(HIGH COURT) FIJHRMEISTER AND COMPANY vs. ABDEL GHANI ALl MOUSA AND SONS HC-CS-372-58 Principles Conflict of laws-Partnership—Whether foreign firm of partners can sue in the Sudan—Partnership Registration Ordinance. s. 4 of Business Names Ordinance, s.5 (a) Contract—Illegality—Effect of statute requiring traders to have license on contracts made by unlicensed traders—Traders’ License and Taxation of Business Profits Ordinance, 5. 4 A foreign firm can sue in the Sudan Courts if it is entitled to sue in the law of its own domicile. A statute requiring traders to obtain a license before trading does not invalidate contracts made by unlicensed traders, in the absence of clear and express provision to that effect. Abdo Robu Salih vs. El Sayed Salih Hussein (AC.REV-96-1955) applied. A foreign firm can sue in the Sudan Courts if it is entitled to sue in the law of its own domicile. A statute requiring traders to obtain a license before trading does not invalidate contracts made by unlicensed traders, in the absence of clear and express provision to that effect. Abdo Robu Salih vs. El Sayed Salih Hussein (AC.REV-96-1955) applied. Action The facts appear from the judgment. Advocates: Abdullah Nageeb ……………….. for plaintiffs Ibrahim Ahmed Ibrahim ………… for defendants 24th May 1960. Osman El Tayeb J.: —The plaintiffs are a foreign firm, having their principal place of business in Hamburg, Germany, and duly registered in accordance with German law. The said firm established a place of business in Khartoum in 1957, in which they placed a representative in the capacity of a manager. They will be referred to hereafter as “the firm”. On 5th July 1957 in Khartoum a contract was made and signed by the firm, through their manager at that time, and defendants. In the said contract plaintiffs undertook to supply under a hire-purchase scheme to defendants some machinery, namely: — 2 Henschel Diesel Trucks; 2 Trailers Schenk type; for the total value of £S.9, 400, to be paid as follows: — £S. 940 (10% of total) on delivery; £S.2, 820 (30% of total) on 1st February 1958; £S.2, 820 (30% of total) on 1st May 1958; £S.2, 820 (30% of total) on 1st August 1958. The contract provided that the prices are based on the rate of exchange of £S.1.000m/ms for DM. 12.06, and that any alteration in this rate of exchange should be borne by the buyer. It also provided that the machinery should be registered and licensed in the Sudan in the name of the sellers and that the license would be transferred into the name of the buyers after full payment of the value. The machinery, specified and described in the contract, was supplied and delivered to defendants. Defendants paid the first installment of £S.940. The second installment was settled by payment of £S.1,000 on 25th February 1958 and £S.1,820 on 13th March 1958, but defendants failed to pay the balance price of the machinery amounting to £S.5,640. For the delay in payment of the first installments defendants agreed to allow the firm interest for which defendants executed a promissory note for the sum of £S.2 I.840m/ms payable on 8th March 1958, and which they failed to settle. The firm claims further the sum of £S.16, being the difference in the rate of exchange between German and Sudanese currency on the first installment that was paid. This was paid in accordance with the advice of Barclays Bank, Khartoum, with whom the bills stated in Deutsch Marks were deposited for collection. There is not any material dispute or difference about these facts. The learned advocate for defendants resisted the claim on the grounds:— (a) that the firm, being a foreign firm incorporated outside the Sudan, and not registered in the Sudan, cannot sue on the contract, and (b) that plaintiffs, at the time of making the contract, were not in possession of a trader’s license under section 4 of the Traders’ License and Taxation of Business Profits Ordinance, which prohibits carrying on business under a penalty. Consequently the contract is void and unenforceable . To start with the firm, as a foreign firm it is not required to register under the Companies Ordinance nor under the Partnership Registration Ordinance, but is required to register a business name under the Registration of Business Names Ordinance, and obtain a trader’s license to carry on business in the Sudan. Part VIII of the Companies Ordinance applies to companies with limited liability incorporated outside the Sudan, which in order to establish a place of business in the Sudan, have to be registered in the Sudan. The firm is not a limited liability Company; it is a private firm composed of two persons, one of them with an unlimited liability and the second with a limited liability. (See the documents of its registration in Germany.) In this form it is not a limited liability company within the meaning of the Companies Ordinance. A partnership, which is an association without limited liability, is exempted from registration under the Partnership Registration Ordinance, S. 4, when trading in the Sudan, if it is registered under a foreign law. The firm comes under the definition of a partnership and is registered in Germany. Under section 5 (a) of the Registration of Business Names Ordinance, a partnership or firm having a place of business in the Sudan carrying on business under a business name shall register that business name. The plaintiffs’ firm is carrying on business under a business name and so it has to register it. The plaintiffs’ firm has to trade under a trader’s license under section 4 (1) of the Traders’ License and Taxation of Business Profits Ordinance. It is a trader to which the exemptions mentioned