KULASINGAM, Petitioner and THAMBIAYAH, Respondent

138-NLR-NLR-V-49-KULASINGAM-Petitioner-and-THAMBIAYAH-Respondent.pdf


Kulaaingam v. Thambiayah.
505
1948Present:Basnayake J.
KULASINGAM, Petitioner and THAMBIAYAH, Respondent.
In the Matter of the Petition of Aiyathurai Varuna Kulasingamof Jafena vfdkb section 77 of the Ceylon (ParliamentaryElections) Order in Council, 1946, to have the Election ofAlfred Leo Thambiayah to represent the Electoral Districtof Kayts (No. 44) declared to be void.
Election Petition—Company having contract with Crown—Shareholder disqualified—Indirect benefit—Ceylon (Constitution) Order in Council, 1946—Section 13(3) (c).
A shareholder of a Company having a contract with the Crown for theproviding of goods or services to be used in the service of the Crown is a personwho is disqualified under section 13 (3) (c) of the Ceylon (Constitution) Orderin Council, 1946.
T
HTS was an election petition challenging the return of the respon-
dent as Member of Parliament for the Electoral District of Kayts.Petitioner in person.—The respondent is disqualified by contracts P5and P3 for being a Member of Parliament, in view of section 13 (31 (c)of the Ceylon (Constitution) Order in Council, 1946. As a shareholderof the Cargo Boat Despatch Company, Ltd., the respondent enjoyed abenefit indirectly from the contracts. Under the proviso in section 3of the House of Commons Disqualification Act, 1782 (22 Geo. 3, c. 45)no disqualification is attached to incorporated trading companies. Thefunction of a proviso in a statute is dealt with in Madras and SouthernMahratla Railway Go., Ltd. v. Bezwada Municipality l. The wordingof the Ballot Act—Article 582 of Vol. 12 of Halsbury’s Laws of England(Hailsham Ed.)—is different from our enactment.
The benefit in the present case is an indirect one. It is a benefit de factoresulting from the contracts. Certain English decisions on similarenactments are helpful—Todd v. Robinson 2 ; Dimes v. Proprietors ofGrand Junction Canal3 ; City of London Electricity Lighting Co., Ltd. v.London Corporation 4 ; Lapish v. Braithwaite 5. The benefit contemplatedin section 13 (3) (c) is not limited to pecuniary benefit. Tt must be under-stood in its widest sense—England v. Inglis6. One has to look to theobject to be attained. The object obviously was to prevent the conflictbetween interest and duty that might otherwise inevitably arise—Huttonv. Wilson 7 ; Barnacle v. Clark 8 ; In re Pollard’s Settlement
Whereas in Article 9 (d) of the repealed Ceylon (State Council) Orderin Council of 1931, there was a proviso exempting a shareholder of anincorporated company, there is no such proviso in section 13 (3) (c) ofthe Order in Council of 1946.
H. V. Perera, K.C., with C. S. Barr Kumarakulasinghe, VernonWijetunge, and T. W. Rajaratnam, for the respondent.—-The mere factthat there is no proviso exempting companies in the new enactment asin the old State Council Order in Council cannot be brought out to show
1 (1943) 28 C. L. W. 65.5(1925)1K. B. 474 at 484.
* (1884-5) 14 Q. B. D. 739.8(1920)2K. B. 636.
* (1852) 3 H. L. C. 759.7(1889)22 Q. B. D. 744 at 748.
(1901) 1 Ch. D. 602 ; (1903) A. C. 434 at 442. 8 (1900)1Q. B. D. 279 at 283.
" (1896) 2 Ch. D. 552.
38 – N.L.R. Vol – xlix
506
Ktdaaingam v. Thambiayah.
that the omission was made with the intention of catching up all companyshareholders. The company in question was a limited liability companyand had a separate legal personality, and, as such, the benefits derivedby it are not the benefits of the shareholder unless it is shown that thecompany was acting as the agent or secret nominee of the respondent,as in the case of Saravanamuttu v. de Mel1.
In section 13 (3) (c) of the (Constitution) Order in Council, 1946, thewords “ directly ” or “ indirectly ” being adverbs must be taken to qualifythe “ holding or enjoying ” the benefit. There is a difference betweena person indirectly enjoying a benefit under a contract and a personenjoying an indirect benefit under a contract. In the latter case thebenefit may be an indirect de-facto benefit, but where a person is said toindirectly hold or enjoy a benefit under a contract, it must be shownthat the indirectness is a legal indirectness and there must be a legalnexus as in the case of a trust or agency. A company is not per se theagent of the shareholder, and the shareholder is only entitled to a dividendif and when declared and has no legal connection either directly or in-directly with the benefits that accrue to the company under a contract.Vide Salomon v. Salomon Co *.
