FERNANDO v. TENNAKOON

003-SLLR-SLLR-2010-V-2-FERNANDO-v.-TENNAKOON.pdf


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FERNANDO V. TENNAKOONSUPREME COURTTILAKAWARDANE, J.
AMARATUNGA, J., ANDMARSOOF, PC. J.
S. C. APPEAL NO. 19/2008S. C. (HC) C. A. L.A NO 44/2007WP/HCCA/ COL NO. 77/2007 (LA)
D. C. MOUNT LAVINIA NO. 951/06/SPLJUNE 17th, 2008.
Civil Procedure Code – Section 18 -Addition of Parties – Necessary Party -Parties improperly joined may be struck out – Section 19 – Interventionin a pending action not otherwise allowed – prescription Ordinance -Section 6 – time limit for filing an action to ‘establish’ a partnership?Prevention of Frauds ordinance 7 of 1840 – Section 18(c) – Partnershipagreement – In writing?
An action was filed in the District Court of Mount Lavinia for thedissolution and winding up of an alleged partnership between E.V.T. deSilva, Geetha Amarasinghe and Sena Ranjith Fernando in the name of‘General Trade Agency’. The District Court permitted the Intervenient -Petitioner – Respondent – Respondent. Tennakoon’ to intervene in theaction filed by E.V.T de Silva and Geetha Amarasinghe who were the 1*'and 2nd Plaintiffs in the District Court Action.
The High Court (Civil Appeal), by its order dated 3rd December 2007,affirmed the Order of District. Judge permitting the intervenient-Petitioner. Tennakoon to intervene in the District Court action and re-fused leave to appeal.
It the Supreme Court the main question for determination was whetherTennakoon has slept over his rights, and if so, whether his delay and/or laches would disentitle him to intervene into the action in the DistrictCourt.
Held
In deciding whether the addition of a new party should be allowedunder Section 18(1) of the Civil Procedure Code, which is alreadypending in Court between two parties, – to avoid multiplicity of
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actions and to diminish the cost of litigation, the lower Courtswere justified in permitting intervention and determine the rightsof all in one proceeding.
Per Saleem Marsoof J. –
“I have no hesitation in following the wider construction expoundedby Lord Esher” in (Byme v. Browne and Diplock)
Cases referred to:-
Norris v. Breazley (1877) 2 CPD 80
Byme v. Browne and Diplock (1889) 22 QBD 657
Ammugam Coomaraswamy v. Andiris Appukamy and Others(1985) 2 S.L.R. 219
Hilda Enid Perera v. Somawathie Lokuge and Another (2000) 3S.L.R. 200.
APPEAL from an order of the High Court (Civil Appeal) WesternProvince.
Nihal Fernando, PC with Rajindra Jayasinghe and Ranil Aangunawela,instructed by Ms. Iresha Soysa for the Defendant-Respondent-Petitioner-Appellant.
Rohan Sahabandu with Ranjith Perera for the Intervenient- Petitioner -Respondent – Respondent.
Chathura Galhena for the Plaintiff – Respondent – Respondent -Respondents.
Cur.adv. vult.
July 22nd 2010SALEEM MARSOOF, J.
