Regazzoni v K. C. Sethia (1944) Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DENNING,LORD JUSTICE BIRKETT,LORD JUSTICE PARKER |
| Judgment Date | 26 April 1956 |
| Judgment citation (vLex) | [1956] EWCA Civ J0426-1 |
| Date | 26 April 1956 |
| Court | Court of Appeal |
[1956] EWCA Civ J0426-1
Lord Justice Denning
Lord Justice Birkett and
Lord Justice Parker
In The Supreme Court of Judicature.
Court of Appeal
Mr. NEIL LAWSON, Q.C. and Mr. E.J. COHN (instructed by Messrs. Buckeridge & Braune) appeared on behalf of the Plaintiff Appellant.
Mr. A.A. MOCATTA, Q.C. Mr. RICHARD VICK and Mr. PETER KENWORTHY BROWNE (instructed by Messrs. Stuart Hunt & Co.) appeared on behalf of the Defendant Respondent.
The Union of South Africa is a country with a tremendous problem - some say an insoluble problem - in regard to the races in her midst. Her attempts at a solution met with the disapproval of the Government of India. To mark its disapproval, the Government of India in 1946 put an embargo on the shipment of goods from India to South Africa. This embargo hit hard the trade in jute, particularly in jute sacks known in the trade as B. Twills. India was practically the only supplier of those sacks at that time; and South Africa was a large consumer of them and needed them for bagging her maize crop. In order to overcome the embargo, South Africa was prepared to pay very high prices for these sacks, and there were a number of middlemen ready to help her by one means or another, so long as the money reward was tempting enough. This case is a dispute between two of those middlemen.
Mr. Regazzoni, the Plaintiff, is a Swiss citizen. From 1947 to 1951, he told the Court, he had sold 10 to 12 million of these bags a year to the South Africa Government, all for dollars. They were not shipped direct from India to South Africa, for that would be too plain a breach of the Indian law. He got them sent to a European port, such as Genoa, as if they were to be used in Europe, and then would tranship them to South Africa. He made transactions, he said, for millions of sacks via Genoa.
The transaction with which we are concerned is one of those transactions via Genoa. It came about in this way: In 1948 Mr. Regazzoni's agent, a Mr. Weil, met an Indian gentleman, Mr. Sethia, in Zurich. Mr. Sethia was a Director of an English company, K.C. Sethia (1944) Limited, which had close connections with an Indian company of a similar name. Mr Weil and Mr Sethia discussed the possibility of transactions in jute bags from India. Mr Sethia told Mr Weil that if he (Mr Weil) had any part in sending goods to South Africa from India, whether directly or indirectly, and the Indian Government knew of it, he would be in difficulty. So he said he did not want to know "officially" what happened to thegoods after they reached the nearest European port. His scruples were respected. A contract was made in 1948 between Mr Weil, Mr Regazzoni's agent, and a Mr Raydt, who was the agent for K.C. Sethia (1944) Ltd., the English company, for the supply of half amillion of these seeks, B. Twills. It was made by telegram passing between Mr Weil in Basle and Mr Raydt in Hamburg, in the German language. Mr Weil's telegram of the 4th September, 1948 read: "Accept" — that means "We will accept" — "500,000 new B, twills September October price 248 shillings c. i. f, Genoa consignee Gattoni Milan" — Gattoni was a servant or nominee of Mr Regazzoni — "Bank guarantee payment against delivery of freight documents Dreyfus Bank Wire agreement." By telegram of the 6th September Mr Raydt replied: "B twills in order." The Judge has held that thereupon there was a concluded contract for delivery of half a million sacks at 248/- for every 100, c. i. f. Genoa.
K.C. Sethia (1944) Ltd., the suppliers, did not fulfil that contract. We do not know the actual reason. It may be that Genoa had become suspect in the eyes of the Indian authorities, or it may be that Sethia Ltd. could sell better elsewhere. Whatever the reason, Sethia Ltd. did not fulfil the contract, and Mr Regazzoni now sues them for damages for breach of it. He made an excursion into the German Courts, without success. There was trouble about parties, and he failed. In 1954, when nearly six years had elapsed since the alleged breach, he brought this action in the English Courts, claiming damages for failure to deliver the sacks in accordance with the contract. He claimed special damages because he said he had lost the profit which he would have made on the re-sale to South Africa, which was a re-sale in dollars. The Judge has found that the price payable by Mr Regazzoni to Sethia Ltd. was a high price, and the pleadings show that the profit on the re-sale to South Africa would be a high profit. The question is whether the contract will be enforced in these Courts.
