De Beers Consolidated Mines Ltd v Howe Has Demonstrated - Aspects of the Law of Contract - Essay Example

De Beers Consoli d Mines Ltd v Howe [1906] AC 455: "a company resides... where its real business is carried on... and the real business is carried on where the central management and control actually abides." Introduction Most businesses operate in isolation of well defined guidelines, hence, are victims of bad debts and huge losses. This comes due to lack of understanding on the laws governing their operations. Each business has its contractual capacity, ability to get into a contract and to withdraw from such contracts. Similarly, the law provides that "a company resides... where its real business is carried on... and the real business is carried on where the central management and control actually abides." These are governed by a set of doctrines that are studied under business law. This paper seeks to address varies aspects of law of contract, a case study where these laws are applicable. Contract law This law provides for the enforcement of rules of association with one another at economic levels. This law allows for an individual to demand a claim upon the breach of such contracts on written documents. Without the law of contract as a premise for business terms, no transaction can freely take place in the corporate world. There are various types’ contract laws. These may imply in various categories of business operations depending on the nature of the agreement. Law of contract is, therefore, explained as private agreement, but voluntary in nature, to exchange property or valuables. It involves fair dealing and good faith in carrying out the exchange transactions. This normally happen on a straightforward way to justify the faithfulness in the business. There are various examples of this kind of law in business. Those that are made by word of mouth are referred to as oral contracts. They reflect on verbal mutual agreement of parties involved in a transaction. The other example is the unilateral performance contract. This can also be referred to as implied contract. This is where the parties in the agreement reward their fellows upon clearing the binding contract. The reward can be of any kind, and it is not mentioned in the written documentation of agreement. Remedies for breach of contract There are a number of compensation measures that are taken against individuals who in their response fail to adhere to the requirements of the law. This acts like a penalty to them. They reward the losses and damages; they may also be subjected to specific performances that would imply the use of certain clauses in the contract to justify. Some of the remedies are treated as equitable, meaning they stand a chance to be highly rewarded provided that the breach of contract is confirmed. Damages can be of different categories such as general, compensatory and special damages all these are payable under the provisions of law of contract. Standard of Care Contrary to duty of care, standards of care reflects on the steps and measures an employee takes in his or her working environment. The prudence, caution and attention given to a condition or a situation in a work environment are an obligation of an employ to exercise. This will help minimize the risks of negligence that may be caused, resulting to undetermined injuries. The management is not responsible for any injuries caused by the employee himself as a result of negligence in the work place. The duty of care does not apply to such conditions and situations. This implies a breach of contract. Other than the relevant areas addressed in the business law applicable cases can be used to justify the applications of these laws. Two companies, for instance, may be bound in a contract, and thus, the implications of their contractual capacities may be established and analyzed appropriately. Below is a case that involved three different companies that were bound by contractual laws. Their liabilities to various tasks lead to a case that required the application of law of contract and relevant tort laws. The case The Rates and Taxes Act, R.S.N.B. 1927, c. 190, s. 20 provides that “all personal property shall be assessed to the owner in the parish where he resides except that if he has a "place of business" in another parish all personal property connected therewith or employed therein shall be assessed in the parish where he has such place of business.” The respondent, whose head office was in the Parish of Lancaster, Saint John County, contracted to pave among others, a road leading through the Parish of Bathurst, Gloucester County, to Douglas town. Northumberland County, and acquired 59 acres of land in Bathurst Parish on which it erected 38 buildings, including an office, mess hall, sleeping camps, repair shops, an asphalt plant and a gravel-crushing plant. During the winter months moveable equipment was stored at the property and some 20 men employed in repairing it. The Bathurst Parish Assessors purporting to act under the authority of s. 20 assessed the respondents personal property in the parish at $600,000. On appeal to the County Court Judge the latter reduced the assessment to $275,000 but otherwise confirmed it. On appeal by way of certiorari to the Appeal Division, Supreme Court of New Brunswick, the assessment was set aside on the grounds that the company had no place of business in Bathurst Parish within the meaning of s. 20 of the Act. Held: 1. That on the facts the assessors could properly find the existence of a business carried on at a "place" in the parish of Bathurst within the meaning of s. 20 of The Rates, and Taxes Act. De Beers Consolidated Mines Ltd. v. Howe [1906] A.C. 455 and Kirkwood v. Gadd [1910] A.C. 422 referred to and distinguished; Swedish Central Ry. Co. v. Thompson [1925] A.C. 495, Mitchell v. Egyptian Hotels Ltd. [1915] A.C. 1022, and San Paulo (Brazillian) Ry. Co. v. Carter [1896] A.C. 31, referred to. 2. That only the machinery and other property used for repairing and storing purposes could be taken to be "connected with or employed in" the business: what was repaired or stored, was not in that language. 