NEW LAW REPORTSOF CEYLONVOLUME LIX
[lx the Privy Council]
1957 Present: Earl Jovvift, Lord Morton of Henryton, Lord Tucker,Lord Keith of Avonholm and Lord DenningK.M. PERERA, Appellant, and H. G. MARTIN DIAS, Respondent
Privy Council Appeal No. 10 op 1956
S.G. 444—D. C. Kuru negala, 370-5
Appeal—Rinding of fact of trial judge—Reversal by appellate court—Importance ofproper perception of facts—Omnibus Service Licensing Ordinance, 1042.
Where a trial judgo lias believed one parly and disbelieved tho oppositeparty on a question of fact and lias found tho primary facts accordingly, anappellato court will roverso the trial judgo on his perception of thoso facts whenit is convinced by tho plainest considerations that it would be justified in doing
Xino persons, each of whom owned one or inoro omnibuses, formed a partner-ship known as tho Iv. A. 13. Bus Co., whoso business was to ply tlioir buses forhire along a particular route. One of these partners was the plaintiff. Anotherwas the defendant, who was the manager of tho partnership business. In 1942the Omnibus Servico Licensing Ordinance was passed in order to avoid compe-tition between bus owners. Under the now licensing system introduced by thatOrdinance, tho licence to ply buses along tho route whero the K. A. 13. Bus Co.had plied their buses was given solely to another Company, the Sri Lanka BusCo., Ltd. Tho result was that if the bus owners of Iv. A. 13. Bus Co. were tocontinue to run tlioir buses on this route, they had to come to some arrangementwith the Sri Lanka Bus Co., Ltd. They did so. Each bus owner sold bis bus,or buses, to the Sri Lanka Bus Co., Ltd. and received shares in that Companyin lieu of cash. Tho partnership ceased to canyon business and was treated bytho Sri Lanka Bus Co. as one of their blanches called “ Branch G By agree-ment between tho directors of tho Sri Lanka Bus Co. and tho aforementionednine persons, tho defendant was nppointed manager of tho “ G ” branch uponterms according to which the manager was expected to pay ten per cent, of thegross takings to tho Sri Lanka Bus Co. and the balance of ninety per cent, wasto bo used by him for his allowance ns manager end for tho expenses relatingto the maintenance, repair and replacement of tho buses. Tho question fordetermination in the present action was whether tho defendant agreed to dividethe profits from that ninety per cent, between the nine persons (one of whomwas the plaintiff) according to the value of their buses or whether he only inti-mated that ho would give them a bonus on takings without being under any"
iJ.N. B 63 72S—J .503 19/57)
I.ORD DEXNIXC—Pcrcra v. Martin Dias
legal liability to do so. Tho defendant did not produce any books to prove thattho profits ivero distributed according to tlio takings. Tho trial judge gavejudgment in fuvour of tho defendant, although tho evidonco of tho defendantwas in direct conflict with tho contemporary documents.
Held, that inasmuch as tho contemporary documents were in direct conflictwith tho evidence of tho defendant and showed plainly that there was an agree-ment botwoen tho nine persons to share tho profits an appellate court was entitledto set aside tho contrary finding of tho trial judge on that point.
Held further, that inasmuch as it sccmod on tho facts far more probable thattho profits wero to bo shared according to tho value of tho buses and not accord-ing to tho takings, an appollato court was entitled to hold accordingly.
xaPPEAL from a judgment of the Supreme Court.
C. I'hiagalingain, Q.C., with Siritncvan Amcrasinghc, for the defendant-appellant.
Robert 31. Hale-s, with A. K. Waddle, for the plaintiff-respondent.
Cur. adv. vult.
June 25, 1957.[Delivered by Lord Dexning]—
This is an appeal from the Supreme Court of Ceylon (Hose, C.-J., andSansoni, J.) who reversed the trial judge (Spencer, A.D.J.) on a question offact. He had believed the defendant and disbelieved the plaintiff, andhad found the primary facts accordingly. Yet the Supreme Court hasreversed him on his perception of these facts. The question is whetherthe Supreme Court were warranted in taking so unusual a course.
