FERNANDO, THE CONSERVATOR OF FORESTS AND TWO OTHERS v. TIMBERLAKE INTERNA

026-SLLR-SLLR-2010-V-1-FERNANDO-THE-CONSERVATOR-OF-FORESTS-AND-TWO-OTHERS-v.-TIMBERLAKE-INTERNA.pdf

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FERNANDO, THE CONSERVATOR OF FORESTS ANDTWO OTHERS V. TIMBERLAKE INTERNATIONAL PVT. LTD.AND ANOTHERSUPREME COURTAMARATUNGA, J.,
MARSOOF, P.C. J., ANDRATNAYAKE, P. C. J.
S.C. APPEAL NO. 6/2008S.C. (SPL) L.A. NO. 4/2008C.A. APPLICATION NO. 866/2007JANUARY 27th, 2009
National Environmental Act, No. 47 of 1980 – ManagementPolicy for forests – Section 21 (1) – Rational exploitation offorestresources – Forest Ordinance – Section 8 (3) – Authorizes theForest Department to impose a levy to remove trees from theirstumps in any forest reserve – Sections 12, 20 and S2 – ForestRules, No. 1 of1979 – Applies to forests not included in a reservedor village forests – Forest Regulations, No. 4 of1979 – Regulation3 – Power to prescribefees, royalties and other payments as speci-fied in Section 20 flf (h) of the Forest Ordinance – Writ jurisdiction- Who has the right to invoke writ jurisdiction – Amenability of acontractual or commercial matter to writ jurisdiction – stumpagefee – Proprietary charge – Interpretation Ordinance – Sections 2 (f)and 17 – Stumpage – Royalty – Locus standi – Uberrima fides -stipulation alteri misrepresentation – Stumpage tax – Principle ofrule of approbate and reprobate
The 4th Respondent – Respondent Pussellawa Plantations Ltd., be-came the lessee of the Janatha Estate Development Board (JEDB) ona 99 year lease of Delta Estate. Pussellawa Plantations Ltd., on thebelief that the pinus plantation found in the said estate too belongedto the Company in addition to its tea plantation, submitted a forestrymanagement plan for harvesting the forest produce from the forestryplantation found in the said estate to the Conservator – General ofForests for his approval, After the receipt of the approval from theConservator of Forests, Pussallawa Plantations Ltd. entered into anAgreement with Timberlake International Pvt. Ltd. and under and byvirtue of the said Agreement sold 42,438 pinus trees planted on 25blocks of land to Timberlake International Pvt. Ltd.
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In terms of the Agreement, in addition to the sums paid by TimberlakeInternational Pvt. Ltd., it agreed to pay the ‘stumpage fees’ to theConservator – General of Forests through Pussallawa Plantations Ltd.As there had been a default in the payment of stumpage fees, theConservator – General of Forests directed Pussellawa Plantations Ltd.to stop the felling of trees. It is this order that prompted PussellawaPlantations Ltd. and Timberlake International Ltd. to invoke the writjurisdiction of the Provincial High Court.
In the High Court the parties entered into a settlement and withdrewthe High Court Writ Application. However later there were furtherdisputes between the parties and this led to the decision to suspend theissue of transport permits to clear the harvested timber.
Thereafter, Timberlake International Pvt. Ltd. invoked the jurisdictionof the Court of Appeal on the basis that the action of the Conservator- General of Forests in imposing and demanding stumpage feesis inconsistent with or exceeding the stipulated royalty was ultra vireshis powers under the Forest Ordinance and regulations and rules madethereunder. The Court of Appeal granted interim relief in favour of Tim-berlake International Ltd.
The Conservator – General of Forests filed a leave to appeal applicationto the Supreme Court against the order of the Court of Appeal. TheSupreme Court stayed the operation of the interim relief and grantedspecial leave to appeal against the order of the Court of Appeal on 11questions, 14 ‘a’ to V. Questions ‘a’ to ‘e’ upon which special leave hasbeen granted by the Supreme Court relate to the alleged authority of theConservator – General of Forests to charge and recover ‘stumpage’ forthe pinus timber sold by Pussellawa Plantations (Pvt) Ltd. to TimberlakeInternational Pvt. Ltd.
Held
Timberlake International Pvt. Ltd. is not a mere busy body who wasinterfering in things which did not concern it and as its interestsare in fact affected by the actions of the Forest Conservator,Timberlake International (Pvt.) Ltd has standing to invoke thejurisdiction of the Court of Appeal.
Our Courts have provided relief through prerogative remedies instatutory contexts where the contractual or commercial characterof a particular transaction is overshadowed by some administra-tive or regulatory malady that needs to be remedied. Therefore theCourt of Appeal did not misdirect itself or err in law in seeking toexercise its beneficial writ jurisdiction in the circumstances of thiscase.
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The ‘stumpage fee’ was envisaged as part of the consideration forthe sale of trees. The ‘stumpage’ is a proprietary charge and nota tax. The relevant clauses of the agreement create a contractualobligation to pay stumpage fees.
Where a recited to a contract is in conflict with one or more of itsoperative clauses, the operative clause or clauses will override therecital,
The Royalty rates set out in the Forest Rules, No. 1 of 1979 are notapplicable to the commercial exploitation of timber.
If stumpage fees are to be prescribed by a mere order made by theConservator – General of Forests, as contemplated by Section 2 (f)of the Interpretation Ordinance then the requirement of publishingthe same in the Gazette would not apply.
Prerogative writs such as writs of certiorari and mandamus beingprerogative remedies, are not issued as of right, and are dependanton the discretion of Court. It is trite law that any person invokingthe discretionary jurisdiction of the Court of Appeal for obtainingprerogative relief, has a duty to show uberrima fides or ultimategood faith, and disclose all material facts to Court to enable theCourt to arrive at a correct adjudication.
Per Saleem Marsoof, J., –
“. . . the fact that Timberlake International (Pvt) Ltd. did not goback to the High Court despite alleging a reneging on the settle-ment reached before that Court further undermines its bona fides.In my considered opinion, the circumstances outlined above alonewould be sufficient to disentitle Timberlake International (Pvt.) Ltd.to any discretionary relief. .
Cases referred to:
Durayappa v. Fernando -69 N.L.R. 265
R. v. Paddington Valuation Officer- [1966] 1 QB 380
Premadasa p. Wijewardana and others – (1991) 1 Sri L.R. 333
De Silva v. Margaret Nona – 40 N.L.R. 251
University Council ofVidyodaya University v. Linus Silva – 66 N.L.R.505
Senathiraja v. Brito – 4 C.L. Rec. 149
Kumarihamy v. Maitripala- 44 N.L.R. 153
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Boniferro MU Works ULC v. Ontario – (2009) ONCA 75
Canadian Industrial Gas and Oil Ltd v. Government of Saskatch-ewan- (1978) 2 S.C.R. 545
Connaught Ltd v. Canada (Attorney General) – 620 (2008) S.S.C. 7
Biso Menika v. Cyril de Alwis – (1982) 1 Sri L.R. 368
Alphonse Appuhamy v. Hettiarachchi- 77 N.L.R. 131
Finnegan v. Galadari Hotels (Lanka) Ltd. – (1989) 2 Sri L.R. 272
Verschures Creameries v. Hull & Netherland Steamship Co. Ltd. -(1921) 2 KB 608
Visuvalingam v. Liyanage- (1983) 1 Sri L.R. 203
Ranasinghe v. Premadharma- (1985) 1 Sri L.R. 63
APPEAL from an order of the Court of Appeal
A.Gnanathasan, P.C., Add. SG with S. Balapatabendi, SSC andN. Wigneswaran, SC for Respondent – Petitioners
Manohara de Silva, P.C., with Arienda Wijesundara instructed byBandara Thalagune for Respondents.
Cur.adv.vult.
January 26th 2009SALEEM MARSOOF, J.
This is an appeal from the order of the Court of Appeal dated28th November 2007 staying, until the final hearing anddetermination of CA Application No. 866/2007, the operationof the letter of the 2nd Respondent-Petitioner, the RangeForest Officer, Nawalapitiya, dated 3rd August 2007 (P28)addressed to the Petitioner-Respondent Timberlake Inter-national Pvt Ltd., (hereinafter referred to as “TimberlakeIPLtd”) intimating to the latter that the issue of permits for thetransport of pine timber is suspended until furtherinstructions are received from the 3rd Respondent-Petitioner,the Divisional Forest Officer, Kandy. By the said interim order,the Court of Appeal also directed the 1st Respondent- Petitioner,
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the Conservator-General of Forests and his subordinates, thesaid 2nd and 3rd Respondent-Petitioners (hereinafter sometimescollectively referred to as the “Forest Conservators") “toissue transport permits forthwith to enable the petitioner(Timberlake IPLtd) to transport the timber already felled fromblocks G, U, V, W and X.” The said blocks are depicted inPlan Nos. 7115 and 7116 dated 22nd October 2002 madeby P. Gnanapragasam, Licenced Surveyor, and referred toin the Agreement dated 31st August 2004 (P9) entered intobetween Timberlake IPLtd and the 4th Respondent-Respon-dent Pussellawa Plantation Ltd., (hereinafter referred to as“Pussellawa PLtd”).
When the application for special leave to appeal againstthe said order of the Court of Appeal was supported beforethis Court on 21st January 2008, it granted special leaveto appeal on the substantive questions of law set out inparagraph 14(a) to (k) of the Petition dated 5,h January 2008,and was also pleased to grant interim relief as prayed for inprayers (e), (f) and (g) of the said Petition, which inter alia hadthe effect of staying the operation of the impugned order ofthe Court of Appeal dated 28th November 2007 until the finaldetermination of this appeal. The substantive questions onwhich special leave to appeal was granted, are as follows:
Did the Court of appeal misdirect itself and err in law inits interpretation of the scope and objective of the GazetteNotification No. 1303/17 dated 28.08.2003 marked PI?
Did the Court of Appeal misdirect itself and err in law inholding that the 1st Respondent-Petitioner was bound bythe Gazette Notification marked PI in so far as is relevantto the matters set out in the application?
Did the Court of Appeal misdirect itself and err in law inholding that the 1st Respondent-Petitioner was bound tocharge stumpage fees in accordance with PI?
