3PLR – JOHN BATEMAN V. JAMES SERVICE

POLICY, PRACTICE AND PUBLISHING, LAW REPORTS  3PLR

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JOHN BATEMAN

V.

JAMES SERVICE

 ON APPEAL FROM THE SUPREME COURT OF WESTERN AUSTRALIA.

[PRIVY COUNCIL AND JUDICIAL COMMITTEE]

3PLR/1980/9 (SC-WS)

OTHER CITATIONS

BEFORE THEIR LORDSHIPS

SIR BARNES PEACOCK,

SIR MONTAGUE E.

SMITH, and

SIR RICHARD COUCH.

REPRESENTATION

Mr. Wills, Q.C., and Mr. J. E. Horne, for the Appellant

Mr. Benjamin, Q.C. (Mr. Romer), for the Respondent,

Solicitors for Appellant: Wilkinson & Drew.

Solicitors for Respondent: West, King, Adams, & Co.

MAIN ISSUES

JURISPRUDENCE AND PUBLIC INTERNATIONAL LAW:- Conflict of Laws – Liability of Foreign Corporation carrying business in another one – Lex Loci Contractus.

COMPANY LAW:- Operations of foreign incorporated company – Liability arising therefrom – Applicable law for determining attachment of liability – Whether incorporation laws of home country of corporation applies

COMPANY LAW:- Shareholding, partnership and agency – Liability of an agent representing a foreign company with limited liability registration status – Applicable law

CAPITAL MARKET: Shareholding, partnership and agency – Liability of an agent representing a foreign company with limited liability registration status – Applicable law

DEBTOR AND CREDITOR:- Recovery of money owed by foreign corporate entity – Need to consider the incorporation statute of home country in determining liability – Liability of individual agent connected therewith – Legal basis

HISTORY AND SUMMARY OF FACTS

Held, that the Western Australian Joint Stock Companies Ordinance Act, 1858, does not apply to foreign corporations or to companies incorporated out of Western Australia and properly and lawfully carrying on business as such. Consequently a limited company incorporated elsewhere, not having complied with its, provisions, can nevertheless carry on business and make contracts in Western Australia by its, agent without its members being liable individually for its debts and engagements.

Held, further, that a company duly registered and incorporated in Victoria could not be again registered as a company in Western Australia.

Bulkeley v. Schutz ⁽¹⁾ approved.

APPEAL from a judgment of the Acting Chief Justice of the Supreme Court (Feb. 20, 1880), whereby judgment, with costs of defence, was given for the Respondent in an action brought against him by the Appellant.

The action was to recover £1233. 9s. 2d., for goods sold and delivered, freight earned, money lent, and money paid by the Appellant to and for the use of the Rockingham Jarrah Timber Company, Limited. The judgment of the Court therein was obtained upon a special case, the terms of which are sufficiently stated in the judgment of their Lordships. The two questions, submitted by the case were: 1. Whether, under the circumstances, which are sufficiently stated in the judgment of their Lordships, the Respondent was liable for the payment of the Appellant’s, claim, the same being for a debt due to the Appellant from the company, incorporated in Victoria, but not registered in accordance with the Western Australian Ordinance; and 2. Whether he could be sued for the said debt without joinder in the action of the other members of the company.  [(1) Law Rep. 3 P. C. 764.]

The Acting Chief Justice decided that the Respondent was not liable for the Appellant’s claim, and ordered the Appellant to pay to the Respondent his costs of the action.

Mr. Wills, Q.C., and Mr. J. E. Horne, for the Appellant, contended that according to sect. 4 of the Joint Stock Companies Ordinance, 1858, there was a several right of action against the Respondent in consequence of his non-compliance with the conditions with regard to registration prescribed thereby. The contract sued upon was made in Western Australia, and must be presumed to have been made with a view to the law of that colony, by which law the parties must be taken to have intended to bind themselves and to be bound. Though the company of which the Respondent was a member was formed in Victoria, it was so for the purpose of carrying on business in Western Australia, and its transactions in this latter colony must be governed by its law; and the Respondent had not by that law limited his liability. Reference was made to General Steam Navigation Company v. Guillon ⁽¹⁾; Newby v. Von Oppen ⁽²⁾; Griffith v. Paget ⁽³⁾; Princess of Reuss v. Bos ⁽⁴⁾; Smith v. Anderson ⁽⁵⁾; Greenwood’s Case ⁽⁶⁾; Lindley on Partnership (last ed.), vol. i., p. 333; Story on Conflict of Laws, s. 29.

