B. P. MEDONZA, Appellant, and B. K. KIEL Respondent

116-NLR-NLR-V-61-B.-P.-MEDONZA-Appellant-and-B.-K.-KIEL-Respondent.pdf


J'd&donza -a. Zlei
4 59
1957Present: H. N. G. Fernando, J., and T. S. Fernando, J.
P. MEDONZA, Appellant, and B. K. KIEL, RespondentS. C. 185—D. C. Colombo, 2A500
Principal and agent—Agent appointed to conduct a business—Action for accounting—
Conditions precedent for instituting it—Must agent maintain a separate bank
account?
Ia an action for accounting instituted by a principal against bis agent whohad been appointed by him to manage and conduct a transport business—-
3dd, (i) that- the obligation of an agent to render accounts to his principaldoes not terminate merely by the submission of account papers ; he is bound toexplain those papers, and if, on accounts taken, it is found that he hag in hishands money which belongs to his principal, he is bound to pay that sum.
An action for accounts does not lie unless the principal has first called uponthe agent to explain the accounts and the agent refuses or fails to explain themsatisfactorily.
(ii) that, in the absence of supporting evidence, the mere failure on the partof the agent to maintain a separate bank account in connection with, the businesswhich he had been appointed to manage was insufficient to establish a chargeof fraud.
460
H. 2>». G. FBB2TA27DO, J.—Medonza v. Kiel
PPEAX, from a judgment of the District Court, Colombo.
H. V. Perera, Q.C., with. H. W. Jayewardene, Q.G., M. L. de Silva andH. D. Pur era, for the defendant-appellant.
27. W. Tambiiih, with C. Itanganathan and S. C. Crossette-Thambiah,for the plaintiff-respondent.
Cur. adv. vult.
April 9, 1957. H. 1ST. G. Fbskakdo, J.—
The defendant in this ease has appealed against a judgment anddecree of the District Court ordering him to render to the plaintiff a trueand correct account of his management during the period 7th January,1943, to 10th May, 1943, of a Transport business known as the HalielaForwarding and Clearing Agency.
The business in question had been owned and carried on by a personcalled D. A. Abeysekera, who died in January 1942 ; his widow foundherself unable to manage the business successfully and entered intonegotiations relating to the management first with one Pakir Saibo andafterwards with the present defendant. The widow herself died inJanuary 1943 having by last will appointed her brother, the plaintiff,as her executor.
The half share of the forwarding business to which the widow hadsucceeded upon the death of her husband was disposed of in the last willbetween the minor children of the testatrix and her brothers and sistersrespectively. In the result, after her death, the minors became entitledto a fth interest in the business, and the brothers and sisters ofMrs. Abeysekera to the remaining Jth.
On 7th January, 1943, the plaintiff as executor named in the will of thewidow concluded an agreement with the defendant whereby the latteragreed to manage the business for a period of one year with an option tobuy it at any time during that period fox the sum of Rs. 40,000. Inconsideration of the option the defendant undertook to pay to the plain-tiff on behalf of the deceased’s estate, one half of the nett profits of thebusiness. This agreement is contained in the letter P 16 written bythe defendant to the plaintiff and was confirmed by the letter P 17 fromthe plaintiff of the same date. It is of some importance to note that thedefendant’s letter PI 6 refers to the fact that the agreement mentionedin the letter is “tentative and subject to ratification after my Mr. Edwin,who is going with you to Half Ela today, returns and reports satisfactoryon the concern. ” It is common ground that from 7th January, 1943,Edwin Silva (the Mr. Edwin referred to in P16) did in fact manage the
H. N. G. FTSRXAI^CO, J,—Medonza v. Kiel461
transport business on behalf of the defendant. Some time prior to June1943 the plaintiff, who was already the executor of the will of his sisterMrs. Abeysekera, was also appointed administrator de bonis non of theestate of Mr. Abeysekera. It is apparent that the original informalagreement under which the defendant commenced to carry on the trans-port business in January 1943 had been made pending the vesting inthe plaintiff of the powers necessary to enable him to enter into a more-formal and binding transaction. On June 22nd, 1943, the plaintiff inhis dual capacity as executor of his sister’s will and as administratorde bonis non of the estate of Mr. Abeysekera, together with his brothers;and sisters (who owned a £th share interest), entered into a notarialagreement P15, the other party to which was the defendant. Thisinstrument provided that the defendant should manage and conductthe business for such period as he should think fit but not exceeding aperiod of two years from 7th January, 1943. The defendant undertookto pay a £ share of the nett profits to the plaintiff, but the amount paya-ble was for the commencement restricted to Rs. 200 per mensem forreasons which immediately appear. The agreement acknowledgedthat the defendant had already advanced a sum of Rs. 4,000 which hadbeen “ received by the plaintiff for the payment of pressing debts dueby the estate ” of the deceased Abeysekera and bis widow, and alsoprovided for a further advance of Rs. 12,500 “ agreed on as essentialfor original repairs ”. The monthly rate of profit payable to the plain-tiff was to be restricted to Rs. 200 per month until such time as thedefendant could reimburse himself for the total amount of these twoadvances. It was farther agreed that the defendant would have theoption of purchasing the business outright at any time during the periodof two years ending on 7th January, 1945, for the sum of Rs. 40,000 lessthe amount of the two advances. In regard to accounts, the agreementprovided that the defendant should keep proper books of accountswhich would be available for inspection at premises called “ Andabel ”(where the office of the business was maintained), and should transmita statement of accounts to the plaintiff every six months.
