038-SLLR-SLLR-2002-3-ALAHAKONE-v.-TAMPOE.pdf
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Alahakone v. Tampoe
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ALAHAKONE
v.
TAMPOE
SUPREME COURTFERNANDO. J.
AMERASINGHE, J. ANDPERERA, J.
SC APPEAL NO. 26/94CA REVISION APPLICATION NO. 433/93DC COLOMBO NO. 15585/LFEBRUARY 24. 1994
Civil Procedure Code – Security for costs where plaintiff resident out of Sri Lanka- Discretion of the court – Section 416 of the Code – “Incurred costs".
The plaintiff, a permanent resident of Australia instituted action to have the saleof the land in suit set aside on the ground of laesio enormis. There was thendue from the defendant to the plaintiff a sum of Rs. 910,000 upon a mortgageof the said land. As a matter of fact the plaintiff was not protracting theproceedings In the case.
Held:
The discretion of the court to order security for costs of the defendantunder section 416 of the Civil Procedure Code should be exercised judiciallyand with reason; and the amount ordered should itself be reasonable.
Section 416 provides for “security" which is required to be furnished, inorder to create a fund from which an order for costs made by the courtcould be satisfied, if such costs are not directly paid by the plaintiff.“Incurred" costs under the section means that amount of costs which thecourt may financially award, regardless of what the party may actuallyspend.
In making the order the court should not be unduly influenced by the viewthat the plaintiff did npt have a prima facie case or the absence of avaluation report annexed to the plaint.
In the instant case order for costs was unnecessary and premature in thatfirstly, the trial could well be concluded within a short time; secondly, at
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the stage of the application the defendant had in his hand a sum ofRs. 910,000 of the plaintiff’s money on the mortgage of land whichwas sufficient security for such costs.
Cases referred to :
Scott v. Mohamadu – (1914) 18 NLR 53.
Girahagama v. Hathurusinghe – (1946) 35 CLW 65.
Senanayake v. Da Croos – (1940) 41 NLR 189.
APPEAL from the judgment of the Court of Appeal.
A. K. Premadasa, PC with C. E. de Silva for plantiff-appellant.
S. Mahenthiran with N. R. Sivendram for defendant-respondent.
Cur. adv. vult.
March 15, 1994FERNANDO, J.
The plaintiff-respondent-petitioner (the plaintiff), a permanent residentof Australia, instituted this action to have a sale of land set asideon the ground of laesio enormis. The defendant-petitioner-respondent(the defendant) applied under section 416 of the Civil Procedure Codefor an order directing the plantiff to furnish security for costs.
The learned trial Judge refused to exercise his discretion in favourof the defendant. In his order he referred to the fact (which was notdisputed before us) that there was then due from the defendant tothe plaintiff a sum of Rs. 910,000 upon a mortgage of theland which was the subject-matter of the action; he also observedthat the proceedings were not being protracted by the plaintiff, eitherwilfully or by lack of due diligence in prosecuting his claim. He heldthat the application was "premature".
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Acting in revision, the Court of Appeal ordered the deposit ofsecurity in a sum of Rs. 300,000 observing:
. . mere residence outside Sri Lanka will not attract an orderfor (security for) costs. Therefore, the court is entitled in the exerciseof its discretion (to) examine the validity of the cause of action,if not in its totality, which would be a premature exercise but onthe test whether there is a case to be tried on the pleadingssubmitted to Court. The plaintiff's claim that the market value isRs. six million is not supported by any valuation of the propertyannexed to the plaint … In an action of this nature it is (the)value of the property that is the matter in issue. It transpires thatthe plaintiff has not accepted a valuation taken on Court commissionas well… But, this court would refrain from making any observationsas to the merits of the case. However, an influencing factor in theordering of security would be the existence of a prima facie caseat the time the application is made. This is subordinate to the primefactor of the residence of the plaintiff outside Sri Lanka. We cannotagree that the application for costs is premature." [emphasis added.]
The order of the Court of Appeal contains no reference to the twomatters mentioned in the order of the learned trial Judge; it seemsto have been unduly influenced by the view that the plaintiff did nothave a prima facie case, and the absence of a valuation reportannexed to the plaint; and gives no indication whatever as to howthe amount of security was fixed as high as Rs. 300,000. .
