MICHELIN & CO. v. DON LEO

084-NLR-NLR-V-27-MICHELIN-&-CO.-v.-DON-LEO.pdf


( 459 )
Present: Dalton J. and Jayewardene A. J.MCHELDs & CO. v. DON LEO.329—D. C. Colombo, 14J79.
Prescription—Claim by foreign company carrying on business inCeylon—Fixed place of business—Residence—Absence beyondthe seas—Ordinance No. 22 of 1871, s. 15.
The plaintiff company, which is registered in France, carried ona business in Ceylon in the sale of tyres. The company had anattorney, who resided in Ceylon a few months each year. It hadno registered office in Ceylon, but had rented a warehouse from alocal firm, which acted as distributing agents of the tyres tocustomers, registered by the attorney.
In an action by the company for the value of tyres sold thedefendant pleaded prescription.
Held, that the plaintiff company was resident within the Islandand was n otentitled to rely on the disability of “ absence beyondthe seas ’* in answer to the plea of prescription.
The expression ** person ” in section 15 of the PrescriptionOrdinance includes a corporation.
1926.
1 (1909) 11 N. £. B. 151.
*(1921) 28 N. L. R. 235.
( 460 )
1926.
MicheUn cfcCo. v. DonLeo
T
HE plaintiff company (Michelin & Co,), ‘which is a Joint StockCompany registered in France, sued the defendant to recover
a sum of Rs. 3,271 *93, being the value of motor tyres purchasedby him. The defendant pleaded prescription, and in answer to thesaid plea the company claimed the benefit of section 15 of OrdinanceNo, 22 of 1871, viz., absence beyond the seas, whereby the termof prescription was prevented from running. It appeared thatthe company did a large business in tyres in Ceylon. It has noregistered office here, but it employed an attorney for the purposeof its business in India and Ceylon, who spends five tc^six months ayear in Csylon. For the purpose of storing goods, it rents a ware-house from E. B. Creasy & Co., who supplied the tyres to customers,registered by the company. The registered customers are agents ofthe company for the sale of their goods and are paid by commission.
The learned District Judge held that the company was resident• in Ceylon, and wfas not entitled to claim the benefit of the disabilityof “ absence beyond the seas/’
Hayley (with him Garvin), for plaintiff, appellant.
G. P. Jayatilleke (with him Navaratnam), for defendant,respondent.
May 4,1926. Dalton J.—
This appeal raises a question under the Prescription OrdinanaceThe plaintiff company claims from the defendant the sum ofRs. 3,271 *93, balance of sum due for goods sold and delivered.The last payment made by the defendant on account of hisindebtedness was on February 24, 1923, and this action wascommenced on November 26, 1924. The defendant pleaded theclaim wras prescribed under the provisions of section 9 of tbs'Prescription Ordinance, 1871, where the term of prescription is oneyear. The plaintiff company, however, pleads the benefit of section15, absence beyond the seas, whereby the term of prescription wasprevented from running. The District Judge answered the onlyissue in the case, “ is the plaintiff's claim prescribed,” in favour of thedefendant, and the plaintiff now appeals. There is no finding asto whether or not the plaintiff company was residing in Ceylon, .although it is found they were carrying on business here.
The evidence shows that the plaintiff company is registered inFrance. It has an attorney for the purposes of its business in Indiaand Ceylon; he spends five to six months a year in Ceylon. Ithas no registered office here, and it is admitted there has been nocompliance with any requirements of section 111 of the Joint StockCompanies Ordinance, 1861, in respect of foreign companies carryingon business in the I- land. The latter fact, however, is of course notcor elusive that it has no place of business established in the Island,
( 461 )
for in practice the requirement of the law is frequently evaded, butit may be pointed out that the power of attorney (P 1) definitelyprovided for the attorney carrying out the provisions of the lawin this respect.
