THE LIQUIDATORS OF THE ENEMY FIRM OF FREUDENBERG & CO. v. SOMASUNDARAM

107-NLR-NLR-V-23-THE-LIQUIDATORS-OF-THE-ENEMY-FIRM-OF-FREUDENBERG-&-CO.-v.-SOMASUNDARAM.pdf

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Present: De Sampayo and Porter JJ,
THE LIQUIDATORS OP THE ENEMY FIRM OPFREUDENBERG & 00. v. S0MA8UNDABAM.
484?—D. C. Colombo, 1,954.
Enemy Firms IAquidatior?Ordinance, No. 20 of 1910—Trading with theEnemy Ordinance, No. 20 of 1914—Debt due to enemy firm beforethe war—Peace Treaty—Clearing house established- —Liquidators’right to maintain action—Prescription.
Plaintiffs were appointed controllers of the business and trade ofan enemy firm in 1014under the Trading with the Enemy Ordinance,1914. Their status was subsequently converted Into that ofliquidators by virtue of section 8 of the Enemy Finns LiquidationOrdinance of 1916. They brought this action on July 11,1921, asliquidators for the recovery of a sum of money due by defendant tothe enemy firm for goods supplied in June, 1914. Objection, wastaken to the right of the plaintiffs as liquidators to maintain thisaction, on thegroundthatsinoe the establishment of a clearing housein pursuance of the Peace Treaty and the Order in Council (August18, 1919) any debts which became due to the enemy firm beforethe war by any British nationals residing in Ceylon can only be.recovered by the clearing offico.
Held, that the action was maintainable by the plaintiffs asliquidators.
Held, further, that Article 300 of the Peace Treaty, whioh suspendedperiods of prescription for the duration of the war and for theirbeginning to run again at the earliest three months (eighteenmonths under Ordinance No. 8 of 1921) after the ooming into force ofthe Peace Treaty, applied only between enemies, and that as plain-tiffs and defendants were both British nationals, the action wasbarred by prescription.
r | ^HE foots are set oat in the judgment.
A. St. V. Jayatcardene, K.C. (with him Arulanandan), for defendant,appellant.
Drieberg, K.C. (with him Bartholomeusz), for plaintiffs, respondents.
Jane 27,1922. De Sampayo J.r—
There are two questions raised in this case, viz.: (1) Whether theplaintiffs can maintain this action; and (2) whether the plaintiffs’claim is baned by limitation of action.
The plaintiffs are the liquidators of the enemy firm of Frenden*berg & Go. They are, in fact, partners of Messrs. Ford, Rhodes,Thornton 6 Co., a firm of accountants carrying on business in
30-j’ 14-22/463
1982.
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1923.
Da SaxpayoJ.
The Liquida-tors of theEnemy Firmof Freuden•berg & Oo, v,Somasun-daram
Colombo. They were first appointed controllers oi the business andtrade of Freudeaberg & Co. by order of the District Court ofColombo on October 24, 1914, under the provisions of the Tradingwith the Enemy Ordinance, No. 20 of 1914. Their status wassubsequently converted into that of liquidators by virtue of section8 (1) and (2) of the Enemy Firms Liquidation Ordinance, No. 20 of1916. This action is brought by them as such liquidators for thereoovery of the sum of Rs. 1,146*13 due by the defendant M.Somasundaram to Freudenberg & Co. for manure supplied in June,1914. The Treaty of Peace was signed at Versailles on June 28,1919,and was brought into operation on January 10,1920. Article 296 ofthe Treaty provides, inter alia, that debts payable before the war anddue by a national of one of the Contracting Powers, residing withinits territory, to a national of an Opposing Power, residing within itsterritory, shall be settled through the intervention of clearing officesto be established by eaoh of the High Contracting Parties. TheAnnex to Article 296 provides that each of the High ContractingParties will establish a olearing office for the collection andpaymentof enemy debts, and that a local clearing office may be establishedfor any particular portion of the territories of the High ContractingParties. For the purpose of giving effect to the above Article andAnnex, His Majesty the King on August 18,1919, made an Order inCouncil enacting, inter alto, that in the event of a local clearing officebeing established in any part of His Majesty’s dominions outridethe United Kingdom, the provisions relating to the clearing officethereinafter contained shall apply thereto for the purpose of thefunctions authorized to be performed by a local clearing office.One of the provisions here referred to is that it shall