Esso Standard Oil v Jose's Ltd

• Jurisdiction: Cayman Islands
• Judge: (Murphy, J.)
• Judgment Date: 11 March 1999
• Court: Grand Court (Cayman Islands)
• Date: 11 March 1999

Grand Court

(Murphy, J.)

ESSO STANDARD OIL S.A. LIMITED

and

JOSE”S LIMITED

R. Ellis, Q.C. and J.C.B. Chapman for the plaintiff;

R.D. Alberga, Q.C. and Ms. C.J. Bridges for the defendant.

Cases cited:

(1) Anderson Ltd. v. Daniel, [1924] 1 K.B. 138; (1923), 93 L.J.K.B. 97.

(2) Archbold”s (Freightage) Ltd. v. S. Spanglett Ltd., [1961] 1 Q.B. 374; [1961] 1 All E.R. 417, followed.

(3) Ashmore v. Corporation of Lloyd”s, [1992] 1 W.L.R. 446; [1992] 2 All E.R. 486, applied.

(4) Brandon v. Proprietors, Strata Plan No. 30, 1994–95 CILR 464, not followed.

(5) Chai Sau Yin v. Liew Kwee Sam, [1962] A.C. 304; sub nom. Yin v. Sam(1962), 106 Sol. Jo. 217, distinguished.

(6) Chase Manhattan Equities Ltd. v. Goodman, [1991] BCLC 897, not followed.

(7) Ebanks v. Symmes, 1980–83 CILR 110, not followed.

(8) Feret v. HillENR(1854), 15 C.B. 207; 139 E.R. 400; 23 L.J.C.P. 185, considered.

(9) Fuji Fin. Inc. v. Aetna Life Ins. Co., [1997] Ch. 173; [1996] 4 All E.R. 608.

(10) Howell v. Falmouth Boat Constr. Co. Ltd, [1951] A.C. 837; [1951] 2 All E.R. 278. followed.

(11) Jackson, Stansfield & Sons v. Butterworth, [1948] 2 All E.R. 558; (1948), 64 T.L.R. 481, distinguished.

(12) Lobb (Alec) (Garages) Ltd. v. Total Oil (Great Britain) Ltd., [1983] 1 W.L.R. 87; [1983] 1 All E.R. 944; on appeal, [1985] 1 W.L.R. 173; [1985] 1 All E.R. 303.

(13) London & S.W. Ry. Co. v. GommELR(1882), 20 Ch. D. 562; 51 L.J. Ch. 530.

(14) Mahmoud and Ispahani, In re, [1921] 2 K.B. 716; [1921] All E.R. Rep. 217; (1921), 90 L.J.K.B. 821, distinguished.

(15) Nelson v. NelsonUNK (1995), 132 Aust. L.R. 133; 184 C.L.R. 538, considered.

(16) Palaniappa Chettiar v. Arunasalam ChettiarELR, [1962] A.C. 294; sub nom. Chettiar v. Chettiar, [1962] 1 All E.R. 494.

(17) Phoenix Gen. Ins. Co. of Greece S.A. v. Halvanon Ins. Co. Ltd.ELRUNK, [1988] Q.B. 216; [1986] 1 All E.R. 908; on appeal, sub nom. Phoenix Gen. Ins. Co. of Greece S.A. v. Administratia Asigurarilor de Stat, [1987] 2 All E.R. 152, distinguished.

(18) Shaw v. Groom, [1970] 2 Q.B. 504; [1970] 1 All E.R. 702, dicta of Sachs, L.J. applied.

(19) Sidmay Ltd. v. Wehttam Inv. Ltd., [1967] 1 O.R. 508; (1967), 61 D.L.R. (2d) 358; on appeal, [1968] S.C.R. 828, applied.

(20) Singh v. Ali, [1960] A.C. 167; [1960] 1 All E.R. 269.

(21) Spiro v. Glencrown Properties Ltd., [1991] Ch. 537; [1991] 1 All E.R. 600.

(22) St. John Shipping Corp. v. Joseph Rank Ltd., [1957] 1 Q.B. 267; [1956] 3 All E.R. 683, dicta of Devlin J. applied.

(23) Strongman (1945) Ltd. v. Sincock, [1955] 2 Q.B. 525; [1955] 3 All E.R. 90, distinguished.

(24) Tinsley v. Milligan, [1994] 1 A.C. 340; [1993] 3 All E.R. 65, followed.

(25) Victorian Daylesford Syndicate Ltd. v. Dott, [1905] 2 Ch. 624; (1905), 74 L.J. Ch. 673, distinguished.

(26) Yango Pastoral Co. Pty. Ltd. v. First Chicago Australia Ltd.(1978), 21 Aust. L.R. 585; 139 C.L.R. 410, applied.

Legislation construed:

Local Companies (Control) Law (Law 24 of 1971), Memorandum of Objects and Reasons: The relevant terms of this memorandum are set out at page 67, lines 33–40.

Local Companies (Control) Law (1995 Revision) (Law 24 of 1971, revised 1995), s.4(1)(b): The relevant terms of this paragraph are set out at page 68, lines 12–19.

s.4(2): The relevant terms of this sub-section are set out at page 68, lines 20–24.

s.10: The relevant terms of this section are set out at page 68, lines 26–35.

s.11: The relevant terms of this section are set out at page 68, line 36–.page 70, line 13.

s.19: ‘Notwithstanding any other law, a person upon whom a fine is imposed under this Law may be sentenced in default of payment thereof to imprisonment….’

s.23: The relevant terms of this section are set out at page 70, lines 27–30.