3. That in making the assessment the assessors preceded upon a wrong principle in whole or in part but a legal and correct assessment could have been made and as provided by s. 126 the matter should be remitted to them for re-assessment on the principles laid down by this Court. The King v. Assessors of Woodstock [1924] S.C.R. 457. Estey J. would have allowed the appeal reducing the amount of the assessment to $175.000. APPEAL from the judgment of the Appeal Division of the Supreme Court of New Brunswick 1 whereby an appeal from the judgment of His Honour Joseph L. Ryan, Judge of the County Court of Gloucester, was allowed and a rule absolute ordered to quash the assessment by the Assessors of the Parish of Bathurst upon the personal property of the Dexter Construction Co. Ltd. Supporting Evidences There are various situations that can be used to support the statement that "a company resides... where its real business is carried on... and the real business is carried on where the central management and control actually abides." A company is to be deemed to reside where it keeps house and does business, and that it kept house and did business where its central management and control actually was. The majority of directors and life governors of the company lived in England, their meetings were held in London, and they exercised the real control in all the important activities of the company except the actual mining operations. It was found, therefore, as a fact that in London that central management and control did abide. From this it followed that the company resided in England and carried on some part of its business there. As a result, it came under the charge of the rule of Schedule D that rendered it liable to taxation on the whole of its profits. But it was never suggested that the company was not also carrying on business in South Africa; its business extended to both countries. The decision meant simply that for the purposes of income tax in England the company was resident and doing business there of a central managing and controlling character. The language of Lord Loreburn, "practically all the important business of the company except the mining operations" implies, that these operations were themselves part of the "important business". But no one questions the fact here that the company through the same degree of control is resident at Fairville; there is no question of residence at all: it is one of doing business at a place of business; and on the authority of De Beers, that business is being conducted both at Fairville and in the parish of Bathurst. The case of Swedish Central Railway Co. v. Thompson is of some interest in presenting another aspect of the question decided in De Beers. There the company was incorporated under The Companies Act, 1862 and 1867, with the object of constructing and working a railway in Sweden. The railway had been leased for 50 years at an annual rent. The central control and management of the business originally in England was later transferred to Sweden, and in that state of things the taxation was claimed. A committee had been appointed to transact formal administrative matters in the United Kingdom, such as the transfer of shares, affixing the seal to certificates, and signing cheques on the London bank account. All dividends were declared in Sweden and the only moneys transmitted to the United Kingdom were for dividends to the shareholders living there. The annual rent was paid to the company in Sweden. It was held, notwithstanding the central direction in Sweden, that there was a sufficient corporate activity in the United Kingdom to establish a residence for the purposes of taxation. The clause of the schedule applied covered the case where, the central management and control of the business not being carried on in whole or part in the United Kingdom, but a residence for limited purposes being there, tax was chargeable on the amount of profits actually received in that country. What was held, in short, was that a company for different categories of tax could have two residences. Another case that can be used to justify the statement is Kirkwoods case, the question was whether, under the Money-Lenders Act, the money-lender was bound to carry on every detail of his business at his registered address, and it was held that he was not. The language of Lord Atkinson must be interpreted in the light of the controversy which he was considering. The acts which were in question were the negotiation of the detailed terms of the loan and the ascertainment of the items of property by which it was to be secured, and it was pointed out that. Therefore, in order to carry on the business, some parts of the transactions must necessarily take place elsewhere than