Ramasamy v British Ceylon Corporation
BRITISH CEYLON CORPORATIONSUPREME COURTAMERASINGHE, J„
DHEERARATNE, J„ ANDGOONEWARDENE, J.
S.C. APPEAL 60/87; CA 138/75; LT 2/1132/79.
December 6 and 7, 1990.
Labour Tribunal proceedings – Business Undertaking (Acquisition) Act No. 35 of 1971,Sections 4 and 17 – Vesting of business undertaking ■ Liability of the undertaking.
The workman, the Managing Director of B.C.C. Ltd., sued the Respondent Companyfor wrongful termination of his services in 1969. The Business Undertaking of theRespondent Company was vested in the Government of Sri Lanka on 25.02.72. TheRespondent Company moved that it be discharged from the proceedings as theliabilities of the Company were that of the Business Undertaking. The Labour Tribunaldischarged the Company and the Court of Appeal affirmed that order.
The liability of a business undertaking which vests in the Government in termsof Section 4(1) are under a contract when that contract subsists. Section 4(1)does not enable the Respondent-Company to be discharged from the LabourTribunal proceedings.
All other liabilities not covered by section 4(1) will vest with the Government.
The phrase "all the liabilities" used in Section 17 is wide enough to cover potentialliabilities which will include liabilities flowing from the order of the Labour Tribunalin the future.
Cases referred to:
B.C.C. vs. Weerasekera (1982) 1 Sri L.R. 180
Thileris Perera v. Eliza Nona (1948) 50 N.L.R. 176
Decro Wall S.A. v. marketing Ltd. W.L.R. (March 19, 1971)
Weerakoon v. Hewanallika (1978 – 79) 2 SLR 97
United Engineering Union v. Devanayagam (1967) 69 N.L.R. 289
Walters v. Barbergh District Court (1982) QBD 82 LGR 235
Bormeiow Edwards Ltd. v. Inland Revenue Commissioner (1969) All E.R. 536
232Sri Lanka Law Reports(1991) 1 Sri LR.
APPEAL from Judgement of the Court of Appeal.
H. L. De Silva, P.C. with L C. Senevirathna P.C. and T. -Keenwinna for applicant -appellant.
Lakshman Kadiragamar with Lalitba Senaratna for respondent – respondent.
Cur. adv. vult.
MARCH 21. 1991
This appeal relates to some interesting questions of law which havearisen in the interpretation of certain provisions of the BusinessUndertakings (Acquisition) Act No. 35 of 1971, in the process ofconsidering the impact of that Act on a proceeding pending beforethe Labour Tribunal.
The appellant (Employee) sought relief from the Labour Tribunal byan application made on 18.06.1969 for termination of his serviceson 11.04.1969 by the respondent – a limited liability company, theprimary relief claimed being reinstatement with back wages. Thevarious defences taken up by the respondent-company are immaterialfor the decision of this appeal but it is sufficient to say that therespondent – company did admit that the appellant was removed fromthe office of Managing Director.
When the matter was pending before the Labour Tribunal, thebusiness undertaking of the respondent – company vested in thegovernment of Sri Lanka, by primary vesting order dated 25.2.1972,made by the Minister of Finance in terms of section 2(1 )(b) of theBusiness Undertakings (Acquisition) Act No. 35 of 1971. Consequentto this vesting, the respondent – company moved the Labour Tribunalto have it discharged from the proceedings, on the basis that theliabilities of the respondent-company in respect of the matter pendingbefore the Labour Tribunal were liabilities of the businessundertaking, which vested in the Government of Sri Lanka with effectfrom 25.02.1972. The Labour Tribunal made order discharging therespondent-company and the Court of Appeal affirmed that order, thepresent appeal made by the employee is the sequel. If such liabilitiesdid vest with the Government, it was common ground before us thatthe respondent-company should have been discharged from theproceedings.
SCRamasamy v British Ceylon Corporation (Dheeraratne, J.)233
For the proper appreciation of the points of law involved, it wouldbe convenient at this stage to set out the relevant provisions of theBusiness Undertakings (Acquisition) Act.
Section 2(1) The Minister of Finance on his own motion or atthe request of any other Minister;
(b) may, by orderpublished in the Gazette, vest
in the Government with effect from such date
as shall be specified in the vesting order any suchbusiness undertaking as shall be so specified.
Section 4(1) subject to the provisions of sub section (2) whereany business undertaking is acquired by or vestedin the Government, all the rights and liabilitiesunder any contract or agreement which relates tothe purposes of that undertaking and whichsubsists on the date of transfer or on the primaryvesting date of that undertaking shall vest in theGovernment.
4(2) The Minister of Finance may at any time repudiatethe liabilities under any contract or agreementreferred to in subsection (1) if he is of opinion thatsuch liabilities were incurred mala fide, dishonestlyor fraudulently. Notice of the repudiation may begiven by the competent authority to the parties tothe contract or agreement.
