013-SLLR-SLLR-1996-1-FREE-LANKA-TRADING-COMPANY-LTD.-V.-BANK-OF-CEYLON.pdf
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Free Lanka Trading Co. Ltd. v. Bank of Ceylon
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FREE LANKATRADING COMPANY LTD.V.
BANK OF CEYLON
COURT OF APPEAL.
JAYASURIYA, J.
REV. APPLICATION No. 468/95.with CA-LA 130/95.
D. C. COLOMBO 4225/SPL.
21 AND 28 JULY, 1995.
Enjoining Order – Refusal of extension – Principles applicable.
A Performance Bond had been entered into between Free Lanka TradingCompany Ltd. (plaintiff) and the Bank of Ceylon on the one hand and betweenthe Ceylon Electricity Board as the other party. The contract itself for thesupply of pre-stressed concrete poles had been entered into between theCeylon Electricity Board and FLAPEC (Private) Ltd. It was FLAPEC (Private)Ltd. that had to enter into the Performance Bond and not the plaintiff.
The plaintiff had failed to aver and plead in its plaint that the plaintiff isentitled to substantive rights and the future prospects and likelihood of theviolation of such substantive rights of the plaintiff. The plaint does notdisclose that the plaintiff had acquired any rights under the contract or thata cause of action has accrued to the plaintiff to institute legal proceedingsunder the contract.
Held:
Plaintiff was not entitled to an enjoinging order and extension was rightlyrefused.
Cases referred to:
Richard Perera v. Albert Perera 67 NLR 445
Dissanayake v. AICC 64 NLR 283
Murugesu v. North Divisional Agriculture Products Union 54 NLR 517
Gordon Fraser & Co. Ltd. v. Jean Marie Losio and Martin Wenzel1984 2 Sri L.R. 85 at 91
APPLICATION for revision of and leave to appeal from order of DistrictJudge.
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L.C. Seneviratne P.C. with Jayantha de Almeida Gunaratne and D.F.H.Gunawardena for Plaintiff.
Kumar Paul S.C. with Ghazzali Hussein S.C. for Defendant-Respondent.
Cur. adv. vult.
04 August, 1995.
JAYASURIYA, J.
The Plaintiff-Petitioner has preferred an application in revisionand an application for leave to appeal in respect of the order deliveredby the District Judge of Colombo on 21.6.95 in this case. The learnedDistrict Judge, on the preferring of the Plaint and an affidavit in sup-port, had issued an Enjoining Order on 16.12.94 enjoining the Defend-ant bank from making any payment whatever upon the PerformanceBond which has been annexed to this application marked P2. Althoughcertain dates have been specified by the learned District Judge for theDefendant to file its objection to the application for an interim injunc-tion and for the filing of the answer, the Defendant-Bank has not filedits statement of objections or the answer, but, by a motion sought toreserve its right to file a statement of objections and answer at a laterdate.
Thereafter, the issue of the extension of the Enjoining Orderalready granted by the District Judge came up for inquiry and bothparties filed written submissions in regard to that matter. The learnedDistrict Judge, after reserving his order on the issue of the extensionof the Enjoining Order, later delivered his order on 21.6.95 dissolvingand setting aside the Enjoining Order entered by him on 16.12.94.
Being aggrieved by the order of the learned District Judge deliv-ered on 21.6.95 dissolving and setting aside the Enjoining Order andrefusing to extend it any further, the Plaintiff-Petitioner has filed thisrevision application and the application for leave to appeal.
The learned District Judge, by his order dated 26.5.95 has statedthat the Performance Bond bearing No. 86257 marked P2 had beenentered into between Free Lanka Trading Company Ltd., the Plaintiffand the Bank of Ceylon on the one hand and between Ceylon Electric-ity Board as the other party. He has also emphasized that the contract
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for the supply of pre-stressed concrete poles, which document hasbeen annexed to the petition marked P1, has been entered into be-tween Ceylon Electricity Board and FLAPEC (Private) Ltd. Thus, therights and duties flowing from the contract marked P1 would be estab-lished only between the two contracting parties to that agreement,namely, Ceylon Electricity Board and FLAPEC (Private) Ltd. The pre-amble to this contract marked P1 says that the Ceylon Electricity Boardhas accepted the offer of Messrs. Free Lanka Trading Company Ltd. incollaboration with Messrs. Projects and Equipment Corporation of In-dia Ltd. and Messrs. Adarsh Cement Products (Pvt) Ltd. for the estab-lishment of plant and machinery to manufacture and supply 250,000concrete poles per year over a period of five consecutive years to theCeylon Electricity Board. The preamble also sets out that the Con-tractor, Messrs. FLAPEC (Private) Ltd. is the joint venture companyformed and registered in accordance with the terms of the offer ofMessrs. Free Lanka Trading Company Ltd. However, the contract P1sets up contractual relations, rights and obligations as between theCeylon Electricity Board and the Contractor, Messrs. FLAPEC (Pri-vate) Ltd. The learned District Judge, when he refers to the fact thatthe plaint fails to disclose the relationship between Free Lanka TradingCompany Ltd. and FLAPEC (Private) Ltd. in his order, is, in effect,referring to the fact that there is no reference in the plaint to any con-tractual relationship between these two incorporated entities.