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Did the Court of Appeal misdirect itself and err in lawby failing to consider the fact that the Pine plantationsin question were planted and maintained by theDepartment of Forest Conservation (hereinafter referredto as the “Forest Department”) from public funds sincethe 1980s?
Did the Court of Appeal misdirect itself and err in law infailing to consider that if the 1st Respondent-Petitionerhad no authority to charge the stumpage fees thenthe entire transaction is null and void and cannot besanctioned by Court?
Did the Court of Appeal misdirect itself and err in lawin failing to consider whether the Petitioner-Respondentcannot approbate and reprobate the charging of stumpagefees as agreed upon?
Did the Court of Appeal misdirect itself and err in lawin failing to consider whether the Petitioner-Respondentwas entitled to seek relief before Their Lordships of theCourt of Appeal, having agreed to a settlement in the HighCourt?
Did the Court of Appeal misdirect itself and err in lawin failing to consider whether the Petitioner-Respondentshould first seek to set aside the settlement arrived at inthe High Court?
Did the Court of Appeal misdirect itself and err in law infailing to consider whether the transaction was amenableto writ jurisdiction?
Did the Court of Appeal misdirect itself and err in lawin failing to consider whether the Petitioner could havemaintained the application, as only the 4th Respondent-Respondent (Pussellawa PLtd) had standing in thismatter, if any?
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Did the Court of Appeal misdirect itself and err in law infailing to consider the serious lack of uberrima fides onthe part of the Petitioner-Respondent?
Factual Matrix
Before examining the above questions in detail, it isnecessary to outline in brief the facts from which the saidquestions may be considered to arise. In terms of the Indentureof Lease bearing No. 61 dated 5th November 1993 (P2) andattested by Oshadi Jeewa Kottage, Notary Public, the 4thRespondent-Respondent-Pussellawa Plantations Ltd., (PussellawaPLtd) became the lessee of the Janatha Estate DevelopmentBoard (JEDB) on a 99 year lease of the Delta Estate, situ-ated in Pupuressa, within the Gampola Division in the KandyDistrict in the Central Province of Sri Lanka. In 2003,Pussellawa PLtd, which apparently believed that the saidestate consisted of a pinus carribaea forestry plantation inaddition to its tea plantation, submitted a detailed forestrymanagement plan for harvesting the forest produce from thesaid forestry plantation through the Ministry of PlantationIndustries to the Conservator-General of Forests. The Con-servator-General of Forests, by his letter dated 3rd September2003 (P4), indicated that he had no objection to theimplementation of the said plan subject to certain guidelines,which included a condition that Pussellawa PLtd shouldobtain clearance under Section 21 of the National Environ-mental Act No. 47 of 1980, as subsequently amended, forsuch activities of the plan that may require environmentalclearance, and that all clear felled areas, except coppiceareas, should be replanted during the same year or the yearfollowing. Thereafter, by his letter dated 18th February 2004(P5), the Managing Director of Pussellawa PLtd applied tothe Conservator-General of Forests through the Director of
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the Plantation Management Monitoring Division (PMMD)of the Ministry of Plantation Industries for his approval forharvesting the pinus forestry plantation at Delta Estate, andthe said letter was forwarded to the Conservator-General ofForests by the Director of PMMD with his letter dated 19thMarch 2004 (P6). The said letter reveals that the Director ofPMMD too believed that “the extent of 74.15 hectares belongsto Delta Estate” and that Pussellawa PLtd is “paying leaserental covering this extent”.
By his letter of 20th May 2004 (P7), the ConservatorGeneral of Forests informed Pussellawa PLtd that forthe granting of permission for the harvesting of the pineplantation in question, the valuation of the plantation isessential, and this would require a “comprehensive enumera-tion” of the plantation to be carried out, but the process can beexpedited through a “sample enumeration of the plantation”.After the Director of Natural Resources of the Ministry ofEnvironment and Natural Resources signified his approvalfor the harvesting of the pinus forestry plantation, andenvironmental clearance obtained, on 31st August 2004,Pussellawa PLtd entered into an Agreement with TimberiakeIPLtd (P9) inter alia to facilitate the harvesting of the said pineplantation in an expeditious manner. Under and by virtue ofthe said Agreement (P9), Pussellawa PLtd sold to the purchaserTimberiake IPLtd approximately 42,438 pinus trees plantedon the 25 blocks of land depicted in Plan Nos. 7115 and 7116dated 22nd October 2002 and made by P. Gnanapragasam,Licenced Surveyor, for a sum of Rs. 850 per tree “exclusive ofdead, rotten, damaged trees or trees with a girth of less than0.45 meters below the bark”.
It is noteworthy in this context that the Agreement (P9)provided that the consideration for the 42,438 pinus treessold thereby shall be paid by Timberiake IPLtd to PussellawaPLtd in the manner set out in Clause 7 of the Agreement.
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Clause 7 provided that in addition to the sum of Rs. 1 millionalready paid by Timberlake IPLtd and acknowledged insub-paragraph (a) of the said clause, the latter shall payPussellawa PLtd a sum of Rs. 9 million at the time of executionof the Agreement, (clause 7 (b) of P9), a further sum ofRs. 10 million within 60 days of the execution of the saidAgreement (clause 7 (c) of P9) and the balance considerationafter the harvesting and removal of the trees as provided indetail in clause 7(e). These provisions did not give rise to anydispute, but what is in controversy in this case is the meaningof clause 7(d) of the Agreement P9, in which TimberlakeIPLtd, as the “purchaser” of the trees from the vendor,Pussellawa PLtd, agreed to “pay the stumpage fees asstipulated by the Conservator-General of Forests for eachblock, prior to the harvesting of each block.” It is significantto note that under the above quoted clause, “stumpage” waspayable by Timberlake IPLtd to the Conservator-General ofForests through Pussellawa PLtd. It is also significant to notethat on the very same date the said Agreement P9 was en-tered into, namely 30th August 2004, the General Manager,Forestry of Pussellawa PLtd wrote the letter marked P10 tothe Conservator General of Forests, in which he stated asfollows:-
“We particularly refer to the copy of the letter dated the21st July 2004 from the Director, Natural Resources ofthe Ministry of Environment and Natural Resources, sentto you under cover of our letter of the 4th August 2004,wherein we received approval for harvesting and removalof the Pinus plantation of 74.15 hectares at Delta estate.We thank you for your concurrent approval.
We are now pleased to inform you that we have inconsequence, sold the said trees to the firm. Timberlake
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International Pvt Ltd of 351, Pannipitiya Road,Thalawatugoda, and the harvesting and removal of thesaid trees would be carried out by them in accordancewith the attached harvesting schedule, as required by theDirector Natural Resources.
We confirm that Timberlake International Pvt. Ltd, will, onour behalf, make to you the stumpage payment for eachblock, on your enumeration and will harvest each blockonly after such payment and your approval
We also advise that we have authorized TimberlakeInternational Pvt Ltd to act on our behalf directly withyour Department in relation to any matters pertainingto the harvesting, removal and transportation of the saidtrees from Delta estate” (italics added).
It is clear from the above that Timberlake IPLtd,. havingpurchased approximately 42,438 pinus trees planted on the25 blocks of land depicted in Plan Nos. 7115 and 7116 dated22nd October 2002, stepped into the shoes, so to speak, ofPussellawa PLtd as far as the obligation to pay stumpage tothe Conservator-General of Forests was concerned. It is alsoapparent from the correspondence including the letter dated29th July 2004 (Pll XI) addressed to Pussellawa PLtd by theConservator-General of Forests that he himself was under theimpression that the pinus plantation belonged to PussellawaPLtd and that the pine trees were planted by the ForestDepartment. On this basis, for the 1,146 pinus trees thatstood Block 01A with total volume of 528.158 cubic meters asenumerated by him, he ordered that a sum of Rs. 753,755.62be paid as stumpage. I quote below the last paragraph of thesaid letter which is most revealing.
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“Please make arrangements to pay this amount. HoweverI request you to provide documentation to prove that thisarea has been released to you by LRC. Furthermore, asthis activity amounts to clear felling of forest plantationsin more than I hectare, Please obtain the environmentalclearance as per the National Environmental Act beforeundertaking felling.”
There is no material to show whether Pussellawa PLtddid produce any documentary evidence as to whether Block01A of the forest plantation was released to Pussellawa PLtd,but that was not a stumbling block to the harvesting havingproceeded- with as contemplated by the said Agreement(P9). By the letters dated 7th November 2004, 22nd December2004, 14th February 2005, 5th May 2005, 27th July 2005 and13th October 2005 marked respectively as Pll X2 to X7, alladdressed to Pussellawa PLtd., the Conservator-General ofForests determined the aggregate stumpage fees payable withrespect to the pine trees to be removed from blocks 01A, 01B,01C, 17Q, 04D, 06F and 16P of the pine plantation as setout in the following table embedded into paragraph 17 of thePetition filed in the Court of Appeal by Timberlake IPLtd:
Table I
Block No. Volume incubic meters (m3) Total
Stumpage Stumpage
Rate
01A 528.158 Rs. 753,755.62 Rs. 1,427.4
01B 673.79 Rs. 690,253.40 Rs. 1,024.43
01C 1082.381 Rs. 1,009,535.62 Rs. 932.70
17Q 1453.959 Rs. 1,618,450.10 Rs. 1,113.13
04D 1064.465 Rs. 1,200,147.06 Rs. 1,296.58
06F 1659.599 Rs. 1,760,520.50 Rs. 1,060.81
16P 1444.982 Rs. 1,671,524.45 Rs. 1,330.30
All 7 blocks 7907.334 Rs. 8,704,186.75 Rs. 1,169.30
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According to Timberiake IPLtd the stumpage rate on thebasis of which the stumpage in the third column of Table Iwas computed is the rate shown in the fourth column of thesaid Table and the average stumpage rate was Rs. 1,169.30per cubic meter. This is a premise which is contested by theForest Conservators and needs closer examination, but it iscommon ground that neither Pussellawa PLtd nor TimberiakeIPLtd, disputed the said enumerated stumpage, which werepaid in due course.
