Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 (14 September 1973)

AUSTRALIAN BROADCASTING COMMISSION v. AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LTD. [1973] HCA 36; (1973) 129 CLR 99

High Court of Australia.

Barwick C.J.(1), Gibbs(2) and Stephen(3) JJ.

2. Clause 2 of the agreement is in the following terms:

3. The annual payment of the licence fee was to be effected by eleven monthly payments of equal and stated amounts with a twelfth payment of the unpaid balance, cl. 3. For some years after the conclusion of the financial year 1966, the Commission paid an annual sum to the Association calculated in respect of each financial year by multiplying the figure of 2.3 pence by the population figures as at December of that year and by then applying to the resultant figure the percentage increase in the cost of living to be attributed to that year. That percentage was obtained by comparing the figure given in the consumer price index issued by the statistician for the December quarter of that year with the figure of the same index for the December quarter of the preceding year. Such payments were accepted by the Association without comment. (at p103)

4. However, in mid-1972 the Association claimed that the payments which had been made had been miscalculated under the agreement and, failing the Commission's acceptance of that view, sued in the present proceedings for what is claimed was the amount of the underpayment. The proceedings in the Equity Division of the Supreme Court of New South Wales sought a declaration that "on the true constructions of cl. 2 (1) of the agreement bearing date 5th December 1964 made between the plaintiff and the defendant in respect of each of the financial years commencing 1st July 1966 the liability of the defendant to pay to the plaintiff is to rise or fall by a percentage equal to the cumulative percentage movement since December 1966 in the cost of living measured as at the December quarter of the financial year in question." The Supreme Court (Street C.J. in Eq.) made the declaration as sought. It was held that:

5. The competing submissions are, on the part of the appellant, that the language of the agreement is unambiguous and that for each financial year after the financial year ending July 1966 the annual sum to be paid is the result of multiplying 2.3 pence by the population as estimated at December of the financial year in question, the resultant figure being increased or decreased as the case may be by the percentage increase in the cost of living in that year ascertained as directed in the proviso; and, on the part of the Association, that the figure of 2.3 pence in cl. 2 (e) was not a fixed figure for use in the calculation of the annual sum in the years after 1966 but that the per capita figure in all of these years should be ascertained by determining what was the amount per capita which had been paid in the prior financial year and then increasing or decreasing that figure by the percentage of the increase or decrease in the consumer price index for the year for which the calculation was to be made. In other words, that the percentage increase due to the changes in the consumer price index should be cumulative from year to year. (at p104)

6. The parties, in negotiating their agreement no doubt had many aspects of their relationship to consider. The licence fee is a global sum payable annually irrespective of the use made during the year of the material covered by that licence. The fee is calculated, not upon the number of listeners or viewers, but on the total population. The parties were evidently conscious of the difficulty of making an agreement for a term of definite duration which would be likely to be and to remain satisfactory throughout its period of operation. Clauses 10 and 11 are as follows:

7. The parties were evidently anxious to provide in some way and to some extent against the depreciation in the value of money. They did so in the first few years of the life of the agreement by expressly increasing the amount per head of population which was to be a factor in the computation of the annual sum. However, for the 1966 financial year they effected a departure from this pattern by no longer varying the amount per head of population for use in computing the annual payment. From and including that year they expressly provided for the computation of that payment by the use of an unvaried per capita amount and for the increase or decrease of the sum initially calculated by a percentage derived from a comparison of the official consumer price index in the current December with the consumer price index in the immediately preceding December. (at p105)

8. It may be granted that the computation of the amount of the annual figure according to the expressly stated formula in cl. 2 may produce results which may not commend themselves to a person seeking to achieve an actual or even approximately constant value of the licence fee. But if that result is produced by the application of the words in which the parties have expressed themselves, it is no part of the function of a court by some process of divination as distinct from construction of the language employed to attribute to parties an intention to do something for which their express words do not provide. In that connexion, we were properly referred to Shore v. Wilson per Coleridge J. (1842) 9 Cl & F 355, at pp 525-526 (8 ER, 450 at pp 517-518) ; Cohen & Co. v. Ockerby & Co. Ltd. per Isaacs J. [1917] HCA 58; (1917) 24 CLR 288, at pp 299-300 ; Reid v. Coggans per Lord Russell of Killowen (1944) AC 91, at p 98 and per Lord Macmillan (1944) AC, at p 102 ; Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum Co. Ltd. per Lord Reid (1959) AC 133, at pp 173-174, 177 . (at p105)

9. The views expressed in these cases were apposite to the resolution of the present matter. In my opinion, both the language which the parties used and the structure of agreement which they expressed are plain and, to my mind, unambiguous. (at p106)