Relations between the parties appear to have been perfectly amicableuntil about the end of the year 1944. In May 1944 the defendant gavenotice of his intention to exercise his option to purchase the business forRs. 40,000 less the amount of the advances, and in conformity with theclause in that behalf which was contained in the agreement. PI5, theplaintiff in December 1944 filed a petition in his deceased sister’s testa-mentary case for the sanction of the District Court “ to proceed with andcomplete the sale of the said business ” to the defendant. Notice of theplaintiff’s application for the sanction of Court was issued on one of hisbrothers as guardian ad litem of the minor children of Abeysekera aswell as on the same brother, another brother and a sister of the plaintiffas donees of the Jth share of the business : and those two brothers and thesister filed objection against the sale of the property. Ultimately it wasagreed of consent in August 1945 that the business be valued by one oftwo firms of Chartered Accountants and floated into a private Companyon that valuation. The present defendant was to be allotted shares in
2*—J. N. B 22598 (3/60)
462
H. 1ST. G. "FERiSTANDO, J.—Medonza v. Kiel
the Company up to the amount of his investment in the business and theremaining shares were to be divided among the heirs of Abeysekera inproportion to their interests. This settlement was approved by theCourt. As neither of the firms named in that order was willing toundertake the valuation, order was made on 30th October, 1945, that thevaluation he done by Mr. A. P. Rowlands assisted by Sambamurti andCo., who are a firm of accountants. At this stage however it was notedthat the consent of the minors and of the two brothers and sister of theplaintiff was subject to their rights “ to have the settlement cancelledon account of the mismanagement of the would be purchaser InSeptember 1946 the accountants filed in Court a financial statementrelating to the business and a valuation report.
On the 30th October, 1946, plaintiff’s Proctor moved that the Commis-sioner’s report he taken up for consideration and date for considerationwas fixed accordingly. Thereafter objections were filed by the plaintiffand by and on behalf of the heirs. So far as the plaintiff was concernedhe did not in his objections refer to any omissions or inaccuracies in theaccounts of the Agency for the period ending on December 31st, 1945,which had been filed by Messrs. Sambamurti and Company, but onlycomplained that the goodwill of the business as well as the value of theroute licences should be added to the assets of the business for the pur-poses of valuation. While consideration of these objections was pending,a settlement was arrived at between the parties and was accepted by theDistrict Judge on 14th October, 1947. This settlement replaced theearlier one of August 1945 which had provided for the floatation of aprivate Company. Under the new settlement it was agreed that theplaintiff should pay a sum of Rs. 67,500 to the defendant on or before30th November, 1947. Upon this payment being duly made the defen-dant was to deliver over possession of the business and all its assets tothe plaintiff. In default of due payment the Court was empowered toissue a commission to Colonel Vandersmaght to sell the business and itsassets as a going concern by public auction, and the proceeds of sale wereto he utilised first in repaying the sum of Rs. 67,500 to the defendant.The defendant was by this settlement empowered to purchase the businesshimself at the auction and in that event was to be allowed credit up to asum of Rs. 67,500 ; if the price realised at the auction was less thanRs. 67,500 the defendant was to be paid the full proceeds and to entersatisfaction for the sum due to hi-m under the agreement. The terms ofthe settlement also included the following provisions :—
“ The 9th respondent is to conduct the business from 14th October,1947, up to 30th November, 1947, in association with B. K. Kiel or aperson nominated by him in writing in consultation with the proctorsin the case. During that period all monies of the business in hand ornow in deposit in any bank or that may come in during the said periodare to be deposited in a bank to the credit of the account of the business,the said bank account of the business to be operated on for the purposeof the business by cheques drawn and signed jointly by Edwin Silvaon behalf of the 9th respondent and Mr. Kiel or his nominee alreadyreferred to. ”
H. 2?. G. IIRJSrASDO, J.—Medonza v. Kiel
463
As a transitional measure the following provision was included withrespect to the carrying on of the business until 30th November, 1947,which was the last date before which the plaintiff could pay off thedefendant in terms of the settlement :—
“ The 9th respondent gives an undertaking to Court that he has notdrawn any monies out of profits or out of the capital of the said businessand agrees to duly account for all monies and assets of the said from1st January, 1946 to 13th October, 1947 on or before 15th December,1947.
