Potter v Broken Hill Pty Company Ltd [1906] HCA 88;

Potter v Broken Hill Pty Company Ltd [1906] HCA 88; - HCA 1906 case summary — Zoe

This is an action brought in the Supreme Court of Victoria by the appellant against the respondent, who is a company incorporated and registered in Victoria, for (inter alia) the infringement in New South Wales of a New South Wales patent. The respondent by its defence denies the novelty and utility of the alleged invention in respect of which the patent was granted. It also denies the infringement. The defences of want of novelty and want of utility are, of course, pleaded with an implied reference to the law of New South Wales, of which the Courts of Victoria are required to take cognizance, and which is in this respect the same as that of England. The defence thus raised is therefore, in substance, that the New South Wales patent is invalid. The respondent also sets up that the alleged cause of action for infringement is not justiciable in Victoria. This latter question was ordered to be argued before the Full Court. The points argued before that Court were, as stated by Hodges J., (a) That the Court had no jurisdiction over the cause of action, and, (b) That, if it had jurisdiction, the facts disclose no cause of action, inasmuch as to entitle the plaintiff to succeed he must show not only that the act was wrongful in New South Wales, but also that that very act, if it had been done in Victoria, would have been actionable. The learned Judges differed in opinion. Hodges J. thought that an action for the infringement of a patent is a local action as distinguished from a transitory action, since a violation of the right of monopoly claimed could only take place within the territory where the monopoly existed. Hood J. concurred in this view, and held also that the action failed on the ground that the act complained of, i.e., the violation of a New South Wales monopoly, would not have been unlawful if done in Victoria. àBeckett J. was of a contrary opinion on both points. After the appeal had been argued before us on these points, we requested further argument on the question whether it is competent for the Courts of a State to examine into the validity of an act purporting to be done by the supreme authority of another State in the exercise of its sovereign or quasi-sovereign powers. This question assumes, of course, that the grant of a patent is such an act. The matter has been very fully and ably argued, and we are much indebted to counsel for the assistance which they have given us. There is apparently no decision either of the English or American Courts directly in point, and the question must be determined on principle.

[7]

Such then being the nature of the right, how is it created? In my opinion there can be only one answer to this question: - By the exercise of the sovereign power of the State. The grant of monopolies was originally regarded as an exercise of the Royal Prerogative. In England this exercise of the sovereign power is now in effect (whether it is or is not in form) exclusively regulated by Statute. And in New South Wales, whether the Royal Prerogative could or could not have been exercised without legislation, the power of creating monopolies is now, and has been since 1852, regulated by Statute. Nor can there be any doubt that the creation of such a monopoly is within the powers of sovereignty conferred upon the State of New South Wales by its Constitution. We were invited to hold that, since the Australian States are not Sovereign States in the full sense of the term, i.e., as between themselves and foreign Powers, their sovereignty should be regarded as of a different and inferior nature, and that the exercise of it might be examined by the tribunals of another State to the same extent as the tribunals of the State itself might make such examination. I cannot accept this distinction. In my judgment it is competent for any tribunal before which the question is raised to inquire as to the limits of the rights of sovereignty possessed by another State whose acts are called in question. But there the inquiry must stop. If the act in question purports to be done within those limits, the case is in principle the same as that of acts done in the exercise of an unlimited sovereignty. This case must therefore, in my opinion, be considered on precisely the same basis as if the patent in question had been granted by the Government of the French Republic or of the United States of America. Now, it is the settled law of all civilized countries that the acts of the Government of a State done within its own territory are not examinable at all in the Courts of another State. Whether they are examinable in the Courts of the State itself depends upon municipal law. In England many such acts are examinable, though not all. In some countries they are not examinable at all, and in some only by special tribunals.