The first real dispute between the parties arose whenby his subsequent letter addressed to Pussellawa PLtddated 25th November 2005 (P14a), the Conservator General ofForests claimed an aggregate of Rs. 29,672,224.00 asadvanced payment of stumpage for a Jurther 17 blocks. It isrevealed in this letter that the aforesaid amount was arrivedat using a sampling method and it is also stated specificallyin the letter that Pussellawa PLtd will be required “to paythe difference once the actual felled volumes are calculatedafter the felling of all trees.” It is alleged by Timberiake IPLtdthat the said stumpage was worked out at the much higherrate of Rs. 1,184.00 per cubic meter, which was higherthan the average rate of Rs. 1,169.30, shown in Table 1, byRs. 14.30 per cubic meter. Although Pussellawa PLtd by itsletter dated 5th December 2005 (P14b) protested that therate Rs. 1,184.00 “seems to be high”, it nonetheless agreedwith the said stumpage unit price of Rs. 1,184.00 but soughtpermission to make the payments “block-wise” as in the pastprior to harvesting each block, and not at once. In view ofthe issues that arise for decision in this case, it is importantto note at this stage that the Conservator General ofForests in his response dated 26th January 2006 (PI5a) sentto Pussellawa PLtd, reiterates very clearly that the timber .volume of these 17 blocks was calculated using sample data
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instead of total enumeration as Pussellawa PLtd requested theestimates very urgently. It was also categorically stated thatalthough the selling price of the State Timber Corporationhad previously been used in the computation of stumpagefees on the assumption that it reflected the current marketprice, it has been revealed that the selling price fixed for pinelogs by the State Timber Corporation is significantly lowerthan the prevailing market price for pinus timber. TheConservator General of Forests stated in this letter that theForest Department is compelled to use the new methodologydeveloped for stumpage calculation based on the market pricefor logs, and as a result of the above changes the stump-age value for remaining pine blocks will have to be revised,and will be intimated to Pussellawa PLtd in due course. TheConservator General of Forests further stated that asrequested by Pussellawa PLtd the valuation will be doneblock-wise giving priority to the next block to be harvested.
It would also appear that the Conservator of Forests,considering an urgent request made by Pussellawa PLtdto harvest block 01R, having made a very approximate esti-mate of the “timber volume” of that block and using the testof “market price”, computed the estimated stumpage fee forthat block at Rs. 4,534,139.00 and requested Pussellawa PLtdto pay a sum of Rs.5,214,259.85 inclusive of value added taxfor the grant of permission to harvest that block. However,considering representations made on behalf of PussellawaPLtd, this amount was subsequently revised by the Conser-vator-General of Forests using the “Timber Corporation salerates”, who requested Pussellawa PLtd by his letter dated 9thFebruary 2006 (P17) to pay a stumpage of Rs. 1,405,850.00as an “interim payment” pending the enumeration of the blockto ascertain the actual volume of timber. Pussellawa PLtdwhile objecting to the computation on the basis that it was
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erroneous and not in accordance with the law, nonethelesspaid a sum of Rs. 1,616,727.50 inclusive of value addedtax, with respect to block 01R and commenced harvesting.However, when Pussellawa PLtd made default in the paymentof the enumerated stumpage fees prior to harvesting each ofthe 17 blocks referred to in the letter dated 25th November
(PI4a) in contravention of the promise it made in its let-ter of 5th December 2005 (P14b), matters came to a head. Theresult was the letter dated 6th April 2006 (PI8) sent by theConservator-General of Forests directed the General Manager- Forestry of Pussellawa PLtd to stop with immediate effect,the felling of pine trees “belonging to the Forest Departmentin Delta Estate, Pupuressa.” It is this order that promptedPussellawa PLtd and Timberlake IPLtd to invoke the writjurisdiction of the Provincial High Court in this connection.
The High Court Writ Application
On 19th April 2006, Pussellawa PLtd and TimberlakeIPLtd filed HC WA Application No. 07/06 in the High Courtof the Western Province citing the Conservator-General ofForests and other officials as respondents, seeking in termsof Article 154P of the Constitution inter alia a writ of certiorarito quash the said decision of the Conservator-General ofForests contained in the letter dated 6th April 2006 (PI8).
During the pendency of the said application, the partieshad a number of discussions with a view to settling thedispute. Certain proposals were made in writing by theGeneral Manager – Forestry of Pussellawa PLtd by his letterdated 6th July 2006 (P21) addressed to the Conservator-General, who responded with his letter in reply dated 27th July
(P22) which suggested the following terms of settlementformulated with the advice of the Attorney – General:-
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Pussellawa PLtd to pay stumpage for the excessvolume of pinus timber already removed byTimberlake IPltd prior to Block 01-R on the basisof the rates already calculated. (The excess volumewill be calculated by using the measurements oflogs indicated on the transport permits issued in thiscontext);
Pussellawa PLtd to pay stumpage on the basisof actual volume once the felling of Block 1-R iscompleted;
Pussellawa to abide by the new sale rates to be fixedby the Committee appointed by the Secretary of therelevant Ministry, and until such time the currentState Timber Corporation prices to be used forcalculation of stumpage (italics added)
Pussellawa PLtd and Timberlake IPLtd, having acceptedthe said settlement in respect of the felling of trees up to block01R, withdrew the aforementioned writ application on 28thJuly 2006, and by his letter dated 16th August 2006 (P23), theConservator-General of Forests allowed Pussellawa PLtd tore-commence harvesting block 01R subject to the conditionsset out above.
Giinng Effect to the Settlement
In pursuance of the settlement reached by the parties asaforesaid, the Conservator General of Forests calculated theactual volume of timber removed from blocks 01 A, 01B, 01C,17Q, 04D, 06F and 16P referred to in Table I based on theactual measurements of logs indicated on the relevanttransport permits as contemplated by condition 1 of theterms of settlement set out in P22, and by his letter dated 7th
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November2006 (P24) addressed to Pussellawa PLtd, demandedan aggregate of Rs. 9,836,853.61 as the balance stumpagepayable with respect to these lots. The particulars relevant tothis claim were set out in the said letter as tabulated below:
Table II
Block Actual
Value
Timber
removed
(m2) EstimatedVolumeof Timberfor whichstumpageis alreadypaid(m3) Difference
in
Volume
(m3) Stumpagefor ActualVolumeRs. Stumpageto be paidRs. Stumpage
already
paid
Rs.
01A 1,119.426 528.158 591.27 1,408,680.85 753,755.62 654,92523
01B 868.889 673.790 195.10 1,289,319.41 690355.40 599,064.01
01C 1,564.444 1,082381 482.06 2,185,104.14 1,009,53562 1,175368.52
17Q 2,115.773 1,453.959 661.81 2340,104.14 1,009,53562 1,175,568.52
04D 1,687.582 1,064.465 623.12 2,394,652.42 1300,147.06 1,194,50536
06F 2,268.729 1,659,599 609.13 3,941,235.83 1,530,887.40 2,410348.43
16P 2,267.731 1,444.982 822.75 4,252£48.69 1,671,524.45 2380,72434
Total 11,892.574 7,907.334 3,98524 183H.40936 8,474,555.65 9,836,,853.61
It is to be noted that the stumpage fees demanded by thesaid letter dated 7th November 2006 (P24) and set out in theabove table were exclusive of value added tax. Pussellawa PLtdresponded to this demand by its letter dated 20th November2006 (P24a) and while not contesting the volume figures,upon which the difference in the quantity of timber amount-ing to 3,985.24 cubic meters was arrived at for the purposeof computing the aggregate amount of Rs. 9,836,853.61demanded by P24, nevertheless conceded that only a sum ofRs. 4,778,573.00 was payable as balance stumpage for blocks01 A, 01B, 01C, 17Q, 04D, 06F and 16P. Pussellawa PLtddisputed the amount claimed by P24 mainly on the basis that
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the Conservator-General had used a higher rate of stumpagefrom what had been originally used, in violation of law as wellas the settlement reached in the High Court. In paragraph 44of its Petition filed in the Court of Appeal, Timberlake IPLtdhas alleged that “even though it was agreed to pay the samerate as before for the said blocks (vide P20, P21, P22), the1st Respondent (Conservator-General of Forests) has increasedthe unit price per cubic meter for blocks 01 A, 01B, 01C, 17Q,04D, 06F and 16P in respect of the excess volume removed."In paragraph 44 of the Petition, Timberlake IPLtd soughtto highlight the difference in the rate of stumpage using thefollowing table:
Table III
Block Stumpage/m3(earlier rate) Stumpage for theexcess volume m3 Difference
01A Rs. 1,427.4 Rs. 1,258.40 Rs. (168.74)
01B Rs. 1,024.43 Rs. 1,483.87 Rs. 459.44
01C Rs. 932.70 Rs. 1,396.73 Rs. 464.03
17Q Rs. 1,113.13 Rs. 1342.38 Rs. 229.25
D4D Rs. 1,296.58 Rs. 1,631.83 Rs. 335.25
06F Rs. 1,060.81 Rs. 1,997.78 Rs. 936.97
16P Rs. 1,330.30 Rs. 2,156.38 Rs. 826.08
In paragraph 45 of its Petition filed in the Court of Appeal,Timberlake IPLtd has referred to the several appeals allegedto have been made by Pussellawa PLtd against the stumpagecomputation in P24, and has stated that as the saidappeals were turned down, a settlement was reached to paythe said sum of Rs. 9,836,853.61 in 12 monthly installments
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commencing January 2007 “notwithstanding the severeeconomic hardship” faced by Timberlake IPLtd. If thecontention of Timberlake IPLtd is correct this would resultin an overpayment of Rs. 5,058,280.61 as stumpage feeswith respect to blocks 01A, 01B, 01C, 17Q, 04D, 06F and16P. However, it needs to be observed that the contention ofTimberlake IPLtd that as shown in Table III the Conservator-General of Forests has computed the sum of Rs. 9,836,853.61as balance stumpage due with respect to the said blocksadopting a higher rate of stumpage is altogether unfounded,amounts to a gross misrepresentation of facts. It will beseen from Table IV below that the rate adopted with respectto each block has been the same, and the difference in thestumpage fees claimed with respect to each block in PI 1 XIto X7 (as estimates set out in Table II) and P24 (on the basisof actual volume) has been due to the difference in the volumeof timber.
