CO129-585-3 Sino-Japanese conflict- shipping 17-1-1940 - 13-11-1940 — Page 49

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We are not told what the terms of the arrangement between the company and the Dairen Kisen Kaisha are.

Argument has proceeded on the assumption, not that the parties in coming to that arrangement intended any law other than the law of China to apply, but that, because the centre of administration of the company is now in Japanese hands, the company could therefore do as it liked regardless of Chinese law.

The only addition to the argument on this point which was not before the learned Chief Justice is that the principle enunciated by Lord Halsbury in In re Missouri Steamship Company, 42 Ch. D., at page 336, and approved in The Torni, (1932) P. 27, was not affected by the decision in Vita Food Products Incorporated v. Unus Shipping Company (1939) A.C. 227, where it was held that the omission to include in a bill of lading a statement required by an enactment of the Newfoundland legislature did not make the bill of lading illegal. One of the terms of the contract was "This contract shall be governed by English law."

The question here is not whether the contract of agency is valid by the law of any particular place, but whether the making of such a contract by the directors is a proper exercise of their powers. The real object of the contract is not so much to enable the company to trade, for that it could do by itself were it not for the war, or by a neutral firm were it not for the same reason, but to put its ships and business in Hongkong in the hands of an enemy firm. The ships would still fly the Chinese flag but would have Japanese crews. The branch of the company in Hongkong would be controlled by Japanese and would be Chinese in name only.

Such a change in the conduct of the business, it is safe to say, was never contemplated by the constitution of the company. The purpose of the contract of agency is illegal by the law of China and could not have been one of the purposes for which the company was incorporated; it is a ground for dissolution of the company by the Chinese courts.

The respondents, it seems to me, are amply justified in asking that the Hongkong branch of the company be wound up, on the grounds of justice and equity. They have every reason for saying that the directors have exceeded their powers, and, in the conduct of the company's affairs, have forfeited the confidence of the respondents.

In this case we are faced as regards the dissolution of the company in China with no alternative law but the law of China and no alternative court but the courts of China. There is no problem here, as there was in The Bank of Ethiopia v. National Bank of Egypt and Liguori, L.R. (1937) Ch. D. 513, of a de facto government. A Chinese court duly appointed according to the law of China has ordered the dissolution of the company. The onus is on the appellants to show that that court had no jurisdiction. Their argument is based, firstly, on the military occupation of Chefoo, where the jurisdiction of the invader is limited to military necessity, and secondly, on the fact that the company for some purposes is deemed to have acquired an enemy character. They have failed to discharge that onus and failed altogether to show that a corporation cannot be dissolved at any time

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