It has certain registered customers in the Island to whom goodsare supplied, of whom the defendant is one. It is admitted alsothat it does a large business in tyres here. For the purpose ofstoring the goods it rents a warehouse from E. B. Creasy & Co.When one of these registered customers requires goods, theyobtain them from E. B. Creasy & Co., who themselves have noauthority to sell by retail. If any individual wishes to purchaseany of the plaintiff company’s goods, he is referred to the registeredcustomers. Creasy & Co. receive and collect payment for the tyressold, and the proceeds are paid by them into the plaintiff’s accountat a bank in Colombo. They are not entitled to operate on thataccount. The registered customers are agents of the plaintiffcompany for the sals of their goods and they are paid by commission.E. B. Creasy & Co. also would appear to be paid by commission, butthe evidence is not very definite on the latter point. It is quitedefinite, however, that they are paid as warehousemen.
On this evidence it is urged for the defendant (respondent) thatthe plaintiff company has a place of business established in Ceylonto satisfy the requirements which come within the term “ residence,”and that, therefore, it being admitted that they carry on businesshere, they cannot be said to be absent beyond the seas.
It is also urged that the provisions of sections 14 and 15 do notextend to corporations, the doubt expressed by Shaw J. in DodweJlds Co. v. John1 being relied upon. This case, however, went to thePrivy Council, and I think it is clear from the judgment there(20 N. L. R. 206) that the expression “ person ” in section 14 hasbeen taken to includa a corporation, having regard to the previsionsof section 3b of the interpretation Ordinance, 1801.
• For the appellant company we have been referred to several cases.It is urged that the business was conducted for the company byE. B. Creasy & Co., merely as agents of the company at their ownpremises where they conducted their own business, and that theplaintiff company whilst they were trading with Ceylon were notcarrying on a trade within the Island. The distinction sought tobe drawn here is referred to by Lord Herschell in Grainger & Son v.Gough,2 where he points out that many merchants and manufacturersexport their goods fo all parts of the world, without it being therebypossible to say that they exercise or carry on their trade in everycountry in which their goods find customers. But the position of thepresent appellants is very different from that of M. Louis Roedererof Reims, the foreign merchant whose business was under consider-ation in Grainger dc Son v. Gough (supra). All that could be shown1 18 N. L, B. 147.* (1896) A. G 335.
1926.
Daxtoh J.
Miclelin sCo. v. DonLeo
( 462 )
1926.
I )auton J.
Michelin AtCo. v. VonLeo
there was that the appellant firm were the agents in Great Britainfor the sale of Boederec’s wine, and they canvassed for orders for him.Any orders obtained were sent to their principal, and all contractsfor sale consequent thereon and all deliveries to the customers weremade in Prance. The stock from which these sales were made waskept in France, neither he nor the appellant company on his belhalfkeeping any stock in England. The appellant company was paid ,by commission only if the orders obtained by them were executed,and had no other interest in the sale. It was held on these factsthat M. L. Roederer did not exercise a trade in the United Kingdomwithin the meaning of the Income Tax Acts.
The other case cited was La Compagnie Generate Trans-Atlantiquev. Thomas Law & Go.1 The question that arose for decisionwas whether or not the foreign corporation was carrying onbusiness in England in such a way as to be resident within thejurisdiction so that-service by the plaintiffs, Thomas Law & Co.,on the agent at his office in London of a wiit in an Admiraltyaction in personam for damage by collision on the high seas wasgood service on the defendant corporation under the rules of Court.The corporation, a French company, were large shipowners whoseprincipal place of business was in Paris. They leased and paid therent of an office in Leadenhall street, London, where applicationsfor freight and passage could be made to the company’s agent.They agreed to be chargeable for income tax, legal expenses, andadvertisements, but the agent himself paid the staff, furnishedand kept up the office, and carried on other business of his ownthere. So far as the defendant corporation was concerned he waspaid by commission on freight and passage money. In seeking ananswer to the question to be decided, which was purely a questionof fact, as pointed out by Lord Halsbury, when the matter camebefore the House of Lords, A. L. Smith L.J. asked whether thebusiness carried on in Leadenhall street was the business of M. Fanet,the agent, or wa3 it the business of the company. He has no doubtthat the premises were taken for the purpose of the company’sbusiness. In the same way, one may ask for what purpose didthe company here hire a warehouse from E. B. Creasy & Co. Wasit for the purpose of E. B. Creasy & Co. carrying on their ownbusiness, part of which was to act as agents‘for the company, or wasit for the purpose of carrying on the business of the plaintiff com-pany? Having regard to the fact3, it sejms to me that, so far asthe evidence goes, the answer is clear that the warehouse was takenthat the company might carry on its business there, by keeping itsstock of supplies, whence the various agents in the Island might drawtheir requirements, sent in through E. B. Creasy & Co. The remarksof Collins L.J. in La Compagnie Generate Trans -Atlantique v. ThomasLaw & Co. (supra) are also very pertinerithere. How has the company
* {1899) A. C. 431.