not be lawfulfor any person to pay or accept payment of any enemy debt (exceptin oertain cases which are not relevant to the present case) otherwisethan through the clearing office, that it shall not be lawful for anyperson to take proceedings in any Court for the recovery of anyenemy debt (except in certain circumstances not applicable to thiscase), and that the clearing office shall have power to enforce thepayment of any enemy debt against the person by whom the debtis due; and for that purpose shall have all such rights and powers asif they were the creditor. – The Order in Council further empoweredthe Legislature of any part of His Majesty’s dominions to make suchmodifications in the said Order as are necessary to adapt it to thecircumstances thereof. Accordingly, the Legislative Council, ofCeylon passed the Treaty of Peace (Enforcement) Ordinance, No. 7of 1920; which made certain formal modifications, and likewiseenacted that “ there shall be established in Ceylon a clearing officeunder the control and management of the Custodian of EnemyProperty appointed under the provisions of the Enemy FirmsLiquidation Ordinance, No. 20 of 1916, and that there shall beattached thereto such officers and servants as the Governor may
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determine/’ By notification published in the Qeyton GovernmentGazette of June 15, 1920, the Governor notified that a clearingoffioe for Ceylon was established in accordance with provisions of theOrdinance No. 7 of 1920.
The argument on behalf of the defendant is that by the establish-ment of a clearing offioe, in pursuance of the Pe&oe Treaty and theOrder in Counoil, the liquidation of the business of Preudenberg &Co. was superseded, and that thereafter any debts whioh becamedue to Freudenberg & Co. before the war by any British nationalsresiding in Ceylon oan only be recovered by the elearing offioe, andthat therefore this action, whioh was instituted on July 11, 1921,cannot be maintained by the liquidators. But in this connectionArticle 297 of the Treaty of Peace must betaken into account. Underparagraphs (a) and (5) and (d) of that Artiole, while the exceptionalwar measures and measures of transfer (defined in paragraph 3 ofthe Annex) taken by Germany with respeot of the properly rightsand interests of nationals of the Allied or Associated Powers wereimmediately to be discontinued and stayed, the Allied and Asso-ciated Powers reserved the right to retain and liquidate all property,rights, and interests belonging to German nationals, and the liqui-dation is to be carried out in accordance with the laws of the Alliedor Associated State concerned, and, as between the Allied andAssociated Powers or their nationals on the one hand and Germanyor her nationals on the other hand, all the exceptional war measuresor measures of transfer are to be considered as final andlnndingupon all persons. By the Annex, paragraph (1), the validity ofvesting orders and of orders for the winding up of businesses, and ofany other orders, directions, decisions, or instructions of any Courtor any department of the Government of any of the High ContractingParties made or given in pursuance of war legislation with regard toenemy property, rights, and interests is confirmed. Underparagraph9 of the Annex, until completion of the liquidation provided for byArticle 297, paragraph (6), the property, rights, and interests ofGerman nationals are to continue to be subject to exceptional warmeasures that have been “ or will be taken with regard to them.”
The expression “ exceptional war measures ” is defined by para-graph 3 of the Annex as including measures of all kinds, legislative,administrative, judicial, or others that have been taken “ or willbe taken thereafter ” with regard to enemy property ….or measures which have or will have as an object the seizure of,the use of, or the interference with, enemy assets, for whatsoevermotive, under whatsoever form, or in whatsoever place. And“ measures of transfers ” are those whioh have affected or will affectthe ownership of enemy property by transferring it in whole or inpart to a person other than the enemy owner and without his consent,such as measures directing sale, liquidation, or devolution of owner-ship in enemy property or the cancelling of titles or securities.
1922.
Db SampatoJ.
The Liquida*
tore oj theEnemy Firmo/Freuden•berg cfe Oo. v.Somaextn*daram
1922.
Db SampayoJ.
