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?
- I shall first state the bare bones of the problem. 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: in other words he cannot say: "I was a purchaser for value without notice". In such a case it is trite law that the court can order Y to assign the British copyright to X. But does the court have power to order that the equivalent foreign copyrights be likewise assigned? The answer may seem intuitively obvious, but not when you have read some of the case law.
- Regrettably, this judgment is not short. It must strive to understand, not only what the law is said to be, but why. It must consider aspects of equity, private international law, land law, intellectual property and English civil procedure. I ask for the indulgence of the reader; the more so if he or she is a specialist in one or more of those fields.
- Now I shall put flesh on the bones. 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
Griggs
, have applied the Logo to all Dr Martens 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 Griggs 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 Griggs by the First Defendant Mr Evans, a commercial artist. But he did the work for an advertising agency, not as an employee, but as a free-lance designer. So 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 Evans created the Logo for valuable consideration on implied terms that the copyright would belong to Griggs, so that Griggs are the owners in equity: see [2003] EWHC 2914 (Ch).
- The Logo was designed in 1988, and neither Griggs nor Mr Evans gave any thought to the law of copyright then or for many years after. Eventually, as a result of certain Australian litigation both Griggs and Mr Evans came to appreciate that the legal title remained vested in Mr Evans. Mr Evans conceived that he was the holder of a valuable asset which could be turned into money. Griggs believed – correctly as I have held – that Mr Evans 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 Griggs Mr Evans 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 ("Raben"), who are an Australian company hostile to Griggs. The assignment to Raben was in the form of a deed, governed by the law of New South Wales.
- I held that because Raben had notice of the facts giving rise to the prior equitable interest of Griggs, they should be ordered to assign the copyright to Griggs. It was not really disputed at the trial that Raben had notice, but in any case it is obvious that they did. For example: (1) the very document by which Mr Evans purported to assign the copyright to Raben recited that in 1988 he, Mr Evans, was contracted by the advertising agency to create the Logo "for persons or entities associated with the Dr Martens group of companies" which, as Raben knew, was a reference to Griggs; (2) Raben knew that the purpose for which the drawing had been created was so that it could be used by Griggs as a trade mark, that Griggs had indeed used the Logo for many years in many countries, so that it must be by now an important trade mark for Griggs, and that it would be (to put it mildly) bizarre for Raben to be in a position to control the use to which Griggs put that trade mark. Those facts in themselves, I thought, were ample notice in themselves, absent any sufficient countervailing factor, of which there was none[1]. That Raben may have mistaken the law is neither here nor there.
- Although my judgment devoted little attention to it, it was clear that references to 'copyright' included, not only the British copyright in the Logo, but the copyright in all foreign countries too: see [2003] EWHC 2914 (Ch), paragraph 58. In any event it was the basis upon which the case was expressly pleaded. There can have been no doubt about it. At the trial no presently relevant distinction was sought to be made between the British and foreign copyrights.
- 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 Raben were obliged to deliver to Griggs 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 Evans, but is now appearing for Raben) communicated with my clerk and counsel for Griggs 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. Raben have never agreed to assign the property to Griggs, so there can be no question of decreeing specific performance. He admits that I can compel Raben to assign the British copyright in the Logo to Griggs, but he denies that I have jurisdiction to do so in respect the foreign copyrights in that same Logo. That would be to interfere with systems of property ownership created by foreign sovereigns, contrary to principles of international comity.
- 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).
- The point is of some significance. For example, it happens all the time that a company agrees to sell its worldwide portfolio of intellectual property rights, or other intangible assets which cannot readily be bought in the open market; or has agreed that it shall transfer them on the happening of a certain event. The rights could be copyrights, patents, registered or unregistered trade marks, registered or unregistered designs, shares in private companies, and so forth. Or it may be that an inventor, author or designer (for example, a free-lance consultant) has been paid to create something on implied terms that the rights are to belong to another.
- 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 is true that the obligee may be able to protect himself by making a prompt registration of his title. But this can take time, and meanwhile he is at risk. It is anyway not possible in the case of some intellectual property rights e.g. copyright since title to these cannot be registered. It is also true that the obligor will be liable in damages for breach of contract; but that is seldom an adequate remedy, for to value unique assets (such as intellectual property or shares in private companies) is an exercise fraught with difficulty; besides, it may happen that he is not good for the damages anyway. Theoretically the obligee may vindicate his rights by suing in foreign countries; but this will not be practicable if those countries are numerous, see paragraph 29 below.
- 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 Griggs 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 Raben must first execute a formal assignment of the copyrights to Griggs, the document to be delivered to Raben'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 Griggs, 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?
- It is common ground that a court has power to change its decision at any time before its order is formally drawn up and entered. However, it is clear that the power ought not to be exercised save in exceptional circumstances: Stewart v. Engel [2000] 1 WLR 2268, C.A. When judgment has been delivered the successful party ought to be able to assume that the judgment is valid and effective; it is not enough that he may be compensated in costs; some most unusual element must be present (ibid).
- There is no question of Raben having been taken by surprise: they knew Griggs were demanding that the foreign copyrights be assigned to them by Raben 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 Raben 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.
- I believe Mr Onslow is right to the following extent. In the ordinary way, parties cannot confer jurisdiction upon a court which it does not otherwise have. If parties cannot do it on purpose, I do not see how they can by mere inadvertence. If a court indeed lacks jurisdiction, and the point is taken for the first time on appeal, then, as it seems to me, the appeal is bound to succeed. Although no authorities for those propositions were cited to me, I conceive that they are supported by the decisions of the Privy Council in Raja Setrucherla Ramabhadraraju v. Maharajah of Jeypore All India Reports 1919 PC 150 and of Lord Greene MR in Upper Agbrigg Assessment Committee v. Bents Brewery Co [1945] 1 KB 196, 200. If that is so, it would be a pointless waste of time and money for the court of first instance, if apprised of the error before its order was formally drawn up and entered, to refuse to correct it. There might be a stringent order as to costs, but that is another matter.
- Hence, when it comes to a problem about lack of jurisdiction, I agree with Mr Onslow that Stewart v. Engel cannot be applied without modification. However, what does it mean to say that a court lacks 'jurisdiction'? The expression is capable of being used in more than one sense.
- For example, it may refer to lack of jurisdiction in the sense that the court or tribunal has no power in virtue of its own constitution to adjudicate on the subject matter in question. Thus a county court has no power to try people for murder. Or it may refer to the purported exercise of a coercive power over a foreign resident who is not subject to, and has not submitted to, the jurisdiction of the court. That does not apply here, for permission was given to serve Raben in Australia and Raben have not challenged the court's jurisdiction in that sense. Or it may refer to a situation where, although the parties are properly before the court, it has no power to make the order that is sought, because the law does not supply the claimant with the requisite cause of action: as would happen if it were subsequently discovered that the proprietary right he is asserting had been abolished by Act of Parliament.