[10]

The first objection requires more serious attention. There is, no doubt, for some purposes a great difference between an act of State, such as that involved in Underhill v. Hernandez [5] (which was an exercise of physical force) and the grant of a monopoly. But I apprehend that any exercise by a de facto repositary of any power of sovereignty, which results in the creation of a right of property that can only be created by such an exercise, must be regarded as an act of the State itself. This appears to be the foundation of the doctrine referred to in the passage cited by Story J. from Vattel , and quoted both by Lord Herschell L.C. and Lord Halsbury in British South Africa Co. v. Companhia de Mo¸cambique [6]. "The defendant's judge (that is, the competent judge), says he," referring to Vattel , "is the judge of the place where the defendant has his settled abode, or the judge of the place where the defendant is when any sudden difficulty arises, provided it does not relate to an estate in land, or to a right annexed to such an estate. In such a case, inasmuch as property of this kind is to be held according to the laws of the country where it is situated, and as the right of granting it is vested in the ruler of the country, controversies relating to such property can only be decided in the State in which it depends." (Story, Conflict of Laws , sec. 553). In Chitty's edition of Vattel , p. 173, the words "as the right of granting it is vested" are translated "as the right of granting the possession is vested." We have not had an opportunity of consulting the original text of Vattel , but I conceive that the variation in language makes no difference to the argument, which is, that the right of creating a title to such property as land, being vested in the ruler, that is in the sovereign power, of the country, controversies relating to such property can only be decided in the State in which the property is situated. The reason appears equally applicable to patent rights, which, as already pointed out, are created by a similar exercise of the sovereign power. In In re Bett's Patent [7], it was held that an instrument of grant made by the sovereign authority of Belgium, and purporting to confer a monopoly within that State, was an act of State within the meaning of the Statute (14 & 15 Vict. c. 99 s. 7), which allows "Proclamations ... and other acts of State" to be proved by sealed copies. The grant was, as said by their Lordships of the Judicial Committee, "an act of the governing power of the country." And, applying the rule, which I have cited from Underhill v. Hernandez [8], the Courts of another country ought not to sit in judgment upon such an act. In British South Africa Co. v. Companhia de Mo¸cambique [9], when before the Court of Appeal, Lord Esher M.R., in his judgment considered at length the reasons why the Courts of any country do not assume jurisdiction in matters that occur beyond their own territory, and, after pointing out that by general consent the law rei sitæ does not govern moveables, and the reason for the adoption of that rule, he said: - "These are the reasons for the general consent as to personal property that it follows the person, and it is the general consent which gives the general jurisdiction. The jurisdiction is prior to any rule of venue made with regard to the method of exercising the jurisdiction. We then have to consider the question, whether, by general consent, the only valid ground on which it can rest, a similar jurisdiction has been given in respect of real or immoveable property." In the same case in the House of Lords Lord Halsbury L.C. said [10]: "No two questions can be more distinct than the question whether a matter is within the jurisdiction of the English Courts at all, and whether a matter undoubtedly within the jurisdiction of the Courts shall be assigned for trial to particular Courts in England. There is a concurrence of opinion of most jurists, if not all, as to the difference between what we call realty and personalty, by whatever words those things are designated in the jurisprudence of foreign countries, which affects very materially the right to try." He then refers to the passage from Vattel already quoted. In my judgment these principles are equally applicable when the Courts of one country are called upon to inquire into the validity of the exercise of the powers of government of another country in the creation of a right of property which can only be enjoyed within the territory of the latter country.

[11]

I will next consider what is involved in denying the validity of a patent right or monopoly purporting to be created by an act of the Government of a country having power to create it. It is not in controversy that by the law of New South Wales such a right can only be created in respect of a new invention. If the Government of that State assumes to grant a monopoly in respect of an alleged invention which is not new, the Government must have been misled. For it cannot be supposed that it would have assumed to create a right when the facts were such that it could not lawfully do so. By the law of New South Wales the grant may be recalled by the proper tribunal on proceedings properly instituted, and the objection of want of novelty may be taken by any person against whom the alleged right is sought to be enforced. It was contended that, as in the latter case the decision of the tribunal is only binding as between the parties, the abstract validity of the grant is not put in question, but only its validity as between the parties to the action. But this argument, in my opinion, rests upon a confusion between a fact and the evidence of the fact. Whether the patent is valid or invalid by the law of New South Wales is a single question, just as the validity or invalidity of a marriage between A and B is a single question. Different decisions may be given by different tribunals before whom the fact is called in controversy, as in the Yelverton case, but the fact is single. The fundamental question is whether the tribunal has jurisdiction to inquire into the fact. The matter of parties is subsidiary only, and, if the Court cannot inquire into the fact, no person can be allowed to raise the question in any form of proceedings. It is settled law that an English Court cannot entertain a suit in which the question of title to foreign land is directly in controversy: British South Africa Co. v. Companhia de Mo¸cambique [11]. The Courts will no doubt entertain such a question of title if it arises merely incidentally in a case in which the foundation of the jurisdiction is a personal obligation arising from contract or quasi-contractual relationship between the parties. But this is the only exception. In the United States of America it has always been held that questions directly arising under patents, which are granted in the exercise of the federal power, are cognizable only in federal Courts. The reasons assigned for this rule do not appear to throw much light upon the question now in debate, since they seem to rest upon an exercise of the assumed power of Congress to confer exclusive jurisdiction upon federal Courts in proper cases, or else upon the nature of the right created by the Acts of Congress under which the grant is made, one of the incidents of which right is that in an action for infringement certain powers, which from the nature of them can only be exercised by a federal Court, may be exercised by the Court in which the action is pending. But, while this rule is well settled, it is also settled that if the validity of a patent arises merely incidentally in an action otherwise within the cognizance of a State Court that Court will not refuse to entertain the question. The rule followed seems to be in principle identical with that followed by the English and American Courts with regard to the title to foreign land.