Table IV
Block Estimated Stumpage as perTable II Actual Stumpage as per P24
Volume
(m3) Rs. Rate perm3 Volume
(m3) Rs. Rate perni3
1A 528.158 753,755.62 1427.140401 1119.426 1597577.62 1427.139999
2B 673.790 690,253.40 1024.434022 868.889 890115.96 1024.430002
3C 1,082.381 1,009,535.62 932.700000 1564.444 1459156.92 932.700000
17Q 1,453.959 1,618,450.10 1113.133245 2115.773 2355130.4 1113.133245
4D 1,064.465 1,380,169.12 1296.584782 1687.582 2188085.07 1296.548782
6F 1,659,599 1,760,520.50 1060.810774 2268.729 2406692.17 1060.810776
16P 1,444.982 1,922,253.11 1330.295542 2267.731 3016752.44 1330.295542
Meanwhile, there had been some discussions in regard tothe modalities of payment of stumpage, and it appears that inorder to facilitate the harvesting of blocks 01R, 02S, 03T and
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05E without disruption, by the letter dated 28th August 2006(P25a) Pussellawa PLtd suggested to the Forest Departmentthat it will deposit a sum of Rs. 2 million upfront with respectto each of the said blocks, and as the deposit is reduced asthe logs are harvested and removed, it will “replenish the de-posit back to Rs. 2mn.” It was further stated in the said letterthat “the transport permits issued by the forest officer at sitewill allow us to calculate the volume removed by us from thesite.” This was readily agreed to, as reflected in the responseof the Conservator-General of Forests dated 7th September2006 (P25b). It is important to note the sense of urgency inthe last paragraph of the said letter in which the Conserva-tor-General states as follows:-
“Once the amount of Rs. 250,000 is reached, you haveto replenish the deposit back to 2 million before continu-ing with the removal of logs. I shall inform you when thedeposit reaches Rs. 250,000.”
There is no dispute that the initial deposit of Rs. 2 millionwith respect to each block was duly made. However, It wasthe failure on the part of Pussellawa PLtd to consistentlyreplenish the initial deposit to Rs. 2 million as undertakenby its letter dated 28th August 2006 (P25a), while largequantities of the pinus timber from blocks 01R, 02S, 03T and05E were being removed by Timberlake IPLtd, that promptedthe Conservator-General to insist in his letter dated 2ndAugust 2007 (P27) addressed to Pussellawa PLtd that forharvesting the remaining blocks of G, U, V and W, a total ofRs. 12 million should be paid as deposit upfront.
This situation also led to the decision to suspend theissue of transport permits with immediate effect until furtherinstructions in this regard are issued by the Divisional ForestOfficer, Kandy, which was communicated to the Site Managerof Timberlake IPLtd by the Range Forest Officer, Nawalapitiyaby his letter dated 3rd August 2007 (P28). It was this decision
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to suspend the issue of transport permits to clear theharvested timber that was the immediate cause for the filing,by Timberlake IPLtd., of the writ application from which thisappeal arises, seeking inter alia to quash by way of certiorariand stay the decisions contained in P28.
When the harvesting of blocks 01R, 02S, 03T and 05Ewere completed, the Conservator-General of Forests, by hisletter dated 7th August 2007 (P26) initially demanded anaggregate of Rs. 33,343,620.05 as stumpage from PussellawaPLtd., based on the market value prevailing in 2007. However,it appears that the Conservator-General of Forests took theinitiative to revise the stumpage fees having realized that theharvesting of blocks 01R and 02S had taken place by the endof 2006. Accordingly, the stumpage claimed in regard to theseblocks were reduced by applying the 2006 market value, andby his letter dated 6th September 2009 (P29), the Conservator-General claimed an aggregate of Rs. 29,345,157.13 asstumpage fees for blocks 01R, 02S, 03T and 05E. After settingoff .the total initial payments/deposits aggregating toRs. 7,616,727.50 and adding to the balance due the applicablevalue added tax, the balance payment demanded by theConservator-General of Forests was Rs. 26,130,203.20, abreakdown of which was given in the said letter as follows:
Table V
Block
No Extract Volumein cubic meters Stumpage
Rs. Initial PaymentRs. Balancedue Rs.
01A 1623.91 7,640,670.97 1,616,727.50 6.023,943.47
02S 979.64 4,518,815.56 2,000,000.00 2,518,815.56
03T 1,565.40 10.152.570.96 2,000,000.00 8,152,570.96
05E 1,881.10 11,434,873.21 2,000,000.00 9,434,873.21
Total 6,050.05 33,746,930.70 7,616,727.50 26,130,203.20
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It is necessary to observe that though Timberlake IPLtdhas stated that to the best of its knowledge no committeehas been appointed to implement the settlement reachedbefore the High Court, it is pertinent to note that TimberlakeIPLtd has not sought the enforcement of such settlement byseeking the appointment of such a committee to determinestumpage. Timberlake IPLtd has also failed to annex any letterby which it or Pussellawa PLtd addressed the Conservator-General of Forests challenging the stumpage rates on thegrounds that it had not been determined by a committee asenvisaged in the High Court settlement. In the light of thesettlement reached before the High Court, if such commit-tee had in fact not been appointed, it would be reasonable toexpect that such non-appointment would be the firstcomplaint that would be preferred by Timberlake IPLtd. It hasalso failed to go before the High Court to complain of suchalleged reneging on the settlement arrived at. Furthermore,Timberlake IPLtd had consistently claimed that not only theConservator-General of Forests, but other public officers alsohad intimated valuation and rates. In these circumstances,it is difficult to accept Timberlake IPLtd’s position that nocommittee had in fact been appointed to advise the Conservator-General on the formula for valuation of stumpage fees asagreed in the High Court.
The Court of Appeal Writ Application
On 8th October 2007, Timberlake IPLtd filed CA ApplicationNo. 866/2007 against the Forest Conservators, citingPussellawa PLtd also as 4th Respondent, seeking underArticle 140 of the Constitution inter alia a writ in the natureof certiorari to quash the decisions relating to the paymentof stumpage made by the Forest Conservators, a writ in thenature of mandamus directing the Conservator-General of
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Forests to charge stumpage for the pine wood harvested ata rate not exceeding Rs. 500 per cubic meter which is the“royalty” applicable to pinus timber under the law, and forcertain interim relief to stay the operation of P28 and tocompel the issue of transport permits. The basis of thisapplication was that in terms of the Notification issued bythe Conservator-General dated 28th August 2003 by virtueof power vested in him under Regulation 5(2) of the ForestRegulations No. 1 of 1979 made under Section 8 of theForest Ordinance (Cap. 451), as subsequently amended, andby Rule No. 20 of the Forest Rules, No. 1 of 1979 framedunder Section 20 (1) of the Forest Ordinance, and publishedin the Gazette Extraordinary bearing No. 1303/17 dated 28thAugust 2003 (PI) the royalty prescribed for pinus timberunder the category of “Class II Timber” was Rs. 500 percubic meter. It was expressly averred by Timberlake IPLtd inparagraph 5 of the application filed in the Court of Appealthat the royalty prescribed in PI “apply in respect of ReservedForests and any other forest other that Reserved or VillageForests.” In paragraph 7 of the said Petition, TimberlakeIPLtd claimed that “the calculation and demand of stumpagein excess of the prescribed rate is unlawful.” In other words,the basis of the writ application was that the action of theConservator-General of Forests in imposing and demandingstumpage fees inconsistent with or exceeding such royaltywas ultra vires his powers under the Forest Ordinance andregulations and rules made thereunder.
When the application was supported in the Court ofAppeal on 18th October 2007, learned President’s Counselappearing for Timberlake IPLtd contended that the two terms“royalty” and “stumpage” were synonymous and that it wasillegal to charge any stumpage inconsistent with or exceed-ing such royalty prescribed in PI, while the learned Deputy
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Solicitor-General argued that “stumpage” was distinct anddifferent in nature and character from “royalty" and thatunlike the latter, the former was a proprietary charge thatcan be imposed based on the market value of the timber lesscertain expenses. After hearing the submissions of learnedCounsel, the Court granted interim relief by staying theoperation of P28, the letter by which Timberlake IPLtd wasintimated of the decision to temporarily suspend the issueof permits to transport pinus timber from the site at DeltaEstate, Pupuressa.
Thereafter, on 26th November 2007 the Court of Appealtook up for inquiry the motion dated 9th November 2007 filedby Timberlake IPLtd seeking further interim relief directingthat the Forest Conservators to issue permits to enableTimberlake IPLtd to transport timber from blocks G, U, V, Wand X of the pine plantation without any further payment ofstumpage. The Court of Appeal, having heard submissions oflearned Counsel, made the impugned order on 28th November2007 holding inter alia that in terms of the NotificationPI, the Conservator-General of Forests is empowered toprescribe the fees, royalties or other payments in respect ofthe collection of forest produce; that the royalty so prescribedin PI for pinus timber is Rs. 500 per cubic meter; and that itis expressly provided in Article 148 of the Constitution thatno public authority can impose taxes, rates or any other levyexcept by or under the authority of a law enacted by Parlia-ment. Referring to submissions made by the learned DeputySolicitor-General who appeared for the Forest Conservations,the Court observed as follows –
“Learned DSG urged that stumpage fee is paid for the right
to severe the trees from their stumps and to remove them
from the forest. Thus, the learned DSG argued that the
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rules framed under Section 20(1) of the Forest Ordinancedo not apply to the Petitioner and that stumpage fee isdetermined by the 1st Respondent as shown in P27.
It is to be observed that when the statute imposes apecuniary burden on a citizen, it has to be interpreted onthe basis of the language used therein, and according to theproper meaning and intent of the Legislature. Between a taxand a fee, there is no generic difference because in a senseboth are compulsory extractions of money from a citizen,Such power of imposition of a tax or a fee must be veryspecific and there is no scope of implied authority forrecovering such tax or fee. The 1st Respondent must actstrictly within the parameters of the authority given tohim under the Forest Ordinance and it will not be properto bring the theory of implied intent or the concept ofincidental or ancillary power in exercising suchauthority.
