Stack, G & Anor v The Brisbane City Council & Ors [1995] FCA 570

Federal Court of Australia|1995-08-04|Before: Cooper J

("BCC") as first respondent, Davies Shephard Pty Ltd ("DS") as second respondent and Davies Shephard (Queensland) Pty Limited ("DSQ") as third respondents, seek the following principal relief :- "1. An injunction restraining the respondents and each of them, whether by themselves or otherwise howsoever, either directly or indirectly, during the term of Australian petty patent no. 645740 (and any extension thereof) from infringing the said petty patent. 2. As against each of the respondents, damages or at the applicants' option an account of profits in respect of infringement of the petty patent. 3. Delivery up on oath to the applicants of all water meter assemblies (or part thereof) in the possession, custody, power and control of any of the respondents, the use or sale of which by any of the respondents would be an infringement of the petty patent. The applicants allege that they are beneficially entitled to a provisional patent application for an invention entitled "water meter assemblies" and to Australian petty patent number 645740 in respect of the said invention. The applicants, by their statement of claim, allege that each of the respondents has infringed the petty patent :- "8(a) Pursuant to Brisbane City Council contract number R55/92/93 the first respondent did on or abut [sic] 8 February 1994 contract with the third respondent whereby the third respondent agreed to sell and supply 60,000 water meter assemblies to the first respondent, which water meter assemblies incorporate the invention, the subject of the patent. (b) The third respondent, pursuant to interim purchase orders from the first respondent, is presently selling and supplying to the first respondent water meter assemblies which incorporate the invention, the subject of the patent. (c) The said water assemblies sold and supplied by the third respondent and to be sold and supplied by the third respondent to the first respondent are manufactured by the second respondent which sells or otherwise disposes of the said water meter assemblies to the third respondent.

(d) The first respondent uses the said water meter assemblies and will use the said water meter assemblies to be supplied by having them installed and connected to homes in Brisbane for the purposes of monitoring a householder's use of water supply." The respondents seek to rely on Chapter 17 of the Patents Act 1990 (Cth) ("the Act") as a defence to the infringement claim. It is against this background that the following preliminary questions were agreed for determination by the court :- "(a) Is the First Respondent an authority of a State within the meaning of Chapter 17 of the Patents Act 1990 (the Act')? (b) If yes' to question (a) (and on the assumption that the invention the subject of Australian petty patent number 645740 (the invention') has or will be exploited by the First and/or Second Respondents), is such exploitation of the invention for the services of the State within the meaning of Section 163 of the Act? (c) If yes' to question (a), has the First Respondent authorised in writing the Second Respondent to exploit the invention within the meaning of Section 163 of the Act? (d) If `yes' to question (c), from what date is such authorisation effective." (e) If the First Respondent is an authority of a State, is it the relevant authority within Chapter 17 of the Act?" Is the Brisbane City Council an "authority of a State"? The relevant sections of the Act provide :- "Commonwealth and State authorities 162. A reference in this Chapter to the Commonwealth includes a reference to an authority of the Commonwealth and a reference to a State includes a reference to an authority of a State. PART 2 - EXPLOITATION BY THE CROWN Exploitation of inventions by Crown 163(1) Where, at any time after a patent application has been made, the invention concerned is exploited by the Commonwealth or a State (or by a person authorised in writing by the Commonwealth or a State) for the services of the Commonwealth or the State, the exploitation is not an infringement: (a) if the application is pending - of the nominated person's rights in the invention; or (b) if a patent has been granted for the invention - of the patent. 2. A person may be authorised for the purposes of subsection (1): (a) before or after any act for which the authorisation is given has been done; and (b) before or after a patent has been granted for the invention; and (c) even if the person is directly or indirectly authorised by the nominated person or patentee to exploit the invention." The Act provides no definition of "authority of a State". It is submitted for the applicants that the structure of the Act is such that it applies only to exploitation by a State directly or through a State authority being a body with the right to control, command or determine as if it was the State. Counsel for the applicants referred the court to the powers, discretions and nature of the BCC as constituted by the relevant State legislation and submitted that the BCC is a body independent of the State Government with discretionary power of its own so that it is not an agent of, nor does it represent the State.

Counsel for the respondents submitted that while the BCC possesses a degree of autonomy, it is subject to considerable control by the State Government. Mr. Martin of counsel contends, in written submissions, that matters dealt with at local government level are matters within the power of the State legislature but which the State Government has decided can be dealt with by another body. That is, a local authority such as the BCC, it is submitted, represents the manner in which a State Government has decided that certain governmental tasks will be performed. In the respondents' submission, the powers of the BCC are drawn from the relevant State legislation and not from voters or from an independent Constitution. As such, it is submitted, the BCC is an "authority of a State" within the meaning of Chapter 17 of the Act. Considerable assistance in determining preliminary question (a) is to be gained from an examination of two cases in which the High Court of Australia has had occasion to consider the phrase "authority of a State". In General Steel Industries Inc. v. Commissioner for Railways (NSW) (1964) 112 CLR 125, the plaintiff brought an action in the High Court against the Commissioner for Railways and others to restrain the defendants from infringing a patent granted to the plaintiff under the Patents Act 1952 (Cth). The defendants, relying on ss.125 and 132 of the Patents Act 1952, sought to have the action struck out or stayed as giving rise to no reasonable cause of action against them. Sections 125 and 132 of the Patents Act 1952 correspond with ss.163 and 162 of the Patents Act 1990 respectively.