- While each case must depend on its particular circumstances, I am inclined to believe that in all those instances the court would reverse its own decision to make the order, even though the point was not spotted until after delivery of judgment. As I have mentioned, in all of those cases the erroneous exercise of jurisdiction could be appealed anyway, and the appeal would be bound to succeed.
- In the present case, however, when Mr Onslow objects to the court's jurisdiction, he is not referring to one of those cases. He is saying that our courts do not assume a jurisdiction to adjudicate upon ownership of foreign land and, by extension, foreign intellectual property. It is not so much that we do not have that power in the abstract, but that we refrain from exercising it in the interests of international comity. Now, "comity is a term of very elastic content" (Dicey & Morris, The Conflict of Laws, 13th ed, §1-010). In general, however, when our courts say that they intend to refrain from making a particular order because it would be a breach of international comity, they mean that, in their judgment, a foreign court would reasonably construe it as an invasion of the sovereignty of its country, and to resent it, accordingly. We do not mean to offend foreign courts, as by seeming to undermine their jurisdiction and authority, and expect a similar degree of self-imposed judicial restraint on their side. But how do we know where to draw the line? At times the line is tolerably clear, because it has been drawn in our own case law, or because it is demarcated by established concepts of international law. At other times the line is less clear.
- Now, if Mr Onslow's point about the foreign copyrights had been taken by Raben in a timely manner (which means, I believe, in their pleadings but, at the very latest, by the time skeleton arguments for the trial had to be delivered) Griggs might conceivably have been able to do something to improve their position. For example, they might have been able to adduce evidence of foreign law pertinent to the question, seeking an adjournment if necessary. For all that I know, they might have been able to show that in the appropriate foreign jurisdictions, or some of them, Raben would be regarded as being under an obligation, arising out of the agreements between Griggs, Mr Evans and the advertising agency, to transfer the copyright to Griggs; and that the local courts, far from considering it to be a breach of comity for us to make the order, would be perfectly content for us to do so. In my judgment, therefore, procedural fairness demands that I should assume those propositions in Griggs' favour, and any other facts which Griggs might have proved, unless and to the extent that it would be unreasonable to do so.
- Even so, it does not follow that I must necessarily reject Mr Onslow's proposition, for it remains to discover whether the law administered by our own courts must be taken to have drawn the line in his favour. For, if that were so, no amount of evidence would serve to defeat his objection. I shall therefore proceed to examine the objection as to want of jurisdiction, subject to the above-described caveats.
- The hearing on Mr Onslow's point was brief, and my own subsequent research led me to find further material which had not been drawn to my attention by counsel. At a subsequent hearing to consider it Mr Onslow objected that in conducting this research I had departed from the role of judge. I disagree. In my judgment, if a court comes to believe it lacks jurisdiction it is bound to take the point of its own motion. It is certainly not bound by the pleadings or the arguments of counsel. Likewise, if a court is led to wonder whether it lacks jurisdiction it is entitled to examine the matter for itself. The court is not an umpire who gives marks to the best ice-skater. Of course, counsel are normally entitled to make observations on such further significant authorities as may have been discovered by the court. Mr Onslow did not complain that I had gone out of my way in finding the authorities cited in paragraph 20 above.
III. MATTERS TO BE EXAMINED.
- Griggs have succeeded with regard to the British copyright in the Logo because they were its owners in equity and Raben 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.
- At first sight the Defendants' case might seem to lack contact with practical reality. No less than 151 countries have pledged themselves to protect copyright by signing the Berne Convention, and there are yet others that do it anyway. If, therefore, the point were well founded, it would signify that the Claimants, in order to secure their worldwide claim to the copyrights in the Logo, would have to bring separate legal proceedings in as many countries. Obviously not a practical proposition. It would not suffice to sue Raben in Australia, for I presume Griggs would run up against the same objection: you cannot adjudicate on title to copyright in all the other countries.
- It might be objected that a problem of this sort can arise but rarely; and would not have arisen in this case if Griggs had enforced their rights against Mr Evans promptly instead of taking years to catch on. I do not think so. So far as Griggs are concerned, we know that when they did apply to Mr Evans it did not take him long to look for a third party who might be prepared to buy the copyrights from him. If that is what he was willing to do in 2002 we cannot say what he might have done in 1988. I think the point has arisen for the first time in this case because it had never occurred to anybody before. That it has not been spotted before does not make it a bad point. Not a few rules of law went unnoticed until someone had the courage and intelligence to identify them, yet they are now taken for granted.
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. The gap may occur for one of many practical reasons. For instance, the purchaser may need time to investigate title, or to perform due diligence, or to raise the money. Or the purchaser may have bought the exclusive option to acquire the property during a certain future period, or on the happening of a certain event. In all these cases the vendor may continue to be the legal owner of the property until the formal assignment is accomplished.
- During that period the person who holds the property – I shall call him 'the vendor' for short – 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. Even a mundane business letter may attract copyright, and on this planet there must be many millions written every day. Indeed a requirement for registration of copyrights would be contrary to international practice: see Article 5(2) of the Berne Convention.
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. This is necessarily somewhat artificial, because I believe that in most parts of the world nowadays interests in land are subject to registration, and under the local law registration may be conclusive. It may well overreach any equity said to arise against a purchaser with notice. In fact, when Deschamps v. Miller and Norris v. Chambres were decided England was very backward in matters of land registration. It is true that we had it, but that was in some counties only, and even there it was not the same as the system we have now. In particular, the purchaser with notice was defeated no matter what was said in the register: compare Midland Bank v. Green. It follows that in those days it might have seemed plausible that the equity arising out of purchase with notice, although effective as regards land situate in England, would anyway have been extinguished by the local law.
- 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. When I write 'property in general' I do not mean to encompass all property whatsoever, because equity did not intervene in all cases. Generally, it did so where the property was in some appropriate sense unique: property in respect of which specific performance might have been decreed.
V. THE DOCTRINE OF THE PURCHASER WITH NOTICE.
The English Rule.
- In this country the general rule is well known but the reason for it sometimes forgotten. 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. Put more accurately, the third party is defeated unless he was a purchaser for value of the legal estate in good faith without actual or constructive notice of the equity in favour of the prior purchaser, or is one claiming under such purchaser. The rule may be modified or overridden by a statutory scheme for the registration of interests in property. Absent such a scheme, the general rule applies.
- Every law student is taught about the rule, but nowadays if asked to explain why it is so he might be reduced to retorting: "Well, it just is". That will not do for the purposes of our case. For I am being asked to apply the rule to property which has no existence except under the laws of foreign states – more than 150 of them. Therefore I need to understand the inwardness of the rule.
