BASNAYAKE, C.J.—Moonesinghe v. The Auditor-General and other a
I960Present: Basnayake, C.J., and Sansoni, J.
S. K. MOONESINGHE, Appellant, and THE AUDITOR-GENERAL
and others, Respondents
S. 0.24/59—Urban Councils Ordinance No. L—1129/28
Urban Council—Audit—Recovery of surcharges—Expenses incurred by a member onhis own responsibility in defending an action—Reimbursement by Council fromthe Local fund—Liability of Chairman to be surcharged—Urban CouncilsOrdinance No. 01 of 1939, ss. 34, 194, 195, 232.
In D. C. Panadura Case No. 2449 a clerk employed in the Urban Councilsued the Chairman of the Council for damages for wrongful dismissal, but hisaction was dismissed with the consent of the parties because the plaintiff,having been given permanent employment by the Local Government ServiceCommission, did not wish to proceed with the action. The defendant was notcondemned in costs. Thereafter, the defendant, who was still a member ofthe Council, though not its Chairman, was paid by the new Chairman, withthe unanimous approval of the Council, the sum of Rs. 1,586 from the localfund on account of expenses incurred by him on his own responsibility inconnection with the legal proceedings, in. which no plea of immunity undersection 232 (1) of-the-Urbam Councils Ordinance had been taken by the.defendant.
Held, that. the-. Auditor-General was entitled, under section 194= (1) of. theUrban Councils Ordinance; to disallow the sum paid, to the defendant in respectof D. C. Panadura Case No. 2449 and to surcharge the full sum on the newChairman alone. The payment could not be justified by the provisions ofsection 232' of the' Urban Councils' Ordinance. – •
A. PPEAL. under section 195. csfT the' Urban Councils Ordinance Ncr. 61of 1939 by the Chairman of’ the Urban Council of Panadura against asurcharge made on him by the Auditor-General under section 194 of thatOrdinance.
R. S. R. Coomaraswamy, with Nimal Senanayake, for Appellant.
V. Tennakoon, Deputy Solicitor-General, with E. R. de Fonseka, CrownCounsel, for 1st and 2nd Respondents.
M. M. Kumarakulasingham, for 3rd and 4th Respondents.
September 20, 1960. Basnayake, C.J.—
This is an appeal under section 195 of the Urban Councils Ordinance• No. 61 of 1939 by Somasiri Kumaradasa Moonesinghe, the Chairmanof the Urban Council of Panadura, against a surcharge of Rs. 1,586/- madeon him by the Auditor-General under section 194 of that Ordinance.The certificate of the Auditor-General under section 194 reads as follows :
" I, Lionel Augustus Weerasinghe, Auditor of the accounts of Urbanj Councils, db hereby, under section 194 (1) of the Urban Councils Ordi-nance No. 61 of 1939, disallow and surcharge against S. K. Moonesinghe,
11 i 1
'iB, 6749—1,883 (11/62)
242 BASNAYATvE, C.-T.—Mooncsinghe v. The Auditor-General and others
Chairman, Urban Council, Panadura, the sum of Rs. 1,58(5/- (RupeesOne thousand five hundred and eighty six only) paid by him fromthe funds of the Urban Council, Panadura, on voucher No. 130 of22.6.57 to Mr Noel T. Mendis on account of expenses incuired by himin respect of D. C. Panadura Case No. 2440 as I consider this an item ofaccount contrary to law, and I do hereby certify that the sum ofRs. 1,586/- (Rupees One thousand five hundred and eighty six only)is due from the said Mr S. K. Moonesinghe to the said Urban Council.
