he did here.

(2) It is a consequence of s 124ZAD(c)(i) of the Income Tax Assessment Act that the authors, composers, actors, scripwriters, editors, producers, directors and technicians identified therein must also be persons who took part in the making of the film, which involves some active participation contemporaneous with the making of the film. If a scriptwriter who is truly the scriptwriter of a film derives his idea for the script from some written work, but no more, the author of that written work will not have taken part in the making of the film, and, accordingly, the Minister should have regard (under s 124ZAD(c)(i)) only to the nationality and place of residence of the scriptwriter and not of the author, although he would be entitled to have regard to the nationality of an author who did not participate in the making of the film under s 124ZAD(f).

(3) Where the Minister has issued a provisional certificate under s 124ZAB(3) of the Act but intends not to issue a final certificate and particularly where expenditure has been incurred in reliance on that provisional certificate, the Minister, upon conveying that intention by letter to the appropriate person, is bound by the rules of natural justice to make clear with some precision the nature and contents of any material which disposed him to refuse to grant the final certificate. On this basis, submissions in a departmental minute and by the Australian Feature Films Directors' Association Ltd should have been put to the respondents.

R v. Gaming Board for Great Britain; Ex parte Bendim and Khaida (1970) 2 QB 417; In re Pergamon Press Ltd (1971) Ch 388; Herring v. Templeman (1973) 3 All ER 569; R v. Secretary of State for the Home Department; Ex parte Mughal (1974) 1 QB 313; Wiseman v. Borneman (1971) AC 297; Sean Investments Pty Ltd v. MacKellar (1981) 38 ALR 363, referred to.

HEARING

Sydney, 1984, October 22-25; December 11. 11:12:1984
APPEAL

Appeal from a decision of McGregor J setting aside a decision of the Minister for Home Affairs and Environment not to issue a final certificate under s 124ZAC(3) of the Income Tax Assessment Act 1936.

D M J Bennett QC and L S Katz, for the appellants.

C J Bannon QC and A S Martin, for the respondents.
Cur adv vult

Solicitors for the appellants: Australian Government Solicitor.

Solicitors for the respondents: Sly & Russell.
GFV

ORDER

The appeal be dismissed.

The appellants pay the respondents' costs of the appeal.

Appeal dismissed with costs

DECISION

The first appellant was at relevant times and the second appellant is now Minister for Home Affairs and Environment in the Commonwealth Government. We shall refer to them simply as "the Minister". They appeal from a judgment of this Court given on 6 June 1984 under the provisions of the Administrative Decisions (Judicial Review) Act 1977 ("the Judicial Review Act").

2. In its judgment the Court set aside a decision made by the Minister not to issue a final certificate under sub-s.124ZAC(3) of the Income Tax Assessment Act 1936 ("the Income Tax Act") in respect of a film "The Return of Captain Invincible". The Court also set aside an ancillary decision made by the Minister to revoke a provisional certificate issued under sub-s.124ZAB(3) of that Act in respect of the same film.

3. Before the learned judge there was a question as to whether the relevant decision had been made by the Minister on 17 November 1982 or on 9 December 1982. As will appear, the determination of this question is not crucial to the outcome of this appeal. Each decision was challenged on the same grounds and the same grounds were upheld by his Honour in respect of each such decision. Equally the same grounds were upheld in respect of the challenge to the decision to revoke the provisional certificate. Nevertheless it will be necessary to make further reference to this aspect at a later stage of these reasons.

4. Section 124ZAC of the Income Tax Act lies within Division 10BA of that Act, a division that is concerned with "Australian films" as that term is defined. The division provides significant tax concessions for a "qualifying Australian film", being a film that is "an eligible film" and "an Australian film". These terms are defined. An Australian film means, so far as is relevant for this appeal, a film that has been made wholly or substantially in Australia and has a significant Australian content (sub-s.124ZAA(1)). A reference to an eligible film, again so far as is relevant, is a reference to a film produced wholly or principally for exhibition to the public in cinemas.

5. Sub-section 124ZAB(1) permits a person to apply to the Minister for a provisional certificate stating that a proposed film will, when completed, be a qualifying Australian film for the purposes of Division 10BA. Where such an application is made and the Minister is satisfied that the proposed film, when completed, will be a qualifying Australian film and that, having regard to the role of the applicant in the proposed production of the film, the applicant is an appropriate person to whom to issue a provisional certificate, the Minister shall issue such a certificate in respect of the proposed film (sub-s.124ZAB(3)). Having issued a provisional certificate, the Minister may request information in relation to the proposed film and, if there is a failure to provide that information, he may revoke the certificate (sub-ss.124ZAB(4) and (5)).

6. At any time after the issue of a provisional certificate, if the Minister becomes satisfied that the proposed film, when completed, will not be a qualifying Australian film or, if it has been completed, that the completed film is not a qualifying film, he shall revoke the certificate (sub-s.124ZAB(6)).

7. Section 124ZAC permits a person to apply to the Minister for a final certificate stating that a film that has been completed is a qualifying Australian film. If the Minister is satisfied that the film is a qualifying Australian film and that, having regard to the role of the applicant in the production of the film, the applicant is an appropriate person to whom to grant a certificate, the Minister shall issue a certificate under the section.