Article 7 of the contract marked P1 provides that within 14 daysof the signing of the contract, the contractor (FLAPEC (Private) Ltd.)shall furnish a Performance Bond in favour of the General Manager,Ceylon Electricity Board, in the form of a bank guarantee from a bankoperating in Sri Lanka. Thus, the contract envisages the PerformanceBond to be furnished by FLAPEC (Private) Ltd., the Contractor, one ofthe parties to the contract P1. However, Free LankaTrading CompanyLtd. has entered into the Performance Bond P2 instead of the partyexpressly specified in Article 7 of P1, the contract.Thus, Free LankaTrading Company Ltd. has taken the role of an imposter and an inter-meddler by becoming a party to the Performance Bond marked P2.Rights and obligations on the contract P1 flow between the CeylonElectricity Board and FLAPEC (Private) Ltd. The Plaintiff Free LankaTrading Company Ltd., derives no rights and is subject to no obliga-tions and duties under the contract P1 .This fact has been emphasizedby the District Judge in his order.
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Besides the reasons expressly spelt out by the learned DistrictJudge in his order for refusing to extend and for discharging the En-joining Order, a substantial and important issue attracts the attentionof this Court. That is, whether the Plaintiff in its plaint and in its appli-cations for an enjoining order and an interim injunction has averred thesubstantive rights of the Plaintiff in respect of the aforesaid relief claimedby way of an enjoining order and an interim injunction and disclosed afuture and impending violation of such substantive rights. On a pe-rusal of the plaint, it is crystal clear that the Plaintiff has failed to averand plead in its plaint that the Plaintiff is entitled to substantive rightsunder the documents P1 and P2 and the future prospect and likelihoodof the violation of such substantive rights of the Plaintiff. In the ab-sence of such necessary averments and pleadings in the Plaint, thequestion arises whether the Plaintiff is entitled at all to the issue of anenjoining order or an interim injunction in its favour as prayed for.
When this matter was raised by this Court at the stage of argu-ment, learned President’s Counsel submitted that the question of thesubstantive rights of the Plaintiff to the relief claimed ought to engagethe attention of court at a later point of time and, inasmuch as'theDistrict Judge had already issued an enjoining order on 16.12.94, thatorder had been made on the assumption that the Plaintiff has estab-lished a prima facie case for the issue of an enjoining order and,therefore,the question of the substantive rights of the Plaintiff to reliefclaimed ought not to engage the attention of this court. I venture tostrongly dissent from this expression of view couched in learned Presi-dent Counsel's submission. Although, generally speaking, a trial judgeora judge sitting in appeal should not generally decide the substantivequestion in considering an application for an enjoining order or an in-terim injunction,yet, the consideration of that substantive question atan early stage is not necessarily irrelevant, particularly where thematerial relevant to the determination of the substantial dispute is alsowholly or mainly pertinent to the issue of the grant of an application foran enjoining order or an interim injunction.
In Richard Perera v. Albert Perera,(1) Justice H. N. G. Fernandoremarked: “In an application for an interim injunction” where the mate-rial placed before the court at the inquiry reveals information whichjustify the prima facie view that the Plaintiff is not entitled to the sub-
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stantive relief claimed in the plaint, it would be erroneous for a court toignore such information and issue an interim injunction … A basiccondition for the grant of an injunction under the law is that it mustappear on the plaint that the Plaintiff is entitled to the judgment heseeks and there must be some apparent violation of the substantiveright to which the Plaintiff appears to be entitled.”
In this case, not only is the present Plaintiff not entitled to anysubstantive rights under the contract, but also there is a total failure inthe averments of the plaint to even set out such a claim that he isentitled to such substantive rights and that there would be a futureviolation of such substantive rights under the contract. In the circum-stances, where there is no averment, pleading or a claim that the Plaintiffis entitled to substantive rights under the contract, this court, in thedetermination of the preliminary application for an enjoining order or anextension of the enjoining order, is entitled to hold that issues arisingon such an inquiry cannot be decided except after consideration of thematerial relevant to the substantial case of the Plaintiff. In such asituation, the ideal course would be to proceed straightaway to con-sider whether there is sufficient averment in the plaint disclosing suchsubstantive rights of the Plaintiff and the prospect of a future violationof such rights on the part of the Defendant.