This is an appeal against the decision of the High Court ofCivil Appeal of the Western Province dated 3rd December 2007refusing leave to appeal from the order of the District Courtof Mount Lavinia dated 25th May 2007. By the said order, thelearned District Judge permitted the Intervenient Petitioner -Respondent – Respondent, Tennakoon Mudiynselage Ranjith
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Tennakoon (hereinafter referred to as Tennakoon) to interveneinto an action instituted by Edirimuni Vijith Thejalal de Silvaand Geetha Amarasinghe, who are respectively the 1“ and2nd Plaintiff – Respondent- Respondent – Respondents to thisappeal against one Sena Ranjith Fernando, the Defendant-Respondent – Petitioner – Appellant, seeking to enforce apartnership agreement. This was an action for the dissolutionand winging up of an alleged partnership between the saidEdirimuni Vijith Thejalal de Silva (hereinafter referred to asE.V.T. deSilva) .Geetha Amarasinghe (hereinafter referred toas Geetha Amarasinghe) and Sena Ranjith Fernando (here-inafter referred to as Fernando) which has been registeredunder the Business Names Ordinance, No. 6 of 1918 assubsequently amended, in the name and style of ‘GeneralTrade Agency. ’
The facts relevant to this appeal may be briefly outlinedas follows. It appears from the Certificate of Registration dated21st June 1983 annexed to the Plaint marked TT, which wasissued under the Business Names Ordinance, that the saidTennakoon and one Rangoda Liyanarachchige Udaya Silva(who is now deceased and who was the husband of GeethaAmarasinghe, the 2nd Plaintiff – Respondent- Respondent- Respondent to this appeal) commenced a business ofrepairing of motor vehicles and distribution of merchan-dise in partnership under the name and style of ‘GeneralTrade Agency’ on 17th May 1983. It also appears that prior tomigrating to Australia, the said Tennakoon executed thePower of Attorney bearing No. 176 dated 6th November1988 and attested by K. A. Wijayadasa, Attorey-at-Law andNotary Public (A4), appointing the said E. V. T. de Silva as hisAttorney to operate certain bank accounts he held inSampath Bank, Colombo and to act for him in relation tothe said partnership. By the said Power of Attorney, the said
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E. V. T. de Silva was authorized by Tennakoon “to act for meand on my behalf in all matters pertaining to the Partnershipcalled and known as ‘General Trade Agency’
It is evidence from the extracts of the Business NamesRegister produced as DP (Y2) that on 7th February 1989 thesaid Udaya Silva made a statement of change, under oath,purportedly under Section 7 of the Business Names Ordinance,to the effect that the said Tennakoon ceased to be a partneron that date and that the said E.V.T. de Silva was admittedas a new partner in his place. It also appears from the saidextract that the Registrar of Business Names, WesternProvince, relying on the said Statement of Change hasaccordingly altered the Register by the inclusion of the nameof the said E.V.T. de Silva in substitution of the name ofTennakoon. However, nowhere in the Register is there anindication as to the circumstances in which Tennakoonceased to be a partner. Thereafter in 1992, the Defendant-Respondent-Petitioner – Appellant, Fernando was admitted asa partner. In 2004, the existing business lines were expandedto include a mechanical workshop, the import, sale anddistribution of moter vehicles, machinery spare parts, electricalitems, drugs and chemicals, transport and tourism, insurance,and manpower services, and the partnership wasre-registered (vide – Certificate of Registration dated 29thNovember 2004 marked ‘P4’). After the death of Udaya Silva,his wife namely, Geetha Amarasinghe entered the partner-ship with E. V. T. de Silva and Fernando, and a new firm wasregistered in June 2005. It is noteworthy that the only recordof Tennakoon’s alleged partnership in the Business NamesRegister is in the Certificate of Registration dated 21st June1983 marked *P1’, and in none of the subsequent registrationof the partnership business Tennakoon’s name is reflected asa partner.
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Although the original partnership business commenced in1983, and there is little or no evidence that the initial partnerTennakoon, who left Sri Lanka in 1988, had any role to playin the partnership business after his departure, no legalproceedings had been commenced in this regard till 314tMay 2006, when E.V.T. de Silva and Geetha Amarasinghecommenced action against Fernando in the District Court ofMount Lavinia seeking to have the partnership dissolved andwound-up. It is to this action that Tennakoon, acting throughhis Attorney Ranjith Amarasinghe, sought to intervene by hisPetition dated 2nd Februaiy 2007, which was made in termsof Section 18 of the Civil Procedure Code No. 2 of 1889, assubsequently amended. The said application for interventionwas made on the basis that the business called “GeneralTrade Agency” was started by Tennekoon on 17th May 1983with one Udaya Silva and that the agreement between thepartners was later reduced into writing, which was thePartnership Agreement dated 30th June 1988 purportedlysigned by Rangoda Liyanarachchige Udaya Silva andTennakoon in the presence of two witnesses, a copy of whichwas produced by Tennakoon marked ‘A3’ with his applicationfor intervention.
