Moorgate Tobacco Co Ltd v Philip Morris Ltd

High Court of Australia|1980-07-01|Before: Wilson JJ, Gibbs J

The applicant's case as pleaded and presented at the trial rested very largely on the existence and terms of a licence agreement said to have been made on 22nd June 1977 between the applicant and the first respondent. The agreement alleged was one which had earlier been made between the predecessors in title of the applicant and the first respondent. According to the applicant it was later adopted by the two parties. By the alleged agreement the applicant granted to the first respondent until 30th November 1977 a licence of all rights in Australia in respect of the trade marks " kent " and " micronite " as then existing or thereafter developed and acquired by the applicant during the life of the licence agreement, such rights being described as "Trade Mark Rights". The agreement provided that the "Trade Mark Rights" licensed were the sole and exclusive property of the applicant, that the first respondent's use of them should enure for the benefit of the applicant and that nothing in the agreement was to be construed as creating in the first respondent any proprietary interest in the "Trade Mark Rights". It was also provided that the first respondent renounced any proprietary interest in those rights and any other trade marks which might be developed and created through its exploitation of the rights granted.

The applicant claimed that, as a result of a variety of acts and transactions mentioned in the statement of claim, it had, prior to 12th July 1977, "acquired rights in respect of the name " kent golden lights " and " golden lights " within the meaning of the Licence Agreement" (par. 30 of the amended statement of claim). The applicant alleged that the first respondent began to manufacture and market in Australia cigarettes known as " marlboro golden lights " (par. 31) and that on 12th July 1977 it applied for registration of the trade mark " golden lights " (par. 39). The applicant claimed that these actions were in breach of the licensing agreement and of fiduciary obligations owed by the first respondent to the applicant and, alternatively, that the application for registration constituted unfair competition.

The applicant went on to allege that on or before 21st December 1977 the first respondent executed a deed of assignment in favour of the second respondent with respect to the trade mark " golden lights " (par. 42) and that on or about 21st December 1977 a transmission application was lodged with the Registrar with respect to the assignment (par. 43). The applicant claimed that the assignment was not effective and did not validly assign to the second respondent "any claim to proprietorship of the trade mark " golden lights " in Australia" (par. 44). By way of particulars of par. 44 the applicant stated that it was the proprietor of this trade mark and also of " kent golden lights ", that the first respondent's claim to proprietorship of the " golden lights " mark was fraudulent, in breach of contract and in breach of fiduciary duty and that the first respondent had no interest in that mark which it could validly assign.

From all this it will be seen that the applicant's case was based on contract, trust or fiduciary obligation, and the tort of unfair competition. So much of the case as related to trust or fiduciary obligation rested on the licence agreement because its provisions constituted the foundation for an argument that " kent golden lights " was a development by the applicant falling within the description "Trade Mark Rights", that the first respondent's use of the " golden lights " mark and any variant of it was the subject of the licence and that by applying for registration of the " golden lights " mark the respondents had established a proprietorship in it entitling the second respondent to registration, a proprietorship which was held for the benefit of the applicant. Mr. Handley Q.C., for the applicant, in the course of the hearing, if not in his opening, made it clear that the applicant was not presenting a passing-off case or a claim to common law proprietorship of " kent golden lights " or " golden lights ". Nonetheless the applicant subsequently filed its further amended statement of claim without alteration to the particulars given in par. 44 or to the relief claimed. And the applicant argued that the circulation of magazines in Australia containing advertisements for " kent golden lights " was sufficient to give the applicant a ground for opposing the respondents' application for registration of the " golden lights " mark - see The Seven Up Co. v. O.T. Ltd. [21] .

In dismissing the action, the primary judge held that the applicant had failed to make out the three principal grounds on which its case for relief was based: (1) that the licence agreement did not confer any rights on the applicant with respect to the respondents' use of the words " golden lights " and that in particular it did not entitle the applicant to the relief claimed; (2) that the trade mark " golden lights " was not the subject of any trust or fiduciary obligation in favour of the applicant; and (3) that the respondents' use of the mark was not actionable as unfair competition. In the course of rejecting the applicant's case the primary judge found that it had not used the trade mark " kent golden lights " in Australia during the period of the licence agreement and that consequently it did not generate any rights here with respect to the mark under that agreement. His Honour considered that the question whether the first respondent had acquired proprietorship of the " golden lights " mark by applying for registration of it, which was an element in the applicant's case that the mark was the subject of a trust in its favour, as well as the question whether the respondent's claim to proprietorship was defeated by the applicant's user of the " kent golden lights " mark should be left for determination in opposition proceedings under the Trade Marks Act 1955 as amended.