Colombo 7, 29th November 1958. ”
Sgd. A. WeerasinqheAuditor
Shortly the facts are as follows —On 22nd January 1951 one Habara-gomuralalage Marshall Peiris Goonetileke of Panadura sued Noel T.Mendis, who was the Chairman of the Urban Council of Panadura between17th January 1950 and 9th October 1952, for damages in a sum ofRs. 2,000/-. The plaintiff alleged that the defendant had wrongfully andunlawfully and acting maliciously in the pretended exercise of his autho-rity discontinued him from the services of the Urban Council in whichhe was employed as a clerk. The defendant filed answer on the 13thApril 1951 and stated that the action taken by him was in his capacityas Chairman of the Urban Council of Panadura, and he denied that anycause of action had accrued to the plaintiff to sue him in his personalcapacity. . The case was thereafter fixed for trial on 17th July 1951. Asthe defendant was unable to get ready for trial on that day it was post-poned to 22nd October 1951. On 16th October 1951 the defendant againmoved for a postponement on the ground of the illness of his counsel andthe trial was refixed for 29th February 1952. On 25th February 1952on the application of the defendant the trial was again.postponed on theground of illness of his Proctor to 9th July 1952. On that day too thetrial was postponed, 251 h November 1952 being the next date. Between9th July 1952 and 25th November 1952, to be exact on 9th October1952, the defendant ceased to be the Chairman. On 25th Novemberit was brought to the notice of the Court that a settlement was in pro-gress and the trial was for the fifth time postponed to 1st April 1953.The trial was thereafter postponed to 8th September 1953 and on thatdate to 8th December of the same year and again to 10th September1954. On that date issues were framed and after a preliminary dis-cussion of the points of law involved in them time was given to counselfor the plaintiff to consider whether he should move for an amendmentof the plaint. Thereafter on 13th October 1954 an application for anamendment of the plaint was made. The defendant opposed the appli-cati( n and the matter came up for hearing on 2nd December 1954. Theapplication to amend was refused but the plaintiff was permitted toalter the date 31st March 1950 in paragraph 5 of his plaint to 9th May
BASNAYAKE, C.j.—Mooncsinghe v. The Audit or-c£^Fsl^
1950 on bis paying the defendant before 22nd Fefcnjary 1955 the taxedcosts incurred by him unless they agree as to the aiA^juprt oncosts. If theplaintiff was unwilling to do so the trial was to proc*b«!jL_jlTfr@ #lgia£iff.was asked to pay to the defendant the costs of the inquiry?^^’ke'trnrTwas thereafter fixed for 10th and 11th October 1955. On the first namedof those dates the plaintiff’s counsel stated “ Plaintiff having been givenpermanent employment by the Local Government Service he does notwish to pursue with this action.” The minute of that date proceeds—
“ At this stage it is agreed Decree should be entered dismissingplaintiff’s action with ccsts- but if plaintiff pays Rs. 100/- to Deaf andBlind School Ratmalana before 10/12/55, then satisfaction of decreere costs to be entered.”
On 8th December 1955 the minute of the journal has recorded the factthat Rs. 100/- was paid to the Deaf and Blind School, and the plaintiff’sProctor moved that it be certified of record and that satisfaction of decreebe entered.
Thereafter on 7th September 1956 the defendant who was still a memberof the Urban Council, though not its Chairman, addressed a letter tothe Chairman and other members of the Council in which he asked theCouncil in terms of section 232 of the Urban Councils Ordinance topay him a sum of Rs. 1,754/50 as expenses incurred by him in defendingthe action against him, but the request was not supported by receipts forthe payments made by him. He said :
“ I was put to considerable expense in retaining lawyers and insummoning witnesses in order to establish my defence. May Itherefore ask the Urban Council of Panadura to defray all expenseswhich I had to incur in order to defend myself in this action.” •
After quoting section 232 of the Urban Councils Ordinance he concludedhis letter thus :
“ In terms of this section may I ask the Council to pay me myexpenses amounting to Rs. 1754/50 after any resolution to that effecthas been sanctioned by tbe Auditor-General.”
The application came up before the Council on 10th September 1956.The following record appears in the minutes in regard to it:—
244 BASNAYAKE, C.J.—Moonesinghe v. The Auditor-General and others
Acting on that resolution on'29th September 1956 the then Chairmanof the Urban Council forwarded to the Auditor-General a copy of theresolution and a copy of Mr Mendis’s letter, and in his covering letteradded certain information regarding the dates on which the case came upfor trial, which Mr Mendis had furnished. The Auditor-General by letterdated 9th October 1956 informed the Chairman that it was hot consistentwith his duties as Auditor of the accounts of the Urban Council to tenderany advice in regard to the proposed payment and that the Chairmanshould consult the Commissioner of Local Government in the matter.Whether the Commissioner of Local Government was consulted and, ifhe was, whether he gave any advice, does not appear from the papersbefore us, but the matter appears to have been brought up on 10thJune and the following resolution passed by the Council :—
Thereafter od 26th June 1957 Mr Mendis made a further claim for hisexpenses by letter of that date to tho Chairman of the Urban Council.In that letter he said :
“ Further to my letter dated 7th September 1956 claimingRs. 1,754.50 being a portion of expenses incurred by me in connectionwith the above case it is clear from the annexed certified copy of theJournal Entries that there have been 14 trial dates spread between the
BASNAYAK3E, C.J.—Mocnainghe v. The Auditor- General and others 245
years 1951 and 1955. Quite apart from the stamp fees, batta toseveral witnesses and other incidental expenses incurred by me, Coun-sel’s fees alone- on the basis of 15 guineas for each trial date amountedto approximately Rs. 2,275/-. If, however, all the other expensesincurred by me are taken into account, it would amount to overRs. 2,500/- but I am restricting my claim only to a sum of Rs. 1,754.50.”
In a postscript he said :
“ If the payment to me is not approved by the Audit, I shall makegood the amount.”