The said Partnership Agreement expressly provides inclause 10 thereof that without the consent of all the otherpartners no rights of the partners may be transferred oralienated or any new partners admitted into the partnership.In paragraph 5(c) of the said application for intervention,it has been pleaded that the partnership between the saidRangoda Liyanarachchige Udaya Silva and Tennakoon cameto an end by the death of the former which occurred on orabout 5th June 2005, and that as the surviving sole partner,the said Tennakoon is entitled to all the assets and capitalof the partnership subject to the rights of the heirs of thesaid Rangoda Liyanarachchige Udaya Silva. In paragraph 6
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of the said application, it has been pleaded that the origi-nal plaintiffs, E.V.T. de Silva and Geetha Amarasinghe andthe defendant Fernando are seeking to divide the capital andassets of the partnership exclusively amongst themselves,and that by reason of the prejudice that would thereby becaused to Tennakoon, he is a necessary parly to this action,and should be added as an intervenient party.
The learned District Judge who inquired into theapplication for intervention after the other parties filed theirrespective objections thereto, has by his order dated 25thMay 2007, concluded that Tennakoon is a necessary andmaterial party and should be added. By its order dated 3rdDecember 2007, the High Court of Civil Appeal of the WesternProvince affirmed the said order of the learned DistrictJudge and refused leave to appeal. This court has on the22nd of February 2008 granted special leave to appeal againstthe order of the High Court of Civil Appeal on the followingsubstantial questions of law: –
Has the High Court of Civil Appeal (Colombo) erred in notconsidering the delay of almost 18 years and the fact thatdifferent partnerships came into being during the periodof 18 years?
Whether the High Court of Civil Appeal (Colombo) erredin dismissing the application for leave to appeal of theDefendant-Petitioner (Fernando)?
Whether the High Court of Civil Appeal (Colombo) erredin holding that the Intervenient Petitioner (Tennakoon) isa necessary party to enable the court of effectually andcompletely adjudicate upon and settle all the questionsinvolved in the said action?
Whether the High Court of Civil Appeal (Colombo) haserred by not considering the fact that the Intervenient
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Petitioner (Tennakoon) is in any event not entitled to anyrelief as he is guilty of laches and/or inordinate delay?
Whether the High Court of Civil Appeal (Colombo) haserred in not holding that the any alleged claim of theIntervenient Petitioner (Tennakoon) is prescribed in lawand as such the Intervenient Petitioner (Tennakoon) isnot entitled to intervene?
The primary question for determination by this Courtis whether Tennakoon has slept over his rights, and if so,whether his delay and/ or laches would disentitle him tointervene into the action in the District Court. In order to dealwith the questions arising on this appeal, it is necessary togo into the facts in some depth. However, since the trial hasnot commenced and at the Interim Injunction Inquiry no oralevidence was led, the facts can be only be gathered from theaffidavits of the parties filed in the original court and in thecourse of the appellate proceedings.
It may be noted at the outset that the Plaint dated 31stMay 2006 filed in the original court did not disclose theexistence of any partnership agreement “in writing andsigned by the party making the same” which is necessary for“establishing a partnership where the capital exceedsone thousand rupees” as provided in Section 18 (c) of thePrevention of Frauds Ordinance No. 7 of 1840 as subsequentlyamended, and in fact, the original court has refused thegrant of interim-injunction by its order dated 30th June 2006,mainly on the ground that despite the initial capital exceedingone thousand rupees, no written partnership agreementhas been produced in evidence. The Application for leave toappeal against the said order dated 30th June 2006 filed inthe Court of Appeal bearing No. CALA 274/06 is pendingin that Court, and appears to have been kept in abeyanceuntil the present appeal is disposed of by the Supreme Court.
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However, with his application for intervention, Tennakoonhas produced in court marked ‘A3’, a copy of the Partner-ship Agreement dated 30th June1988 purportedly signed byRangoda Liyanarachchige Udaya Silva and himself in the pres-ence of two witnesses, which expressly provides in clause 10thereof that without the consent of all the other partners norights of the partners may be transferred Or alienated or anynew partners admitted into the partnership. Furthermore, itis provided in clause 11 of the Agreement that upon the deathor resignation of any partner, any part of the capital or anyprofits payable to such partner shall be paid to him or hislegal representative or heir before the last day of the ensuingfinancial year. Clause 12 expressly provides that 6 monthsprior written notice must be given by a partner of intent toresign from the partnership firm.