8. It is unnecessary to consider in any detail the tax implications of Division 10BA. Essentially the division permits a special deduction (formerly 150%, now 133%) of a taxpayer's contribution to the capital expenditure on an Australian film for which a final certificate is issued. The issue of a provisional certificate is not a pre-requisite to qualification under Division 10BA. But if such a certificate is issued it is deemed to have been in force at all times (sub-s.124ZAB(9)). Equally a revoked provisional certificate is deemed never to have been in force (sub-s.124ZAB(6)). A deduction under the division is available only where, at the time of expenditure, a provisional or final certificate was in force. The advantage to an investor of knowing that a provisional certificate has been issued is apparent.

9. In the present case there was a provisional certificate which was revoked and there was a decision not to issue a final certificate. The film in question was "The Return of Captain Invincible". The provisional certificate was issued to Andrew Gaty, one of the respondents, and the decision to revoke that certificate and not to issue a final certificate was communicated to him. Mr. Gaty played an important part in the production of the film, including the co-authoring of its script.

10. The respondents are members of two partnerships, the composition of which is set out in an annexure to his Honour's reasons for judgment. It is unnecessary to refer in any detail to the respondents or to their relationship with each other and their roles in the production of the film. The standing of the respondents to make an application under the Judicial Review Act was not challenged before the primary judge nor was it challenged in this appeal.

11. Many grounds were relied upon in the respondents' application under the Judicial Review Act. Most of these were held by his Honour not to have been made out. The respondents gave notice, pursuant to order 52 rule 22(3) of the Federal Court Rules, of intention to contend that some matters of fact and law had been erroneously decided against them.

12. There was a lengthy hearing before the primary judge and evidence was taken in Australia and in the United States. His Honour's reasons for judgment contain a detailed analysis of the matters in issue before him (see (1984) 54 ALR 65). It will be necessary to look at the grounds of appeal in some detail but, broadly speaking, the appellants seek to uphold the Minister's decision not to issue a final certificate on the ground that he was entitled to conclude that "The Return of Captain Invincible" was not a qualifying Australian film within Division 10BA of the Income Tax Act. The judgment setting aside the Minister's decision concluded that the Minister had misconstrued the meaning of certain provisions within Division 10BA; that the decision that the film was not a qualifying Australian film was so unreasonable that no reasonable person could have exercised the power conferred on the Minister in the way that he did; and that there had been breaches of the rules of natural justice in connection with the Minister's decisions to refuse to grant a final certificate and to revoke the provisional certificate.

13. Before turning to the background against which application was made for a provisional and a final certificate, it may be noted that the grounds upheld by his Honour were as follows:

Ground 2(i)

The Minister took into account an irrelevant
consideration viz. that, contrary to the
fact, the original authors of the film script
were Ron Inkpen and Tony Macaulay.

Ground 2(j)

The Minister took into account an irrelevant
consideration viz. that, contrary to the
fact, the idea behind the script 'The Return
of Captain Invincible' was the same as that
behind the script 'Whatever Happened to
Captain Incredible'.

Ground 4

That the making of the decisions was an
improper exercise of the Minister's power
conferred by ss.124ZAB and 124ZAC of the
Income Tax Act in that the Minister exercised
his power of satisfying himself that the film
was an eligible film so unreasonably that no
reasonable person would have so exercised the
power.

Ground 7

The decisions involved an error of law in
that the Minister erred in his construction
of the provisions of the Income Tax Act in
their definition of 'significant Australian
content'.

Ground 8

The decisions involved an error of law in
that the Minister erred in his construction
of the word 'authors' contained in the Income
Tax Assessment Act.

Ground 9

The Minister breached the rules of natural
justice in connection with making the
decisions in that he failed to give the
present respondents or any of them an
opportunity of being heard before making the
decisions.

14. As the primary judge's recital of the facts was not the subject of any serious challenge, it is appropriate to rely upon that recital for an appreciation of the events giving rise to the proceedings in this Court. Mr. Gaty, to whom reference has been made, arrived in Australia in 1956 or thereabouts and has continued to reside here except for two brief periods in London and New York. His experience in the film industry extends over 14 years including script writing and distribution of films. He is the managing director of and a major shareholder in Seven Keys Pty. Ltd., one of the respondents.

15. In 1975, while in London, Mr. Gaty met Mr. Inkpen and Mr. Macaulay who are mentioned in the grounds upheld by the primary judge. They had written a stage play musical "Whatever Happened to Captain Incredible", later called "Zap". They asked Mr. Gaty to produce the play for them and he agreed to do so though he was concerned that the story line was based on the well known character Superman. Messrs. Inkpen and Macaulay were not prepared to have the script rewritten and Mr. Gaty decided not to produce the play. He did however retain one version of the script.

16. In 1978 Mr. Gaty was employed in New York as a film consultant by Martin Poll Productions Incorporated. He gave thought to a film, the central theme of which was a super hero who had dropped out of society and lost his powers but was recalled in a time of crisis. He wrote a broad outline of this theme, known in the trade as a treatment. Mr. Martin Poll was enthusiastic about the idea of the film and, at Mr. Gaty's suggestion, engaged Mr. de Souza to work on the script with him. After many writing sessions and telephone discussions de Souza produced a rough first draft in March 1979. A satisfactory first joint draft was produced in or about November 1979. Thereafter Mr. Gaty left Martin Poll Productions and acquired the rights in the script by payment of $35,000 to Metropolitan Communications which had bought out Martin Poll Productions.