Mr. Benjamin, Q.C. (Mr. Romer with him), for the Respondent, contended that the company of which the Respondent was a member was, so far as the law of Western Australia was concerned, a foreign corporation. As such it was entitled to trade and did trade in the colony of Western Australia. It was not a partnership within the meaning of sect. 4 of the ordinance. He referred to In re General Company for the Promotion of Land Credit ⁽⁷⁾, which is Princess of Reuss v. Bos under another name. The ordinance has nothing to do with this case: see sects. 31, 44.

(1) 11 M. & W. 877.

(2) Law Rep. 7 Q. B. 293.

(3) 6 Ch. D. 511.

(4) Law Rep. 5 H. L. 197.

(5) 15 Ch. D. 273.

(6) 3 De G. M. & G. 459.

(7) Law Rep. 5 Ch. 363.

Again, partners are liable jointly, but as to joint and several liability see Kendall v. Hamilton ⁽¹⁾. [He was stopped by their Lordships.]

Mr. Horne replied.

MAIN JUDGMENT

SIR RICHARD COUCH [DELIVERING THE LEAD JUDGMENT OF THE COURT]:-

This is an appeal from a judgment of the Acting Chief Justice of Western Australia upon a case which was stated for the opinion of the Court. The case states that “previous to and at and within the terms mentioned in the particulars of demand, and subsequent thereto, the Defendant was, with more than ten other persons, a shareholder in and he was also one of the directors of a company which was duly formed, incorporated, or registered in the colony of Victoria, according to the laws in force in that colony in that behalf, under the style of the Rockingham Jarrah Timber Company, Limited, and all the shareholders except two,” who are named, resided, and those two now reside, out of Western Australia, and out of the jurisdiction of the Court; that “the company,” as stated in the memorandum of association, was formed in Victoria for the object, amongst others, “to buy, sell, or otherwise deal in Jarrah timber and other timber in Western Australia or in any other part of the world.” The case then states the registration of the company in Victoria and its incorporation there, and that the organisation and government of the company were exclusively in Victoria, where its directors all resided, and where it had its principal place of business; that the company carried on business on a large scale in Victoria, and that its operations in Western Australia were conducted by Mr. William Wanliss, the then local agent and manager of the company, who acted under a power of attorney, but that the company was satisfied with its incorporation and privileges of limited liability acquired in Victoria, and took no steps to procure its incorporation with liability limited in Western Australia, either by royal charter, letters patent, or Act of the Western Australian Legislature; nor has it ever been registered under the Joint Stock Companies Ordinance of 1858. It also states the mode in which the business was carried on, and that the cheques by which payments were made were in the form: “The Rockingham Jarrah Timber Company, Limited,” signed by William Wanliss. It is not disputed that the business was carried on by William Wanliss, in Western Australia, as the agent of a limited company incorporated in Victoria. The transactions were entered into by him as such agent, and the credit was given to such company. The question in the case was, whether the Defendant, who was a shareholder in the company and one of the directors, could be made liable for the debt which had been contracted by Wanliss as its agent.

In the argument for the Appellant it was conceded that the general principle was, as stated by Mr. Justice Lindley in his work on partnership, “that if a company is incorporated by a foreign Government so that by the constitution of that company the members are rendered wholly irresponsible, or only to a limited extent responsible, for the debts and engagements of the company, the liability of the members as such would be the same in this country as in the country which created the corporation.” But it was contended that the Legislature of Western Australia had a right, if it thought fit, to annex any kind of condition to the carrying on business in their own territory, and that, by the construction which should be put upon the Ordinance of 1858, it had enacted that unless a foreign corporation, carrying on business in Western Australia, complied with this Ordinance and was registered according to its provisions, its individual members should be liable to be sued for its debts. It was stated, and properly, that the real question in the case was whether the Western Australian Legislature so enacted.

In considering that question, we may first look at the principle which is laid down by Story⁽¹⁾, and quoted by the Chief Justice in his summary of the argument for the Plaintiff, in these words:- “In the silence of any positive rule affirming or denying or restraining the operation of foreign laws, Courts of justice presume the tacit adoption of them by their own Government, unless they are repugnant to its policy or prejudicial to its interests.” Therefore, we have to see whether, upon the true construction of this Ordinance, the Legislature of Western Australia has said that a company incorporated in another colony or in a foreign country, not having complied with its provisions, cannot carry on business or make contracts in Western Australia by its agent without its members being liable individually for its debts or engagements.