The plaintiff applied for special leave to appeal. Having heard bothcounsel, we granted special leave. As counsel agreed that the matterin issue was fit for immediate consideration and disposal, without theneed for written submissions, we took up the appeal for hearing atonce.
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An order for the deposit of security, if not complied with, wouldresult in the dismissal of the plaintiff’s action under and in terms ofsection 418 (1). Such an order must be made with due regard tothese drastic consequences, and the court's discretion must beexercised, judicially and with reasons, and not as a matter of course:Scott v. Mohamadu,(1> Girahagama v. Hathurusinghe:2> Such securityis for "the payment of all costs incurred and likely to be incurred".Two questions arise. Did the circumstances justify the exercise of thatdiscretion, and, if so, was the amount ordered reasonable?
Learned counsel for the defendant sought to justify the order ofthe Court of Appeal on the basis that it was common knowledge thatin a matter of this nature legal fees would exceed Rs. 10,000 fora day at the trial, and would range from Rs. 30,000 to Rs. 50,000 foreach appeal. On the assumption that 15 to 20 dates of trial wouldbe required, he submitted that Rs. 300,000 was a fair assessment.He also contended that an order under section 416 could only bemade once, that thereafter the Judge was functus, and accordingly,the Judge must assess the costs likely to be incurred assuming themaximum number of dates of trial, two appeals, and even a possibleretrial. This would be an oppressive use of section 416, resulting ina possible denial of the plaintiff’s right to his day in court. The powerconferred by section 416 is one to which section 4 of the InterpretationOrdinance (cap. 2) applies, and may be exercised, from time to time,as the interests of justice require; the Judge is not bound to estimateall likely costs in one attempt. I will assume that section 416 doesextend to costs of appeal, although I doubt this. I cannot agree withlearned counsel that "incurred" costs must be construed as meaningor including all costs actually incurred. It is "security" which is requiredto be furnished, in order to create a fund from which an order forcosts made by the court could be satisfied, if such costs are not directlypaid by the plaintiff. Accordingly, "incurred” costs means that amount
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of costs which the court may finally award, regardless of what theparty may actually spend. Counsel conceded that, having regard tothe amounts prescribed in the second schedule to the Code, costsawarded by the trial court could not exceed Rs. 40,000; and that evenif costs in appeal were included, a sum of Rs. 70,000 would still beon the high side. The Court of Appeal was clearly wrong in orderinga prohibitively higher amount.
The decision of the learned trial Judge that the defendant's applicationwas premature appears to have been based on the fact that therewas, at that point of time, no real risk that the defendant would beunable to recover any costs awarded to him, because it was opento him, in some appropriate way, to recover the same out of the sumsdue from him to the plaintiff: in other words, that he already hadsufficient security for such costs. Looked at another way, the defendantadmittedly had Rs. 910,000 of the plaintiffs money: why should theplaintiff be asked to deposit any additional sum of money to meeta possible claim by the defendant (for a relatively small amount) untilthat sum was exhausted, or nearing exhaustion? It was contendedon behalf of the defendant, that this sum was being repaid in periodicinstalments, and that at some future date the defendant would notowe the plaintiff anything at all. That is speculative, because if thenecessary co-operation is forthcoming from parties and their legaladvisers, the trial can well be concluded within a short time. Thepurpose of an order under section 416 being to ensure that an orderfor costs would be satisfied, so long as the defendant owed moneyto the plaintiff, such an order was unnecessary and "premature". Thelearned trial Judge correctly exercised his discretion, consistently withthe principles laid down in previous decisions (such as Senanayakev. de Croos, where the likely difficulty of recovering such costs wasregarded as a relevant factor) which continue to be applicable despitethe amendment of section 416 by Law, No. 20 of 1977. The Court
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of Appeal was in error in acting upon impressions as to the maintainabilityof the plaintiffs case, especially because of the absence of a documentnot required by law to be annexed to the plaint. No prejudice hasbeen caused to the defendant because it is open to him to makeanother application if and when the circumstances warrant it.
It was for these reasons that, at the conclusion of the argument,we made order allowing the appeal, without costs, and directed thelearned .trial Judge to hear and determine the action expeditiously.
AMERASINGHE, J. – I agree.PERERA, J. – I agree.
Appeal allowed.
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