- The rule was evolved by our courts of equity. Nobody has been able to come up with a satisfactory definition of 'equity', save to say that it is that body of rules and principles which, before 1875, were the peculiar province of certain special courts notably the Court of Chancery. From the beginning the courts of equity regarded themselves as courts of conscience (per Viscount Haldane LC in Nocton v . Lord Ashburton [1914] AC 932 at 954). They ordered the defendant to behave as a righteous man would have done in that particular situation. Over time they came to accept that 'conscience' was too elastic a concept to be employed by itself (as Deane J was to put it much later in Muschinski v. Dodds (1985) 160 CLR 583 at 615, it would open the door to "idiosyncratic notions of fairness and justice"). But from that starting principle they evolved a detailed and precise body of rules. What they achieved was a kind of supplementary jurisprudence which was intended to fill up the gaps in the common law.
- The upshot was that the result of a case might easily differ, depending on whether it was heard by a court of common law or a court of equity. Despite this, when both sets of courts were merged in 1875 it was found that there were very few rules upon which law and equity were in conflict (Maitland, Lectures on Equity, 1909, 16-18). This seems an amazing paradox at first sight, but is resolved once it is appreciated that equity did not create titles rival to those of the common law, but instead acted in personam. A simple example will serve to bring out several of the features which were characteristic of equity, and are pertinent to our case.
- Suppose a man had agreed to sell his estate Blackacre yet refused to complete by the due date. The courts of common law would have said: "You have broken your contract, and must pay damages to the buyer". But the buyer did not want the money: he wanted Blackacre. No two estates are alike and so an award of damages was not an adequate remedy. No other remedy was available in the courts of common law. So the buyer might decide to bring a suit in a court of equity: for specific performance. I suspect that the origin of this equitable remedy is lost in the mists of time, but I believe that, originally, the court of equity would have said to the vendor something along these lines: "If you were a man of good conscience you would not keep this estate – leaving the plaintiff to his inadequate remedy. You would keep to your bargain and convey Blackacre to him. And that is what you must do, or we shall hold you in contempt of court".
- But now suppose that the vendor had already conveyed the estate to a third party – before the court of equity had made any order, of course. The courts of common law would have said: "Well, the vendor could have chosen to pay damages and keep his estate. Then he could have sold Blackacre to anyone. Therefore he must still pay damages, but the conveyance in favour of the third party is good and effective". In contrast, a court of equity, while not denying that the third party was the legal owner – they would have admitted that none but he could bring proceedings against a trespasser – would have added : "It is fine if you acquired this estate as a purchaser for value without notice. But a righteous man in your position would not have acquired Blackacre if he had known that the vendor had already agreed to convey it to the original buyer. So, if you did have notice of the prior contract, we shall order you to convey the estate to the original buyer."
- This illustration brings out several features characteristic of equity. Note, first, that the equity judges never sought to overrule the decisions of their common law brethren. They had not the power to do so. They were not a superior court with power to quash decisions of inferior tribunals, as in proceedings for judicial review nowadays. Instead, they achieved their aim by compelling the wrongdoing litigant himself to comply with the rule prescribed by equity. Thus equity acted in personam. It 'fastened upon the conscience' of the defendant and compelled him to act accordingly. The distinction may sound like mere sophism, but it was not. Show me the third party purchaser, and I will show you the difference. If equity had tried to make the third party purchaser liable, irrespective of any notice, it would not have been acting in personam. It would have been creating a title in the original purchaser good as against the whole world. Thus it would have been acting in rem. It would have been ousting the common law, not supplementing it. Hence, as Lord Browne-Wilkinson said in Barclays Bank plc v. O'Brien [1994] AC at 195: "The doctrine of notice lies at the heart of equity".
- Why did notice make all the difference? It was because if the second contract was entered into with notice, and I mean actual notice, equity considered it to be a fraud on the first. I must stress that 'fraud' in this context does not mean common law fraud, which, in essence, involves lying. For that reason the word has acquired an opprobrious connotation in law and business; and it is a cardinal rule of pleading that if fraud (in that sense) is going to be alleged, it must be set forth distinctly. In contrast, when courts of equity referred to something as 'fraud' it might have nothing to do with deceit: see Nocton v. Lord Ashburton (citation as above). It might have been conduct which today would best be described as unconscionable.
- Story's Equity Jurisprudence was, perhaps, the most systematic work on equity ever achieved, at least until modern times: its author was not only Dane Professor of Law at the University of Harvard, but a Justice of the Supreme Court of the United States, and his treatise was based largely on the decisions of the English courts of equity. It is a classic work of authority which explains the reasons for doctrines which are nowadays sometimes taken for granted. Chapter VII concerns constructive fraud, that is to say, those kinds of fraud which, although perhaps not so according to the courts of common law, were considered to be such by the courts of equity. Paragraph 333[3] states as follows:
But the great class of cases, in which relief is granted, under this head, is whether the contract or other act is substantially a fraud upon the rights, interests, duties or intentions of third persons. And, here, the general rule is, that particular persons, in contracts, and other acts, shall not only transact bona fide between themselves but shall not transact mâla fide in respect to other persons, who stand in such a relation to either, as to be affected by the contract or the consequences of it.
- 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. How dare the epithet 'fraud' be applied to his clients, he urged, seeing that fraud had not been pleaded? But, in the first place, I doubt that his clients are in a position to adopt a lofty tone (for I do not know what application might have been made by Mr Hacon to amend his pleadings, and what evidence he might have produced, had Mr Onslow's point been taken in a timely manner). Much more pertinently, Story was not writing about common law fraud, as I have already observed, but about equitable fraud; and the traditional rule always was that the onus to plead and prove a purchase for value in good faith without notice lay on he who alleged it: Snell's Equity (30th ed) §4-09. But, Mr Onslow goes on to say, this is all out of date, because nowadays constructive fraud is confined to three branches (illegality, undue influence and breach of fiduciary duty). For present purposes I do not mind how one classifies it. 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." That was the origin of the doctrine of constructive notice. I do not want to go into this topic unnecessarily, but for present purposes the point is that by the end of the 19th century matters had developed to a stage where it was no longer necessary to establish equitable fraud, which concept ceased to be stressed in textbooks when addressing the topic. The courts had found an easier route. It was enough to prove that the third party purchaser had been careless in making his enquiries (often labelled "gross negligence"). It could consist of a failure to make such enquiries as were standard in a conveyancing transaction of the sort in question. The later doctrine of constructive notice arose as follows. First, as I have said, it was held that deliberately to refrain from making enquiries with the object of being able to deny notice was itself equitable fraud ("not only absence of notice, but genuine and honest absence of notice", per Lord Wilberforce; and see the passage from the judgment of Fry LJ quoted in paragraph 50 below). But although there is an obvious difference between deliberately shutting one's eyes (on the one hand) and mere negligence in making enquiries (on the other), the territory between those two extremes was not always easy to map. Negligence might give rise to a suspicion of turning a blind eye; and, if it were gross enough, the inference might be strong, perhaps irresistible. But these were refined distinctions, and the courts had to be practical. For, a prudent man acting in his own best interests would anyway have made proper enquiries before purchasing an estate. It was eventually decided[5] that if he failed to do so this was negligence so gross that the courts would not help him. Even though his motive was, not a desire to outdo some suspected prior purchaser, but mere laziness. In that sense one might say that there came to be at least two doctrines of the purchaser with notice: one (actual notice) which was equitable fraud pure and simple, and the other (constructive notice) where it might not be.
