CA
Institute of Chartered Accountants of Sri Lanka v Institute of
Chartered Public Accountants and others
91
INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKAv
INSTITUTE OF CHARTERED PUBUC ACCOUNTANTS ANDOTHERSCOURT OF APPEALWIMALACHANDRA, J.
C ALA 388/2005DC COLOMBO 7262/SPLJULY 3, 15,2006AUGUST 4, 2006
Institute of Chartered Accountants Act incorporated under Act No. 23 of 1959 -section 10, section 22 (as amended >- Institute of Chartered Public Accountantsestablished under the Companies Act No. 17 of 1982-section 19(2)-Right to usethe term "Chartered" – Is State approval required for the use of ”Charteredm by anyperson – Is "Charteredu a restrictive word under the Companies Act – Interiminjunction – Prima facie case.
The plaintiff – Institute of Chartered Accountants of Sri Lanka – sought an interiminjunction restraining the 1st defendant — Institute of Chartered Public Accountantsfrom wrongfully, unlawfully, and illegally establishing that the 1 st defendant companyhas the right, privilege and authority to confer on its members the right to use theterm “Chartered Public Accountants" and its abbreviation "CAA*. The defendantcompany is an institution established under the Companies Act. The District Courtrefused the relief sought on the basis that the plaintiff is guilty of laches, that theplaintiff does not have the exclusive right to use the term “Chartered", that the 1stdefendant company has registered the name of 'Institute of Chartered PublicAccountants under the Companies Act, the word "Public" exclusively belongs to the1 st defendant company.
On leave being sought, with leave being granted,
Held:
(1) The Institute of Chartered Accountants Act No. 23 of 1959 (ICA Act)established the Institute of Chartered Accountants of Sri Lanka, S22(1) andprovides that no person, not being a member of the Institute shall take anduse the title "Chartered Accountants". Chartered Accountant is a titlerecognised by Parliament as a professional qualification in the professionof practicing accountancy.
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(2) In terms of the ICA Act the plaintiff is the only body that has beenestablished by an Act of Parliament relating to the practice of accountancyin Sri Lanka as "Chartered Accountants", whereas the 1st defendantcompany is an Institute established under the Companies Act.
Per Wimalachandra, J:
"It can be seen that the use of the title “Chartered Accountant* is not one which canbe used arbitrarily and capriciously to the liking of a business or a companyexploiting the same 1or personal gain. The name “Institute of Chartered PublicAccountants* is a calculated attempt to show the public that the 1 st defendant is anorganization that has the state patronage to confer the “Chartered PublicAccountants" similar in status to the plaintiff.”
APPLICATION for leave to appeal from an order of the District Court of Colombowith leave being granted.
K. Kanag Iswaran, PC with Chanaka de Silva and Aruna Samarajeewa for plaintiff-petitioner.
A.P. Niles with Saman de Silva and Arosha de Silva for 1st defendant-respondent.
Cur.adv.vuft
March 16, 2007WIMALACHANDRA, J
This is an application for leave to appeal from the Order of thelearned District Judge of Colombo dated 19.9.2006. By that Order thelearned District Judge refused to grant the interim-injunctions prayed forby the plaintiff-petitioner (Plaintiff) in prayers (j), (k), (I) and (m) of theplaint.
Briefly, the facts are as follows:
The plaintiff is a body corporate established under the Institute ofChartered Accountants Act No. 23 of 1959 (as amended) having thecapacity to sue and be sued in its corporate name. The 1 st defendant-respondent (1st defendant) is a company incorporated under theCompanies Act No. 17 of 1982. The 2nd to 8th defendants-respondents(2nd to 8th defendants) are the directors of the 1 st defendant-company.
The main complaint of the plaintiff is that the 1 st to 8th defendantsby acting in violation of the express provisions in the Institute of
Institute of Chartered Accountants of Sri Lanka v Institute of
CAChartered Public Accountants and others (Wimalachandra, J.)
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Chartered Accountants of Sri Lanka Act No. 23 of 1959, have attemptedwrongfully, unlawfully and illegally to establish, represent and hold thatthe 1st defendant-company has the right privilege and authority toconfer on its members the right to use the term "Chartered PublicAccountant" and its abbreviation "CPA".
The plaintiff instituted this action in the District Court of Colomboagainst the defendants inter alia for the declaratory reliefs and thepermanent injunctions prayed for in the plaint.