The appellant issued under his hand a voucher dated 22.6.57 forRs. 1,586/- in favour of Mr Mendis to which he appended the followingcertificate under the designation of “ Officer responsible for the service ” :
“ I certify that the above account amounting to Rupees One thou-sand five hundred and eighty six only …. and cents ….is correct and was incurred under the authority quoted and that thecharge is in accordance with the regulation or contract governing itand is fair and reasonable.”
To this voucher was attached Mr Mendis’s letter of 26th June 1957in which he undertook to pay back the money if the Audit did not “ ap-prove ” the payment. A cheque signed by the appellant appears to havebeen issued in payment of the voucher on 27th June 1957.
On 6th May 1958 the Auditor-General addressed the following letterto the appellant :—
“ I have to address you with reference to the payment of Rs. 1586/-made by you on voucher No. 139 of 22.6.57 to Mr Noel T. Mendis asreimbursement of legal expenses of Rs. 1754.50 less Rs. 168.50 drawnearlier, in Case No. 2449 in the District Court of Panadure. The case* referred to was an action for damages in a sum ot Rs. 2000/- claimedfrom Mr Mendis personally by Mr H. M. P. Gunatilleke for havingbeen wrongly discontinued from the service ol the Urban Council,Panadura.
2. The payment is, in my view, contrary to law in that (i) MrMendis had not reported the matter to the Council and obtained itsprior approval in terms of Section 48 (i) of the Urban Councils Ordi-nance to defend the case and (ii) a claim of Rs. 1754.50 for defendingan action for Rs. 2000/- is, prima facie, excessive. There is also thepoint as to whether Mr Mendis, having settled the case amicably con-sequent on the grant of permanent employment by the Local Govern-ment Service Commission to Mr H. M. P. Gunatilleke, and havingwaived his costs, which the Court was prepared to allow, is entitledto make a claim on the Council.
2*—X 5740 (11/62)
240 BASNAYAKE, C.J.—Mooncsinghe v. The Auditor-General and others
3. I, therefore, propose to disallow in terms of Section 194 (i) oftho Urban Councils Ordinance, No. 61 of 1939, the aforesaid sum ofRs. 1586/- (Rupees One Thousand five hundred and eighty six) andsurcharge the same on you as the person who authorised the paymentand I do hereby, as required by Section 194 (2) of the same Ordinance,give you notice that you may make any representations with referenceto such proposed disallowance and surcharge as you may think fit.Such representations should be made to me within one month of thedate hereof.
I am, Sir,
Your O.bedient Servant,
Sgd. A. Weebasingbe,Auditor
On receipt of this letter the appellant asked for a certified copy of theletter which contained Mr Mcndis’s undertaking to refund the moneyif the payment to him was not passed in audit. Upon receipt of it theappellant wrote to the Auditor-General on 3rd June 1958 as follows :—
“ Reference to your letter dated 6th May 1958, the payment ofRs. 1,5SG/- to Mr Noel T. Mcrdis on Voucher No. 139 of 22.G.57 asre-imbursement of legal expenses in case No. 2449 in D. C. Panadurawas made on a unanimous decision of Council (Res : 23 of 10.6.57).1 as Chairman in making payment acted upon the decision of theCouncil as provided for in Sec. 34 of the Urban Councils Ordinance.
When the question of payment of cost of litigation in the case insti-tuted by Mr H. M. P. Gunatilleke against Mr Noel T. Mendis wasbrought up in Council on 8.10.56 (vide Res. 2A) it was decided toobtain legal opinion as to the validity of the payment.
In terms of this resolution I wrote to Council’s Lawyers, MessrsPern an do & Fernando, Crown Proctors, Panadura, seeking legalopinion on the matter. The Lawyers after having gone through therelevant documents, files, etc. advised the Council that the paymentwas in order.
The Council at its meeting held on 10.6.57 considered this matterand unanimously resolved to pay this sum to Mr Noel T. Mendis.When the matter was being discussed, it was also agreed to obtainan undertaking from Dir Noel T. Mendis that he would refund thissum if the payment was not approved by the Audit. Dir Noel Mendisaccordingly gave the undertaking which was annexed to VoucherNo. 139 of 22.6.57 by which the payment was made and thereforeMr Mendis alone is liable for a surcharge in the event cf your disapprov-ing the payment.
In view of this under talcing given by Dir DIendis I am of the viewthat the surcharge should be on Mr Noel T. Mendis as the.person whoactually drew the amount and not on me.
BASNAYAELE, C.J.—Moonesinghe v. The Auditor- General and others 247
As stated above, I, as Chairman only acted in terms of proviso toSec. 34 of the Urban Councils Ordinance.
Your proposal to surcharge the full' amount on me, I state, isunfair and unreasonable. If a surcharge is made it should be onMr Mendis. OR on all the members of the Council who voted for theresolution of Council authorising the payment.”
