Gfindlays Bank Ltd. v. Mackinnon Mackenzie & Go. Ceylon Ltd.
GRINDLAYS BANK LTD.
v.MACKINNON MACKENZIE & CO. CEYLON LTD.
COURT OF APPEALv-
P.R.P. PERERA, J. AND L. WEERASEKERA, J..
C. A. No. 752/89,D. C. COLOMBO 87249/M,
OCTOBER 26 and 27, 1989.
Civil Procedure – Civil Procedure Code ss. 754, 761, 763, 763 (2) — Execution pendingappeal • Section 23 bf the Judicature Act as amended by Act. No. 27 of 1979 – Stay ofexecution – Substantial loss.
The plaintiff – respondent obtained judgment against the defendant-petitioner for damages(damnum emergens) but its claim for consequential loss was disallowed. The defendantappealed against the judgment and,the plaintiff too appealed against the part of thejudgment which disallowed consequential loss. The Plaintiff moved for execution pendingappeal of the part of the decree which ordered payment of damages in his favour. TheDistrict Judge issued writ of execution on deposit of security.
. Held :
. There was a judgment in favour of the plaintiff for damages (damnum emergens)against which' defendant had appealed. The decree ordering this payment can beexecuted pending appeal.
Sri Lanka Law Reports
 1 SriL.R.
If the judgment debtor desires stay of execution pending appeal, he should establishsubstantial loss. The usual course is to stay proceedings pending an appeal whenexecution would cause irreparable injury. Mere inconvenience and annoyance is notenough. The damage must be substantial and the defendant must.prove it.
Cases referred to:
Charlotte Perara v. Thambiah 1983 1 Sri L R. 352.
Sokkalal Ram Sait v. Kumaravel Nadar and Others 13 CLW 52.
Wallord v. Walford LR 1867 — 83 — Ch. App. Cas. 812.
Fakira Mahadagi Marathe and Another v. M. T. Rumsukhibai 33 AIR 1946 Ragpoor
APPEAL against issue of writ of execution pending appeal.
Dr. H. W. Jayewardene, O. C. with H. L. de Silva. P. C„ I. S. de Silva, Harsha Amerasekera.Harsha Cabraal and Prasanna Jayawardena for defendant – respondent – petitioner.
K. N. Choksy, P. C. with P. A. D. Samarasekera, P. C.. J. de Almedia Guneratne. P.Agalawatte and A. Vikun Fernando for plaintiff – petitioner – respondent.
December 04 ,1989.
P. R. P. PERERA, J.
The Plaintiff – Petitioner – Respondent (hereinafter referred to as theRespondent), instituted action against the Defendant – Respondent -Petitioner (hereinafter referred to as the Petitioner), in the District Courtof Colombo, claiming a sum of Rs. 10,250,000/- being the capital lossincurred by him in consequence of a fire caused by the alleged negligenceof the petitioner as specifically pleaded in paragraphs (8), (9) and (10) ofthe plaint.
In paragraph (13) of the plaint, the petitioner claimed a sum of Rs.2,070,000/- as consequential loss and damage suffered by him by reasonof being deprived of the rentals from the tenants who occupied thesouthern portion of the said building which had been destroyed by the f ire,for the period October 1980 up to the end of September 1982. Therespondent in the above premises prayed for judgment against thepetitioner in the aggregate sum of Rs. 12,320,000/- with legal interestthereon.
The petitioner filed answer denying the claim of the respondent andstated inter alia that the losses said to have been incurred by therespondent were due to its own, negligence and in any event, that the fire
CA Grindlays Bank Ltd. v. Mackinnon Mackenzie S Co. Ceylon Ltd.21
that resulted in loss and damage to the respondent were not caused byan omission or negligence on the part of the petitioner.
At the trial, seventeen issues were raised, on behalf of the parties, andaccepted by court. Issues (1) – (10) which are relevant to this applicationare reproduced below:-
Did a fire take place on 4th October, 1980 in the said premisesbearing No. 37?
Did the said fire take place on account of a defect in the electricalwiring system of the Defendant’s building?
Was the entirety of the Defendant's said building engulfed by thesaid fire which spread and damaged the Plaintiffs building?
