PETER v. COORAY

003-NLR-NLR-V-22-PETER-v.-COORAY.pdf


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Present: De iSampayo J. and Dias A. J.PETER v. COORAY.
117—D. C. Coldmbo, 53,071.
Agreement to advance money to toddy renter in consideration of gettingshare of the profits — Is agreement a violation of the ExciseOrdinance f
Defendant, who had purchased toddy rents, entered into anagreement with the plaintiff to pay him two-fifths share of the profitsin consideration of plaintiff advancing to defendant moneyswhenever required for the purpose of the business. The businesswas to be.carried on by the defendant, and was to be under his solecontrol and supervision.. /
Held, that the agreement wasTlaw.
fTlRE facts appear from the following portion of the judgmentof the District Judge :—
The plaintiff avers in his plaint that the defendant purchased fromGovernment the privilege of selling toddy from October 1, 1917, toSeptember 30,1918, at Hettiyawatta, Marshall street, Modera.'Lansiya-watta, and Timbirigaspitiya. That at defendant’s request he advanceda sum of Rs. 9,000 for the purpose of carrying on the business, and thedefendant agreed to give him two-fifth share of the profit and that a sumof Rs. 4,200* 76 is due to him, as a sum of Rs. 10,501 * 90 was earned asprofits.
The defendant denies his liability, and alleges that the agreementis bad in law; that the rents of the toddy taverns referred to in theplaint were purchased by Ins son Patrick Cooray; that he signed theagreement X as agent of his son Patrick Cooray; and that there wereno profits.
According to the evidence of the plaintiff the defendant told hima few days before the sale that the rents of the toddy taverns referred toin the plaint were to be sold, and after the sale the defendant told him
1920.
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1920. he had purchased the rents, and asked him to advance him (defendant)__money from time to time to carry on the said businoss. Plaintiff agreed
Peter v.to advance the money in consideration of his receiving a two-fifths
Ooorayshare of the profits, and at his request the defendant signed document X.
Subsequently, the plaintiff learnt that the rents had been purchased bydefendant in his son’s name.
The plaintiff advanced defendant from time' to time Rs. 15,000 toBe. 20,000. In September, 1918, it was found that the defendantowed plaintiff Rs. 9,000. This amount was secured by nine promissorynotes, which are the subject of other actions.
The evidence of Lewis Perera makes it clear that the rents of threeof the taverns were purchased by or in the name of defendant’s son,Patrick Cooray, and two in the name of one B. A. Fernando. On thesefacts the defendant contends that plaintiff cannot maintain the actionagainst him as he did not purchase the privilege of selling the toddyat the taverns in question.
I have no doubt, however, that Patrick Cooray and B. A. Fernandowere the defendant’s nominees, and that the rents were purchased forthe defendant. The defendant admitted that he found the money forPatrick Cooray.
This view is supported by the document X signed by the defendant.It runs as follows
“Five shares of the following five toddy taverns: Hettiyawattu,Marshall street, Modera, Lansiyawatta, Timbirigaspitiya.
“Two shares to Mr. J. R. Peter.
“ One share to Mr. J. Cooray.
“Two shares to Patrick. Mr. Peter should look into all and beresponsible for the transaction.”
I have no doubt that the defendant made the agreement deposedto by the plaintiff.
Even if the defendant did not himself carry on the business cf sellingtoddy at the taverns in question, he is, in my opinion, liable onbis agree-ment; but on the evidence it appears to me that Patrick Cooray wasmerely the defendant’s agent, and I find on the first issue that defendant' did carry on the business of selling toddy at the taverns in question.
As regards the fifth issue, too, I find that the defendant was the realpurchaser of the taverns, and be is liable, although his name is not onrecord, as the purchaser, and 1 answer the fifth issue in the affirmative.
Before dealing with the third issue, I shall dispose of the fourth issue,which raises a question as to the legality of the agreement on the groundof ft being against public policy. On this issue plaintiff’s counsel reliedon the cases of Meyappa Chetty v. Ramanathan et al.1 and Mohideen v.Saibo.*
In the case of Meyappa Chetty v. Ramanathan,1 the two defendantsand three others entered into a partnership deed for acquiring the yrholeof the opium licenses and thus secure the monopoly of the opiumtraffic.throughout the Island. The plaintiff, who was not a party tothe deed, sued the defendants for an eighth share of the profits, averringthat the defendants had by a verbal agreement of partnership agreedto give him an eighth share of the profits.