10. However, the respondent sought to find ambiguity in the agreement by taking the word "rate" in the sentence in the proviso "then where a variation is evident such variation shall be applied to determine the rate applicable for the whole of the then current financial year;" to mean the rate at which payment was to be calculated in each year. What was then submitted involved the conclusion that it was intended by the clause that there should be constructed a per capita amount by applying the percentage by which the cost of living varied as between the current December and the immediately preceding December to an amount per capita derived from dividing the total sum payable in the preceding year by the population of that year. The result of this construction is that the figure of 2.3 pence in cl. 2 (e) must be substituted for the financial year 1967 by a larger figure because of the application in the preceding financial year of the percentage increase in the consumer price index. It was further submitted that the word "each" in the opening words of the proviso must be read as "all but the year 1966" because it is clear that the amount of 2.3 pence in cl. 2 (d) cannot be increased by any use of the proviso. (at p106)

11. However, it is evident from the language of the agreement that the parties, having increased the per capita figure in each financial year prior to the year 1966, decided that for that and all subsequent financial years there should be no increase in the figure of 2.3 pence and that the only variable factor in the computation of the annual licence fee payable should be the percentage change in the consumer price index as between December of the current year and the immediately preceding December. Because they had chosen the month of December, i.e. in the middle of the financial year, as at which to determine the percentage increase or decrease, it was necessary to provide that this comparison, made in respect of one month of the year, should be treated as symptomatic of the percentage increase in the consumer price index in respect of the whole year. Thus it is said in the proviso that, in the words already quoted, the variation disclosed in the comparison of one month should be used as the rate of increase or decrease for the whole of the current financial year. The reference to "the rate", in my opinion, is clearly not a reference to the per capita figure or to the result of multiplying that figure by the population. (at p106)

12. In my opinion, the word "each" in the proviso means each and all so that the proviso must apply equally to the payments to be made according to cl. 2 (d), (e) as well as to each year thereafter. Its full operation is to require the application to the sum resulting from the multiplication of 2.3 pence by the population of the year in question, of the percentage increase in the consumer price index according to the comparison of the figures for the month of December in the current financial year with those of that month in the immediately preceding financial year. (at p107)

13. Thus this is not a case of resolving ambiguity for, in my opinion, there is none. To accept the respondent's submission would require a radical change to be made in the language chosen by the parties to express their intention. (at p107)

14. I would allow the appeal and dismiss the Association's suit. (at p107)

GIBBS J. On 8th December 1964 the parties entered into an agreement whereby the respondent, the Australasian Performing Right Association Ltd. the owner of performing rights in certain musical works and the agent of the owners of performing rights in certain other musical works, licensed the appellant, the Australian Broadcasting Commission, to use the works on the conditions set out in the agreement. The agreement was to operate in respect of the period ending on 30th June 1967, although it might in certain events have been terminated before that date, but it was to continue thereafter until determined by six months' notice given by either party to the other to expire on the 30th June in any year with provision for earlier determination in the event of breach (cll. 10 to 12). The consideration for the licence was fixed by cl. 2 of the agreement, which reads as follows:

2. The submission on behalf of the respondent, which was accepted by the learned primary judge, is that the adjustment of the payments in respect of each financial year after that ending on 30th June 1967, by reference to the percentage movement in the cost of living, was to be effected cumulatively. If, for example, the per capita payment for the year ended 30th June 1967 was adjusted upwards from 2.3 pence to 2.35 pence and a further percentage increase occurred in the following year, that percentage should be applied to 2.35 and not to 2.3. On the other hand, the appellant submits that the effect of the proviso is that it is necessary to determine the percentage increase that has occurred during the financial year in question and to apply that increase to the specified per capita payment of 2.3 pence, ignoring the fact that for intervening years the amount of that per capita payment has been increased. It is immediately apparent that the construction for which the appellant contends will lead to surprising results. If the consumer price index rose by an equal percentage in two successive years, that percentage would in each year be applied to the 2.3 pence so that in each year the per capita payment would be the same notwithstanding that the cost of living was higher in the later year than in the earlier. Indeed, if in one year the index rose by four per cent and in the following year by an additional three per cent the per capita payment for the second year would be lower than that for the first. It is umlikely that the parties intended such a result in a period of mounting inflation. However, according to the submission put on behalf of the appellant, these results are required by the words of the agreement and to adjust the per capita payments cumulatively would be to give effect, not to what the parties had written in their agreement, but to what it is surmised they intended to write. (at p109)

