That dispute was heard by the Copyright Tibunal earlier this year. It involves the Phonographic Performance Company of Australia Ltd (PPCA,) which represents the interests of most of those who own the copyright in sound recordings, and Fitness Australia Ltd (Fitness Australia), a body that represents the fitness industry.
The Tribunal operates under the Copyright Act (Cth). It is able to fix a rate that in practice serves as a ceiling on the price which is charged for use of the music that provides amenity in 'fitness' ventures, similarly to payment by cafes and restaurants for music played in those venues.
In May this year the Tribunal determined that an appropriate rate was $15 per fitness class, a substantial increase on the previous rate of 94.6 cents per class. Fitness Australia was aggrieved by that decision and sought a judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth), primarily on the basis that there was a breach of the rules of natural justice in connexion with the Tribunal's making of the decision (s 5(1)(a)).
The court agreed that there had been a breach. It noted that -
The action being a judicial review action, this Court is not in anyway concerned with whether the $15 figure is correct which is solely for the Tribunal to determine. This Court’s role is only to assess whether Fitness Australia’s challenge to the processes adopted by the Tribunal is sound. For reasons which follow, we are of the opinion that it is and that the Tribunal did conduct itself in a way which was procedurally unfair to Fitness Australia. The consequence is that its determination must be set aside and that it must be ordered to perform its function again according to law. PPCA must bear the costs in this Court.It went on to explain that the -
PPCA referred a licence scheme dealing with music played in exercise classes to the Tribunal and Fitness Australia was joined by it as the opposing party. No particular price was sought by PPCA but it was indicated that economic evidence would be placed before the Tribunal to assist in that question’s determination. The Tribunal’s statutory task was to confirm or vary the proposed scheme or even to substitute another scheme for it and in doing this it was to make whatever order “the Tribunal considers reasonable in the circumstances” (s 154(4)). Importantly for present purposes it was to do that only “after giving to the parties to the reference an opportunity of presenting their cases”. Since Fitness Australia was a party to the reference it followed that s 154(4) required the Tribunal to give it an opportunity to present its case. ...The Tribunal relied on an earlier survey report by Professor Opewall of Monash University, the Roberts Research Rport.
# The task at hand was the ascertainment of a price for the particular use (playing music in exercise classes) of an intangible asset (copyright in sound recordings). No direct market in that kind of use exists. To make matters even more complex, not all of the sound recordings played in fitness classes comprise sound recordings in respect of which PPCA controls the copyright (there is a market in “covers”, that is, popular tunes performed by persons other than the original artists). The determination, therefore, of what was “reasonable in the circumstances” necessarily contained within it the potential for substantial debate between the parties.
# The litigation before the Tribunal was hard fought and resource intense. On PPCA’s side five economic experts were called including an economist, an emeritus professor of econometrics and a professor of management. All five witnesses were cross-examined by senior counsel for Fitness Australia over six days. Fitness Australia itself called three such witnesses including a professor of economics from the University of California, Berkeley and a professor from Stanford University. They, in turn, were cross-examined over the course of seven days. In all, more than 25 witnesses were called and there is over 1,400 pages of transcript. The documentary evidence was voluminous.
It is in the midst of that economic debate that the procedural unfairness is said to lie. Central to PPCA’s case was an item of evidence known as the “Gyms Survey”. In its opening written submissions to the Tribunal, PPCA said that it had sought to conduct an economic or value-based assessment of the music in question and that to that end it had “conducted an economically-based, rational assessment of that value, by use of a choice modelling survey (the Gyms Survey), which has yielded a derived amount of the appropriate share of a member’s value for recorded music of $4.54 per member per month, or in the case of a casual attendee, $0.99 per attendance for those who pay per visit”. The Gyms Survey was said in PPCA’s opening written submissions to be its “central evidence”. Unsurprisingly, those written submissions showed that the evidence of each of its experts was directed to showing the Gyms Survey’s correctness.
