#5192 - Janred Properties V Enit - Conflict of Laws BCL

Janred Properties v. ENIT

Facts

Vendor’s action for damages arising out of a contract for the sale of a long lease of an office property in London. The unusual features of the case derive from the status of the purchaser, Ente Nazionale Italiano per il Turismo (ENIT), which is an organisation created and regulated by Italian legislation as a state body supported largely, if not entirely, by Italian public funds. Shortly stated, ENIT's claim is that the contract was ultra vires its constitution and therefore void. The vendor, Janred Properties Ltd (Janred), claims that the contract was no worse than voidable and that ENIT is estopped from denying that it is bound by it.

Immediately before 19 March 1982 Janred held 1 Princes Street and 6 Swallow Place, London SW1 (the property) under an underlease which had nearly 79 years to run, being due to expire on 29 December 2060. On 19 March 1982 two agreements were entered into between Janred of the one part and ENIT of the other part. The first was for the grant to ENIT of a sub-underlease of the property for 25 years at an initial rent of 114,000 per annum.

As will appear, it was a requirement of ENIT's constitution that its entry into the two agreements should be approved by the Italian Minister of Tourism and Entertainment (the minister). That approval was not given.

Knox J decided, first, that, because ENIT's entry into the July agreement was not approved by the minister, Mr Moretti did not have power to authorise Mr Tomba to sign it and thereby bind ENIT. Furthermore, it has throughout been common ground that the minister never gave his approval to any such agreement. The important question which remains is whether, in the light of subsequent events, ENIT is estopped from denying that it is bound by such an agreement.

Holding

Applicable conflict of laws rule

This question falls to be determined by an application of the rules of English private international law. Did ENIT have power to enter into the July agreement? Both sides relied on r 139 in Dicey and Morris The Con-flict of Laws (10th edn, 1980) p 730:

'(1) The capacity of a corporation to enter into any legal transaction is governed both by the constitution of the corporation and by the law of the country which governs the transaction in question. (2) All matters concerning the constitution of a corporation are governed by the law of the place of incorporation.'

The July agreement, being one for the sale and purchase of English leasehold property, was governed by the law of England. Accordingly, if limbs (1) and (2) are read together and applied to this case, we have the following: the capacity of ENIT to enter into the July agreement is governed both by its constitution (as inter-preted and given effect by Italian law) and by English law.

ENIT’s Capacity – Italian Law

It follows that the first question to be asked is whether, under Italian law, ENIT was capable of entering into the July agreement and, if so, to what effect? Was ENIT capable under Italian law of entering into the July agreement without the approval of the minister and, if so, to what effect?

Finding on Italian law:

'I find the Italian law to be as follows. Where there is a contract made by or on behalf of a public entity such as ENIT with a third party without requisite consent and made on the authority of persons to whom the requisite power is not given (here by Mr Tomba and Mr Lattanzi) the result is not a total nullity. The contract is voidable at the suit of the public authority and with the consent of the Italian court and unlawful in the sense that it is contrary to provisions of the Italian law designed primarily to protect the Italian public revenue. The contract is binding upon and not voidable by the third party. It is susceptible of ratification by the public entity on obtaining the requisite consent or otherwise curing the defect.'

Effect of ENIT’s Capacity (in Italian law) under English Law - Estoppel

Knox J's findings as to the effect of Italian law must apply a fortiori to an act of ENIT itself as opposed to an unauthorised act of one of its officers. In the circumstances it would seem, as a matter of Italian law, that on 14 July, alternatively on 14 October 1982, there came into existence a contract to purchase the property on the terms of the July agreement. That contract was voidable at the suit of ENIT and with the consent of...