3. It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate", to use the words from earlier authority cited in Locke v. Dunlop (1888) 39 Ch D 387, at p 393 , which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case (1880) 16 Ch D 681, at p 686 . Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd. [1932] UKHL 2; (1932) 147 LT 503, at p 514 , that the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. [1968] HCA 8; (1968) 118 CLR 429, at p 437 ). (at p110)

4. The proviso in the present case requires "the payments referred to in (d) and (e) abovementioned" to be subject to "rise or fall by a percentage equal to the percentage movement in the cost of living in each financial year". A question was raised as to whether the "payments" referred to in these words were the per capita payments expressly described as such in sub-cll. (d) and (e) or the total amounts which those sub-clauses require to be paid. I think that, read naturally, the word "payments" in the proviso refers to the per capita payments expressly mentioned, but it seems immaterial which view is correct, because the result would be the same whether the per capita payments, or the total amounts, were increased in the manner specified in the proviso. The crucial question is whether the words of the first sentence of the proviso refer unambiguously to the percentage movement in the cost of living that has occurred in the financial year in respect of which the payment is to be made. In my opinion the words do not plainly and unambiguously convey that meaning. The proviso has to be applied "in respect of the financial year commencing 1st July 1966" (sub-cl. (d)) as well as "in respect of each financial year" thereafter (sub-cl. (e)). When applied to the former year, the words must of course be meant to refer to the percentage movement that has occurred in that year, but they are not well adapted for that purpose; the word "each" is inappropriate when the proviso is applied to sub-cl. (d). Similarly the word "each" is inaptly used in respect of the following years, if it was intended to mean that in each financial year after that ending on 30th June 1967 the rise or fall is to be effected by the percentage movement in that financial year. "Each" in sub-cl. (e) is used correctly to refer to every year viewed individually, but when the proviso is read back to refer to any particular year the reference to the rise or fall in the cost of living "in each year" does not naturally mean "in that year". There is to my mind a lack of grammatical exactitude and a consequent obscurity in the opening words of the proviso. (at p110)

5. The following words of the proviso, commencing with "For the purpose of assessing any variations" and ending with the words "compared with the previous December quarter", plainly enough show how the percentage movement in respect of any one year is to be determined. The process required by the contract is to compare the Index points in two successive Decembers and ascertain the percentage increase that has occurred. It is perhaps not irrelevant in the construction of the clause to notice that it would be a meaningless exercise to find the percentage movement from one December to another if the percentage were not to be applied to some figure taken at or in respect of the commencing date. However, the part of the proviso to which I have referred does not say to what use "any variations", when assessed, are to be put; that is left to the concluding words of the proviso, according to which the variation is to "be applied to determine the rate applicable for the whole of the then current financial year". It is significant that the proviso does not say, as it so easily could have said, that a variation so determined shall be the percentage movement by which the per capita payment of 2.3 pence is to rise or fall. In fact it says that the variation is to "be applied to determine the rate applicable for the whole of the then current financial year", although it does not expressly say to what it is to be applied. These words suggest that, the variation once having been ascertained, some further computation is to be made to determine "the rate applicable for the whole of the then current financial year". The latter words are in themselves ambiguous but they seem to mean the rate by which the per capita payment of 2.3 pence is to be increased. The concluding words of the proviso, in my opinion, support the view that the percentage movement that occurs from one December quarter to another does not in itself represent the percentage by which the per capita payment of 2.3 pence is to rise or fall; that percentage movement is to be the starting point of a calculation by which the percentage of rise or fall is to be determined. (at p111)

6. For the reasons that I have given, I have reached the conclusion that the proviso is ambiguous. When regard is had to the fact that it is contemplated by the agreement itself that the agreement may endure indefinitely, and that during the years specified up to that ending on 30th June 1967 the per capita payment would constantly increase, and to the notorious fact that the cost of living would be likely to continue to rise thereafter, and to the irrational consequences of applying the percentage increase each year to a fixed per capita payment, in my opinion sufficient indications exist to resolve the ambiguity by holding that the percentage movement from the previous December to the December in the year in question is to be applied to the percentage movement that has already occurred from the starting date contemplated by the contract - 31st December 1965. The result is to bring about a cumulative increase in the percentage by which the per capita payment of 2.3 pence is to be affected. The appellant submitted that such a construction would mean that the proviso would not apply equally to sub-cll. (d) and (e). With respect, I cannot agree. In the case of any year the per capita payment of 2.3 pence is to be adjusted by the total percentage movement that has occurred from 30th December 1965 to the December in the year in question. The proviso thus applies consistently to both sub-clauses. (at p112)

7. For these reasons I am of the opinion that the construction placed upon the contract by the learned trial judge was correct. I would dismiss the appeal. (at p112)