The case concerns buses on the roads of Ceylon. Before 1912 therewas much wasteful competition between them. Buses were owned byindividuals who used to race one another and to undercut fares. Inconsequence a traffic expert, Mr. Helson, came from Kngland and recom-mended the introduction of a licensing sj'stcm. The government acceptedhis recommendations and passed an ordinance to give effect to it called the“Omnibus Service Licensing Ordinance 1912”. In order to facilitatethe change, the owners of buses were advised to form themselves intogroups, so that thej* could eliminate competition between themselves.
One of the groups so formed was the K. A. B. Bus Company. It con-sisted of nine persons who ran buses on the route from Ivurunegala toAlawwa and the feeders to it. Seven of them owned one bus each,and two of them two buses each, making eleven buses in all. Some ofthe owners drove their own buses. Some did not. One of them, forinstance, was a woman who owned a bus but did not drive it. Jlhcyregistered themselves as a partnership firm on 20th July, 1912, describingtheir business as the plying of omnibuses for hire. One of these partnerswas Martin Dias, the plaintiff, who owned one bus. Another wasK. M. Perera, the defendant, who owned two buses.
Ivow lx. M_ Perera was the best educated of the nine partners, andlie became the manager of the partnership. All the takings were paidto him. He made the disbursements for the expenses and made the
LORD DEN'XIX’G—Perera v. Martin Dias
distribution of profits to the owners of the buses. 'He kept books ofaccount for the purpose. Each month he called a meeting ot thepartners at which he put before them the profits and losses for tliomonth for their consideration.
The new licensing system was due to come into force on 1st January,1943 : and applications for licences had to be made to the Commissionerfor Motor Transport before 24 th December, 1942. Unfortunately,Mr. K. M. Perera, the defendant, “ did not bother to find out when theexclusive route licence system would be enforced ”. The i*esult was thathe did not lodge the applications for licences for the K. A. B. Companyuntil a week late, the 31st December, 1942. He was told that theywere out. of time, and that licences had already been issued to anothercompany, the Sri Banka Bus Company. He therefore withdrew theapplications and endorsed them “Application withdrawn, and the time-table, fare-table, plan of route taken for re-submission through Sri BankaBus Co.
The result was, of course, that if these bus owners were to continueto run their buses on this route, they had to come to some arrangementwith the licence-holders, the Sri Banka Bus Company Bimited. Theydid so. Each bus owner sold his bus, or buses, to the Sri Banka BusCo. Btd. and received shares in that company in lieu of cash : and,pending a settlement, the buses were run on the route, the drivers pa3'ingtheir takings to the Sri Banka Bus Co. Btd. and receiving wages. TheSri Banka Bus Co. treated it as one of their branches called “ Branch ‘ G ’ ”and the partnership ceased to carry on business.
On the 12th March, 1943, the directors of the Sri Banka Bus Co.had a meeting with the nine persons who had previously owned thesebuses and acre now shareholders of the Sri Banka Bus Co. (TheirEordships find it convenient to call them “ the nine ”.) A discussionwas held as to the future terms of working branch “ G ”. The SriBanka Bus Co. wanted to appoint a manager of the branch. The managerwould be expected to pay ten per cent, of the gross takings to the SriBanka Bus Co. and also one rupee per bus per day to the Sri BankaBus Co. The balance of ninety per cent, was to be used to pay thedrivers and employees, to bus- new buses, to repair vehicles, to supplypetrol, and so forth. Any profit or loss was to goto the benefit or debit ofthe branch manager. The Sri Banka Co. had wanted Mr. IC. M. Pererato become manager on these terms, but he had refused. He was afraidthat he might, not be able to bear the expenses involved. The Sri BankaBus Co. directors then asked that one of the previous owners shouldbecome manager of all the buses on the route : but each of them wantedto run his own bus individually. The Sri Banka Bus Co. directorsmade it clear that, if no one of the nine would .take charge of thebranch, they would have to appoint an outsider who would be in a positionto dismiss them. The nine of them then went outside and had a discussion.After about half-an-hour they returned and told the directors that thedefendant Mr. KL. 31. Perera was willing to accept the post as manager ofthe “ G ” branch on the original terms offered by the Sri Banka Bus Co.to them. A few days later, on the 10th March, 1943, the company sentto 3£r. K. M. Perera a letter appointing him manager and setting out the
LORD DENIZING—Perera v. blarlin £>ia&
terms, including the stipulation “ You are to maintain, repair and replace”the buses, and finishing with the clause : “ The Company will pay 90%of the collections from omnibuses under 3rour charge for your expensesand your allowance as manager ”,
The question in the case is whether Mr: K. M. Perera was entitled totake the profit from that 90% for his own benefit or whether he was todivide it between the nine.
