GORDON FRAZER & CO. LTD. v. JEAN MARIE LOSIO AND MARTIN WENZEL

007-SLLR-SLLR-1984-2-GORDON-FRAZER-CO.-LTD.-v.-JEAN-MARIE-LOSIO-AND-MARTIN-WENZEL.pdf


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Gordon Frazer v. Jean Marie Losio
85
GORDON FRAZER & CO. LTD.
v.JEAN MARIE LOSIO AND MARTIN WENZEL
COURT OF APPEAL.
L. H. DE ALWIS, J. AND G. P. S. DE SILVA. J.
A. 1379/83.
C. COLOMBO 2325/SPL.
MAY 2 AND 3 1984
Injunction as substantive relief – Can such injunction be sought without declaratoryrelief ? – Section 217(F) of the Civil Procedure Code – interim injunction granted exparte – Can it be suspended ? – Service of process on a company – Sections 471.662. 666 of the Civil Procedure Code – Proxy of a Company – Arbitration – Scott v.Avery clause – Institution of suit without recourse to arbitration – Section 7 of theArbitration Ordinance.
The plaintiff-petitioner instituted this action on 22.9.83 agamst three FrenchCompanies La Societe Nouvelle Des Establissements Foret. La S .e Maury, andKlockner Ina as defendants to restrain them from repudiating their contract with thepetitioner. The petitioner also sought an interim injunction restraining them and theirservants and agents from interfering with the petitioner's rights under the contract untilthe determination of the contract. On 23.9.83 an interim injunction was granted exparte as prayed for. On 30.9.83 the proxy of Jean Marie Losio and Martin Wenzel wasfiled by an Attorney-at-Law as persons on whom the injunction addressed to the threedefendants had been served and also a motion seeking to have the injunction recalled orsuspended until the disposal of a preliminary objection to the jurisdiction of the court tohear and determine the action as a clause in the contract required all disputes betweenthe parties to be referred to arbitration. On 3.10.83 the court made order suspendingthe operation of the interim injunction without any notice to the plaintiff-petitioner. On3.10.83 the Attorney-at-Law for Losio and Wenzel also filed a petition and affidavitpraying for an order nisi in terms of section 377 (a) of the Civil Procedure Code settingaside the interim injunction. On 6.10.83 order nisi was entered and served on theplaintiff-petitioner who filed its objections on 19.10.83. As Losio and Wenzel were inthe meantime attempting to encash the Performance Guarantee for Rs. 1.630,631.80which plaintiff-petitioner had tendered in favour of the three defendants under thecontract, the plaintiff-petitioner on 26.10.83 applied for a second interim injunctionrestraining the defendants from doing so either by themselves or through Losio andWenzel until the final determination of the action and for an enjoining order in the sameterms until the hearing and determination of the application. After hearing submissionsthe Court made order on 15.11.83 holding that its suspension order and order nisiwere to be effective and that it would hold an inquiry into the objections to the ordernisi.
The plaintiff-petitioner then filed papers in the Court of Appeal for Revision.
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Held –
The notice of interim injunction and summons had been validly served on the threedefendant companies in terms of section 471 of the Civil Procedure Code. Thedefendants could then have appeared in court through an Attorney-at-Law if they hadgiven him a proxy under their seal. But in the proxy filed by the Attorney-at-Law grantedto him by Losio (an employee of the first defendant company) and Wenzel (a Director ofthe third defendant company) the signatures of Losio and Wenzel had beensuperscribed over a rubber frank of the defendant-companies. Losio and Wenzel havesigned the proxy in their personal capacities and therefore have no status in law toparticipate in the proceedings. The proxy signed by them does not authorise theAttorney-at-Law to appear for the companies.
There is no provision in section 666 of the Civil Procedure Code to suspend aninterim injunction.
The provision in the contract for reference to arbitration is not a Scott v. Averyclause and is not a condition precedent to the institution of an action. The jurisdiction ofthe court is not ousted by the failure to refer the dispute to arbitration. An agreement tooust the jurisdiction of the courts altogether is illegal and void as being contrary topublic policy. Where there is an agreement between the parties to refer their differencesto arbitration and one of the parties commences a suit without prior recourse toarbitration, the court can on application made to it stay the proceedings and refer thematter to arbitration under section 7 of the Arbitration Ordinance. But only the parties toa contract containing an arbitration clause can have recourse to section 7 of theArbitration Ordinance.
