Mr Peter Prescott QC:
I. INTRODUCTION.
A last-moment development in this case raises a point of some
importance concerning the scope of the court's equitable jurisdiction. It
concerns a person who chooses to acquire property situate abroad when
he has notice that it had already been contracted to be transferred to
another. Can equity prevent him from retaining the property?
By a contract governed by English law, an author is paid to create a work
on implied terms that the copyright in every country of the world shall
belong to X. The author does create the work but, instead of assigning the
copyrights to X, he assigns them to Y. Y has notice of the prior contract:
(…) But does the court have power to order that the equivalent foreign
copyrights be likewise assigned?
The copyright work in question is a drawing. It was intended for use as a
business logo. Since 1988 the Claimants, who are footwear manufacturers
and whom I shall call G., have applied the Logo to all Dr M. boots and
shoes that have been sold, not only in this country, but in numerous
countries of the world. It must therefore be a Logo which has acquired
very considerable business value. Moreover in countries in which G. have
not yet started to trade and wherein they have no trade mark rights
the local copyright must be of value to them since its existence should
prevent claim-jumping.
The Logo was designed for the use of G. by the First Defendant Mr E., a
commercial artist. (…) the legal title to the British copyright vested in him
personally, that being the effect of the Copyright, Patents and Designs
Act 1988. However, I have held that Mr. E. created the Logo for valuable
consideration on implied terms that the copyright would belong to G., so
that G. are the owners in equity: see [2003] EWHC 2914 (Ch).
Mr. E. conceived that he was the holder of a valuable asset which could
be turned into money. G. believed – correctly as I have held – that Mr. E.
was obliged to transfer the asset to them for nothing, but they thought it
would be prudent to offer him some money in order to obtain his formal
assignment of the copyright without the expense of litigation. After
bargaining with G. Mr. E. thought that he could do better elsewhere, and
on 13 May 2002 he purported to assign the copyright for about £12,000
to the Second Defendant ("R."), who are an Australian company hostile to
G. The assignment to R. was in the form of a deed, governed by the law
of New South Wales.
I held that because R. had notice of the facts giving rise to the prior
equitable interest of G., they should be ordered to assign the copyright
to G. It was not really disputed at the trial that R. had notice, but in any
case it is obvious that they did. For example: (1) the very document by
which Mr. E. purported to assign the copyright to R. recited that in 1988
he, Mr E., was contracted by the advertising agency to create the Logo
"for persons or entities associated with the Dr M. group of companies"
which, as R. knew, was a reference to G.; (2) R. knew that the purpose
for which the drawing had been created was so that it could be used by G.
as a trade mark
I delivered the final version of my judgment and heard the parties
concerning costs and other aspects of the form of order. I refused
permission to appeal because I considered that the defendants had no
reasonable prospect of success. One of the provisions of the form of order
concerned the time within which R. were obliged to deliver to G. a formal
assignment of the copyrights.
However, before the order had formally be drawn up and entered, Mr
Onslow (who had been counsel for Mr E., but is now appearing for R.)
communicated with my clerk and counsel for G. and sought to take a new
point. It had not been mentioned at the trial.
In essence, Mr Onslow's point is that this court has no power to make
orders affecting ownership of intellectual property in foreign countries,
except where the defendant has assumed a personal obligation to transfer
the property to another; for example, by agreeing for good consideration
that he shall do so.
Mr Onslow's argument contains two steps. First, that his proposition
would be true if the property situate abroad had been, not a copyright,
but land: for this he cited the judgment of Parker J in Deschamps v.
Miller [1908] 1 Ch 856 (itself following Norris v. Chambres 29 Beav. 246;
affirmed 3 De G. F. & J. 583) and the decision of the House of Lords in
British South Africa Company v. Companhia de Moçambique [1893] AC
602. Secondly, that the Moçambique rule was extended to intellectual
property by Vinelott J in Tyburn Productions Ltd v. Conan Doyle [1991]
Ch 75. He also drew to my attention pages 36-50 of Spry on Equitable
Remedies (6th edition, 2001).
Certainly if the agreement is governed by English law our courts can
enforce the obligation, if necessary by ordering the obligor to sign the
requisite documents (specific performance)[2]. But if Mr Onslow's point
is correct, the obligor will always be able to defeat the right to specific
performance with respect to the foreign property by assigning it to a third
party, even though that third party is well aware of the circumstances. I
suppose in an extreme case the third party might even be an associate
company.
It was my first impression that Mr Onslow's point might be a serious one
but that, without doubt, it had been taken very late in the day, so that
G. might complain that it was a contrivance to delay the vindication of
their rights. I therefore intimated that I would hear argument on it, on
condition that R. must first execute a formal assignment of the copyrights
to G., the document to be delivered to R.'s solicitors to be held by them
to the order of the court: in effect, in escrow. I have been told that this
requirement has been complied with.
Mr Hacon, who appeared for G., objected that it was far too late for Mr
Onslow to take his new point. He further contended it was wrong in law.
II. ESPRIT DE L'ESCALIER?
There is no question of R. having been taken by surprise: they knew G.
were demanding that the foreign copyrights be assigned to them by R. for
it clearly appeared on the face of the pleadings. With becoming frankness,
Mr Onslow explained to me that the point of law was not spotted by R.
until after my written judgment had been handed down in open court. But
he said that his point goes to the court's jurisdiction to make the order in
the first place, which was not the case in Stewart v. Engel.
II. MATTERS TO BE EXAMINED.
G. have succeeded with regard to the British copyright in the Logo
because they were its owners in equity and R. purchased the asset
with sufficient notice of the relevant facts. The question before me is
whether that doctrine extends to the foreign copyrights in the Logo. The
passages in Spry which Mr Onslow has cited, while confirming that a court
of equity's power to order a party to transfer property situate abroad
rests on some sort of personal obligation, convey to me the flavour that
land is treated as a specially onerous case, for reasons of comity (see
especially at pages 40 and 43). The chief authorities cited by Mr Onslow
(Deschamps v. Miller and the Moçambique case) are cases about foreign
land. He seeks to extend then to foreign intellectual property. So I must
examine the court's power to order the assignment of property situate
abroad, and in the course of doing so I believe I should consider the
following matters:
What is the reason for the doctrine of purchaser with notice?