The respondents' case that the Supreme Court was exercising federal jurisdiction was based on (a) the existence in the further amended statement of claim of the claim to proprietorship of " kent golden lights " and " golden lights ", despite Mr. Handley's disclaimer, and (b) the claim that the respondents were not the proprietors of the mark " golden lights ". Additionally, the respondents submitted that their defence attracted the exercise of federal jurisdiction, but this argument may be put aside.

It was common ground between the parties that the Supreme Court was invested by s. 39 (2) of the Judiciary Act with federal jurisdiction to determine matters arising under the Trade Marks Act, being matters arising under a law made by the Parliament (Constitution, s. 76 (ii.)). Moreover, the parties were in agreement that a matter is a s. 76 (ii.) matter if, being a right, title, duty, privilege, protection or immunity, it "owes its existence to Federal law or depends upon Federal law for its enforcement" (R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [22] , per Latham C.J.; Felton v. Mulligan [23] ). Nor was it in contest that a matter pleaded by way of defence, as well as a matter asserted by a plaintiff by way of claim for relief, will attract an exercise of federal jurisdiction (see Miller v. Haweis [24] ; Felton v. Mulligan [25] ). In the result it was accepted that if in the proceedings there arose an issue as to the existence or non-existence of a right created by the Trade Marks Act the Supreme Court was exercising federal jurisdiction.

(1945) 70 C.L.R. 141, at p. 154. 2. (1971) 124 C.L.R., at pp. 387, 408, 416. 3. (1907) 5 C.L.R. 89, at p. 93. 4. (1971) 124 C.L.R. 367.

However, the parties were in dispute as to when a matter "arises" within the meaning of s. 76 (ii.) so as to attract the exercise of federal jurisdiction. The cases establish that federal jurisdiction is attracted if the right or duty based in a federal statute is directly asserted by the plaintiff or defendant, but not if the federal question arises only in some incidental fashion. So too federal jurisdiction is attracted if the court finds it necessary to decide whether or not a right or duty based in federal law exists, even if that matter has not been pleaded by the parties. But the converse is not true. If a federal matter is raised on the pleadings federal jurisdiction is exercised, notwithstanding that the court finds it unnecessary to decide the federal question because the case can be disposed of on other grounds.

An analogy is provided by the cases dealing with inter se questions. An inter se question arises as soon as it appears that the case can be resolved by deciding that question, even if it might ultimately prove possible, by answering other questions, to dispose of the case without determining the inter se question itself (The Commonwealth v. Bank of New South Wales [26] ; Lansell v. Lansell [27] ; Reg. v. Green; Ex parte Cheung Cheuk To [28] ). Likewise it may be said that once federal jurisdiction is attracted, it is exercised "throughout the case" (Felton v. Mulligan [29] ); it is not lost by subsequent disclaimer. The disclaimer may inhibit what the court does in the exercise of its jurisdiction but it does not affect the existence of its jurisdiction. Consequently, if the pleadings attracted federal jurisdiction by raising a s. 76 (ii.) matter for determination, that jurisdiction was not lost by subsequent disclaimer or by the primary judge's failure to decide the matter.

(1949) 79 C.L.R. 497, at p. 624. 2. (1964) 110 C.L.R. 353, at pp. 357-358. 3. (1965) 113 C.L.R. 506, at p. 518. 4. (1971) 124 C.L.R., at p. 373.

In asserting that the "proprietorship" issues raised for decision are a federal matter, the respondents proceeded according to a view that the Trade Marks Act creates a right or entitlement to registration based on a statutory concept of proprietorship. It has been accepted that when s. 40 (1) provides that a person "who claims to be the proprietor of a trade mark" may make application for registration it expresses the notion of proprietorship of a mark before registration and that registration depends upon proprietorship (Shell Co. of Australia Ltd. v. Rohm and Haas Co. [30] ; The Kendall Co. v. Mulsyn Paint and Chemicals [31] ). It is also settled that proprietorship for the purposes of s. 40 (1) is demonstrated by prior public user of a distinctive mark or authorship and the making of an application for registration (Shell [32] ; Aston v. Harlee Manufacturing Co. [33] ).

(1949) 78 C.L.R. 601, at p. 629. 2. (1963) 109 C.L.R. 300, at p. 304. 3. (1949) 78 C.L.R., at pp. 627-629. 4. (1960) 103 C.L.R. 391, at pp. 399-401.