The plaintiff also sought an interim-injunction restraining the 1stdefendant, its directors, servants, agents and all those acting underand/or through them and/or from and on its behalf from doing any of thematters referred to in the aforesaid declarations and also sought anenjoining-order pending the determination of the interim-injunctionsprayed for by the plaintiff.
The 1st to 8th defendants filed objections to the application for theinterim-injunctions. When the application for the aforesaid interim-injunctions were taken up for inquiry, the parties agreed to tenderwritten-submissions and invited the Court to decide the matter on thewritten-submissions filed by the parties. Thereafter, the learned Judgereserved his Order for 15.9.2005 and subsequently delivered the Orderon 19.9.2005 refusing the grant of the interim-injunctions prayed for bythe plaintiff on the basis that the plaintiff is guilty of laches, the plaintiffdoes not have the exclusive right to use the term "Chartered", the 1stdefendant-company has registered the name "Institute of CharteredPublic Accountants" under the Companies Act, the names of the plaintiffand the 1st defendant-company are distinct in that the word "Public"exclusively belongs to the 1st defendant-company and there are weliqualified personnel in the field of accountancy in the Board of Directorsof the 1 st defendant-company. The learned District Judge also held thatthe plaintiff has failed to establish a prime-fade case in its favour.
When this matter was taken up before this Court on 13.10.2005,leave to appeal against the said Order of the District Judge was grantedby consent of the parties. The Counsel for the defendants consenting tothe grant of leave to appeal against the order of the District Judge itselfshows that there is a serious matter to be looked into in this Application.
The main issue in this application is whether the 1 st to 8th defendantsare acting in violation of the provisions of the Institute of CharteredAccountants of Sri Lanka Act No. 23 of 1959 and whether the 1st
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defendant has the right to use the term “Chartered" as the 1 st defendant-company was registered as the Institute of Chartered Public Accountantsand its abbreviation "CPA11, under the Companies Act.
The question now arises as to whether State approval is required forthe use of the word “Chartered" by any person. As pointed out by thelearned President's Counsel, this does not require factual evidence.Hence, this is a question of law that has to be determined by the Court.The learned Counsel directed the question, "does the law relating toCorporations in Sri Lanka, permit the use of the word "Chartered" aspart of the name of the 1st defendant without the specific sanction forthe use of that word being granted by the Parliament."
The Institute of Chartered Accountants Act No. 23 of 1959 (ICAAct)established the Institute of Chartered Accountants of Sri Lanka. Section22(i) of the said Act provides that "No person, not being a member ofthe Institute shall take or use the title “Chartered Accountants". Thus, itwill be seen that 'Chartered Accountants' is the title recognised by theParliament as a professional qualification in the profession of practicingaccountancy. In the circumstances, can the 1st defendant-companyuse the term 'Chartered' legally without the authority of the Parliament?In terms of the ICA Act, the plaintiff is the only body that has beenestablished by an Act of Parliament relating to the practice ofaccountancy in Sri Lanka as “Chartered Accountants", whereas, the 1stdefendant-company is an Institution established under the CompaniesAct.
The learned Counsel for the defendants submitted that the Registrarof Companies had ruled that the word 'Chartered‘ is not a restrictiveword under the Companies Act. The learned Counsel submitted thathence, the ICAAct does not confer any exclusive right to the plaintiff touse the word Chartered
At this stage this Court is not going to decide the plaintiffs action butis only concerned whether the learned District Judge erred in law whenhe made the Order dated 19.9.2005 refusing to grant the interiminjunction prayed for by the plaintiff. In every application for an interim-injunction pending the determination of the action, the Court must besatisfied that the party seeking the interim-injunction has a prima faciecase. He must satisfy Court that there is a serious question to be triedat the hearing and there is a probability that he is entitled to the reliefclaimed by him.
Institute of Chartered Accountants of Sri Lanka v Institute of
CAChartered Public Accountants and others (Wimalachandra, J.)
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Kerr on injunctions, 6th Edition at page 2 states thus:
"It is enough if he can show that he has a fair question toraise as to the existence of the right he alleges".
The plaintiff has been established by an Act of Parliament to engagein the practice of accountancy as Chartered Accountants. In terms ofsection 22 (1) of the said Act, no person not being a member of theInstitute shall take or use the title "Chartered Accountants". The plaintiffseeking an interim-injunction is not required to establish his case. All hehas to show is that he has a legal right and that there is an invasion ofthat right. At this stage the Court is not required to resolve the disputedquestion of law or question of fact which will have to be decided at thetrial. It is to be noted that the status quo which is sought to be protectedis what existed at the beginning of the controversy.