Barwick CJ considered the provisions of the relevant State legislation from which the Department of and Commissioner for Railways derived powers, functions and structure and concluded (at 132) that, as a result of these provisions, the Commissioner was :- "... in charge of a sub-department of government under the direct control and direction of a Minister of the Crown. That sub-department is to manage and control the railway system of the State, a function historically connected with government in New South Wales. He collects its revenues for the State and pays them into a Treasury fund; and he has the control and management of moneys appropriated by Parliament for the running of the railway system." The learned Chief Justice noted that there was no direct judicial precedent for deciding the meaning of "authority of a State" for the purposes of s.125 of the Patents Act 1952, and (at 133) went on to say that he considered that Electricity Trust of South Australia v. Linterns Ltd [1950] SASR 133 was "... perhaps the judicial decision most relevant to answering this question." However, his Honour stated that :- "... The concept of an instrumentality' accepted by his Honour in that case is not identical with the concept of an authority of the State for present purposes though the two concepts may have some common elements and be closely allied. Thus, though the considerations which weighed with his Honour in that case have their relevance here, they are not decisive." In my view, the long line of cases relating to Crown instrumentalities and Crown privileges and immunities are of limited relevance to this case. As will be seen, the phrase "authority of a State" carries a different emphasis. Whilst there is undoubtedly overlap between the concepts, the relevant factors for consideration in determining whether the BCC is an "authority of a State" in the present context can be found in the cases in which the phrase was directly considered. In Committee of Direction of Fruit Marketing v. Delegate of the Australian Postal Commission (1980) 144 CLR 577 ("the C.O.D. case"), the High Court considered whether the C.O.D. as established by the Fruit Marketing Organisation Act 1923 (Qld) was an "authority of a State" within the meaning of by-law 118 made under the Postal Services Act 1975 (Cth). The judgment of Gibbs J and the joint judgment of Mason and Wilson JJ, agreed in by Barwick CJ, bear considerable attention. Gibbs J (at 580-581) examined the phrase "authority of a State" :- "... The expression authority of a State' refers to a body which exercises power derived from or delegated by the State, but the fact that a body is established under State law and possesses power conferred upon it by State law will not necessarily mean that the body is an authority of a State. For example, a private company, such as a gas supply company, which provides a public service for profit, may be set up under the company laws of a State, and may be given special statutory powers to enable it to carry on its undertaking, but it does not thereby become an authority of a State. The words authority of a State' naturally mean a body which is given by the State the power to direct or control the affairs of others on behalf of the State - i.e., for the purposes of and in the interests of the community or some section of it. In some cases it may be decisive that the body concerned is given exceptional powers of a kind not ordinarily possessed by an individual or a company, and that those powers are intended to be exercised for a purpose that would ordinarily be regarded as a purpose of government. On the other hand, in some cases it may be decisive that the body is conducted in the interest and for the profit of its members. In all cases, however, it is necessary to have regard to all the relevant circumstances in order to determine the character of the body in question. In reaching these conclusions as to the meaning and effect of the by-law I have been much assisted by the cases which have discussed the meaning of the expression public authority' in other statutes, in particular Federal Commissioner of Taxation v. Silverton Tramway Co. Ltd. (1953) 88 C.L.R., at pp. 565-566, 567-568, 570-571 and Western Australian Turf Club v. Federal Commissioner of Taxation (1978) 139 C.L.R. 288, at pp. 292, 296-298, 309-312 and by the one case where the meaning of the words an authority of the State' (in the Patents Act 1952 (Cth)) was considered: General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 C.L.R. 125, at pp. 132-134." (Emphasis added) After considering the provisions of the Fruit Marketing and Organisation Act 1923 (Qld) and other relevant legislation which defined the powers and functions of the C.O.D., his Honour (at 582-583) concluded :- "There can in my opinion be no doubt that the C.O.D. exercises exceptional powers conferred on it by the State. The purpose for which those powers are conferred is to perform a function which under modern conditions is widely regarded as the proper function of a State, viz., to control the marketing of an important commodity produced by many people in many parts of the State. The producers of the commodity are enabled to play a part in controlling the exercise by the C.O.D. of its powers, but that only means that the State has allowed the persons affected by the powers to play a part in their exercise. On a consideration of the whole of the provisions of the Act, it seems to me that the powers are intended to be exercised in the interests of the community rather than in the interests of particular individuals. The fact that the powers of the C.O.D. extend to the regulation and control of a particular industry of course does not mean that the C.O.D. is not exercising the powers of the State. Even if it is right to say that the powers are intended to be exercised in the interests of the industry, that does not mean that they are not intended to be exercised in the public interest, for it is in the public interest that an important industry such as that of the growing of fruit and vegetables in Queensland should be successfully conducted. For these reasons I consider that the C.O.D. is given by the Act exceptional powers to direct and control the affairs of others for the purposes of the State and in the interests of the community and not for individual profit or gain. I accordingly conclude that the C.O.D. is an authority of the State within the meaning of those words in by-law 118. ..." The joint judgment of Mason and Wilson JJ (agreed in by Barwick CJ) is to similar effect. Their Honours referred to the judgment of Barwick CJ in General Steel Industries and the judgments of Stephen and Aickin JJ in Western Australian Turf Club v. Federal Commissioner of Taxation (1978) 139 CLR 288 at 295-298, 309-313 as pointing up the range of considerations to which regard would be had in determining whether the C.O.D. was an "authority of the State". Their Honours went on to say (at 585) :- "... The principle is clear that no one consideration will necessarily be decisive, and that more often it will be a question of fact and degree, depending both on the particular statutory description which is required to be satisfied and the features of the body in question which are relevant to that description." After setting out in great detail the provisions of the relevant legislation containing the constitution, function and powers of the C.O.D., their Honours noted that the phrase "authority of a State" was not confined to the Crown, nor to those bodies which were so closely identified with the Crown so as to enjoy its immunity. Nor did their Honours consider the test to be whether the body in question drew its funds from Government sources. The gravamen of their Honours' judgment appears at 593-594 :- "In our opinion, the focus is upon government, and the function of government. If the appellant is to succeed, it must be because the proper conclusion, based on the legislation, is that the C.O.D. is not engaged in the work of government, notwithstanding that it is created a statutory authority with a wide range of powers. It would have to be shown that the authority represented by those powers in reality is derived from the growers, not from the State. ... The manner in which the Act pursues the objective of organized marketing of fruit is clearly, in our opinion, to impress the stamp of government upon the activities of the C.O.D. ... In the words of Smithers J. in this case: ... government is still government albeit representative government, and even if dependent in some respects upon the will of the governed ... The authority and effectiveness of the decisions of the C.O.D. are derived not from growers but from the State'." (Emphasis added) Their Honours remarked on the considerable degree of participation by the Minister and the Governor in Council in the operation of the legislative scheme and concluded (at 595) :- "In our opinion, the legislation clearly creates the appellant an instrument of government and equips it with the powers to achieve the organized marketing which is the purpose of the legislation. It is properly described as an authority of a State' within the meaning of Postal By-law 118." The judgments referred to above indicate the approach which ought to be taken in determining whether the BCC is an "authority of a State" within Chapter 17 of the Act. The primary focus is on government and the function of government. The BCC will be an "authority of a State" if its functions are "impressed with the stamp of government" or if it has been given by the State the power to direct or control the affairs of others on behalf of the State. The role and involvement of the executive, through the Governor in Council or the appropriate Minister, is also a relevant factor. In determining whether the BCC satisfies the test, no one consideration is necessarily decisive. It is a question of fact and degree in the circumstances and which depends on the structure, powers and functions of the BCC and the context of the statutory description which is to be satisfied. A detailed examination of the statutory scheme by which the BCC is created and within which it operates is necessary. Relevantly, the Local Government Act 1993 (Qld) provides :- "3. The objects of this Act include - (a) providing a legal framework for an effective, efficient and accountable system of local government in Queensland; and (b) recognising a jurisdiction of local government sufficient to allow a local government to take autonomous responsibility for the good rule and government of its area with a minimum of intervention by the State; and (c) providing for community participation in the local government system; and (d) defining the role of participants in the local government system; and (e) establishing an independent process for ongoing review of certain important local government issues. ..... 9.(1) This Act applies to the Brisbane City Council only so far as is expressly provided by this or another Act. ..... 20. In exercising its jurisdiction of local government, a local government has - (a) a law-making role for local laws; (b) an executive role for - (i) adoption and implementation of policy; and (ii) administration of local government; and (iii) enforcement of its local laws. ..... 22.(1) A local government may exercise the jurisdiction of local government for all parts of its local government area. (2) Its local government area is its basic territorial unit'. ..... 25. Each local government has jurisdiction (the `jurisdiction of local government') to make local laws for, and otherwise ensure, the good rule and government of, its territorial unit. 26.(1) A local government's jurisdiction of local government includes jurisdiction to make local laws with respect to any matter - (a) required or permitted to be prescribed under this or another Act; or (b) necessary or convenient to be prescribed or exercised for carrying out or giving effect to its local laws.