Accordingly the Court concluded that the rules framedunder the existing law do not permit the Conservator-Generalof Forests to impose a stumpage fee that exceeds the royaltyprescribed in PI, and that the stumpage fees set in P26, P27and P29 was illegal, unreasonable and ultra vires. On thisbasis the Court of Appeal made order staying, until the finalhearing and determination of the case, the operation of theletter of the Range Forest Officer, Nawalapitiya, dated 3rdAugust 2007 marked P28 purporting to suspend the issue ofpermits for the transport of pine timber, and further directedthe Conservator-General of Forests and his subordinateofficers to issue transport permits forthwith to enableTimberlake IPLtd to take away the timber already felled fromblocks G, U, V, W and X of Plan Nos. 7115 and 7116 dated
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22nd October 2002. It is this order of the Court of Appeal thatis the subject matter of this appeal, in regard to which specialleave to appeal has been granted.
The Question of Standing
In regard to the numerous questions on which specialleave to appeal has been granted by this Court, it needs tobe observed that there are two which are rather preliminaryin nature, and should therefore be considered first. The firstamongst them is the question of locus standi, which has beenraised as question (j) in the following manner:
(j)Did the Court of Appeal misdirect itself and err inlaw in failing to consider whether the Petitioner couldhave maintained the application, as only the 4th Respon-dent-Respondent (Pussellawa PLtd) had standing in thismatter, if any?
Learned Additional Solicitor General has submitted thatsince it was Pussellawa PLtd that had submitted a forestrymanagement plan and obtained permission to harvest theforestry plantation in question, and since Timberlake IPLtdhad entered the arena as a purchaser of the timber intendedto be harvested on the basis of a purely commercial relation-ship embodied in the Agreement dated 30th August 2004 (P9)which had been entered into between Pussellawa PLtd andTimberlake IPLtd, the latter had no legal standing to have andmaintain the application filed in the Court of Appeal. The gistof his submission was that insofar as Pussellawa PLtd hasagreed to pay the stumpage as stipulated by the Conservator-General of Forests, Timberlake IPLtd, being a mere purchaserof the trees, had no standing to question such arrangement.
Learned President’s Counsel for Timberlake IPLtd hasresponded to these submissions by inviting the attention
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of Court to Clause 7(d) of the Agreement P9, wherein it isexpressly provided that Timberiake IPLtd, as the purchaserof the pinus trees from the vendor, Pussellawa PLtd, shouldpay the “stumpage fees” to be stipulated for each block to theConservator-General of Forest through Pussellawa PLtd. Healso emphasized that as contemplated by clause 08 of theAgreement P9, on the very day P9 was executed, PussellawaPLtd sent the letter dated 30th August 2004 (P10) to theConservator-General of Forests informing him that TimberiakeIPLtd has been authorized to deal with the Forest Departmentfor and on behalf of Pussellawa PLtd “in relation to thesubject matter of this Agreement”. The following passage fromthe said letter is worthy of note:-
“We confirm that Timberiake International Pvt Ltd, will,on our behalf, make to you the stumpage payment foreach block, on your enumeration and will harvest eachblock only after such payment and your approval. Wealso advise that we have authorized Timberiake Inter-national Pvt Ltd to act on our behalf directly with yourDepartment in relation to any matters pertaining to theharvesting, removal and transportation of the said treesfrom Delta estate. * (italics added)
It will be seen that Timberiake IPLtd is not a merepurchaser of trees, and it has also been authorized to acton behalf of Pussellawa PLtd in relation to any matterspertaining to the harvesting, removal and transportation ofthe trees from Delta Estate. Apart from this, it is also relevantto note that the letter dated 3rd August 2007 (P28) by whichthe Range Forest Officer, Nawalapitiya intimated his decisionto suspend the issue of permits for the transport of pinustimber was in fact addressed to the Site Manager, TimberiakeIPLtd, and this is clearly because even the officials of the
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Forest Department were aware that any suspension of theissue of transport permits would directly affect the rights ofTimberlake IPLtd.
Although the learned Additional Solicitor-General choseto argue the question of standing on first principles anddid not cite any case law, he could easily have relied on theclassic decision in Dumyappa v. Femandd1', in whichthe Privy Council held that the Mayor of a MunicipalCouncil does not have standing to seek redress from thecourts with respect to a legal wrong or injuiy caused to aMunicipal Council. However, the Learned President’s Counselfor Timberlake IPLtd had submitted that our law relatingto locus standi has developed a great deal from the days ofDurayappa v. Fernando, (supra) and in view of the liberal attitude towards standing adopted by the courts, TimberlakeIPLtd has standing to have and maintain the writ applicationfiled by it. He submitted that the law has moved forward andbecome progressive, and relies on the following dictum of LordDenning, in R v. Paddington Valuation Officer12' –
“The Court would not listen, of course to a merebusybody who was interfering in things which did notconcern him. But it will listen to anyone whose interestsare affected by what has been done.”
As H. W. R. Wade and C. F. Forsyth note in theircelebrated work Administrative Law Ninth Edition, page684, “prerogative remedies, being of a ‘public’ character asemphasized earlier, have always had more liberal rules aboutstanding than the remedies of private law.” Sri Lankan courtshave shown an increasing willingness to open out theirjurisdiction to whoever whose interests are affected by
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administrative action, and in Premadasa v. Wijewardena andothers ,3,at 343 Tambiah, C. J. observed that –
“The law as to locus standi to apply for certiorari maybe stated as follows: The writ can be applied for by anaggrieved party who has a grievance or by a member ofthe public. If the applicant is a member of the public, hemust have sufficient interest to make the application.”
There can be no doubt that Timberiake IPLtd is not amere busy body, and its interests are indeed affected bythe actions of the Forest Conservators. I therefore hold thatTimberiake IPLtd had standing to invoke the jurisdiction ofthe Court of Appeal in regard to this matter, and proceed toanswer question (j) in the negative.
Commercial Nature of the Transaction and its Amenabilityto Writ Jurisdiction.
The other question which has the character of apreliminary objection is the question of the amenability of thetransaction embodied in P9 to writ proceedings. This questiontakes the following form:
(i) Did the Court of Appeal misdirect itself and err in law infailing to consider whether the transaction was amenableto writ jurisdiction?
The main thrust of the submissions of the learnedAdditional Solicitor-General on this question was that sincethe transaction between Pussellawa PLtd and TimberiakeIPLtd was purely commercial in nature, it was not amenableto the writ jurisdiction of the Court of Appeal. In other words,this contract was in the realm of private law and did notattract public law remedies such as the writ of certiorari or
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mandamus. As against this, learned President’s Counsel forTimberlake IPLtd has pointed out that neither the Conser-vator-General of Forests nor any other governmental agencywas party to the Agreement P9 which has been an agree-ment between Pussellawa PLtd and Timberlake IPLtd only,and that as far as the Forest Department is concerned, therehas been absolutely no contractual nexus. This is not en-tirely correct, since as learned Additional Solicitor Generalhas ventured to stress, the Conservator-General of Forestsis entitled, under our common law principle of stipulationalteri, to benefit from any stipulation contained in a contractbetween two other persons. As Keuneman, J. observed in DeSilva v. Margaret Nona at 253, a person is “entitled underthe Roman-Dutch law to enforce by action the pact in hisfavour, although he was not one of the contracting parties(videPerezius on Donations, BK. VUI; tit. 55, s, 5).” LearnedPresident’s Counsel for Timberlake IPLtd, has howevercontended that the writ application from which this appealarises was filed by Timberlake IPLtd in the Court of Appealto challenge the validity of the “stumpage fee” sought to belevied by the Conservator-General of Forests on the basisthat it was far in excess of the royalty that can belawfully levied in teems of the Notification bearingNo. 1303/17 dated 28th August 2003 (PI) made by theConservator-General of Forests, and the wrongful actiontaken by the Range Forest Officer, Nawalapitiya to suspendthe issue of transport permits to take out the harvestedtimber.
As Wade and Forsyth observe in their work AdministrativeLaw Ninth Edition, page 668 “contractual and commercialobligations are enforceable by ordinary action and not byjudicial review.” While this principle is illustrated by manyjudicial decisions such as University Council of Vidyodaya
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University v. Linus Silva, which have had the effect ofexcluding contractual disputes from the pale of judicialreview through prerogative remedies, our courts havenevertheless provided relief through prerogative remediesin statutory contexts where the contractual or commercialcharacter of a particular transaction is overshadowed bysome administrative or regulatory malady that needs to beremedied.
In the writ application filed by Timberlake IPLtd, whatwas sought to be remedied are the allegedly wrongful actionsof the Conservator-General of Forests and his subordinates inthe context of their regulatory functions. The writ applicationfrom which this appeal arises was filed by Timberlake IPLtd inthe Court of appeal to challenge the validity of the “stumpagefee” sought to be levied by the Conservator – General ofForests on the basis that it was far in excess of the royaltythat can be lawfully levied in terms of the Notification bearingNo. 1303/17 dated 28th August 2003 (PI) made by theConservator-General of Forests, by virtue of power vested inhim under Regulation 52 of the Forest Regulations No. 1 of1979 and Rule No. 20 of the Forest Rules, No. 1 of 1979. Thewrit application was prompted by the action taken by theRange Forest Officer, Nawalapitiya by his communicationdated 3rd August 2007 (P28), which had the effect of suspendingthe issue of transport permits for the transport of the harvestedtimber which was required in view of the provisions ofSection 25 of the Forest Ordinance read with Regulation2 of the Forest Regulations, No. 01 of 2005 made by theMinister of Environment and Natural Resources in terms ofSection 24 of the Forest Ordinance and published in the GazetteExtraordinary bearing No. 1380/30 dated 18th February 2005.Since, pinus timber has not been specifically excluded byColumn II of the Schedule to the said Regulation, the transport
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of the harvested timber without a permit, out of theAdministrative District of Kandy, within which DeltaEstate is situated, was a punishable offence. In all thesecircumstances, I have doubt that the Court of Appeal did notmisdirect itself or err in law in seeking to exercise itsbeneficial writ jurisdiction in the circumstances of this case,and therefore answer question (i) in the negative.
