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International Business Law

This is a case brought in an Australian State claiming for damages that were caused by negligent accounting advice that was give in a foreign country. The facts involved Australian companies that were suing a US Accountant who had been employed to provide advice on taxation issues by one of the subsidiary companies that had its operations in the US. Tax advice was sought, and this turned out to be the basis of the plaintiff's allegation that the advice was negligent and that the companies in New South Wales had suffered loss. The high court stayed proceedings in New South Wales Court following a majority decision that found out that New South Wales was a clearly inappropriate forum (international commercial law n.d. P 4).

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Facts and History

Manildra Flour Mills (MFM) And Honan Investment Pty Ltd, a holding company of MFM, were the two plaintiff companies incorporated under the New South Wales law. Manildra Flour Mills sold starches and starch products to Manildra Milling Corporation (MMC) a subsidiary of Honan Investments from 1976-1983. MMC was incorporated under the Kansas law, United States. Voth, the appellant was a Missouri practicing accountant in the US. Allegedly, he had provided negligent advice on matters of tax to MMC, an issue that also affected MFM. MFM was therefore liable to pay withholding tax on the accrued interest from MMC making it be indebted to MFM because of the transactions between them under the laws the laws of the United States. MMC was liable under the law to deduct the withholding tax from interest payments to MFM. MMC had not deducted the tax in the period from 1976-1983 nor did MFM pay any tax to US government in the same period. All these were allegedly the result of Voth's negligence. This therefore compelled MFM and Honan Investments to sue Voth in New South Wales for professional negligence in 1984. Voth applied for a stay of proceedings in New South Wales, an application which was denied by the Supreme Court of New South Wales. A subsequent appeal to the Court of Appeal of the Supreme Court of New South Wales failed to go through. This prompted Voth to file an appeal to Australian High Court arguing that the New South Wales court was not an appropriate forum for the case (Kellam J. & Mouledoux R. 2009. P 4).

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Propositions established by the Oceanic Sun and Spiliada cases.

The Spiliada case of 1986 involved the land mark decision where the House of Lord ruled that the general doctrine of forum non conveniens can apply to both common law and service out cases. This simply meant that in situations where a defendant in a case can show that a foreign forum was more appropriate for the case or had real and substantial connection, then a stay could be favored. But for interests of justice, this can be denied if the plaintiff proves that he would be denied a legitimate juridical advantage by ordering a stay. The Oceanic Sun case on the other hand proposed that defendants served out of their jurisdiction were to be treated in a way as if they were subject to the common law jurisdiction of the court. This meant that a defendant is subject to the plaintiff's prima facie right to insist on the exercise of jurisdiction. The high court ruled basing on the issue of appropriateness and decided that Missouri was the appropriate forum and therefore ordered for a stay (Voth v Manildra Flour Mills Pty Ltd 1990. P 1).

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Formulation of the inappropriate forum

The judges in this case used the doctrine of forum non conveniens to determine whether there should be a stay of proceedings. The application of this doctrine to the facts showed that the appellants action had the most real and substantial connection to Missouri. And also that the appellant committed the crime on an incorrect basis and whether this is seen as a positive act or a negligent, the fact remains that the cause of complaint was committed in Missouri although some damages were felt in New South Wales. The judges therefore decided that New South Wales was an inappropriate forum and therefore Missouri was the appropriate forum. The High Court thus allowed for an appeal and ordered for a stay of proceedings. It made the following orders; that

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An appeal to be allowed with costs, to the Court

The orders made on 13th December 1986 by Clarke J. be set aside

The action to be stayed on condition that the appellant undertakes not to plead any defense, in any proceedings brought by the respondents concerning the matter in Missouri, and that the respondents should start proceedings within three months of the order.

Respondents pay the appellant's costs of proceedings before Clarke J.