As Managing Director, the respondent got a fixed salary and not acommission on the profits of the company and, as such, the fact that therespondent was Managing Director of the company is irrelevant.
The quantum of shares is also irrelevant. Viscount Cave’s observationin Lapish v. Braithwaite 3 was a mere suggestion for the Legislature tobe watchful of a large shareholder, and the quantum of shares cannotbe made an issue on a mere suggestion which has not yet been acted uponby the Legislature.
Section 9 (d) of the State Council Order in Council of 1931 differs fromsection 13 (3) (c) of the Order in Council of 1946, for very good reasons.There is a vast difference between a Member of Parliament and a formerMember of the State Council. In the old State Council every memberwas a member of an executive committee. The cases cited by thepetitioner are inapplicable in the present case unless the words whichare to be interpreted are exactly similar. See Venkata Subamma v.Ramayya4 and Batik of England v. Vagliano Brotherss. The words inour section 13 (3) (c) are taken from the operative part of the EnglishHouse of Commons Disqualification Act, 1782 (22 Geo. 3, c. 45). Abroader interpretation has to be given to the operative part of anenactment—Lapish v. Braithwaite6 ; Todd v. Robinson1 ; Nvtton v.Wilson8.
Petitioner in reply.—The right or benefit contemplated by section 13
(c) is not necessarily a dejure right or de jure benefit. The term shouldbe given the widest meaning, for there is no qualifying adjective to either“ right ” or “ benefit ”. The word “ right ” is used in contradistinctionto the word “ benefit ”.
Cur. adv. vult.
1 jS. C. Minutes of August 23, 1948 (Elec-tion Petition).
(1897) A. O. 22 at 56.
■ (1926) A. C. 275 ot 279-80.
(1932) A. I. B. Privy Council 92.
(1891) A. C. 107.
(1926) A. C. 275.
7 (1884-5) 14 Q. B. D: 739 at 745.
(1889) 22 Q. B. D. 744.
BASNAYAKE J.—KtUasingam v. Thambiayah.
507
September 13, 1948. Basnayake J.—
The petition in this case has been presented, under section 79 (e) ofthe Ceylon (Parliamentary Elections) Order in Council, 1946 (hereinafterreferred to as the Elections Order), by one Aiyathurai Varuna Kulasingamwho alleges that he was an unsuccessful candidate at the election of aMember of Parliament for the Electoral District of Kayts (No. 44) heldon August 23, 1947.
He prays that the election of the successful candidate, one Alfred LeoThambiayah, the respondent to this petition, be declared void underparagraphs (c) and (c) of section 77 of the Elections Order in that—
the corrupt practice of bribery was committed in connection
with the said election with the knowledge or consent of therespondent, or by the agent or agents of the respondent, and
the respondent was at the time of his election a person disqualified
for election as a member.
The petition was presented on September 19, 1947. The petitionerdid not appoint an agent under rule 9 of the Parliamentary ElectionPetition Rules, 1946 (hereinafter referred to as the Election Petitionrules), but at first chose to act for himself. Later he appointed onePonnambalam Kandiah. a proctor of this Court, as his agent and on thedate of the trial revoked the appointment as he desired to conduct hiscase in person. Under rule 10 of the Election Petition rules, by writingdated October 10, 1947, the respondent appointed as his agent one JohnWilson (Jnr.), a proctor of the Supreme Court.
On November 21, 1947, the respondent filed a statement of objectionsto the said petition on the ground that the security was not given inaccordance with Election Petition rule 12. On the same day he madean application in writing under Election Petition rule 5 for an orderfor particulars in the following terms—
“ I further move that the petitioner be ordered to furnish full parti-culars in writing to John Wilson (Jnr.), at 365, Dam street, Colombo,
31 days before the trial of the above petition, stating :
the contract or contracts referred to in paragraph 3 (a) of thepetition mentioning date or dates and by whom or with whomthe said contracts were entered into,
(&) what benefits the respondent was enjoying under the saidcontract or contracts, what services were provided or furnishedas referred to in the said paragraph and when,
the names of all persons alleged in paragraph 2 (6) of the petitionto have been bribed and by whom, through whom they werebribed with the address and electoral number, if any, theoccupation of each person, bribing or bribed, the time or times,and the place or places where each act of bribery took placeand the nature, amount and value of the bribe.”