(2) To avoid any doubt, a local law may be made - (a) making it an offence to contravene a local law; and (b) fixing a penalty for an offence against a local law (including different penalties for successive offences against a local law) of not more than 850 penalty units. ..... 30.(1) A local government has no jurisdiction to make a local law - (a) that the Parliament could not validly make; or (b) purporting to exclude or limit the future repeal or amendment of the law. (2) A local government also has no jurisdiction to do anything else that the State cannot do. 31. If a State law and a local law (whether made before or after the State law) are inconsistent, the State law prevails over the local law to the extent of the inconsistency. ..... 459.(1)A local government's jurisdiction to make laws is stated in Chapter 2 (The local government system), Part 1 (local governments), Division 3 (Jurisdiction of local governments). (2) This Chapter provides a common law-making process for all laws made by local governments. (3) It also provides for local law policies to assist the detailed implementation of a local law's objects. 460. This Chapter applies to the Brisbane City Council 461. A local law' is a law made by a local government. 462.(1)A model local law' is a law about a matter within the jurisdiction of local government that is proposed by the Minister as suitable for adoption by local governments as a local law. (2) A model local law must be gazetted. ..... 465.(1)The process stated in this Division or Division 3 (Making other local laws) must be used to make a model local law.

(2) If a local government purports to make a model local law in contravention of subsection (1), the purported law is of no effect. 466.(1)A local government makes a model local law if, by resolution, it - (a) adopts a model local law about a matter; and (b) if there is an existing local law about the matter that is inconsistent with what is adopted - amends or repeals the existing local law so that there is no inconsistency. ..... 475.(1)The local government must - (a) advise the Minister of the proposed local law; and (b) give the Minister information about the proposed local law required by the Minister or by regulation. (2) If the Minister considers State interests are satisfactorily dealt with by the proposed local law, the Minister must advise the local government that it may proceed further in making the law. (3) Alternatively, if the Minister considers State interests would be satisfactorily dealt with by the proposed local law if the local government satisfied particular conditions, the Minister - (a) may impose conditions on the local government that the Minister considers appropriate; and (b) must advise the local government that it may proceed further in making the law if it - (i) satisfies any conditions about the content of the proposed local law; and (ii) agrees to satisfy any other conditions. (4) If the Minister considers that the proposed local law only makes a minor amendment of an existing law (including, for example, the correction of a minor error), the advice of the Minister also may state that the local government may proceed to Step 8 without satisfying Steps 3 to 7. (5) Steps 3 to 7 do not apply if the Minister's advice to the local government includes the statement mentioned in subsection (4). (6) The advice of the Minister also may state that the local government may proceed without satisfying Step 7 if the local government agrees to satisfy particular conditions.

(7) Before proceeding further in making a proposed local law, the local government must - (a) get an advice under subsection (2) or (3); and (b) satisfy any condition about the content of the proposed local law; and (c) agree to satisfy any other conditions. ..... 497.(1)A local government has control of all roads in its area. ..... 526. A local government has the exclusive right to provide a ferry service across a watercourse at a place where the land forming both banks of the watercourse is in its area." The City of Brisbane Act 1924 (Qld), as amended, forms part of the statutory scheme :- "4.(1) The area of the City of Brisbane continues to be a city under the name City of Brisbane. (2) The boundaries of the City are the boundaries of the city immediately before the commencement of the Local Government Legislation Amendment Act 1993, as subsequently varied under section 5 of the Local Government Act. ..... 6. The Council - (a) is a body corporate with perpetual succession; and (b) has a common seal; and (c) may sue and be sued, and otherwise exercise its powers, under the name `Brisbane City Council'. 6A.(1) The Council has such powers as are conferred on it under this or any other Act. (2) Without limiting subsection (1), the Council has, for or in connection with the performance of its functions, all the powers of an individual, and may, for example - (a) enter into contracts with any party; and (b) acquire, hold, dispose of and deal with property; and