[13]

It is, however, contended for the plaintiff that the case of a grant of a patent is peculiar in this respect, that the grant is made on the condition that the right granted cannot be enforced against anyone who can prove that the invention was not novel, that it is therefore a conditional and not an absolute grant, since the person claiming rights under it may be put to proof of performance of the condition. And it is said that to put him to such proof does not involve an examination into the validity of the exercise of the powers of government by the State by which the patent is granted. The same arguments would apply to a grant of land made on the faith of representations of fact, if by the law of the country its validity might be impeached in a suit by the grantee against a stranger to enforce his rights under the grant. This argument is, in my opinion, founded upon a mistaken use of the word "condition." When a grant is made upon a condition, properly so termed, it is necessary to inquire whether the condition exists in order to discover whether the grant has come into operation. It is an incident of every contract or grant that if it is obtained by misrepresentation it may be avoided by the person deceived. But this incident is not properly called a condition. In the case of an ordinary contract or grant it is clear that the objection can only be taken by the person deceived, and the circumstance that in the case of patents the English law allows the objection to be taken by anyone of the inhabitants of the country, all of whom are prejudicially affected by the deceit practised on the Crown, does not alter the nature of the objection itself. The distinction is analogous to that between what is void and what is voidable. An inquiry into the performance of a condition assumes that the grant is a valid instrument, and deals only with the question whether the prescribed event or condition has or has not happened, while an inquiry into the validity of the grant itself stops short at the period when the instrument is executed.

[15]

Though many cases were cited in which the distinction between local and transitory actions had been closely discussed, in my view, decisions as to what actions are local and what are transitory are not on the question really involved, although much learning may be found in the reports of such cases helping to throw light on the present question. That question, namely, whether the validity of a patent granted by the government of one country can be directly tested in the Court of another, is in this Empire one the answer to which depends, so far as we are concerned, on the limits which in the absence of legislative mandate, the Courts impose on their own jurisdiction in recognition of international comity. On the other hand, the extent to which that comity leads Governments to tolerate any pronouncement, judicial or otherwise, upon the validity of their acts by Courts of other nations, is not the subject of judicial inquiry. In Companhia de Mo¸cambique v. British South Africa Co. [12], Lord Esher M.R. was the dissenting Judge of the Court of Appeal, Fry and Lopes L.JJ. being the majority. On appeal to the House of Lords his view was adopted, and it was held that an action would not lie in England for trespass to land committed in a foreign country. In that case, notwithstanding the difference between the questions for decision, Lord Esher's reasoning is interesting and helpful in the consideration of the present dispute. He said: "The main point in the case seems to me to be, whether the English Courts have ever, for the purpose of granting any relief whatever, entertained any action founded directly on an injury to the plaintiff in respect of his right to land or other immoveable property situated abroad, and, if not, what has been the real ground of their refusal to do so. Has the refusal been rested on the purely municipal difficulty with regard to the venue of the place where the action is to be tried, or upon a prior and larger difficulty, that the law of England has declined from the beginning to assume jurisdiction?" ... "The question, whether the Courts of a nation will or will not entertain jurisdiction of any dispute, is to be determined exclusively by the nation itself - i.e., by its municipal law. If by express legislation the Courts are directed to exercise jurisdiction, the Courts must obey. If there is a proper inference to the same effect, the result is the same. But there are certain rules which have by universal consent indicated the circumstances from which the inference may properly be drawn. We have to consider what is the inference in respect of matters arising abroad. The first cardinal rule, agreed upon by all jurists, is one arising necessarily from the division of mankind into nations. "It is plain that the laws of one country can have no intrinsic force, proprio vigore, except within the territorial limits and jurisdiction of that country ... Whatever extra-territorial force they are to have is the result, not of any original power to extend them abroad, but of that respect which from motives of public policy other nations are disposed to yield to them," etc.: Story's Conflict of Laws , sec. 7. "This is the natural principle flowing from the equality and independence of nations" (sec. 8)." ... "With regard, then, to acts done within the territory of a nation, all are agreed that such nation has without more jurisdiction to determine the resulting rights growing out of those acts; but, with regard to acts done outside its territory it has no jurisdiction to determine the resulting rights growing out of those acts, unless such jurisdiction has been allowed to it by the comity of nations." The principles there laid down are most material to the proper determination of this case.