- 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 Northern Counties Fire Insurance Co v. Whipp the question was whether a company which had a legal mortgage had lost its priority to a subsequent equitable mortgage which had been created because the company's manager (who was on a frolic of his own) had a duplicate key to the safe where the title deeds were kept. The Court of Appeal therefore had to decide whether the company's carelessness should be equated to equitable fraud. I agree with Mr Onslow that that was a different class of case from the present: it concerns those cases in which the owner of a legal right is defeated by a subsequent equitable interest because he has improperly connived in the creation of that later interest. But the starting point of the Court of Appeal's judgment was an examination of cases which do fall into the present class. At page 487 Fry LJ (who delivered the judgment of the court), after referring to "The cases which assist in answering the question", which fell into two categories, went on describe the first class, as follows:
In the case of a person taking the legal estate, and not seeking for or obtaining the title deeds from the mortgagor [i.e. not inspecting the title], the question may arise between the legal mortgagee and either a prior or a subsequent incumbrancer or purchaser. But in such a transaction the fraud about which the Courts are most solicitous is that which is practised when a man takes the legal estate with knowledge of a prior equitable sale or incumbrance, and yet strives to place himself in a position to show that he took without notice – that kind of fraud which Lord Hardwicke explained in Le Neve v. Le Neve, when he said:- "The taking of a legal estate after notice of a prior right, makes a person a mala fide purchaser … This is a species of fraud, and dolus malus itself; for he knew 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 estate."
Mr Onslow contends that Fry LJ's remarks were obiter. I cannot agree. In any case the submission presupposes that Fry LJ, who had a deep knowledge of equity, was uttering an eccentricity. On the contrary I believe he was summarising what was, by that date, well-established doctrine.
- I therefore believe that it has been established for at least 250 years that a purchaser who takes a legal estate with actual notice of facts which have created a prior equitable interest, or who deliberately refrains from pursuing obvious enquiries for fear of learning the truth about same, is guilty of equitable fraud or, if one prefers to say so, conduct which is unconscionable; always provided that the concept has not been modified by the legislature: see paragraph 58 below. The equitable interest may consist of a right to specific performance arising out of a prior contract between the vendor and another. (There was one immaterial quasi-exception – where the purchaser with notice was himself the successor to a purchaser for value without notice; for else the innocent purchaser might find the land to be unsaleable – but I do not need to go into that here.)
- I have not overlooked that in our case there was not one contract, but two. There was the contract between Mr Evans and the advertising agency, and the contract between that agency and Griggs (followed by a formal assignment of the copyrights from the agency to Griggs). I consider that the distinction is immaterial for present purposes.
A Parochial Rule?
- 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 Raben and they have taken their point between the stirrup and the ground. Even though I know perfectly well that there must be many countries whose laws do not recognise such concepts as "equitable jurisdiction", "constructive trust", and so forth. But I believe I must proceed with some caution, because Mr Onslow's point concerns international comity. It would not be right to trample upon the sovereignty of foreign states and the jurisdictions of their respective courts just because the parties here have refrained from adducing evidence of foreign law. I have said that I shall assume the necessary propositions in Griggs' favour unless it would be unreasonable to do so. I should ask myself, therefore, whether our rule about purchasers for value with notice would seem to be nothing more than a quaint, parochial concept which is unlikely to commend itself to courts in other lands.
- I do not think so. In the first place, I conceive that our rule, although originally developed by our courts of equity, does not reflect a concept which is peculiar to the jurisprudence of those courts. If equity had never been invented I am sure that, over time, the courts of common law would have arrived at the same result. In fact, I suspect they have done so. As I understand it, it is a common law tort knowingly to have contractual dealings which are inconsistent with a prior contract (see the judgment of Jenkins LJ in D.C. Thomson & Co Ltd v. Deakin [1952] Ch 646, 694; see also H Lauterpacht, 'Contracts to break a contract' 52 LQR 494). Or take a field even more remote from equity, the sale of goods. In the interests of commercial security there have to be special cases in which a buyer of goods can acquire a good title even though the vendor is not their real owner, but looks to the outside world as if he is. But this is so if, and only if, the buyer is a purchaser for value without notice. The Sale of Goods Act 1893 was a codification of the common law and contained several provisions to that effect: s.22 (sale in market overt); s.23 (sale under a voidable title); s.25 (seller or buyer in possession after sale). In each instance there was employed the concept of the purchaser for value in good faith. Passing now to pure creatures of statute law, the concept is employed in ss.90 and 91 of the Copyright, Designs and Patents Act 1988 (purchaser of a copyright is bound by a licence granted in favour of a third party by the previous owner unless he was a purchaser for value without notice); and in s.33 of the Patents Act 1977 (already mentioned). And the concept may be found elsewhere in statute law. For instance, a conveyance to defeat a man's creditors might be valid if made in favour of a purchaser for value without notice.
- 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.]
- So that is an instance where the concept was applied in a civil law environment. The civil law is, of course, that body of learning (originally derived from Roman law) on which were founded not only the modern property systems of France and French-speaking Canada but also those of most Continental countries, not to mention Scotland, South Africa, Louisiana, Sri Lanka, Japan and many other lands. It is interesting that the last sentence of the passage I have quoted from Story cites Lord Hardwicke's explanation of the doctrine of purchaser with notice which "exactly agrees with the civil law definition of dolus malus". Having cited a passage from Justinian's Digest, Lord Hardwicke continues:
Now, if a person does not stop his hand, but gets the legal estate when he knew that the right was in another, machinatur ad circumveniendum…
Fraud, or mala fides, therefore, it is the true ground on which the Court is governed in the cases of notice …
- I mention these illustrations merely in order to stress that the result of the present case, insofar as it concerns the British copyright, should not be seen as arising from some refined technical point derived from an arcane body of jurisprudence ("equity") which is peculiar to English law. The concept that no upright citizen acquires unique property which, to his knowledge, has already validly been contracted to be transferred to another, and that the second transaction ought to be ineffective, is, on its face, neither arcane nor parochial. The man on the Clapham omnibus would think the law ought to be so, and I have no reason to believe the passenger on the Japanese bullet train would think otherwise. It would appear to be, as Lord Halsbury said, "part of the ordinary rules of justice as between man and man".
