COLOMBO SHIPPING CO. LTD. V. CHIRAYU CLOTHING (PVT) LTD

020-SLLR-SLLR-1995-2-COLOMBO-SHIPPING-CO.-LTD.-V.-CHIRAYU-CLOTHING-PVT-LTD.pdf


CA
Colombo Shipping Co. Ltd. v. Chirayu Clothing (Pvt) Ltd.
97
COLOMBO SHIPPING CO. LTD.
v.
CHIRAYU CLOTHING (PVT) LTD.
COURT OF APPEALSILVA, J. P/CARANARAJA, J.
C. A. 665/94
A. L.A. 224/94
C. COLOMBO 12238/MEAPRIL 5, 1995.
Addition of Parties – Civil Procedure Code Sections 18, 19, 21, 38, 46, 90 and93 – Amendment of Pleadings – Applicability of the Amending Act, No. 9 of 1991S. 93(2) – Amendments allowed only in limited circumstances – Notice underS 18.
The Respondent instituted action against the Petitioner alleging that theRespondent entered into an agreement with ‘X’ of U.S.A. for manufacture ofgarments. ‘X’ nominated the petitioner as the freight forwarder. The Respondentconsigned the goods to Y Bank of Hongkong which opened the Letters of Creditand handed over the goods to the Petitioner. The goods were shipped to U.S.A.and after clearance from Y Bank the Respondent could not obtain payment. TheRespondent claimed from the Petitioner on the ground that it had consigned thegoods to a party other than the Y Bank. The Petitioner denied having enteredinto any agreement with the Respondent claiming that it acted as an Agent of 'Z'Ltd., who were the agents of Y. The Respondent, thereafter, sought to add ‘Z’and amend the Plaint. The learned District Judge allowed the amendment.
Held:
The amendment sought should make the real issue clearer.
The real Issue is whether the Petitioner consigned the goods to Y Bank ornot; adding ‘Z’ Ltd., will not make this issue clearer.
The Respondent, having chosen to sue the Petitioner cannot by adding 'Z'Ltd., rectify the mistake of instituting action against the wrong party.
Proper course is to drop the action and commence a fresh action against theproper party.
‘Z’ Ltd., has been added without the requisite Notice. Hence it is also not inconformity with the requirements of Section 18.
98
Sri Lanka Law Reports
[1995] 2 Sri L.R.
After the amendment No. 9 of 1991, if an application is made to add a partyafter the first date of trial, Sec. 18, 21, 93(2) of the Code should be read togetherin allowing or refusing such an application.
Per Ranaraja J.
"Amendments on and after the first date of trial can now be allowed only in verylimited circumstances namely, when the Court is satisfied that grave andirremediable injustice will be caused, if the amendment is not permitted and theParty is not guilty of laches”.
Cases referred to:
Ratwatte v. Owen-2 N.L.R. 141.
Kira v. Kira- 3 C.L.R. 73.
Don Alwis v V.C. of Hiripitiya- 54 N.L.R. 225.
Loos v. Schrenguivel – 3 C.L.R. 47.
Banda v. Dharmaratne- 24 N.L.R. 210.
AN APPLICATION in Revision from an Order of the District Court of Colombo.
S. Sivarasa, PC. with K. M. Basheer Ahamedfor Petitioner.
G. D. L. Weerasinghe for Respondent.
Cur. adv. vul
May 05,1995.
RANARAJA, J.
The Respondent instituted action against the Petitioner alleginginter alia, that the respondent entered into an agreement with C. S. I.Garments Incorporated, U.S.A., (C.S.I.) for the manufacture ofgarments, C.S.I. nominated the petitioner as the freightforwarder/consolidator. The respondent consigned the goods,(garments) to the Philadelphia National Bank of Hong Kong, whichopened the letters of credit and handed over the goods to thepetitioner for shipment. The goods were shipped to U. S. A. and werecleared by the U.S. customs. The respondent was unable to obtainpayment from the said Bank. Hence, the respondent claimed a sumof US $ 24,277.33 from the petitioner on the ground that it hadconsigned the goods to a party other than the Philadelphia NationalBank, or on the alternative ground of unjust enrichment.
CA Colombo Shipping Co. Ltd. v. Chirayu Clothing (Pvt) Ltd. (Ranaraja, J.)99
The petitioner denied having entered into any agreement with therespondent. It claimed to have acted at all times as agent of BuyersConsolidators Ltd.; of Hong Kong, who were in turn the agents ofC.S.I.