It was held that the action was not maintainable, as it was foundedon a partnership which was illegal as being contrary to the policy of theOrdinance, on the ground that the control and management of the
1 {1913) 16 N.L. R. 33.
* {1913) 17 N. L. R. 17.
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shops were vested, not in the hands oi the licensees, but in the hands of asyndicate, of whose existence the licensing authorities were presumablynot aware.
In the case of Mohideen v. Saibo,1 the plaintiff was a licensee andoccupant of two stalls for the sale of mutton in the Kandy market.He entered into an agreement with defendant by which defendant wasto carry on the business under plaintiff’s license, and pay plaintiffRs. 100 a month.
The plaintiff sued to recover the instalments, and it was held thatthe agreement was illegal, being in contravention of by-laws of theMunicipal Council of Kandy, which prohibits (o) a person from usingor occupying a stall without a license; (6) a stall holder from transferringhis license; (o) any person other than a licensee from occupying a stall.
Plaintiff’s counsel contended that the agreement sued on in this oa$ewas an entirely different character, and relied on the case of Fernando v.Ramanathan*
In the oase of Fernando v. Ramanathan,* the plaintiff sued on apartnersliip agreement. The parties of the first part had bought theprivilege of selling opium at certain places, and the parties of the secondpart had purchased the privilege of selling opium at certain other places,and they agreed to carry on the business in partnership. The manage-ment being vested in two of the parties to the agreement, Pereira J.and Ennis J. held (Wood Benton C.J. dissenting) that the oase ofMeyappa Chetty v. Ramanathan* was notan authority for holding thatthe agreement sued on was illegal, as being contrary to public policy,and they held, further, that the agreement was not illegalIn considering whether a contract is against public policy, eachoase must, as stated by Pereira J. in the case of Fernando v. Ramana-than,,a depend on its own facts and circumstances.
What are the facts and circumstances in this case ? They are, shortly,as stated, a promise by the defendant to give the plaintiff a two-fifthsshare of the profits derived from the sale of toddy in certain taverns inconsideration of the plaintiff advancing him money from time to timeto carry on the business of selling toddy at those taverns. It is clearthat the plaintiff was to receive a share of the profits, if any, in lieu ofinterest.
The arrangement did not, unlike the agreement in the cases cited,vest the plaintiff with any control of the business of selling toddy at thetaverns, nor did he take the place of the licensee as in the case ofMohideen v. Saibo.1
I am therefore of opinion that there was nothing in the contractwhich rendered it illegal on the ground that it contravened the pro-vision of any Ordinance. I answer issue (4) in the negative.
The agreement between the parties was as follows :—
This indenture made and entered into at Colombo on August 30,1918, between Kurukulasuriyage Simon Fernando of No. 117 of Modern _street in Colombo of the first part, Mututantri Patabendige JohannesCooray of Moratuwaof the second part, and Joseph Bajadurai Peter ofKotahena in Colombo of the third part.
Whereas the said Kurukulasuriyage Simon Fernando and1 the said .Mututantri Patabendige Johannes Cooray have purchased from theGovernment of Ceylon toddy rent for the taverns situate at Marshall
1 (1913) 11 N. L. R. 11.* (1913) 16 N. L. R. 331.
* (1913) 16 N, L. R. 33.
1920.
Peter v.Cooray
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1920. street and Modera street in Colombo, Potuwila in Colombo District,
and Palliawatta in Negombo District, arid Have obtained from the
Peier «. Government licenses for sale of toddy at the said places for the periodCooray commencing October 1, 1918, and ending September 30, 1919:
And whereas the said Kmrukulasuriyage Simon Fernando and thesaid Mututantri Patabendige Johannes Cooray and the said JosephRajadurai Peter have agreed to enter into these presents for the purposeof securing for the said taverns a regular supply .of toddy, and for thepurpose of determining the matter of distribution of the income andprofits of the said business:
Now, the indenture witnesseth that it is hereby agreed between thesaid Kurukulasuriyage Simon Fernando and the said MututantriPatabendige Johannes Cooray and the said Joseph Rajadurai Peteras follows:—
The said Kurukulasuriyage Simon Fernando shall and will dailyfrom October 1, 1918, to April 30, 1919, procure, transport to, andsupply at the Marshall street tavern 125 gallons or more of good toddyat the rate of 35 cents a gallon.