Authority to Recover Stumpage
Questions (a) to (e) upon which special leave to appealhas been granted by this Court relate to the alleged authorityof the Conservator-General of Forests to charge and recover“stumpage” for the pinus timber sold by Pussellawa PLtdto Timberlake IPLtd by the Agreement marked P9. It hasbeen contended by the learned Additional Solicitor-Generalthat the pinus carribaea forestry plantation in Delta Estate,Pupuressa is State owned, and was in any event not includedin the extent of land leased out by the JEDB to PussellawaPLtd by the Indenture of Lease bearing No. 61 dated 5thNovember 1993 (P2). He submitted that as explicitly stated inthe letter dated 19th March 2004 sent by the Director of thePlantation Management Monitoring Division of the Ministryof Plantation Industries with copy of the Managing Director ofPussellawa PLtd, the pinus trees of the said plantation “wereplanted by the Forest Department in the early 80s, whilst theestate was under the management of JEDB”.
Learned Additional Solicitor-General has submittedthat the “stumpage” in question was claimed in terms of theprovisions of the Agreement (P9) entered into betweenPussellawa PLtd and Timberlake IPLtd, Clause 7 (d) ofwhich contemplated the payment of such “stumpage” to theConservator-General of Forests as the trees in question fromwhich the timber was produced belonged to the State. Hestressed that the Notification bearing No. 1303/17 dated
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28th August 2003 (PI) had no application in this case, and inany event, the Forest Conservators were not bound in law tocompute “stumpage” on the basis of the rates set out inthe said notification. He argued with great force that the“stumpage” claimed by the Forest Department was distin-guishable from “royalty” chargeable in terms of PI whichhe stressed was not applicable to the matter in dispute inthis appeal. He submitted therefore that the Court of Appealhad misdirected itself and erred in law in its interpretationof the scope and objective of PI and had misdirected itself inholding that the Conservator-General of Forests was boundby it in giving effect to Clause 7(d) of P9.
Learned President’s Counsel for Timberlake IPLtdcontested the position that the forestry plantation in Delta.Estate belonged to the State, and pointed out that in therecital to the Agreement (P9) for the sale of the pine trees inquestion it was expressly stated that Pussellawa PLItd “is thetitle holder and is well and sufficiently seized and possessedof or otherwise well and truly entitled to the pinus carribaeacultivation at Delta Estate in Pupuressa and containing inextent 74.15 hectares”. He submitted that even if the treeshad been planted by the Forest Department, the common lawprinciple encapsulated in the maxim ■ superficies solo cred-it (Gaius, II. 73) had the effect of conferring the ownershipof the trees to the owner of the land, that “stumpage” is aproprietary charge available by virtue of ownership ofthe trees, and in the absence of such ownership, the onlypayment the Conservator-General of Forests and hissubordinates are entitled to is the “royalty” computed at therate of Rs. 500 per cubic meter applicable to Class II Timberunder the Notification PI. Learned President’s Counsel forTimberlake IPLtd submitted with great respect that the Courtof Appeal was correct in holding that “stumpage” sought to berecovered from Pussellawa PLtd is in essence a compulsory
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extraction of money by the State which in terms of Article 148of the Constitution, can only be imposed under the authorityof a valid law. Accordingly, he argued that the much higherrates of “stumpage” claimed by the Forest Conservators isultra vires the powers of the said Conservators, and that thedecision to suspend the issue of permits for the transport ofpine timber harvested under and by virtue of the Agreement(P9) by Timberlake IPLtd from the said forestiy plantation, isunlawful.
The most fundamental issue this Court has to addressis in regard to the nature and character of the stumpage feesought to be recovered by P26, P27 and P29. An importantquestion in this context is whether “stumpage”, which isnot mentioned anywhere in the Forest Ordinance or in anyregulation made thereunder, is in essence a tax, as contendedby Timberlake IPLtd., or a proprietary charge sought to beimposed under a contract, as urged by the Appellants.Learned Additional Solicitor-General for the Appellantssubmitted that “stumpage” is a payment made to the ownerof the forest land, irrespective of whether it is State ownedor owned privately, as the consideration for purchase of thetimber. He has invited the attention of Court to the followingpassage from William A. Leuschner’s work Introduction toForest Resource Management page 67:
“Stumpage is defined as the trees, standing on theforest, unsevered from their stumps. The stumpage priceis the price paid for the right to sever the trees from theirstumps and remove them from the forest. Stumpage isvalued by estimating its market value.”
No doubt, this is in accord with the natural meaning ofthe term “stumpage” which has been defined in Black’s LawDictionary, 6th Edition at page 1424, as “the sum agreed to
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be paid to an owner of land for trees standing (or lying) uponhis land.” It is essentially in this sense that the word “stump-age” has been used in the legislation and regulations of otherjurisdictions where forest resources have been prudentlymanaged and carefully exploited. For instance, Section 2 (q)of the Nova Scotia Crown Lands Act. R. S.,c. 114, s. 1,providesthat “stumpage” means ” the amount . . .which is payableto the Crown for timber harvested on Crown lands”, andthe New York Environmental Conservation Law § 71-0703,Section 6 (c) defines “stumpage value” as the “current fairmarket value of a tree as it stands prior to the time of sale,cutting, or removal.” While it is clear from the foregoing that“stumpage” is a proprietary charge and not a tax, it must alsobe remembered that stumpage payments can also give rise totax liability, as for example, under Section 5 of the New YorkReal Property Tax Law, § 480-A, which imposes a tax of 6 percentum of the “certified stumpage value of the merchantableforest crop” proposed to be felled by the owner of the forestland.
Learned President’s Counsel for Timberlake IPLtd hassubmitted that only an owner of the trees is entitled to claimstumpage, and has argued with great force that the fee soughtto be recovered by P26, P27 and P29 cannot be regarded asa proprietary “stumpage fee” as the forest plantation fromwhich the timber was cut belongs to Pussellawa PLtd., andnot to the State. Unfortunately, Timberlake IPLtd whichfiled HC WA Application No. 07/06 in the High Court of theWestern Province, jointly with Pussellawa PLtd, has chosennot to file the application from which this appeal arises inthe Court of Appeal jointly with Pussellawa PLtd, and insteadcited the latter as a Respondent. While Pussellawa PLtd hadno opportunity of filing objections in the Court of Appeal, ithas not appeared before this Court at any stage in the course
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of this appeal, though noticed. While the learned President’sCounsel for Timberlake IPLtd has heavily relied on the recitalin P9 which claims that Pussellawa PLtd is the title holder tothe pinus carribaea cultivation at Delta Estate, the learnedAdditional Solicitor-General has submitted that the Conser-vator-General of Forests and the State, not being parties to thesaid Agreement, cannot in law be bound by it. The questionarises as to what extent the State can disassociate itself fromthe statement regarding title found in P9 while at the sametime claiming the benefit of the “stumpage fee” stipulatedtherein.
However, it is not necessary to answer this question as it ismanifest from the early correspondence such as P7 which ledto the Agreement P9 and the provisions of Clause 7 (d) and (e)of the Agreement P9 itself that the arrangement to pay stump-age is in effect an acknowledgement of State title to the saidplantation and its trees. It is significant that the “stumpagefee” sought to be recovered has been claimed in terms ofclauses 7(d) and (e) of the said Agreement, which are quotedbelow:
“The consideration for the sale of the aforesaid trees
shall be paid by the Purchaser (Timberlake IPLtd) to the
Vendor (Pussellawa PLtd) in the following manner:
The purchaser agrees to also pay the stumpage feesas stipulated by the Conservator-General of Forest foreach block, prior to the harvesting of each block. Thepurchaser will pay such stumpage fees through thevendor. ”
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Balance consideration will be paid by the Purchaser tothe Vendor in the following manner.
The purchaser shall proceed with the harvesting andthe removal of the said trees from each block after theconfirmation of payment of stumpage fees to the ForestDepartment for each block by the purchaser. A copy ofthe receipt of payment of stumpage will be handed overto the vendor by the purchaser and the purchaser shallproceed to harvest and remove the said trees withinfourteen (14) days from date hereof.” (Italics addedby me)
It is clear from the above quoted clauses of the Agreementthat the “stumpage fee" was envisaged as part of theconsideration for the sale of the trees in question, and it is alsonoteworthy that the said clauses sought to create a contractualobligation on the part of Timberlake IPLtd to pay to theConservator-General the stumpage fees for each block to bestipulated by him. I am firmly of the opinion that TimberlakeIPLtd, which has agreed to these clauses and to the stipulationfor the payment of stumpage fees, cannot now rely on therecital in the said Agreement to dispute the title of the Stateto the timber in question. It is trite law that where a recitalto a contract is in conflict with one or more of its operativeclauses, the operative clause or clauses will override therecital. See, Senathiraja v. Brito; Kumarihamy v. Maitripala.In fact, the conduct of the parties in the course ofimplementing the Agreement P9 and the settlementreached by the parties in the Provincial High Courtbased on the terms contained in the letter in replydated 27th July 2006 (P22) would appear to be rational onlyif one assumes that the forestry plantation in question aswell as its produce belonged to the State or a State agency.
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Such an assumption will be consistent with the presumptioncontained in Section 52 of the Forest Ordinance that inproceeding taken under the said Ordinance or in conse-quence of anything done under the Ordinance any “timberor produce shall be presumed to be the property of the Crownuntil the contrary is proved.”
It is also important to observe in this context that itappears from the order date 15th February 1982 made by theMinister of Agricultural Development and Research underSection 27A read with Section 42H of the Land Reform LawNo. 1 of 1972, as subsequently amended, and publishedin the Gazette bearing No. 183/10 dated 12th March 1982,that the entirety of Delta Estate in extent 724.94 hectareswas vested thereby in the JEDB. It needs to be mentionedthat a copy of the said Gazette was made available to thisCourt marked X4, only with the written submissions of theConservator-General of Forests, but since it is a publicdocument this Court takes judicial notice thereof. However, itis relevant to note that under the Indenture of Lease bearingNo. 61 (P2), JEDB leased out to Pussellawa PLtd only anextent of 639.8 hectares out of the extent of 724.94 hectaresof the said Estate. It is evident from the Schedule to the saidIndenture of Lease that the discrepancy in the land extentwas caused by the exclusion from the purview of the lease,“the land given to the Forest Department and Janasaviyaproject”. It is therefore manifest that the Pinus carribaeaforest plantation from which Timberlake IPLtd is seeking toremove the timber in question in fact belongs to the JEDB.The reference to the Forest Department in the said Schedulealso gives credence to the assertion made by the Director ofthe Plantation Management Monitoring Division (PMMD) ofthe Ministry of Plantation Industries in his letter dated 19thMarch 2004 (P6) addressed to the Conservator-General of
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Forests with copy to Pussellawa PLtd that the pinus trees inquestion were “planted by the Forest Department in the early80s”. Even if the principle embodied in the maxim superficiessolo cedit is applied to this situation, the resulting positionwould be that the pine trees belong to the JEDB, which isa State agency, and not to Pussellawa PLtd as asserted byTimberlake IPLtd.