Is it merely a parochial rule of English law?
If it were to be applied to foreign land, would it conflict with the principle
that we do not decide questions of title to such land (the Moçambique
rule)?
If no, what is the proper explanation of Deschamps v. Miller?
If yes, should that aspect of the Moçambique rule be extended to
intellectual property?
IV. THE SCOPE OF THE PROBLEM.
Introduction.
It might be objected that a problem of this sort can arise but rarely; and
would not have arisen in this case if G. had enforced their rights against
Mr. E. promptly instead of taking years to catch on. I do not think so. So
far as G. are concerned, we know that when they did apply to Mr. E. it did
not take him long to look for a third party who might be prepared to buy
the copyrights from him..
The Need For Some Rule About Property Agreed to Be Transferred in
Futuro.
More generally, there will be many cases where property is to be
transferred pursuant to an agreement but there is going to be a gap in
time between contract and formal conveyance.
During that period the person who holds the property – I shall call him
'the vendor'(…) – may be tempted to assign it to a third party. Any legal
system that aspires to prevent this must, I suppose, choose one of three
general approaches. The first is caveat emptor: the future or contingent
interest in the property somehow passes to the purchaser as soon as the
obligation is entered into. Then it is up to all purchasers (including the
third party) to satisfy themselves that the vendor has an unencumbered
right to sell; if they get it wrong, bad luck. But this may be harsh, and
create business uncertainty. The second option is to have a scheme for
registration of title, and of contracts pertaining to that title. Once the
contract is registered no third party can validly acquire the property from
the vendor. The third option is to say that the third party cannot validly
take the property if he had notice of the prior contract (or would have had
notice, had he made proper enquiries).
In a 'pure' registration system (such as we have under s.13(2) of the
Land Charges Act 1925) notice is irrelevant; this has the advantage that
intending purchasers are relieved of the burden of making exhaustive
enquiries: see the speech of Lord Wilberforce in Midland Bank Trust
Co v. Green [1981] AC 513, 528-530 for a lucid explanation and, for a
more lucid explanation still, the speech of Mr Leonard Hoffmann QC at
pages 516F-517G and 521C-E. However under a pure registration system
the drawback is that the first man to register always wins, irrespective
of business ethics. Therefore some schemes combine registration and
notice: for example, under s.205(1)(xxi) of our Law of Property Act 1925
where there is also a requirement of good faith (per Lord Wilberforce at
page 529C); or under s.33(1) of our Patents Act 1979, where the first
man to register will prevail, unless he knew of the earlier transaction.
But there are some kinds of property whose title cannot be registered
at all, as for instance copyright, because it has been decided that a
registration system would be too cumbersome..
Land.
I have to examine a doctrine which is said to be established in relation
to land before I can say whether it extends to intellectual property.(…)
In fact, when Deschamps v. Miller and Norris v. Chambres were decided
England was very backward in matters of land registration. I think,
therefore, that in order to deal properly with Mr Onslow's point I should
begin by asking myself what was our doctrine of notice with respect to
property in general, even though that doctrine was originally evolved in
relation to land.
V. THE DOCTRINE OF THE PURCHASER WITH NOTICE.
The English Rule.
First, let us recall the rule. It is that where a vendor has entered into an
obligation to transfer property to a purchaser, being an obligation which
can be enforced in specie, a third party who has notice of that obligation
may not validly acquire the property from the vendor, without the consent
of the original purchaser.
(…)
Story then proceeds to illustrate the doctrine, and at §395-397 he insists:
Another class of constructive frauds consists of those where a person
purchases with full notice of the legal or equitable title of other persons
to the same property. In such cases he will not be permitted to protect
himself against such claims: but his own title will be postponed, and made
subservient to theirs. It would be gross injustice to allow him to defeat
the just rights of others by his own iniquitous bargain. He becomes, by
such conduct, particeps criminis with the fraudulent grantor…
The same principle applies to cases of a contract to sell lands, or to grant
leases thereof. If a subsequent purchaser has notice of the contract, he
is liable to the same equity, and stands in the same place, and is bound
to do the same acts, which the person who contracted, and whom he
represents, would be bound to do.
… The ground of the doctrine is (as Lord Hardwicke has remarked) plainly
this: "That the taking of a legal estate, after notice of a prior right, makes
a person a mâla fide purchaser; and not that he is not a purchaser for
valuable consideration in every other respect. This is a species of fraud
and dolus malus itself; for he knew that the first purchaser had the clear
right of the estate, and, after knowing that, he takes away the right of
another person, by getting the legal title. And this exactly agrees with the
definition of the civil law of dolus malus."
When I drew these passages to the attention of counsel Mr Onslow
strongly objected. (…) The point is that in the eyes of equity the
purchaser with actual notice is considered to be guilty of fraud or, if one
prefers to call it so, unconscionable behaviour. Numerous authorities
make the same point. Story himself is quoting from the judgment of
Lord Hardwicke[4] in the leading case of Le Neve v. Le Neve 3 Atk 647 at
654-5 (also available to generations of law students in 2 White & Tudor's
Leading Cases on Equity e.g. 9th ed, 1928, 157). The point was later
repeated by the Court of Appeal in Northern Counties Fire Insurance Co v.
Whipp (1884) 26 Ch D 482 at 487-491. It was thus taught to his students
by Maitland (Lectures on Equity, 1909, pp.128-9). More recently we have
it on the authority of the House of Lords in Midland Bank plc v. Green
[1981] AC 513 at page 528D-H, where Lord Wilberforce said:
My Lords, the character in the law known as the bona fide (good faith)
purchaser for value without notice was the creation of equity. In order
to affect a purchaser for value of a legal estate with some equity or
equitable interest, equity fastened upon his conscience and the composite
expression was used to epitomise the circumstances in which equity
would or rather would not do so. I think that it would be generally true
to say the words "in good faith" related to the existence of notice. Equity,
in other words, required not only absence of notice, but genuine and
honest absence of notice. As the law developed, this requirement became
crystallised in the doctrine of constructive notice …
Hence the courts of equity held it was also equitable fraud for a man
deliberately to refrain from making any enquiries, in order to be able to
say "Notice? I had no notice." (…)
But the fact that, as a practical matter, litigants no longer had to establish
equitable fraud in no way overthrew the principle that, if there was actual
notice – enough notice to cause an honest man to stop his hand – it was
equitable fraud just as much as it ever had been. In Midland Bank v.