Where the defendants are trying to repudiate the contract entered into by themwith the plaintiff-petitioner, such a dispute constitutes a dispute "relative to' thecontract and falls within the arbitration clause set out in the contract.
In the plaint itself the plaintiff can, as it has done, seek an injunction to restrain thedefendants from committing an act, the commission or continuance of which wouldproduce injury to the plaintiff, as a substantive relief. A decree granting such substantiverelief is permissible in terms of section 217(F) of the Civil Procedure Code without aprayer for declaratory relief. It is relief of this type that plaintiff prays for in paragraph (a)of the prayer to the plaint. The reliefs in paragraphs (b) and (c) of the prayer to the plaintcan be granted during the pendency of the action while the relief in prayer (a) will begranted if the plaintiff succeeds.in establishing his right to it.
The orders of 15.11.83 and 3.10.83 have been made per incuriam and are nulland void.
Cases referred to :
Stassen Exports Ltd. v. Hebtulabhoy & Co. Ltd. [1984] 1 SLR 129.
Jinadasa v. Weerasinghe (1928) 30 NLR 283.
Scott v. Avery (1856) H. L. Cases 811.
Thomson v. Charnock 1798 Term Reports 139.
Wijeyanarayana v. General Insurance Co. Ltd. (1946)47 NLR 289
Weerakoon v. Hewamallika [ 1978 — 79] 2 SLR 97, 103.
Heyman v. Darwins Ltd. [1942] AC 356, 366.
H. W. Jayewardene, Q.C., with K. Kanag-lswaran and Dinal Phillips for theplaintiff-petitioner.
Herman J C Perera with Tony Wickremasmghe for the respondents
Cur adv. vult
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Gordon Frazer v. Jean Mane Losio (L. H. De Alwis, J.)
87
June 15, 1984.
L. H.DE ALWIS, J.,
The plaintiff-petitioner instituted action No. 2325/Spl. in the DistrictCourt of Colombo on 22.9.83 against three defendants, seeking, interalia, an interim injunction in terms of paragraphs (b) and (c) of theprayer to the plaint, restraining them and their servants and agentsfrom in any manner interfering with its rights under the contractannexed as A6 until the final determination of the action, andrestraining them, their servants and workers howsoever from enteringinto any contract, bargain, agreement or arrangement or doing any actwhatsoever with any third parties which will interfere with its rightsunder the said contract A6 until the final determination of this action.The plaintiff is a company incorporated under the provisions of theCompanies Ordinance and the defendants are bodies corporateincorporated under the laws of the Republic of France. They are-
La Societe Nouvelle Des Establissements Foret, No. 30, Ruedes trois Bornes, 7501 1, Paris, France and also ofNo. 113/1,5th Lane, Colombo 3.
La Societe Maury, No. 30, Rue des trois Bornes, 75011,Paris, France, and also of No. 113/1,5th Lane, Colombo 3.
Klockner Ina, No. 31, Rue Marbeuf, 75008, Paris, France,and also of No. 9, Abdul Gaffoor Mawatha, Colombo 3.
I shall refer only to the matters that are relevant to the presentapplication. On 23.9.83 the application for the injunction in the plaintwas supported and an interim injunction in terms of paragraphs (b)and (c) of the prayer to the plaint was issued and served with thesummons on the three defendants. On 30.9.83, Herman J. C. Perera,Attorney-at-Law filed the proxy of one Jean Marie Losio and MartinWenzel, the 1st and 2nd respondents, respectively, as the persons onwhom the injunction addressed to the three defendants had beenserved, and also a motion seeking to have the injunction recalled orsuspended until the hearing of the preliminary objection taken by himto the jurisdiction of the court to hear and determine the action, inview of a clause in the contract which required all disputes betweenthe parties to be referred to arbitration. Order was made to call thecase on 3.10.83. On 3.10.83 the motion was supported by Counseland court made order suspending the operation of the interiminjunction. No notice of the motion or of the calling date was given tothe plaintiff. No appearance was also made on behalf of the 1-3
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defendants. On the same day Mr. Herman Perera filed the petition andaffidavit of Losio and Wenzel praying that the interim injunction issuedby court be cancelled, set aside or recalled and that Order Nisi in termsof section 377 (a) of the Civil Procedure Code be entered, to takeeffect in the event of the plaintiff not showing cause against it on adate appointed for the purpose. It was supported by Counsel on
and Order Nisi was entered and served on the plaintiff whofiled objections on 19.10.83 and moved court to vacate thesuspension order made on 3.10.83. Inquiry was fixed for 20.10.83and eventually came up for hearing on 8.11.83. In the meantime theplaintiff became aware that Losio and Wenzel who had obtained asuspension of the interim injunction had fraudulently made anapplication to the Indosuez Bank for the encashment of thePerformance Guarantee that the plaintiff had tendered in favour of thedefendants under the contract for the sum of Rs. 1,630,631.80. Theplaintiff therefore made an application to the District Court undersection 662 of the Civil Procedure Code on 26.10.83 praying for aninterim injunction restraining the three defendants acting bythemselves or through Losio or Wenzel from encashing the saidPerformance Guarantee until the final determination of the action andfor an enjoining order in the same terms until the hearing anddetermination of the said application. After hearing submissions, theJudge reserved his order for 4.11.83, which happened to be a publicholiday.