Now an examination of the ordinance appears to shew that this was not the intention. Its title is, “An Ordinance for the incorporation and regulation of Joint Stock Companies and other Associations, and for limiting the liability of certain of the same.” The preamble shews that one of the objects was that members of joint stock companies should be enabled to limit the liability for the debts and engagements thereof to which they are or would be subject. The 4th section is:- “If more than ten persons shall, after the 1st day of January, 1860, carry on in partnership any trade or business having gain for its object, unless they are registered as a company under this ordinance or are incorporated or otherwise legally constituted by or in pursuance of some private ordinance, royal charter, or letters patent, every person so acting shall be severally liable for the payment of the whole debts of the partnership, and may be sued for the same without the joinder in the action or suit of any other members of the partnership.” These words are not descriptive of a corporation carrying on business in Western Australia by its agent. You cannot say that a corporation is ten persons or more carrying on business. It may or may not be that the corporation which was formed in Victoria consists of more than ten persons. That is not a matter to be inquired into in Western Australia. The whole enactment appears to be applicable to a case where persons intended to commence business in Western Australia in partnership; and if there were more than ten, then, unless registered as a company, each might be sued for the whole debts of the partnership without joinder of any other members of it. It appears to refer to a company proposed to be formed for the purpose of carrying on business in Western Australia – not to a corporation existing in another place and coming to Western Australia to carry on some business there through its agents. The case of such a corporation does not appear to have been contemplated by this section, and the presumption certainly would be, according to the authorities before mentioned, that this was not intended. It is not to be presumed that there was an intention, contrary to the comity of nations, to prevent a foreign incorporated company carrying on business at all in the colony, because there would be so many difficulties in the way of a foreign incorporated company registering its members in accordance with the provisions of this ordinance, that practically it could not do so. Then the 5th section contains words which shew that what was meant is, not an existing incorporated company coming to Western Australia to trade, but a company which was to be formed there. It speaks in several places of the proposed company. And sect. 18, and other sections which have been referred to by Mr. Benjamin his argument, shew that in many instances it would be impossible for a foreign company to comply with the requirements of this ordinance. Sect. 18 says, that “Once in every year a list shall be made of the persons who, on the fourteenth day succeeding the day on which the ordinary general meeting of the company, or, if there is more than one ordinary meeting in each year, the first of such ordinary general meetings, is held, are the holders of shares in the company,” and sect. 35 provides that there shall be a general meeting of the company held once at least in every year. In this instance there appears to have been no shareholder in Western Australia, and it might frequently occur that there would be no shareholder in the foreign company resident there. Consequently those provisions could not be complied with.

The whole scope of this ordinance appears to their Lordships to be opposed to the view that it was intended to apply to a company which was incorporated elsewhere. Its object was one which might well be contemplated by the Legislature of Western Australia; namely, that persons there who wished to carry on business in partnership with a limited liability for the debts and engagements thereof, if there were more than ten of them, should be registered, but it was not meant to apply to foreign corporations, or companies incorporated elsewhere and properly and lawfully carrying on business as such.

This is in accordance with the decision of their Lordships in the case of Bulkeley v. Schutz ⁽¹⁾, where it was held that “A railway company and a partnership complete and existing in a foreign country is not within the purview of the English Joint Stock Companies Acts of 1856, 1857, so as to enable H.B. Majesty’s Consular Court in Egypt to issue a sequestration against such of the members of the company as were resident within the jurisdiction of that Court, for not complying with an order of that Court to register the company as one of limited liability under the English Acts.” The company there, being a complete and existing company, could not be registered as one of limited liability under the English Acts. Applying that decision to the present case, it is an authority that this company, being duly registered under the ordinance of the colony of Victoria, and incorporated there, could not be again registered as a company in Western Australia. It was mentioned in the course of the argument that it would not be possible so to register it without, as it were, first disintegrating the company, and making it cease to be, as far as Western Australia is concerned, a corporation at all. But it is conceded on the part of the Appellant, and appears from the case, that it was carrying on business in Western Australia, and was dealt with and given credit to, as an existing company. It appears, therefore, to their Lordships that the contention on the part of the Appellant that this ordinance is to be construed as prohibiting this company from carrying on its business in Western Australiaas a corporation, and making the individual shareholders liable, cannot be supported. That was not the intention of the Legislature of Western Australia. It was not intended that where business was carried on in this way by the agent of a corporation, and credit was given to it through its agent, the individual shareholders should be made liable.

Their Lordships, therefore, will humbly advise Her Majesty that the judgment which is appealed from be affirmed, and the appeal dismissed with costs.

(1) Law Rep. 3 P. C. 764.

6 App. Cas. 386