On December 12, 1947, the respondent’s application for the parti-culars and his motion that the petition be dismissed for non-compliancewith Election Petition rule 12 were heard and decided by my brotherNagalingam. In view of the decision of a bench of three judges in the
608BASNAYAKJE J.—KtUasingam v. Thambiayah.
case of Perera v. Jayewardenethe counsel for the respondent did notpress his objection. The petitioner agreed to furnish the particularsrequired by the respondent, and my brother made the following order—“ I direct that the particulars called for be furnished 10 days before
the date of trial exclusive of the dates of filing and delivery of parti-culars, the date of trial and of all Sundays and all public holidays.”
On March 15, 1948, the petitioner filed the particulars in regard tothe allegation under section 77 (e) of the Elections Order and on April 26and August 17, 1948, the particulars in regard to the allegation undersection 77 (c).
At the trial, which commenced on August 23, 1948, the respondenttook objection to the particulars in regard to the allegation of briberyon the ground that the order of my brother Nagalingam had not beencomplied with. Although the petitioner had nearly eight months withinwhich to comply with my brother’s order he had not taken the troubleto do so. I therefore upheld the objection of respondent’s counsel andruled that the petitioner was not entitled to lead evidence in regard tothe allegation of bribery.
The trial was therefore confined to the ground specified in section 77 (e).In his particulars, the petitioner alleged that the respondent was ashareholder and the Managing Director of the Cargo Boat DespatchCompany, Limited (hereinafter referred to as the Company), a companywith limited liability incorporated in Ceylon on May 11, 1936, under theJoint Stock Companies Ordinance, 1861, which had entered into twocontracts of the description referred to in section 13 (3) (c) of the Ceylon(Constitution) Order in Council, 1946 (hereinafter referred to as theConstitution Order).
According to the annual return (P8) made by the Company the nominalshare capital of the Company was Rs. 1,000,000 divided into 20,000six per cent, cumulative preference shares of ten rupees each and 80,000ordinary shares of ten rupees each. On December 7, 1946, 13,200 pre-ference shares had been taken up and they stood in the name of therespondent. Of the ordinary shares, 45,308 had been taken up by30 persons one of whom was the respondent, who held 550 such shares.It is in evidence that for the year April 1947 to March 1948, the Companydeclared an interim dividend of 10 per cent, on these shares and that therespondent received a sum of Rs. 10,999 • 20 after deduction of income tax.
The first, of these contracts dated July 15, 1947, is between the CargoBoat Despatch Company, Ltd. and Louis Abraham Wijesinghe actingfor and on behalf of the Government of Ceylon with the authority ofTTis Excellency the Governor (hereinafter referred to as P5) and is for theperformance of the service of taking delivery from the landing companyin accordance with the practice prevailing in the Port of Colombo of allGovernment cargo, subject to certain specified exceptions, landed fromvessels arriving in the Port of Colombo between the first day of May, 1947,' and the thirtieth day of September, 1947 (both days inclusive) anddelivering such cargo with the utmost despatch at the places indicatedby the Deputy Superintendent of Stores or any person or persons acting
1 (1947) 49 N. L. R. 1.
BASNAYAKE J.—Kulaaingam v. Thambiayah.
509
under his authority. The exceptions are foodstuffs, coal, wooden sleepers,crossing timbers, and teak logs for the Railway Department and localtimber shipped by the Forest Department from other ports in Ceylonto Colombo. The contract specifies the details of the service to be per-formed and the conditions of such service. For the services renderedunder this contract during the months of Slay, June, July, August, andSeptember, 1947, the Company was paid Rs. 17,990’02.
The second contract signed by the respective parties on August 6 and 7,1947 (hereinafter referred to as P3) between the Company and Kovinda-pillai Alvapillai, acting for and on behalf of the Government of Ceylon,provides for the performance by the Company of .the services of thecarriage and haulage, from ship’s side in the port of Colombo to shore,the warehousing and loading into transports, of food or other cargoes,and all such services as may be incidental thereto. The duration of thecontract is not fixed in P3, but it is to endure until terminated by threecalendar months’ notice by either party. The remuneration payableunder the contract is left to be mutually agreed upon between the con-tracting parties from time to time. Details regarding the service andthe further conditions thereof are specified. Between August 5, 1947,and July 31, 1948, a sum of Rs. 636,009-92, more or less, was paid (P4)to the Company under this contract.
