Presentaciones Musicales SA v Secunda and Another
| Jurisdiction | England & Wales |
| Judgment Date | 12 November 1993 |
| Judgment citation (vLex) | [1993] EWCA Civ J1112-6 |
| Docket Number | No. CHANF 92/0374/B |
| Court | Court of Appeal (Civil Division) |
| Date | 12 November 1993 |
[1993] EWCA Civ J1112-6
(Mr. Justice Mervyn Davies)
Before: Lord Justice Dillon Lord Justice Nolan and Lord Justice Roch
No. CHANF 92/0374/B
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
(ON APPEAL FROM THE HIGH COURT)
(CHANCERY DIVISION)
MR. J. McDONNELL QC and MR. J.S. EIDINOW (instructed by Messrs. Compton Carr, London) appeared on behalf of the Appellant.
MR. M. BURTON QC and MR. H. CARR (instructed by Messrs. Cameron Markby Hewitt, London) appeared on behalf of the 1st and 2nd Respondents.
MR. C. NUGEE and MISS J. BRYANT (instructed by Messrs. Goodman Derrick, London) appeared on behalf of the 3rd Respondents.
( )
Friday, 12th November 1993
DILLON L.J.:— This is an appeal by the First Defendant in the action, Mr Daniel Secunda, against the Order of Mervyn
Davies J made on the 14th January 1992 after he had heard a preliminary issue in the action directed by an earlier Order. The general field of law with which the appeal is concerned is that of the ratification and adoption by the nominal plaintiff of an action started by English solicitors in the name of that plaintiff without proper authority.
The writ was issued on the 19th April 1988 by English solicitors, Messrs Goodman Derrick & Co, in the name of Presentaciones Musicales S.A. ("P.M.S.A.") a company which had been incorporated in the Republic of Panama. Goodman Derrick & Co. supposed that they had authority, derived indirectly from a Mr Van Walsum, to issue the Writ on behalf and in the name of P.M.S.A. Subsequently another firm of solicitors, Messrs Cameron, Markby, Hewitt, succeeded Goodman Derrick & Co as the solicitors on the record in the action for P.M.S.A. Both firms of solicitors are respondents to the present appeal, as is P.M.S.A. itself if it still exists.
The Writ claimed relief against the First Defendant for alleged infringement of copyright in some sound recordings called "The Jimi Hendrix Tapes." The relief claimed was the usual relief in a copyright action brought under the Copyright Act 1956, viz an injunction, damages for infringement of copyright or an account of profits, and delivery up of offending copies. It has to be borne in mind that, where successive copies are published in breach of copyright, the publication of each gives rise to a fresh cause of action.
On the 11th March 1991, however, the Defendants learned from a search in the Companies Registry in Panama that P.M.S.A. had been "dissolved" under the Panama Corporations Law on the 17th June 1987 —some ten months before the Writ was issued. Therefore the First Defendant on the 18th April 1991 issued a notice of motion seeking an order that all proceedings in the action be stayed and additionally or alternatively that the claims in the action against the First Defendant be struck out as an abuse of process.
As against that it is claimed for the two firms of solicitors and for P.M.S.A. that the commencement of the action was ratified and the action was adopted by P.M.S.A. acting by its directors as its liquidators in May 1991
The issue directed to be tried as a preliminary issue was the issue as to ratification of the issue and conduct of the action.
In the course of the hearing before Mervyn Davies J and in the light of certain provisions of Panamanian Law to which I shall come, that issue was expanded to read:-
"Where an English action has been commenced and conducted in the name of a Panamanian corporation without its authority within a three year period after its dissolution prescribed by Article 85 of the Panamanian Corporation Law, can the liquidators or trustees of the Corporation ratify the commencement or conduct of the action after the expiration of the three year period."
Moreover, for the purpose only of the hearing of the preliminary issue, certain assumptions were agreed viz:-
1) That P.M.S.A. was "dissolved" by means of the registration on the 17th June 1987 of an earlier shareholders' resolution,
2) That three particular individuals were directors and were appointed to be the liquidators of P.M.S.A. on 17th June 1987
3) That the Writ in this action was issued and the proceedings were carried on down to May 1991 without the authority of P.M.S.A. or the liquidators and
4) That the liquidators have on dates in May 1991 ratified (or as the First Defendant would assert have purportedly ratified) the instructions given by Mr Van Walsum.