( 463 )
itself dealt with the matter ? It has appointed a manager for Indiaand Ceylon, who, the evidence shows, spends a considerable portionof his time here. It imports its stock and hires a warehouse.Whose trade is carried on there ? It is the trade of E. B. Creasy &Co., so says the company. Unquestionably it is, in my opinion,the trade of the plaintiff company. Why should they pay E. B.Creasy & Co. rent for carrying on their own business ? They areremunerated by the payment of a commission. The defendantcompany have their various registered dealers in the Island, who itis also admitted are agents of the company, and they draw theirsupplies from the central store in Colombo, the warehouse rentedfrom E. B. Creasy & Co. The latter collect all sums due and paythem into the defendant’s company account in Colombo.
The test prescribed by Collins M. R. in a later case (DunlopPneumatic Tyre Company v. A dien-Oesellschaft Fur Motor UndMotorfahrzeugbau vorm. Cuddl db Co.2 is set out in the followingway
“ The true test in such cases is whether the foreign corporationis conducting its own business at some fixed place withinthe jurisdiction, that being the only way in which acorporation can reside in this country. It can only soreside through its agent not being a concrete entity itself ;but, if it so resides by its agent, it must be considered forthis purpose as itself residing within the jurisdiction.”
Applying this tost to the facts of this case, I am of opinion that areasonable and proper inference may be drawn from them that theplaintiff corporation was conducting its own business at a fixedplace within the jurisdiction, by its agent, E. B. Creasy & Co., andtherefore cannot plead the disability of “ absence beyond the seas,”so as to prevent the period of prescription running.
On this conclusion it is not necessary to deal with the furtherquestions raised on the appeal.
The appeal must, therefore, be dismissed; with costs.Jayewasdene A.J.—
This case raises the question: When a foreign company can besaid to be resident within the Island so as to disentitle it to thedisability of “ absence beyond the seas ” under section 15 read withsection 14 of the Prescription Ordinance, 1871.
The plaintiff—A. Michelin & Co.—is a joint Stock Company(Sodete Anonyme) with its head office in France. It sued thedefendant in this case to recover a sum of Rs. 3,271 *93, being thevalue of motor tyres purchased by him. The defendant pleadedthat the claim was prescribed under section 9 of the Prescription
1 {1902) 1 K. B. 347.
1926.
Daexon
MichelinCo. v. DoLeo
27/32
1926.
Jayewab-
DENB A.J,
Michelin <3eCo. v* VonLoo
( 464 )
Ordinance as the action was not brought within a year of its accrual.The plaintiff’s answer to this is that it is not bound by the timelimit owing to its absence beyond the seas. The learned DistrictJudge held that the plaintiff company was not so absent as toentitle it to rely on the disability in question. The plaintiff appeals. ‘
It cannot, of course, be denied that a company can exist andreside outside the country in which it is registered or incorporated.Its places of business may, in certain cases, properly be deemed thedomicile. Then, if it can acquire a residence in a foreign country bycarrying on business there, it cannot be said to be beyond the seasin respect of such country. The question then is : Is the plaintiffcompany carrying on business here in such a way as to constituteresidence in this country ? Although the disability of absencebeyond the seas waB created by the English Limitation Act passedin the year 1623, from which it was adopted into our law, yet nocase can be found in which its application to foreign corporationshas been discussed, and when the same question arose in the localcase of Dodwett <k Go. v. John & Co.,1 this Court in deciding the pointapplied the principles laid down by the House of Lords in La Com-pagnie Generale Trans-Atlantique v. Thomas Law & Co.2—“ LaBourgogne ”—which had held that for purposes of service of processa foreign company may carry on business in a country other thanthe country in which it has been incorporated or registered, undersuch circumstances as would enable it to be said that it was residentin that country in the same maimer as a company registered there.And this Court held that although Dodwell & Co. had itsregistered office in England, it was not “ absent beyond the seas ”within the meaning of sections 14 and 15 of the PrescriptionOrdinance, a3 it had a residence and carried on business within theIsland. With this view the Privy Council expressly concurred.3
Therefore, in the decision of the question whether plaintiffcompany was resident in Ceylon or was absent beyond the seas atthe time the cause of action arose, the principles laid down in theEnglish case above cited and similar cases have to be applied.In Dunlop Pneumatic Tyre Go. v. Cvdell & Co.,4 which was alsoconcerned with the service of process on a foreign corporationcarrying on business in England, and where it was contended thecorporation was not resident in England, Lord Collins M.R. said :—
“ It has been held in a number of cases, beginning with Newby v.Van Oppen5 and ending with the case of “ La Bourgogne ”(supra), that the true test in such cases is whether theforeign corporation is conducting its own business at somefixed place within th° jurisdiction, that being the only
1 (1915) IS N. L. B. 133.* (1918) 20 N. L. B. 201.