(c) appoint agents and attorneys; and (d) make charges, and fix terms and conditions, for services and information supplied by it to any party. (3) In this section - party' includes - (a) the Crown; and (b) another local authority; and (c) a public authority of the Crown. ..... 37. Acquisition of land. (1) For the purpose of taking any land granted in fee-simple required for any purpose of this Act, Brisbane City Council shall be a constructing authority under The Acquisition of Land Act of 1967' and, subject to this Act, that Act shall apply and extend accordingly. (2) The Council may expend moneys from the City Fund for the purpose of making surveys and obtaining plans, estimates, and reports as to the cost or desirability of taking any lands for any purpose of this Act: Provided that in the event of such lands being taken by the Council such preliminary expenditure shall be charged to the special account to which the cost of such taking is charged. (3) The Council may in respect of land taken by it as a constructing authority under `The Acquisition of Land Act of 1967' do all or any of the following things that is to say :- (a) demolish, alter, improve or retain any buildings or erections thereon; (b) construct or erect new buildings thereon; (c) dedicate any part thereof and construct the same as a road for public use; (d) generally alter, remodel and improve such land and in such manner as it may think fit; (e) with the prior approval of the Minister, lease the whole or any part of such land for such periods and on such terms and conditions as it may think fit until such time as the land may be required for the purpose for which it was taken; (f) if the land or any part thereof is found to be not required for the purpose for which it was taken, with the prior approval of the Minister sell the same. 47.(1) All land is rateable land other than -

(a) vacant Crown land; or (b) land occupied by or on behalf of - (i) the Crown; or (ii) a Crown instrumentality; or (c) land exempt from rating by regulation; or (d) land used for public, religious, charitable or educational purposes that is exempt from rating under a resolution of the Council. (2) Subject to subsection (3), land is not occupied on behalf of the Crown or a Crown instrumentality if - (a) It is ordinarily used for residential purposes, regardless of whether it is occupied at a particular time; or (b) it is ordinarily used for a commercial enterprise, regardless of whether it is used for a commercial purpose at a particular time. (3) Land is occupied on behalf of the Crown or a Crown instrumentality if it is ordinarily used for residential purposes by a person - (a) holding an appointment under, or in the employment of, the Crown or a Crown instrumentality; and (b) who is required by the terms of appointment or employment to live on the land. 48. The Council may, for a financial year, make and levy - (a) a general rate or differential general rates; and (b) minimum general rate levies; and (c) separate rates and charges; and (d) utility charges. ..... 112. The Council may enter into financial arrangements under section 22 of the Statutory Bodies Financial Arrangements Act 1982. 113. The Council may invest money under section 48 of the Statutory Bodies Financial Arrangements Act 1982. ..... 122. Audits of the Council are to be conducted by the Auditor-General under the Financial Administration and Audit Act 1977."

The Local Government (Planning and Environment) Act 1990 (Qld) also forms part of the legislative scheme. This Act applies to the BCC (s.1.4) and its objectives are stated in s.1.3 :- "1.3 The objectives of the Act are - (a) to provide a code by which a local government or the Minister may undertake the planning of an area to facilitate orderly development and the protection of the environment; and (b) to provide an adequate framework for a person to apply for approval in respect of a development proposal and to provide for appropriate appeal rights in respect thereof." The relevant Minister and the Governor in Council retain ultimate control over the processes established by this Act. (See ss. 1A.1, 2.11, 2.12, 2.15, 2.18, 2.20, 2.22, 4.5, 4.8 and 4.10). The BCC is a "statutory body" for the purposes of the Statutory Bodies Financial Arrangements Act 1982 (Qld) :- "16.(1) The Treasurer, on behalf of the Government of Queensland, may guarantee, subject to and in accordance with the approval of the Governor in Council, the due payment of all or part of the moneys from time to time payable and the due performance of any other obligations undertaken in accordance with financial arrangements entered into by a statutory body. (2) A guarantee under subsection (1) may be given - (a) by way of an instrument of guarantee; or (b) by way of an order in council; or (c) in such other form or manner as the Treasurer thinks fit. ..... 22.(1) Subject to this Part a statutory body may -