Green (same page reference) Lord Wilberforce continued:
[I]t would be a mistake to suppose that the requirement of good faith
extended only to the matter of notice, or that when notice came to be
regulated by [the pre-1925 statutes] the requirement of good faith
became obsolete. Equity still retained its interest in and power over the
purchaser's conscience. The classic judgment of James LJ in Pilcher v.
Rawlins (1872) LR 7 Ch App 259, 269 is clear authority that it did: good
faith is there stated as a separate test which may have to be passed even
though absence of notice is proved. And there are many references in
cases subsequent to [the Conveyancing Act 1882] which confirm the
proposition that honesty or bona fides remained something which might
be inquired into (see Berwick & Co v. Price [1905] 1 Ch 632, 639; Taylor
v. London and County Banking Co [1901] 2 Ch 231, 256; Oliver v. Hinton
[1899] 2 Ch 264, 273).
In theory, I am entitled to presume that the doctrine of acquisition with
actual notice not only exists, but is exactly the same in all other countries
of the world, since no evidence of foreign law has been adduced by R. and
they have taken their point between the stirrup and the ground.
Going further afield, in Bank of Montreal v. Sweeny (1887) 12 App Cas
617, P.C. (an appeal from Canada in which Quebec law, that is to say, a
system of law derived from France, had to be applied) a bank received
property from a trustee knowing it to be trust property, although they
knew not that the trustee was acting improperly, nor anything else, and
made no enquiries. The bank was ordered to restore the property to the
rightful beneficiary. Lord Halsbury LC said:
Their Lordships are led to this conclusion by the ordinary rules of justice
as between man and man, and the ordinary expectations of mankind in
transacting their affairs. [My emphasis.]
I therefore consider that G., in demanding that R. assign to them the
foreign copyrights in the Logo, are not seeking a result which would seem
to be peculiar to English law, yet possibly astonishing and offensive to the
laws of other countries of the world.
But that is not the end of the story. For it still remains to discover
whether to order R. to assign the foreign copyrights in the Logo to G.
would be regarded as a breach of comity according to our own case law.
(…) Conceivably the foreign court might regard it as the exercise of a
jurisdiction in rem. Thus there are many equitable interests which can be
registered and, if registered, are good as against the whole world. Then
they are rights in rem.
VI. FOREIGN IMMOVABLES.
The Moçambique Case.
Suppose the dispute concerned land outside England, instead of
copyright. Except where they felt able to exercise their equitable in
personam jurisdiction (see below) the English courts refused to decide
questions of title to foreign land. This was so even if the defendant was
otherwise properly before the English court. In the first place, it would
have been pointless to assert such a jurisdiction: how could our courts
order foreign peace officers to put the successful claimant in possession of
the land? In the second place, they considered that to try title to foreign
land would have been disrespectful to their foreign judicial colleagues, as
by seeming to undermine their jurisdiction and authority.
The leading case is British South Africa Company v. Companhia de
Moçambique. Two companies, the one Portuguese, the other British and
controlled by C.R., were in dispute about a territory called Manica (…)
The Portuguese company complained that they owned lands and mineral
rights in Manica yet the British company had invaded the territory with
a military force and seized the lands and minerals, doing injury to their
business. The House of Lords held that the Portuguese company was not
entitled to maintain its claims in the English courts, for that would be to
try a question of title to foreign land.
In Personam Jurisdiction in Relation to Property Situate Abroad.
The Moçambique case was about rights in rem.
The equitable jurisdiction in personam touching land abroad has existed
for at least 250 years. Notice the difference. In the Moçambique case the
Portuguese company was saying, in so many words: "Please decide that
under the local law we were already the owners of the Manica lands and
minerals". In contrast, under the in personam jurisdiction of equity the
claimant would be saying: "I fully admit the defendant is the owner of this
land. That's my very complaint. You see, he has signed a contract to sell it
to me. Please compel him to fulfil his bargain."
A court of equity would decline to act if it were proved that the local law
forbade the owner to sell his own property. Such property is said to be
inalienable. (…) But usually the local sovereign does permit privately
owned land to be alienated. Then there can be nothing wrong in its owner
deciding to do so of his own free will.
Thus when our courts of equity exercise their in personam jurisdiction
they are not questioning the local land laws. They are not setting up a
rival title. There is in truth no conflict at all between English equity acting
in personam and the foreign land laws, (…)
Of course, Mr Onslow does not dispute the existence of our equitable
jurisdiction to make orders in personam which result in the transfer to
another of foreign land or intellectual property. But he contends that
there is a limit to that power. It does not exist unless the defendant has
assumed a personal obligation to do it, and it is his case that R. have not
done so.
Rationale of the Moçambique Rule.
In my judgment the only rationale which survives today (apart from
the court's possible incapacity to execute its order abroad, which is
not applicable in our case) is that it would be a breach of international
comity to try questions of title to foreign land in rem, save incidentally:
see, for example, the judgment of the Court of Appeal in Pearce v. Ove
Arup Partnership Ltd [1999] FSR 525, 548. But we still have to discover
precisely why it would be considered a breach of comity.
It cannot be merely because, in trying title to foreign land, we would be
delving into a right of property which is granted by and exists under the
laws of a foreign sovereign. For instance, it is clear that no equivalent to
the Moçambique rule has ever applied to chattels. They might be ships, or
jumbo jets. The contrast is neatly illustrated by the decision of the House
of Lords in Hesperides Hotels Ltd v. Aegean Turkish Holidays Ltd [1979]
AC 508, which held that no English action lay for trespass[6] to a hotel
on the island of Cyprus, but that an action did lie for the conversion of
the chattels present in that same hotel. Now, when chattels are present
in a foreign jurisdiction they, and the rights of their owner, are subject to
the protection of the foreign law. If it is complained that they have been
misappropriated, the claimant in an English court necessarily undertakes
to show that the conduct of the defendant was contrary to the laws of the
country in which the events occurred. The court may have to consider
the existence or scope of the nearest foreign equivalent to what we call
the law of conversion, which may be very different from ours. Yet nobody
objects that the bringing of the action is forbidden because it may call into
question the existence or scope of laws created by a foreign sovereign.