If it is found that he has drawn any monies out of the capital orprofits of the business as aforesaid or if any money is found to be dueby the 9th respondent after such due accounting ha is to be debited withthe said monies if any drawn by him as aforesaid or found due asagainst the said sum of Rs. 17,500 to be deposited in Court as aforesaidthe 9th respondent being liable to pay to the Executor of the Estate ofMrs. Abeysekera and Administrator of the Estate of Mr. Abeysekeraany sum found to be due in excess of the said sum of Its. 17,500. Ifthe 9th respondent duly accounts as aforesaid before the 30th Novem-ber, 1947, as aforesaid the said sum of Us. 17,500 or such other sumas may be agreed upon or found as being due to the 9th respondenttherefrom it is to be paid to him direct and not into Court. ”
The plaintiff failed to pay to the defendant the stipulated sum ofUs. 67,500 before the end of November 1947, and, upon the applicationof the defendant, on 11th December, 1947, the District Court issued acommission for sale. Early in January 1948 an application was madeby the plaintiff to stay the sale. Several issues were raised upon thatapplication and the Court thereafter made order on 30th January, 1948,refusing to stay the sale and also remedying the omission of the Court toenter a formal decree in terms of the settlement of October 1947, andentering decree nune pro tunc in terms of that settlement.In the mean-
time an application had unsuccessfully been made in the Supreme Courtfor restitutio in integrum in order to set aside the settlement of 14thOctober, 1947. Subsequently in 1950 the Supreme Court dismissed anappeal which had been filed against the District Judge’s refusal to staythe sale. The sale actually took place in March 1948 and the businesswas purchased by the defendant for Rs. 50,000. The sale was confirmedwithout objection on 27th April, 1948, and the EiscaFs conveyanceexecuted in favour of the defendant in May 1948.
The present action for an accounting was filed on 26th August, 1949.In the plaint no reference whatever was made to the various applicationsand proceedings which had earlier been taken in the District Court or tothe settlements which had been arrived, at in that Court. The cause ofaction relied on was that the defendant had by the agreement of June1943 undertaken to manage and conduct the business, that he had doneso until 10th May, 1948, and that he had failed to render true and eorrectaccounts for the period of management to wit 7th January, 1943 to 10thMay, 1948. To this plaint the defendant answered by referring to the
484
H. N. G. ‘FERNANDO, J.—Medomza v. Kiel
option to purchase and to the plaintiff’s’applieation to Court for sanctionto sell the business to the defendant in terms of that option and by settingout the purport of the settlement of October 1947 to which I have alreadyreferred. Thereafter an amended plaint was filed in August 1950 againreciting only the original agreement of June 1943 but including a newallegation that “ the defendant has wilfully and fraudulently failed andneglected to render a true and correct account of the business ” for thewhole period. In support of this allegation the amended plaint referredto seventeen different items in respect of which there had been an allegedfailure to account.