in the section do not apply. As it came to start business, the firm thought that it had to be registered under the Companies Ordinance, so it applied to the Registrar of Companies. The latter found that it is not a limited liability company, so he refused to register it; later, on 6th June 1958, it registered a business name and at the same time obtained a trader’s license. The question whether a foreign corporation, firm or association can sue in its own name, according to the rules of private international law, is governed by the law of its domicile. So long as that law gives it the status of suing, it can sue in the Sudan. There is nothing in this case to show that the German law under which the plaintiff firm is created denied it the right of suing. The second question that is posed for discussion is whether a contract for the sale of goods entered into with a trader who had at the time no trading licence, is illegal or void and unenforceable, to the extent that that trader cannot recover the price of the goods sold and delivered in accordance with the contract. Section 4 of the Traders’ Licence and Taxation of Business Profits Ordinance runs in this way: “No trader . . . shall carry on business unless he has registered his name of business or place of business . . . and has obtained a trader’s licence . . .”. The trader who carries on business without such licence is subject to a penalty under section 37 of the Ordinance. There is here a statutory prohibition with a penalty for a trader who trades without a trader’s licence. How does this affect the enforceability of his contracts? The question is of great importance and needs careful consideration. The advocate for defendants dealt with the matter at some unnecessary length that appears to be confusing. The rule as laid down by Chitty on Contracts (21st edition. 520—521) is as follows: — “Clearly, if a statute expressly prohibits the transaction in respect whereof an agreement is entered into, the agreement will be invalid. But a contract may be illegal, although it be not in contravention of the specific direction of a statute, provided it be opposed to the general policy and intent thereof; and the rule is the same although there be no clause expressly prohibiting a certain act, but merely imposing a penalty for doing it. As a general rule ‘everything in respect of which a penalty is imposed by statute must be taken to be a thing forbidden.” The same work goes on to distinguish between the objects of statutes, as to whether the object is the protection of the public or the protection of revenue. In the first case contracts made in contravention of the provisions of the statute are prohibited, but in the second case the contracts are not prohibited. The learned advocate for defendants relied on the above rules of law, adding that the Traders’ Licence and Taxation of Business Profits Ordinance is enacted with the object of protecting the public, and so the contract made between the two parties is void and unenforceable. I do not find myself in agreement with this argument. And I confess that I do not find the statement of law above quoted from Chitty sufficiently clear on the subject. It gives the impression that when a statute prohibits the doing of some act. then the making of any contract whether directly or indirectly relating to that act is also prohibited. In my opinion this cannot be accepted to be the law. The American work of Williston on Contracts states the rule somewhat differently (p. 503):— “For the protection of the public, or for purposes of taxation, or for both reasons, many statutes are enacted forbidding certain bargains and sales either altogether or unless certain statutory regulations are complied with. There can be no doubt that if a statute directly prohibits a contract or sale, it cannot be enforced by the parties to it, and the same is true if the formation or performance of the bargain is declared to be a crime.” The validity and enforceability of a contract or sale depends on the nature of the statute and its intent and purpose. Following this, we find that a contract or sale would be void or unenforceable when the statute directly prohibits the making of the contract or sale, or when the statute is in respect of certain contracts or sales, prohibiting them altogether or unless they comply with certain regulations. These rules can be clarified by examples. For the statutes that directly prohibit the making of the contract or sale, I put forward the following examples: — (a) The Agricultural Tenants Protection Ordinance, s. 4, makes every contract for disposition of the crop void and money paid under it not recoverable. (b) The Natives Disposition of Lands Restriction Ordinance makes the contract for sale of land without the written consent of the Governor null and void. For the second rule, when the statute is, in respect of certain contracts or sales, prohibiting them altogether or unless they comply with Certain regulations, I put forward the following examples : — (a) The Liquor Licence Ordinance, prohibits the sale of liquors without a licence, and some kinds of liquors are altogether prohibited. (b) The Arms, Ammunition and Explosives Ordinance prohibits the trade or sale of arms, unless a licence is obtained. (c) The Prohibited and Restricted Goods Ordinance, s. 4 (4): “No person shall import, export, transfer, cultivate, manufacture or deal with any such goods or article in contravention of any restriction in this section”. (d) A medical man can only practice under a licence, issued in accordance with the provisions of the Public Health Ordinance, and a pharmacist can only