The said Mututantri Patabendige'Johannes Cooray shall and willdaily from the said October 1,1918, to the said April 30, 1919, procure,transport to, and supply at the Marshall street tavern, between the hoursof 6 a.m. and 5 p.m,, 125 gallons or more of good toddy at the said rate of35 cents a gallon..
The said Kurukulasuriyage Simon Fernando shall from May 1,1919, to September 30, 1919, procure, transport to, and sipply at thesaid Marshall street tavern 250 gallons or more of good toddy, betweenthe hours of .6 a.m, and 6 'em., at the said rate of 35 cents a gallon.
In the event of the said Kurukulasuriyage Simon Fernandoand the said Mututantri Patabendige Johannes Cooray failing tosupply within the said hours the said quantity of toddy, the party indefault shall pay into the joint account in respect of the stud tavernsa sum of 30 cents per each gallon short of the said quantity of toddy,provided, however, that in the event of the said Mututantri PatabendigeJohannes Cooray supplying during the period October 1, 1918, andApril 30, 1919, any toddy after the hour ….
And toddy remaining unsold at the said tavern shall be convertedinto vinegar at the said Marshall street tavorn and sold on the joint accountof the said Kurukulasuriyage Simon Fernando and the said MututantriPatabendige Johannes Cooray, and the amount realized thereby paidto the said Joseph Rajadurai Peter into the said joint account of thesaid Kurukulasuriyage Simon Fernando and the said Mututantri 'Patabendige Johannes Cooray.
Ths registered' tavern keepsrs for the said tavern shall be
appointed by the said Kurukulasuriyage Simon Fernando and the saidMututantri Patabendige Johannes Cooray, but either of them shall beat. liberty at his own cost to appoint a supervisor at any one or moreof the said taverns.’•
• (7)-The -.amount realized by the sale of the toddy during the courseof each day shall be paid to the said Joseph Rajadurai Peter at the endof such date, who shall collect the same at the said taverns, and beresponsible for the custody thereof after the payment of the same tohim cr to any person or persons employed by him for the purpose ofcollecting the saic moneys; upon receipt of the said moneys a properreceipt shall be granted therefor by the said Joseph Rajadurai Peter orhis agent to the said tavern keeper.
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A. St. V. Jayawardene (with him B. F. de Silva), for defendant;,appellant.
Arutanandim, for plaintiff, respondent.
Cur. adv. vult.
May 6, 1920. Da Sampayo J.—
In this case a question of law arises for decision. The plaintiffalleged in his plaint that the defendant obtained from the Govern*ment the privilege of selling toddy for twelve months, commencingfrom October 1, 1917, at certain places in the District of Colombo,and that “ the said business was to be carried on by and was to beunder the sole control and supervision of the defendant, and the saidbusiness was carried on entirely by the defendant during the wholeof the said period.” He further alleged that for the purpose ofcarrying on the said business the plaintiff advanced to the defendantcertain moneys on an agreement by the defendant to give theplaintiff two-fifths share of the profits of the said business. He esti-mated the profits made by the defendant at Rs. 10,501*90, andclaimed in this action the sum of Rs. 4,200*76 as his two-fifthsshare of the profits.
' The defendant in his answer took issue on the facts as alleged,and stated that the privilege of selling toddy in the said places, of“ the rent,” as it is called, was purchased, not by himself, but by hisson Patrick Cooray, and that the actual agreement was a partnershipagreement between the plaintiff and Patrick Cooray. He furtherpleaded, as a matter of law, that the alleged agreement was againstpublic policy, and in contravention of the Excise Ordinance, 1912,and that-the action was, therefore, not maintainable.
