New Law Reports
(1978) Vot. 80 N.LR.
1977 Present: Thamotheram, J., Walpita, J. and Gunasekera, J.A. Z. SEBASTIAN, Appellant andL. S. SRI DHARMAKUMARAJEEWA, Respondent.
S.C. 121/75 (F) – D.C. Negombo 2829/M
Civil Procedure Code – Action by summary procedure on a liquid claim – Bona fide defencedisclosed in affidavit – Court can order security as a condition to file answer – Sections 704 (2),706.
In an application for leave to appear and defend, even if the affidavit of the defendant issatisfactory, the court can exercise its discretion under section 706 and order the defendant todeposit pan of the sum claimed in the plaint as a condition to defend the action.
Decision in Issadeen and Company v. Wimalasuriya 62 N.L.R. 299 not followed.
GUNASEKERA, J. – Sebastian v. Kumarajeewa
Appeal from an order of the District Court of Negombo.
N.Devendra with L.F. Ekanayake for the appellant.Respondent absent and unrepresented.
Cur. adv. vult.
December 8, 1977. GUNASEKERA, J.
The Defendant-Appellant has appealed against the Order of the learnedDistrict Judge granting him leave to appear and defend this action filedagainst him under summary procedure on the condition that he shoulddeposit a sum of Rs. 10,000/-. He submits that he should have been allowedto so appear and defend the action unconditionally.
The Plaintiff-Respondent claimed in this action that the Appellant hadissued a cheque for Rs. 20,000/- in his favour, and that this cheque wasdishonoured by the Bank on presentation with the endorsement that theAppellant’s account had been closed. Summons were issued in terms ofsection 703 of the Civil Procedure Code and the Appellant moved for leaveto appear and defend the action on the ground that the Respondent was amoney lender and that the Appellant borrowed from him only a sum ofRs. 10,000/- for which this cheque for Rs. 20,000/- had been taken assecurity and that the capital sum borrowed as well as all interest due hadbeen repaid by him to the Respondent.
On the day fixed for the Appellant’s Application he did not appear inCourt and his Attorney withdrew from the case stating he had noinstructions. The learned Judge nevertheless considered the Petition andAffidavit filed by the Appellant and ordered that he should depositRs. 10,000/- in Court on or before 20.4.1975 to enable him to appear anddefend the action.
Mr. Devendra for the Appellant referred us to section 704(2) of the CivilProcedure Code and submitted that as this Order of the learned Judgeindicates that he did not think that the Appellant’s defence was ‘not primafacie sustainable’ or that it lacked ‘good faith’ the Appellant should in law bepermitted to defend the action, unconditionally. He relied on the judgment ofWeerasooriya, J. in Issadeen and Company v. Wimalasuriya.'.
In that case too the Plaintiff’s claim was to recover a sum of Rs. 20,000/-on a cheque issued to him and the defence was that only a sum ofRs. 10,000/- had been borrowed by the Defendant on the security of thecheque sued on, and that a certain amount of the capital borrowed had beenrepaid and only Rs. 7,000/- was still due. The learned District Judge orderedthe Defendant to deposit a sum of Rs. 7,000/- to'enable him to file hisAnswer.
(I960) 62 N.L.R. 299.
New Law Reports
(1978) Vol. 80N.LR.
Weerasooriya, J. considered Section 704(2) and stated:
“Mr. Renganathan submitted that there is nothing in section 704(2) whichprecludes its application to a case where a prima facie sustainable defenceis disclosed in regard to only part of the claim while the rest of it isadmitted. Assuming that the learned District Judge had no reasonabledoubt about the good faith of the defence disclosed in the present case, Ithink that Mr. Renganathan’s submission is entitled to prevail. Under thecorresponding provisions of the law in England (see Order XIV, rule 4)judgment may be given in favour of the Plaintiff for a part of his claimwhich is admitted, and the Defendant allowed to defend as to the residueof it. We have no such provision in Chap. LIII. But, in my opinion, thisdoes not mean that where as against a part of the claim a prima faciesustainable defence is disclosed, the good faith of which is not in doubt,the defendant should be ordered to deposit the sum which is submitted tobe due, or give security in respect of it, as a condition precedent to hisfiling Answer. As pointed out by Mr. Renganathan, such an order wouldvirtually prevent the defendant from defending himself unconditionallyas he is entitled to do under section 704(2), against that part of the claimin respect of which he has a prima facie sustainable defence. I amfortified in the view I have taken by the decision in Annamalay Chetty v.Ali Marikar,2 where of two promissory notes sued on, the claim on one ofthem was admitted by the defendant who, however, pleaded that the otherhad been discharged by the grant of a fresh note which had been notmatured. It was held in appeal that the defendant was entitled to defendthe action unconditionally”. (The underlining is by me).