It has been submitted by the learned President’s Counselfor the Defendant – Respondent – Petitioner – AppellantFernando, that the original action is a nullity ab initio andshould be dismissed in limine, inasmuch as the disputerelates to a partnership business of which admittedly thecapital exceeds one thousand rupees and no written partner-ship agreement has been produced with the plaint. As such,he submits, it is not unnecessary to add the Intervenient -Petitioner who claims to have been a partner but who resignedin 1989.1 find it difficult to agree with this submission as thecase is still pending in the District Court, and the fortunes ofthe parties cannot be predicted or prejudged at a stage whenits trial has not even commenced. In any event, as far as theIntervenient Petitioner-Respondent-Respondent Tennakoonis concerned, there is no difficulty in this respect as he hasproduced the purported Partnership Agreement signed bythe original partner Rangoda Liyanarachchige Udaya Silva,
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who is the deceased husband of the 2nd Plaintiff-Respondent-Respondent- Respondent Geetha Amarasinghe.
I also have a great deal of difficulty with the submissionthat Tennakoon resigned from the partnership, whichsubmission is in fact based on an averment in paragraph6 of the Plaint dated 31*‘ May 2006 and paragraph 7 of theaffidavit of the same date filed in the District Court by E.V.T.de Silva and Geetha Amarasinghe, as the only documentrelied on for this purpose, which is the extract of the BusinessNames Register dated 7th February 1989 marked DP(Y2) whichis merely a Statement of Change made under Section 7 of theBusiness Names Ordinance unilaterally by the said RangodaLiyanarachchige Udaya Silva, and there is nothing to suggestthat due notice of intention to resign had been given byTennakoon as contemplated by Clause 12 of the PartnershipAgreement dated 30th June 1988 (marked A3). Furthermore,the Statement of Change marked DP(Y2) does not contain thesignature of Tennakoon and cannot be construed as a noticeof resignation, and in the circumstances, there is insufficientmaterial to establish that Tennakoon had resigned from thepartnership or his Attorney E. V. T. de Silva has been properlyadded as a partner of the firm. In terms of Clause 10 of thePartnership Agreement produced by Tennakoon, no newpartner could be introduced without the express consentof all other partners, and the evidence at this stage is verymuch suggestive of a fraud having been perpetrated by theTennakoon’s Attorney E. V. T. de Silva and his other partnerRangoda Liyanarachchige Udaya Silva. If that be so, noamount of delay and laches can defeat the claim of a personwho has been defrauded by his agent and/or partner both ofwhom stand in a fiduciary relationship with him.
The question has also been raised by learned President’sCounsel as to whether the application for intervention should
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be deemed to be in effect an action by Tennakoon to asserthis rights, and if so whether it has been prescribed in termsof Section 6 of the Prescription Ordinance which lays downa time limit of 6 years for filing any action to “establish” apartnership. However, the prescriptive period stipulated in thatsection beings to run only from “the date of the breach of suchpartnership deed”, and Tennakoon has come to court on thebasis that the partnership between Rangoda LiyanarachchigeUdaya Silva and himself came to an end by operation of lawupon the death of the former, on or about 5th June 2005. Interms of clause 11 of the Partnership Agreement marked ‘A3’partnership accounts have to be settled after the occurrenceof any event that would ipso jure terminate the partnershipsuch as death or resignation of a partner, and Tennakoonmay well be within the prescriptive period. In any event, inmy considered opinion, these are matters that can only beconsidered after trial in the light of all the evidence led, and itis in my view premature to deny intervention to an aggrievedparly on the basis of pre-judgment.
It is in this context, necessary to refer to Section 18 of theCivil Procedure Code No. 2 of 1889, as subsequently amended,in terms of which the Intervenient Petitioner-Respondent-Respondent Tennakoon sought to intervene into the action filedby E.V.T de Silva and Geetha Amarasinghe against Fernando.The said section provides as follows:
*(l)The court may on or before the hearing, upon theapplication of either party, and on such terms as the
court thinks just, order that any plaintiff be
made a defendant, or that any defendant be made aplaintiff, and that the name of any person who oughtto have been joined, whether as plaintiff or defendant,or whose presence before the court may be necessary
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in order to enable the court effectually and completelyadjudicate upon and settle all the question involved inthat action, be added.
(2) Every order for such amendment or for alternationof parties shall state the facts and reasons whichtogether form the ground on which the order is made.And in the case of a party being added, the addedparty or parties shall be named, with the designation ”added party", in all pleadings or processes or papersentitled in the action and made after the date of theorder."