17. Mr. Gaty returned from New York to Sydney towards the end of 1980. On 26 February 1981 his solicitors submitted an application to the Department of Home Affairs and Environment for a provisional certificate under Division 10BA of the Income Tax Act relating to a film which then bore the title "The Return of Captain Incredible". The application identified the scriptwriters as Mr. Gaty and Mr. de Souza and the director as Phillipe Mora, a well known film director.

18. In mid-1981, after discussions with Mr. de Souza and Mr. Mora, Mr. Gaty decided to rewrite part of the script so as to set some of the action in Australia. The name "The Return of Captain Invincible" was chosen for the film and on 3 July 1981 or thereabouts Mr. Gaty submitted to the Department a further application for a provisional certificate. An amended application was submitted on 19 August. Both applications stated the source of finance to be Australian resident citizens. In August 1981 Mr. Gaty finished the first draft of the rewritten script. A number of songs were included and the final shooting script was completed on or about 31 October 1981.

19. In August 1981 a partnership called Willarra Pty. Ltd. and Others ("the Willarra partnership") had been formed to produce a motion picture entitled "Painted Lady". That partnership entered into an agreement with Seven Keys Pty. Ltd. to produce the film but difficulties were encountered. On 14 September 1981 the partnership and the company agreed to cancel that production and to produce instead "The Return of Captain Invincible".

20. On 10 September 1981 the Minister informed Mr. Gaty by letter that a provisional certificate for "The Return of Captain Invincible" had been issued pursuant to s.124ZAB of the Income Tax Act. The letter called upon Mr. Gaty to inform the Minister of any changes made to the film in the course of production so that its eligibility might be reviewed and drew attention to the Minister's power to revoke a provisional certificate.

21. Originally it had been hoped to engage Mr. Paul Newman, the American actor, and Mr. Frank Thring, the Australian actor, for the key roles of Captain Invincible and Mr. Midnight. In the end Mr. Alan Arkin, also a well known American actor, and Mr. Christopher Lee, a well known English actor, were engaged instead. By letter dated 19 October 1981 the Minister was told of these changes and of an increase in the budgeted expenditure overseas "due to the fees necessary for the principal cast and also to re-evaluating the 'Special Effects' to be used in the film". On 19 November 1981 the Minister wrote to Mr. Gaty to say that in his view those changes did not alter the eligibility of the film.

22. Filming began on 23 November 1981. The inside scenes were shot in Rozelle and at the old Balmain power station near Sydney; outside scenes were shot on location around Sydney and in the Blue Mountains. As a result of changes made to the script it became unnecessary to take any of the cast to New York to shoot any scenes or to engage any American extras or technicians.

23. Once shooting had been completed early in 1982, the job began of editing, composing and recording music, laying and mixing sound tracks and processing and development. With the consent of the Willarra partnership Mr. Gaty decided to mix the sound in Dolby stereo to give an improved performance, to engage a larger orchestra to produce the musical score and otherwise to incur certain costs to improve the film's quality and appearance. He then left for the United States to promote the film and to have preliminary discussions in relation to a distribution agreement for it.

24. On 9 April 1982 in New South Wales Mr. Gaty saw the first cut of the film. He was unhappy with what he saw and felt that the film was "just not right". He met Mr. Mora for discussions and on 16 April he saw the second cut of the film which had been reduced by some 20 minutes. On 17 April he wrote to Mr. Mora listing 67 points for discussion. In some of these he suggested a change and in others he expressed dissatisfaction with matters of detail. In his Honour's words: "Thus it would not be accurate to say that there were 67 points each of which required a specific change to the film". At first Mr. Mora was upset at the disappointing response to the film and was angry at the many suggestions made by Mr. Gaty. In the end he agreed to consider alterations and a third cut of the film was completed by 23 April 1982. This effected a further reduction of 28 minutes so that the film ran for 102 minutes. Mr. Gaty was satisfied that the re-editing had incorporated many of his suggestions.

25. On 25 May 1982 there was a public announcement by the Minister that he had made formal arrangements with the Australian Film Commission to assist him in evaluating applications for certificates under Division 10BA.

26. On 23 May 1982 Seven Keys, acting as agent for the Willarra partnership, entered into an agreement with Manley Productions Incorporated for the sale of distribution rights of the film in certain countries and territories of the Middle East.

27. By 21 June 1982 an answer print had been struck. Broadly speaking, an answer print is one which combines sound recording with photography. It is in a form which enables the film to be shown though it does not mean that no further alterations at all will be made. His Honour commented that an examination of the answer print disclosed that some 94.5% of its running time was made up of footage shot exclusively in Australia and 3.5% of its running time from stock archival footage from the United States and Australia. About 2% of the running time of the film was shot in New York.

28. The final cost of the film was $4,979,541, an increase of $478,860 over the original estimate. These additional funds were provided by the original investors.

29. On 23 June 1982 the June version of the film was screened to various members of the board of Willarra, to most of the investors and to others involved in making the film. In an affidavit filed in these proceedings Mr. Gaty deposed:

"I regarded the answer print of the Film which
was struck on 21st June 1982 as the completed
version of the Film and that that version was
a highly refined product which would be
readily saleable".

30. A letter dated 29 June 1982, containing an application for a final certificate dated 23 June 1982 together with the final script, budget and final cost statement and statutory declaration, was forwarded to the Minister. Mr. Gaty arranged for additional prints to be struck for the Australian Film Institute Awards. On 24 June he went to Los Angeles to show the answer print to major studios. His Honour appears to have accepted Mr. Gaty's evidence that he would not have done this unless satisfied that the film was complete and in a form capable of exhibition to the public. There was a screening in the United States on 25 June 1982 and again on 29 June.