However, learned President’s Counsel for TimberlakeIPLtd has contended that the only provision of law thatauthorizes the imposition of any levy to remove trees fromtheir stumps in any reserved forest is Section 8(3) of theForest Ordinance, and that in the case of a forest which isnot a reserved or village forest, similar powers have beenconferred by Section 20(l)(h) of the Forests Ordinance. Hehas submitted that the Notification marked PI has beenissued pursuant to Regulation 5(2) of the Forest RegulationsNo. 1 of 1979 and Rule No. 20 of the Forest Rules No. 1 of1979 framed in terms of the aforesaid sub-sections of theForest Ordinance, and by the said Notification the royaltyfor various types of timber has been prescribed, but there isno provision therein to charge “stumpage fees”, or any othersuch levy. It is his contention that in view of Article 148 of theConstitution, which precludes the imposition of any tax rateor any other levy “except by or under the authority of a lawpassed by Parliament or of any existing law”, the Conservator-General of Forest cannot in law demand any payment for thefelled pinus trees in excess of Rs. 500 per cubic meter, whichis the applicable royalty for Class II timber under the saidNotification. He has further submitted that even if it be thecase that the “stumpage” fee sought to be recovered by P26,P27 and P29 is proprietary in nature, still the amount thatcan be recovered cannot exceed Rs. 500 per cubic meter inview of PI.
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It is therefore necessary to examine at the outset whetherthere is statutory authority to charge a “stumpage fee",particularly with respect to timber harvested from the pinuscarribaea forestry plantation at Delta Estate. In the absenceof any material to show that the said forestry plantation waspart of a reserved forest, and in view of the uncontradictedaverment in paragraph 5 of the Petition filed by TimberlakeIPLtd in the Court of Appeal that the said forestry Plantationhas not been declared as a village forest under Section 12of the Forest Ordinance, it is safe to presume that the saidforestry plantation is governed by the Forest Rules, No. 1of 1979, which apply to “forests not included in a reservedor village forest”. It is important to note that the said Rulesseek to prohibit or regulate activities such as felling, cutting,girdling, lopping, tapping, sawing, converting, damaging,collecting, removing and transporting trees or forest produce inany forest not being a reserved forest or village forest. The Rulesalso authorize such activity to be carried out in accordancewith the conditions of a permit (Rule 7) and also allow villagersto collect “dead or fallen sticks” (Rule 19) or other forest producein certain circumstances. In the Notification P1, the Conservator-General of Forests has prescribed the royalty for varioustypes of timber and other forest produce as a rate per cubicmeter or kilogram, and at the very end of the notification it isstated that –
“The Royalty rates given above are a privilege allowedto the villagers who have the rights of collection of thesematerials from the forests.”
It is obvious that the royalty rates set out in PI areex facie not applicable to the transaction relevant to thisappeal, as Timberlake IPLtd and Pussellawa PLtd have beeninvolved in the commercial felling of pinus trees, and neither
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of these companies can claim any privilege conferred tovillagers who have the right of collection of timber producefrom the forest under the said Forest Rules. The rates ofroyalty prescribed in PI are clearly inapplicable to thecommercial exploitation of timber of the magnitude envisagedby P9.
It is also significant to note that the Forest Rules No. 1 of1979 have been framed under Section 20(l)(h) of the ForestsOrdinance, which inter aKa empowers the Minister to makerules to –
“(h) prescribe, or authorize any forest officer to prescribe,subject to the sanction of the Minister, the fees, royalties,or other payments for such timber or other forest produce,and the manner in which such fees, royalties or otherpayments shall be levied whether in transit, partly intransit or otherwise.” (Italics added)
It is noteworthy that Rule 20 of the Forest Rules No. 1 of1979, provides as follows:-
“The Conservator-General of Forests may, with thesanction of the Minister, prescribe the fees, royalties,or other payments in respect of the collection of forestproduce and the manner in which such fees, royalties orother payments shall be made.”
In terms of Regulation 3 read with the Schedule of theForest Regulations, No. 4 of 1979 published in the GazetteExtraordinary bearing No. 68/14 dated 26th December 1979,the power to prescribe fees, royalties and other payments asspecified in Section 20(l)(h) of the Forests Ordinance hasbeen conferred on the Conservator-General of Forests as wellas on the Deputy Conservators – General of Forests and theSenior Assistant Conservators-General of Forests.
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The fact that in the Notification PI the Conservator-General of Forests has prescribed royalty that can be recoveredfrom villagers who have the right to collect forest produce asa matter of privilege, does not preclude him from seeking toprescribe other payments in accordance with the procedurelaid down by law for this purpose. Although neither theForest Ordinance nor any regulation or rule made thereundercontain any provision as to how any such fees, royaltiesor other payments may be prescribed, by the Conservator-General of Forests, it is expressly laid down in Section 2(f) ofthe Interpretation Ordinance No. 21 of 1901 as subsequentlyamended, that in “every written law, whether made before orafter the commencement of this Ordinance, unless there besomething repugnant in the subject or context, “prescribed”shall mean prescribed by the enactment in which the wordoccurs or by any rule, regulation, by-law, proclamation or ordermade thereunder.” It is in this connection, necessary toconsider whether the method by which the royalty wasprescribed in the Notification PI has necessarily to befollowed in stipulating “stumpage fees” as contemplated byClause 7(d) and (e) of the agreement marked P9.
It is clear from Section 2(f) of the InterpretationOrdinance that where anything that could lawfully beprescribed is not prescribed in the relevant enactment itself,then it may be prescribed by any rule, regulation, by-law,proclamation or order made thereunder. This provision has tobe understood in the context of Section 17(l)(e) to (f) and 17(2)of the Interpretation Ordinance which are quoted below:
17(1) Where any enactment, whether passed before orafter the commencement of this Ordinance, confers poweron any authority to make rules, the following provisionsshall, unless the contrary intention appears, have
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effect with reference to the making and operation of suchrules:-
(a) to (d)
all rules shall be published in the Gazette and shall•have the force of law as fully as if they had been enactedin the enactment of the Legislature; and
the production of a copy of the Gazette containing anyrule, or of any copy of any rule purporting to be printedby the Government Printer, shall be prima facie evidencein all courts and for all purposes whatsoever of the duemaking and tenor of such rule.
(2) In this section the expression "rules” includes rules andregulations, regulations, and by-laws. (Italics added)
Applying the above provisions to the question of themethod by which stumpage fees may be prescribed, it isvery clear that if they are prescribed by regulations, rules, orby-laws, such regulations, rules and by-laws must bepublished in the Gazette. However, if such stumpage fees areto be prescribed by a mere order made by the Conservator-General of Forests, his deputy or senior assistant, as contem-plated by Section 2(f) of the Interpretation Ordinance, thenthe requirement of publishing the same in the Gazette wouldnot apply.
Accordingly, it may be concluded that the stumpage feesstipulated in the letters of the Conservator-General of Forestsin marked P26, P27 and P29 as contemplated by Clause 7(d)and (e) of the Agreement P9, have been lawfully enumerated,computed and prescribed as a proprietary charge based onthe value of the timber. In this context it is useful to referto the recent decision of the Court of Appeal for Ontario in
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Boniferro Mill Works ULC v. OntaridB] in which an argumentsimilar to the one made in this case by Learned President’sCounsel for Timberlake IPLtd was made to the effect thateven a proprietary charge may in essence be a tax. That wasan appeal from a decision of the Superior Court of Justiceholding that a charge imposed on timber based on thevalue of timber in terms of the Crown Forestry SustainabilityAct, 1994, S.O. 1994, c. 25 is a tax. In arriving at thisdecision, the Superior Court of Justice was influenced bythe decision of the Supreme Court of Canada in CanadianIndustrial Gas & Oil Ltd. v. Government of Saskatchewan,191holding that a royalty surcharge was in effect a tax.In overruling the decision of the Superior Court of Justice,the Court of Appeal for Ontario stressed the proprietarynature of the impugned charge. Justice MacFarland, J.A.sought to distinguish the Canadian Supreme Courtdecision in CIGOL by pointing out that in that casethe court was concerned with a royalty surcharge,imposed not only on those producers who had existing leaseswith the Crown but also on those who were producing onprivate lands and whose rights in that regard wereexpropriated by the same legislation. Justice MacFarlandhad no doubt that proprietary charges are different fromregulatory charges or taxes, and quoted the following dictaof Rothestein, J. in 620 Connaught Ltd. v. Canada (AttorneyGeneral),m at para. 49:
“I agree that proprietary charges for goods and servicessupplied in a commercial context are distinct fromeither regulatory charges or taxes and may be determinedby market forces. As explained by Professor Hogg inConstitutional Law of Canada (5th ed. 2007) at pp. 870-71:
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“Proprietary charges are those levied by a province in theexercise of proprietary rights over its public property. Thus,a province may levy charges in the form of licence fees,rents or royalties as the price for the private exploitationof provincially-owned natural resources; and a provincemay charge for the sales of books, liquor, electricity, railtravel or other goods or services which it supplies in acommercial way.”