Was the said defect due to the failure and neglect of theDefendant to.maintain its wiring system in good order and/or dueto the failure arid neglect by the Defendant and its authorisedagents to take care and precaution in the course of effectingrepairs to the said electrical systems of re-wiring the same?
Was the.darfiage caused to the Plaintiff's building referred to inissue 3 above caused by one or more or all of the acts oromissions set out in paragraph 10 of the Plaint?
(i) if the above issues (1) to (5) are answered in favour of Plaintiffis the Plaintiff entitled ro recover damages?
(ii) if (1) above is answered in the affirmative what quantum ofdamages is the Plaintiff entitled to recover?
At the time oi the said fire was the Southern portion of the saidbuilding rented out to various tenants?
Was the Plaintiff deprived of the said rents by reason of the factthat the said portions let to the said tenants were destroyed by theaforesaid fire?
If issues numbered (1) to (5) and (7) and (8) are answered,infavourof the Plaintiff; is the Plaintiff entitledto recover damages?
If issue (9) is answered in the affirmative, what damages is thePlaintiff entitled to recover?
The District Judge, delivered his judgment answering issues (1) – (6)and (9) & (10) in favour of the respondent but held that issue (7) had notbeen proved and that therefore issue (8) did not arise. The District Judge,awarded a sum of Rs. 8.4 million on the claim based on capital loss, anddisallowed the claim for Rs. 2.07 million relating to consequential loss.
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The petitioner has appealed from the said order which is presentlypending before this Court. The respondent has also appealed againstthat part of the judgement rejecting his claim of Rs. 2.07 million relatingto consequential loss.
Thereafter, in November 1988, the respondent sought to execute thedecree entered in its favour for the recovery of the sum of Rs. 8.4 millionby the District Court. The respondent pleaded inter-alia that it wasprepared to furnish a Bank Guarantee as security for an amount, equalto the value of the decreed sum or that-as an alternative it was willing toexecute a mortgage over immovable property the value of which wouldbe in excess of the decreed sum.
The petitionerfiled objections and sought a dismissal of the applicationfor the execution of the decree by the respondent notwithstanding theappeal.
After inquiry into the application for execution of decree, the DistrictJudge, delivered his order permitting the respondent to execute thedecree notwithstanding the appeal, on the respondent depositing anunconditional Bank Guarantee for an amount of Rs. 20,000,000/- (twentymillion) valid for 10 years with the Registrar of the District Court. This orderhas been produced marked ‘D It is this order of the learned DistrictJudge, dated 27.09.89, that the petitioner is seeking to set aside in thepresent proceedings by invoking the revisionary powers of this Court.
Dr. H. W. Jayewardene, Q. C., who appeared in support of thisapplication contended that the respondent cannot have and maintain anapplication for execution of decree pe nding the appeal from the judgment,and that the District Court has no jurisdiction to grant execution to therespondent as the respondent himself has appealed from the judgmentand decree in this case. It was Dr. Jayewardene's contention that wherea party has appealed from a judgment, he had questioned the finality ofthat judgment and decree, and cannot therefore seek execution of thatdecree in the District Court. Counsel urged, that neither the provision ofthe Judicature Act nor the provisions of the Civil Procedure Code,permitted such a course of action.
Mr. K. N. Choksy P. C., submitted however, that neither section 23 ofthe Judicature Act nor section 761.of the Civil Procedure Code contained
CA Grindlays Bank Ltd. v. Mackinnon Mackenzie & Co. Ceylon Ltd.23
any limitation of the right of the judgment creditor to apply for executionof – a – decree in his favour under the provisions of section 763 of the CivilProcedure Code. In point of fact, section 23 of the Judicature Act,specifically provides that “no such appeal shall have the effect of stayingthe execution of such judgment, decree or order." Mr. Choksy, contendedfurther, that in terms of section 754:
“Any person who shall be dissatisfied with any judgment pronouncedby any original Court in any civil action, proceeding or matter to whichhe is a party, may prefer an appeal to the Court of Appeal against suchjudgment for any error in fact or in law.”
Counsel contended therefore, that in terms of this section a partlysuccessful plaintiff is entitled to a right of appeal, and that there is nothingcontained in section 763 of the Civil Procedure Code, which prohibitssuch a partly successful plaintiff from seeking execution of a decree.