The facts as found by the District Judge were that the defendant *did eqter into the agreement pleaded by the plaintiff; that thedefendant was the real purchaser of the toddy rent; that PatrickCooray, who was a mere lad of nineteen years, was only a nominallicensee; and that the defendant in his .own right carried on thebusiness of selling toddy at the taverns in question. The DistrictJudge, however, decided the question of law in favour of the plaintiffon the authority of Fernando v. Ramanalhan,1 and gave plaintiffjudgment as claimed. The defendant has appealed.
Section' 17 of the Excise Ordinance, No. 8 of 1912, prohibits thesale of excisable articles except on a license from the GovernmentAgent, and section 43 makes it an offence to sell excisable articles
in contravention of the Ordinance or any rule or order madethereunder, or of any license, permit, or pass obtained under theOrdinance.” Under section 18, a person, to whom the exclusiveprivilege of selling has been granted, cannot exercise his privilegeuntil he has obtained a license in that behalf from the GovernmentAgent, and under section 24 the license may be subjeot to such
7‘1 (1913) 16 N. L. B. 337.
1920.
Peter v..Cooray
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1920.
. Da SampayoJ.
Peter v.Coorcvy
restrictions and such conditions as the Governor may direct.Section 31 empowers the Governor to make roles, inter alia, pre-scribing the restrictions under and the conditions on which anylicense may be granted. By Excise Notification No. 29 datedMarch 4, 1914, the Governor acting under section 24 directed thatno privilege of manufacture, supply, or sale, or any interest therein,shall be sold, transferred, or sub-rented without the GovernmentAgent’s previous permission (see Government Gazette No. 7,010 of May9, 1919). It is clear to my mind from the above-recited provisionsand the general tenor of the Excise Ordinance and the rules framedthereunder that the licensee alone is to carry on the business ofselling excisable articles, and that it is illegal for anyone else to do so‘ either without a license or under the colour of a license granted toanother person. The case of a.mere servant may be governed byspecial considerations, but the defendant was not in the positionof a servant or even an agent. The situation as disclosed by theabove faots is that the defendant sold toddy without a license,* orwas in the position of a transferee of his son Patrick Cooray’sprivilege and license, and was, in fact, the sole person interested inthe business, and that this act of carrying on the business of'sellingtoddy during the period in question was in contravention of theOrdinance, and therefore illegal. This point appears to me to be; covered by the authority of Meyappa Chetty v. Ramanathan1 andMohideen v. Saibo,2
The case of Fernando v. Ramamthan (supra), on which the DistrictJudge relied, is distinguishable. That was the case of a partnershipagreement between the grantees of separate licenses to sell opium inseparate places, and the only issue which the Court had to considerwas whether the agreement was “ contrary to the policy of theOrdinance.” The majority of the Judges laid down that each casemust depend on its own facts and. circumstances, and afteranalyzing the terms of the agreement and comparing them withthe provisions of the Opium Ordinance, No. 5 of 1899, the learnedJudges came to the conclusion that the agreement in that case didnot contravene the policy of the Ordinance or any of its provisions.The character of the Excise Ordinance of 1912, with reference towhich the present case must be decided, and the facts, as statedabove, appear to me to distinguish that case from this. The Indianand English authorities on this subject are cited and discussed inthe dissenting judgment of Wood Benton C.J., and I need notrefer to them particularly here. I think it must be held that in thecircumstances the defendant contravened the Ordinance. The actof the defendant in carrying on the business of selling toddy beingthus found to be illegal, the plaintiff, who is obliged to set it up insupport of his own claim, is precluded from deriving any benefittherefrom.
1 (J913) 16 N. L. R. 33.8 (1913) 17 N.L.R^ 17.
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' 1 am of opinion that the plaintiff cannot maintain this aotion,and I would set aside the judgment in his favour and dismiss hisaction, with costs in both Courts.