A fortnight after the meeting LIr. K. M. Perera sent out a letter tothe nine giving notice of a meeting of “ our ” branch. It was heldon 8th April, 1913. There was a dispute at the trial as to what tookplace at that meeting. The plaintiff Martin Dias and another oneof the nine, Pabilis Appuhamy said that at that meeting it was agreedthat out of the 90% Mr. Iv. M. Perera should pay the expenses, andtake a remuneration of 100 rupees a month to himself, and that theprofits should be divided among the nine according to the value of theshares allotted to them (which had been based on the value of theirbuses). Mr. K. INI. Perera denied there was any agreement to share theprofits. He said that on that day he increased the salary of driversand conductors ; but they wanted more : and he told them that if theyincreased their daily collections and brought in more money, then, ifhe found a reasonable profit, he would give them 10% to 15% of thegross amount on what each man brought in daily in respect of his bus.
The difference thus disclosed was the principal issue in the case. Itmay be stated thus : Did the defendant, K. M. Perera, agree to sharejirofits with the nine (and thus impliedly they would share losses) ?Or did he only intimate that he would give them a bonus on takings(without being under any legal liability to do so) ? In deciding this issue,it becomes very material to consider the subsequent letters which passedbetween Mr. K. M. Perera and the others.
There are a series of letters from June to November, 1913, in whichMr. K. M. Perera called monthly meetings of the nine. The first was21st June, 1943, which said :
“A meeting will be held at 11 a.m. on the 23rd instant for thepurpose of checking accounts and for sharing the profits and lossesof this branch for the month of May, 1943, therefore your presenceis solicited
The last was 4th November, 1943, which said :
“ As there will be a meeting on the 7th November at 11 a.m to decidethe profits and losses of the month of September, 1943, your presenceis essential ”..
The plaintiff Martin Dias said that at those meetings he was paidRupees 350, 275, 145, 200.20 as his monthly shares and he gave receiptsfor them. The defendant K. M. Perera admitted that he made payments,but said they were paid on his basis and not that alleged by the plaintiff.In November, 1943, Mr. Iv. M. Perera ceased to pay anything, andhas paid nothing since. He gave as his reason a conversation lie had
LOUD DKXXI.VO—Perera r .Martin Dias
with a director of the Sri Lanka Bus Co. named Mudaliyar Madanayakewho said tiiat lie ought to huy some new chassis, and he must reservemonev for the purchase of new buses for the running of the branch. –
Although Mr. Iv. M. Perera ceased to pay anything after November,19J3, nevertheJess a long time passed before any of the nine madeany complaint. Six months later, on 31st May, 1944, Mr. Iv. M. Pereradismissed the plaintiff Martin Lias from his post as inspector. Theplaintiff, with three others, then, on 13th June, 1914, asked that ameeting of the shareholders of the “ G ” branch be convened, and on23rd June, 1944, asked the manager of the Sri Lanka Bus Co. to takenecessary action, but the plaintiff did not make any complaint that thedefendant had withheld money from him until April, 1913. He thenlaunched a criminal charge of misappropriation against the defendant.This failed. On 21st August, 19-1G, Mr. Iv. M. Perera dismissed anotherone of the nine—Pabilis Appuhamy. Nine days later, on 30th August,194G, plaints were issued on behalf of the plaintiff Martin Lias, PabilisAppuhamy, and three others of the nine, all in similar terms, againstthe defendant ,K. M. Perera claiming an account of moneys collectedby him as manager of the ' G ” branch and payment of the sum founddue. The plaint of Martin Dias lias been tried and forms the subjectof appeal to their Lordships. The four other plaints arc still pendingand an a it the result of this appeal.
