SOUTH CHINA MORNING POST
27th July, 1939.
68
Cannot be Enforced
Mr. Cheshire in his recent work on Private International p. 197 writes "It is axiomatic that Law at a contract that is illegal by its pro- per law cannot be enforced in Eng- land. The dearth of authority for this proposition is not surprising, for few would be bold enough to sue on a contract that is prohibited by the legal system to which it properly belongs."
In The Torni (1932) p. 78 at 88 Greer L.J. in considering the judg- ments in the Court of Appeal in In re Missouri Steamship Co. Ch. D. 321) said: "I regard the de- !
(42 cision as meaning that if, country where the contract was made, in the the contract was illegal-not merely void and unenforceable but illegal- then the courts in this country would recognise the illegality and act in accordance with the law of the coun- try where the contract was made.'
Mr. Cheshire puts it thus: been suggested that a contract which "It has is illegal by the law of the country where it is made cannot be enforced in England.
in
"Bold and sweeping statements of this nature are seldon tenable Private International Law. particular one, at any rate, derives This little confirmation from the decisions usually cited in its favour, since they were concerned with cases in which the lex loci contractus was also the proper law. The casual place of com- pletion cannot as a rule raise legal effects.
"It is academic and impracticable to suggest that a contract must be regarded as a nullity everywhere merely because it happens to have been made in a country by the law of which it is illegal. But what is true is that if that country is some- thing more than the locus contractus,' if, for instance one of the parties is resident there, or if the subject matter of a contract of sale is situated there, then, even though the law of that. country is not the proper law, never- theless any imperative provision by which it prohibits and illegalises the contract will be recognised by the English Courts."
Three Arguments
Mr. Sheldon has submitted three interesting arguments in opposition to the making of the order prayed.
Firstly, he contends, the fact that the local branch of the Company is precluded by existing circumstances from carrying on business in the Colony is not in itself a ground for making a winding-up order, and he relies on the case of In re Middles- borough Assembly Rooms Co. (1879) 14 Ch.D. 104.
In that case a company formed for building and letting assembly rooms resolved, owing to trade depression, to suspend work; for more than a year.
was
A shareholder presented a petition for winding-up. He was supported by one-eighth in value of the share- holders whereas the petition opposed by four-fifths in value.
In these circumstances the Court of Appeal held that a winding-up order ought not to be made.
( 3 )
Secondly, he argues, the Supreme Court of China has made an order which is entirely nugatory. only assets within the jurisdiction of The
on Chefoo or Dairen, and, notwith- that court are fourteen ships based standing the order of the court these ships are still trading. This court will not make a useless or ineffective decree (Ferguson vs. Wilson L.R. 2 Chancery Appeals p.77).
Two Fallacies
reason
That argument is based fallacies.
on two In the first place the com- pany has within the jurisdiction of this court substantial assets and it has not been suggested that order which I make will not be im- any mediately effective so far as these assets are concerned. In the second place the fact that certain foreign nationals are in contempt of an order of a competent court is no why I should disregard that order or fail to treat it with proper respect. The case of de Jager vs. A.G. for Natal (1907) Appeal Cases 326 is direct authority for the proposition that the company in Chefoo is still subject to the jurisdiction of the Chinese courts. As Lord Loreburn there said in delivering the judgment of the Judicial Committee: "The protection of a State does not cease · merely because the State forces, for! strategical or other reasons, are tem- porarily withdrawn, so that the enemy for the time exercises the rights of an army in occupation. On the con- trary, when such territory reverts! to the control of its rightful sovereign wrongs done during the foreign occupation are cognisable by the ordinary courts".
In the third place, he maintains the contributories are the best judges as to whether there is any danger to the local assets of the company. Their considered view is shown by the fact that whereas the petition is presented by contributories holding 1,500 shares it is opposed by 50,000 in value, and it is a familiar and settled principle that a court will not interfere with a domestic forum.
It is perhaps not surprising that the majority of the contributories re- sident either in the province of pation or in Dairen in Manchukuo Shantung which is in Japanese occu-
should desire to trade with the enemy. It may, for aught I know be a profitable undertaking: it is in any event more profitable than hav- ing the company's ships laid up in harbour or forcibly seized by the Japanese forces.
High Treason
It is clear however from Mr. T. F. Lo's affidavit that these activities of the company
are by Chinese law illegal, in fact treasonable and I have not been referred to any authority for the proposition that, in order to meet the wishes of, a majority of shareholders I should connive at and in fact facilitate high treason by sub- jects of a friendly power.
Mr. D'Almada, who followed Mr. Sheldon, has advanced another argu- ment.
Assuming every argument put for- submits that the true remedy is not ward by Mr. Potter, Mr. D'Almada
a winding up order but an injunction to restrain the local branch from do-
In my opinion that case is easily distinguishable. It was a petition! for the winding-up of an English Company whereas here I have to consider a petition for the winding-ing illegal acts. That submission up of the local branch of a foreign company which has already been wound up by order of a competent court. I know of no authority for keeping alive a branch where the parent trunk is in process of disso- lution.
firstly, that the company has been seems to me to disregard two facts, wound up in China and that we are concerned here only with a branch, and, secondly, that, the company
!
no
here
on
having
representatives except a Japanese corporation whose contract of agency is illegal by the laws of China, there is no one whom an injunction could be served. Having come to the conclusion which I have already reached on Mr. Potter's first ground, it is not strictly necessary for me to state my views on the second and third grounds, but in case on appeal the Full Court holds that the first ground falls it will obviate the necessity for a rehearing ment the petition is one which should de novo if I record that in my judg-
be granted on all the three grounds advanced.
There will be an order for the winding up of the branch of the company within the jurisdiction of this Court. There will be liberty to appeal and the costs of the petitioners will be paid from the local assets of the company.
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