In the instant case, the plaintiff is not required to prove his case buthe must only show that he has a fair question to raise as to theexistence of the legal right. He must show that the interim-injunctionsought by him is necessaiy to preserve the rights claimed by the
plaintiff.
Moreover, the 9th defendant, the Registrar of Companies in hisanswer dated 27.6.2005 has admitted paragraphs 39, and 40 of theplaint. Paragraph 39 of the plaint states thus:
"The plaintiff states that the 1 st defendant, not having beenincorporated by the State and not having any relationship orpatronage of the State, has no legal right and/or privilegeand/or entitlement to use the term 'Chartered1 in its name. Theplaintiff further states that the 1 st defendant is wrongfully andunlawfully using the term 'Chartered' in its name and iswrongfully and unlawfully using the name Institute ofChartered Public Accountants."
Besides, the Registrar of Companies, the 9th defendant hasadmitted paragraph 41 (ii) of the plaint, thereby, admitting that the 1 stdefendant has not received the consent of the Minister to use the term'Chartered1 and/or to use the name "Institute of Chartered PublicAccountants" and accordingly, it violates the provisions of section 19(2)of the Companies Act No. 17 of 1982.
The learned District Judge has failed to address his mind to theaforesaid admissions made by the Registrar of Companies in his
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answer. The learned Judge has failed to consider the specific provisionsof section 22(i) of the Institute of Chartered Accountants Act No. 23 of1959 which states that 'No person, not being a member of the Institute(the Plaintiff) shall take the title “Chartered Accountant*'. The learnedJudge has misdirected himself in coming to the conclusion that theplaintiff and the 1st defendant-company are two distinct entities as theword 'Public' appears in the name of the 1st defendant. The learnedJudge has also failed to understand that the plaintiff's case is not basedon the confusion of names but on illegality, as the name of the 1stdefendant violates the provisions of section 22(i) of the ICA Act. This facthas been admitted by the 9th defendant in his answer (vide paragraph3 of the answer). The learned District Judge was mainly concerned withthe question whether the plaintiff has the exclusive right to use the term'Chartered'. The learned District judge has not considered and lookedclosely at the effect of section 22(i) of the ICA Act. Section 22(i) providesthat, no person, not being a member of the Institute (plaintiff) shall takeor use the title "Chartered Accountant" or any addition mentioned insection 6 of the ICA Act Hence, it can be seen that the use of the title"Chartered Accountant" is not one which can be used arbitrarily andcapriciously to the liking of a businessman or a company exploiting thesame for personal gain. In my view, using the term 'Public' in betweenthe term "Chartered Accountants" by the 1 st defendant who confers thetitle Chartered Public Accountants to practice as "CharteredAccountants" appears contrary to the section 22(i) of the ICA Act. Thename "Institute of Chartered Public Accountants" is a calculated attemptto show the public that the 1 st defendant is an organisation that has theState patronage to confer the title "Chartered Public Accountants"similar in status to the plaintiff.
In deciding whether the plaintiff has a prima facie case, all that theCourt has to see is, that on the face of it whether the plaintiff has a casewhich needs consideration and which is not bound to fail by someapparent defect. In order to decide whether the plaintiff has a primafacie case, the Court is not required to come to a conclusion that theplaintiff is entitled to relief by examining closely the plaintiffs case on itsmerits.
The facts and circumstances of this case show that there is anexistence of a legal right in favour of the plaintiff. The plaintiff has showna prime facie case, in that in all probability obtaining relief in favour ofthe plaintiff on the material placed before Court. In this case there is nodispute as to the legal right of the plaintiff. When the plaintiff's legal right
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Institute of Chartered Accountants of Sri Lanka v Institute of
CAChartered Public Accountants and others (Wimalachandra, J.)
is not being disputed and the fact of its violation is denied, the bestcourse for the Court is to grant the injunction. However, before grantingthe injunction, the Court must consider in whose favour the balance ofconvenience lies.
The burden lies upon the plaintiff, as the person applying for theinjunction, of showing that his inconvenience exceeds that of thedefendants.
Section 9(2) of the ICA Act states the duties conferred upon theplaintiff. It appears that the plaintiff has a bounden duty to maintain avery high professional and accounting standard in the field ofaccountancy.
The defendants in their statement of objections have claimed thatthe 1st defendant is a non-profit organisation (Paragraph 18 of thestatement of objections). Hence, no loss of profit can arise to the 1 stdefendant from the grant of an injunction.