On 8.11.83 the Petitioner stated its objections to the Order Nisi andcourt reserved Order for 15.11.83. There has been some confusionover the nature of the inquiry because the court by its Order of
held that its suspension Order and the Order Nisi issued byit were effective and in force and then said that it would hold an inquiryinto the objections filed against the Order Nisi. It is this order that theplaintiff-petitioner now seeks to have set aside by way of revision.
It is contended for the petitioner that the proxy filed by Mr. HermanPerera on behalf of Losio and Wenzel is in their personal capacitiesand not on behalf of the three defendants, who are bodies corporate.They therefore had no status in law to participate in the action which isagainst the three defendants, and obtain an order from court tosuspend the operation of the Interim Injunction entered in favour of theplaintiff and an order nisi to set it aside. The proxy filed in the DistrictCourt by Mr. Perera has been signed by Losio and Wenzel. Above
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Gordon Frazer v. Jean Marie Losio (L. H. De AMs. J.)
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Losio's signature is a rubber frank bearing the name 'groupementForet-Maury', while above that of Wenzel's, appears written in blockletters, the name 'Klockner Ina'. The three defendants against whomthe plaintiff filed action, are La Societe Nouvelle Des EstablissementsForet, La Societe Maury and Klockner Ina. They are admittedly bodiescorporate and their proxy should have been evidenced by theircorporate seal.
In the affidavit filed in this court in objection to the petitioner'sapplication, Losio describes himself as an Architect and an employeeof the 1 st defendant company, and Wenzel as a Director of the 3rddefendant company. The notice of the interim injunction andsummons issued by the District Court have been served on them attheir respective addresses, as principal officers of the defendantcompanies. That is a valid service on the defendants, in terms ofsection 471 of the Civil Procedure Code. The defendants could thenhave appeared in court through an Attorney-at-Law, if they had givenhim a proxy, under their seal, which they have failed to do. What hasbeen affixed to the signatures of Losio and Wenzel, who have giventheir proxy to Mr. Perera, is a rubber frank of the defendantcompanies. The defendants are companies incorporated outside SriLanka and if they wish to carry on business within this country, theyhave to comply with the provisions of sections 394 et seq. of theCompanies Act No. 17 of 1982.
The proxy purports to be one given by the three defendantcompanies to Mr. Herman J. C. Perera, to appear on their behalf incase No. 2325/Spl, filed by Gordon Frazer & Co. Ltd., and to act forand defend them in the action. But as pointed out earlier it is signed byLosio and Wenzel in their personal capacities. The learned DistrictJudge has misdirected himself when he stated in his judgment thatthere is a 'seal' too placed on the proxy. It is not the 'corporate seal'of the defendant companies that has been placed on the proxy but arubber frank. The learned Judge thus erred in arriving at the conclusionthat the proxy 'appears' to be filed on behalf of the defendants. Thelearned Judge also held that proxy has been filed on behalf of thedefendants because the Attorney-at-Law who filed it has stated in hismotion that he is appearing on behalf of the parties on whomsummons was served. That is the method of service of summonsprovided for on bodies corporate, by the Civil Procedure Code. But, ifthey wish to appear in court through an Attorney-at-Law, their sealmust be affixed to the proxy.
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I am of the view that in the absence of the corporate seal, the proxygranted to Mr. Herman J. C. Perera does not authorise him to appearfor the defendants, but only for Losio and Wenzel in their personalcapacities. But Losio and Wenzel are no parties to the action filedagainst the three defendant companies and have no status in law toparticipate in the proceedings. It was therefore not open to them tohave appeared in the action and have had the interim injunction issuedagainst the defendants, suspended, or to have taken steps for theissue of the Order Nisi on the plaintiff. The orders made by the learnedJudge in this respect are consequently made per incuriam and are nulland void.