at the lenders headquarters. In Mitchell v. Egyptian Hotels Limited 8, a case of similar facts, Lord Parker, at p. 1037, in the course of his speech, cited the decision of the House in San Paulo v. Carter 9, to the effect that "a trade or business cannot be said to be wholly carried on abroad if it be under the control and management of persons resident in the United Kingdom, although such persons act wholly through agents and messengers resident abroad. Where the brain which controls the operations from which the profits and gains arise is in this country, the trade or business is, at any rate partly, carried on in this country." It is obvious that in these cases there was no thought that the business in its entirety was being carried on in the United Kingdom, and likewise it cannot be said that because the head office of the company in this appeal is in Fairville, its total business is to be deemed concentrated at that point. Paragraph (b) of 20(1) contemplates any number of shops, offices, factories or other places of business in different parishes which can constitute, in many forms, branches of one provincial activity, and in interpreting the legislation the difference between ascertaining the conditions upon which personal property can be taxed by a local administration and those by which a company with a highly ramified organization is to be subject to income tax must be kept in mind. What s. 20 envisages is a business localized at a place in a parish which attracts to itself certain personal property to which it gives a local habitation: taxation based on the presence of personal property in a parish other than that of the owners residence but associated with a place of business. Carrying on a business cannot be intended to include every act of management or related to performance which affects it. A business to be conducted in its entirety within a specific local area can, in these days, embrace only the simplest body of simple transactions. S. 20 clearly extend to businesses that are branch activities of a central organization: and the facts here indicate that the company has other units of plant and other groups of equipment elsewhere in the province. Once a complex of repeated or systematized business operations becomes localized about a place and presents its moveable property in more than a mere unfixed or transient employment in the parish, then the precise period of its presence there becomes of minor importance. One can imagine, for instance, a special sale of a bankrupt stock conducted in a parish, say, for three months and in premises rented for that period only. How could it be maintained that that was not a business carried on at a shop or place in the parish? Yet its duration would be only a fraction of what was involved in the facts before the parties. The situation must be visualized from the standpoint of the community. Here, for well over a year, these operations of preparing roadbed, gathering and treating gravel, making surfacing material and applying it to the roads, storing and repairing the machines used, hiring, paying and discharging workmen, employing truckers with their, vehicles, all under an immediate superintendence centralized at a headquarters, aggregate to what in the ordinary meaning of the words is road making business. The business of the company here lies not in negotiating or making contracts but in performing them: contracts are or may be necessary, no doubt; financing and account books, likewise; but these are formal elements of the operating activities of the company. The question on certiorari is whether on the facts before us the assessors could properly find the existence of a business carried on at a "place" in the parish, and in my opinion they could have done so. But a further question arises of the scope of the business so centered at Bathurst. It was contended that only the work done in the parish could be taken into account: but that misconceives the statute. The business is what is carried on, at, and from, the place of business within the parish; its reaches of operation are not restricted. There is no evidence, however, that the work in Kent County was directed from Bathurst. The main road from Bathurst to Douglas town in Northumberland County I take to have been under that direction. Local time offices are stated to have been kept in both Northumberland and Kent counties but it is not clear whether in the former there was other work than that of the main road or not. The fact that all equipment for the three counties was stored and put into condition at Bathurst during the winter does not annex it, in the sense of the statute, to the business conducted in Bathurst: in that branch of the operations, only the machinery and other property used for repairing and storing purposes could be taken to be "connected with or employed in" the business: what is itself repaired or stored is not within that language. The Rates and Taxes Act expressly contemplates the taxation of personal property at a place of business other than the head office, the principal place of business or the place from which direction and control emanate and, therefore, the considerations so important in the foregoing cases are not conclusive in determining that other place of business contemplated in s. 20. The foregoing authorities as well as others, and, indeed, the cases decided in Canada, lead to the conclusion that to decide whether or not a company carries