carry out his business under a licence issued in accordance with the Pharmacy and Poisons Ordinance. We can see that in the first set of examples the contract is directly prohibited, that it is declared to be void and unenforceable. In the second set of examples, where the Ordinance is in respect of a certain trade, or certain goods or certain occupations, which the Ordinance prohibits altogether or unless a licence is obtained, here the Ordinance intended to make the contract or sale void and unenforceable; the price of goods sold and the charges of a medical man cannot be recovered. The Traders’ Licence and Taxation of Business Profits Ordinance does not directly touch on a contract or sale made by a trader who had no licence, and further it is not in respect of certain contracts or sales or occupations. It is of a general nature for general trading, and its generality can be seen from the fact that a trader who has a trader’s licence under this Ordinance cannot trade in liquors or firearms, unless he has obtained another special licence under the respective Ordinances regulating trade in liquors or firearms. The learned advocate for plaintiff refers to the case of Abdo Robu Salih and another vs. El Sayed Salih Hussein (AC/REV/ 96/1955).It is a case on the point under discussion. It was argued in that case that an agreement of partnership was illegal because one of the partners was a non-Sudanese and not a holder of a trader’s licence. The Court of Appeal held that the partnership was not illegal. The Court said: — “The argument is specious, but not sound. Section5 is a procedural Section. Illegality or prohibition has to be found elsewhere. For this we referred Dr. Malka to section 4 (1) of the Ordinance, which says that no trader, for himself or on behalf of another person, shall carry on business unless he has registered himself, paid his fee and obtained his licence. This clearly shows that the legislature does not prohibit any person from trading whether for himself or on behalf of somebody else. There is nothing to prohibit a non-Sudanese from trading. There is nothing to prohibit a Sudanese in joining a non-Sudanese to carry on business. But certain formalities are prescribed and certain fees have to be paid for that purpose. The carrying out of these formalities or the payment of these fees is regulated. For their non-fulfillment the person transgressing may be fined. The seriousness of the transgression can be seen from the fact that the maximum amount of fine for transgressing section 4 is £S.10 under section 37. There is no imprisonment prescribed. This Ordinance is a piece of administrative law or a law for raising revenue. It does not necessarily follow that all transactions to which a penalty is attached become illegal in the sense that the Courts refuse their help regarding contracts arising out of them. We put it to Dr. Malka whether a single individual (who had not taken out his licence, but who had joined nobody with him) would be refused the help of the Courts in a civil action brought by him against a man who had broken a contract with him arising out of his trade dealings. Dr. Malka could not say that the Courts could refuse their help. Nothing more serious than that has happened in the present case.” This judgment classifies the Ordinance as an administrative law having the object of protection of revenue, distinguishing it from statutes enacted for the protection of the public. As we have seen, the English authorities hold that the prohibitions imposed by statutes enacted with the object of protection of revenue, do not make the contracts that are contrary to the statute illegal or unenforceable, but the other class do make them illegal. In that case the Court of Appeal, by deciding that the Ordinance is enacted for the protection of revenue only, and so the contracts made by traders without licences are not illegal, has followed the principles of English law. Lastly I return to the American book of Williston on Contracts, which, speaking about statutes requiring registration of those doing business under assumed names, said : — “Though some of these statutes expressly deny the right of unregistered proprietors to enforce contracts so made, others simply provide a penalty or make non-compliance with the statute a misdemeanour. In the last-mentioned situations the decisions are in conflict, but the great weight of authority supports the right of the proprietor to enforce a contract so made, especially when the other party has received the consideration, as in the case of an action to recover the price of goods sold.” Our Ordinance requires the registration of a business name and obtaining a trading licence and provides for a penalty for non-compliance, so there is no illegality about the contract entered into by a trader before compliance with the requirements of the Ordinance. The contract is also enforceable, especially as it is one of sale of goods: the goods were delivered and the price must be recoverable. In conclusion, the contract in this case is valid and enforceable. The firm is entitled to the balance price of goods and all other sums claimed that are lawfully due in accordance with the contract, amounting to £S.5,706.040m/ms, and interest at the rate of 9 per cent. from the institution of the suit until settlement. The firm is still entitled to recovery of the machinery, because the agreement was a hire-purchase one and the machinery, by the contract, is the property of the firm. The firm is entitled to Court fees and advocates’ costs. (Judgment for the plaintiffs. Order accordingly)1 1 This case has gone on appeal (AC-APP.13-1960)