Trade and Business Licensing Law (1996 Revision) (Law 25 of 1971, revised 1996), s.4: The relevant terms of this section are set out at page 70, lines 37–40.

s.5: The relevant terms of this section are set out at page 70, lines 42–45.

s.6: The relevant terms of this section are set out at page 71, lines 2–21.

s.7: The relevant terms of this section are set out at page 71, lines 23–26.

s.8: The relevant terms of this section are set out at page 71, lines 28–39.

s.12: The relevant terms of this section are set out at page 71, line 41 – page 72, line 2.

s.13: The relevant terms of this section are set out at page 72, lines 4–6.

s.14: The relevant terms of this section are set out at page 72, lines 8–9.

s.15: The relevant terms of this section are set out at page 72, lines 11–21.

s.16: The relevant terms of this section are set out at page 72, lines 23–31.

Schedule: The relevant terms of this Schedule are set out at page 72, line 32 – page 73, line 5; page 86, lines 14–32.

Companies-administrative control of companies-licence to trade-Trade and Business Licensing Board may validly back-date licence under Local Companies (Control) Law, s.11-no breach of rule against retrospective operation of legislation-power unaffected by form of licence prescribed by Regulations

Contract-illegal contracts-agreements regulated by statute-dealership contract and lease of service station valid and enforceable despite breach of Local Companies (Control) Law, s.4(1) and Trade and Business Licensing Law, s.4 because unlicensed, since no legislative intention to prohibit collateral contracts-contract saved by Local Companies (Control) Law, s.23 in any event

Contract-illegal contracts-effect of illegality-contract void, not merely unenforceable if prohibited by statute

Landlord and Tenant-option to renew lease-effect of illegal contract-tenant may enforce option to renew even if acquired under illegal contract-equitable proprietary interest acquired if no reliance on illegality itself to assert option

The plaintiff applied for an injunction to restrain the defendant from breaching a dealership agreement and for declarations relating to the renewal of the agreement and the lease of the defendant”s premises.

The plaintiff, a Bahamian company which had been selling and distributing petroleum products in the Islands for many years, was obliged as a foreign company from 1975 onwards to be licensed under the Local Companies (Control) Law (‘the LCCL’) by the Caymanian Protection Board (later replaced for this purpose by the Trade and Business Licensing Board) to do so. It applied for and was granted a licence in 1981, back-dated to 1975 and expiring in 1986.

The plaintiff also had to obtain a yearly ‘bulk fuel installation’ licence under the Trade and Business Licensing Law (‘the TBLL’) for which a fee of $65,000 was payable. In 1988 it applied to the Board for a licence permitting it to trade from its own petrol station sites. The Board declined to grant such a licence and stated that since the plaintiff”s LCCL licence had expired in 1986, it was not entitled to a TBLL licence and that the annual licences granted since then had therefore been erroneously issued. It advised the plaintiff to rectify the situation.

Meanwhile, in 1988, the parties entered a dealership agreement consisting of a 10-year ‘tied sales’ agreement, a head-lease by which the defendant, a Cayman company, leased premises to the plaintiff for a term of 10 years and a sub-lease under which the plaintiff leased them back to the defendant for the same period. The head-lease and the sub-lease contained parallel provisions allowing the plaintiff and the defendant respectively the option to renew the term for a further 10 years upon giving six months” notice to the other party.

In 1989 the plaintiff applied for a new LCCL licence but was not granted one until 1992. The Board then stated that the issue of an LCCL licence had previously been approved but that the licence simply had not been forwarded to the plaintiff. It also sought payment of fees due since 1985 before forwarding the licence. The licence was, however, back-dated to 1987 and was to expire in 1998.

Relations between the parties deteriorated and when, in 1997, the plaintiff notified the defendant that it intended to renew the head-lease for a further 10 years until 2008, the defendant responded by saying that it wished to repudiate the agreement. It stated that the leasing arrangements were invalid but, in the event that they could be enforced by the plaintiff (and since it would be unable to trade without such arrangements being in place), it gave notice that it wished to renew the sub-lease for a further term.

The plaintiff brought the present proceedings seeking to restrain the defendant from repudiating the agreement. The parties agreed that the question of the validity of the dealership agreement and leases should be tried as a preliminary issue. The defendant”s alternative claim that the contracts were in restraint of trade was not so tried.

The defendant submitted, inter alia, that (a) the sales agreement and leases were illegal contracts, since (i) the plaintiff had held no valid LCCL licence in 1988 and the back-dated licence granted by the Board in 1992 had been issued ultra vires, there being no express power in the LCCL, s.11 to issue a retrospective licence; to construe it thus would be contrary to the rules of statutory interpretation and at variance with the LCCL Regulations, (ii) there was no evidence that a TBLL licence had been granted for 1988 or that the appropriate fee had been paid and, not having a valid LCCL licence, the plaintiff was not entitled to any such licence in any event, (iii) even if valid licences had been in place, the plaintiff had, by owning, leasing and sub-leasing property at its various sites, acted outside the terms of those licences, which permitted only ‘bulk fuel installation’ (storing petroleum for distribution to others), and (iv) furthermore, in view of this, the plaintiff was obliged to hold additional TBLL licences as a real estate agent, retailer, service station operator and wholesaler, which it did not; (b) accordingly, these...