8 (1899) A. C. 431.4 (1902) 1 K. B. 342.
*L.B.7 Q. B. 293.
( 465 )
way in which, a^corporation can reside in this country. Itcan only so reside through its agent not being a concreteentity itself; but, if it so resides by its agent, it must beconsidered for this purpose as itself residing within thejurisdiction.”
And Romer L.J. said :—
“ The result of the authorities appears to me to be that, if fora substantial period of time business is carried on by aforeign corporation at a fixed place of business in thiscountry, through some person, who there carries on thecorporation’s business as their representative and notmerely his own independent business, then for that periodthe company must be considered as resident within thejurisdiction for .the purpose of service of a writ.”
The test as stated by Lord Collins was adopted by Cozens-HardyL.J. in De Beers. Consolidated Mines, limited, v. Howe? where it washeld that a foreign corporation might be resident in England forthe purposes of income tax. To apply-that test to this case. Has itbeen proved that the plaintiff company has been conducting its ownbusiness at some fixed place within the Island ? That it does carryon business in Ceylon is fairly clear. The plaintiff company’sattorney, who was called as a witness, stated that the plaintiffcompany does ” not carry on business in Ceylon ” but dodsr” a largebusiness in tyres here.**. Jts tyres are, shipped and stored in awarehouse belonging to Messrs. E. B. Creasy & Co., Colombo.The tyres are supplied to customers who are approved andregistered by the attorney;" Every contract or transaction for thesale of tyres is, therefore, entered into by the attorney, who canapprove or refuse any One desiring to become a customer. Creasy& Co. cannot register a name without the sanction of Hie attorney,although they may do so provisionally,. subject to confirmationby the attorney. All actions for money due are instituted bythe attorney. Creasy & Co. are entitled to receive payment fortyres sold, btft the money received must be deposited to the creditof the plaintiff company.
These facts appear from the evidence given in the case, but itwas admitted by a witness called for the plaintiff that there is anagreement in writing entered into between Messrs. E. B. Creasy& Co. and the plaintiff company. This has not been produced.Its production would have obviated the necessity of calling oralevidence to prove the terms on which Messrs. Creasy & Co. actedfor the plaintiff company, and its non-production entitles theCourt to draw the inference that its terms are unfavourable'tothe plaintiff company’s case. Messrs. E. B. Creasy & Co. appearto be managers of the plaintiff company’s business in Ceylon.
1 11905) 2 K. £. 612 (642).
1926.
Jayewab-
DBKE A.J.
Michelin deCo. v, DonLeo
12(61)29
( 466 )
1926.
Jaybwab-DENE A.J.