In this case it was clear that the alleged negligence was triggered or initiated in Missouri but was completed in NSW, the major damage was felt more in New South Wales. Therefore NSW was not out rightly an inappropriate forum. This might just encourage Australian courts to start exercising jurisdiction over matters that have little connection Australia an issue that is dangerous if not looked at again (Garnett R. 1999. P. 1)

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Downs Investments PTY Ltd v Perwaja Steel SDN BHD

In this case, the plaintiff who was by then dealing as Wanless Metal Industries was in contract with Perwaja Steel SDN, a firm from Malaysia, to sell 30,000 tones of scrap steel. This was a standard form contract which had been used on previous occasions. It was however noted that other several matters were added on the contract in the subsequent discussions changing the original terms of standard substantially. The contract stipulated that the buyer was supposed to approve the suitability of the ship before its charter, but because the seller was familiar with the buyer's requirements, there was no need to prove the details of the vessels. Parties present during the making of the contract for Perwaja Company, were not present at the time of the alleged breach of contract. These were Rohani Basir and Wan Ghani, the then managing director. The new team alleged that it had no authority to issue a letter of credit to cover the price agreed upon in the contract a view that was taken as repudiation of contractual obligations by Wanless. This led to Wanless filing a case against Perwaja for losses (Spagnolo L. 2001. P 1).

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Application of the Queensland law and the United Nations' Convention for the International Sale of Goods 1980 ("CISG 1980")

In this case, the refusal by Perwaja business Steel SDN to establish a letter of credit on time was a clear breach of the contract as stipulated under article 25 and 64(1)(a) of the CISG 11980. Wanless had given a reasonable notice to Perwaja over its intentions, a notice that was not acted upon. Failure by Perwaja to establish a letter of credit was a failure in meeting its obligation to pay the agreed price in the contract of sale as provided by article 54 of the convention (Zeller 2000. P1).

The convention's provides for damages claim in articles 74 and 75. Article 74 provides that damages caused by breach of contract by one party consist of a sum that is equal to the loss including losses suffered in profits by the other party as a consequence of the breach. These damages may not exceed the loss foreseen at the time of terminating the contract. Article 75 provides that if the contract is avoided and the seller has taken a reasonable time in a reasonable manner, he or she can sell the goods and recover the profits accrued from it. The plaintiff's damages therefore include; the loss of profit on the substitute sale of the cargo to Pernas amounting to $498,450, loss in profit on the substitute sale on BHP amounting to $89,955.13, losses resulting from the rechartering of MV Dooyang Winner amounting to $343,163.47. a total of $931,568.60 and interest at 9% from 30/9/96 to 17/11/200 of about $348,779.28 as stipulated by article 74 & 75 of the convention. Perwaja in its defense argued that the damages together with whole case should not have been solely based on the provisions of the convention (Downs Investments Pty Ltd v Perwaja Steel SDN BHD 2000. P. 1).

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Steps taken by Downs Investments when it became evident its Perwaja contract wasn't proceeding

On seeing that Perwaja was not willing to honor the contract, the Malaysian lawyers of Wanless advised perwaja that if it does not establish a letter of credit for the full contract price on august 7th 1996, then it would be taken as a repudiation contract because a vessel had already been chartered. On august 8th Perwaja was again advised that failure to honor its obligations, then the contract will be terminated. Nothing was done and on 8th lawyers for Perwaja admitted that they had failed to get any positive feedback from Perwaja. And on 9th August, Wanless accepted Perwaja's repudiation of the obligations of the contract (Downs Investments Pty Ltd v Perwaja Steel SDN BHD 2001. P1).

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If Perwaja does not appeal then Wanless could file for more charges from Perwaja in a Malaysian court. It can claim that the Queensland court had no jurisdiction or if it did then, its jurisdiction was not better than what is reflected in the Reciprocal Enforcement of Judgments Act 1958 of the Malaysian laws. Under this Wanless can claim that the court ruling in Australia was not exhaustive and demand hearings in Malaysia (Malaysia 1958. P 36-42).

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