Th* Liquida-tor* of theEnemy Firmof Fftuden-berg & Oo. v.Someuntn-dareun
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There is no doubt that the Trading with the Enemy Ordinance,No. 20 of 1914, under which the plaintiffs were appointed controllersof the business of Freodenberg & Co.* and the Enemy Firms Liquids*tion Ordinance, No. 20 of 1916* by which their status was convertedinto that of liquidators, were war legislation, and the liquidation wasan “ exceptional war measure ” as defined in paragraph 3 of theAnnex to Article 297 of the Peace Treaty. As exceptional warmeasures include those “ that will be taken hereafter, ” that is tosay, after the date of the Treaty, and as by Article 297, paragraph(6) itself, Great Britain, together with the other Allied and Asso-ciatedPowers, reserved the right to retain and liquidate all property,rights, and interests belonging to German nationals, the provisionsof Article 296 of the Peace Treaty with regard to clearing officescannot be considered to have superseded the liquidation or put anend to the right of-tbe liquidators to collect, reoover, or realizeenemy debts. Seethe judgment of Eve J. in Meyer <k Oo. v. Faber,1where it was decided that the provisions of Article 29-3 of thePeace Treaty, which declared that enemy debts were to be settledthrough the clearing offices to be established after the Treaty cameinto operation, were qualified by Article 297′, and that the provisionsof that Article and its Annex validated all acts done or proceedingstaken thereafter in the execution of exceptional war measures, andan action brought some months after the Treaty came into operationby the Controller to recover the assets of the business of an enemyfirm was held to have been properly brought. Great stress was laidon behalf of the defendant on the judgment of Russel J. in theearlier case In re Nierhau#1 That case was cited at the argumentof Meyer is Co. v. Faber (supra), but the interpretation therein givenof Articles 296 and .‘$97 was not followed. Moreover, it was the caseof an application to Court by the creditor of an enemy that thecustodian in whom enemy debts had been vested be directed to paythe claim of the applicant, and the specific point decided was thatthe power conferred on the Court by the Trading with the Enemy(Amendment) Act, 1914, section 5 (2), to authorize the custodianto pay out of property paid to him.in respect of any enemy debtcame to an end by reason of the Treaty of Peace Act, 1919, suchpayments having to be mode thereafter only through the clearingoffice. Meyer & Co. v. Faber {supra) is the case that has the mostdirect bearing on the present case, and should, X think, be followed.
Further, sub-section (1) of section 3of the Enemy Finns liquida-tion Ordinance, No. 20 of 1916, vests all the property of the enemyfirm, movable and immovable, in the liquidator, and sub-section (2)provides that every liquidator ” -shall, for all purposes whatsoever,have as lull rights as if the whole of the trade previously carriedon by such firm …. and all the property of every
&-(29M) L. B. 2 Oh. 226.* {2921) L. R. 1 Oh. 269.
description of (he firm, had been absolutely assigned to such liqui- jggg.dator for valuable consideration, and as if all the oontraots of such-—
trade had originally been entered into with such liquidator.” Thus, ‘j™4*0the pre-war debt due by the defendant to Freudenberg & Co.ceased to be an enemy debt, and became due to theliqmdators, whoare British nationals, by the defendant, who is also a British national.Consequently, Article 296 of the Peace Treaty, which provides for ^ & 0o-pre-war debts due by a national of one of the Contracting Powers Bomaem-to a national of an Opposing Power being settled through theclearing office alone, has no application to the present case.
For the above reasons I think the liquidation has not been super-seded by the provisions of the Peace Treaty, but can be and ought tobe carried through to its final conclusion. The plaintiffs axe there-fore entitled, so far as their powers are concerned, to maintain thisaction.
The above view of the position of the plaintiffs as liquidators hasa serious effect on the issue as to prescription. Article 300 of thePeace Treaty no doubt provides far all periods of prescription beingtreated as having been suspended for the duration of the war, andfor their beginning to run again at earliest three months after thecoming into foroe of the Treaty. This period of three months wasextended by paragraph 18 of the Order in Council to six months,and, again, by Ordinance No. 8 of 1921, section 4; to eighteenmonths. The above Article 300, however, in providing for thesuspension of the periods of prescription, has this express limitation,
“so far as regards relations between enemies.” But there is norelation of “ enemies ” between the plaintiffs and the defendant.
Both parties are British nationals. The plaintiffs as liquidators arenot even regents of Freudenberg & Co. The liquidation is a warmeasure taken by the British Government. . The question of pre-8oriptionasbetweentheplaintifisandthe defendant must hegovemedby the ordinary law. By our Ordinance an action for goods soldand delivered cannot be brought after one year. The present actionhas been brought long after the expiration of that period, and isbarred by limitation.