[16]

Although it may not be quite accurate to call the States of this Commonwealth sovereign in the literal and extensive meaning of that term, still they may justly be so termed, as to the entire ambit of the legislative powers conferred on them, and of the executive powers either expressly conferred or necessary for the complete enjoyment of their legislative rights or the complete effect and execution of their laws. In the exercise of that defined sovereignty, apart from the powers and laws of the Imperial Government and Parliament, on the one hand, and those of the Australian people in their federal or national capacity, on the other, they are as independent of each other and as much entitled to freedom from interference as any nations in Europe. Their right of making patent laws and of saying in such laws, for example, how their patents should be granted, by whom and to whom, was part of this defined sovereignty, and so remains except so far as it has been affected by the exercise of the federal legislative power as to patents. It is only within the particular State that in the nature of things the patent right granted before 1903 could operate by virtue of a State Statute. For, to quote Lord Herschell L.C., in Steers v. Rogers [13], "What is the right which a patentee has or patentees have? It has been spoken of as though a patent right were a chattel, or analogous to a chattel. The truth is that letters patent do not give the patentee any right to use the invention - they do not confer upon him a right to manufacture according to his invention. That is a right which he would have equally effectually if there were no letters patent at all; only in that case all the world would equally have the right. What the letters patent confer is the right to exclude others from manufacturing in a particular way, and using a particular invention." That is a right exercisable only within the territory of the Government which grants it. If Mr. Potter, for instance, wished to exercise such a power of exclusion within Victoria, it would be preposterous for him to ask the Government of South Australia to grant it to him. He must go to the authorities of this State. Is it not then a strange proposition that a right which cannot exist outside New South Wales territory should be enforceable extra-territorially by a branch of the governing power of every other country? The proposition, if true at all, is as large as that. The governing power of New South Wales, in the execution of its Statute, has granted by its patent this right of exclusion from manufacturing and using this invention within the limits of that State. As already pointed out, that is a right which cannot possibly exist outside the limits of New South Wales. In the absence of legislative power to interfere with the right of any other State to exclude its own subjects from the use of a manufacture, the whole subject matter is excluded from the cognizance or competence of the State itself, and its Courts cannot sit in judgment to determine whether such rights are validly granted. Holding that opinion, I concur with the learned Chief Justice in the conclusion to which he has come, that is to say, that the validity of this patent cannot be passed upon in the way proposed.

[19]