The statutory concept of proprietorship is novel in that it differs from the common law notion of proprietorship of a mark by treating authorship by a person intending to use the mark, in the absence of prior public user, and the making of an application for registration as a foundation for proprietorship - see especially Shell [34] .

There are passages in the judgments of this Court which, it is suggested, support the proposition that an applicant who is the "proprietor" in the statutory sense of the mark applied for is entitled to registration of it. In Shell [35] , McTiernan J. spoke of the lodgment of the application as giving to the proprietor of the mark "an inchoate title to that trade mark and an inchoate right to its exclusive use" [36] . See, also, Shell [37] , and Kendall [37a] We do not so read them. They do no more than say "The statutory proprietor is the person who is entitled to get on the register if the requirements of the statute e.g. s. 28 are otherwise fulfilled". They do not say "The statutory proprietor is entitled to registration without more".

(1949) 78 C.L.R. 601. 2. (1949) 78 C.L.R., at p. 631. 3. (1949) 78 C.L.R., at pp. 626-627. 4. (1963) 109 C.L.R., at p. 304.

Less emphasis has been given to this concept of proprietorship in the United Kingdom than in Australia. In G.E. Trade Mark [38] Lord Diplock (with whose speech other members of the House of Lords concurred) said [39] that "registration of a person as proprietor of a mark became the source of his title to the exclusive right to the use of the mark". Later, his Lordship said [40] that the Acts made "registration the only way whereby a trade mark could become the subject-matter of proprietary rights".

[1973] R.P.C. 297. 2. [1973] R.P.C., at p. 331. 3. [1973] R.P.C., at p. 332.

Certain it is that the lodgment of the application does not entitle the applicant to registration, for it remains to be established that the mark is free from objections under s. 28. Even so, a critical question, if not the critical question, for the Registrar to decide is whether the applicant is the proprietor in the statutory sense. If the applicant is the proprietor and there are no lawful grounds of objection, then the Registrar is bound to accept the application (s. 44 (1)).

In view of the foregoing we accept that the applicant's case did not invite the Supreme Court to decide whether there was vested in the applicant or the respondents a right conferred by the Trade Marks Act. None the less we think it correct to say that the Supreme Court was invited to determine matters arising under that Act by reason of the applicant raising for decision the questions (1) whether the applicant was the proprietor in the statutory sense of " kent golden lights " and " golden lights "; and (2) whether the respondents or either of them were the proprietors of " golden lights ".

We note that the first declaration sought is expressed to relate to the " names " kent golden lights " and " golden lights " " (emphasis supplied). But this has no significance. Once it is appreciated that the applicant was not presenting a passing-off case the first declaration had no purpose except to provide a determination relevant to the pending applications for registered trade marks. As we have seen, registration is the only way in which a trade mark can become the subject of a proprietary right to its exclusive use. Moreover, although the first declaration may have been expressed too widely for the purpose, it seems to have been directed in part to establishing that the use of the " kent golden lights " mark in Australia in advertisements in magazines was a bar to the respondents' registration of the " golden lights " mark. So also with the second declaration. Its raison d'être is exclusively connected with the trade mark applications. If the applicant had succeeded in making out a case for relief based on contract, trust, fiduciary obligation or unfair competition, it would not have been entitled to either of the declarations, unless in addition the issues of proprietorship under the Trade Marks Act had been raised and decided.

The fact that the relief claimed was declaratory does not make it non-federal. Section 39 of the Judiciary Act invests State courts with jurisdiction to grant declaratory as well as other forms of relief. It was not suggested before us that federal law, more particularly the Judiciary Act, read in the light of the Trade Marks Act, does not authorize a State court to make declarations with respect to issues arising in trade mark applications, though a submission to this effect was pleaded and, it seems, argued in the Supreme Court.

As Walsh J. observed in Felton v. Mulligan [41] , s. 39 (1) of the Judiciary Act took away the jurisdiction of State courts in matters in which the High Court had jurisdiction. This was achieved by making the jurisdiction of this Court exclusive of that of State courts. The jurisdiction of State courts in those matters in which this Court might have original jurisdiction conferred on it but in which such jurisdiction was not conferred, was not affected. However, by s. 39 (2) State courts were invested with federal jurisdiction in both classes of matter. We agree with the reasons given by Walsh J. [42] for "treating the Commonwealth law as paramount and as excluding, in relation to the matters to which that law applies, the operation of the laws under which the State jurisdiction of the court would be exercised". The supremacy of Commonwealth law in this respect is based on s. 109 of the Constitution and covering cl. 5.

(1971) 124 C.L.R., at pp. 411-412. 2. (1971) 124 C.L.R., at pp. 412-413.