The petitioner’s submission that P5 and P3 come within the ambitof the words “ any contract made by or on behalf of the Crown in respectof the Government of the Island for the furnishing or providing of moneyto be remitted abroad or of goods or services to be used or employed inthe service of the Crown in the Island ”, was not disputed by the respon-dent’s counsel. Upon a reading of the documents I have myself formedthe conclusion that they are contracts made on behalf of the Crown inrespect of the Government of the Island for the providing of servicesto be used or employed in the service of the Crown in the Island.
The question that remains for decision is whether the respondentdirectly or indirectly held or enjoyed at the time of his election any rightor benefit under P5 and P3. It was not olaimed by the petitioner thatthe respondent held or enjoyed any right under those contracts, buthe maintained that as shareholder of the Company the respondent in-directly enjoyed a benefit thereunder. It cannot be gainsaid that ashareholder of a company indirectly benefits from its activities. The■contracts made in pursuance of its objects are designed to bring profit.The profits earned by it doubtless benefit the shareholders.
The petitioner referred me to a number of English cases, in support■of his submission that as a shareholder of the Company the respondentwas a person who indirectly enjoyed a benefit under the contracts.Although the statutory provisions discussed in those cases are not in■exactly the same terms as the provision I have to construe, they arehelpful in deciding the matter in issue and go to confirm the view I haveformed.
The earliest of the cases is Todd v. Robinsonl. The defendant was-a shareholder in the Blyth and Cowpen Gas Company for some years.An agreement had been in force since 1872 between the Gas Company
1 (1884-5) 14 Q. B. D. 739.
510
BASNAYAJKJ3 J.—KtUasingam v. Thambiayah.
and the Local Board for the supply of gas. In July, 1882, the Local Boardhy resolution asked for an extension of the service, and the defendant,as clerk to the Board, communicated this resolution to the Company.The gas was supplied and the amount payable to the Company for thefull season for which the supply was provided was £ 311.13s. Thebenefit accruing to the defendant as shareholder irom the contract wasmerely nominal. Brett M.R. held that the defendant as shareholderof the Gas Company was a person indirectly interested in the contract.He was influenced in his decision by the language of an amending Act,which excluded from the ambit of the section shareholders in a companyhaving a contract with a local authority. He also placed some relianceon the case of Dimes v. Proprietors of Grand Junction Canal1 whereinit was held that a judge who "was a shareholder in a company was dis-qualified on the ground of interest from deciding a cause to which thecompanv was a party. Cotton L.J. expressed himself thus :
“ The defendant was a member and shareholder of the gas company ;the profits of the gas company go to the benefit of the shareholders,and this circumstance is. conclusive to shew that the defendant iswithin the Act.”
The next case is City of London Electric Lighting Company Ltd. v.London Corporation 2. That was a decision under section 42 of the Cityof London Sewers Act, 1848 (11 & 12 Viet. c. 163) which provided that noperson, being a Commissioner, or a member of the Court of Aldermen or ofthe Common Council of the City, shall be directly or indirectly interestedor concerned in any contract which shall be made or entered into by or onbehalf of the Commissioners. Rigby L.J. in construing section 42observes at page 612 :
“ As to the meaning of s. 42, the important point for decisionis whether a corporator or shareholder of an incorporated companyis or is not interested directly or indirectly in any contract enteredinto with the corpoiation or company. It was admitted on behalfof the plaintiff company that as a general rule- he is so interested ;and indeed to deny that would be equivalent to saying that in casecf a contract with an incorporated company no person whatsoeveris interested though the whole fortunes of the corporators or share-holders may depend upon the contract—a contention which is mani-festly absurd.”
In approving the decision of the Court of Appeal, Lord Robertsonobserved in the House of Lords 3 :
“ But the Acts of 1848 and 1851 both deal with the case of commis-sioners being shareholders in companies, and it is impossible to denythat a shareholder in a limited company comes under s. 42.This is enough for the decision of the present case.”
The next case which is relevant to the present discussion is Lapish v.Braithwaite4. The facts of the case in the words of Bankes L.J. are asfollows 5 :—
“ At all "material times the appellant was an alderman of the Cityof Leeds, and he was also managing director of, and a large shareholder
1 {1852) 3 H. L. C. 759 ; 10 E. R. 301.* (1903) A. C. 434 at 442.