In reply to this letter the Auditor-General wrote as follows :—
“ 1 have to refer to your letter No. A of 3rd June 1958 in reply tothe notice of surcharge given by my No. L-1/29/28 of 6.5.1958, and tostate that I am unable to accept your explanation as good and sufficientreason for passing in audit the payment of the sum of Rs. 1,586/-.
I, therefore, enclose a certificate of surcharge under section. 194(1) of the Urban Councils Ordinance No. 61 of 1939.
In this connection your attention is invited to section 195 of thesaid Ordinance as amended by Ordinance No. 31 of 1946.”- ‘
The certificate of‘surcharge referred to therein is set out at the commence-ment of this judgment.
Learned counsel for the appellant contended that the surcharge wasnot warranted by the law under which the Auditor-General purported toact. Learned counsel for the Auditor-General argued that sections232(1) and 232(2) did not empower the Chairman of the Urban Councilto pay out of the local fund the claim made by Mr Mendis. Section232(1) reads as follows :—
“ No matter or thing done and no contract entered into by anyUrban Council, and no matter or thing done under the direction of anyUrban Council by any member or officer of such Council or by any otherperson whomsoever, shall, if the matter or thing so done or the contractso entered into was done or entered into bona fide for the purpose ofthis Ordinance or any other Ordinance relating to the powers andduties of an Urban Council, or any by-law, or rule made thereunder,subject any member of the Council or any such officer or other person,in his private capacity, to any action, liability, claim, or demand what-soever ; and any expenses incurred by any such Council, or by anymember, officer, or other person acting as aforesaid, shell bo borneand repaid out of the local fund.
Provided that nothing in this section shall exempt any member ofany Urban Council from liability to be surcharged with the amount ofany payment which may be disallowed upon the audit of; accountsof such Council, and which such member authorised or joined in autho-rising.”
248 BASNAYAIvE, C.J.—Moonesinghe v. The Auditor-General and others
It is contended on behalf of the Auditor-General that the expensescontemplated under sub-section (1) are not legal expenses incurred bythe Council or any of its members but expenses incurred in the doingof any of the acts referred to in the earlier part of the section. With thissubmission we agree.
For a member to be repaid out of the local fund the expenses incurredby him under subsection (1) a matter or thing must be done or a contractentered into by him under the direction of the Urban Council bona fidefor the purposes of the Urban Councils Ordinance or any other Ordinancerelating to the powers and duties of Urban Councils or any by-law or rulemade thereunder. This is not such a case. There is no matter or thingdone by Mr Mendis under the direction of the Urban Council for whichhe has incurred expenses. The defence of the action is not such a matteror thing and the expense incurred in that behalf cannot be borne andrepaid out of the local fund.
In our opinion the provision that applies to costs in legal proceedings issection 232 (2) which reads as follows :—
“ Subject and without prejudice to any other powers, an UrbanCouncil in any case where the defendant in any action, prosecution, orother proceeding is a member of the Council, or its officer, agent, orservant, may, if it thinks fit, except so far as the court before whichthe action, prosecution, or other proceeding, is heard and determinedotherwise directs, pay out of the local fund all or any part of any sumspayable by the defendant in or in consequence of the action, prose-cution or proceeding, whether in respect of costs, charges, expenses,damages, fines, or otherwise.”
In the instant case the member had incurred the expenses on hisown responsibility, and section 232 (2) does not empower the Urban Councilto reimburse a member who has expended his own money in defendingan action. It empowers the Council to pay any costs a member who isa defendant is decreed to pay by a Court. The member was not con-demned in costs. Subsection (1) makes a member Who does a matteror thing bona fide for the purpose of the Ordinance immune from liabilityto be sued in his private capacity, but the Ordinance does not providefor his conducting bis defence at his expense, without pleading hisimmunity under subsection (I), and later seeking reimbursement ofhis expenses.
We are of opinion that the Auditor-General has acted within theprovisions of the law and that the surcharge has been properly made.Section 194(1) vests in him the discretion of deciding whether he shouldsurcharge the item of account disallowed on the person making the illegalpayment or the person authorising it. The payment to Mr Mendis wasa payment from the local fund, and the appellant as the person signingthe cheque has been rightly surcharged as the person making the paymen^
Dharmadasa a. Piyadasa Pever a
No doubt it is within the auditor’s power if he so thinks fit in a givencase to surcharge any one or more of the persons who concur in the illegalpayment or vote for it.
It was contended by learned counsel for the appellant that the appel-’lant should not have been singled out for the surcharge as the othermembers also authorised the payment. But in the circumstances of theinstant case the Auditor-General has thought it fit to surcharge the personmaking illegal payment and he was acting intra vires in so doing. Theappellant should have no cause for complaint as he has played sucha prominent part in persuading the Council to make the payment andin himself executing the necessary documents in that behalf.
The appeal is dismissed with costs payable to the 1st respondent.Sansoni, J.—I‘agree.