The foreign law is treated as a question of fact. The foreign law is created
at the will of the sovereign, and when we find the fact we are trying to
respect his will, not defy it.
Hence it must be clear that the proper justification for the Moçambique
rule cannot rest on a general proposition that our courts do not entertain
disputes concerning the existence or scope of laws made by a foreign
sovereign. Thus in the case of In re Duke of Wellington [1947] Ch 506,
515 Wynn-Parry J said:
It would be difficult to find a harder task than that which faces me,
namely, of expounding for the first time either in this country or Spain the
relevant law of Spain as it would be expounded by the Supreme Court of
Spain, which up to the present time has made no pronouncement on the
subject, and having to base that exposition on evidence which satisfies
me that on this subject there exists a profound cleavage of legal opinion
in Spain, and two conflicting decisions of courts of inferior jurisdiction.
(…)in the Ove Arup case the Court of Appeal said (at 549-550):
It is, we think, clear from an analysis of the judgments in the Moçambique
case that the House of Lords treated the question whether the English
courts should entertain an action for trespass to foreign land as one of
justiciability. The English courts should not claim jurisdiction to adjudicate
upon matters which, under generally accepted principles of private
international law, were the peculiar province and competence of another
state…
We think that the approach of the House of Lords was, in substance, the
same as that of Lord Esher MR in the Court of Appeal. He had identified
the question … as:
"… whether, in regard to an action of trespass done to land situated
outside its territory, there is evidence to justify the inference that by the
comity of nations the jurisdiction to determine the rights resulting from
such an act has been allowed by other nations to this country, and has
been accepted by this country." [My emphasis.]
Why can one bring a claim that says "According to the laws of the
sovereign the chattel is mine", but not "According to the laws of the
sovereign the land is mine"? The answer must be that it is understood
that in the case of land the sovereign is or may be asserting a double
prerogative. Thus in the Ove Arup case the Court of Appeal cited from
another work of Story to show that according to the Roman law the judge
of the place where the land was situate had exclusive jurisdiction.
What, then, if the claim is not in rem, but in personam? The
understanding must be that the local sovereign would say: "I do not mind
if A agrees to sell and B agrees to buy land situate in my country, and
they vindicate their personal rights under the contract in the courts of
another state". The question that then arises is: would he start to mind
if it was a case of a third party purchaser with notice? For the rationale
of the purchaser with notice doctrine is that he comes under a personal
obligation arising out of his equitable fraud upon the contract between A
and B.
International Developments.
The question resolves itself into discovering what is internationally
acceptable.(…) I refer, of course, to the Brussels and Lugano Conventions.
Mr Hacon submits that it would be absurd if our country had one policy
concerning foreign land when it came to the Brussels and Lugano
Conventions and another policy when it came to the other States of the
world.
In general, those Conventions require proceedings to be brought in
the courts of the state where the defendant is domiciled. But there
are certain exceptions, and for the moment I am interested in that
exception which concerns land. Article 16(1) of the Brussels convention
provides that, in proceedings 'which have as their object rights in rem in
immovable property', or tenancies of immovable property, the courts of
the Contracting State in which the property is situate shall have exclusive
jurisdiction. (There is now a partial exception for short lets). The Lugano
Convention is the same. The Jenard Report and the ECJ have explained
why this rule was adopted. Ignoring leases (which may involve locally
sensitive policy questions concerning tenants' rights), it was partly
because convenience frequently requires that the decision be made by
the man on the spot, and partly because prior German and Italian public
policy had required exclusivity.
Now, it turns out that Article 16(1) is narrow. It is only where the principal
purpose of the proceedings is to assert rights in rem, that is to say,
rights which are good as against the whole world (as opposed to rights
which are good as against certain persons only), that the court of the
country where the land is situate has exclusive jurisdiction. See the next
paragraph below. Otherwise, the proceedings not only may, but very
possibly must, be brought in a state where the land is not situated.
As to that, Dicey & Morris refers to an important authority and contains an
important observation (§23-012):
In Webb v. Webb[8] the European Court ruled that an action for a
declaration that a person holds immovable property as a trustee and
for an order requiring that person to execute such documents as are
required to vest legal ownership under the lex situs in the plaintiff does
not involve rights in rem within the meaning of Article 16(1). It was
held to be irrelevant that the ultimate purpose of the plaintiff was to
obtain ownership of an immovable; what is important is whether rights
in rem are the object of the proceedings. Since the plaintiff did not claim
that he already enjoyed rights directly relating to the property which
were enforceable as against the whole world, but sought only to assert
rights against the defendant, the action was not a right in rem within the
meaning of Article 16(1), but an action in personam. This ruling suggests
that, even if the object of the proceedings is to vindicate equitable rights
against a third party (for example, where the claimant seeks to establish
that a purchaser of trust property holds it as constructive trustee), the
proceedings should not be regarded as involving rights in rem. [My
emphasis.]
Forum Non Conveniens.
Even though our courts may have jurisdiction to hear a case or make an
order concerning property situate abroad, it does not necessarily follow
that they will do so. They have a discretion. Nowadays, and subject to
any mandatory rules prescribed by European legislation, our courts may
decline to exercise their jurisdiction if they consider that there is a court
in a foreign country in which the dispute can be tried more conveniently.
Then England is said to be a forum non conveniens.
Choice of Law.
Similarly, there are grounds for believing that what would nowadays be
regarded as a problem about choice of law would, in those days, have
been presented as a problem about lack of jurisdiction. I shall revert to
this later.
With those preliminary observations in mind, I now turn to review the
authorities relied upon by Mr Onslow concerning the limits to the court's
equitable in personam jurisdiction in cases concerning foreign land.
Norris v. Chambres.
In Norris v. Chambres (1861) 29 Beav. 246, affirmed 3 De G.F. & J. 583,
a company director had committed suicide; the claim was brought by his
estate. The company had been established in England to work a Prussian
coal mine, and the director had personally advanced a large sum towards
its purchase. The company agreed to buy the Prussian mine, as planned,
but the director's suicide intervened before completion. The result was
that his estate was temporarily short of funds, further instalments he was
supposed to pay according to the contract were not paid, and the property
was in danger of being lost. Accordingly, the other directors caused the
contract to be cancelled and they set up a new company instead, which
acquired the mine under a replacement contract. The shortfall was made
up by crediting the vendor with the monies already advanced by the
deceased director.
