Cyprus court dismisses defendant's jurisdiction challenge, holding contract formed when acceptance letter was posted in Cyprus.

[*556] 1982 July 23

(NIKITAS, P.D.C. & FR. NICOLAIDES, AG. D. J. )

IN THE DISTRICT COURT OP NICOSIA

Domestica Ltd.,

Plaintiff,

v.

Thorn Consumer Electronics Ltd.,

Defendant.,

(Action No. 5150/80).

Civil Procedure - Practice - Writ of summons – Service out of-the jurisdiction - Setting aside writ of summons and service thereof for lack of jurisdiction - Claim under agency agreement - Which was concluded by exchange - of letters - Letter of acceptance posted in. Cyprus

- Contract, subject-matter of the proceedings, made in Cyprus - And plaintiff Company has a perfect right to sue upon it in the Cyprus Courts - Order 6 rule 1(e) of the Civil Procedure Rules, section 21(1) of the Courts of Justice Law, 1960 (Law. 14/60) and Section 4(2) of the Contract Law, Cap. 149.

Contract - Acceptance - Communication of - When complete - Section 4(2) of the Contract Law Cap. 149·

P. Polyviou, for applicant-defendant.

D, Liveras, for the respondent-plaintiff.

JUDGMENT

The following judgment was delivered by:

NIKITAS, P.D.C. : The plaintiff, [*557] Domestica Limited, a local company brought the present action against Thorn Consumer Electronics Limited, an English company, claiming damages, inter alia, for breach of an exclusive agency agreement entered into between the parties whereby the defendant company is alleged to have constituted the plaintiff its agent for importing and distributing in Gyprus the defendant’s electronic products including radio and television sets. Further there is a claim for an account and payment of the commission found to be due.

On the 11th November, 1980, leave was given by another court to issue and serve the writ upon the defendant out of the jurisdiction. The application was based, inter alia, on the Civil Procedure Rules, 0.6 r.1(e). This provision is identical in terms with 0.11 r.1(e) of the rules of the Supreme Court save that the third limb of the rule is omitted from the Cyprus provision and it authorizes service of the writ or notice of the writ whenever -

“the action is one brought to enforce, rescind, dissolve, annul, or otherwise affect a contract or to recover damages or other relief for or in respect of the breach of a contract –

(i) made in Cyprus, or

(ii) made by or through an agent trading or residing in Cyprus on behalf of a principal trading or residing out of Cyprus, [*558] or is one brought in respect of a breach committed in Cyprus of a contract wherever made, even though such breach was preceded or accompanied by a breach out of Cyprus which rendered impossible the performance of the part of the contract which ought to have been performed in Cyprus.".

In due course conditional appearance was entered and the defendant company now applies for an order setting aside the writ of summons in this action and service thereof on the ground that the court has no jurisdiction to take cognizance of the dispute. It is argued on behalf of the defendant that on the facts of the case neither the agency agreement was made in Cyprus nor any of the alleged breaches of it occurred within the jurisdiction. Put shortly the submission is that no one of the conditions in the relevant statutory provisions, namely, s.21 (1) of the Courts of Justice Law 14/60 or the order we have just read, which confer jurisdiction upon our courts, were satisfied.

Learned counsel for the plaintiff contended that the action is one brought against the defendant (a) to enforce a contract made within the jurisdiction and(b) the action is brought in respect of breaches committed in Cyprus and the Court may assume jurisdiction.[*559]

In order to deal with the submissions of counsel it is necessary to refer briefly to some of the essential facts giving rise to the claim so far as they may be ascertained from the affidavit evidence and the other material before the Court at this stage of the proceedings.

On the 5th October, 1962, the defendants wrote from England proposing that the plaintiff company should become its distributor in Cyprus for the products, manufactured by the defendant company under the brand name Ferguson, namely, radio and television receivers. The appointment was, as stated in the letter, to take effect as from December 14, 1962, the date of expiry of a notice of termination of a distribution agreement given by the defendant company to another local firm which at the time represented the defendants in Cyprus. And the letter concludes:-

"We can, of course, rely on you to take up the reins smoothly from Dickran Ouzounian to avoid any unpleasantness in order to keep good relations with all concerned."

The letter was on notepaper headed "British Radio Corporation Limited" that being the name under which the defendant operated at the time and it bore the signature of its export manager. [*560]

On the 16th October, 1962, the plaintiff replied accepting the offer and ordering at the same time goods for the forthcoming Christmas season. Photocopies of both letters were attached as exhibits to the affidavit sworn by Mr. Hji Ioannou, managing director of the plaintiff company.

It appears that the commercial relationship of the parties had started before October 1962, but was eventually

embodied in the exchange of the letters dated;5/10/62 and 16/10/62. We wish to emphasize at this point that the facts

are not yet fully investigated and our reference to what appear to be the basic facts is subject to that observation.