The term (January 1943 to May 1948), for which an accounting isdemanded, can be divided into four periods. There was firstly the periodfrom January 7th, 1943 to June 30th, 1944. In respect of this periodthere was an audit report dated 8th September, 1944, by Messrs. Weera-mantri and Co. to which was attached the accounts for the year ending31st December, 1943, and the half year ending 30th June, 1944. There-after the plaintiff made his application to the District Court in December1944 for sanction to sell the business to the defendant in terms of theagreement of June 1943 (P15). The affidavit D2 attached to that appli-cation and signed by the plaintiff contains a paragraph 13 stating thatthe half share of the profits of the business to which the plaintiff wasentitled as executor until 30th June, 1944, amounted to Es. 6,826/50and that a sum of Es. 3,350/79 had been withdrawn by the plaintiff outof these profits for the maintenance of the minor children. The figuresquoted in this paragraph are obviously based on the balance sheetsfurnished by Messrs. Weeramantri and Co. which show that 50% of theprofits of the year 1943 amounted to Es. 3,622/92 and that 50% of theprofits for the first half year of 1944 amounted to Es. 3,203/68. Theamount of drawings specified in paragraph 13 of D2 was arrived at by theaddition of Es. 970/96 (shown in the accounts as the 1943 drawings) andEs. 2,379/83 (shown as the drawings for the first half year of 1944).' Theaffidavit D2 also recites that the total value of the interest which theplaintiff had, as executor, held in the business up to the end of June 1944(made up of the value of lorries and equipment as at 7th January, 1943,and of the balance of undrawn profits) was Es. 27,975/81. This figure alsowas taken directly from the balance sheet prepared by Messrs. Weeramantriand Co. Considering that the plaintiff’s application to the Court inDecember 1944 was made in a fiduciary character with the object ofseeking the approval of Court for the sale of assets held by him as exe-cutor, it should fairly be assumed that the plaintiff was perfectly satis-fied in December 1944 with the accounts, figures from which were utilisedby him in his application to which the defendant was named a respondent.I cannot see therefore how the plaintiff can now contend, a3 he has soughtto do, that those accounts were neither accepted by him nor regarded assettled. The only ground therefore upon which those accounts canproperly he canvassed at this stage would be the ground of fraud, towhich I shall refer later.
In respect of the second period, which is July 1944 until December, 1945.Messrs. Sanbamurthi and Co. furnished in September, 1946, (P35) to theDistrict Court working and profit and loss accounts for the whole of the
H. N. G. FERNANDO, J.—Medonza v. Kiel465
years 1944 and 1945 and also furnished valuation reports as directed bythe Court. It was after these accounts were furnished that the settlementof October 1947 was arrived at of consent by which the parties agreedthat a total sum of B>s. 67,500 was due to the present defendant and wouldbe paid to him by the plaintiff in terms of the settlement 05. Thissettlement was only approved of by the Court after recording the evidenceof Mr. Sambamurthi and after an examination of the figures in Mr. Sam-bamurthi’s statement of accounts. It should be noted that a period ofthirteen months elapsed after Messrs. Sambamurthi and Co.'s accountswere filed in Court and that during that period no request was made atany time by the plaintiff to the defendant for any books or vouchersconnected with the accounts or any explanations as to the accounts.On the contrary the plaintiff, who was represented by Counsel, volun-tarily agreed to the figure of Its. 67,500 as being the sum which shouldbe paid to the defendant in order to “ buy out ” his interest in the busi-ness. It should be noted also that the defendant by this settlementsurrendered the right, which he had under the original agreement of June1943, to acquire the whole business for himself for the sum of Rs. 40,000less amounts advanced by him and profits due to him. Here again thecircumstances lead to the obvious conclusion that on the basis of theaccounts furnished by Messrs. Sambamurthi negotiations took placebetween the parties which resulted in the settlement of October 1947 andthat the accounts upon which the settlement must have been based,had been mutually accepted by the parties.
