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Court of Cassation - Civil & Trade Division - Number: 3 /2008

Ruling Summary Record: The Court: Court of Cassation Circuit: Civil & Trade Division Number: 3Year: 2008Session Date: 3/18/2008

The Court Panel :Abdulla Bin Ahmed Al-Saadi - Ibraheem Mohamed Al-Taweela - Mubarak Bin Naser Al-Hagry - يحيى إبراهيم عارف. - عبد الله الرؤوف أحمد البقيعي -

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Court of Cassation – Civil and Commercial Circuit No. 3/2008

Cassation "Appeal Proceedings" Filing of Papers and Documents: Filing of Memos "Power of Attorney for Appeal". Invalidation, "Invalidation of Dispositions". Shamming. Contract, "Subjugation Contract or Pseudonym". Agency, "Undisclosed Agency". Invalidity, "Invalid judgment: what is not invalidating" Cassation "Grounds of appeal: Public Order related reasons". "Power of Court of Cassation". Judgment "What is invalidating it: Erroneous legal conclusions". Companies, "Joint Stock Companies: Subscribing in them". Public order.
Session: March 18, 2008
Appeal No. 3, 2008 Civil Cassation
Cassation "Appeal Proceedings" Filing of Papers and Documents: Filing of Pleadings" "Representation in Appeal".
Appearance of Respondent in the Appeal for Cassation to present his defence by means of empowering a court of cassation advocate to file a memo in his name supported by the documents within the fixed time limit. Article (11) of Law (12), 2005 on Appeal for Cassation in Civil Actions. Power of Attorney by Respondent for his advocate may be delayed until reserving appeal for judgment. Other papers. Mandatory compliance with the time limit specified in Article (11) above mentioned. Reason for.
(2) Invalidity, "Invalidity of Dispositions". Shamming. Contract, "Subjugation Contract or Pseudonym". Agency, "Undisclosed Agency".
Undisclosed Agency. Nature of. When Agent lends his name to Principal and concludes contract in his capacity as principal not as agent. Effect of. Contract goes to principal as in disclosed agency. Contract, "Subjugation Contract or Pseudonym". Valid if for lawful purpose. Considered a kind of shamming. Being void if for unlawful purpose. Avoidance includes contract of undisclosed agency and the disposition made by the agent in his name in performance of the agency contract and the contract by which the agent conveyed the right to the principal.
(3-6) Invalidity, "Invalidity of Judgment". what is not invalidating". Cassation: "Grounds of appeal: Public Order related reasons". "Power of Court of Cassation". Judgment "What is not invalidating it: Erroneous legal conclusions". Companies, "Joint Stock Companies: Subscribing in them". Public order.
(3) Public Order Purpose of.
(4) Subscription in Joint stock companies. Condition for. Must be personal and must not exceed the percentage legally prescribed for promoters. Articles (76), (77/9), (324/11) of Law (5), 2002 Enacting the Commercial Companies Law. That being public order related.
(5) Public order related reasons. Court of Cassation may raise even if not previously asserted before the Court of First Instance or in the statement of appeal. Condition for. Elements for determining them must be available from the facts and papers presented to the Court of First Instance.
(6) judgment reaching the correct conclusion. Reasoning including erroneous legal conclusions. may not invalidate it. Court of Cassation applies the correct rule of law to the point in issue.