That evidence looked impressive at the commencement of the case. However, during the course of the case the Gyms Survey came under sustained attack from Fitness Australia. It is not presently necessary to recount in any detail the Gym Survey’s tribulations during the hearing but the Tribunal ultimately concluded that “the attacks on the Gyms Survey disclosed real flaws in the design of the survey instrument, in the application of it and in manipulation and analysis of data obtained from the survey”: Re Phonographic Performance Company of Australia Ltd (ACN 000 680 704) [2010] ACopyT 1; (2010) 87 IPR 148 at [256] (“Phonographic”). In those circumstances, the Tribunal was unable to rely upon the Gyms Survey to estimate the appropriate value.
With PPCA’s “central evidence” rejected this might, at first blush, have provided succour for the notion that victory had been handed to Fitness Australia. However, that did not eventuate. It is what happened next which lies at the heart of the present dispute.
Professor Opewall was not called by PPCA as a witness in the case and, consequently, he was not cross-examined. His report came to be in evidence only as an attachment to a report of one of PPCA’s witnesses, Dr Williams. In that report Dr Williams described the Roberts Research study as a “pilot using a limited sample” and said that it was “merely the first stage in what would be a two-stage project”. The Gyms Survey was to be seen as the successor to the Roberts Research study which took on board criticisms which had been made of that study by the fitness industry at an earlier stage of consultation. In his opening address senior counsel for PPCA described the Roberts Research study in various ways including as “a very quick and dirty pilot survey” and as one having a “very small and unrepresentative sample”.
Given the primacy which the Gyms Survey had in PPCA’s case it is unsurprising that there was no reference at all to the Roberts Research study in its opening written submissions. Indeed, when senior counsel for PPCA opened to the Tribunal he indicated that the Roberts Research study was one upon "the results of which we don’t rely". That was an important statement. Because it will presently be relevant, it is to be noted that PPCA did not open the case by suggesting that the Roberts Research study could be used to show that the then current rate of 94.6 cents was too low or that the study indicated an appropriate per-class rate. No mention of such matters was made at all. The reasons for that are obvious. PPCA had no present need to call in aid the study because the Gyms Survey adequately fulfilled all of the purposes it had in mind.
Fitness Australia says that these matters legitimately signalled to it that it did not need to prepare for, or meet, a case based upon the figures or values in the Roberts Research study and it submits that, in fact, it made no attempt to meet such a case. Those suggestions are significant because of what the Tribunal then did. It will be recalled that the Tribunal rejected the adequacy of the Gyms Survey. Having done so, the basis upon which it could embrace directly PPCA’s case had become somewhat more problematic because the central evidence upon which that case rested had lapsed. In the event, the Tribunal reasoned that, in light of its rejection of the Gyms Survey: “the survey results obtained by Roberts Research in PPCA’s preliminary survey, which was simpler in its concept and more modest in its design, provides more reliable information, despite the limited size of the sample. In particular, the Tribunal considers that the preference for music by survey participants in the Roberts Research project provides a more useful guide to WTP [scil. willingness to pay] for music than the Gyms Survey”: Phonographic at [257].
That positive attitude towards the Roberts Research study then led the Tribunal to this final conclusion at [309]:
Taking a cautious approach, the Tribunal concludes that a discount of 40 per cent should be applied to PPCA’s share of the value of music in fitness classes, as found in the Roberts Research study. This produces a figure of $19 (just below the figure of $20 sought by PPCA in Option 2 of the further amended reference). The Tribunal regards the figure of $19 as somewhat high, taking into account the limitations on the Roberts Research study and the other factors referred to earlier bearing upon the process of judicial estimation. The Tribunal has concluded that that a fair and reasonable per class rate would be $15.Fitness Australia says that that conclusion amounted to a breach of procedural fairness. The case had been conducted on the basis of the Gyms Survey and reliance upon the Roberts Research study was expressly disavowed in PPCA’s opening submissions. Believing the correctness of the Roberts Research study not to be at issue in the case Fitness Australia says that it did not seek to challenge the correctness of that study by cross-examining any of PPCA’s witnesses about that topic; that if it had known that the Tribunal was going to use the study as it did it would have trained its fire not only at the Gyms Survey but also at the Roberts Research study; and that in the course of that process it would have considered calling expert evidence to contradict the study. Further, says Fitness Australia, the fact that the Roberts Research study was not being used by PPCA to fix a rate was expressly recognised both by PPCA and the Tribunal in closing submissions