The third period of the entire term is the period January 1, 1946 to14th October, 1947. Inregard to thisperiod the provision in the settlementD5 was that the defendant would duly account for all monies and assetsof the business on or before 15th December, 1947. On the specified datethe defendant filed in Court a statement of account (P34) for that periodprepared by Messrs. Sachithananda, Schokman and de Silva. By thistime the defendant was no longer entitled in terms of the settlementD5 to “ buy out ” the plaintiff for the agreed sum of Rs. 67,500. BetweenDecember 1947 and the time of the filing of the plaint in 1949 the plaintifftook no steps whatever to challenge the defendant’s statement of accountsnor to ask for any explanation or assistance with regard to any particularitems in the accounts. Instead as I have already stated -he institutedvarious proceedings both in the District Court and in this Court the onlyobject of which was to abrogate the settlement of October 1947, and thepresent action was filed only after repeated efforts at abrogation hadfailed. I should refer in this connection to one letter (P46) of 18thFebruary, 1948, which appears to have been regarded by the learnedtrial Judge as a request by the plaintiff for assistance to verify thedefendant’s accounts. The relevant paragraph is as follows :—
“ Please let me know whether you can make available to me thesebooks to enable me to take extracts from these books. I want thebooks for 1944, ’45, ’46 and ’47. ”
It is evident that the only reason why the plaintiff here asked for thebooks was because he himself had to submit accounts in the testamentary
466
H. £3. G-. FERNANDO, J.—-M.edonza v. Kiel
case and desired to include in these accounts extracts from the books.There was no word here of any dissatisfaction with the accounts submittedto Court, in December 1947 nor indeed with the earlier accounts preparedby-Messrs. Weeramantri. and. Messrs. Sambamurthi. The defendantreplied by P47 of 23rd February, 1948, to the effect that the books wereavailable at the office of the Accountants and were at the time of writingavailable at Hali Ela where the office of the business was maintained. Hestated that the plaintiff would be at liberty to inspect those booksobtain extracts. Having regard to the terms in which the plaintiff madethe request for those books, it is unreasonable to expect that the defen-dant should have interpreted that request as one for any explanation orassistance in connection with the accounts.
While the original agreement of June 1943 only provided for themanagement of the business by the defendant until a date not later than7th January, 1945, the defendant actually conducted the business afterthat date and until October 14th, 1947, acknowledging all the time theright of the plaintiff to a half share of the profits to which he was entitledduring the pendency of the original agreement. It has been contendedon behalf of the defendant that since the agreement had ceased to bein force in January 1945 the relationship between the parties as from thebeginning of the year 1945 had become altered and was different from therelationship established by the agreement. I see no force in this con-tention. The only reason why the defendant continued to be responsiblefor management after January 1945 was that proceedings were pendingin the District Court for sanction to sell the business to the defendantin terms of the original agreement. At the lowest it must therefore heassumed that there was an implied agreement between the parties that'therelationship established by the orginal agreement would continue nnt.ilthe termination of the Court proceedings.
This implied agreement was acknowledged and confirmed in the settle-ment D5 of October 1947 in which the defendant undertook to aeeount-for the management of the business until October 14, 1947.
The defendant was clearly Hie agent of the plaintiff under the originalagreement of 1943 and continued to be his agent until October 14, 1947,being entitled to a half share of the profits in consideration of his under-taking the duties of management. It is clear that the duty of an agent to-'render accounts to his principal is not he regarded as having been dulyperformed merely by his furnishing accounts to the principal. “ It is.well settled that his obligation towards his principal does not terminatemerely by the submission of account papers ; he is bound to explain,those papers, and if, on accounts taken, it is found that he has in his-hands money which belongs to his principal, he is hound to pay that sum. ”(Madhusudan Sen v. Dakhal Ghandra Das) 1. And as the learned trialJudge has rightly observed in the present case, the requirement of leaveto surcharge and falsify accounts which have been furnished is necessaryonly in a ease where accounts have been settled, and not where the agent-has failed to carry out his obligation in terms of the principle laid downby the Privy Council in the jugdgment just cited. At the same time,,
1 A-T.R. 1916 Calcutta at 684.
H. G-. FERNANDO, J.—Medonza v. Kiel
467
however, if statements of account have in fact been submitted the agenthas prima facie performed his duty to account and the action for anaccounting does not lie unless the principal has first called upon the agentto explain the accounts and the agent refuses or fails to explain themsatisfactorily. “ At the same time we think that the decree has been tooreadily passed and the order for examination, of the accounts has beenmade without proper findings or materials. If a decree were justifiedin the present case it will be open to any principal who has got all theaccounts of his agent in his possession, to employ the machinery of theCourts for examining his accounts on the off-chance of making his agentliable for any sum which on such examination may he found due fromhim. Such indiscriminate issue of commissions by Courts for examiningaccounts has been condemned by this Court on more occasions than one…”,(Chakrabarty v. Rai J.1
In the present case there is nothing in the evidence to show that thedefendant was ever called upon bv the plaintiff to explain the accountsaudited respectively by Messrs. Weeramantri, Sambamurthi and Satchi-thananda. Indeed neither the original plaint nor the amended plaintcontains averment that the defendant failed or neglected to explain anyof those accounts or to furnish any books or documents called for by thedefendant in connection with an examination of the accounts. None ofthe issues framed was directed at establishing any such failure or neglect.