1- The import of the provision of Article (11) of Law No. (12), 2005 on appeal for cassation is that if Respondent wants to appear in the appeal for cassation and present his defence, he must empower a cassation advocate to file in his name a memo with the supporting documents he deems necessary. By so doing, Respondent is considered to have appeared before the court of cassation and to have the right to ask for judgment on his claims in the appeal, and that copy of the document of power of attorney for such advocate to file the appeal will not do. That being so, and as the time limit specified in the said Article for Respondent to file his documents and his defence is ten days from serving on him notice of the statement of appeal, which is a short notice period compared with the period for the appeal for cassation, hence, to prevent hardship and distress on litigant parties and place Respondent at equal footing, it requires that presentation of the advocate power of attorney document remain acceptable until reservation of the appeal for judgment while keeping the limit prescribed by Article (11) above mentioned for filing the other papers.
2- Held - in the judgment of this court - that he who lends his name will be a mere agent for whom he gives his name and is subject to the same rules of agency as agent without differing from any other agent except that his agency is undisclosed so that he is apparently the agent, but in reality he is the principal, while in the disclosed agency the agent remains an agent apparently and in reality. The undisclosed agency is referred to as the subjugation or the pseudonym contract and that subjugation is valid if it's for a lawful purpose because it's a kind of shamming, since shamming without more is not a reason for invalidating a disposition, however, if the purpose is unlawful, subjugation becomes invalid and such invalidity includes the contract of the undisclosed agency as well as the disposition made by the agent in his name in execution of the contract of agency by which agent conveyed the right to the principal.
Since the purpose of public order is to achieve a public interest, political, social or economic, relating to the supreme social order ranking over the individual interests, which all such individual must observe such public interest and its achievement, and must not oust it by agreements among them even such agreements achieved individual interest and even if there is a provision of law forbidding it or not.
4- The import of Articles (76), (77/9), (324/11) of Law (5), 2002 Enacting the Commercial Companies Law is that subscription must be personal without exceeding the percentage prescribed for the promoter, which is %10 of the capital share of the company, violation of which being penalized by imprisonment or fine. All such matters are intended by the legislator to give equal chance for all to benefit from the merits of subscription in the joint stock companies in a way to guarantee a social and economical public interest, therefore, it prevented subjugation of others, directly or indirectly, to obtain a larger number of shares in care for the limited income individuals and vindication of the integrity of social structure, which are all public order related.
5- Held - in the precedents of this court - that the Court of cassation may raise the public order related reasons even if not previously asserted before the Court of First Instance or in the statement of appeal whenever the elements for determining are available from the facts and papers presented to the Court of First Instance.