(a) borrow money from the Treasurer; (b) borrow money from the Corporation; (d) borrow or raise money by way of sale of - (i) debentures; or (ii) bonds; or (iii) inscribed stock; or (iv) other securities approved by the Treasurer; (e) enter into such other financial arrangements as the Treasurer approves upon such terms and conditions as the Treasurer thinks fit; and may enter into financial arrangements partly in one and partly in another or other of the ways specified in this subsection. ..... (3) Before entering into negotiations for financial arrangements a statutory body shall obtain the sanction of the Treasurer and for that purpose shall furnish to the Treasurer such information as the Treasurer requires. (4) A statutory body shall not enter into financial arrangements without the approval of the Governor in Council first had and obtained, on such terms and conditions (if any) as the Governor in Council thinks fit." The Financial Administration and Audit Act 1977 (Qld) is also relevant, the BCC falling within the definition of "public sector entity" in s.5. This Act creates a Queensland Auditor-General, appointed by the Governor in Council and an Audit Office. Part 6 of this Act provides for the Auditor-General to audit all public sector entities. Thus, the legislative scheme creates the BCC a body corporate with considerable autonomy and wide discretion in the exercise of its powers and functions within its territorial boundaries. The BCC has power to and does make local laws on a wide range of issues including public transport, roads, parks, the environment, waste disposal, town planning, sewerage and water supply. Councillors and a Lord Mayor are elected at triennial elections. Funds for BCC operations are raised by, inter alia, the levying of rates and charges and by borrowings and investment. The BCC brings down its own Budget for each financial year. However, regard must be had to the degree of control over the BCC potentially and actually exercised by the Minister and the Governor in Council. All local laws must be approved by the Minister. The Minister and Governor in Council have ultimate control over town planning matters and State laws prevail over local laws to the extent of any inconsistency. Further, borrowings are subject to approval by the Governor in Council and the State Government is not subject to rates and charges which are levied on rateable land. It is also clear that the BCC does not assume its authority from the electors in the BCC elections, but rather from the legislative scheme outlined above. The context in which the BCC exists must also be noted. All the functions and powers exercised and exercisable by the BCC are matters within the constitutional power of the State Government. The BCC is not a "third tier of government" provided for in the Federal Constitution. Rather, the BCC is a statutory body, established and ultimately controlled by State legislation. Its functions and powers are State governmental functions and powers, exercised in the interests of the community, which the State has delegated to it in legislation. Having regard to these matters, it can be seen that the BCC is involved in and is part of the State governmental function such that its activities are "impressed with the stamp of government". It has been given by the State the power to direct and/or control the affairs of the people within its territorial boundaries on behalf of the State. The executive of the State Government, through its Ministers and the Governor in Council, retains a prominent role and a practical involvement. The purpose of Chapter 17 of the Patents Act 1990 (Cth) is to ensure that the Commonwealth and State Governments have inventions available to them for the benefit of the services of the respective governments at once, rather than at the end of the term of the letters patent. Section 162 of the Act recognises that those services are managed or performed, not exclusively by departments of government, but as well by "authorities" of the Commonwealth or States (See General Steel Industries at 133-134 per Barwick CJ). In my view, the BCC is an "authority of a State" within the meaning of Chapter 17 of the Patents Act 1990 (Cth). Question (a) must be answered in the affirmative. Was the exploitation of the invention for the services of the State? The invention was exploited (in fact or on the assumption) by the BCC contracting to buy from the third respondent and the third respondent supplying water meters incorporating the invention to measure water supplied by the BCC to properties in the BCC territorial unit for the purpose of levying charges for supply on users based on levels of consumption. The water meters supplied by the third respondent are manufactured by the second respondent and sold or otherwise disposed of by the second respondent to the third respondent.

It is submitted for the applicants that the installation of water meters is a revenue-gathering function of the BCC and is not exploitation for the services of the State. Mr. Crowe of counsel submitted that on the proper construction of s.163 the exploitation referred to must be exploitation for the State or the services of the State and not for, or for the services of, the "authority of a State". It is submitted that the benefit of the installation of water meters is enjoyed by the BCC and not by the State and therefore the exploitation is not "for the services of the State" within Chapter 17. In my view the question is initially one of statutory interpretation. By s.162, a reference in Chapter 17 of the Act to a State includes a reference to an authority of a State. Therefore, the real question here is whether the exploitation of the invention was for the services of an authority of a State, viz. the BCC. The contention that ss.162 and 163 of the Act should be read such that "authority of a State" is interposed in the phrase "exploited by ... a State" but not in the phrase "for the services of ... the State" which follows almost immediately after the former cannot be supported by any principle of law nor by logical argument. Furthermore, no assistance is to be gained for the applicants by the fact that the exploitation referred to in s.163 must be by a State" while the exploitation be for the services of "the State". The plain meaning of ss.162 and 163 is that the exploitation by a State (or an authority of a State) is not an infringement of a patent where the exploitation is for the services of the State (or authority of a State) which is exploiting the invention. The focus of inquiry must then turn to the meaning of "for the services of".