In delivering the aforesaid judgment, the Supreme Court in thecase of Richard Perera and Albert Perera (supra) distinguished thedecision in Dissanayake v. AICC,i2) wherein the view had been ex-pressed earlier that an injunction inquiry must not be a full-scale trialof the substantive dispute in the action. I am inclined to follow theprinciples laid down by the Supreme Court in Richard Perera v. AlbertPerera,(supra) and the principles laid down in the decision reported inMurugesu v. North Divisional Agriculture Products Unions and holdthat where there is no material on the plaint itself of a claim or aver-ment in regard to the substantive right of the Plaintiff which can beviolated, it would be unreasonable to issue an enjoining order or grantan extension of the enjoining order already issued or to issue an in-terim injunction. 11
11 .These principles seem to have influenced the District Judge inmaking his order although he has not spelt out these principles ex-
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pressly; he has failed to articulate these principles in precise termsthough they are implicit in his order. For the reasons spelt out in myjudgment, I hold that the District judge was right and correct in refus-ing to extend the enjoining order by his order dated 26th May 1995. Inthe circumstances, the application for leave to appeal and the applica-tion in revision are dismissed with costs in a sum of Rs. 1050 payableby the Plaintiff-Petitioner to the Defendant-Respondent.
Since the Order of the learned District Judge was very closelyanalysed and impugned, I wish to emphasize the following facts whichare stressed by the learned District Judge:
Firstly, he has emphasized that the contract, from which rightsand duties flow marked P1, is entered into between Ceylon ElectricityBoard and FLAPEC (Private) Ltd. as the two contracting parties;
Secondly, he has emphasized that in violation of the terms of thecontract marked P1, the Plaintiff as opposed to FLAPEC (Private) Ltd.has entered into the Performance Bond marked P2;
Thirdly, that the Plaint does not disclose the grounds for this dichotomy;
Fourthly, the Plaint does not disclose the contractual relation, ifany, between Free Lanka Trading Company Ltd. and FLAPEC (Private)Ltd,:
Fifthly, the Plaint in its averments, does not disclose the contrac-tual relationship between the Plaintiff and the Defendant in this actionand the reasons why the Plaintiff entered into the Performance Bondmarked P2;
Sixthly, under the terms of the Performance Bond P2, the con-tracting parties are the Plaintiff and the Defendant but under the allimportant contract maked P1, the contractual relations are establishedbetween FLAPEC (Private) Ltd. and Ceylon Electricity Board andFLAPEC (Private) Ltd. is not a party to the action bearing No. D. C.Colombo 4225/Spl;
Seventhly, the Plaint does not disclose that the Plaintiff had ac-
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quired any rights under the contract marked P1 or that a cause ofaction has accrued to the Plaintiff to institute legal proceedings underthe contract marked P1.
For the matters spotlighted in the District Judge’s Order andfor the additional reasons spelt out by me relying on the principles laiddown in Richard Perera v. Albert Perera, (supra) I hold that the DistrictJudge had made a correct order in refusing to extend the enjoiningorder granted by him earlier on 16.12.94.
Learned counsel for the Plaintiff- Petitioner in drafting the peti-tions and the affidavits, relied upon in this application, has expresslyreferred to the Arbitration clause in the contract marked P1 and hassubmitted that as disputes have arisen under the said contract, theparties were obliged and under a duty to refer such disputes to arbitra-tion in the first instance without calling upon the defendant bank tomake payments in terms of the Performance Bond P2. Neither thePlaintiff nor the defendant bank were contracting parties to the con-tract marked P1. Hence the plaintiff is not entitled to raise and ad-vance any exceptions and defences based on the Arbitration clausecontained in the contract marked P1 as the plaintiff was not a party tothe said contract. In the decision in Gordon Fraser & Co. Ltd. v. JeanMarie Losio and Martin Wenzel it was laid down affirmatively thatsuch an exception and plea in bar could with success be raised andadvanced by one of the parties to the contract only. In the result, theexception and plea in bar raised by learned counsel for the plaintiffpetitioner is without substance and merit in law.
Leave to appeal Application is dismissed with costs; applica-tion in revision is also dismissed with costs.
Application for revision and for leave to appeal refused.