I think tint the defendant’s plea of prescription must be upheld,and this appeal allowed, with costs, in both Courts.
Poster J.—
The plaintiffs in this case are described as the liquidators of theenemy firm of Freudenberg & Co.’ The plaintiffs sued the defend-ant for the recovery of a sum of Us. 1,140 • 13, to wit, Bs. S6Q beingvalue of manure supplied by Freudenberg & Co. to the defendantin June, 1914, and Bs. 295*13 being interest at 5 per cent. Thematter in issue being the same, this appeal will be a test case to decideappeals numbered 499, 500, and 501 in this Court. The learnedJudge in the Court below entered judgment for the plaintiffs for the
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1922. amount claimed, and costs, and held that (1) this action was notpo— j prescribed; and (2) that, notwithstanding Ordinance No. 7 of 1920’ (which was enacted to bring into force the Treaty of Versailles),The Liquida* section 29 of Ordinance No. 20 of 1916 contemplates that a windingEnemy Firm up once commenced under that Ordinance shall be carried to its con~of Freuden* elusion. Hence, this action is maintainable in its present form.^onuJun* I will deal first with the ruling of the learned Judge that thisdaram action is not prescribed. For this purpose the following dates arematerial:—
The debt was incurred on June 19, 1914.
War was declared on August 4,1914.
The controllers were appointed on October 24,1914.
The liquidators were appointed by Ordinance No. 20 of
1916 on July 29,1916.
Peace was declared as from January 10,1920.
This action was brought on July 11,1921.
The declaration of peace was embodied in Ordinance No. 7 of 1920.Article 300, section (a), sets out that “ all periods of prescription*or limitation of right of action, whether they began to run before orafter the outbreak of war, shall be treated in the territory of theHigh Contracting Parties as far as regards relations between, enemiesas having been suspended for the .duration of the war.” “Theyshall begin to run again at earliest three months after coming intoforoe of the present Treaty.” This period of three months weresubsequently extended to a period of eighteen months from January10, 1920, that is, July 10, 1921. The deciding question as to pre-scription in this case is whether this case “ regards relations betweenenemies.” The present plaintiffs were appointed liquidators bythe Enemy Firms Liquidation Ordinance, No. 20 of 1916. Section3, sub-section (2), reads : “ Every liquidator so appointed (includingall persons declared by this Ordinance to be deemed to be so appoint-ed) shall, for all purposes whatsoever, have as full rights as if thewhole of the trade previously carried on by such firm, together withthe goodwill of such trade and every part thereof, and all the pro-perty of every description of the firm has been absolutely assigned tosuch liquidators for valuable consideration, and as if all the contractsof such trade had originally been entered into with such liquidators.”
The Ordinance came into force on July 29, 1916, and, as counselfor both sides has argued, clearly assigned the whole .of the rights ofthe enemy firm of Freudenberg & Co. to the present plaintiffs fromthat date. It is therefore quite clear that the present plaintiffs mighthave maintained this action at any time after July 29, 1916, untilprescribed. There is nothing in Ordinance No. 7 of 1920 extendingthe period of prescription to the duration of the war, or any longerperiod, as regards the present plaintiffs and defendant betweenthemselves, as neither of them are enemies.
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I think, therefor©, that the learned District Judge was wrong inholding that this debt was not prescribed. It would, therefore, beunnecessary for me to discuss the second point, on which the greaterpart of the time was spent in arguing this appeal.
I would, however, record on the authority of the case of Meyer v.Faber1 that this is not a debt as defined’by Article 296 of the PeaceTreaty, and therefore is not one which should be settled through theclearing office, but dealt with under Article 297 of the Peace Treaty.The Treaty contemplates winding up being carried to their logicalconclusion. Under the Treaty Germany has to give up her ex-ceptional war rights, England as victor does not. The exceptionalwar rights given to the plaintiffs by Ordinance No. 20 of 1916 wouldhave enabled the plaintiffs to have maintained this action had itnot been that by their delay in bringing this action they are nowout of time, and the debt is prescribed.
I would, therefore, set aside the judgment, and enter judgment forthe defendants, with costs.
Set aside.
1922.
POBXBB J.The Liquid**
tore of t fie
Enemy Firmof Fr&uden*berg A Co. v.Somamtn*daram