In any event, as was held by this court in the recent case of StassenExports Ltd., v. Hebtulabhoy & Co. Ltd. (V 'n which I agreed withMoonamalle J., who wrote the judgment, there is no provision insection 666 of the Civil Procedure Code to suspend an interiminjunction issued under that Chapter of the Civil Procedure Code. Videalso Jinadasa v. Weerasinghe (2). The order made by the Judgesuspending the operation of the Interim Injunction is therefore invalid.
It was submitted by the learned Attorney-at-Law for therespondents, that arbitration provided for in clause 24 of the contractA 6, precludes recourse to a court of law. Indeed, what appears tohave induced the learned Judge to make the order suspending theoperation of the interim injunction issued by him ex parte at theinstance of the plaintiff, is that there was clause 24 in the contractA 6, which required parties to settle any disputes relating to thecontract by reference to arbitration by the International Chamber ofCommerce in Paris. The learned Judge was of the view that theplaintiff was lacking in 'uberrimae fides" in omitting to refer to thisarbitration clause in its plaint and, as it had failed to give reasons whyarbitration was not possible in terms of section 7 of the ArbitrationOrdinance, Cap. 98, the Court had no jurisdiction to proceed with theaction. Consequently he held that the order made by him suspendingthe operation of the interim injunction, was correct. The learned Judgehas overlooked the fact that the plaintiff had in fact annexed a copy ofthe contract A 6 to the plaint, and a perusal of clause 24 would havedisclosed the existence of the arbitration clause. His commenttherefore that there was a suppression of material facts is withoutfoundation. Clause 24 is not what is commonly termed a Scott v.Avery (3) clause which makes reference to arbitration, a condition
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Gordon Frazer v. Jean Marie Losio (L. H. De Alwis. J.)
91
precedent to the institution of an action, so that the jurisdiction of thecourt is not ousted by a failure to refer a dispute to arbitration first. InThompson v. Charnock. (4) it was held that if the contract betweenthe parties simply contains a clause or covenant to refer to arbitrationand goes no further, then an action may be brought in spite of thatclause, although there has been no arbitration. Vide alsoWijeyanarayana v. General Insurance Co. Ltd., (5) and Weerakoon v.Hewamallika, (6) An agreement however which purports to oust thejurisdiction of the courts altogether is illegal and void as being contraryto public policy, but an arbitration agreement not expressly purportingto oust the jurisdiction is not to be read as doing so. Halsbury Laws ofEngland, 4th Ed. p. 277 para 543, Russel on Arbitration, 17th Ed.p. 65, Clause 24.2 of the contract A 6 merely provides that:
"If an amicable settlement is not reached, the disputes relative tothis contract or to the execution thereof will be settled according tothe Rules of conciliation and arbitration of the International Chamberof Commerce in Paris by three arbitrators chosen in conformity withthese Rules."
Nowhere in the sub-clauses 3 to 5 is the right to institute an actiontaken away. On the contrary clause 24.5 appears to countenancerecourse to litigation. It states-
"The aforementioned arbitrators (24.2 above) shall be bound byany possible decision arrived at in a litigation between Klockner Inaand Foret Maury provided Gordon Frazer have been invited toparticipate in such proceedings to the extent Gordon Frazer isconcerned."
Where there has been agreement between parties that anydifferences between them should be referred to arbitration, but anyone of the parties shall nevertheless commence any action against theother party, section 7 of the Arbitration Ordinance (Cap. 98) enablesthe court, on application made to it, to make order staying allproceedings in such action and compelling reference to arbitration.Learned Attorney-at-Law for the respondents filed a motion along withthe affidavit of Losio and Wenzel to this application and submitted thatorder be made staying all proceedings in the above application and inthe District Court of Colombo case, in terms of section 7 of theArbitration Ordinance. Learned Queen's Counsel for the plaintiff on theother hand contended that it was only the "parties' to a contract
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containing an arbitration clause who could resort to section 7 of theArbitration Ordinance. In the present case the parties to the contractA 6 are the plaintiff and the three defendants, and not therespondents. I agree with this submission. Indeed as was statedearlier, the two respondents have no legal status at all to participate inthis action.