It is noteworthy that Section 19 of the Code express-ly provides that no person shall be allowed to intervene ina pending action otherwise than “pursuance of, and inconformity with, the provisions of the last preceding section”.The aforesaid provisions have been considered andcommented upon in a large number of judgments of thisCourt, and learned Counsel representing the contestingparties in this appeal have invited the attention of Court toseveral of these decisions. However, It is not necessary torefer to all these decisions for the purpose of disposing of thisappeal, except to refer to the “narrow view” on interventionas elucidated by Lord Coleridge. C. J. in Norris v. Beazlexf1]which was to the effect that the words of the correspond-ing statute in England “plainly imply that the defendant tobe added must be a defendant against whom the plaintiffhas some cause of complaint which ought to be determinedin the action, and that it was never intended to apply wherethe person added as a defendant is a person against whomthe plaintiff has no claim and does not desire to Prosecuteany.” On this reasoning, learned President’s Counselfor the Defendant-Respondent – Petitioner – Appellant,
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Fernando submitted that the original plaintiffs de Silva andAmarasinghe had no issue with Tennakoon, as they had suedFernando on an altogether different partnership to the onethat Tennakoon claimed to be a party to. He further submittedthat similarly, Fernando too had no grouse with Tennakoon,as his partnership relationship with E.V.T de Silva andAmarasinghe was one that was much more recent in origin,and was very much different in character.
Learned Senior Counsel for Intervenient Petitioner-Respondent-Respondent, Tennakoon, however, submittedthat his client will be affected by any decision the court mightmake in the original action, and in particular that he wasaggrieved by the conduct of E. V. T. de Silva and Amarasingheas well as that of Fernando. He relied on the “wider construction”placed on the very same English provision by Lord Esher inBy me v. Browne and DiplockP] in the following terms :-
“One of the chief objects to the Judicature Act was tosecure that, whenever a Court can see in the transac-tion brought before it that rights of one of the parties willor may be so affected that under the forms of law otheractions may be brought in respect of that transaction, theCourt shall have power to bring all the parties before it,and determine the rights of all in one proceeding. It is notnecessary that the evidence in the issues raised by thenew parties being brought in should be exactly the same:it is sufficient if the main evidence and the main inquirywill be the same, and the Court then has the power tobring in the new parties and adjudicate in one proceedingupon the rights of all parties before it. Another greatobject was to diminish the cost of litigation. That beingso, the Court ought to give the largest construction to
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those acts in order to carry out as far as possible the twoobjects I have mentioned.”
It is important to note that the conflicting viewsexpressed by the English courts on this question wereconsidered by Ranasinghe, J., (as he then was) in the courseof his seminal judgment of Arumugam Coomaraswamy v.Andiris Appuhamy and othersPK As his Lordship observed at229 of the said judgment –
“On a consideration of the respective views. . . . whichhave been expressed by the English courts in regard tothe nature and the extent of the construction to be placedupon the rule regulating the addition of a person as aparty to a proceeding which is already pending in Courtbetween two parties, the “wider construction” placedupon it by Lord Esher, which has been set out abovecommends itself to me. The grounds which moved LordEsher to take a broad view, viz: to avoid a multiplicity ofactions and to diminish the cost of litigation, seem to me,with respect, to be eminently reasonable and extremelysubstantial. Lord Esher’s view though given expressionto more than a century ago, is even today as constructiveand acceptable.”
It is relevant to note that the above approach hasbeen sanctioned by subsequent decisions of this Courtsuch as Hilda Enid Perera v. Somawathie Lokuge andAnother and a large number of decisions of the Courtof Appeal, and I have no hesitation in following the widerconstruction expounded by Lord Esher. On that reasoning,it is abundantly clear that the lower courts were justifiedin permitting the intervention in question and adding
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Tennakoon as a party Defendant in all the circumstances ofthis case.
For the foregoing reasons, I am inclined to answerquestions (a) of (f) on the basis of which special leave toappeal was granted by this Court in the negative, and affirmthe order of the High Court of Civil Appeal dated 3rd December2007. I do not maike any order for costs in all the circum-stances of this case.
TILAKAWARDANE, J. – I agree.
AMARATUNGA, J. -1 agree.
appeal dismissed.