* (1901) 1 Ch. D. 602.* (1925) 1 K. B. 474.
5 (1925) 1 K. B. 474 at 484.
B AS>f AYAKR J.—Kulaeingam v. Thambiayah.
611
in, a limited liability company carrying on business at Leeds. Thiscompany had a capital of £250,000. It did an extensive businessand it had a contract with the Corporation of Leeds for the supply ofa large quantity of earthenware goods, which contract was runningat the time when the appellant is alleged to have acted as aldermanalthough disqualified. The only evidence that the appellant took anactive part in reference to the making of the contract consisted inthe fact that he was one of the two directors of the company whosigned the document as witnesses to the affixing of the company’sseal. The correspondence which led up to the contract was conductedby the secretary of the company. The appellant was paid a fixedsalary as managing director, ”
In the course of his judgment the learned Lord Justice observes :
“ A managing director who is also a shareholder has indirectly aninterest in the contract made between his company and a councilbecause he is a shareholder. As managing director merely he has noshare in the contract,. ”
Atkin L.J. who disagreed with Bankes and Scrutton L.JJ. on themain issue that a managing director of a company has no interest in acontract as such observes in regard to a shareholder :
“ That a shareholder in a company has an interest in a suit'iu whichthe company is litigant was decided in Dimes v. Proprietors of theGrand Junction Canal [(1852) 3 H. L. C. 759] where a decree of LordCotteuham L.C. was set aside on the ground that the Lord Chancellorwas a shareholder in the Canal Corporation. … The interest
of a shareholder in the company party to a contract appears to me togive him an interest direct or indirect in the contract within thewordsof the disqualifying clause. ”
The cases to which I have referred demonstrate that a shareholderof a company has an interest in its contracts in so far as he indirectlygets the benefits accruing therefrom directly to the company. The word“ benefit ” in section 13 (3) (c) of the Constitution Order is not limitedby any such word as pecuniary. It must therefore be understood inits widest sense. The case of England v. Inglis1, in my view, can betaken as indicating the scope of the word “benefit” in an enactmentsuch as the one I have to construe. In that case it was held that thecontract of the corporation with the defendant’s son for the supply ofspectacles to the schools controlled by the education committee helpedto advertise the defendant’s business as a jeweller and an optician andthat the defendant thereby derived benefit in the shape of widespreadadvertisement and the probability of increased custom because the soncarried on business from his father’s shop and in his father’s time althoughhe contracted directly with the local authority, ordered the spectaclesfrom his father’s wholesale dealers in London in his .own name, paid forthem by his own cheque,-received the corporation’s cheques made outto him and paid them to his own account. Roche J. in the course ofhis judgment observes at page 641 :
{1920) 2 K. B. 636.
512
BASNAYAJKE J.—Kulasingham v. Thambiayah.
“ As to the benefit accruing to the defendant from its performance,the judge was, in xny opinion, entitled to come to the conclusion thatthe burden was not sustained for nothing and that there was thepossibility, and even probability, of an actual resulting benefit whichhas been summed up as useful advertisement.”
The petitioner also drew my attention to certain judicial dicta as tothe object of legislation of this kind. In Hutton v. Wilson1 Lindley L.J.says referring to the words “ concerned in the contract ” :
“To interpret words of this kind, which have no very definitemeaning, and which perhaps were purposely employed for that everyreason, we must look at the object to be attained. The object obviouslywas to prevent the conflict between interest and duty that mightotherwise inevitably arise.”
Justice Darling in adopting the dictum of Lindley L.J. observes inthe case of Barnacle v. Clark 2 :
“ The object of this legislation seems to be very clearly stated byLindley L.J. in his judgment in Hutton v. Wilson [22 Q. B. D. 744],and I entirely agree with the view there expressed. It is intendedthat the members of public bodies shall be free from any suspicion ofderiving profit, directly or indirectly, by reason of the position theyhold.”
In the case of Lapish v. Braithwaite to which I have already referredBankes L.J. in commenting on section 12 3 of the Municipal CorporationsAct, 1882, observes at page 485 :
“ There is no doubt as to the intention of the Legislature in framingthis section. It was to secure as far as was thought necessary thataldermen and councillors should not place themselves in positions inwhich their duty and their interest conflicted, and to remove a possiblesource of temptation.”
1 {1889) 22 Q. B. D. 744 at 748.* (1900) 1 Q. B. D. 279 at 283.