Miehelin &Co. v. DonLeo
They are not carrying on that business as their own independentbusiness. The plaintiff company, in the only way in which acompany can through an agent, enters into contracts in Ceylon,and earns, or attempts to earn, profits here, that would amount tocarrying on business in Ceylon. For as Cotton L. J. said in Ericksonv. Cash,1 whenever a foreigner either by himself or through arepresentative in this country “ habitually does and contracts to doa thing capable of producing profit, and for the purpose of producingprofits he carries on a trade or business.” The fact that the attorneywho enters into the contract locally resides in Ceylon for only fiveor six months in the year cannot make any difference so long as thecontracts are entered into and carried out in Ceylon. On this aspectof the case learned Counsel for the appellant relied on two cases :Minor v. London dc North-Western Railway Co? and Grainger & Sonv. Gough? In the first case this Court held that Messrs. Kckford& Co., to whom the plaintiff had entrusted certain goods to beconveyed by the defendant company’s railway, did not carry onthe business of the defends t company at their offices, but carried onits own business as agents for the receipt and booking of parcelsand packages for all the railways generally; but not as servants ormanagers of any railway company. As the business was held tobe Pickford & Co.’s own business, that case has no applicationhere. In the second case it was held that a foreign merchant whocanvasses through agents in England for orders for sale of hi6merchandise to customers in England does not exercise a trade orcarry on business in England within the meaning of the Income TaxActs so long as all contracts for the sale and all deliveries of themerchandise to customers are made in a foreign country. Fromthe facts of the present case as I have stated them above, thiscase is obviously distinguishable. I would therefore hold that theplaintiff company is carrying on business in Ceylon.
Has it a fixed place of business ? The tyres manufactured bythe plaintiff company are, as I have said, shipped to Ceylonand kept at the stores belonging to Messrs. Creasy & Co., whoare called its warehousemen. From these stores the tyres aredelivered to customers with whom the agent has entered intocontracts. Messrs. Creasy & Co. keep files or books for Miehelin& Co.’s accounts, and all transactions relating to plaintiff company’styres are, I presume, entered in those books. Messrs. Creasy& Co. are paid as warehousemen, and also, I believe, a smallcommission. The fact that Messrs. Creasy & Co. carry on theirown business at the same place does not prevent such place frdmbecoming the plaintiff company’s fixed place of business: LaGompagnie Generate Trans-Atlantique v, Thomas Law ds Co. (supra).It pays for the warehousing of its goods, and thereby payB,
1 (1881) 8 Q. B. D. 414 (420).1 (1856) 1 C. B. (N. S.) 325.
» (J5S5) 3 A. C. 325.
( 467 )
it may be indirectly, a part of the rent of the warehouse. It has, ineffect, rented a part of the warehouse. The business of the plaintiffcompany is transacted in premises belonging to Messrs. Creasy &Co., who are its managers. Their premises constitute its fixed placeof business. I would therefore hold that the plaintiff company hada residence and carried on business inside the Island, and thatit was not absent beyond the sea3 at the time the cause of actionarose : Dodwett <k Co. v. John de Co. («swpra). The action was,therefore, rightly dismissed.
Before concluding, 1 would like to refer to the points taken bylearned Counsel for the respondent in support of 'the judgment.He contended that the sections creating the disabilities were notapplicable to corporate bodies as the other disabilities, such asinfancy, idiotcy, and unsoundness of mind, were inappropriate withreference to corporations. This same contention was raised inDodwdVs case (supra), and although there was some difference ofopinion among the Judges of this Court, the judgment of the PrivyCouncil shows that the dis ibility of absence beyond the seas maybe availed of by a corporate bodj, if it does not reside and carry onbusiness in the Island. This contention must, therefore, be regardedas untenable. He next contended that the plaintiff company couldnot maintain the action as its business name has not been registeredunder the Registration of Business Names Ordinance of 1918. I donot think it is necessary to give a decided opinion on this point.But according to my reading of that Ordinance, it has no applicationto the plaintiff company as it is not carrying on business in partner*ship with another firm, individual dr corporation, or as nominee ortrustee of or for another person or corporation, or as agent for anyforeign firm. The plaintiff company, however, in my opinion, comeswithin the operation of section 111 of the Joint Stock CompaniesOrdinance, 1861, a section which has been added to the mainOrdinance by Ordinance No. 7 of 1918, which was passed at thesame time as the Ordinance requiring the registration of businessnames. Non-compliance with the requirements of section 111does not, however, debar a foreign company from maintaining anaction.
The appeal will be dismissed, with costs, as ordered by mybrother Dalton.
1926.
Jayewar-DENE A.J*
Michelin dsCo. v. DonLeo
Appeal dismissed.