Though the provincial context of the above quoted dictamay not fit the Sri Lankan scenario, they are of immensepersuasive value in understanding the nature and characterof a “stumpage fee” such as the one stipulated by the ordersof the Conservator-General of Forests in the letters P26,P27 and P29 as contemplated by Clause 7(d) and (e) of P9,which is entirely proprietary in nature, and for the purpose ofdistinguishing such a fee from a revenue measure thatmay be imposed as a levy on timber or other forest produceharvested from a private forest. I am of the opinion thatsince the stumpage fee is not such a levy, its quantum is notsubject to the rates specified in the Notification PI, and Article148 of the Constitution has no relevance. I therefore, holdthat the Court of Appeal of Sri Lanka misdirected itself in thiscase in failing to appreciate the proprietary nature of the saidstumpage fee and the vital distinction between a proprietarycharge and a tax or other revenue levy.
Learned President’s Counsel for Timberlake IPLtd hasnot been able to cite any provision of the Forest Ordinance orany regulation or rules made there under that may not havebeen complied with in determining the aforesaid stumpagefee, nor did he take up the position that the stumpage feesin question had been prescribed without the sanction of therelevant Minister. In my opinion, the rates of royalty set out
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in PI cannot, and were not intended to, apply to a commercialexploitation of the forest plantation by an export orientedcompany, and there is nothing in the Forest Ordinance andthe regulations and rules made there under which renderthe stumpage fees sought to be charged on the basis of acommercial transaction such as Clause 7(d) and (e) of theAgreement P9 ultra tares the powers of the Conservator-Generalof Forests. This position is buttressed by the relevantbudget estimates tendered by the Additional SolicitorGeneral, which specify under the “Non-Tax Revenue” categorythat the Forest Conservator is the Revenue AccountingOfficer for “Rent on Crown Forests” (vide Code 20.02.10.02).The Sinhala version of the budget estimates, which use thephrase “<36®cS s>iei ©6^eposes®”, clearly shows that the
word “rent” in the English version is used in the sense ofrevenue or income.
Accordingly, I answer questions (a) to (e) on whichspecial leave to appeal has been granted in the affirmative,and hold that the Court of Appeal has misdirected itself anderred in law in its interpretation of the scope and objectiveof the notification PI, in deciding that the ConservatorGeneral of Forests was bound by it, to charge stumpage fees inaccordance with it. I am of the opinion that the Court ofAppeal misdirected itself and erred in law by failing to considerthe fact that the pinus forestiy plantation at Delta Estate wasplanted and maintained by the Forest Department since the1980s. I also hold that the Court of Appeal misdirected itselfand erred in law in failing to consider that by its decisionthat the Conservator-General of Forests had no authority tocharge the stumpage fees, it nullified the transaction in P9 inso far as it related to the stumpage fees referred to in Clause7(d) and (e) which constituted part of the consideration forthe said transaction.
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Conduct of Timberlake IPLtd
Questions (f) to (h) and (k) relate to the conduct ofTimberlake IPLtd in relation to the matters that are relevantto the application for the writs of certiorari and mandamusfiled by it in the Court of Appeal. They are of great relevancebecause such writs, being prerogative remedies, are notissued as of right, and are dependent on the discretionof court. It is trite law that such discretionary relief byreason of his own conduct” (per Sharvananda, J. inBiso Menika v Cyril de Alwidil) at 377). A party seekingprerogative relief must come to court “with clean hands”(ibid., page 381) and the sanction for the failure to do so isthe dismissal in limine of the application for relief withoutgoing into the merits of the case. See, Alphonse Appuhamy v.Hettiarachchi,il2>. As Bandaranayake, J. observed in Finneganv. Galadari Hotels (Lanka) Ltd.,il3) at page 278, this is a “rulebased on public policy designed to prevent abuse of procedureof court when court was dealing with a matter ex parte.”
Timberlake IPLtd derives its right to harvest timber fromthe Agreement P9 which it has entered with Pussellawa PLtd ,and in fact has stepped into “its shoes” in its dealings withthe Forest Department. It is necessary to observe that theforestry plantation from which the timber was harvestedbelonged to the JEDB, which is an agency of the State, thoughPussellawa PLtd had stated the contrary in a recital to P9.Furthermore, it appears from Clause 2(a) of the Indenture ofLease marked P2 that the rent paid by the Pussellawa PLtd forthe lease of the tea plantation of Delta Estate was a meagerRs. 500 per annum for the entire 639.8 hectares (which didnot include the forestry plantation in question). It wouldhave been inimical to all notions of justice, and a substantial
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loss of revenue for the State, if this paltry sum could be saidto permit Pussellawa PLtd to dispose of extremely valuablepinus timber, without any consideration of the fact thatthese plantations were made and maintained by the ForestDepartment using public funds. This in fact is the justificationfor the imposition of the stumpage fees in question.
This Court is not unmindful of the fact that TimberlakeIPLtd has paid substantial amounts of money to PussellawaPLtd to acquire the right to harvest the timber, and the paymentof stumpage fees to the Conservator-General of Forests wasonly part of the consideration. Unfortunately, in my opinion,the conduct of Timberlake IPLtd, has fallen short of what is ex-pected of a deserving litigator seeking prerogative relief. Afterentering into the Agreement P9 in which it expressly agreed withPussellawa PLtd to pay the entire stumpage fee on the basisof actual enumerated volume of timber prior to harvesting(clause 7(d) of P2), it questioned the “interim payment” ofRs. 1,616,727.50 claimed by the Conservator-General ofForest by P17 with respect to block 01R and delayed thepayment of the full stumpage fee based on actual volumeamounting to Rs. 7,640,670.97 (vide supra Table V) withrespect to the said block, even after removing the timber fromthe forest plantation. When by PI8, the felling of trees wassought to be suspended, it joined hands with Pussellawa PLtdto challenge that decision in HC WA Application No. 07/06filed in the High Court of the Western Province. After settlingthis case on the basis of certain and clear terms, it went backon the settlement, and filed the writ application in the Courtof Appeal from which this appeal arises, again challenging thelegality of the stumpage fees which it had expressly agreed topay not only in the Agreement P9 but also in the settlementreached in the High Court. As Scrutton, L.J. observed in
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Verschures Creameries v. Hull & Netherland Steamship Co.Ltd.'14* at 612 –
“A person cannot say at one time that a transaction isvalid and thereby obtain some advantage, to which hecould only be entitled on the footing that it is valid, andthen turn round and say it is void for the purpose ofsecuring some other advantage. This is to approbate andreprobate the transaction.”
In VisuvaUngam v. Liyanage*151 at page 227, Samarakoon,C.J. using more descriptive language to bring home theessence of denying parties the freedom to “approbate andreprobate”, commented that one “cannot blow hot and cold.” AsSharvananda C.J. observed in Ranasinghe v.Premadharmd161at 70, the concept has “stood the test of time and has beenaccepted as part of our law.”
Based on its own prior performance, the well establishedprinciples of estoppel applied in the context of basis principlesof contract law, would deem Timberlake IPLtd as being barredfrom claiming relief in a manner that is starkly opposite to itsmanner of conduct at prior times and from which it gainedpecuniary and other benefits. There is in effect a legitimateexpectation created not only in the other party to the contract,namely Pussellawa PLtd, but also in the Conservator-Generalof Forests on whose behalf the stipulations contained inClause 7(d) and (e) of the Agreement P9 were made, thatTimberlake IPLtd has wholly accepted the contractualobligations as well as subsequent undertakings such as thoseflowing from the settlement reached in connection with thematter before the High Court of the Western Province, andintends to act accordingly. This court cannot in its binding
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commitment to doing equity deny the realization of suchrights.
In addition to the conduct described above, which itselfdemonstrates the lack of bona fides in Timberlake IPLtd’sconduct, I find it has also misrepresented material facts in itsPetition to the Court of Appeal. It is trite law that any personinvoking the discretionary jurisdiction of the Court of Appealfor obtaining prerogative relief, has a duty to show uberrimafides or ultimate goof faith, and disclose all material facts tothis Court to enable it to arrive at a correct adjudication on theissues arising upon this application. As observed previously,even though the Petition in paragraph 44 seeks to demonstratea difference in the stumpage charged in respect of Blocks01 A, 01B, 01C, 17Q, 04D, 06F and 16P (vide Table III), thechange in the aggregate stumpage charged is due to thedifference in the volume of timber and not the rate charged.This is evident on a perusal of Table IV included in this judge-ment above. Timberlake IPLtd has sought to portray in itsPetition to the Court of Appeal a difference due to the actualvolume of timber extracted as an arbitrary change of rate,which is altogether misleading. Furthermore, the fact thatTimberlake IPLtd did not go back to the High Court despitealleging a reneging on the settlement reached before thatcourt further undermines its bona fides. In my consideredopinion, the circumstances outlined above alone would besufficient to disentitle Timberlake IPLtd to any discretionaryrelief, even if it was otherwise entitled to such relief.
I therefore hold that questions (f), (g), (h) and (k) must beanswered in the affirmative. I am of the opinion that the Courtof Appeal has misdirected itself and erred in law in failingto consider whether Timberlake IPLtd can be permitted toapprobate and reprobate and go back on its obligation to pay
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stumpage fees as stipulated by the orders of the Conservator-General of Forests in the letters P26, P27 and P29 ascontemplated by Clause 7 (d) and (e) of the Agreement P9.It is also my considered opinion that the Court of Appealmisdirected itself and erred in law in failing to considerwhether Timberlake IPLtd was entitled to invoke the writ juris-diction of the Court of Appeal, having settled HC WA ApplicationNo. 07/07in the High Court of the Western Province on 28th July2006, inamanner grossly inconsistentwith the said settlement.I also hold that the Court of Appeal misdirected itself anderred in law in failing to consider the serious lack of uberrimafides on the part of Timberlake IPLtd. In my consideredopinion, the conduct of Timberlake IPLtd in this case hasbeen such that it was not entitled to any form of discretionaryrelief, and in all the circumstances of this case, the Court ofAppeal should have dismissed its application in limine.
Conclusion
For the aforementioned reasons, I answer questions (i)and (j) on which special leave to appeal was granted in thenegative, and questions (a) to (h) and (k) in the affirmative.Accordingly, I allow this appeal and vacate the order of theCourt of Appeal dated 28th November 2007, and further holdthat the application filed by Timberlake IPLtd in the Court ofAppeal should stand dismissed. I do not make an order forcosts, in all the circumstances of this case.
AMARATUNGA, J. – I agree.
RATNAYAKE, J. – I agree.
Appeal allowed.