As to the quality of the grant of the patent in this case, it seems to me to be quite immaterial whether it is called an act of State or not, or whether the term "act of State" is properly reserved for certain occasions such as those mentioned by Sir J. F. Stephen in his History of the Criminal Law, as cited by Mr. Higgins. The question for us is whether this was an act in exercise of the supreme governing power, and that is a question to be determined not merely by considering whether, for instance, there is a prerogative in existence, a subject to which Mr. Mitchell devoted some time in his argument, or whether the act in question is legislative, judicial, or executive. But the question to which an answer must be given is this: - Is the thing you propose to examine, and of which you propose to test the validity, an act of the supreme governmental power in any of its branches of another State in respect of a matter which is within its jurisdiction and committed to it for the exercise of that governmental power? There can only be one answer to that question in respect of the grant of this patent, and whether the thing done is called an act of State or not seems to me totally immaterial. The legislature of New South Wales having certain powers of law making, has exercised them for the purpose of regulating the grant of patents. Under that legislation what purports to have been an act of the Governor in Council in the issue of letters patent is put forward as a matter to be examined here. It seems to me the inquiry stops on the threshold. If a grant is put forward as an act of the supreme governmental power of New South Wales in respect of a matter in which this State has no share, in respect of which its rights and duties are totally distinct, then it cannot be sustained that, whether it was an act of State of those two States or anything else, the validity of that grant can be inquired into by the Courts of this State. Mr. Mitchell was strongly impressed with the view that this matter can only be dealt with by an exercise of the executive power, and therefore he argued very earnestly that, if that were so, it could only be dealt with by an exercise of the prerogative, and he said that, as the commission of the Governor of New South Wales gave no delegated right to him in respect of the prerogative to deal with letters patent, so this was an act which could not be looked upon as a prerogative act in the usual sense of the term, but was merely some act derivative from the terms of the Statute. It seems to me that that inquiry is immaterial as between separate States, and the States of the Commonwealth are separate in this respect, that they have separate powers, distinct and operating upon different territories and rights. They are so distinct from each other that the aspect in which their respective exercise of power is to be regarded is not that of municipal but that of international law. In that aspect it is to no purpose to inquire whether an act is executive or legislative or otherwise, so long as it is an active exercise of the supreme governmental power. So I think the inquiry about the prerogative leads to no practical result in this case. As dealing with acts of a government de facto, the case of Underhill v. Hernandez [15], which was much discussed during argument, seems to require some consideration. The acts complained of as tortious, were acts of military government committed by the defendant as the head of a revolutionary army in Venezuela, after defeating the troops of the administration, which the revolutionists avowed had ceased to be the legitimate government. Ultimately the revolutionists prevailed, the capital was taken, and a new civil government was installed and was formally recognized by the United States as the legitimate government of Venezuela. The plaintiff, Underhill, was a citizen of the United States. Having failed in his action in the Circuit Court, he took his case to the Circuit Court of Appeals. His appeal was rejected by that Court, on the ground "that the acts of the defendant were the acts of the government of Venezuela, and as such are not properly the subject of adjudication in the Courts of another government" [16]. On certiorari, the Supreme Court of the United States held that the Circuit Court of Appeals was justified in that conclusion. Now, the proposition laid down was that the Courts of the United States could not hold the defendant to account, as he had acted in exercise of the sovereign power of Venezuela. The decision was unquestionably right, and rests on a principle acknowledged and applied in English law. But in the present action, the acts of the Government of another State are challenged, as between subjects of this State, and not by way of impleading the other State or the representative of its sovereign power. It is undeniable that, as Fuller C.J., put it, "Every sovereign State is bound to respect the independence of every other sovereign State, and the Courts of one country will not sit in judgment on the acts of another done within its own territory." But the decision in Underhill's case was given in the assertion of "the immunity of individuals from suits brought in foreign tribunals for acts done" by them "within their own States, in the exercise of governmental authority, whether as civil officers or as military commanders." And it may be urged that in the two propositions quoted, the Circuit Court of Appeals on the one occasion or the Supreme Court on the other, did not mean to go beyond the maintenance of that immunity, and that to the extent that the declarations are pushed beyond that meaning they become obiter dicta, because there was nothing more to be decided in the case. All this is true. It does not follow, however, that they are not of wider application in reason.

[22]