31. On 1 July there was a further private screening held at Gomillian Sound Studios in Hollywood, the purpose of which was to gauge a broader public reaction. The reaction was described as "politely favourable". Mr. de Souza suggested that the film needed re-cutting. On or about 7 July it was screened again for certain senior executives. Mr. Gillin, Mr. Gaty's representative in Los Angeles, suggested that it not be shown to other studios until cuts had been made. Mr. Gaty was of the view that if any re-editing or re-cutting was necessary it should be done in the United States and he engaged Mr. Kuperman to participate in this process. Other private screenings were arranged but the reaction of the audiences was disappointing. Mr. Gaty concluded that more changes were necessary but this was not a view shared by Mr. Mora. However Mr. Gaty embarked upon further re-editing. He was assisted by Mr. Kuperman and later by Miss Barnett, an Australian assistant editor. His Honour accepted the evidence of Mr. Gaty that he "did retain creative control".

32. Mr. Gaty claimed that the re-editing did not change the story though different "takes" were used, some 30 seconds of archival footage were added and some parts of the film were reduced. Running time was now 92 minutes.

33. By October or December 1982 the re-editing process was completed. The "New York cut", as the result was called, was shown to various persons. Some responded enthusiastically, others did not. On 16 October 1982 a distribution agreement was made with Jensen Farley Pictures Incorporated of Beverley Hills.

34. On 1 October 1982 Mr. Meadley, a film certification officer with the Australian Film Commission, sent a telex to the Department of Home Affairs and Environment suggesting that before the Commission provide a recommendation as to a final certificate, the Department ask Mr. Gaty to sign a statutory declaration that the June version was the film "produced wholly or principally for exhibition to the public and that no other film has been made or is being used for that purpose". On 8 October Mr. Gaty made such a statutory declaration, having first spoken to Mr. Meadley who suggested the wording of the document. On the day preceding the making of the statutory declaration (which was received by the Australian Film Commission by 13 October) Mr. Harris, a representative of the Commission in Los Angeles, spoke to Mr. Meadley to say that Mr. Gaty had been to see him, that the June version of the film had been re-cut and that "we would obviously need a full explanation from Gaty". According to Mr. Gaty's evidence, which again his Honour seems to have accepted, he was never told the need for a full explanation.

35. On 12 October 1982 the Department sent a telex to Mr. Meadley asking that the Australian Film Commission "expedite" advice on the application for a final certificate. On 13 October the Commission advised the Department of its recommendation that a certificate be issued in view of the statutory declaration provided by Mr. Gaty. This advice was never put before the Minister, a question having arisen as to the authority of the Commission under its statute to provide advice to him.

36. On 16 November 1982 a departmental minute was sent to the Minister advising that he reject the application. The Minister did so on 17 November. It is of some importance to set out the relevant passages of the Minister's letter:

"On 8 October 1982 you declared in a statutory
declaration

'The film completed on 23 June 1982
is the film produced wholly or
principally for exhibition to the
public and that no other film has
been made or is being used for
that purpose.'

In the same statutory declaration you
declared:

'any changes to the film are or
will be made only for censorship,
or marketing purposes or to comply
to the distributors request'.

Having regard to the information before me, I
am unable to satisfy myself that the film is
an eligible film.

Furthermore, in my view, changes to the film
made at the request of an overseas
distributor would mean that total creative
control is not in Australian hands unless
these changes were supervised by the
Australian director. I have reason to
believe that this is not the case.

This situation, taken together with the
considerable increase in key overseas
elements since the time of provisional
certification, including the fact that there
is some doubt about the origin of the script
and that budget payments reflect a minimal
Australian contribution to the script, means
that I am unable to satisfy myself that the
film remains a qualifying Australian film in
terms of the Income Tax Assessment Act 1936."

37. On 18 November Mr. Gaty replied, enclosing a telex from Mr. de Souza stating that "The Return of Captain Invincible" was an original screenplay written by him and Mr. Gaty and was not based on any other work by any other person. He also dealt with the other matters mentioned in the Minister's letter. On 19 November Mr. Gaty met with officers of the Department. He told the officers that it was incorrect to say that changes to the film were made at the request of an overseas distributor thus taking creative control out of Australian hands; that changes were for marketing reasons; that no extra footage was shot and that the New York cut was the same film as that completed in June; and that there was no increase in the overseas elements of the film since the time of provisional certification except for those changes approved by the Minister.

38. On 9 December 1982 the Minister, acting on the advice of his Department, wrote to Mr. Gaty to say that he remained unsatisfied that the film was a qualifying Australian film and that he was therefore obliged to revoke the provisional certificate. In the course of the letter he said:

"Furthermore, while I am prepared to accept
your statement that you were co-author of the
script, I remain unconvinced about the origin
of the idea".

39. By letter dated 17 December 1982 solicitors for Mr. Gaty called upon the Minister, pursuant to s.13 of the Judicial Review Act, to provide reasons for his decision. The Minister provided a statement of his reasons.

40. The provision in sub-s.124ZAA(4) that an "eligible film" is a reference to a film produced wholly or principally for exhibition to the public is cast in objective terms. That is not to say that in proceedings under the Judicial Review Act the Court is entitled to substitute its own view for that of the Minister; a successful challenge to the Minister's decision must be based on one of the grounds in sub-s.5(1) of the Act.