4(3) Where the Minister of Finance under subsection
repudiates the liabilities under any contract oragreement such liabilities shall be deemed neverto have vested in the Government.
4(4) For the purpose of this section "liabilities" shall notinclude any loan repayable to a director of anybusiness undertaking which is acquired by orvested in the Government or to any member ofthe family of such director.
Sri Lanka Law Reports
(1991) 1 Sri L.R.
That portion of section 17 which defines what a business undertakingis, reads:-
“business undertaking" means any undertaking ofa commercial, industrial, agricultural or professionalnature and includes –
all property, movable or immovable which wasused for the purposes of the undertaking on theday immediately preceding the date of transferor the primary vesting date and which may bespecified by the Minister of Finance in theprimary vesting order;
subject to the provisidns of this Act all rights,powers, privileges and interests arising in or outof the property or business and all the liabilitiesof that undertaking;
all books, accounts and documents relating toor appertaining to the business undertaking orany property of that undertaking;
It may be useful at this point, for the sake of clarity, to refer to thedescription of "liability" appearing in The Oxford Companion to Lawby David M. Walker (1980) pages 765 and 766, leaving out thereference to the criminal law aspect.
“Liability. The legal concept of being subject to the power of another,to a rule of law requiring something to be done or not done. Thus,a person who contracts to sell goods is liable to deliver them andthe buyer is liable to pay the price. Each is required by law to dosomething and can be compelled by legal process at the other'sinstance to do it; the other is empowered to exact the performanceor payment. It is sometimes called subjection. The correlative conceptis power.
A person is said to be under a liability when he is, or at least maybe, legally obliged to do or suffer something. Thus, one may be saidto be liable to perform, to pay, to be sued, to be imprisoned orotherwise to be subject to some legal duty or legal consequence.
Ramasamy v British Ceylon Corporation (Dheeraratne, J.)
In general, liability attaches only to persons who are legallyresponsible; an insane person does not generally incur any liability.
Liability may arise either from a voluntary act or by force of somerule of law. Thus, a person who enters into a contract therebybecomes liable to perform what he has undertaken, or to pay forthe counterpart performance, or otherwise to implement his part ofthe contract. If he acts in breach of contract, he becomes liable bylaw to pay damages in compensation for the breach. Similarly, if aman acts in breach of any of the general duties made incumbenton him by statute or common law such as to refrain from injuringhis neighbour, or to maintain his tenants house in reasonable repair,or to exercise diligence in administering property of which he istrustee, he incurs legal liability to make good his omission or default. . . civil liability may arise from many grounds, from the naturalrelations of the family, from undertaking or contract, the commissionof a harm, from trust, statute, or decree of court…
The term liability is sometimes used of the sanction or penalty itself.Thus a debt is spoken of as a liability.
The term is also used in the analysis of rights and duties (q.v) as asynonym for 'subjection' and the correlative of 'power1.
From the foregoing description, it would be noticed that the liabilitiesof the respondent-company as an employer, in relation to theappellant as an employee, consequent upon the termination of thelatter's services, could spring from four different sources, namely:-
under the contract of employment (unquantified).
by a judgment of a competent civil court exercising itsordinary jurisdiction in relation to the contract, (quantified); butthis situation does not arise here.
by operation of the statute – the Industrial Disputes Act whichempowers the Labour Tribunal in the exercise of its just andequitable jurisdiction to grant relief, (unquantified)
by the order of the Labour Tribunal (quantified).
Sri Lanka Law Reports
(1991) 1 Sri L.R.
The liabilities of the business undertaking which qualify for vestingin the Government in terms of section 4(1), are those under acontract when that contract subsists. The operation of section 4(1) insimilar circumstances came up for consideration before this court inthe case of British Ceylon Corporation V. Weerasekera (1). In thatcase Victor Rerera J. stated at page 1 & 6 as follows:
"In this case the employees were dismissed in 1963 and therewas a termination of their contracts of employment. The companyitself had repudiated the contract of employment and theemployees were entitled to claim contractual damages if theyhad gone to the courts. Therefore at the date of the vesting therewas no subsisting contract but there remained only a right orliability to be determined. By resorting to arbitation under theIndustrial Disputes Act they could have obtained reliefs onequitable grounds outside the contract such as reinstatement ifthe termination was held to be unjustified . . .
With respect to Victor Perera J. the conclusion reached that therewas no subsisting contract in those (so indeed in the present)circumstances, does not appear to me to be based on a correct legalfoundation.
A contract cannot come to an end by a unilateral act of an employerand it cannot be generally extinguished otherwise than byperformance, payment or reparation, mutual agreement, operation oflaw or being set aside by a competent court, and so long as thebond that unites the parties – 'vinculum juris' remains, the contractsubsists. See Thideris Perera v. Eliza Nona (2); Decro – Wall S.A.v. Marketing Ltd. (C.A.) (3) and Weerakoon v. Hewamallika (4) page108.