STEPHEN J. This is an appeal from a decision of Street C.J. in Eq. in proceedings in which the plaintiff (the Association) sought a declaration concerning the true construction of an agreement made between it and the defendant (the Commission). By that agreement the Commission agreed to make annual payments to the Association in consideration of the grant to it of a licence to use for performance certain musical works of which the Association is either the owner or agent for the owner. The point of construction in issue and which the Association sought to have resolved by declaration of the Court concerns the effect of a provision by which rises and falls in the cost of living influence the amount of certain of the annual payments. (at p112)

2. This provision appears as a proviso to cl. 2 of the agreement; that clause, including the proviso, is set out in full in other judgments. Sub-clauses (a), (b), (c) and (d) of the clause are in identical form save that they each deal with a different financial year and provide for an ever-increasing per capita payment which is, in each case, related to the population of the Commonwealth as at 31st December in that year. Sub-clause (e) relates to financial years after that dealt with in sub-cl. (d) and provides for a fixed per capita payment but again related to population figures as at 31st December in each financial year. Then follows the proviso relating to rise and fall. (at p112)

3. Reference should also be made to cl. 10, which describes the term of the agreement as a period terminating on 30th June 1967 the end of the financial year to which sub-cl. (d) of cl. 2 relates, but then provides that subject to cl. 11 the term of the agreement shall continue thereafter until determined by six months, notice in writing given by either party to expire on 30th June in any year. Clause 11 enables either party to give to the other six months, notice in writing of intention to terminate the agreement and negotiate a fresh agreement if any "significant variation not presently contemplated" should arise in certain specified factors, such notice to expire on 30th June in any year; no notice has been given under either of these clauses. The learned primary judge has succinctly described the problem of interpretation presented by the proviso when stating the rival contentions of the parties before him. He said:

4. Clause 2, in each of its sub-clauses, speaks of a per capita payment of a specified number of pence. Each annual payment, the making of which is stipulated for in the opening words of the clause, is not expressed to be an amount calculated at a rate of so much per capita but rather as a per capita payment of a number of pence. On each occasion when the Commission is required to pay moneys they will thus consist of as many of these payments of amounts of pence as there are then persons comprized in the population of the Commonwealth. It is these individual payments of amounts of pence that are, by the proviso, made subject to rise or fall in respect of the 1966/1967 and subsequent years. Accordingly in the 1966/1967 year each payment of 2.3 pence is to be subject to rise or fall by a percentage ascertained by the method specified in the proviso. That method is clearly expressed; any rise or fall is to be a percentage of 2.3 pence, the specified amount of pence, equal to the percentage movement in the cost of living in each financial year, as ascertained by a direct comparison of that year's December quarter consumer price index figure with the index figure for the previous December quarter. (at p114)

5. The above states the effect of all but the last phrase of the proviso, which states that when a variation, that is to say, as I construe it, the percent measure of a rise or fall in the per capita payment, is "evident" it is to be applied to determine "the rate applicable for the whole of the current financial year". This is the first reference to any rate; the lettered sub-clauses are, as I have mentioned, expressed in terms of an agglomeration of multiple payments and not of one payment calculated at a specified rate. However, since the number of these payments is dictated by population figures, it is not inappropriate to describe their total as consisting of the application to those figures of a rate of pence, the rate being the amount of pence resulting from the addition to or subtraction from the sum of 2.3 pence of the percent figure thrown up by any movement in cost of living. (at p114)

6. I can discern no ambiguity in the wording of the clause as a whole or of its proviso viewed in isolation. The operation of the proviso is, of course, curious; instead of reflecting in a cumulative way changes that occur in the cost of living it does no more than ascertain the percent change in cost that has occurred with the passing of a year and apply this to the sum of 2.3 pence per head of population. The result is that the percent change each year is always applied to one and the same base figure and the result in no way reflects, in a time of inflation, the falling purchasing power of the payments to be made under the agreement. (at p114)

7. The learned primary judge concluded that the words of the second sentence of the proviso were susceptible of two possible meanings. Were I of the same view I would have little hesitation in choosing that meaning which his Honour preferred; however, with great respect to his Honour's conclusion, I have been unable to give to that sentence any meaning other than the one which I have already described. (at p114)

8. This agreement is one in which, in my view, two corporations have determined, in unambiguous terms and in a formal document obviously prepared with legal assistance, their quite complex contractual relationship for a considerable term of years into the future. The approach of courts to the construction of such documents, when they contain no ambiguity nor any other patent error or omission, cannot be other than that of an uncritical rendering of the meaning of the text. (at p115)

9. In those circumstances I would allow this appeal. (at p115)