6- If the appealed judgment reached the correct conclusion in dismissing the suit, it may not be invalidated by the legal mistakes committed in reasoning for the court of cassation will apply the correct rules of law to the point in issue.
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Court
After reviewing the papers and hearing the report, read by the reporting judge, the pleading, and deliberation.
Whereas the appeal has satisfied its formal conditions.
The facts, as stated in the appealed judgment and all the papers, are that Appellant instituted Suit No. (-), Full Civil, and claimed the sum of 1,302,169.93 riyals to be paid by Respondents jointly with interest at %5 as of 7/4/2005 until payment; explaining this by saying that it subscribed in the shares of (-) company in the names of certain individuals. And by virtue of official agency contracts and authorizations issued by them in in favour of it, it has the right to sell the shares allotted to them and receive their price. After finishing the allotment process, it issued orders to first Respondent to sell those shares, however, the latter - after sale - and contrary to the agency terms - delivered some of the cheques issuing from its clients, and delivered the other cheques to second Respondent, and that the third Respondent bank collected these cheques, thereby escaping Appellant the chance to receive the value of those shares. The court appointed an expert and on 25/3/2007 the court passed judgment dismissing the suit. Appellant filed Appeal No. 285/2007. And on 27/11/2007 the court passed judgment confirming the appealed judgment. Appellant made this appeal for cassation of this judgment, which was put before this court – in the consultation room – which fixed a date for hearing.
Whereas the import of the provision of Article (11) of Law No. (12), 2005 on appeal for cassation is that if Respondent wants to appear in the appeal for cassation and present his defence, he must empower a cassation advocate to file in his name a memo with the supporting documents he deems necessary. By so doing, Respondent is considered to have appeared before the court of cassation and to have the right to ask for judgment on his claims in the appeal, and that copy of the document of power of attorney for such advocate to file the appeal will not do. That being so, and as the time limit specified in the said Article for Respondent to file his documents and his defence is ten days from serving on him notice of the statement of appeal, which is a short notice period compared with the period for the appeal for cassation, hence, to prevent hardship and distress on litigant parties and place Respondent at equal footing, it requires that presentation of the advocate power of attorney document remain acceptable until reservation of the appeal for judgment while keeping the limit prescribed by Article (11) above mentioned for filing the other papers. As is established from the papers, the third Respondent's advocate presented his defence with a photocopy of his power of attorney on 27/1/2008 and on 30/1/2008 he filed the original document before reserving the appeal for judgment, therefore, the filing was properly made.
Whereas the appeal is based on a single grounds on which Appellant argues against the appealed judgment for misapplication of law, unsound reasoning and bad inference or invalid conclusion. In brief, the first judgment confirmed by the appealed judgment was based on the expert report which ignored the import of the official agencies made in favour of Appellant by the subscribers and owners of the shares in dispute, and which vested in Appellant alone the right to dispose of them and receive their value and neglected the content of the declarations issued by them after authorising third parties in this regard and that the judgment ignored Appellant's objections against the report, therefore, it is flawed and in need of cassation.
Whereas this argument is basically not good, for as is held - in the judgment of this court - that he who lends his name will be a mere agent for whom he gives his name and is subject to the same rules of agency as agent without differing from any other agent except that his agency is undisclosed so that he is apparently the agent, but in reality he is the principal, while in the disclosed agency the agent remains an agent apparently and in reality. The undisclosed agency is referred to as the subjugation or the pseudonym contract and that subjugation is valid if it's for a lawful purpose because it's a kind of shamming, since shamming without more is not a reason for invalidating a disposition, however, if the purpose is unlawful, subjugation becomes invalid and such invalidity includes the contract of the undisclosed agency as well as the disposition made by the agent in his name in execution of the contract of agency by which agent conveyed the right to the principal. And since the purpose of public order is to achieve a public interest, political, social or economic, relating to the supreme social order ranking over the individual interests, which all such individual must observe such public interest and its achievement, and must not oust it by agreements among them even such agreements achieved individual interest and even if there is a provision of law forbidding it or not. And that the import of Articles (76), (77/9), (324/11) of Law (5), 2002 Enacting the Commercial Companies Law is that subscription must be personal without exceeding the percentage prescribed for the promoter, which is %10 of the capital share of the company, violation of which being penalized by imprisonment or fine. All such matters are intended by the legislator to give equal chance for all to benefit from the merits of subscription in the joint stock companies in a way to guarantee a social and economical public interest, therefore, it prevented subjugation of others, directly or indirectly, to obtain a larger number of shares in care for the limited income individuals and vindication of the integrity of social structure, which are all public order related. That being so, and as is held - in the precedents of this court - that the Court of cassation may raise the public order related reasons even if not previously asserted before the Court of First Instance or in the statement of appeal whenever the elements for determining them are available from the facts and papers presented to the Court of First Instance. And as established from the papers that Appellant admitted that it agreed to subjugate certain individuals for subscribing in their names for Appellant's account in the capital of (-) company to acquire a larger number of shares than it may otherwise possess, and that it was Appellant who paid the value of such subscription and concluded the mentioned agencies to enable it to sell the shares allotted in the names of those individuals to collect the price after putting them into circulation at the stock market - which shows clearly the unlawful purpose of these agency contracts for contravening the subscription rules by get round the limit set for the individual share of capital and violating the purpose of subscription which is public order related as stated, therefore, these agencies were void ab initio and may not be a proper cause of action in the present suit, and if the appealed judgment reached the correct conclusion in dismissing the suit, it may not be invalidated by the legal mistakes committed in reasoning for the court of cassation will apply the correct rules of law to the point in issue; therefore argument in this respect becomes baseless.
For the above, appeal is dismissed.

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