However, the difficulty of the application of section 4(1) to the factsof the present case, appears to come from the word 'under' in thatsection. The proceedings in the Labour Tribunal, no doubt stem fromthe relationship of master and servant established by the contractof employment between the appellant and the respondent – companybut it could not be said that those proceedings, are concerned withliabilities arising ‘under1 the contract, particularly because section 31(5)
of the Industrial Disputes Act states as follows:-
Ramasamy v British Ceylon Corporation (Dheeraratne, J.)
Any relief or redress may be granted by a Labour Tribunal to aworkman upon an application made under subsection (1)notwithstanding anything to the contrary in any contract of servicebetween him and his employee.
For the above reasons l-hold that section 4(1) does not enable therespondent – company to get itself discharged from the pendingproceedings of the Labour Tribunal.
I shall now proceed to consider the applicability of the provisions ofsection 17. If one looks at the scheme of the Business Undertakings(Acquisition) Act, in relation to the vesting of liabilities of a businessundertaking with the Government, such liabilities intended by thelegislature to be vested could conveniently be grouped into twocategories; namely:-
those liabilities under a subsisting contract or agreement in termsof section 4(1), not repudiated by the Minister in terms of section4(2) as those incurred mala fide, dishonestly or fraudulently.
in terms of section 17 (having being caught up in the definitionof business undertaking) "subject to the provisions of the Act",all the liabilities of that undertaking (read with section 2(1 )(b) ).
The term 'subject to the provisions of this Act' would mean save andexcept as otherwise provided by the Act; so that the clear intentionof the legislature appears to be that all other liabilities, not coveredby section 4(1), shall vest with the Government, lock, stock andbarrel. The Minister's freedom of repudiation has been limited toliabilities under subsisting contracts and agreements specified insection 4(1) only and that seems to have been the necessity ofdrafting that part of section 17 in the present shape it has taken soas to include every other liability in relation to the businessundertaking.
It is contended on behalf of the appellant, on the authority of themajority judgment of the Privy Council in United Engineering Unionv. Devanayagam (5) that the Labour Tribunals, unlike the ordinaryCourts which adjudicate between existing rights of parties, create newrights. It is therefore contended that the liabilities of the respondent-
Sri Lanka Law Reports
(1991) 1 Sri L.R.
company will arise only in the future, when the decision of the LabourTribunal is pronounced and that section 17 deals with only liabilitiesin esse not with potential liabilities. I would like at this juncture torefer to the following illuminating passage in the minority judgmentin Devanayagam's case (supra) appearing at page 309, with whichI am in respectful agreement.
"It is the statute which creates the right to equitable relief bygiving to the workman the option of going to the Labour Tribunalto ask for it instead of taking what the common law gives him.One method of altering the law on master and servant wouldbe to enact a new set of rules, as has been done to some extentin the United Kingdom by the statutes we have mentioned,leaving to the court only the task of interpretation and application.Another method frequently employed is to give fresh powers toCourt. Under the latter method the right comes into existenceas soon as there is created the relationship, in this case that ofemployer and workman, from which it springs, it does not haveto wait for life until the relief granted is spelt out in words bythe court."
If liabilities also flow from the statute as I have already held, theywould not be potential liabilities in the pending proceedings and theyexist unquantified until they are quantified by the order of the LabourTribunal. The Dictionary of English Law by Earl Jowitt (Volume 21959) at 1085 states.
"Liability, the condition of being actually or potentially subject toan obligation, either generally as including every kind ofobligation, or, in a more special sense to denote inchoate, future,unascertained or imperfect obligations as opposed to debts, theessense of which they are ascertained and certain. Thus whena person becomes surety for another he makes himself liable,though it is unascertained in what obligation or debt the liabilitymay ultimately result."
In any event, the words 'all the liabilities' in section 17 are wideenough even to cover potential liabilities which will include liabilitiesflowing from the order of the Labour Tribunal in the future. See alsoWalters v. Barbergh District council (6); The Times 21st June 1983;and Bromiiow and Edwards Ltd., v. Inland Revenue Commissioners
. It was contended on behalf of the appellant that since a'business undertaking' is not a legal person and therefore incapable
Gunaratne and another v. Ceylon Electricity Board and others
of,acquiring any liabilities, that part of section 17 which speaks of'all the liabilities of that undertaking' is meaningless and inoperative,in the result no liabilities whatsoever vest with the Government interms of that section. The intention of the legislature appears to meto be quite clear that the section refers to the proprietor's liabilitiesin relation to the business undertaking. As said by Megarry J. inBromilow and Edwards Ltd., V. Inland Revenue Commissioners(Supra) " I have no hesitation in choosing the interpretation whichmakes sense and makes this part of the subsection work, as againstone which reduces it to dust'1.
For the above reasons I hold that in terms of section 17, therespondent-company has been correctly discharged from theproceedings. The appeal is dismissed with costs.
AMERASINGHE J. – I agree.
GOONEWARDENE J. – I agree.