* Section 12, Municipal Corporations Act, 1882 (45 and 46 Viet., c. 50) :
“ (1) A person shall be disqualified for being elected and for being a councillor,if and while he—-
(а)Is an elective auditor or a revising assessor, or holds any offee or place of
profit, other than that of mayor or sheriff, in the gift or disposal of thecouncil ; or
(б)Is in holy orders, or the regular minister of a dissenting congregation ; or(c) Has directly or indirectly, by himself or his partner, any share or interest in
any contract or employment with, bj, or on behalf of the council;
“ (2) But a person shall not be so disqualified, or be deemed to have any shareor interest in such a contract or employment, by reason only of his having anyshare or interest in—
Any lease, sale, or purchase of land, or any agreement for the same ; or
Any agreement for the loafi of money, or any security for the payment of
– money only ; or
Any newspaper in which any advertisement relating to the affairs of the
borough or council is inserted ; or
Any company which contracts with the council for lighting or supplying
with water or insuring against fire any part of the borough ; orle) Any railway company, or any company incorporated by Act of Parliamentor Royal Charter, or under the Companies Act, 1862.”
BASNAYAKE J.—Ktilasingam v. Thambiayah.
5X3
Lord Justice Atkin who delivered the dissenting judgment in thecase observes at page 502 :
“ I am the more encouraged to take this view by the reflection thatit obviously promotes, while the appellant’s view obstructs, theprinciple of public policy which underlies the statute. In 1872 ‘ forfurther securing the freedom and independence of Parliament ’ theLegislature made provision1 disqualifying from being a member ofthe House of Commons any person who directly or indirectly himselfundertook, executed, held or enjoyed in whole or in part any contracton account of the public service during the period during which heso undertook or enjoyed the benefit of such contract. The provisionhi the Municipal Corporations Act, 1835, is conceived in the likespirit. The object is manifest. It is to obtain for the public bodyconcerned the disinterested advice of its members, so that they arenot put in a position where their duty and interest conflict. It isintended also to prevent the possibility of members’ votes and othermatters being influenced by the promise or receipt of beneficial contracts.And it is further intended to secure the honour and dignity of thecorporation itself by securing that there shali be no suspicion of theintegrity of its members, and no ill-will amongst burgesses not membersof the corporation, because they are passed over in business in preferenceto favoured councillors. No suspicion of corruption has been suggestedin this case. But the facts disclosed make it clear that all the evilssought to be avoided may be present if such a position as the defendant’sin this case is not within the Act.”
The petitioner invited me to infer from the absence in section 13 (3) (c)of the Constitution Order of a proviso in favour of a shareholder of anincorporated company similar to that in Article 9 (d) of the repealedCeylon (State Council) Order in Council, 1931 (hereinafter referred to asthe repealed Order) that the existing law' was designed to include theclass of persons excepted by the repealed Order.
Learned counsel for the respondent argued that there was a differencebetween a profit-sharing corporation and an incorporated company. Hesubmitted on the authority of the Mersey Docks Case2 and the case ofVenkata Subamma and another v. Ramayya and others3 that section13 (3) (c) of the Constitution Order must he interpreted without reference
House of Commons (Disqualification) Act, 1782 (22 Geo. 3, c. 45), s. 1 :
“Any person who shall, directly or indirectly, himself, or by any personwhatsoever in trust for him, or for his use or benefit, or on his account, undertake,execute, hold, or enjoy, in whole or in part, any contract, agreement, or commissionmade or entered into with, under, or from the Commissioners of His Majesty’sTreasury, or of the Navy or Victualling Office, or with the Master General orBoard of Ordinance, or with any one or more of such Commissioners, or withany other person or persons whatsoever, for or on account of the public service,or shall knowing^' and willingly furnish or provide in pursuance of any suchagreement, contract or commission which he or they shali have made or enteredinto as aforesaid, any money to be remitted abroad or any wares or merchandiseto be used or employed in the service of the public, shall be incapable ofbeingelected, or of sitting or voting as a member of the House of Commons, during thetime that he shall execute, hold, or enjoy, any such contract, agreement, orcommission, or any part or share thereof, or any benefit or emolument arisingfrom the same.”
(1865) 11 H. L. 443 ; 11 E. R. 1405.* (1932) A.I.R. Privy Council 92.