Learned Queen's Counsel for the plaintiff also contended that theattempt of the defendants to break the contract with the plaintiff byreason of which the plaintiff came into court and obtained an interiminjunction restraining them from doing so, is not a dispute that fallswithin the ambit of the contract, and is therefore not referable toarbitration. I do not agree. In Heyman v. Darwins Ltd. (7) ViscountSimon L.C. at pg. 366 said-
'But, in a situation where the parties are at one in asserting thatthey entered into a binding contract, but a difference has arisenbetween them whether there has been a breach by one side or theother, or whether circumstances have arisen which have dischargedone or both parties from further performance, such differenceshould be regarded as differences which have arisen in respect of orwith regard to or under the contract, and an arbitration clause whichuses these or similar expressions should be construed accordingly."In the present case, clause 24 which speaks of disputes 'relative to'the contract would, in my view, catch up a situation where thedefendants are seeking to repudiate the contract. For, attempts madein that direction if not restrained, might well result in the repudiation ofthe contract. Repudiation referred to in Heyman's case would also, inmy view, include attempts or efforts at repudiation. They constitutedisputes 'relative to' the contract, and fall within the terms of thearbitration clause.
Learned Attorney-at-Law for the respondents submitted that aninjunction cannot be granted by the District Court unless a plaint hasbeen filed setting out a cause of action and a declaratory relief prayedfor. But section 54(1) (a) of the Judicature Act No. 2 of 1972,provides that the plaintiff is entitled to an injunction against thedefendant restraining the commission of an act, the commission orcontinuance of which would produce injury to the plaintiff. This is initself a substantive relief which can be made the subject of a decree interms of section 217 {A} of the Civil Procedure Code, without a prayerfor a declaratory relief. The procedure for making the application is set
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Gordon Frazer v. Jean Marie Losio (L. H. De Alwis, J.)
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out in section 662 of the Civil Procedure Code. The case relied on bylearned Attorney-at-Law for the respondents, reported inWeerakoon's Reports Vol. IV p. 19 is not applicable to this case. Thatwas a case where no plaint was filed and proceedings commencedwith a petition and affidavit in which an application was made for aninjunction against the defendant. In the present case a plaint has beenfiled praying for an injunction against the defendants. All that Grenier,
ii»
J., said in that case is that according to section 662 of the CivilProcedure Code-
"It is absolutely necessary under our law and procedure that theplaintiff should first file plaint setting out his cause of action againstthe defendants.’
His Lordship then went on to say in reference to section 662 that-
"The action unmistakably contemplates two distinct cases : onewhere an injunction is prayed for in a plaint, and the other whereafter a plaint has been filed the plaintiff applies for an injunction therebeing no prayer in the plaint for this remedy. In the latter case theapplication is required to be by petition and affidavit containing astatement of the facts'on which the application is based."
In the present case, the injunction has been prayed for in the plaint
itself.
A "cause of action" is defined in section 5 of the Civil ProcedureCode as "the wrong for the prevention or redress of which an actionmay be brought and includes the denial of a right, the refusal to fulfil anobligation, the neglect to perform a duty, and the infliction of anaffirmative injury." In the instant case the plaintiff's complaint, as setout in paragraph 21 of the plaint, is that the three defendants havebeen secretly negotiating with other parties, both abroad and in SriLanka to do the work that the plaintiff was to do (under the contractA 6). In short it alleged that the defendants were seeking to repudiatethe contract, which would cause it irremediable mischief andirreparable damage. It is the wrongful and unlawful conduct of thedefendants that has given rise to a cause of action to the plaintiff tosue them for the reliefs set out in sub-paragraphs (a), (b) and (c) ofparagraph 24 of the plaint. The reliefs in paragraphs (b) & (c) of theprayer to the plaint can be granted during the pendency of the action
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while decree will be entered in terms of paragraph (a), if the plaintiffsucceeds in establishing his right to it. The submission of learnedAttorney-at-Law for the respondents must therefore fail.
The action has been instituted against the three defendantcompanies and the two respondents who have filed proxy in theirpersonal capacity had no right to participate in the proceedings andobtain the orders that they have obtained in their favour. In the resultthe orders made by the District Judge in their favour have been madeper incuriam and are null and void.
I accordingly set aside the order of the learned District Judge dated
and vacate the order of the Judge dated 3.10.83suspending the operation of the Interim Injunction entered by him on23.9.83.
The proxy of Losio and Wenzel filed by Mr. Herman Perera on
must be rejected. The District Judge will now proceed withthe action as from the stage where notice of the Interim Injunction andsummons were served on the three defendants. Notice should begiven to the defendants before proceedings are continued.
The plaintiff-petitioner will be entitled to costs from the respondentsin the District Court and in this Court.
P. S. DE SILVA, J. – I agree.
Orders set aside.