41. On the other hand, the question whether a film is an "Australian film" requires the Minister to determine whether the film has a significant Australian content. In making that determination, the Minister is obliged by s.124ZAD of the Income Tax Act to have regard to the following matters:

"(a) the subject matter of the film or
proposed film;

(b) the place or places where the film was
or the proposed film will be, made;

(c) the nationalities and places of
residence of -

(i) the persons who took part, or who
will take part, in the making of
the film or proposed film
(including authors, composers,
actors, scriptwriters, editors,
producers, directors and
technicians);

(ii) the persons who are, or who will
be, the beneficial owners of
shares in any company concerned in
the making of the film or proposed
film; and

(iii) the persons who are, or who will
be, the beneficial owners of the
copyright in the film or proposed
film;

(d) the source from which moneys that were
used in the making of the film were, or
that are to be used in the making of the
proposed film will be, derived;

(e) the details of the production
expenditure incurred in respect of the
film or of the budgeted production
expenditure to be incurred in respect of
the proposed film; and

(f) any other matters that the Minister
considers to be relevant."

42. These matters are not listed in any order of priority nor does the section attach importance to one as against another. Furthermore para. (f) empowers the Minister to have regard to any other matters he considers to be relevant. The section confers on the Minister a wide discretion or perhaps more accurately wide scope in evaluating whether a film has a significant Australian content, an evaluation he is required to make in determining whether a provisional or final certificate should issue. Of course s.5 of the Judicial Review Act remains available to anyone who is aggrieved by the Minister's decision. But in considering whether the making of a decision was an improper exercise of the power conferred by Division 10BA, one must not lose sight of the way in which the legislature has vested decision making in the Minister.

43. When the Minister is faced with the task of making a determination under s.124ZAD, in our view he ought not to weigh those matters which point to an Australian content against those matters which do not and reach his decision according to the side on which the scales come down. It is quite possible, as counsel for the Minister acknowledged, that a film may have a significant Australian content and a significant non-Australian content. In this respect the primary judge said:

"'Significant' is an ordinary English word
used in Division 10BA according to its common
understanding. I take its meaning to be
'important', 'notable', 'of consequence'".

44. Counsel did not quarrel with the meaning attached by his Honour to "significant". A film may be said to have a significant Australian content if the Minister, having had regard to the matters contained in s.124ZAD including such other matters as he considers to be relevant, is satisfied that there are aspects of the film which give it a content which is significantly Australian.

45. In this regard it is for the Minister to say whether he regards the subject matter of the film as more important than the place where the film was made. It is for the Minister to say whether the nationalities and places of residence of those taking part in the film are more or less important than the source from which the monies used in the making of the film were derived. Of course the exercise of power conferred by s.124ZAD may, in an appropriate case, be improper in the sense that it is so unreasonable that no reasonable person could have exercised the power in this way. Or it may be improper for any of the other reasons set out in sub-s.5(2) of the Judicial Review Act. In the appellants' submission the Court does not, in relation to para (g) of the sub-section, concern itself with the justification for any finding of fact made by the Minister leading to the exercise of power unless perhaps there was no evidence at all to warrant the finding. It may be noted that para (h) of sub-s.5(1) identifies as a ground for review that "there was no evidence or other material to justify the making of the decision". But of course that paragraph is concerned with the decision itself rather than facts found in the course of making the decision.

46. We agree with the appellants that, in terms of para (g) of sub-s.5(2), the Court does not examine the basis of each finding of fact; its powers are more circumscribed. It is the exercise of power with which the Court is concerned. But it is appropriate, when considering the reasonableness of the exercise of power, to refer to all the material before the Minister. An examination of that material might yield the conclusion that no decision maker, acting reasonably, could have made the decision sought to be reviewed. Borrowing the language of criminal appeals, the Court may conclude that the exercise of power was perverse. It is important to keep in mind the distinction drawn by Menzies J. in Parramatta City Council v. Pestell [1972] HCA 59; (1972) 128 CLR 305 at p 323:

"There is, however, a world of difference
between justifiable opinion and sound
opinion. The former is one open to a
reasonable man; the latter is one that is not
merely defensible - it is right".

See also Brennan J. in Foley v. Padley [1984] HCA 50; (1984) 54 ALR 609 at p 624.

47. In our opinion the Minister did not approach the matter of a final certificate with a correct appreciation of what was involved in determining whether the film had a significant Australian content. The Minister's letters of 17 November and 9 December 1982 and his statement of reasons of 13 January 1983 placed undue emphasis on what the Minister saw as the non- Australian elements of the film and failed to examine the Australian elements with a view to determining whether, in the light of those elements, the film had a significant Australian content. The error was not merely one of emphasis; it arose from a misunderstanding of what s.124ZAD required.

48. There are questions of interpretation and construction arising out of s.124ZAD, some of which are relevant to the determination of this appeal.

49. The words in para. (a) of s.124ZAD, "the subject matter of the film" are ordinary English words. They have no technical connotation and entitle, indeed require, the Minister to have regard to such matters as the setting of the film, whether it purports to tell a story about Australians, whether there is some quality about the film that marks it out as an Australian film. This does not mean that only a film such as Jedda or Gallipoli may be said to have a significant Australian content. The Minister may well determine, in a particular case, that the subject matter of the film is universal but that it reflects a cultural background peculiar to Australia. He may well determine that the other components of s.124ZAD warrant a decision that the film has a significant Australian content, notwithstanding that its subject matter has no particularly Australian quality.