In inviting the Supreme Court to make declarations on questions which were crucial to the outcome of the trade mark applications the applicant in our opinion raised for decision matters arising under the Trade Marks Act and attracted the exercise of federal jurisdiction. Although the word "matter" in s. 76 (ii.), as we have seen, has often been translated as embracing "right", "title", "duty", "privilege", "protection", "immunity" and "defence", its content should not be confined to these terms and to what they denote. "Matter" is the subject matter for determination in a legal proceeding (In re Judiciary and Navigation Acts [43] ; Carter v. Egg and Egg Pulp Marketing Board (Vict.) [44] ); in our opinion it extends to a claim that a party satisfies or does not satisfy a statutory description, whether it be a qualification or a condition, when conformity with that description is made essential to the grant of a right for which the federal statute makes provision.

(1921) 29 C.L.R. 257, at p. 265. 2. (1942) 66 C.L.R. 557, at pp. 586-587.

In this case the proprietorship issues were raised directly for decision on the pleadings, in the relief sought and in the presentation of the applicant's case. The disclaimer by the applicant's counsel of a passing-off case left these issues open for decision, as the final judgment of the primary judge so amply demonstrates, though in the event he considered that they should be left to the Registrar in opposition proceedings. Although the applicant's three principal grounds for relief are causes of action based on the general law and do not owe their existence to the Trade Marks Act, the applicant was unwilling to confine its case to the three grounds and to the relief which those grounds might afford, dissociated from issues arising under the federal statute and from relief directed to the obtaining of rights under that statute. Indeed, both the pleadings and the manner in which the case was fought create the strong impression in our minds that registration of the trade mark " golden lights " was the real bone of contention between the parties. What is more, many of the issues which arise in the case under the contract, trust and fiduciary obligation claims would have inevitably arisen for decision in opposition proceedings. In these circumstances we find it impossible to conclude that the issues which arose under the Trade Marks Act were merely an "incidental consideration", to use the expression of Barwick C.J. in Felton v. Mulligan [45] . They were directly pleaded and asserted by the applicant with a view to obtaining registration of a trade mark.

The important question which remains is whether there was room in the case for the exercise of any non-federal jurisdiction. If so, it is submitted that conditional leave to appeal should be granted in respect of that part of the case. In approaching this problem we have assumed that the court has no discretion to refuse or grant conditional leave to appeal under the Privy Council Appeal Rules embodied in the Order in Council dated 2nd April 1909 when the applicant here has an appeal as of right under cl. 2 (a) - see Lopes v. Valliappa Chettiar [46] . But there is a question as to the meaning of decision in s. 39 (2) (a). What is the extent of its application when the determination of the lower court involves claims and questions which have their origin in State as well as federal law?

The extent, if any, to which a State court in a given case is exercising non-federal, as well as federal, jurisdiction necessarily depends upon the limits of the legislative power to invest State courts with federal jurisdiction under s. 77 (iii.) of the Constitution. In Felton v. Mulligan [47] , Barwick C.J. observed that if federal jurisdiction is attracted it is exercised throughout the case "unless perhaps there is some completely disparate claim constituting in substance a separate proceeding". In that case Walsh J. [48] , with whom Barwick C.J. agreed, thought that there was no "severable" non-federal question and that "the decision was really given upon one entire legal question".

(1971) 124 C.L.R., at p. 373. 2. (1971) 124 C.L.R., at p. 410.

There are strong reasons for saying that the word "decision" in s. 39 (2) (a) should not be narrowly construed. It is not to be supposed that the Parliament intended to permit an appeal to the Privy Council on an isolated question or questions abstracted from the entirety of a case, unless the question or questions constituted or formed part of a non-federal claim which is distinct and unrelated to the federal claim. Were it otherwise, the paragraph would be productive of confusion and injustice, as Walsh J. explained in Felton v. Mulligan [48] . The possibility that appeals on issues of fact common to both federal and non-federal claims could be taken to both the Privy Council and this Court is sufficiently alarming to deter us from accepting an interpretation of s. 39 (2) (a) which would admit of an appeal to the Privy Council on a non-federal claim being a cause of action different from the federal claim but standing on related facts.

Once the subject matter for determination involves a federal claim, then the Court exercises jurisdiction by virtue of, and in accordance with, the authority conferred by s. 39 of the Judiciary Act. The "decision" to which s. 39 (2) (a) refers certainly comprehends so much of the decision as relates to the issues which arise for determination in federal jurisdiction. And for reasons already given it should be understood as comprehending the decision given in the entire proceeding, unless perhaps it can be shown that there was some distinct and unrelated non-federal claim, as, for example, where the federal claim and the non-federal claim are not based on a common substratum of facts. If, however, the two claims arise out of common facts and transactions, they cannot be described as distinct and un-related and, accordingly, they are non-severable.