- Of course, this is to presuppose that the concept has not been modified by the legislature. As already mentioned, this may happen where the legislature has decided to substitute some scheme for registration of title. In such cases – in what I have called a 'pure' registration scheme – the law may be that the purchaser of an asset is entitled to rely on what is stated in the register, and nothing else, and does not have to worry about what may lie behind it. Even if he should happen to have actual notice of the true circumstances, he is considered to act honestly, because the legislature has altered "the ordinary expectations of mankind in transacting their affairs" (per Lord Halsbury LC in the Bank of Montreal case), and "it is not fraud to take advantage of legal rights, the existence of which may be taken to be known to both parties" (a dictum cited by Lord Wilberforce in the Midland Bank case at page 530G).
- However, in our case we are reasonably safe in assuming that no foreign legislature can have set up such a registration scheme. I repeat that a requirement for registration of copyrights would be contrary to the Berne Convention.
- I therefore consider that Griggs, in demanding that Raben 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. And, seeing that the alternative would be for Griggs to sue Raben in some 150 of those countries, it is by no means apparent that to deal with the whole question in England, here and now, would strike the courts of those countries as an invasion of their judicial sovereignty.
- But that is not the end of the story. For it still remains to discover whether to order Raben to assign the foreign copyrights in the Logo to Griggs would be regarded as a breach of comity according to our own case law. Furthermore, the fact that English equity may consider itself to be acting in personam does not prove that a foreign court would think the same if confronted by the actual result. 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 Cecil Rhodes, were in dispute about a territory called Manica, which I believe is three times larger than Wales. 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.
- It is instructive to contemplate what would have happened had it been decided otherwise. The British company was claiming a title to the mineral rights granted by the native ruler Umtasa, while the Portuguese insisted that Umtasa was a vassal of an overlord who owed allegiance to Portugal. A more political dispute can scarcely be imagined. The incident led to a serious diplomatic confrontation and eventually the British government told Cecil Rhodes to back off. Thus Manica became a province of Mozambique, not Rhodesia (Zimbabwe), and is so to this day. But the Moçambique rule has frequently been applied in less exacting circumstances. I shall examine its rationale later.
In Personam Jurisdiction in Relation to Property Situate Abroad.
- The Moçambique case was about rights in rem. I do not doubt that if the British company had admittedly been the owner of the land in Manica, but had agreed to sell it to the Portuguese company, a court of equity might have decreed specific performance. For that would have been to enforce a right in personam. The House of Lords was not purporting to overrule a long line of equity cases to that effect.
- 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." Then the court of equity would 'act upon the conscience' of the recalcitrant party by ordering him to transfer the land to the claimant according to the forms of local law. The jurisdiction is not over the property, but over the person. The defendant signs the requisite documents for fear of being held in contempt of court, but the result is to alter the ownership of foreign land all the same.
- This equitable jurisdiction of our courts is both undoubted and long-standing. So much so that the original Mason-Dixon line, which demarcated boundaries between the privately-owned territories of Maryland, Pennsylvania and Delaware, and whose very name afterwards came to symbolise the difference between slavery and freedom, was drawn by an English astronomer and surveyor as a result of a decree of our Court of Chancery in 1750 (Penn v. Lord Baltimore 1 Ves. Sen. 447). The Court did not claim to interfere with the land laws of colonial North America: those were the exclusive province of the local judges. It merely compelled Lord Baltimore to comply with the obligations he had assumed to the Penn family.
- 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. (For example, in our country Blenheim Palace is inalienable.) It would not order the defendant to defy the laws of the foreign state; an exercise not only pointless, but disrespectful to the authority of the sovereign of that state. 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. Suppose he has assumed such an obligation by entering into a contract governed by English law. For my part I cannot see why in such case it should be considered to be a breach of international comity, even remotely, for an English court to compel him to comply with his obligation. I would interject that, even if there are parties to the Berne Convention whose laws declare copyright to be a right of the author which is inalienable (which ought not really to be the case, see Article 2(6) of that Convention), it can have no material effect on what I have to decide. For, supposing Mr Evans to be incapable of alienating the copyright in the Logo by the laws of State X, that is something of which Raben are in no position to complain.
- 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, less if anything than there was between equity and the common law before the Judicature Act. The foreign land laws allow a man to assume personal obligations with respect to that land. Of course, it is open to a foreign sovereign to enact that no land in that State may be sold save pursuant to a contract to be governed by the local law, the courts of that State to have exclusive jurisdiction. On that being shown, I apprehend, our courts would decline to intervene. But that is not the general case, nor this case.
- There is another way in which our courts may make orders which affect ownership of foreign land. It often happens that an Englishman dies having made a will disposing of his property both in this country and abroad, including land. In those circumstances our courts may be called upon to administer the estate and, in so doing, to adjudicate upon this question: who succeeds to the title to the foreign land? Two famous examples concern Admiral Lord Nelson (land in Sicily) and the Duke of Wellington (land in Spain): Nelson v. Bridport (1846) 8 Beav. 547; Re Duke of Wellington [1948] Ch 118, C.A.. I shall revert to this aspect later, but it will be obvious that this particular jurisdiction, whatever may be its intellectual superstructure, rests on practical considerations. A man may die leaving property in many countries, and it would not be sensible to compel his executors to institute a diversity of proceedings. (A certain analogy with our case is apparent.)
- 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 Raben have not done so.
Rationale of the Moçambique Rule.
- At various times several reasons have been advanced in justification 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. They do it all the time. This is so even if the courts of that country are themselves at odds on the very same question. 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.
Indeed, since he had to make up his mind as between two conflicting Spanish court decisions, Wynn-Parry had necessarily to decide that one of them was wrong; which he did, saying its reasoning was not "at all satisfactory". There are strong reasons for believing that the courts of Spain – a proud and noble country, which nobody has accused of feebleness when it comes to justly resenting an usurpation of its prerogatives – would have not thought this to be disrespectful to their authority and jurisdiction[7].
- Furthermore our court may have to decide that the law of the foreign country, when properly expounded, will import a rule of English law, and act on that English law. It may do so even where the result of the case is going to determine which of two parties under the jurisdiction of our courts is going to be the owner of foreign land. This happens all the time in cases about succession, and happened in the Duke of Wellington case itself, which concerned the fate of Spanish estates which had been granted to the first Duke together with a title of nobility.