There are very few decisions on the statutory predecessors of s.163(1) of the Act. The two principal decisions are General Steel Industries (per Barwick CJ) and Pfizer Corporation v. Ministry of Health [1965] AC 512 (in the House of Lords on appeal from the Court of Appeal). The Crown use provisions of the Copyright Act 1968 (Cth) fell for consideration in Re Australasian Performing Rights Association Ltd's Reference; Re Australian Broadcasting Corporation (1982) 45 ALR 153 by a Full Court of the this court (Bowen CJ, Franki and Sheppard JJ) but the meaning of "for the services of" ultimately did not fall to be and expressly was not decided. In Pfizer Corporation the House of Lords had occasion to consider s.46(1) of the Patents Act 1949 (UK) which was in the following terms :- "46.(1)Notwithstanding anything in this Act, any Government department and any person authorised in writing by a Government department may make use and exercise any patented invention for the services of the Crown in accordance with the following provisions of this section." Pfizer Corporation was the patentee in the UK for the antibiotic drug tetracycline. The drug was used in the National Health Services. In 1961 the Minister of Health invited tenders for the supply of tetracycline from various firms and offered protection to the tenderers relying on s.46 of the Patents Act 1949 (UK). The successful tenderer imported the drug from Italy where it was legally produced by a supplier without the plaintiff's authority. Pfizer Corporation sought declarations that the Ministry of Health had no power under s.46 of the UK Act to authorise this method of supply. The Ministry of Health was a government department within the meaning of the section and gave the successful tenderer written authority. The Ministry supplied the drug to National Health Hospitals for administration to both in-patients and out-patients and the main question in the case was whether this use of the drug was "for the services of the Crown". A majority of the House of Lords (Lord Reid, Lord Evershed and Lord Upjohn) held that the use made of the patented drug was "for the services of the Crown" within the meaning of s.46(1) of the Patents Act 1949 (UK). Both the Court of Appeal and the majority in the House of Lords held that an act was done "for the services of the Crown" if it was done for the purpose of performing a duty or exercising a power which was imposed upon or invested in the executive government by statute or by prerogative. Lord Wilberforce, in whose judgment Lord Pearce agreed, thought such a definition of the powers of the Crown to use or authorise the use of patented inventions was alarmingly wide. The result of accepting the Ministry's argument (and the formulation of the majority) was, in Lord Wilberforce's view (at 568) :- "... to withdraw from the benefit of the patent either a large or preponderant part of the customers to supply whom the invention was made (and supposedly protected by a monopoly of the right to vend) - customers being members of the general public, themselves in no way part of a Government department or of a Crown service. To accept this seems to me to go far beyond such a logical extension of the Crown's rights as a liberal process of judicial interpretation may properly accept: it gives to those rights another dimension altogether which it is the province of the legislature to define on a fresh consideration of the respective interests of the public and of the inventor." The phrase "for the services of the State" was considered in General Steel Industries. Barwick CJ said (at 133-134) :- "The evident purpose of s.125, having regard to sub-s. (7), is to ensure that the Governments of the commonwealth and of the States have the invention available to them for the benefit of the services of the respective Governments at once, rather than at the end of the term of the letters patent. Under s.132 the Patents Act recognizes that in Australia those services are managed or performed, not exclusively by departments of government, but as well by `authorities' of the Commonwealth or State. Cf. Patents Act, 1949 (U.K.), s.46 Sub-section (8) of s.125, in providing that no action for infringement shall be brought for what would otherwise be an infringement of the letters patent, emphasizes the clear intention of sub-s. (1) and with sub-s. (7) provides a means of securing the untrammelled use of the invention by the Governments and the authorities of the Commonwealth and of the States. On the other hand, sub-ss (5) and (6) ensure that proper compensation shall be paid to the owner of the letters patent for the acts of a Government or an authority of Commonwealth or State which makes use of the invention. The railway system of the State is, in my opinion, undoubtedly a service of the State and the use of the invention in the construction of railway carriages to be used by the Commissioner in that railway system is a use for a service of the State or for the services of the State within the meaning of the expression in the Patents Act 1952, whichever may be the proper way to read the final words of s.125(1). One could scarcely imagine that sections such as ss.125 and 132, with their evident practical purpose, did not extend to include within the expression the use of the services of the Commonwealth or State, the use of an invention for the purposes of one of the Government railway systems in Australia. In the case of the Commissioner, therefore, there are present not merely the circumstances to which I have already called attention, but the asset of the State which is under his control and management, subject to Ministerial direction, is itself for relevant purposes a service of the State. All these factors combine, in my opinion, to require the answer that the Commissioner is an authority of the State within the meaning of ss.125 and 132 of the Patents Act. I am also of opinion that the use by the Commissioner - if his contracting with the other defendants in the circumstances amounts to a use of the invention by him, as indeed the plaintiff claims - is a use for the services or for a service of the State, within the meaning of those sections." There is nothing in the authorised report of General Steel Industries to indicate whether Barwick CJ was referred to the decision in Pfizer Corporation at first instance or before the English Court of Appeal. The House of Lords' decision was given in February 1965 after the decision in General Steel Industries. However Barwick CJ did have regard to the decisions in Pyrene Company Limited v. Webb Lamp Company Ltd. (1920) 37 RPC 57 and Aktiengesellschaft Fur Autogene Aluminium Schweissung v. London Aluminium Co. Ltd. [No. 2] (1923) 40 RPC 107. In Pyrene Company Ltd. v. Webb Lamp Company Ltd., the Ministry of Munitions contracted with the defendant to supply fire extinguishers which infringed the plaintiff's patent. The evidence established that the defendant was shown an extinguisher of the plaintiff's manufacture and directed by the Ministry to reproduce it. The defendant manufacturer was sued for infringement, the alleged infringement being sale of the reproduced extinguishers to the Ministry. The contracts were entered into during the period of hostilities in the First World War. The defendant claimed the protection of s.29 of the Patents and Designs Act 1907 (UK) which provided :- "A patent shall have to all intents the like effect as against His Majesty the King, as it has against a subject, provided that any Government Department may by themselves, their agents, contractors, or others, at any time after the application, use the invention for the services of the Crown on such terms as may, either before or after the use thereof, be agreed on, with the approval of the Treasury, between the Department and the patentee, or, in default of agreement, as may be settled by the Treasury after hearing all parties interested." Lawrence J held (at 65-66 ) :- "It is not to be wondered at that contracts entered into at the time when this contract was entered into were possibly not of the best draughtmanship. It was a time of stress and trouble in the country. Printed forms were used by the Ministry of Munitions. Everybody was in a rush and under a strain which was almost at breaking point just at this time. There were shipping difficulties and other difficulties had to be considered. The tender and the acceptance in these cases I have seen and they are on the usual printed forms, and I hold that, notwithstanding the particular wording of this contract, it was a contract which compelled the Defendants to copy as closely as they could the Plaintiffs' patented invention. I further come to the conclusion that it was the intention that the Defendants were not bound to obtain the leave of the Plaintiffs to make their machine, and that one of the reasons for entering into this contract was that the Plaintiffs not only were asking too much for their extinguisher in the opinion of the Ministry of Munitions, but also were importing parts or the whole machine - I am not sure which - from America, and it was desired to conserve the shipping. In these circumstances I hold that this agreement was one which, within the exception admitted by Mr. Hunter Gray, compelled the manufacture of this particular machine without obtaining the leave or licence of the Patentee. In those circumstances, without expressing my opinion as to the larger question, I unhesitatingly hold that the Defendants were contractors within the meaning of Section 29, and that the Plaintiffs' invention was being used by a Government Department, namely, the Ministry of Munitions, by their contractors, the Defendants, for the services of the Crown. That being so, I am of opinion that Section 29 forms a good defence to this action, and that the Defendants, as contractors, are immune from any proceedings for an injunction or for damages." In Aktiengesellschaft fur Autogene Aluminium Schweissung v. London Aluminium Co. Ltd. [No. 2], the plaintiff was the patentee of two patents relating to the welding of aluminium. The defendant had, inter alia, supplied welded articles for use by the Government. The issue was whether s.29 of the 1907 UK Act provided a defence to the defendant. The evidence established that in some cases the defendant did the welding itself, in others it sub-contracted the work. Sargant J said (at 117) :- "... In my judgment, the Section is primarily an agency section, that is to say, protection is afforded to the Government department, and to any person or persons, contractors or others, who are acting as agents for, or by the express or implied authority of, a Government department. In each case, it will have to be ascertained, if the parties think fit to fight out each individual case, whether the acts of the Defendant Company in that particular case were acts done for the purposes of the Crown, and with the authority, or by the direction, of the Crown. In that case, they will not be liable; but where the acts that they have done have not been done by virtue of some express or implied authority from the Crown, then it seems to me they will be liable. It may be in many cases that, where they are sub-contractors, there will have been such a relation between them and their contractors, such a direction given by the Government to the contractors, or such a direct supervision over the employers by the Government, as will amount to an implied authority sufficient to make the Company in that individual case an agent acting by the authority, and for the purposes, of the Crown." In the reasoning of Lord Wilberforce in Pfizer Corporation it was the re-supply by the government department in competition to the patentee which underpinned the conclusion that the grant of monopoly rights was not by the exception in s.46(1) of the Patents Act 1949 (UK) to derogate from the monopoly to a greater extent than the right of the Crown to exploit the invention for its own immediate purposes. (See [1965] AC at 568). In each of the three first instance cases there was the supply of an item by a contractor for the direct use of the authority of a State (in the case of General Steel Industries) or the government department (in the case of the UK cases). In no case was the item re-supplied by the State or department to a third party in competition to the patentee where that third party was a prospective customer of the patentee. Factually each of these three cases falls within the majority and minority views in Pfizer Corporation. The law in this country is no narrower than the minority view in that decision. If the facts in the instant case fall within the minority view in Pfizer Corporation and the first instance cases referred to above, it is unnecessary for present purposes to determine whether the majority view in Pfizer Corporation is the law of Australia.