614
BASNAYAJBLE J.—Kulasingant v. Thambiayah
to Article 9 (d) of the repealed Order. He also referred me to the followingObservations of Lord Davey at page 56 in the case of Salomon v. Salomon<Ss Co. 1 :
“ The ground on which the learned judges seem to have chieflyrelied was that it was an attempt by an individual to carry on hisbusiness with limited liability, which was forbidden by the Act andunlawful. I observe, in passing, that nothing turns upon there beingonly one person interested. The argument would have been just asgood if there had been six members holding the bulk of the shares andone member -with a very small interest, say, one share. I am at a lossto see how in either view taken in the Courts below the conclusionfollows from the premises, or in what way the company became anagent or trustee for the appellant, except in the sense in which everycompany may loosely and inaccurately be said to be an agent forearning profits for its members, or a trustee of its profits for themembers amongst whom they are to be divided.”
He further argued that the fact that the respondent was the managingdirector was irrelevant as was the fact that he owned a large block ofshares. I was also referred to the judgment of my brother Dias in thecase of Saravanamuttu v. de Mel 2. Learned counsel further submittedthat the position of a member of the House of Representatives was differentfrom that of a member of the State Council. Under the repealed Orderthe members of the Legislative assembly were also members of executivecommittees which had executive functions. He also submitted that theprovision under discussion should be interpreted with due regard to therealities of life, and that if the petitioner’s contention was sound thosewho held shares in such companies as Cargills Ltd. and Times of CeylonCo. Ltd. with whom the Govenment entered into business transactionsboth large and small would be disqualified. Learned counsel also statedfrom the Bar that if the petitioner’s contention succeeded it would affecta number of others besides the respondent. But those are not considera-tions I can take into account in construing the section. As was observedby Lord Davey in City of London Electric Lighting Company v. LondonCorporation 3 “ the stringency of the section is not a reason for a Court- oflaw to decline to give effect to it or construe it otherwise than accordingto the plain meaning of the words ”. Learned counsel construed thesection as extending to contracts collateral with the contract with theCrown. He distinguished the cases cited by the petitioner as beingcases dealing with members of local authorities and stated that theevil sought to be avoided in the case of those institutions which wereof a parochial nature did not exist in the case of Parliament, and thatthe observations of judges in regard to local authorities should not beregarded as extending to the case of Parliament.
A share is a term indicating a right to participate in the profits of aparticular joint stock undertaking4. The profits are divided in. theform of a dividend, which means prima facie a share of the profits avail-able for distribution. Paying a dividend is an act of the shareholders
1 (1897) A. C. 22.» (1903) A. C. 434 at 440.
* S. C. Minutes of 23rd August, 1948.* Morice v. Aylmer, (1884) L. R. 10
Ch. 155.
BASNAYAjvE J.—Kulasingam v. Thambiayah.515
and is regulated by the Articles of the Company. How can. it then besaid that a shareholder of a company such as the one we have in thiscase does not indirectly receive a benefit under its contracts ? Thejudicial opinions I have quoted above support the view that a shareholderhas an indirect interest in the contracts of the company. I have in mindparticularly the words of Rigby L.J. and Lord Robertson. It is notirrelevant to this discussion to record that in the English Local Govern-ment Act of lf)33 the Legislature has taken into account the judicialopinions expressed from time to time and enacted by section 76 (2) ofthat Act that a person who by himself or any nominee of his is a memberof a company or other body with which a contract is made shall betreated as having indirectly a pecuniary interest in a contract. I observethat my brother Dias in the case of Saravanamuttu v. de Mel (supra)remarks in passing : “ The fact that he as a shareholder may ultimatelybenefit by this contract by the dividends he may receive, is too remotea benefit to disqualify him under section 13 (3) (c) of the Order in Council. ”My brother rests his decision on another ground and his observations musttherefore be regarded as obiter, especially its the question at issue in theinstant case does not appear to have been as fully argued before himas it was before me.
The benefit contemplated by this section is, as I have stated earlier,not necessarily a pecuniary benefitl. The word “ benefit ” is a wideexpression. It means an advantage of whatsoever kind whether resultingin profit or not, A person may indirectly enjoy a benefit under a contractwithout being a party to it or without any profit resulting from thecontract. It is conceivable as was observed by Atkin L.J. in Lapish v.Braitkwaite (supra) that a person may have an interest in a contractderived from a company without even having an interest in the company.But one cannot escape the fact that one of the incidents of the law ofcorporations is that in respect of personal property vested in the cor-poration, the individual members though not owners of that property orany part of it, are each interested in the property, as they may deriveindividual benefit from its increase. In order that a person mayindirectly enjoy any benefit under a contract it is not necessary that thevery profits derived therefrom should reach his pocket, for then thebenefit would be direct. It is not necessary that the benefit should beone flowing from the contract by a tie of law, whether directly or throughanother person, nor is it necessary to prove that the contract producedany profit or that any profits from the contract in question actuallyreached the pocket of such person 2.