- Theoretically, a foreign state might misunderstand the nature of our equitable in personam jurisdiction, and perhaps resent it as being an invasion of its sovereignty. But so far as I know this has not happened. Obviously our own courts do not regard it to be such. Nor do they so regard the other instances I have mentioned. Why is that? The answer must be that, according to the usage of nations, it is not considered to be so. Thus 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.]
- So the reason it is perfectly in order for our courts to decide that the defendant has misappropriated or dispossessed chattels situate in a foreign state, contrary to the laws of that state; to decide that the defendant is liable for personal injuries or damage to property inflicted by his breach of the local road traffic or ship navigation laws; to decide that A but not B shall succeed under an English will made by the owner of foreign land; to order that X must convey to Y land situate in a foreign state in accordance with his obligation; must be because, according to the usages of nations, it is not considered to be a breach of comity to do these things.
- Even so, it is apparent that to litigate a title in rem to land situate abroad is regarded as a special case. Why is it a special case? It is partly because the court cannot enforce its judgment and partly because it is felt the local sovereign might object. But why might he object? 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. It is not only a prerogative to make laws for his own country, but a prerogative to have those laws adjudicated in his own courts exclusively. That was the traditional understanding when it came to land. 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. It is perhaps not hard to see why this arose, and I shall revert to this in paragraph 118 below.
- 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. What may not have been acceptable in 1908, may be so in 2004. And a helpful source to go to, absent an actual decision of our courts which can be regarded as still applicable today, is the usages of nations as evidenced by widely respected conventions or treaties. There is no convention, universally adhered to, which governs the question; but there are certain regional conventions, notable for the fact that they have been adhered to by States which possess very different legal systems and traditions, and which were founded on the works of legal scholars of international distinction. I refer, of course, to the Brussels and Lugano Conventions. I should stress that I am interested in these, not as a source of positive law, but as evidence of the usages of at least an important group of civilised nations on a particular point (compare the observations of Lord Esher quoted in the above extract from the judgment of the Court of Appeal in the Ove Arup case). 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. I think that is to go too far. The Brussels and Lugano Conventions are just that – conventions. They consist of accommodations voluntarily entered into between sovereign states. Their precepts cannot be exported so as blindly to affect States who are not parties. All the same, I find their doctrine to be instructive within the limits I have described.
- 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.]
Lack of Jurisdiction Contrasted with Forum Non Conveniens or Choice of Law.
- When reviewing the older English cases concerning the limits to the court's in personam jurisdiction in cases concerning land situate abroad, upon which Mr Onslow relies, it is worth bearing in mind that they were decided before the formulation of the modern doctrine of forum non conveniens, and at a time when the topic of private international law was, by present standards, comparatively underdeveloped by our courts.
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. For example, if the witnesses are numerous and live there; or if the case is all about a point of foreign law, best tried in a court versed in that system of law. Then England is said to be a forum non conveniens.
- Now, so far as English law is concerned this doctrine is relatively recent: its development began in 1974 and it was not formally recognised until 1984. This is well known to every lawyer in our field and it is conveniently summarised in Lord Diplock's speech in The Abidin Daver [1984] AC 398, 407-411. The old rule was expressed thus:
[The cases] support the general proposition that a foreign plaintiff, who can establish jurisdiction against a foreign defendant by any method recognised by English law, is entitled to pursue his action in the English courts if he genuinely thinks that will be to his advantage and is not acting merely vexatiously. Neither the parties nor the subject matter of the action need have any connection with England. There may be proceedings on the same subject matter in a foreign court. It may be a far more appropriate forum. The defendant may have to suffer great expense and inconvenience in coming here. In the end the decisions of the English and foreign courts may conflict. But nevertheless the plaintiff has a right to obtain the decision of an English court. He must not act vexatiously or oppressively or in abuse of the process of the English court, but those terms have been narrowly construed.
- Although The Abidin Daver was about lis alibi pendens (litigation pending simultaneously in two jurisdictions), I believe it is nevertheless true that we had no formal doctrine of forum non conveniens until quite late in the twentieth century. Before that, a defendant to a suit could not plead: "Do not exercise jurisdiction over me, because there is a foreign court where the case can be tried more conveniently". Instead, he would have had to make out, if he could, that the English court had no power to try the case; or that the court's decree would be ineffectual, because its enforcement would have required the co-operation of the foreign court; or that the proceedings were vexatious and oppressive (itself a tough test to pass).
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… We must suppose that the Court at Dusseldorf has ample means to enforce the whole of its decree, and that the Plaintiff will have the full benefit of that decree, which may be considered as creating a debt for which the opposite parties are personally liable and a charge upon the property sold.
- 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.
- Pausing there, how might those facts strike a lawyer now, in 2004? Why had there been no divorce, seeing that the parties to the French marriage had been separated for 30 years? The wife may have been entitled to support. But could she refuse to divorce him, stand by while he acquired a fortune in India over many years, then claim half of it? Did French law in those days permit a divorce at all? If not, would that rule be recognised universally? Nowadays, would this perhaps be regarded as a problem touching on family law? In any event, why was not the case brought in the courts of Madras? Surely they knew all about Indian land law, and was not the de facto wife's property vested in an Indian official?
- However that may be, 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. If, for example, the land were in England, it would not be enough to prove that according to French law the wife had an interest. 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. Of course a purchase for value under the English law may have a totally different meaning from a purchase for good consideration according to French law; and I am told in the present case that in France good consideration for such a purpose as this means full consideration in money or money's worth. 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. Not only may that law differ from the law of England in the extent to which equitable interests are recognized, but also in the importance which attaches to the presence or absence of notice. It may also contain provisions such as the statutes for the limitation of actions or suits, or for the registration of title, which would materially affect the matter I have to decide.
- 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 Raben 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.
- Now, Parker J was an equity judge of great eminence, and he who presumes to question his reasoning may well be regarded as foolhardy indeed. However, what I need to know is, not whether the case was correctly decided in 1908, or whether the actual result would be the same in 2004 (albeit, perhaps, by a different route). I need to know and understand precisely what was its reasoning in the first place, being the reasoning upon which Mr Onslow relies, and whether it holds good in 2004. For I am being asked to marry what is said to be a rule concerning foreign immovables with one of intellectual property: which is (as the rubric advises, although in another context) a task "not by any to be enterprised, nor taken in hand, unadvisedly, lightly, or wantonly … like brute beasts that have no understanding". Therefore I must try to understand why Parker J ruled as he did; and I confess that there is one aspect of his reasoning I have not found altogether easy to understand. I must now explain the difficulty.
- 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 Johnston a modest amount of money. Johnston 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 Johnston had intended all along, Lord Cranstown 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 Johnston, 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 Johnston uttered no false representation to anyone, nor did he violate any law of the island, nor did he owe any contractual obligation to Lord Cranstown; but he did know that he was going behind Lord Cranstown'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 Johnston must restore the estate upon being repaid the original debt and expenses.