In the instant case, the respondent's claim for damages was made upas follows:-
a sum of Rs. 10,250,000/- being the capital loss in respect ofdestruction caused to a part of its building;
a sum of Rs. 2,070,000/- as consequential loss suffered by therespondent namely the loss of rents from the tenant to whom thesaid destroyed part of the building had been let by the respondent.
The learned Trial Judge, has awarded the respondent a sum of Rs. 8:4Million in respect of the damage caused by the destruction of a part of itsbuilding (damnum emergens) but has rejected the claim of the respondentbased on consequential loss arising from the loss of income as set outabove. The petitioner has filed an appeal against this judgment. Therespondent has also appealed against a part of the said judgment insofaras it relates.to the findings in respect of issues (7) and (8) rejecting theclaimof the respondent for consequential loss in a sum of Rs. 2.07 million.The respondent, has not appealed against the award made in his favourin a sum of Rs. 8.4 million although his original claim on this account hasbeen reduced by the learned Trial Judge, there is then clearly a judgmentin favour of the respondent in a sum of Rs. 8.4 million against which anappeal has been filed by the petitioner. The respondent in our opinion, isentitled to seek execution of this judgment and decree in his favour in
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119901 1 SriL.R.
terms of section 763 of the Civil Procedure Code in the District Court. Wetherefore hold that this objection raised by learned Queen’s Counsel,must fail.
Dr. Jayewardene also submitted, that the learned Trial Judge hasfailed to direct his mind to the question that the purpose of section 761 andsection 763 of the Civil Procedure Code, as amended is to ensure that ajudgment creditor would be able to enjoy the fruits of his success in theevent of his succeeding in the Appellate Courts, and to protect andsafeguard the interests of the judgment debtor in the event of thejudgment being set aside in appeal. It was Counsel's complaint that theDistrict Judge has failed in particular to consider the provisions of section763 (2) which empowered the Court to order execution to be stayed uponsuch terms and conditions as it may deem fit where:
the judgment debtor satisfied the Court that “substantial loss"may result to the judgment – debtor unless an order for stay ofexecution is made and security is given by the judgment -debtorfor the due performance of such decree or order as mayultimately be binding upon him.
Counsel submitted that the learned District Judge has failed toconsider the fact that the petitioner was prepared to give a BankGuarantee either from its own bank, or from another bank or any other. security as determined by Court for the full decreed sum in the event ofthe respondent succeeding in appeal and therefore the fruits of therespondents success would be assured. It was Counsel's submissionthat in fact substantial loss would be caused by the petitioner unless anorder for stay of execution is made.
Section 23 of the Judicature Act, as amended by Act No. 37 of 1979lays down the principle that execution of decree under appeal shall not bestayed by reason only of an appeal having been preferred against thedecree. This principle applies generally to executions of decrees pendingappeal. This principle is however subordinated by its application toanother fundamental principle that is enshrined in section 763 (2) of theCivil Procedure Code that the execution may be stayed if the appellantsatisfies the Court that substantial loss may result to him thereby. It is thuscompetent for the Court to order stay of execution on the application ofthe party appealing, on its being satisfied of the probability of substantial
CA Grindlays Bank Ltd. v. Mackinnon Mackenzie & Co. Ceylon Ltd.
loss resulting to the appellant and on his giving the pecessay security. Itis therefore clear, on an examination of the relevant provision of theJudicature Act, and the Civil Procedure Code, that the District Court maymake an order staying execution “when it shall see fit to make an orderto that effect”. In terms of section 23 of the Judicature Act, as amendedby Act No. 39 of 1979 or when it is satisfied that substantial loss will resultto the appellant unless an order for stay of execution is made and theappellant gives security for the due performance of such decree or orderas may ultimately be binding upon him in terms of section 763 (2) of theCivil Procedure Code, Vide Charlotte Perera v. Thambiah (1).
The question which the learned District Judge was called upon todetermine at this inqu iry t hen was whether the petitioner had satisfied theCourt, that ‘substantial loss' would be caused to him if the execution of thedecree in not stayed. Section 763 (2) requires the petitioner"to provesubstantial loss. The only material relevant to the question on ‘substantialloss’ relied upon by the petitioner is contained in paragraph (6) (c) of theobjections filed by the petitioner in the District Court. This document hasbeen produced marked ‘D Paragraph (6) (c) reads thus:
"any alleged delay in the use of the building as alleged in the petitionis due to the plaintiff/petitioner, and its own financial resources whicheven suggests the necessary inference that execution of the decreeappealed against by both the parties could cause irreparable loss andprejudice, and loss to the defendant respondent in the event of thejudgment and decree being set aside by the Appellate Courts and mayeven give rise to further litigation between the parties for enforcementof the guarantee referred to in the petition".