It is needless to speculate as to the reason why in the ConstitutionOrder no exemption was created in respect of shareholders of incorporatedcompanies contracting with the Crown. The omission of such animportant provision cannot be regarded as accidental but must be takento have been intentional3. The consequence is that persons such as therespondent come within the ambit of the section. The granting of such
In re Pollard’s Settlement (1896) 2 Ch. D.552.
Forbes v. Samuel (1913) 3 K.B. 706.
Craies' Statute Law (4th Edn.) p. 133 : The Queen v. Price (1870-71) 6 L. R,Q. B. 411 at 416.
516
BASNAYAKE J.—Ku lasing am v. Thambiayah .
an exemption is a matter for the legislature. In making such a provision,if it is decided to do so, it might be -well to bear in mind the observationsof Viscount Cave in Lapish v. Braithwaite 1 wherein he says :
“ When in the year 1869 the exception in favour of a shareholder wasfirst enacted, it was no doubt the view of the legislature that a councilought not to lose the services of a capable member only because heheld a few shares in some company with which the council desired toenter into contractual relations, and it was probably considered thatan interest of that kind would be unlikely to exercise any prejudicialeffect on the action of a member in his corporate office. But sincethat date the practice of forming businesses into limited companies hasbeen greatly extended. There are now many companies in whichmost or substantially all of the shares are held by one man, who mayalso be the principal or governing director of the company, so that thebusiness is his business in all but name ; and if by reason of the exceptionin s. 12, sub-s. 2, such a man can remain a member of a municipal bodywith which his company is in contractual relations, the section 'willlose much of its force and value. It is not for your Lordships to suggestthe manner in which this danger should be met, but it appears to methat the Legislature might well consider whether the section should notbe strengthened either by extending the disqualification to personswho hold a substantial proportion of the shares in a contracting companyor in some other way.”
I find myself unable to uphold the submission of learned counsel forthe respondent that in the discussion of this question one should not lookat the corresponding provision of the repealed Order while I agree thatthe words cf section 13 (3) (c) of the Constitution Order should not begiven a wider meaning than the corresponding words of Article 9 (d) ofthe repealed Order merely because there is no exception in theconstitutionOrder. In the interpretation of statutes it is not improper, in certaincircumstances, to refer to repealed enactments in pari materiaI 2. Therepealed Order devoid of the proviso in my view carries with it the sameimplications as the provision under consideration. The omission of theproviso is an indication that the legislature in re-enacting Article 9 (d)did not intend to create any exception to the rule, which was notappreciably different then. The existence of the proviso in the repealedOrder shows that the legislature assumed that a member who was a share-holder in a company having a contract of the kind specified in the articlewas within the disqualification and that the legislature considered thatthe language of Article 9 (d) of the repealed Order must be construed inthe sense in which the petitioner claims it should be 3.
The object of legislation of this nature is admirably stated in theremarks of Atkin L.J. which I have quoted earlier. The House ofCommons (Disqualification) Act, 1782 (22 Geo. 3, c. 45) by which ourlegislation appears to have been influenced, in its Preamble states that
1 (1926) A. C. 275 at 279-280.
* Alison and others v. Bums, (1889-90) 15 A.C. 44 at 51.
The. Queen v. Price (1870-71) 6 L. R. Q. B. 411.
3Todd. v. Robinson (1884-85) 14 Q. B. D. 739, Brett, M. R., at 745.
JAYETELEK-E 8.P.J.—Francina v. Gtmawardene.
617
the Act is enacted for further securing the freedom and independence ofParliament. One may presume that similar legislation in this country isdesigned to achieve the same end.
I declare that the election of the respondent as Member of Parliamentfor the Kayts electoral district is void on the ground that he was at thetime of his election a person disqualified for election as a Member for thereason that he indirectly enjoyed a benefit under a contract made onbehalf of the Crown in respect of the Government of the Island for theproviding of services to be used or employed in the service of the Crownin the Island.
I order the respondent to pay the petitioner all costs actually incurredby him for the purpose of establishing this charge.
Election declared void.