- So that is one example of equitable fraud. What, then, about the equity that arises in the case of a second purchaser with notice?
- Now, as explained by Story (a text I chose deliberately because I believe it reflects the understanding of equity judges towards the end of the nineteenth century), and by Fry LJ writing for a unanimous Court of Appeal well within the professional lifetime of Parker J, and as was being taught by Maitland to his students at the same time as Deschamps v. Miller was decided, the very reason the third party purchaser with actual notice is held liable is because his contract is considered to be unconscionable by an English court of equity, as being a fraud on the party who had been the first to agree to purchase the land. 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").
- Since it must be impossible to believe that Parker J and his predecessors were not well aware of the conventional basis of the rule concerning second purchasers with actual notice (indeed, the plaintiff explicitly claimed that the settlement on the de facto wife was a fraud on the French marriage contract), how are we to account for the reasoning in the cases of Deschamps v. Miller and Norris v. Chambres upon which Mr Onslow relies? 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? Despite a careful perusal of the judgments in those cases, I have not discovered in them an answer to these questions founded on a principled explanation which accords with modern ideas.
- 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.
- I gratefully adopt the reasoning of Millett J (as he then was) which I have emphasised in the above-quoted passage. In my respectful judgment, it is the only way to account for my difficulty. Private international law has moved on. Today we should treat the fact that the land is situate abroad as affecting the choice of law, not jurisdiction, if the case is one in which it is sought to enforce an equitable claim in personam. At least in cases where the original contract is governed by English law, the third party purchaser with actual notice is considered to behave unconscionably, unless of course the law of the State where the land is situate provides otherwise, as it might well do according to some scheme for the registration of titles, because in that case it would not be unconscionable to acquire the land even with notice, for the reasons I have summarised in paragraph 58 above.
- It would follow that today, in 2004, a claim to have foreign land conveyed to one, based on an English contract and made against a purchaser of the land with prior notice of that contract, could in principle succeed, provided the foreign law would not overreach our doctrine of notice. It would be a claim in personam, not in rem. The claimant would succeed, not by proving that he already had a title to the land arising out of the foreign land law, but upon a personal obligation owed to him by the defendant (compare Dicey & Morris, op cit, §23-012) arising out of the contract and his unconscionable conduct. Internationally, it would be classified under the rubric 'Obligations'. There would be no question of trying title to foreign land, for it would be common ground that the defendant was the legal owner. The claimant would simply be asking the court to compel the defendant to sign the documents required by the foreign land law, so as to transfer the title to him. He would be relying on a personal obligation: an equity arising from the English contract which had not been extinguished by the lex situs.
- It is true that other considerations might intrude. If it were (say) just a claim about land in India, brought against a purchaser with notice, it might well be that an English court would decline to entertain it because India, not England, was the forum conveniens. But that is a different objection. As I understand it the doctrine was not available to Parker J in 1908.
- It is also true that until now our courts have applied English notions of equity in these cases, unaffected by foreign law. But, as Spry suggests (op cit, pages 40-41):
[I]t is necessary for conflict of law rules to be applied and developed in cases where equitable remedies are sought. These limitations have received little express consideration in English and Australian decisions… Because these difficulties have generally been passed over sub silentio by the courts, they cannot be regarded as resolved; doubtless more precise rules that will accept the applicability of foreign laws in appropriate cases will be established in the course of time.
Dr Spry's views are entitled to great respect.
- In this case I do not have to investigate those questions. I am entitled to presume or (at least) procedural fairness compels me to presume, that the laws under which the foreign copyrights exist would not extinguish Griggs' equity arising from the doctrine of purchase with notice. This seems reasonable: given that there is no registration system I cannot easily imagine why the foreign law should be otherwise. Maybe Raben might have identified countries in which it is not so, but they have not.
Conclusion on Immovable Property.
- I would therefore have held that in the circumstances of this case Griggs 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?
- I have sought to distinguish cases like Deschamps v. Miller on the basis of modern doctrines of private international law. An alternative view may be that the answer to the questions I have posed in paragraphs 102 and 107 above is to be found in the reluctance of our courts in the nineteenth century to be perceived to meddle unduly in property disputes concerning foreign land, albeit through the medium of a suit in personam. As Lord Esher thought, the equitable jurisdiction "seems to be open to the strong objection that the court is doing indirectly what it dare not do directly" (Companhia de Moçambique v. British South Africa Co [1892] 2 QB 358, 404-5, C.A.). While Lord Esher was not an equity lawyer by training and I doubt that his opinion would have been regarded as conventional in a court of equity, it is nevertheless possible that, because of that reluctance, the equity judges may have felt that they ought to draw the line somewhere, and that any line would have been, and in the event was, somewhat arbitrary (see Dicey & Morris, op cit, §23-045). On this view they chose to draw the line when it came to the purchaser with notice (but not when it came to the other species of equitable fraud).
- If that was so it would not be very logical; but the underlying emotion would be comprehensible. According to deeply held notions of mankind, land, the surface of the earth, has a very special, I am almost tempted to say, sacral character – which cannot be said of most intellectual property. Even as I write there are men and women who are prepared to kill or maim innocent people, all because of what an outsider might call a tract of arid desert or mountain; yet who would, perhaps, scorn to do so over money of equivalent value. In former times ownership of land might confer obligations of a military character. In unruly times the very puissance of the sovereign might depend on his ability tightly to control land ownership. Later on, ownership of land might confer a right to vote or to seek election to the legislature. For a foreign court to determine titles to land might amount to undermining the constitution of the country. Those considerations are obsolete now in civilised states, but may have shaped the law. In §23-003 of Dicey & Morris it is stated that:
In a broad sense [Rule 113] is based on a general principle found in most legal systems that, where the action concerns immovable property, the courts of the country where the land is situated have exclusive jurisdiction… There are various reasons for the principle… land still has a rather special position in most legal systems …
- 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 Sir Arthur Conan Doyle, 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; I doubt that the sovereign could be assumed to be asserting a prerogative to have claims of that sort decided exclusively in its own courts. But, however that may be, on any showing it was a pure matter in rem. It was not a dispute where, it being common ground that the rights did exist, one party claimed that he had the better title to them than the other. Much less did the case concern the point which exercises me here, namely, the existence or scope of this court's equitable in personam jurisdiction as against a purchaser with notice of foreign intellectual property rights already contracted to be transferred to another by contracts governed by English law.
- Mr Onslow nevertheless asks me to apply the reasoning in Tyburn to the present case. Before I proceed to examine that reasoning, I must note some legal developments which have occurred since the date of that case, or which were not cited to the court there.