The only ground therefore upon which the plaintiff's action can succeedin respect of accounts for the period ending October 14, 1947, is that thedefendant has been guilty of fraud. In his attempt to establish fraudthe plaintiff referred in his amended plaint to some twenty seven itemsin respect of which he challenged the accounts. The learned DistrictJudge did not arrive at any finding adverse to the defendant in regard toany one of the matters itemised in the amended plaint. Some at leastof them were not even referred to in the evidence. With regard to thoseitems which were referred to in the evidence, the accounts and explana-tions offered on behalf of the defendant make it impossible to hold thatthere was fraud in connection with any one of those accounts. Therewas however one matter upon which the learned Judge did reach afinding of fraud. This was in regard to a bill rendered on 19th August,1946, for transport work done by the Agency for one Mrs. Pestonjee.It is clear from the evidence that this work was undertaken by the Agencyat the express request of the plaintiff. The evidence on behalf of thedefence was that the bill was sent to the plaintiff for collection fromMrs. Pestonjee. The truth of this evidence is supported by a letter P52of 8th October, 1946, written by EdwinSilva to the plaintiff which containsthe following statement:—“ With regard to Mrs. Pestonjee's bill let herpay anything she likes. There is nothing left in that bill for me to pruneonce again. I am returning herewith her bill ”. The fact that the billwas sent to the plaintiff and not to Mrs. Pestonjee is borne out by EdwinSilva’s statement in P52 that he is returning the bill to the plaintiff. Theplaintiff himself admitted that he was asked to collect money fromMrs. Pestonjee. TTis explanation was that the amount was collected bythe driver of one of the Agency’s lorries and a clerk who accompanied thedriver. If in fact the money had been paid by Mrs. Pestonjee to the driver
1 A.I.JR. 1925 Calcutta at 1072.
468
H. N. G. FERNANDO, J.—Medonzu v. Kiel
it is strange that the plaintiff did not Gall her to prove the payment or toproduce a receipt.. It is stranger still that the plaintiff was able to pro-du,ee the original bill at the trial; he could only have done so if the billremained all the time in his custody, or else if Mrs. Festonjee had for someinexplicable reason retained'the “bill but not the receipt. In these eir-oumstances it was unreasonable to reject the evidence given on behalfof the defendant that the auditors advised !Edwin Silva to debit theplaintiff’s personal account with the sum due from Mrs. Pestonjee.
The learned trial Judge was also not satisfied with the manner in whichthe accounts of the Agency had been maintained. It is undoubtedlycorrect that no proper accountant was employed by the defendant andthat the accounts shown on vouchers and other documents were notcontemporaneously entered in the books of account. But the plaintiffadmitted in his evidence at the trial, as well as in bis statements to Court'in connection with his own application to sell the business to the defendant,that the business had been conducted in a most unsatisfactory and un-profitable manner before the business passed into the bauds of the de-fendant. This at least was one reason why the defendant was unableeither to incur special expenditure in connection with the accounts orto make quick improvements with regard to the management of thebusiness.
Much was made of the fact that the defendant failed to produce certainrecords which the Motor Car Ordinance required a Transport Agency tomaintain. Be did however produce books in which had been enteredsums received for transport services from various estates and from theEacheheri for work performed for the Government. In regard to theJKacheheri payments in particular, strenuous effort was made by the plain-tiff, but without success, to prove that the defendant’s accounts did nottally with those produced from the Kachcheri. With regard to othercasual transport work the defendant explained his failure to produce theappropriate books by the suggestion that those books were with theplaintiff and had not been returned. This suggestion does receive somesupport from the circumstance that nearly all of the items which werescheduled to the amended plaint are items which refer to work done not •for estates hut for other casual customers, and as I said earlier, the plaintiffwas unable to snbstantiatehisallegationthatthere was fraud in connectionwith any one of those items.