50. Counsel for the respondents submitted that guidance to the meaning of the expression "the subject matter of the film" is to be derived from the provisions of the Copyright Act 1968 in which reference is made to the subject matter of copyright. In counsel's submission, para. (a) of s.124ZAD is not concerned with the cultural aspects of a film; it is simply a reflection of the fact that since the legislation of 1968 there may be copyright in a film as such, as opposed to its components - a series of photographs, a sound track, a production and a separate literary or dramatic copyright in any scenario or script. See Copinger & Skone James on Copyright 11th Ed. paras 753,754.

51. We do not accept that submission. It is true that Division 10BA refers to copyright subsisting in a film by virtue of Part VI of the Copyright Act 1968 but it does so in defining "copyright" for the purposes of the division. See the definition in sub-s.124ZAA(1). The question is not one of the existence of different definitions of the same subject matter in statutes of the one parliament, as to which see Yager v. R. [1977] HCA 10; (1976-1977) 139 CLR 28 at p 43. In s.124ZAD the legislature has chosen the expression "the subject matter of the film" as a collection of ordinary English words. Paragraph (c)(iii) lists as a relevant matter for the Minister's consideration "the persons who are, or who will be, the beneficial owners of the copyright in the film or proposed film". An examination of that matter requires an examination of the meaning of copyright in the Copyright Act. But the reference to "the subject matter of a film" is a quite different and unrelated consideration.

52. Paragraph (c)(i) of s.124ZAD requires that regard be had to the nationalities and places of residence of "the persons who took part ... in the making of the film ... (including authors, composers, actors, scriptwriters, editors, producers, directors and technicians)". Counsel for the respondents invited us to read the bracketed words ejusdem generis. Presumably that requires that "the persons who took part ... in the making of the film" be regarded as the genus. Whether or not it be a case of ejusdem generis, it is we think a consequence of para (c)(i) that the persons identified by the words in brackets must also be persons who took part in the making of the film. There may be others who answer the general description in para (c); the list though comprehensive is not exhaustive. As to the significance of the use of "including" in a statute, see Buckle v. Josephs (1983) 47 ALR 787.

53. The words used in para (c) are ordinary English words and their meaning is a question of fact for the Minister. Brutus v. Cozens [1972] UKHL 6; (1973) AC 854; Hope v. Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1. However the notion of taking part in the making of a film suggests some active participation, contemporaenous with the making of the film. Thus if, as is often the case, a film takes as its musical theme a composition of a composer long since dead (Beethoven or Mozart for instance), it is hard to see how that person can be said to have taken part in the making of the film. It should not be assumed that there will always be someone to answer each of the descriptions in para. (c)(i) of s.124ZAD; it may be that in a case such as that instanced there will be no composer who took part in the film. At the other end of the scale, a person who is engaged to write the musical score for a film is undoubtedly a person who, for the purposes of s.124ZAD, takes part in the making of the film.

54. Some difficulties may arise in connection with authors and scriptwriters. By definition the scriptwriter takes part in the making of a film but what of the author? If the scriptwriter has taken a novel written by an author now dead and adapted it for a film, there is a scriptwriter but no author who took part in the making of the film. Questions of degree will arise. A living author may sell the film rights to a novel but retain some power of veto in regard to changes made to the plot of the novel. It is not hard to regard such a person as an author who took part in the making of the film. To take another illustration which is more germane to the matters now before the Court, if a scriptwriter derives his idea for the script from some written work but no more, the author of that written work will not have taken part in the making of the film. Of course questions of copyright may arise but that is another matter. It does not follow that the fact that the work of an Australian author, now dead, is used for the purposes of a film is irrelevant; it is a matter that the Minister may properly take into account under para. (f) of s.124ZAD of the Income Tax Act.

55. The identification of authors and scriptwriters is a matter of some importance in this appeal since the grounds upheld by the primary judge included a finding that the Minister took into account an irrelevant consideration viz. that, contrary to the fact, the original authors of the film script were Ron Inkpen and Tony Macaulay and further that he took into account an irrelevant consideration viz. that, contrary to the fact, the idea behind the script "The Return of Captain Invincible" was the same as that behind the script "Whatever Happened to Captain Incredible".

56. In our view his Honour was correct in upholding these grounds. Messrs. Inkpen and Macaulay were the authors of a script which has a number of similarities to the script of "The Return of Captain Invincible". But we have read both scripts and consider that the differences are substantial and such as to justify his Honour's finding. Even if the idea behind "Whatever Happened to Captain Incredible" was the same as that behind "The Return of Captain Invincible", it does not follow that Messrs. Gaty and de Souza were not persons who took part in the making of the film and that they were not scriptwriters within the terms of para (c)(i) of s.124ZAD. The Minister's "doubt about the origin of the script" (see his letter of 17 November 1982 quoted earlier in these reasons) was misplaced and arose from a misunderstanding of para (c)(i) of s.124ZAD.

57. Nevertheless, counsel submitted, the origin of the idea behind the film was a matter to which the Minister was entitled to have regard by reason of para (f) of s.124ZAD. This may well be so if the Minister had approached the making of his decision with a correct appreciation of the difference between scriptwriters and originators of ideas, keeping in mind that the nationality and residence of the former was a matter to which the section directed attention expressly. But in the particular circumstances of the present case, it is not an adequate answer to the primary judge's conclusion that the Minister took into account irrelevant considerations to say that the Minister merely applied the wrong paragraph of the section. The fact is that he did not appreciate that Mr. Gaty was truly one of the scriptwriters of the film about which he was required to make a decision, that there was no relevant author and that he was confusing the origin of the script with the origin of the idea for it. We do not wish to be taken as suggesting that the nationality of the originator of an idea is necessarily a relevant consideration. The connection between idea and script may be so tenuous as to be of no importance in determining whether the film has a significant Australian content. That is a matter for the Minister to decide.