on business within the meaning of a particular statute it is first necessary to construe the phrase as used in the particular statute and then to determine, as a question of fact, whether the operation or activity in question comes within the phrase so used and construed. The business of the Company is admittedly the construction of highways. The pertinent issue is, therefore, granting the Company carried on business in the Parish of Lancaster in the County of Saint John; did it also carry on business within the Parish of Bathurst within the meaning of s. 20? S. 20 require that three essentials be established in order that a tax upon personal property may be imposed. The Company must have a place of business in the parish, at which it carries on its business and in connection with which it uses the personality. If these three essentials be present then it would seem that the Company is carrying on business within the meaning of that section. The evidence discloses, with great respect to those who hold a contrary view, that the Company had a place of business, within the meaning of s. 20, at Bathurst. Permanent records were not kept at Bathurst, but it was there that the mens time was recorded, their wages computed and the cheques issued there for. It is fair to assume that a laborer would attend at that office to complain of any error in his cheque. The supplies purchased locally were recorded and vendors paid therefore by cheques issued from this place of business. Moreover, in connection with the construction of this highway, it would appear that those at head office, as well as those directing and supervising the work of construction, treated the premises at Bathurst as a place of business. It was the place to which at least those associated with the construction work and the local people went to deal with the Company. There is no question but that a large amount of equipment was used upon the highway and used in connection with the business that was carried on at Bathurst. It, therefore, appears that the three essentials required by s. 20, in order that the tax might be imposed, are here present. Counsel for the respondent pressed that, as the direction and control of the business emanated from the head office in Fairville, and once the contract was completed the facilities at Bathurst would be removed or abandoned, that within the meaning of s. 20 it could not be said that the Company carried on business in the Parish of Bathurst. Corporate residence of a business in relation to 21st century In the current business world, most organizations operate on a model that ensures that their products and services meet the market demands at different levels. This implies that globalization and decentralization of their operations must be applied in order to earn large customer base. This therefore, disqualifies the assumption that "a company resides... where its real business is carried on... and the real business is carried on where the central management and control actually abides." According to laws governing business operations, the business is, therefore, in very truth carried on, in and from a particular country although the actual operations of the company are in another country, and in that sense the business is also carried on in that country. Corporate residence of a business assumes that where any person has a shop, factory, office or place of business in a parish other than that in which he resides, or in which shop, factory, office or place of business he carries on his trade, profession, calling, or business, all his personal property connected with or employed in his trade, profession, calling or business so carried on, shall be assessed to him in the parish where he has such shop, factory, office, or place of business: The law also provides that where any person has two or more shops, offices, factories or other places of business situate in different parishes, at which he carries on his trade, profession, calling or business, he shall be assessed in each parish for the portion of his personal property connected with, or employed in the business carried on thereat. In the 21st century, it is therefore, clear that the statement is invalid and does not support corporate business developments that can assist various people at different locations of the world. This is evident in various cases that are presented in the paper. De Beers Consolidated Mines Ltd v Howe shows an ideal case that is determined based on previous similar cases in the business world. Based on the judgment made, it is evident that current business world deals in almost homogeneous products. Such products require a lot of sales and promotional strategies that will enable them to operate. This gives them opportunity to carry out their businesses anywhere away from their normal business premises. Bibliography CCH HONG KONG LIMITED. (2008). Hong Kong master tax guide 2008/09. [Hong Kong], CCH Hong Kong Limited. INTERNATIONAL FISCAL ASSOCIATION, INTERNATIONAL ASSOCIATION FOR PUBLIC FINANCE AND FISCAL LAW, & INTERNATIONAL TAX CONGRESS. (1939). Cahiers de droit fiscal international = Schriften zum internationalen Steuerrecht = Studies on international fiscal law. Basel, Verlag für Recht und Gesellschaft. LYNCH-FANNON, I., & CUDDIHY, K. (2010). Corporations and partnerships in Ireland. Alphen aan den Rijn, The Netherlands, Kluwer Law International. PEPPITT, M. (2009). Tax due diligence. London, Spiramus. Read More