In the course which the case has taken, and in the view which I hold as to the last point argued, I find it necessary to deal with one question only, namely whether it is within the power of the Supreme Court of Victoria to try an issue involving the validity of a patent granted by the Governor of New South Wales under his sign manual and the seal of that State in accordance with the provisions of the New South Wales Patent Act of 1899 . It would be impossible to escape from that issue in the trial of the case. The action is for infringement of the rights of the patentee. The rights conferred by a patent are well described by Lord Herschell L.C., in Steers v. Rogers [18]. "What is the right which a patentee has or patentees have? It has been spoken of as though a patent right were a chattel or analogous to a chattel. The truth is that letters patent do not give the patentee any right to use the invention - they do not confer upon him a right to manufacture according to his invention. That is a right which he would have equally effectually if there were no letters patent at all; only in that case all the world would equally have the right. What the letters patent confer is the right to exclude others from manufacturing in a particular way, and using a particular invention." The defence necessarily involves a denial of that exclusive right, first, on the ground that no valid patent was issued to the plaintiff, and secondly, on the ground that the defendant did what is complained of by virtue of the rights conferred upon it by another patent issued by the same authority and under the same Statute. The New South Wales Patent Act , which regulates the rights of the parties, expressly declares that every ground which was formerly available as a ground for repeal of a patent by scire facias shall be available by way of defence to an action of infringement. Before the passing of the Patents Act in England the King issued patents for inventions by virtue of his common law right controlled by the Monopolies Act . He had no power to grant a patent unless in the circumstances set forth in sec. 6 of that Statute. If, for instance, it were proved in the proceedings for scire facias that the patentee was not the "true and first inventor," or that the subject of the patent was not novel, it was adjudged that the grant was void and the King had been deceived into issuing it. Various Statutes relating to patents have in modern times regulated the exercise of prerogative in the issue of patents in England, but, as pointed out by Edmunds in his book on Patents, at p. 3, the grant of letters patent is still a power within the prerogative of the Crown regulated as to procedure by the Patents Act . The prerogative spoken of in this connection of course is not the personal prerogative of the monarch. The grant of a patent is an executive act, and done, as other executive acts are done, on the advice of responsible officers of the Crown. Thus the exercise of the prerogative to grant a patent is an exercise of the executive power of the community in the manner provided by Statute. Mr. Higgins has contended that no such prerogative power is vested in the Governor of New South Wales, and that the grant of a patent in that State is merely the exercise of a statutory power under the Patents Act by the authority designated in the Act for that purpose. I do not think that the distinction is of much moment, but, if it is important, I think it is beyond question that, whatever prerogative power to grant patents is in England vested in the King, is in New South Wales for the purpose of New South Wales patents vested in the Governor. It is not necessary to consider whether such a power existed in the Governor before the passing of the New South Wales Statutes regulating patents, but it is clear that the Patents Act of 1899 recognizes its existence. The important question however is whether the grant of a patent is an exercise of the executive power of the State of New South Wales. The procedure under the Act is as follows - a petition from the applicant to the Governor setting forth certain particulars is lodged with a Minister of the Crown, and is then referred by the Minister to the examiner. The examiner reports thereon to the Minister. The Minister, after considering the petition and the report of the examiner, may or may not in his discretion report his approval of the prayer of the petition to the Governor, the latter on receipt of the Minister's report may or may not in his discretion grant the letters patent under his sign manual and the seal of New South Wales. It seems to me of little moment whether the grant so issued is described as an exercise of prerogative power regulated by Statute, or as an exercise of the power of the Executive Government conferred upon it by Statute. It is in either view an exercise according to its discretion of the supreme executive power of the State. If there were any reason to doubt the power of the State by its Governor to grant patents within New South Wales, there would be good ground for the contention that its claim to exercise that power would be examinable in a Victorian Court, because the State is sovereign only as to matters within its jurisdiction. But there is no reason to doubt the jurisdiction of the State in this respect. The power is directly recognized, and its exercise regulated by the Statute. Under these circumstances the matter for our consideration may be thus stated - Is it within the competency of a Victorian Court to inquire whether the Executive Government of New South Wales has properly or improperly exercised an executive power which it has jurisdiction to exercise according to its discretion, or, putting the question in another form, has a Victorian Court jurisdiction to determine whether the Governor in exercising that power has or has not been deceived into issuing a grant in respect of which the conditions precedent for its lawful issue did not exist? It has been conceded throughout the argument that, for the purposes of the question now under consideration, the several States of Australia stand towards each other in the position of foreign States. The question whether