Dias A.J.—
The plaintiff brought this aotion to recover from the defendant,M. J. Cooray, the sum of Rs. 4,200*76, being two-fifths share ofthe profits arising from the toddy rents of five taverns duringthe period of twelve months ending on September 30, 1918. Healleged in his plaint that the defendant bought from Governmentthe privilege of selling toddy in those taverns, and that the businesswas to be carried on by him and to be under his sole control andsupervision, and that the business was so carried on entirely by thedefendant during that period. For the purpose of carrying on thebusiness the plaintiff and defendant entered into an agreement, interms of which, inter alia, the plaintiff was to advance to defendantmoneys whenever required, and in consideration thereof the plaintiffwas to have two-fifths share of the profits. That agreement wasembodied in a writing (marked X) signed by the defendant, whoallotted two shares to the plaintiff, one share to the defendant, andtwo to Patrick (the defendant’s son). The plaintiff accordinglyadvanced from time to time sums amounting to Rs. 23,000, of whichthe major part was repaid to him, leaving in September, 1918, abalance of Rs. 9,000 still due on the advance account.
For that sum the plaintiff brought a separate aotion, and has-already recovered Rs. 7,000. The present action relates only tothe share of profits in terms of the alleged agreement.
Several issues of fact and law were raised and dealt with in theDistrict Court, but, I think, it is unnecessary to go beyond theprincipal one which strikes at the root of the case, namely, whetherthe agreement relied on by the plaintiff was against public policyor the provisions of the Excise Ordinance (No. 8 of 1912), and,consequently, void. The policy of the Ordinance and the intentionof the Legislature were clearly to control and regulate the manu-facture, sale, and possession of toddy and other intoxicants byrestricting the privilege to certain persons specially licensed byGovernment. Section 20 of the Ordinance' permits such a licensee tolet or assign the whole or part of his privilege to another, but onlywith the express sanction of theTfovemment Agent. Rule 13 madeunder the Ordinance by the Governor in Executive Council enactsthat “ no privilege of manufacture, supply, or sale, or any interesttherein, shall be sold, transferred, or sub-rented without theGovernment Agent’s previous permission, nor, if the GovernmentAgent so orders, shall any agent be appointed for the managementof any such privilege without his previous approval.” Hence, anyact done or agreement entered into in violation of any of these
1620.
Di SampatoJ.
Peter v.Cooray
< 20 )
1920.
Bias A. J.
Peter v.Ooafay
provisions must necessarily be contrary to the policy of the Ordi-nance, and, consequently, unlawful, and no aotion can be maintainedto enforce such an agreement. It is admitted in this case that thepersons in whose names the licenses were obtained were Patrick inrespect of three of the taverns and one B. A. Fernando in respect ofthe remaining two, and it is not suggested that either of them hadthe Government Agent’s authority to assign or sublet their privilegesto the defendant or anyone else. The learned District Judge hasfound that the real purchaser of these rents was the defendant, andthat Patrick and B. A. Fernando were only his nominees. Theywere mere dummies to deal with the Government Agent, while thedefendant was the de facto renter. The evidence justifies thatfinding, and, moreover, it was on that footing that the plaintiffhimself entered into his agreement with the defendant to shareprofits as expressly set out in paragraphs 2 and 3 of his plaint.Thus, it is perfectly clear that the defendant and the plaintiffattempted to enjoy the privileges conferred on the licensees withoutthe consent of the proper authority, and entered into this agreementin respect of them. Though the learned District Judge came tothat conclusion with regard to the defendants’ true position in theirventure, he has held that this agreement was not void by reason ofanything contained in the Ordinance, but I am of a different opinion.It was a clear infringement of the policy of the Ordinance and of therule above referred to. This Ordinance is much stricter in its provi-sions than the Opium Ordinance (No. 5 of 1899), on which the caseof Fernando v. Bamanathan1 was decided. That case was decidedby a Full Bench, where Pereira and Ennis JJ. (Wood Benton C.J.dissenting) held that a deed of partnership between some opiumlicensees and strangers was not invalid simply because it wascontrary to what may be termed the policy of the Ordinance, butthat it would be invalid only if it contravened some specific provi-sion of the Ordinance. In the present case, as I have already stated,both the policy of the Ordinance and one of its express provisionshave been violated.
The plaintiff’s action is, therefore, not maintainable, and must bedismissed, with costs in both Courts.v
Set aside.
4*
1 {1913) 1$ N. L. R. 337.