- First, the significance of Article 16(4) of the Brussels and Lugano Conventions, respectively. Doubtless those conventions were not cited to Vinelott J because their relevance was not perceived, seeing that the United States is not a party; nor was it very likely that their relevance would have been perceived at that date, when we were unaccustomed to the novel concept that in certain circumstances a claim for infringement of foreign copyright not only may, but must, be brought before the English courts. I have already reviewed matters touching Article 16(1), which concerns foreign immovables, and have felt them to be useful source of evidence concerning developing international practice about judicial comity in such cases. I consider that the same approach may be useful with regard to Article 16(4), which concerns foreign intellectual property. 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. Secondly, and though not directly pertinent for present purposes, it does not apply even in the case of the rights which are so required, so long as the proceedings do not concern their registration or validity. Thus in Case 288/82 Duijnstee v. Goderbauer [1983] ECR 3663, E.C.J. there was a dispute between an inventor and the liquidator of a company concerning ownership of patents. The liquidator's claim was that under Dutch law the inventions had been made on terms that the patents ought to belong to the company. He demanded that the inventor should be ordered to transfer not only the Dutch patent, but also the corresponding patents in 22 other countries, including five which had adhered to the Brussels Convention. The European Court of Justice held that to make the order would not violate Article 16(4) of the Convention. The validity of the patents was not being challenged. Nor, for that matter, was the conduct of the various national authorities whose business it was to keep the patent registers. Nor was the liquidator seeking an order directing those authorities to rectify their registers in the light of Dutch law. Instead, the liquidator was asking for an order which would have required the inventor himself to apply to rectify the registers: an order in personam.
- While it is true that the ECJ's decision was not concerned with the laws of those countries which were not parties to the Convention, I nevertheless regard it as helpful evidence of modern international practice. Furthermore, it is clear that the Dutch courts in that case were prepared to make in personam orders which would have affected title to intellectual property in non-Convention countries, which is further evidence of the usages of nations. Evidently the Dutch courts, at least, thought it would not be a breach of international comity.
- 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 order to understand that rule, which had nothing to do with comity, it is helpful to remember that, historically, it was developed back-to-front. It quite often happened that one Englishman injured another while both were abroad: it might have been an assault, say, or destroying his sailing ship. When both returned to England the injured party could sue the culprit; and, originally, English courts would merely apply their own rules in tort without bothering to enquire what was the law in the foreign country.
- This was all very well for simple torts e.g. assault; but, as life became more sophisticated it was appreciated that it would not be right to hold a man liable for doing something which was not wrong according to the laws of the foreign country. Eventually the rule was developed that, for the action to lie in England, it was necessary to show, not only that an English tort had been committed, but that the act in question was actionable in the foreign country. In a more rational world the rule would not have been developed back-to-front. It would simply have been enquired whether a tort had been committed in the foreign country, according to the law of that country, and English tort concepts might have served as a mere backstop, to prevent exotic claims succeeding contrary to the policy of our law. But that is not what happened.
- So, when I write "an English tort had been committed", I mean that the act in question would actually have amounted to a tort had it been done in England. All ingredients of the cause of action as required by English law had to be present. It followed that, irrespective of any question about comity or forum non conveniens, it was out of the question to sue in this country for infringement of a foreign patent or other intellectual property right. Suppose you had sued in England for infringement of a French patent. It is obvious that if you owned no equivalent British patent your action would have been bound to fail, because the working of the invention in France would not be a tort in England. Patents are territorial, as are all other intellectual property rights. The French patent was a monopoly limited to France, impossible to be infringed by working the invention in England. Now suppose you also owned an equivalent British patent. According to the double-actionability rule your claim would fail all the same. This was because it is an essential ingredient of the tort – infringement of the British patent – that the act be done within the territorial limits of the United Kingdom. Since this was not the case, no liability. That was what was decided in Def Lepp Music v. Stuart-Brown [1986] RPC 273. However, it has now been questioned by the Court of Appeal in Pearce v. Ove Arup [1999] FSR 525, 560-1.
- 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.
- I have said: "questions of comity apart". It still may well be a breach of comity to challenge the validity of a foreign patent, compare Article 16(4) of the Brussels and Lugano conventions; and in cases actually within that Article it is expressly forbidden.
- There is a sense in which our courts may consider that to adjudicate on foreign intellectual property rights, absent a requirement imposed by an international convention, is indeed a breach of comity. Suppose an action is brought in England for an injunction to restrain the defendant from infringing a foreign patent. This is not only an action in rem: the effect of the injunction, if granted, may be to drive up prices for the patented product in the foreign state. This, conceivably, may annoy the citizens of that state. See Plastus Kreativ AB v. Minnesota Mining and Manufacturing Co [1995] RPC 438 at 447 per Aldous J. But however true that may be, it is not in any meaningful sense analogous to our case.
- On the other hand, in one sense it has always been possible to call into question both the validity and the scope of a foreign intellectual property right. For instance, where the defendant has agreed to pay royalties to the claimant on any product covered by a valid claim of a foreign patent and the agreement is governed by English law and confers jurisdiction upon the English courts. A recent instance is Celltech Chiroscience Ltd v. MedImmune Inc [2003] EWCA Civ 1008: indeed at first instance Jacob J said "I found myself receiving submissions on US case law just as if I were a US District Judge": [2002] EWHC 2167 (Pat) §8. When this happens our courts are not considered to act in breach of comity. Even though they might appear to be enquiring into the validity or scope of an intellectual property right granted by a foreign sovereign. But in truth, they are not purporting to tell the American public, say, that one of their patents is invalid or that the scope of its claims is not what it might appear to be. They are merely settling the rights of two private litigants who have chosen to submit their dispute to the adjudication of our courts. Once again, rights in personam, not rights in rem. However, once again that is not this case, for Griggs and Raben had no antecedent agreement to submit their differences to the adjudication of this court.
- Happily, I do not have to decide whether (and if so, in what circumstances) it would be a breach of comity to entertain an action for infringement of a foreign intellectual property right, or call in question the existence of that right in a non-registration case.
- 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. The court was being asked to embark on an analysis of the laws of some 50 American states, and to grant a declaration concerning those laws for the elucidation of its citizens, in circumstances where the Americans would have paid no attention to the English court's decision. However I do not find that the rest of the court's decision helps me in what I have to decide, for the reasons I have ventured to set forth above.
- 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.
- Raben's objection to the jurisdiction fails. In my judgment it is not a breach of international comity to order Raben to assign the foreign copyrights in the Logo to Griggs, instead of leaving Griggs to bring parallel proceedings in numerous countries. Furthermore Griggs have an equity arising out of English contracts which, were the property situate in England, Griggs could enforce against Raben; 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 Griggs are entitled to succeed. In my judgment the assignment in escrow must be delivered by Raben's solicitors to the order of Griggs.