Both parties agree that the proper law of the contract is English law. It is said that the contract is unenforceable because there was an intention to break the Indian law in the matter. The Indian law was enacted on the I7th July, 1946, before India became independent. A Regulation was made under the Sea Customs Act, 1878, by which the Government of India prohibited "the taking by sea or by land out of British India of goods from whatever place arriving which are destined for any port or place in the Union of South Africa or in respect of which the Chief Customs Officer is satisfied that the goods, although destined for a port or place outside the Union of South Africa, are intended to be taken to the Union of South Africa."
Upon the true construction of the Regulation I think it prohibits shipments out of India, either directly to South Africa, or indirectly to South Africa, whenever South Africa is the ultimate destination of the goods. The second part enables the Chief Customs Officer to stop exports in cases where, although the ultimate destination may appear to be outside South Africa, nevertheless he is satisfied that they are intended to be taken to South Africa. Mr Lawson asks us to hold that the Chief Customs Officer has an executive discretion, almost like a person who has a discretion whether to grant an export licence or not. I do not so read the Regulation. I think there is an absolute prohibition against shipment direct or Indirect from India to South Africa. Indeed, looking at the evidence and the correspondence in the case, there can be little doubt that the parties to this contract knew perfectly well that such shipment was illegal. When they spoke of "difficulties", the difficulties which they envisaged were getting over the prohibition of export from India. I need only read one Illuminating paragraph in the letter of the 18th July, 1948, just before this contract was made, from Mr Well to Mr Raydt: "As regards the B Twills business, I know all the difficulties connected with this business.
I believe, however, that Sethia, as an Indian firm, are the very firm to achieve something where other firms fail. When I was together with Sethia in Zurich, we discussed these transactions, and at that time he indicated that in this connection he could do some things which it would be impossible for other firms to do. This was to be assumed from his price quotations…… Let Mr Sethia make use of his good connections, and make an offer in these sacks on the terms as before."
It seems to me quite plain that these were middlemen attempting to overcome "difficulties", as they called them; but what they were in fact attempting to overcome was the prohibition by Indian law of shipment direct or indirect from India to South Africa.
Now, what is the law upon this matter? I quite agree that on looking at the terms of this contract by itself, there is nothing that necessitates or requires either party to do an act which is illegal by the law of any country. It is possible that the contract might lawfully have been fulfilled, for example, by Sethia Ltd. getting the goods from somewhere else other than India, or by buying them on board ship, or by Mr Regazzoni not sending them to South Africa. All that is possible. I do not see, therefore, that this case can be brought within the case of ( Balli Brothers v. Compania Naviera Sota y Aznar 1920, 2 K.B., page 287); because there is nothing in the stated terms of this contract which compels the performance of an act illegal in the country where it is to be performed. But that is not the sole ground on which these Courts will refuse to enforce a contract. The cases starting from ( Biggs v. Lawrence 1789, 3 Term Reports, page 454), and finishing with ( Foster v. Driscoll 1929, 1 K.B., at page 470), show that if two persons agree together on a transaction which to their knowledge is intended to be carried out by means of one or other of them breaking the laws of a friendly country, or procuring or assisting another person in the breach of such laws, then the Courts of this Country will not lend their aid to the enforcement of the transaction. The reason is because itwould be a breach of the comity which should exist between countries, and especially between countries of the British Commonwealth. The Courts of one country should not help break the laws of another. The transaction may not on the face of it disclose any illegal intention. The parties will usually take steps not to let any illegality appear. They will execute a contract for the sale of goods, or for the purchase of a steamer, or such like, which does not actually necessitate the performance of an illegal act, hoping thereby to validate the transaction and make it enforceable. But the Court is not to be hoodwinked by subterfuges of that kind. Once it appears that, in order to implement the transaction, one of the parties to the knowledge of the other, intends to break or to assist in breaking the laws of a friendly country or to get someone else to do it, then it will not be enforced.
( Holman v. Johnson (1775) 1 Cowper, p. 343; English Reports 98, page 1121) is quite distinguishable, because there the sale of the tea...
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