With regard to section 706 he said,
“Mr. Jayasundera contended that section 704(2) should be read subjectto section 706, and that under the latter section the Court has a discretionto impose conditions even in a case where there is a defence which isprima facie sustainable and as to the good faith of which there is noreasonable doubt. But, regarding this same argument Hutchinson, CJ.,stated nearly half a century ago in Rengasamy v. PakeetJ that it was toolate to urge it, in view of two previous decisions to which he referred,one of them being Annamalay Chetty v. Ali Marikar (supra)”.
But what Hutchinson, CJ. himself said about section 706 was,
“The section which applies here is 706…. The law says that even whenthe affidavits are satisfactory and disclose a defence the Court mayimpose such terms as to security as it thinks fit. There is a good deal tobe said for the view that the Legislature intended to give to the Judge in
>(1912) 14 N.L.R. 190.
GUNASEKERA, J. – Sebastian v. Kumarajeetva
every such case a discretion as to imposing terms with which the AppealCourt should not interfere. But I think that it is too late to urge that viewnow. Having regard to the decisions of the Court in Annamalay Cketty v.Ali Marikar (supra) and Meyappa Chetty v. Usoof4 I think that we arebound to hold that in such a case as this, where the defendant has sworn tothings which, if proved, will be a good defence, he should be allowed todefend unconditionally, unless there is something on the face of theproceedings which lead the Court to doubt the bona fides of the defence. Icannot reconcile this rule with section 706, which authorises the Court toimpose such terms as it thinks fit; but it is the rule laid down by twoJudges in the last mentioned case, and we are bound to follow it”.
In the first case followed by Hutchinson, CJ (Annamalay Chetty’s case) whatBrowne, J. said was,
“Appellant’s Counsel has quoted to us the most recent remarks in theEnglish Court upon the question raised by this Appeal, as they appear inthe Law Times of the 3rd of August, 1901 under the head “Practice, OrderXIV Leave to Defend”, viz., “Order XIV should not be used to shut out adefendant from laying his defence before the Court because it appears thatsuch defence is not likely to succeed. The plaintiff should only have leaveto sign judgment where it appears that assuming all the facts in favour ofthe defendant they do not amount to a defence in law as on the formerpractice on a demurrer to the plea”.
From this it appears that the true criterion as to whether a defendantshould be allowed to defend an action upon a bill of exchange only onterms is – whether the suggested defence is considered not to amount to adefence in law.”
Browne, J. did not consider section 706 in this judgment. Moncreiff, J.mentioned section 706 but paraphrased only section 704(2) and merely stated“the provision requires no commentary.” In the other case (MeyappaChetty’s case) too section 706 was not considered or even referred to.
It will thus be seen that when Hutchinson, CJ. expressed the view thatsection 706 allows a District Judge to order security even when he thoughtthe Defendant’s Affidavit satisfactory but said that earlier decisions of thisCourt held him bound not to apply the plain words of this section he said so,if I may say so with respect, per incuriam. Those earlier decisions proceededon the interpretation given to the English Order XIV and a considerationonly of section 704(2), completely disregarding section 706. It will also beseen that the rule enunciated by Weerasooriya, J. in the Issadeen andCompany case that if the bona fides of the defendant is not doubted thedefendant must be allowed to defend the action unconditionally originatedfrom these two decisions and the English Practice and the English OrderXIV.
*(1902) 5 N.L.R. 265, Meyappa CheUy v. Usoof.
(1902) 2 Br 394.
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But on this question we are governed by the plain words of the twosections 704(2) and 706 and an analysis of these two sections in my viewshows that the rule enunciated in the Issadeen and Company case ismanifestly erroneous.
Section 704(2) says:
“The defendant shall not be required, as a condition of his being allowedto appear and defend, to pay into Court the sum mentioned in thesummons or to give security therefor, unless the Court thinks hisdefence not to be prima facie sustainable, or feels reasonable doubt as toits good faith”.
The words I have underlined show clearly that this subsection is dealing onlywith one particular question, that is, when'the Judge can order the Defendantto deposit the full amount claimed or give security for that full sum. It onlysays that a Judge cannot order such a deposit of the full sum claimed unlesshe is able with reason (See 14 N.L.R. at 191) to state that the defence is notbona fide-, in the reverse it means that the Judge can order such a deposit ifhe considers the defence not prima facie sustainable or not bona fide.
The reason for this law is also quite clear. If the Defendant merelydeposits the full sum claimed without offering any explanation, he can as ofright file his Answer (Ramanathan v. Fernando5). And so if the Judge rejectsthe defence totally he cannot proceed ex parte but must still give theDefendant an opportunity of exercising the right he has in law to deposit thefull sum claimed and file his Answer.