a Court can or cannot inquire into the validity of the executive acts of a foreign State depends principally upon the application of a well known principle of international law. The Courts of a country have and must exercise the jurisdiction within their own territory which their laws give them. If their laws gave them express jurisdiction to inquire into the validity of the acts of a foreign Government, their right to do so and to bind persons subject to their jurisdiction by their decisions could not be questioned. But the Courts of every country are bound to give effect to the principles of international law unless to do so would be to decline the exercise of jurisdiction expressly conferred on them by their own laws. The principles of international law, which systematizes the comity of nations, generally recognize that the Courts of a country will not inquire into the validity of the acts of a foreign State, except subject to certain well-known limitations. The principles upon which the limitations rest are concisely stated as follows in the Companhia de Mo¸cambique v. British South Africa Co. [19], by Lord Esher M.R. in his judgment in the Queen's Bench Division - a judgment which was afterwards upheld in the Court of appeal. "With regard, then, to acts done within the territory of a nation, all are agreed that such nation has without more jurisdiction to determine the resulting rights growing out of those acts; but, with regard to acts done outside its territory it has no jurisdiction to determine the resulting rights growing out of those acts, unless such jurisdiction has been allowed to it by the comity of nations." For instance, the Courts of most nations will refuse to adjudicate upon claims of title to foreign land in proceedings founded upon an alleged invasion of the proprietary rights attached to it. It was on that ground that the House of Lords in the British South Africa Co. v. Companhia de Mo¸cambique [20] held that the Supreme Court of Judicature in England had no jurisdiction to entertain an action to recover damages for trespass to land situate in a foreign country. Similarly the Courts of most nations will refuse to inquire into the validity of the acts of a Foreign Government done within the territory of that Government. I do not know that the principle has been better stated anywhere than in the following words of Chief Justice Fuller in delivering the opinion of the Court in Underhill v. Hernandez [21]: - "Every sovereign State is bound to respect the independence of every other sovereign State, and the Courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves." That was a case in which Hernandez, in command of a revolutionary army in Venezuela, committed, as commander, certain acts of trespass and other wrongs to the plaintiff then living in the city of Bolivar. The revolutionary government under which Hernandez was acting was recognized by the United States as the government of Venezuela. Judgment having been given for the defendant in the Circuit Court, the Circuit Court of Appeal affirmed the judgment, holding that "the acts of the defendant were the acts of Venezuela and as such were not properly the subject of adjudication in the Courts of another Government." The Supreme Court of the United States held that the Circuit Court of Appeal was justified in that conclusion and upheld the verdict. Another illustration may be taken from the English Courts. In Gladstone v. Ottoman Bank [22], it appeared that the government of the Sultan of Turkey had granted to the plaintiffs, under the name of the "Bank of Turkey," the exclusive right of issuing bank notes in Turkey. Subsequently the Sultan's government, in derogation of that grant, made a similar concession to the defendants under the name of the Ottoman Bank, the defendants then being a company incorporated by charter carrying on business in London. A bill was filed by the plaintiff on behalf of the Bank of Turkey, against the Ottoman Bank its directors and the Sultan, praying a declaration of the plaintiff's exclusive right and an injunction against the Ottoman Bank and its directors. The Vice-Chancellor, Sir W. Page-Wood, decided on demurrer that the Court had no jurisdiction to interfere, holding that an engagement entered into with a foreign government such as that upon which the plaintiff's rights depended was not an engagement which the Court could enforce or against the breach of which it could give any relief. In the course of his judgment he says [23]: - "Now, unless the Court is prepared to hold that this is a contract which it can enforce against the principal, it seems to me impossible (inasmuch as all the rights of the plaintiffs stand upon the contract) to hold that, if the same sovereign power chooses to act in derogation of the right granted by the first sovereign act, I can interfere with the sovereign power itself to prevent an act in derogation of it. But if I cannot interfere with the principal, how can I interfere with the accessory, namely, the person who is alleged to be aiding in defeating the rights which the sovereign power has granted by the first concession. That the grant operates through the medium of the sovereign power of the Ottoman Empire acting for state purposes there can be no question. Mr. Rolt attempted to draw a distinction between the act of a sovereign doing something for his own benefit, and the act of what is called the legislature, where a legislature exists; but the fact that the sovereign has the control of the money current in his kingdom only amounts to this; that it is a privilege enjoyed by him for the public purposes of his country. The right of ascertaining what shall be the current coin of the kingdom is vested in the sovereign of the country, but that right, like every other right which he holds quà sovereign, is presumed to be exercised for the benefit of the community upon public grounds. This is not a contract for the private benefit of the sovereign, of which this Court might take cognizance, but simply a grant of the sole right of issuing notes as part of the current coin of his realm, made by the Sultan in his public capacity as the sovereign of the country."