In other words, the injustice to the deceased director's estate was this: it
had no shares in the new company, and nothing to show for the large sum
he had already advanced. The plaintiff brought two suits, one in Prussia
and the other in England. The English claim was for a declaration that
the plaintiff had a lien on the coal mine, an account, and a declaration
that the defendants had purchased the mine subject to the lien and as
his trustees, and that unless the money was repaid the mine should be
sold in order to generate the sum required for that purpose. It will be
obvious to the modern reader of the reports that England was a forum
non conveniens. Indeed by the date of the first-instance hearing the
Prussian suit had already succeeded.
At first instance Sir John Romilly MR said (29 Beav 246 at 254):
I am told that according to late decisions, and according to the law of
England, if a man sell an estate to B and receive part of the purchase-
money, and then repudiate the contract, and sell the estate to C, who has
notice of the first contract and of the payment of part of the purchase-
money by B, B shall, in that case, have a lien on the estate in the hands
of C, for the money paid to the original owner. But assume this to be
so, this is purely a lex loci which attaches to persons resident here
and dealing with land in England. If this be not the law of Prussia, I
cannot make it so, because two out of the three parties dealing with the
estate are Englishmen, and I have no evidence before me that this is
the Prussian law on this subject, and it if it be so, the Prussian Courts of
Justice are the proper tribunals to enforce these rights. If the owner of
an estate in Prussia mortgage that estate to an Englishman, it is new to
me that the Courts of Equity in this country will administer, as between
those persons, the law obtaining in England with relation to mortgages,
and foreclose or direct a sale of the Prussian estate, if payment be not
made of the amount due…
[T]here is no equity between the parties; here the Plaintiff is entitled to
no decree against the Defendants for payment of any sum of money, nor
is any such claimed, but the equity and relief sought begin and end with
a prayer to make a certain transaction between other persons, one of
whom is a stranger to the Plaintiff, an interest to an estate in Prussia,
belonging to that stranger, and this independently of all personal equities
attaching upon him. I never heard of any such case, and I will not be
the first Judge to create such a precedent, which if adopted, for ought I
see, would go to assert a right in the Courts here to determine questions
between foreigners, relating exclusively to immoveable property in their
own country.
On appeal Lord Campbell LC said (3 De G.F. & J. 583 at 584):
With respect to this advance, I think that, upon the authority of Penn
v. Lord Baltimore, which has often been acted upon, the Plaintiff would
have been entitled to succeed if he could have proved that the claim for
a declaration of the proposed charge or lien on the Maria Anna mine was
founded on any contract or privity between him or the deceased [director]
and the Defendants, the purchasers of the mine, and if there had not
been a suit in the Prussian Courts, in which the same question was raised
and had been decided in the Plaintiff's favour.
But I agree in thinking with the Master of the Rolls that the Plaintiff has
failed to shew any such contract or privity. Upon the evidence adduced
the purchasers of the mine, whom he sues, are to be considered as mere
strangers, and any notice which they may have had of the transactions
between [the deceased director] and [the old company] (which has now
ceased to exist) cannot give this Court jurisdiction to declare the proposed
lien or charge on lands in a foreign country. An English Court ought not
to pronounce a decree, even in personam, which can have no specific
operation without the intervention of a foreign Court, and which in the
country where the lands to be charged by it lie would probably be treated
as a brutum fulmen. I do not think that the Court of Chancery would
give effect to a charge on land in the county of Middlesex so created by a
Prussian Court sitting as Dusseldorf or Cologne.
But another objection is lis alibi pendens, a suit pending before the proper
tribunal in Prussia, and that by this tribunal, a decree has actually been
pronounced in favour of the Plaintiff, giving him what he seeks…
If we strip out the complications caused by the difficulty of enforcing a
lien on foreign land and by the existence of parallel proceedings in Prussia
(obviously the forum conveniens) it seems to have been decided that
there was no equity against a purchaser for value with notice because the
land was situate in a foreign State. But this enshrouds a conundrum, and
I shall return to that case later.
Deschamps v. Miller.
In Deschamps v. Miller [1908] 1 Ch 856 the dispute was over land in
India. The claimant offered to prove the following facts. His parents,
a French couple, had married in France in community of property. So
according to the French marriage contract the wife was supposed to be
entitled to one half of the husband's after-acquired property. The husband
left the wife, went to India, and bigamously married a lady who, for want
of a briefer expression, I shall refer to as his de facto wife. He acquired
business premises in Madras and other lands there. After living a great
many years in India (and having been separated from his de jure wife for
30 years) he put them in trust for the benefit of the de facto wife. These
lands, it was said, were after-acquired property within the meaning of the
marriage contract, and had been transferred to the benefit of the de facto
wife other than for valuable and sufficient consideration, in breach of that
contract.
After the death of all three members of the triangle, the de jure wife's
son, who claimed as her successor according to the law of France, took
out English letters of administration of her estate. He claimed to be
entitled to a share of the Indian property, and sued the trustees of the
Indian settlement. However, according to Indian law the estate of the
de facto wife was vested in the Administrator-General of Madras. The
parties were personally subject to the jurisdiction of the English court. But
the Administrator-General was not a party – even though the point had
been taken in the defendant's pleadings. Parker J held that, even on the
facts as alleged by the claimant, the English court ought not to entertain
jurisdiction, because the lands were situate in India.
(…) let us consider the case as one about property. At page 862 Parker J
said:
But it is alleged that the conveyances of the husband under which the
defendants claim title were not made for good consideration according
to French law [i.e. were made at an undervalue], and that consequently,
according to the same law, the wife could follow the property and claim
it in the defendants' hands. It is obvious, however, that whether or not
the wife could assert any interest against land outside France would be
governed entirely by the law of the place where the land is situate. In
order to assert such an interest against the defendants it would have to
be made out either that the defendants were not purchasers for value,
or that, though they were purchasers for value, they had notice of the
wife's interest under the French contract. In order, therefore, to decide
whether the plaintiff can succeed in following the property into the hands
of the defendants I should have to consider the law relating to immovable
property in India.