The validity of the claims depends entirely on what took place at themeetings on the 12th March, 1943 (when the nine had a discussionbetween themselves and afterwards told the Sri Lanka Bus Co. thatMr. Iv. M. Perera was willing to be manager of the G ” branch), andon the Sth April, 1943 (as a result of which Mr. Iv. M, Perera made,payments to them from June to November 1943).
The trial did not take place until more than 5 years after those meetingsIt was held before a District Judge on 14 days spread over the 19 monthsfrom May 194S to December 1949, with long intervals between thehearings. The District Judge reserved his judgment and delivered iton 20th March, 19-50. He accepted the evidence of the one side (thedefendant) and rejected that of the other (the plaintiff) and gave judg-ment for the defendant accordingly. The losing side appealed to the■Supreme Court of Cey lon. The ajrpcal did not come on for hearing untilmore than 4 years later. It was heard on 8 successive days in June-and July, 1934. The .Supreme Court reserved judgment and deliveredit on 4th August, 1934. They came to just the opposite conclusion fromthe District Judge. They rejected the evidence which he accepted,and accepted the evidence which he rejected, and gave judgment forthe plaintiff accordingly. There is now air appeal to their Lordshipsseeking to restore tire judgment of the District Judge. It conies onfor hearing 3 years after the decision of the Supreme Court and 14 yearsafter the events which are in dispute.
Mr. Thiagalingam for the appellant reminded their Lordships of theweight which an appellate court should always give to the findings offact of the trial judge and referred to the well-known decisions of the
.1*.T Y it
LORD DENXIN'G—Perera v. 2/artin Dias
House of Lords in Powell and Wife v. Streatham Manor Nursing Home 1and Walt or Thomas v. Thomas He urged that the Supreme Court■was not justified.in reversing the trial judge on what was in truth hisperception of the facts, not his evaluation of them—a distinction drawnby the House of Lords in Benmax v. Austin Motor Co., Ltd. 3-
Whilst their Lordships appreciate the foicc of this argument, theycannot accept it because in their opinion the evidence of the defendantwas in direct conflict with the contemporary documents. The letterswritten by the defendant between June and November, 1913, showplainly that there was an agreement between these nine people to sharethe profits and losses from the “ G ” branch. They are quite inconsistentwith the notion that the defendant only said ho would give a borius ontakings. His evidence on that point must therefore be rejected.
It is one thing, however, to reject the defendant’s evidence : but it isquite another to put the plaintiff’s evidence in its place. Disbelief ofthe defendant does not mean belief of the plaintiff. Both may be inerror. Their Lordships have therefore carefully considered what isproved and what is not. The letters show conclusively that there was anagreement to share the profits and losses of the “ G ” branch ; but theydo not show how those profits were to be shared. Were they to be sharedaccording to the takings from the buses ? Or according to the value ofthe buses (as represented by the shares in the Sri Lanka Bus Co.) ?
The defendant said that the profits were distributed according to thetakings, but he never produced any books or accounts to support his 'statement. Their Lordships think it would be contrary to the veryobjective they all had in mind for if the profits were to be shared accord-ing to the takings, there would still be competition between the buses.The defendant himself said that “ competition would not have beenreduced in any degree if the bus owners were paid their profits in propor-tion to their takings ”. It seems to their Lordships far more probablethat the profits were to be shared according to the value of the buses.This is what the plaintiff and his witness said was agreed : and theirLordships think it should be. accepted.