It is equally clear that section 704(2) certainly does not say that if theJudge accepts the defence outlined as bona fide he must necessarily giveleave to appear and defend unconditionally. To reach that conclusion in theearlier decisions, Browne, J. in Annamalay Chetty’s case applied the EnglishPractice on Order XIV and Bonsor, CJ. in Meyappa's case merely said(apparently following the earlier decision):
‘The rule would appear to be that when the defendant does swear to facts,which, if true, constitute a good defence, he must be allowed to defendunconditionally, unless there is something on the face of the proceedingswhich lead the Court to doubt the bonafides of the defendant.”
In the English Law under Order XIV the question of bona fides of thedefence decides not the question of the amount of security to be given as inour law, but the very right to defend the action. The Annual Practice (1956)at page 243 says,
“The purpose of Order 14 is to enable a plaintiff to obtain summaryjudgment without trial, if he can prove his claim clearly; and if thedefendant is unable to set up a bona fide defence, or raise an issue againstthe claim which ought to be tried. (Roberts v. Plant6).
’(1930)31 N.L.R. 495
GUNASEKERA, J. – Sebastian v. Kumarajeewa
The mere offer to bring the sum claimed into Court is not sufficient toentitle the defendant to have leave to defend. “He is bound to show that hehas some reasonable ground of defence to the action”, Per BramwellL.J …”
And though Rule 6 says, “Leave to defend may be given unconditionally, orsubject to such terms as to giving security or time or mode of trial orotherwise as the Judge may think fit”, the Practice on that Rule as set out inpage 265 is,
“The principle on which the Court acts is that where the defendantcan show by affidavit that there is a bona fide triable issue, he is to beallowed to defend as to that issue without condition (Jacobs v. Booth'sDistillery Co.)1”.
and at page 266,
“Since Jacobs v. Booth's Distillery Co., (1901) 85 L.T. 262 H.L., thecondition of payment into Court, or giving security, is not often imposed.”
It was wrong to so resort to the English practice when the English Lawitself differed so much from'dur law. Our Civil Procedure Code expresslyprovides for the situation when the Judge accepts the defence outlined asbona fide. Section 706 says that “upon affidavits satisfactory to theCourt…the Court shall give leave to appear and defend the action on suchterms as to security…as the Court thinks fit.” section 704(2) and 706 arecomplementary and must be applied together because section 704(2) onlyprovides for the position when the defence is rejected as not bona fide andsection 706 provides for the position when the defence is consideredsatisfactory. (See Garvin, ACJ. in Ramanathan v. Fernando (supra)).Needless to state however is the position, that when the defence outlined isvery ‘satisfactory’ the learned Judge may well exercise his discretion interms of section 706 and permit the Defendant to appear and defendunconditionally.
I am therefore of the view that the rule enunciated in the case of Issadeenand Company that the Judge is bound to allow unconditional leave if thewhole or even part of the defence is accepted as bona fide is incorrect andshould not be followed. To some extent this was made manifest in the latercase of Valliappa Chettiar v. Visuvanathan/ where the claim was on threecheques each of Rs. 8,400/- and no bona fide defence was available inrespect of two of them and the learned District Judge had ordered security tobe given in a sum of Rs. 16,000/-. The same Counsel who appeared for theAppellant in the Issadeen and Company case understandably argued before
’(1901)85 L.T. 262 H.L.
’(1961) 66 N.L.R. 481.
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Weerasooriya, J. that in keeping with the earlier decision the bona fides ofthe defence to a part of the claim having been established the Defendantshould have been permitted to answer unconditionally. Weerasooriya, J.rejected this submission and.affirmed the Order of the learned District Judgesaying that the earlier decision could be distinguished on the ground that“there is no admission of any liability by the Appellant and what he seeks toobtain is leave to appear and defend the action in its entirety.” If these factscreate an exception to the rule enunciated in the Issadeen and Company caseit must be observed that in the instant case too there is no admission ofliability by the Appellant and the Appellant seeks to defend the action in itsentirety. But both before the decision in the Issadeen and Company case as isshown by the facts in that case itself and thereafter as is shown in ValliappaChettiar’s case Judges of our Courts have always exercised their discretion interms of section 706 in cases where they considered the Affidavit of theDefendant ‘satisfactory’ and often ordered the Defendant to deposit part ofthe sum claimed in the Plaint.
I would therefore affirm the Order of the learned District Judge anddismiss this Appeal.
Thamotheram, J. -1 agree.WALPITA, J. -1 agree.
A. Z. SEBASTIAN, Appellant and L. S. SRI DHARMA KUMARAJEEWA, Respondent