58. Another ground upheld by the primary judge and challenged in these proceedings is that the Minister breached the rules of natural justice in making his decision or decisions, in failing to give the respondents an opportunity of being heard.

59. The significance of the reference to "decision or decisions" is that the Minister wrote two letters to Mr. Gaty, one dated 17 November 1982 and the other dated 9 December 1982. The notice of appeal to this Court contended that the primary judge erred in holding that the letter of 17 November 1982 recorded the terms of a decision within the meaning of the Judicial Review Act. Before this Court counsel for the appellants acknowledged that the letter did record a decision but nevertheless argued that it was merely the expression of a tentative opinion on matters for decision on the application for a final certificate, impliedly giving the respondents the opportunity to make submissions on these matters, which opportunity was later acted upon.

60. It is not possible to ignore completely the earlier letter but it has little practical significance for the outcome of this appeal save for an argument by the respondents that, the Minister having made a decision on 17 November, it was not open to him to make a further decision in respect of the same matter on 9 December. Counsel for the respondents was at first somewhat reluctant to make a submission in these terms but in the end contended that even if the earlier decision were invalid it was not open to the Minister to reconsider the matter and reach a further decision. It may be that the last sentence should be qualified by the words "to the same effect" for we did not understand counsel to suggest that the Minister could not reconsider the matter and come to a decision favourable to the respondents.

61. We do not accept the respondents' submission on this aspect of the appeal. If the Minister acted in breach of the rules of natural justice in reaching the decision of 17 November 1982, we see no reason why he should not reconsider the matter, particularly in the light of any further material drawn to his attention. Such rules of natural justice as were applicable to the making of a decision by the Minister under s.124ZAD would of course remain applicable. Ridge v. Baldwin [1963] UKHL 2; (1964) AC 40 at p 79; Twist v. Randwick Municipal Council [1976] HCA 58; (1976) 136 CLR 106 at p 115.

62. In our view it was open to the Minister to reconsider the granting of a final certificate following his letter of 17 November. It was incumbent on him to notify the respondents that he was giving the matter his consideration, give them the opportunity to be heard further and in particular bring to their attention any material which had not been before him on 17 November.

63. Sub-section 5(1) of the Judicial Review Act does not itself import into the making of any decision, susceptible of review under that Act, an obligation to adhere to the rules of natural justice. What it does is permit a person aggrieved by a decision to which the Act applies to seek a review of that decision on one or more of prescribed grounds, one of which is:

"(a) that a breach of the rules of natural
justice occurred in connection with the
making of the decision".

64. Thus it becomes necessary to determine which, if any, of the rules of natural justice were applicable to the decision made by the Minister on 9 December 1982. In the end there was little disagreement between the parties to this appeal on the principles applicable. It was common ground that the respondents were entitled to be informed of any matters before the Minister that might militate against a decision that the film had a significant Australian content or that it was a film produced wholly or principally for exhibition to the public. There was some disagreement between counsel as to the particularity with which the Minister should acquaint the respondents of any such matters. In the appellants' submission it was enough that the respondents be informed of their substance and that it was not necessary for the Minister to refer, by chapter and verse, to the material upon which he proposed to rely.

65. We agree that the rules of natural justice do not necessarily require a decision maker to bring to the attention of persons in the position of the respondents the precise detail of all matters upon which he intends to rely. R. v. Gaming Board for Great Britain; Ex parte Benaim and Khaida (1970) 2 QB 417; in Re Pergamon Press Ltd. (1971) Ch 388; Herring v. Templeman (1973) 3 All ER 569; R. v. Secretary of State for the Home Department; Ex parte Mughal (1974) 1 QB 313; Ansell v. Wells [1982] FCA 186; (1982) 43 ALR 41. The extent of the obligation will necessarily depend upon the circumstances. But in a case such as the present, particularly when the Minister had issued a provisional certificate, he was bound to make clear to the respondents with some precision the nature and contents of any material which disposed him to refuse the grant of a final certificate and to revoke the provisional certificate. It must be remembered that by the time the Minister came to make his decision of 9 December 1982 the respondents had incurred expenditure of $5,000,000 and it is fair to say that the expenditure had been made in substantial reliance on the grant of a provisional certificate.

66. Before this Court there was some debate as to the implications of the issue of a provisional certificate pursuant to s.124ZAB of the Income Tax Act. It is clear that the issue of such a certificate does not prevent the withholding of a final certificate. There is nothing in Division 10BA comparable to sub-s.170(3) of the Income Tax Act which precludes the amendment of an assessment increasing the liability of a taxpayer who has made "a full and true disclosure of all the material facts necessary for his assessment". At the same time, where a provisional certificate has issued and expenditure has been incurred in reliance on that certificate, the rules of natural justice require that the Minister be especially sensitive to the need to acquaint the holder of the certificate with any material tending to support the withholding of a final certificate. "Natural justice, it has been said, is only 'fair play in action'" (Lord Morris in Wiseman v. Borneman (1971) AC 297 at p 309).