If the wife's interest in the Indian land was indeed "governed entirely"
by Indian law, why not receive evidence about Indian law? However, Mr
Onslow relies on the following proposition enunciated by Parker J at page
863:
In my opinion the general rule is that the Court will not adjudicate on
questions relating to the title to or the right to possession of immovable
property out of the jurisdiction. There are, no doubt, exceptions to that
rule, but, without attempting to give an exhaustive statement of those
exceptions, I think it will be found that they all depend on the existence
between the parties to the suit of some personal obligation arising out
of contract or implied contract, fiduciary relationship or fraud, or other
conduct which, in the view of a Court of Equity in this country, would
be unconscionable, and so not depend for their existence on the law of
the locus of the immovable property. Thus, in cases of trusts, specific
performance of contracts, foreclosure, or redemption of mortgages,
or in the case of land obtained by the defendant by fraud, or other
such unconscionable conduct as I have referred to, the Court may very
well assume jurisdiction. But where there is no contract, no fiduciary
relationship, and no fraud or other unconscionable conduct giving rise
to a personal obligation between the parties, and the whole question is
whether or not according to the law of the locus the claim of title set up
by one party, whether a legal or equitable claim in sense of those words
as used in English law, would be preferred to the claim of another party, I
do not think the Court ought to entertain jurisdiction to decide the matter.
In the present case there is, in my opinion, no such personal obligation
as above mentioned, and I do not think I could assume jurisdiction in this
case without acting contrary to the decision in Norris v. Chambres.
Mr Hacon at first contended that R. owe a personal obligation to his
clients which is not derived from the law of the locus of the intellectual
property, but from English law, which I take to be a reference to our
doctrine of purchaser with notice. But I thought that this was much the
same argument as would appear to have been rejected by Parker J in
Deschamps v. Miller. We need to delve further.
If the land had been situate in England, not India, apparently the claim
would have succeeded, unless it transpired that the de facto wife was
a purchaser for value without notice of the de jure's wife's equitable
interest. That much Parker J himself acknowledged in the passage
bridging pages 862-3. If the wife's interest had prevailed it would be
because the de facto wife had had notice of it; her conscience would be
affected; she would have known that she was taking property already
contracted to belong to another. But, if that is so, why should it make all
the difference that the lands were in India instead of England? Assuming
there was no overriding specialty of the local land law e.g. overreaching
of interests under a registration system, how could the mere geographical
location of the property affect the wholly different question, namely
whether (in Parker J's words) there was "some personal obligation"
between the parties?
It is not an answer to say that the obligation would be governed entirely
by the lex situs. For, as Parker J himself explained, a "personal obligation"
– sufficient to permit the English court of equity to grant relief – might
arise from "fraud, or other conduct which, in the view of a Court of
Equity in this country, would be unconscionable, and so not depend for
their existence on the law of the locus of the immovable property". [My
emphasis.]
By "fraud" Parker J cannot have meant just common law fraud – the tort
of deceit – for the books show that the concept was not so restricted. He
must have had in mind, at least, the case on equitable fraud which was
cited to him: the leading case of Cranstown v. Johnston. (1796) 3 Ves
170. Lord Cranstown, who was the absentee owner of a valuable estate in
a Caribbean island, owed the defendant J. a modest amount of money. J.
caused a suit for the money to be brought in the appropriate court of that
island, whose laws permitted a form of substituted service. You just nailed
the writ on a post and on the courthouse door. Thus, as J. had intended
all along, Lord C. received no actual notice of the proceedings, with the
result that judgment was given against him by default, the estate was put
up for auction to satisfy the judgment, and J., who was the only bidder,
acquired the property for the amount of the debt, which was far less
than the value of the estate. From beginning to end J. uttered no false
representation to anyone, nor did he violate any law of the island, nor did
he owe any contractual obligation to Lord C.; but he did know that he was
going behind Lord C.'s back in getting the estate for a pittance. In a suit
brought in England to recover the estate, Arden MR held that, although he
would not question the jurisdiction of the foreign court, or the regularity
of its proceedings, and although he would not presume that the local laws
would set aside the transaction, it was a fraud all the same according to
English rules of equity, and that the defendant J. must restore the estate
upon being repaid the original debt and expenses.
What, then, about the equity that arises in the case of a second purchaser
with notice?
In plain language, by covertly entering into the second contract they are
going behind his back to do him down. Furthermore, in deciding whether
there is such a personal obligation as to affect the defendant's conscience,
the English courts have until now applied their own notions, and not those
of the foreign state: Cheshire & North's Private International Law, 12th
ed, pp.258-9; Dicey & Morris The Conflict of Laws, 13th ed, §23-044; and
note Parker J himself in Deschamps v. Miller ("conduct which, in the view
of a Court of Equity in this country, would be unconscionable").
Why would a purchaser with notice succeed in the case of foreign lands
when he would have failed if the land had been English? Why, at the
least, was the foreign law not presumed to be the same as English law,
absent evidence to the contrary; or, if that is putting it too high, why
was it apparently assumed by Parker J that the claimant would not have
been allowed to tender evidence of the foreign law? In short, why was the
problem treated as one of lack of jurisdiction, and not as one of choice of
law?
However, I believe the answer is to be found in Macmillan Inc v.
Bishopsgate Trust (No. 3) [1995] 1 WLR 978 (affirmed on other grounds
[1996] 1 WLR 387, C.A. but not so as to affect the principle cited
hereunder). There Millett J (as he then was), referring to Norris v.
Chambres, said at 989:
A suit in equity was instituted between two parties resident in England
to enforce an equitable lien to land situate abroad. The court declined to
entertain the suit. It held that, although a purchaser to whom land out of
the jurisdiction of the court had been agreed to be sold by a person within
the jurisdiction may obtain an order for specific performance against the
vendor … he cannot obtain an order against a third party to whom the
vendor has conveyed the property even though such person took with
notice of the contract and is within the jurisdiction. The case was treated
as one of jurisdiction, but it would today more properly be regarded as
one of choice of law; whether the claim be brought against the vendor
himself or against his transferee, the plaintiff would be invoking the in
personam jurisdiction of the court against a defendant who was amenable
to that jurisdiction. The difference between the two cases is that in the
second case there is no equity or privity between the parties which
the court can enforce except such equity, if any, as may arise from the
transferee's notice; while the sufficiency of such notice to affect the
transferee's title is a matter for the lex situs. If, by that law, the transfer
to the defendant extinguished the plaintiff's interest notwithstanding the
defendant's notice, the plaintiff no longer has any proprietary interest
upon which he can base his suit in England.'