[24]

I have purposely avoided using the expression "act of State." That expression is no doubt often used in the special sense explained by Sir James Stephen in his History of the Criminal Law of England in the passage quoted by Mr. Higgins from p. 61. It is at best a vague and unsatisfactory term, and I assent to Mr. Higgins' argument that it cannot be applied to the grant of a patent. The authority therefore cited by the Attorney-General in In re Betts' Patent [26] cannot be taken as establishing that the grant of a patent is an "act of State" in any technical sense of the term. The decision merely interpreted the words "act of State" used in the 7th section of the Evidence Act (14 & 15 Vict. c. 99), as applied to the document of grant of a Belgian patent. But I think that case may be taken as establishing that the grant of a foreign patent is a document evidencing an act of the foreign State, that is the executive government representing the Sovereign Power of the State, and therefore that the granting of the patent is an exercise of that power. Mr. Mitchell relied upon R. v. Clarke [27] and R. v. Hughes [28], as establishing the position that the validity of grants by a State Governor under the authority of a State Statute will be inquired into. In those cases the Courts of the State were inquiring into the validity of the executive acts of its own State. A State may give its Courts what jurisdiction it pleases to inquire into the executive acts of the State. Its laws may give its Courts the fullest jurisdiction to inquire into any act of its executive government, and in the case of British Possessions that inquiry may be further considered on appeal by the Privy Council. International law or the comity of nations has no concern with cases of that kind. In Clarke's Case [29], the validity of a New Zealand grant was inquired into by the New Zealand Courts and on appeal by the Privy Council. In Hughes' Case [30] a similar inquiry took place in the South Australian Courts into the validity of a grant of the Governor of South Australia, and went on appeal to the Privy Council. In neither of those cases could the principle now under consideration have any application.

[25]

It is true that the principle of international law with which I am dealing is subject to certain modifications. For instance, it has been generally recognized that the Courts of a State may inquire into matters, which by comity of nations would otherwise be outside their jurisdiction, where the act or transaction in the foreign country is not directly but only indirectly the subject of inquiry. Again, there are cases in which a Court of Equity in the exercise of its jurisdiction in personam will investigate acts and transactions which have taken place in a foreign country, which would otherwise by comity of nations be outside their field of inquiry. It is unnecessary to do more than mention these modifications of the general principle because there are no circumstances in this case which make them applicable. Mr. Higgins' strongest contention was based upon an ingenious and somewhat new view of the nature of the grant of a patent. The grant he urges is a conditional grant - the conditions being that the applicant is the first and true inventor, that the invention is a novelty, and that the other circumstances exist which make the issue of the grant valid under the Statute of Monopolies. He says that the matter therefore for inquiry by the Victorian Court is not the validity of the patent, but whether the applicant has duly fulfilled the conditions upon which the grant was made by the Governor of New South Wales, and that such an inquiry can be made without any breach of the principles of international law. If the grant of the patent is a conditional grant that would be so. But the answer to the contention is obvious. The grant, we have had the terms of it before us, is not a conditional, but an absolute grant. No conditions can be implied from its terms, nor can any conditions be implied from its nature and incidents. The whole purport of the Patents Act of New South Wales is, while recognizing patent grants as under the old law, to provide machinery for inquiry and investigation by officers of the government before a patent is issued, and the cancellation of the grant when it ought not to have issued. But the nature of the grant is not altered. Its incidents are well known, and are the same now as they were when the Statute of Monopolies was passed. The declaration in the Act, that although scire facias is abolished as a method of procedure, the grounds of scire facias will be grounds of defence to an action of infringement, indicate that the legislature did not intend to alter the nature of the grant of a patent, but intended it to remain, what it always has been, the absolute grant of a monopoly made by the sovereign executive power to a subject, but liable to be declared void by the Courts, and withdrawn and cancelled if it should at any time be proved that the sovereign power was misled into issuing it by incorrect representations of the applicant. As the grant therefore is not conditional on its face, and cannot from its nature be held to be conditional, the contention of Mr. Higgins must fail. For these reasons I am of opinion that the Supreme Court of Victoria could not try this case without inquiring into the validity of the patent grant, and could not make that inquiry without violating a fundamental principle of the comity of nations which is binding on the Victorian Courts in the absence of any Victorian law authorizing them to make such inquiry. The case, therefore, not being justiciable in the Victorian Courts, I am of opinion that the decision of the Supreme Court was right, and the appeal should be dismissed.

At a glance

Court

Decision date

Before

Source

Judgment (57 paragraphs)

Potter v Broken Hill Pty Company Ltd [1906] HCA 88; (1906) 3 CLR 479 (20 March 1906)

Parties

Cases Cited (1)