The essential question is whether by May 1991 it was possible in law for the three liquidators to ratify or adopt the action as they purported to, or whether that was not possible. That raises issues of Panamanian law and also one issue of possibly much greater importance under English law. I propose to deal with the Panamanian issues first.
The Panamanian Issues .
The key provisions of the law of Panama are Articles 85 and 86 of the Panama Corporations Law. These provide as follows:-
" Acts of Dissolution
ARTICLE 85. Every corporation existence of which ends by expiration of the term established in the articles of incorporation or by dissolution, will continue, nevertheless, for a period of three years from that date for the specific purpose of initiating the special proceedings deemed necessary, defend its interests as defendant, settle its affairs, transfer and dispose of its assets and divide its corporate capital: but in no case it may continue the business for which it was organised.
Powers of the Directors after dissolution
ARTICLE 86. When the existence of a corporation ends by expiration of its term of duration or by dissolution, the directors shall act as trustees of the corporation with power to settle its affairs, collect its credits, sell and transfer its assets of all kinds, distribute its properties among its shareholders, once the debts of the corporation have been paid; and they shall also be empowered to initiate judicial proceedings in the name of the corporation with respect to its credits and assets, and to represent it in the proceedings that may be brought against it."
These raise, very obviously, two points which have never been resolved by the Panamanian Courts but remain the subject of discussion and disagreement between eminent Panamanian jurists.
The first of these points is whether the reference to "dissolution" in Article 85 means, as it would in English law, that the corporation ceases to exist as a separate corporate entity and its assets are automatically vested in the directors as trustees and liquidators to wind up the corporation's affairs, or whether it means that the corporation continues to exist as a somewhat shadowy corporate entity in liquidation which continues to have its assets vested in it while its directors proceed with the winding up of its affairs, bringing and defending proceedings in the corporation's name wherever necessary.
The second point is as to the effect of the expiration of the 3 year period under Article 85. In the present case, that period of three years from the dissolution on the 17th June 1987 expired in June 1990, which was 9 months before the Defendants in this action discovered that P.M.S.A. had been "dissolved", and even longer before any ratification. The question is whether, even if the "dissolution" of P.M.S.A. did not automatically cause it to cease to exist as a corporate entity at the date of dissolution the expiration of the three years from the date of dissolution did have that effect, leaving the assets thenceforth vested in the trustees or liquidators personally or possibly claimable by the state as bona vacantia.
Besides these two points, a further issue has been discussed by Panamanian lawyers, which is whether Article 557 of the Commercial Code of Panama applies to corporate bodies which are subject to the Panama Corporations Law. Article 557 provides that:-
"The document of final approval of the liquidation and partition accounts, or the judicial sentence in respect thereof, shall be published and registered at the Mercantile Register and shall fix the end of the juridical existence of the company."
The judge had evidence from two Panamanian lawyers —Mr de Puy, called by the appellant and Mr Patton called by the respondents. Mr de Puy held the view that a company ceased to be a corporate entity at the moment of its dissolution under Article 85 or at the latest at the end of the 3 year period specified in Article 85. In the latter view he was supported by an authoritative text book written by Mr R.A.Durling.
Mr Patton held the view that dissolution came at the end of liquidation when all of the obligations were satisfied, all judicial and administrative affairs were resolved and the net assets were distributed among the members. The views held by Mr Patton had also been expressed by Professor Ozores, highly respected in Panama, in a prologue to Mr Durling's book, and by influential commentators, Mr A.V. Herrera and Mr Guillero Endara, who at the time of the hearing before Mervyn Davies J had become President of Panama.
One point, however, on which every one including Mr De Puy, agreed was that proceedings could be started by the liquidators in the name of the company in a Court in Panama during the 3 year period under Article 85, and if they had not been concluded by the end of the three year period they could be continued in the name of the company after the expiration of the 3 year period, at any rate in a Court in Panama. That of course led to questioning as to what the position would be if an...
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