In the instant case the water meters were, or are to be, supplied to the BCC to be attached to its pipework to measure the quantity of water supplied by it from the public supply to any landowner to whose land reticulated water is supplied. The water meter is not re-supplied to the land owner; it is not used in the relevant sense by the land owner. The water meter is an asset of the BCC which enables it to quantify the water actually supplied and to charge for it by reference to that quantity. The water meter becomes a component part of the apparatus by which water is supplied by the BCC for consumption in the territorial area of the BCC, such supply being a function of local government. Conformably with the approach taken by Barwick CJ in General Steel Industries the use of the water meters by the BCC as part of the supply by it of reticulated water in the Brisbane local authority area is the exploitation by the BCC as an authority of a State of the invention, the subject of Australian petty patent number 645740, for the services of it as such an authority. In consequence, s.163(1) of the Act operates to prevent the exploitation by the BCC of the invention constituting an infringement of the said petty patent. Question (b) must be answered in the affirmative. Was DS "authorised in writing" by the BCC to exploit the invention? It is submitted for the respondents that authorisation in writing for the purposes of s.163 is contained in the tender documents themselves which ultimately became contractual terms, or alternatively in a letter dated 7 April 1994 from the BCC to DS. Counsel for the applicants conceded that s.163(2) has retrospective operation and that in consequence the letter of 7 April 1994 is sufficient written authorisation of the conduct of the second and third respondents for the purposes of the section. For the sake of completeness the letter relevantly contained the following :- "For the avoidance of doubt, the BCC hereby authorises DS, for the purposes of s.163 of the Patents Act 1990 to manufacture and supply to the BCC water meter assemblies of the type previously: (a) submitted by DS as a sample with its tender for contract no. R22/93/94; and (b) supplied to the BCC under the Interim Orders. The authorisation hereby granted extends to the exploitation (if any) by DS of any invention the subject of the Patent. For the purposes of this letter the term `DS' includes: (i) all persons (natural or corporate) related to DS (as that term is understood in the Corporations Law); and (ii) all subcontractors engaged by DS for the purpose of the manufacture of water meter assemblies for supply to the BCC. Yours faithfully, ..." In light of these concessions, question (c) must be answered in the affirmative. From what date is the authorisation effective? It having been conceded that DS was authorised by the letter dated 7 April 1994 from the BCC to it and that such authorisation was effective to retrospectively authorise the conduct of the second and third respondents which otherwise would be an infringement of the petty patent, the only question is whether or not DS was authorised in writing at an earlier time. The only relevance, on the submission of counsel for the applicants, of an earlier authorisation date is on an issue of costs. Namely, whether the institution of the principal proceedings was reasonable and necessary having regard to the existence or otherwise of a necessary authorisation. Mr. Caine of counsel submitted that the tender documents, because they relate specifically to a particular configuration of a water meter assembly, namely the assembly which was ultimately supplied in conformity with the tender, amount to a written authorisation within s.163. The tender documents relevantly contain the following :- " BRISBANE CITY COUNCIL DEPARTMENT OF WATER SUPPLY AND SEWERAGE CONTRACT NO. R. 22/93/94 SUPPLY OF WATER METER ASSEMBLIES FOR A PERIOD OF TWO (2) YEARS SUPPLEMENTARY SPECIFICATION 1 DESCRIPTION OF CONTRACT AND METER ASSEMBLIES 1.1 - The contract is for the manufacture, supply, assembling, testing and delivery of 20mm nominal diameter water meter assemblies comprising the following basic components - Isolating Valve Water Meter Manifold Back-flow Prevention Device Underground Housing (Meter Box) 1.2 - Tenderers are referred to the Tender Drawings No. WM 16 which indicate in diagrammatic form the types of meter manifolds preferred. .....