67. The view taken by the primary judge was that, in reaching the decision recorded in his letter of 9 December 1982, the Minister acted in breach of the rules of natural justice. In particular he failed to acquaint the respondents with material in a minute submitted to him by his officers dated 16 November 1982. In that minute the First Assistant Secretary to the Minister informed him that "We (presumably a reference to the officers of the department most concerned with the application for a final certicate) have been unable to assure ourselves that this film is a qualifying Australian film". The reasons were expressed as doubt whether the film was eligible in the sense that it was a film produced wholly or principally for exhibition to the public and doubt whether the film could properly be described as an Australian film having regard to changes in its Australian content since the issue of a provisional certificate.

68. It should be said at once that it is not the province of this Court to examine the departmental minute as if it were a judgment on appeal. The Minister was entitled to look to his department for advice and the officers of his department were entitled, indeed bound, to give him advice. Even if that advice placed too much stress on some matters and attached insufficient weight to others, it would not be for this Court to interfere. Of course if the advice contained errors of law and a decision was made in accordance with that advice, the decision may be attacked under s.5 of the Judicial Review Act. Sean Investments Pty. Ltd. v. MacKellar (1981) 38 ALR 363 at 371. For present purposes, the relevance of the minute lies not so much in its contents but in whether the Minister failed to bring those contents to the attention of the respondents.

69. In our view there was a failure to do so. In particular the Minister's attention was drawn to a submission made by Australian Feature Films Directors' Association Limited which alleged that the film was rushed to completion by 30 June 1982 to meet the requirements of the Income Tax Act and that subsequently all editing materials had been removed to the United States where the film had been re-cut without consultation with the director. The significance of this lay in the inference that might be drawn that the film for which a provisional certificate had been issued was not produced wholly or principally for exhibition to the public but simply to meet the requirements of the Income Tax Act and with a view to substantial alterations being made thereunder. Such a film might not be "completed" within the meaning of sub-s.124ZAC(1) of the Act.

70. Furthermore, the minute said, there had been an increase in the number of overseas elements in the film since the issue of the provisional certificate and subsequent ministerial approvals. This was a matter which, in fairness, the Minister should have put to the respondents to give them the opportunity to rebut it. He failed to do so.

71. The primary judge reached his conclusion that there had been a breach of the rules of natural justice, without relying upon the Minister's failure to have regard to the advice of the Australian Film Commission that the film had a significant Australian content and was a qualifying Australian film. As mentioned earlier, doubt had arisen as to the capacity of the Commission, in terms of its statutory functions, to offer advice to the Minister. In our view the Commission was not precluded from giving advice. The Minister's failure to take that advice into account was particularly open to criticism when he was prepared to have regard to the unfavourable views of Australian Feature Film Directors' Association Limited, the Actors and Announcers Equity Association of Australia and the Australian Writers Guild Feature Film Committee.

72. In all the circumstances we are of the opinion that in reaching his decision of 9 December 1982 the Minister failed to accord to the respondents natural justice. He failed to give them the opportunity to confront and reply to matters which had not been before him when he issued a provisional certificate but which clearly played a substantial part in persuading him not to issue a final certificate.

73. In a notice of contention filed in these proceedings the respondents contended that the primary judge erred in holding that the Minister had taken into account the intention of all copyright owners of the film in determining whether it was an eligible film within Division 10BA.

74. The argument of the respondents was that the Minister had wrongly assumed that Mr. Gaty's intention was the intention of all the respondents. The submission seemed to be in part that the Minister was not entitled to conclude this to be the case and in part that he had an obligation to elicit the intentions of the owners of the copyright in the film rather than concentrating on the intention of Mr. Gaty.

75. In our view this submission should not succeed and we think his Honour was right in the finding he made. In view of the earlier conclusions we have reached it is not essential that we deal with this submission. But since the matter must go back to the Minister it is advisable that we do so.

76. The application for a provisional certificate and for a final certificate were each made by Mr. Gaty whose involvement in the production of "The Return of Captain Invincible" has already been described. Mr. Gaty was one of the copyright owners and it is apparent from the evidence that he was acting as the agent of the owners for all matters concerned with the production of the film and in dealing with the Minister's department. It is equally apparent from the evidence that the other owners were content that he should do so.

77. In so far as sub-s.124ZAA(4) provides that a reference in Division 10BA to an eligible film is a reference to a film produced wholly or principally for exhibition to the public, the Minister was entitled to have regard to the intention of Mr. Gaty and to assume that his intention reflected the intention of the other copyright owners. In any event this was essentially a matter for consideration by the Minister and he was entitled to form his own view on the matter.

78. The appellants have failed to persuade us that the primary judge erred in upholding grounds 2(i) and (j), 7 and 8 of the application for review. We have expressed some views about ground 4 (unreasonable exercise of power) but consider that it is unnecessary to reach a firm view on this ground. The matter must in any event go back to the Minister for reconsideration and it will do so on the basis of the whole of the information now available, including the material presented to the primary judge. This far exceeds the material available to the Minister when he made his decision on 9 December 1982. The parties did not seek to persuade us what decision the Minister should reach in the light of the expanded material and it would be inappropriate for us to suggest what decision the Minister should reach. For this reason, although we were shown the June and December versions of "The Return of Captain Invincible" we do not think we should express an opinion as to the subject matter of the film or whether changes appearing in the New York cut warrant an inference that the earlier version was not intended for exhibition to the public. These are matters for the Minister.

79. The appeal will be dismissed with costs.