When I drew that authority to the attention of counsel Mr Onslow argued
that it might be so in a case about movables (Norris v. Chambres) but not
in a case about land (Deschamps v. Miller). I do not agree. The first was a
case seeking to declare a lien on foreign land, and Parker J followed it in
the second.
Conclusion on Immovable Property.
I would therefore have held that in the circumstances of this case G.
would have succeeded, even if the foreign property had been land, not
copyright, always supposing there were no local rules which served
to extinguish the equity (for example, arising out of some scheme for
registration of title). Put more generally, in the absence of such local
rules I can see no sound reason why a claim in personam in respect of
foreign immovables arising out of a prior contract, brought against a third
party purchaser who had had actual notice of that contract and who is
otherwise properly before the court, should fail; at any rate, where the
contract is governed by English law and the immovables are located in
manifold jurisdictions.
It would follow that the first step in Mr Onslow's argument fails and that
I do not need to examine his second step, viz. that the Moçambique
doctrine has been extended from land to intellectual property. However,
I am not content to found my judgment on that point alone. I shall
assume that I may be wrong, and ask myself if his point applies to foreign
intellectual property.
VII. OWNERSHIP OF FOREIGN INTELLECTUAL PROPERTY.
Truly Analogous to Land?
Intellectual property rights are not 'immovables', and indeed s.90 of our
Copyright Act states that 'Copyright is transmissible by assignment, by
testamentary disposition or by operation of law, as personal or moveable
property'. Likewise a patent is described as 'personal property' or, in
Scotland, 'incorporeal moveable property' (Patents Act 1977, ss. 30, 31);
and similar expressions are employed in statutes concerning other species
of intellectual property. Even so, there may be some ways in which foreign
intellectual property rights in point of comity are analogous to foreign
immovables. For example, if a court in State X were to grant injunctions
restraining people from infringing patents in State Y, there being no treaty
between those States which allowed it, it is easy to see that the sovereign
of State Y might resent it: see paragraph 132 below. For that would be to
assume a jurisdiction to control important aspects of the internal trade of
another sovereign state. But that is not the case before me.
Tyburn Productions v. Conan Doyle.
Nevertheless, the second step in Mr Onslow's argument is that the
Moçambique rule has been extended to foreign intellectual property by
the decision of Vinelott J in Tyburn Productions Ltd v. Conan Doyle [1991]
Ch 75. The actual point underlying that case was whether, many years
after the death of A., there still existed copyrights or other intellectual
property rights under the laws of the United States, or under state
laws, which could be asserted to prevent the distribution of a film about
Sherlock Holmes in that country. It was held that the issue was not
justiciable in England and that, in any event, the proceedings were
pointless since there was nothing to show that the courts in America
would pay any attention to the result of the English case supposing it had
been allowed to go ahead.
It was thus a dispute which, on one view, called into question the
existence of intellectual property rights said to have been granted by a
foreign sovereign. I do not think so myself, for it would merely have been
a question of receiving evidence about the will of that sovereign;
Mr Onslow nevertheless asks me to apply the reasoning in Tyburn to the
present case.
First, the significance of Article 16(4) of the Brussels and Lugano
Conventions, respectively. It provides that 'in proceedings concerning
the registration or validity of patents, trade marks, designs, or other
similar rights required to be deposited or registered', the courts of the
Contracting State where the deposit or registration is supposed to take
place shall have exclusive jurisdiction.
Once again the narrowness of that exception should be noted. In the first
place, it does not apply to copyrights since these are not required to be
deposited or registered.
At any rate, it follows from the Brussels convention that, in certain
circumstances, our courts not only may, but must, entertain proceedings
for infringements of foreign copyright (Pearce v. Ove Arup). If that is
so it is hard to see why they should object to adjudicate upon a case
concerning their ownership, said to arise from a contract governed
by English law. The more so in the light of the usages of nations as
evidenced by the decisions of the ECJ and the Dutch courts in Duijnstee v.
Goderbauer.
The second legal development since the date of the Tyburn case is the
abolition of the so-called double-actionability rule. It was interpreted to
mean that infringements of foreign intellectual property rights could not
be sued for in England.
In any case the double-actionability rule was abolished by s.10 of the
Private International Law (Miscellaneous Provisions) Act 1995, with the
effect that, in general, it is now enough to show that the act complained
of is actionable according to the law of the country where the event took
place. Hence (questions of Convention, comity and forum conveniens
apart) it is now sometimes possible to sue in England for infringement of
a foreign intellectual property right.
With those observations in mind, I return to Tyburn Productions v. Conan
Doyle.
Now, I believe that Vinelott J's reasoning, insofar as it may be said to
assist Mr Onslow, can be summarised as follows.
(1) The rule in the Moçambique case precludes English courts from
determining title to foreign immovables.
(2) The High Court of Australia in Potter v. Broken Hill Pty Co Ltd (1906)
3 CLR 479 held that the Moçambique rule applies by analogy where
the validity or infringement of a patent is in issue, for that would be to
enquire into the validity of an act of a foreign sovereign.
(3) The principle was supported by a more recent decision of the High
Court of Australia in Norbert Steinhardt & Son Ltd v. Meth (1961) 105 CLR
440.
(4) Furthermore it was conceded by counsel for the claimants in the
Tyburn case that, if this was right, the same principle must apply to other
intellectual property rights such as copyright.
(5) The court would be reluctant to decline to follow decisions of the High
Court of Australia unless convinced that circumstances had so changed as
a result of social or economic developments or statutory intervention that
the rule should now be confined to actions in which title to land is in issue.
(6) The application of the rule to intellectual property could be supported
by other authority, namely the decision of Sir Nicolas Browne-Wilkinson
V-C in Def Lepp Music v. Stuart-Brown [1986] RPC 273, where it was
held that a claim to infringement of copyright by acts performed in the
Netherlands and Luxembourg was not justiciable in England, because
such a claim cannot satisfy the double-actionability rule, namely, that the
relevant acts must be actionable in the foreign state and England.