The effect of the said averment is that execution of decree would causeloss and prejudice to the petitioner in the event of the judgment anddecree being set aside by the Appellate Courts and that furnishing of abank guarantee, or mortgage by the respondent, could give rise to furtherlitigation between the parties in such event.
Mr. Choksy contended that the learned District Judge has addressedhis . mind to the provisions of section 763(2), and has made anappropriate and proper order in this case. It was Counsel’s submissionthat the petitioner has failed to establish that substantial loss may accrueto him unless an order for stay of execution is made. Counsel cited the
Sri Lanka Law Reports
(1990] I Sri L.R.
case of Sokkalaf Ram Sait v. Kumaravel Nadar and others (2) on thequestion as to what constitutes “substantial loss". In this case, Keuneman
“It has been stated in England that the usual course is to stayproceedings pending an appeal only when the proceedings wouldcause irreparable injury to the appellant; mere inconvenience andannoyance is not enough to induce the Court to take away from thesuccessful party the benefit of its decree — Watford v. Watford (3) .Even if we had to regard the damages as being irreparable, in thesense that the defendants could not recover the damages yet I think,that under our law, it must be shown that the damage would also besubstantial and I do not think that has been established in this case".
Further in support of this view Counsel cited Fakira MahadajiMaratheand another, v. M. T. Rumsukhibai (4).-
I find that there is merit in the submission of Counsel for the respondentthat the petitioner has failed to adduce sufficient material to establishsubstantial loss. Further, in the present case the learned District Judgehas in my view taken into account whether or not a non compliancecauses prejudice to the opposite party. It is in this context that Judgeshave stressed the mandatory nature of some of the rules and the needto keep channels of procedure open for justice to flow freely andsmoothly. The position of course counts the balance of convenience andinconvenience of the parties in allowing the application for execution ofwrit. The learned District Judge has also taken into consideration thescheme of the Civil Procedure Code which provided for the execution ofdecrees and the matters set out by the petitioner in his statement ofobjections in exercising his discretion in this matter. The District Judgehas directed the respondent to deposit with the Registrar of the Court anunconditional bank guarantee for Rs. 20 million in favour of the Registrarvalid for a period of 10 years as a pre-condition for the issue of the writ.The District Judge has also ordered that in the event the said bankguarantee was not deposited by 19th October, 1989, the application forwrit will not be considered further.
I can see no grounds for interfering with the decision of the learnedDistrict Judge, which seems to me to have been properly based upon ajust appreciation of the relative position of the two parties.
CASumanadeva and Another v. Sediris and Another
Dr. Jayewardene invited our attention to the fact that the decretalamount as at date stands at Rs. 16,499,885 and 93 cts. inclusive ofinterest and having regard to the present inflationary trends in thecurrency of this country and the fact that it would take several more yearsfor the final appeal to be concluded, that the order of the District Judgedirecting the respondent to furnish a bank guarantee for Rs. 20,000,000/- in favour of the Registrar must necessarily be enhanced.
Having regard to the special circumstances of this case, I agree thatthere is justification to increase the quantum of the bank guarantee andI direct the respondent to deposit with the Registrar of the District Courtan unconditional Bank Guarantee for a sum of Rs. 25,000,000/- (RupeesTwenty Five Million) subject to the same conditions specified in the orderof the learned District Judge, as a precondition to the issue of writ in thiscase. The application to set aside the order of the District Judge dated27th September, 89 is refused with costs fixed at Rs. 2,100/- payable bythe defendant-respondent-petitioner to the plaintiff-petitioner-respon-dent. The stay order issued by this Court would cease to be effective fromtoday.
Both parties had agreed to abide by the decision in this application inthe leave to appeal application No. C. A. L. A. No. 98/89.
That application is also accordingly proforma dismissed.
L. WEERASEKARA, J. -1 agree.
Execution allowed, pending appeal on enhanced security.