The learned District Judge has also commented on the failure of thedefendant to maintain a separate bank account in connection with thebusiness. Even if the explanation offered for this failure was unsatis-factory, the evidence and the correspondence which has been producedmake it clear that the plaintiff continually visited the office of the Agencyand innst necessarily have been aware that no separate bank accountexisted. The bank account was in fact one maintained in the name ofEdwin Silva personally, and payments were made at various times tothe plaintiff by Edwin Silva, but the plaintiff never once complained ofthe failure to maintain a separate account. In the absence of supportingevidence, the mere failure to- maintain a separate account is in' myopinion quite insufficient to establish a charge of fraud.
H. -N-. G. l*EB2iTAiJI>0, J.—Medanza v. Kiel
469
For these reasons I am of opinion that the plaintiff has now no causeof action to sue the defendant for an accounting in respect of the periodJanuary 7, 1943 to October 14, 1947. Although the plaintiff had, as analternative to his claim for an accounting, asked in his plaint for paymentof a lump sum alleged to he due to him, the evidence does not establishwhat sums the plaintiff was entitled to receive on the basis of the accountsactually furnished by the defendant. Nor is it clear that the settlementD5 did not, in fivrng the sum of Us. 67,500 as being due to the defendant,operate to liquidate all outstanding liabilities of the defendant. At thesecond hearing in appeal which was held in connection with these twomatters, Counsel for the plaintiff was unable to satisfy us that the materialon the record entitled him to a decree for the payment of any unpaidprofits of the period prior to October 14th, 1947.
The remaining period of the whole term is October 15th, 1947 to May10th, 1948, on which latter date the ownership of the business passed to thedefendant under a Fiscal’s conveyance. No accounts have in fact beensubmitted to the plaintiff in respect of this period, and the defendant hasin his answer denied any liability to submit them. The transitionalarrangement made in the settlement D5 of October 14, 1947, was thatfrom October 15th until November 30th, the business was to be managedjointly by Edwin Silva (on behalf of the defendant) and the plaintiff orhis nominee ; no provision was included for the management of the busi-ness after November 1947.
The plaintiff had asked for an accounting for the entire term on thebasis that the defendant was managing as agent under the originalagreement of 1943 ; hence it was contended for the defendant that sincethe management after October 14, 1947, was in pursuance of the settle-ment D5 and not of the original agreement, no cause of action had beenaverred in the plaint to claim an accounting for the period subsequent toOctober 14th, 1947 ; it was also contended that since the settlementprovided for joint management, the defendant would either not be liableto account to his co-manager, or would else have been entitled to set npdefences which had not been taken at the trial because the claim of theplaintiff had been on the basis of an agency and not of a co-managership.
■ In my opinion neither of these contentions is entitled to succeed in the. circumstances.
Although the claim for an accounting did not refer to the settlementof October 1947 and to the arrangement for co-managership thereafter,all the necessary material concerning the circumstances and the mannerof management after October 14, 1947, is in the record of evidence. Ifthat evidence established that- there had in fact been co-managership, thecontentions of the defence would have much force. But in fact theplaintiff does not appear to have made serious efforts to appoint anominee on his side, and the provision for joint management was virtuallya dead letter. The defendant impliedly admitted in his answer that hehad been responsible for management until his purchase of the business,and it is clear that for a great part, if not the whole, of this last period,the plaintiff did not actually participate in the management. In these
470
Wijeaundera v. Weerawadiwajjtara
circumstances, the mere fact that the plaintiff had a right to participatein management is no answer to the claim that the defendant shouldaccount for the monies which actually came into his hands during theperiod. As regards-the right-te- profits during-the last period, the termin the settlement D5 that the defendant would have no share in theprofits has to be given effect.
The decree under appeal, which directed an accounting for the entireterm, must be set aside. Decree will instead be entered ordering thedefendant to render a true and correct account of Hr management of thebusiness from October 15th, 1947, till May 10th, 1948, and declaring theplaintiff entitled to payment of the entire nett profits of this last period.'The defendant having been only partly successful, will be entitled to bepaid one half of the costs of this action and of this appeal.
T. S. Fernando.—I agree.
Appeal partly allowed.