The matter was fixed for trial on 10.6.93, on which day, the trialwas refixed for 27.10.93. On 6.9.93, the respondent made anapplication under Section 18 of the Civil Procedure Code to addBuyers Consolidators Ltd; (added defendant), as a defendant andalso amend the plaint. The petitioner objected to the respondent'sapplication. The Additional District Judge however allowed theapplication on 30.9.94. These applications in Revision and leave toappeal are from that order.
The petitioner has adduced four grounds why the order cannot besustained. Namely, (1) There is no agreement pleaded between therespondent and the petitioner. (2) An action brought against a wrongparty cannot be converted by adding a new party. (3) The properprocedure in seeking to add the new party has not been followed. (4)The application for the amendment of pleadings cannot be alloweddue to laches on the part of the respondent.
In reply, the respondent has submitted that Section 18 of the CivilProcedure Code permits Court to add a party as a defendant in orderto, (1) avoid a multiplicity of actions, and (2) to diminish the cost oflitigation. It is further submitted that an amendment necessitated bythe addition of a party, is not an amendment contemplated by Section93 of the Code. In any event, it is urged, the amendment should beallowed as otherwise it would cause grave and irremediable injusticeto the respondent.
Section 18 of the Code reads:
(1) The court may on or before the hearing upon the applicationof either party, and on such terms as the court thinks just, orderthe name of any party, whether as plaintiff or as defendantimproperly joined, be struck out; and the court may at any time,either upon or without such application, and on such terms asthe court thinks just, order that any plaintiff be made adefendant, or that any defendant be made a plaintiff, and that
100
Sri Lanka Law Reports
11995] 2 Sri LR.
the name of any person who ought to have been joined,whether as plaintiff or defendant, or whose presence before thecourt may be necessary in order to enable the court effectuallyand completely to adjudicate upon and settle all the questionsinvolved in that action, be added.
The words “all questions involved in that action” in the Sectioncircumscribe the power of Court to add or strike out a party to anaction. The provisions of the Section were never intended to apply toa person against whom the plaintiff did not disclose a cause ofaction.
The respondent has sought to amend paragraphs 16.17 and 22 ofthe plaint by substituting the word “defendants” in place of the word“defendant”. In none of these paragraphs is it alleged that therespondent had any agreement with the added defendant. Inparagraph 11 of the original plaint, it is alleged that the petitionersacting as agent of C.S.I. promised the respondent, payment of US $24,277,31. This paragraph remains unamended except for thesubstitution of the words “first defendant” for the word “defendant”. Itis the same in the amended paragraph 12, which avers that therespondent handed over the consignment of goods to the petitioner.The basis on which the added defendant is sought to be made liablein damages is not set out in any other paragraph of the amendedplaint. In other words, the addition of Buyers Consolidators Ltd. willneither help to settle any question in the action nor avoid a multiplicityof actions and reduce the cost of litigation.
The principle by which a Court ought to be guided in deciding toalter a pleading is that the alteration will make the real issues clear.Ratwatte v. Owen (,). The complaint of the respondent against thepetitioner is that it had consigned the goods to a party other than thePhiladelphia National Bank. The real issue between the petitioner andthe respondent appears to be whether the petitioner consigned thegoods to Philadelphia National Bank or not. Adding BuyersConsolidators will in no way make the issue any clearer. Nor will sucha course enable Court to effectively and completely adjudicate uponand settle all questions involved in the respondent's action againstthe petitioner.
CA Colombo Shipping Co. Ltd. v. Chirayu Clothing (Pvt) Ltd. (Ranaraja, J.)101
It appears that the intention of the respondent is to rely on theaverments in the answer filed by the petitioner, that it acted as agentof Buyers Consolidators Ltd.; to make the latter liable. Therespondent having chosen to sue the petitioner, cannot by addingBuyers Consolidators Ltd.; as a defendant, seek to rectify the mistakeof instituting the action against the wrong party. The proper course isfor the respondent to drop the action which it has wrongly institutedand commence a fresh action against the proper party, who shouldhave been made the defendant in the first instance. Kira v. Kira (2).Don Alwis v. V.C. of Hiripitiya131. In the present action, documents 4(a)to 4(c) show clearly that the receipt of goods was acknowledged bythe petitioner on behalf of Buyers Consolidators Ltd. Thesedocuments also disclose that the goods were in fact consigned toPhiladelphia National Bank.