The observations of Barwick C.J. and Walsh J. in Felton v. Mulligan [49] reflected what had earlier been stated in a different context by Latham C.J. in Carter [50] . There, the plaintiffs had joined to a claim for a declaration of invalidity on constitutional grounds of three State statutes and a regulation a severable non-federal claim for an account of the defendant's dealings with the plaintiff and an order for payment of any amount found due on the taking of such account. Latham C.J., holding that the claim for an account was beyond the Court's jurisdiction, described it as "an entirely severable claim having no relation whatever to another claim or claims made in the same proceeding which other claim or claims alone involved the interpretation of the Constitution" [51] . Williams J. [52] described the claim for an account in the words of Sargant J. in Goldrei, Foucard & Son v. Sinclair and Russian Chamber of Commerce in London [53] , "This alternative claim constitutes a separate and distinct cause of action resting on a different foundation and involving very different remedies". See also Carter's Case [1] .

(1971) 124 C.L.R. 367. 2. (1942) 66 C.L.R. 557. 3. (1942) 66 C.L.R., at p. 580. 4. (1942) 66 C.L.R., at p. 601. 5. [1918] 1 K.B. 180, at p. 192. 6. (1942) 66 C.L.R., at pp. 585-587, 594.

In Parton v. Milk Board (Vict.) [2] , Dixon J. said that the Court had jurisdiction to deal with an attached non-federal claim because, unlike Carter's Case [3] , it was not "collateral to and severable from that involving the Federal questions". See also P. J. Magennis Pty. Ltd. v. The Commonwealth [4] .

(1949) 80 C.L.R. 229, at p. 258. 2. (1942) 66 C.L.R., 557. 3. (1949) 80 C.L.R. 382, at p. 425.

In the instant case we are not concerned with the exercise of "pendent jurisdiction", to use the American expression, by a federal court. In ascertaining the meaning of decision in s. 39 (2) (a) we are confronted with a converse problem, one which does not arise in the United States, namely, that of identifying the extent, if any, to which a State court was exercising non-federal jurisdiction. We therefore do not find it necessary to examine the views expressed by Northrop J. in Adamson v. West Perth Football Club Inc. [5] with respect to the exercise of pendent jurisdiction by the Federal Court of Australia.

(1979) 39 F.L.R. 199, at pp. 220-222; 27 A.L.R. 475, at pp. 499-500.

In this case many of the questions arising on the pleadings would have been relevant to the proprietorship issues and therefore incidental to the determination of them. It is true that the applicant's case for damages and an account of profits had its genesis in contract, fiduciary obligation and unfair competition. It was therefore non-federal in character. However, both the federal and non-federal cases presented by the applicant rested on what was a common substratum of transactions involving a plurality of issues of fact giving rise to questions of law some of which were common to both cases. So inextricably mixed and interwoven were the two cases that it would be a task of overwhelming difficulty to identify with precision the extent to which, and the respects in which, the Supreme Court was exercising non-federal jurisdiction, that is, jurisdiction in respect of issues which were not incidental to matters arising under the Trade Marks Act. The applicant's non-federal claim was not distinct from and unrelated to the federal claim; in the words of Barwick C.J. in Felton v. Mulligan [6] , the applicant's non-federal case was not a "completely disparate claim constituting in substance a separate proceeding".

For these reasons we would dismiss the application.

In Southern Centre of Theosophy Inc. v. South Australia [7] this Court decided that appeals in non-federal matters still may be taken to the Privy Council from State Supreme Courts (at least of South Australia). My view is that appeal rights to the Privy Council no longer exist.

This case has been conducted on the basis that such appeals lie from the Supreme Court of New South Wales. The competence of such an appeal is, of course, subject to the provisions of s. 39 of the Judiciary Act 1903 Cth, as amended. For the reasons given by Stephen, Mason, Aickin and Wilson JJ., I agree that, even if an appeal would lie in a purely non-federal case, it does not lie here. A federal common law rule should be adopted that where non-federal issues as well as federal are involved in a case, the case should be treated as wholly within federal jurisdiction unless the non-federal aspects are completely separate and distinct.

High Court of Australia Barwick C.J. Gibbs, Stephen, Mason, Murphy, Aickin and Wilson JJ. Moorgate Tobacco Co Ltd v Philip Morris Ltd [1980] HCA 32

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