(7) Finally, the principle was further supported by the decision in Rey
v. Lecouturier [1908] 2 Ch 715; [1910] AC 262, where it was held that
a ruling by the French courts that the ownership of the trade mark
Chartreuse (formerly belonging to the monastery of Grand Chartreuse)
had passed to a liquidator under French law, could not affect the title to
the English trade mark, since the French courts had no jurisdiction to
determine title to this English property.
I would be slow to depart from the reasoning of that experienced (and, I
would add, genial) judge Vinelott J. However, it has not escaped learned
criticism: see Cheshire and North, Private International Law, 12th ed,
263-4; Dicey & Morris, op cit, §§35-027 to 35-031, see also footnote 38;
Fawcett and Torremans, Intellectual Property and Private International
Law, 286 et seq. Furthermore it was analysed by the Court of Appeal in
Pearce v. Ove Arup Partnership [1999] FSR 525, 546, 556-7, who were
not enthusiastic and concluded as follows:
We can derive little or no assistance from the decision in the Tyburn
Productions case on the question whether an action for alleged
infringement of a foreign copyright by acts done outside the United
Kingdom, in a case where the existence and validity of the right is not in
issue, is justiciable in an English court. [My emphasis.]
I must therefore make up my own mind, and I shall express my views
concerning each of the steps in Vinelott J's reasoning as set forth above.
(1) (Moçambique rule precludes English courts from determining title to
foreign immovables.) This is not applicable to the present case, which
concerns the scope of the court's equitable in personam jurisdiction. See
the previous section of this Judgment. Even if that is wrong, the point was
not before Vinelott J. He was being asked to say the rights did not exist at
all.
(2) (Potter v. Broken Hill extends Moçambique rule to validity or
infringement of patents). That was a case in which the plaintiff sued in
the state of Victoria for infringement of a patent granted by the state of
New South Wales. The defendant challenged the validity of the patent. In
so doing he was necessarily calling into question the validity of an act of
the local sovereign i.e. the state of New South Wales. He was contending
that the authorities of that State had been wrong to grant the patent, or
had been wrong to grant it in that form. This could not be allowed. But
that, of itself, in no way establishes that an action for infringement could
not have been entertained if the validity of the patent had not been in
question. See the analysis of the case by the Court of Appeal in the Ove
Arup [1999] FSR at 551-554. Much less does it establish that a dispute
over the right to a patent could not be entertained under the in personam
jurisdiction.
(3) (Principle further supported by the more recent Australian decision
in Norbert Steinhardt.) That case was an action for threats, uttered in
England, to sue on an Australian patent in Australia. The action failed
because a threat uttered in England was not within the scope of the
Australian Patents Act. See the analysis of the case by the Court of Appeal
in the Ove Arup case at page 554. (With respect, the Court appears
somewhat to have misunderstood the nature of the cause of action, which
was for the statutory tort of threatening to bring patent proceedings,
not for threats to infringe a patent. But that error is irrelevant to its
reasoning.) The Norbert Steinhardt case, therefore, adds nothing to the
matter in hand.
(4) (Concession by counsel that, if Moçambique rule applies to patents,
it must also apply to copyright.) It does not follow. Unlike patents,
copyrights are not registered. Compare Art. 16(4) of the Brussels and
Lugano conventions. Hence the Court of Appeal in the Ove Arup case held
that an action lay in England for infringement of Dutch copyrights.
(5) (Court would be reluctant to decline to follow decisions of the High
Court of Australia unless convinced that circumstances had so changed
as a result of social or economic developments or statutory intervention
that the rule should now be confined to actions in which title to land is in
issue.) I have already pointed out that:-
Times have changed seeing that we now do entertain actions for
infringement of foreign copyrights, at least in some instances.
The Australian decisions are not authority on the point before me: neither
the existence nor validity of foreign patents, let alone copyrights, is in
issue.
Land may indeed be a special case (see paragraph 118, above).
(6) (Principle is further supported by Def Lepp Music v. Stuart-Brown.)
If anything, Def Lepp is against Mr Onslow's contention, for it serves
to explain why proceedings for infringements of foreign intellectual
property rights could not be brought in the past. It was a rule about
double-actionability and implied nothing about justiciability in the sense of
comity. Anyway the rule has now been abolished by Parliament.
(7) (Rey v. Lecouturier is further support for the principle since French
courts had no jurisdiction to determine title to English trade marks.) In
the first place, what had happened in France was a decree of confiscation
of the Carthusian monks' property. It is trite law that, in general, foreign
penal acts of a confiscatory nature are not recognised in England. In
the second place, the actual observation relied on, that the French court
"had no jurisdiction to determine what ought to be the entries in the
register of trade marks in England", while correct, is not in point. Of
course the French court had no jurisdiction in rem – to give directions
to our Registrar. But the case has nothing to do with what would have
happened – in a case not about penal confiscation – if a French court had
held that the monks were under an obligation, enforceable in personam,
to transfer the trade marks.
In my respectful opinion, the actual result in the Tyburn Productions case
was correct.
In my judgment, prima facie it is not a breach of comity today, if ever it
was, to adjudicate in personam on rights to foreign intellectual property
arising out of a contract, even as against a third party purchaser with
actual notice thereof, or sufficient notice to cause an honest man to
make better enquiries or else stop his hand. This is especially so where
the contract is governed by English law and the rights exist in manifold
jurisdictions. Absent some special rule in any particular jurisdiction which
serves to extinguish the English equity (and in a non-registration system,
such as applies to copyright, it is not easy to imagine one) such a claim, if
otherwise well founded, ought to succeed.
VIII. CONCLUSION.
R.'s objection to the jurisdiction fails. In my judgment it is not a breach
of international comity to order R. to assign the foreign copyrights in
the Logo to G., instead of leaving G. to bring parallel proceedings in
numerous countries. Furthermore G. have an equity arising out of English
contracts which, were the property situate in England, G. could enforce
against R.; as regards the property situate abroad, it is not shown that
the laws of the foreign countries would extinguish that equity; and it
is not unreasonable to proceed on that basis. Hence G. are entitled to
succeed. In my judgment the assignment in escrow must be delivered by
R.'s solicitors to the order of G.