The learned Additional District Judge has commented that therespondent had made the application for the addition of BuyersConsolidators Ltd; under Section 93 and not under Section 18 of theCivil Procedure Code, hence no notice need be served of theapplication on the party sought to be added. The caption to theapplication clearly shows that the application was one made underSection 18 of the Code. Besides, as will be explained later, this is nota correct interpretation of either Section 18 or Section 93. In thematter of an application to add a party in terms of Section 18 of theCode, it has been pointed out in Loos v. Schrenguivelw and adoptedwith approval in Banda v. Dharmaratne (5>, the procedure that shouldbe followed is for the party seeking to bring a third party to obtain exparte, an order giving leave to serve a notice on the person whom hedesires to add, and the question whether such party ought to bejoined should be considered and dealt with in his presence and inthat of the parties already on record. No such application has beenmade in the instant case. Buyers Consolidators Ltd; has been addedwithout the requisite notice and in its absence. Hence the procedurefollowed is not in conformity with the requirements as set out in theabove judgments. The requirement of notice to the party to be addedis to give him an opportunity to show cause why he ought not beadded at the stage of application for addition, rather than compellinghim to raise objections to addition in his answer or by way of motion
102
Sri Lanka Law Reports
[1995] 2 Sri L.R.
and memorandum in writing under Section 90 of the Code, andthereby prolong the proceedings.
Section 21 of the Civil Procedure Code provides:
“When a defendant is added, the plaint shall unless courtdirects otherwise, be amended in such manner as may benecessary, and a copy of the amended plaint shall be servedon the new defendant and on the original defendants.”
Provision for the amendments to pleadings is made by Section 93,which is the pivotal Section on amendments to pleadings, inChapter XV of the Code. As that Section stood prior to theamendments by Act No. 79 of 1988 and Act No. 9 of 1991, it posedno problem when an amendment was necessitated by adding a partyas a defendant under Section 18 of the Code, as it was entirely withinthe discretion of the Court to permit amendments to pleadings. Sincethe amendment by Act, No. 9 of 1991, if an application is made toadd a party as a defendant after the first date of trial, Sections 18, 21and 93(2) of the Code have to be read together, in allowing orrefusing such an application. As noted earlier, each Section cannotbe considered in isolation. The position would be the same evenwhen amendments are sought under other Sections of the Code, asfor instance, Sections 38 and 46 of the Code.
Section 93(2) (as amended) provides:
“On or after the first day fixed for the trial of the action andbefore final judgment, no application for the amendment of anypleadings shall be allowed unless the Court is satisfied, forreasons to be recorded by Court, that grave and irremediableinjustice will be caused if such amendment is not permitted,and on no other ground, and that the party so applying has notbeen guilty of laches."
The amendments to pleadings on or after the first date of trial cannow be allowed only in very limited circumstances, namely, when theCourt is satisfied that grave and irremediable injustice will be causedif the amendment is not permitted and the party applying is not guilty
CA Colombo Shipping Co. Ltd. v. Cnirayu Clothing (Pvt) Ltd. (Ranaraja, J.)103
of laches. The onus of proving that both these conditions are fulfilledlies squarely on the party seeking the amendment. The Court is alsoobliged to record the reasons as to how it came to be satisfied thatthe two conditions have been met.
The respondent has nowhere in the affidavit filed in support of itsapplication to add Buyers Consolidators Ltd. as a defendant, statedthat it would suffer irremediable injustice if the application is notallowed. The learned Judge has himself not stated how or why hewas convinced that irremediable injustice would be caused if theparty was not added and the amendments disallowed.
The respondent by 9.8.91 had documents 4(a) to 4(c) in its hands.That is, at least ten months before it instituted this action. Thepetitioner has specifically pleaded that it was the agent of BuyersConsolidators Ltd. in it’s answer dated 5.2.93. Yet no attempt wasmade by the respondent to add Buyers Consolidators Ltd; as adefendant till after the first date of trial. No explanation has beenforthcoming from the respondent for the delay in making theapplication to add Buyers Consolidators Ltd. as a party defendant.There has obviously been a lack of due diligence on the part of therespondent which deprives it of the right to amend its plaint underSection 93(2) of the Code. The learned Judge has not given reasonsfor excusing the delay of over two years taken by the respondent torealise that it had a cause of action against the added defendant. Inthe circumstances the order dated 30.9.94 cannot be allowed tostand. It is accordingly set aside.
The application in revision is allowed with costs.
The connected leave to appeal application C.A. L.A. 224/94stands dismissed without costs.
S.N. SILVA, J. P/CA -1 agree.
Revision application allowed.