11 DRAWINGS SUPPLIED BY COUNCIL 11.1 - Drawing No. WM 16 indicates in diagrammatic form the type of 20mm Meter Manifold preferred. Inlet and outlet threads and joint details at same are to be as indicated on the drawing. The connecting thread for the Meter Mechanism is to be 1˝" FASTENING INTERNAL THREAD TO AS 1722 PART 2 as indicated. 11.2 - Drawing No. 2/12.88 indicates the Capillary Straight Union Connectors used by the Council for connection to the forms of inlets indicated on Drawings WM 16. The straight Union Connectors are not to be supplied under this contract." Tender Drawings No. WM 16 is a diagram of a water meter manifold. A sample water meter incorporating a manifold of the type illustrated in "WM16" was provided by DS to the BCC before the contract was entered into. The BCC accepted the sample provided and it was the sample which formed the agreed design of the assembly under the contract. There is no dispute that the sample and the water meters ultimately supplied incorporated a manifold which infringed the petty patent. Nor is there any dispute that the contract as let by the BCC to DS required the supply of water meters in accordance with the sample. In these circumstances the respondents submit that the acceptance of the tender and the formation of the contract to supply by the letter of the BCC dated 14 February 1994 constituted the relevant authority in writing. In support of a submission that the contractual terms authorise the exploitation of the petty patent, the respondents rely upon the observations of Barwick CJ in General Steel Industries (at 135-136) :- "I turn now to the position of the contractors to the Commissioner who are co-defendants in these applications. Again I deal first with submissions based on Order 26, r.18. Confining myself to the plaintiff's statement of claim, which in case of ambiguity must be read, to use the pleader's convenient phrase, against him, I observe that the plaintiff, in pars. 10, 13 and 14 of the statement of claim, which I have abstracted in the opening portion of these reasons, says that the agreements made between the Commissioner and the other defendants call for and require the use of the plaintiff's invention. These paragraphs allege that the Commissioner has contracted with each of the other defendants to manufacture the invention and use it as part of complete railway carriages for use by the Commissioner on the railway system of the State. I do not think these paragraphs merely say that the agreement with the Commissioner requires the doing of acts which happen because of the manner in which the other defendants have chosen to perform them to infringe the letters patent. I read them as saying that the agreement stipulates the use of a coupling which necessarily infringes the letters patent, whether knowingly or inadvertently being immaterial. No doubt in the case of a contract with an authority of a State for manufacture or for supply of an article, it may be that the contractual terms leave the contractor with such a choice as to his method and design of manufacture that he is free to perform the contract without infringing an invention, or it may be that, as I think it is here, the contractual terms require the very act which amounts to an infringement of some patentee's letters patent. In the former case it would seem that the contractor needs some written authority to make use of the invention. In the latter case the contract itself being in writing is a sufficient authority. Pyrene Co. Ltd. v. Webb Lamp Company Ltd. (1920) 37 R.P.C. 57, at p. 65; Aktiengesellschaft fur Autogene Aluminium Schweissung v. London Aluminium Co. Ltd. [No. 2] (1923) 40 R.P.C. 107, at pp. 116, 117." His Honour concluded on this point (at 136) :- "... the agreements themselves require the other defendants to manufacture and in such manufacture to do that which amounts to a use of the invention. I conclude that the plaintiff's claim is that the other defendants were authorized by the Commissioner, whom I find to be an authority of the State, to use the invention, i.e. to make a railway vehicle body and truck central bearing of a design which in fact incorporates the plaintiff's invention." Barwick CJ expressly contemplated a situation such as that contended for by the respondents as being one within the ambit of s.163 of the Act. That is, where the terms of the tender or contract between the Crown and another party are such as to require the successful tenderer or contractor to infringe the patent in order to properly perform the contract, that fact makes the written contract or tender documents themselves a sufficient authority. (See also Pyrene Co. Ltd. v. Webb Lamp Company Ltd. at p.65; Aktiengesellschaft fur Autogene Aluminium Schweissung v. London Aluminium Co. Ltd. [No. 2] at 116, 117). I am satisfied that upon formation of the contract by the BCC's letter of acceptance of 14 February 1994, DS was authorised in writing within the meaning of s.163(1) of the Act to supply the infringing water meters. Question (d) must be answered: 14 February 1994. Is the BCC the "relevant authority" within Chapter 17 of the Act? The present proceedings as framed are not for remuneration under s.165 of the Act for exploitation of the petty patent. There is no lis between the applicants and the BCC and/or the State of Queensland as to whether remuneration should be paid, by whom, and in what amount. Importantly, it cannot be alleged that the relevant authority, whoever that may be, has failed to agree remuneration in terms of the section so as to enliven the jurisdiction of the court. To the extent that any party wishes to argue that the State of Queensland is the relevant authority within Chapter 17 of the Act, the fact is that the State is not a party to the present proceedings, nor has it appeared before the court to argue in its own interests. As I intimated when this question was added, it may ultimately be that the absence of the State of Queensland would make it inappropriate to answer the question. Upon consideration and for the above reasons that has proven to be the case. Accordingly, I decline to answer the question. Conclusion The answers to the preliminary questions are as follows :- Question (a): Yes Question (b): Yes Question (c): Yes Question (d): 14 February 1994 Question (e): Decline to answer THE COURT ORDERS THAT:

The preliminary questions which were ordered pursuant to Order 29 rule 2 to be decided separately and before all other questions arising in these proceedings are answered as follows :- (a) Is the First Respondent an authority of a State within the meaning of Chapter 17 of the Patents Act 1990 (the Act')? Yes (b) If yes' to question (a) (and on the assumption that the invention the subject of Australian petty patent number 645740 (the invention') has or will be exploited by the First and/or Second Respondents), is such exploitation of the invention for the services of the State within the meaning of Section 163 of the Act? Yes (c) If yes' to question (a), has the First Respondent authorised in writing the Second Respondent to exploit the invention within the meaning of Section 163 of the Act? Yes (d) If `yes' to question (c), from what date is such authorisation effective. 14 February 1994 (e) If the First Respondent is an authority of a State, is it the relevant authority within Chapter 17 of the Act? Decline to answer
The applicants pay the respondents' costs of and incidental to the preliminary questions to be taxed if not agreed. I certify that this and the preceding thirty-four (34) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper. Date: 4 August 1995 Associate Counsel for the Applicants: Mr. A. Crowe Solicitors for the Applicants: Smits Leslie Barwick Counsel for the First Respondent: Mr. G. Martin Solicitors for the First Respondent: Mr. G. Fletcher of Brisbane City Council Counsel for the Second and Third Respondents: Mr. B. Caine Solicitors for the Second and Third Respondents: Minter Ellison Morris Fletcher Date of Hearing: 19 April 1994 Place of Hearing: Brisbane Date of Judgment: 4 August 1995

Local Government Act 1993(Qld)

City of Brisbane Act 1924(Qld)

Local Government (Planning and Environment) Act 1990(Qld)

Financial Administration and Audit Act 1977(Qld)

Fruit Marketing Organisation Act 1923(Qld)

Fruit Marketing and Organisation Act 1923(Qld)

Relevantly, the Local Government Act 1993(Qld)

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