The 1st defendant by claiming to confer a professional qualificationof the "Chartered Public Accountant" is attempting to representwrongfully to the public that it provides a professional qualificationequivalent to the professional qualifications of "Chartered Accountant"granted by the plaintiff. The 1 st defendant also by claiming to confer theabbreviation 'CPA' is attempting to portray and represent to the publicand to the world at large that it provides professional qualificationsequivalent to or in par with the Certified Public Accountants (CPA)qualification granted by the United States of America.
In these circumstances, it appears that continuance of the businessof the defendant tends to violate the provisions of section 19(2) of theCompanies Act and the provisions of section 22(i) of the ICA Act.Where the plaintiff has established that he has a right which has beeninfringed and further infringement is threatened, the plaintiff is entitledto an interim-injunction.
In my view an interim-injunction will not inflict a greater injury on the1st defendant as the 1st defendant has admitted that it is not a profitmaking body.
Kerr on injunctions, 6th Edition at pp. 25 states thus:
"If on the other hand, it appears that greater damage wouldarise to the plaintiff by withholding the injunction, in the eventof the legal right proving to be In his favour, than to the
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defendant by granting the injunction, in the event of theinjunction proving afterwards to have been wrongly granted,the injunction will issue."
In the instant case, the Registrar of Companies who hadgranted permission to register the 1st defendant is clearly of theview that the 1st defendant is in violation of the provisions ofsection 19(2) of the Companies Act as previously stated. Thematerial issues relevant to this application are whether the 1stdefendant is entitled to use the name "Institute of CharteredPublic Accountants" and confer the title "Chartered PublicAccountant" and its abbreviation "CPA11. In view of the provisionsof section 19(2) of the Companies Act and section 22(i) of theICA Act, it appears that the defendants are acting unlawfully inusing the term 'Chartered1. The learned Judge has notconsidered the loss and harm that will be caused to the plaintiffand there will be an erosion in the standards of accounting in SriLanka. The learned District Judge has not addressed his mind tothe dangerous precedent which the 1st defendant is trying toestablish.
The learned District Judge also held that the application forinterim-injunction had been made by the plaintiff after the lapseof a considerable period of time. The learned District Judge hasstated that the 1st defendant made the application to register itsname in May 2003 and the plaintiff has filed this action on17.3.2005 and there was a delay of nearly two years and held itis fatal to the plaintiffs application for an interim-injunction. Thelearned Judge has not considered the explanation given by theplaintiff. The plaintiff's position is that it had come to know aboutthe 1st defendant on a newspaper advertisement whichappeared on 11.2.2005, by which the 1st defendant advertisedthat it is offering an educational programme on accountancy andsuccessful candidates will be awarded the title "Chartered PublicAccountant" with its abbreviation "CPA". After making inquiriesabout the said advertisement, the plaintiff for the first time hadcome to know about the activities of the 1st defendant. It is onlythereafter the plaintiff had instituted this action in the DistrictCourt of Colombo on 17.3.2005. Even though the plaintiff hasexplained the delay, the learned District Judge has notaddressed his mind to the explanation given by the plaintiff.
institute of Chartered Accountants of Sri Lanka v Institute of
CA Chartered PubBc Accountants and others tWImaiachanrira . IJ
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On the question of delay, Kerr on injunction (6th edition) P.43observes:
"Mere delay will not be fatal to the application if nomischief is caused thereby to the defendant."
It lies upon the defendant to show that as a result of the delayon the part of the plaintiff, a right has been lost or his right hasbeen affected. Where the delay has not prejudiced thedefendant, the Court should not on account of mere delay of theplaintiff, hold against the plaintiff. In the instant Case, the plaintiff,in my view, has given a plausible explanation for the delay. In anyevent, it appears that the 1 st defendant has violated section 22(i)of the ICA Act and section 19(2) of the Companies Act, hence,even if there is any delay on the part of the plaintiff, the actcommitted by the 1st defendant remains illegal and in suchsituation delay in detecting such illegal acts shall not prevent theplaintiff from taking legal action against the defendant. If awrongful act is a continuing one, the person wronged is normallyentitled to an injunction against the person who causes harm tohim, even if there is delay in filing action.
For the reasons stated above, I set aside the Order of thelearned District Judge of Colombo dated 19.9.2005 and I makeorder granting the interim-injunctions prayed for in paragraph (i),(j) and (k) of the prayer to the plaint (English copy of the plaint).Accordingly the Appeal is allowed, with costs.
Appeal allowed.