In his affidavit Mr. Hji Ioannou says that since 1962 his company acted as the exclusive agent and distributor of the Ferguson products and gradually became the exclusive agent of all the defendant's products under all brand names. On the 1st August, 1980, the defendant company sent to the plaintiff a letter purporting to determine the contract within five months thereafter. At any rate, it is common ground that the agreement has been determined.

The plaintiff company alleges that in 1979 the defendant in breach of the existing agreement made a secret contract with another Cypriot company for locally assembling television sets. The defendant does not deny [*561] that it undertook toprovide that company with television kits, but says that the plaintiff showed no interest in the project and the new agreement, which in any event came to the knowledge of the plaintiff company, was unconnected with the original business arrangement with plaintiff - see the affidavit filed in support of the application sworn by Mr. P. Demetriou one of the advocates appearing for the plaintiff. It will be remembered that besides damages for breach of contract the plaintiff is claiming an account for all supplies of television kits to the other company and payment of 7½% commission on such supplies.

The first question which has to be considered is whether there was a contract made within the jurisdiction. It is well settled in English Law that when agreement is reached through correspondence exchanged from different countries the contract is made in the country where the letter of acceptance is posted. (See Wansborough Paper Co. Ltd. v. Laugland, 1220 W.N. 344C.A., Benaim & Co. v. L.S. Debono, (1924)A.C.514·,

520 (P.C.), Harper v. Robinson, N.Ir. 162. See also Brinkibon Ltd. v. Stahag Stahl und Stahlwarenhandelsgesellschaft mbH, (1982) 1 All E.R. 293, a decision of the House of Lords.)

Learned counsel for the defendant company submitted that the position in Cyprus is different in view of the provisions of s.4 (2) of the Contract Law, Cap.149, which provides:- [*562]

"The communication of an acceptance is complete –

(a) as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor;

(b) as against the acceptor, when it comes to the knowledge of the proposer."

In the submission of Mr. Polyviou the contract in the circumstances of this case was made in England when the proposer, that is, the defendant company received the plaintiff's letter of acceptance and this is so despite the express provision in s.4(2) (a) which provides in effect that the offeror is bound as soon as the acceptance is put into the post box. The contract is concluded, as Mr. Polyviou argued, when both sides are bound by it.

Though the argument is attractive it cannot be supported on authority. Section reproduces verbatim the correspondeng section of the Indian Contract Act,1972, on which the Cyprus Contract Law is modelled. Pollock & Mulla on the Indian Contract and Specific Relief Acts, 9th Ed. at p.70 under the title "agreement between parties at a distance" discuss the implications of the section vis-a-vis the common law principles. They also [*563] deal with the situation where the acceptance does not reach the offeror and express the opinion, which is amply warranted by the wording of the section, that even in such eventuality there is a binding agreement on which the acceptor can sue. It is stated at p.70:-

“It (section 4) has done this, as regards acceptance by enacting (in combination with s.5) that for a certain time - namely, while the acceptance is on its way - the receiver shall be bound and the sender not. The proposal becomes a promise before it is certain that there is any consideration for it. This can be regarded only as a deliberate and rather large departure, for reasons of convenience, from the common law rule which requires the promise and the consideration to be simultaneous. No such departure has been found necessary in England. The case of an acceptance being ‘put in a course of transmission to’ the proposer, but failing to reach him, is not expressly dealt with. It seems to result from the language of the second paragraph that the proposer must be deemed to have received the acceptance at the moment when it was despatched so as to be [*564] ‘out of the power of the acceptor', and. That accordingly it becomes a promise on which the acceptor can sue,·unless some further reason can be found why it should not."

This is confirmed in another passage at p. 71:-

“…where the agreement is to consist in mutual promises, a binding contract appears to be formed by a letter of acceptance despatched in the usual way, even if it does not arrive at all, unless the proposal was expressly made conditional on the actual receipt of an acceptance within a prescribed time, or in due course, or unless the acceptor sends a revocation as provided for by the latter part of the section..."

The rule relating to the formation of contracts by the exchange of letters is stated in the concluding words of the same paragraph at p. 71 as follows

". . . when the proposal and acceptance are made by letters, the contract is made at the time when and the place where the letter of acceptance is posted."

This statement is founded on a number of decided cases appearing in the footnotes and expresses the true construction of the section which we respectfully adopt.

In the present situation there was no dispute that the letter of acceptance was posted here. It follows that the contract, subject matter of these proceedings, [*565] was made in this country and the plaintiff company has a perfect right to sue upon it in the Cyprus courts.

It may be added that no evidence or substantial evidence was put forward to suggest that it would be inconvenient for the defendant company to contest the case in Cyprus. In fact the issue of forum conveniens was, not raised at all by the defendant. On the other hand there is ample material showing that the Cyprus Court is the appropriate Court. We therefore hold that this Court has jurisdiction to try the case.

In the result the application is dismissed with costs to be assessed by the Registrar.

Application dismissed

with costs.