The next question is how were the profits to be calculated. It seemsclear to their Lordships that the defendant KL. M. Perera would be boundto carry out his obligations to the Sri Lanka Bus Co. before he coulddistribute any profits to the others. The nine must have realised thiswhen they agreed that he should be manager. ’When he received thegross takings, he would have to set aside 10 per cent, for the Sri LankaBus Co. and one rupee per bus per day for them. He would then, outof the 90 per cent., have to pay the running expenses, such as petrol,garage hire, repairs, wages of drivers and conductors, and his own remu-neration. He would presumably have to set aside a sum as a reservefor replacements, and so forth. After all proper calculations had beenmade, the ensuing profit or loss Mould have to be divided between thenine according to the value of their shares. This is a matter ofaccountancy.
1 1103-5'] A. C. 243■ – 11047] .4. C. ISl
.3 [75-55] .4. C. 370 at p. 373
I.o R L) DKXN'IXG—Pcrcra v. Marlin Dias
Finally, there was a good deal of evidence for the plaintiff wiueh wentto show that, on the monthly distribution, the defendant K. M. Pereradivided tuo-thirds of the profits for the month amongst the nine andkept back one-third as a reserve. The defendant denied this. This docsnot appear to their Lordships to be a material difference, because thisdivision would clearly be provisional only, like the drawings of partners,and would have to be adjusted when the yearly accounts were taken.
Mr. Thiagalingam rightly stressed the failure of the plaintiff to makeany complaint for a long time, but this docs not, in their Lordships’opinion, outweigh the considerations to which they have drawn attention.
Jn considering this ease their Lordships call to mind the wise wordsof Lord Greene, M.B., in Yitifl v. Yuill 1 when lie said : “ We were re-minded of certain well-known observations in the House of Lords dealingwith the position of an appellate court when the judgment of the trialjudge had been based in whole or in part on his opinion of the demeanourof witnesses. It can, of course, only be on the rarest occasions, and incircumstances where the appellate court is convinced by the plainestconsiderations, that it would be justified in finding that the trial judgehad formed a wrong opinion. But when the court is so convinced it is,in my opinion, entitled and indeed bound to give effect to its conviction ”.The Supreme Court here- was convinced that the trial judge had formed awrong opinion : and their Lordships think the Supreme Court were right.Mr. Thiagalingam did draw attention to some errors which he said were tobe found in the judgment of the Supreme Court but these were not ofsufficient moment to affect their conclusion.
Mr. Thiagalingam further said that in the plaint it was alleged inparagraph 7 that there was a contract between the Sri Lanka Bus Co.and the nine for the running of the buses by the nine, whereas they onlyproved a contract- between the Sri Lanka Bus Co. and the manager forthe running of the buses by him. Their Lordships think that this israther too fine a point to prevail. The plaint makes it clear that the SriLanka Bus Co. wished one person to represent the nine : and then goeson to allege in paragraph 1 1 the real substance of the case that at themeeting of Sth April, 1943. there was an agreement between the ninefor the division of profits. Their Lordships realise that the facts whichthey find to he established differ in some minor details from those whichwere pleaded, but the difference is not such as to prejudice the defendantin ant" way and lie should not be allowed to take advantage of it.
A point was raised about prescription but it soon appeared that theperiod of limitation in tin's ease was three years, and the action wasbrought, within that time.
Their Lordships are of opinion therefore that- the plaintiff has establishedhis right to an account of moneys received by the defendant as moneysof the “ G ” branch from November 1943, until 30th August 194G, andto payment of the amount found due. The account should be takenon the lines already indicated. Their Lordships will humbly adviseHer Majesty that the appeal should be dismissed. The appellant mustpay the costs.
1 [/S/-5] at p. ]0.
K. M. PERERA, Appellant, and H. G. MARTIN DIAS, Respondent PRIVY COUNCIL APPE