056-SLLR-SLLR-1995-2-ROBERT-DASSANAYAKE-AND-ANOTHER-V.-PEOPLES-BANK-AND-ANOTHER.pdf
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ROBERT DASSANAYAKE AND ANOTHER
v.
PEOPLE'S BANK AND ANOTHER
COURT OF APPEALS. N. SILVA, J. P/CA.,
RANARAJA, J.
C.A. 401/94
A. L.A. 81/94
C. COLOMBO 10892/MRJUNE 6, 1995.
Civil Procedure – Civil Procedure Code S18 – Contract of Guarantee – Third partytaking over the liabilities – Addition of parties – Necessary parties.
The 1st Respondent Bank instituted action against the Petitioners on a Contractof Guarantee for the repayment of a loan given to ‘X’ Ltd., by the 1st RespondentBank. The Petitioners admitted that they signed the agreement personallyguaranteeing the repayment of the amount falling due from the Company. ThePetitioners however pleaded that ‘X’ Ltd., fell into financial difficulties and by anagreement recorded between 'X' Ltd., and the National Development Bank (NDB)the latter took over all liabilities of the Petitioners; and further sought to add theNDB as a party almost after 1 1/2 years of filing answer. The learned DistrictJudge refused this application.
Held:
On a perusal of the documents it is quite clear that by none of them has the1st Respondent Bank agreed to release the Petitioners from their liabilities on theguarantee.
“If a plaintiff can show that he cannot get effectual and complete relief, unless thenew party is joined or a defendant can show that he cannot effectually set up adefence, which he desires to set up unless the new party is joined, the additionshould be allowed".
There is nothing to prevent the 1st Respondent Bank obtaining complete andeffectual relief against the petitioners without joining the NDB as a party.
Any claim the Petitioners may have against the NDB in no way precludes the1st Respondent Bank from obtaining relief against the Petitioners on theagreement.
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Cases referred to:
Coomaraswamy v. Andiris Appuhamy 1985 2 SLR 219.
Kanagammah v. Kumarakulasingham 66 NLR 525.
Senarathne v. Perera 26 NLR 225.
Kandavanam v. Kandaswamy57 NLR 241.
Fernando v. Fernando 41 NLR 208.
Banda v. Banda 42 NLR 475.
APPLICATION in revision from the order of the District Court of Colombo.
Faiz Mustapha, PC. with N. Sivendran for Petitioner.
K.Paul, S.C. for 1st Respondent.
Cur adv vult.
June 27,1995.
RANARAJA J.
The 1st Respondent instituted action against the petitioners andanother on a contract of guarantee X10, for the repayment of a loangiven to B. P. G. (Lanka) Ltd., by the 1st respondent. The petitionersfiled answer admitting inter alia, that they signed the said agreementpersonally guaranteeing the repayment of the amounts falling duefrom the company upto a sum of Rs. 500,000/- and interest thereonfrom the date of demand. They also admitted that the 1st Respondenthad made a demand by letter dated 19.4.91 and that they have failedand neglected to pay the sum demanded. However, they went on toplead that B. P. G. (Lanka) Ltd., fell into financial difficulties and by anagreement reached between B. P. G. (Lanka) Ltd., and the NationalDevelopment Bank, (NDB) the latter took over all liabilities of thepetitioners. The 1st Respondent having consented to this agreement,it was pleaded, was estopped from denying the agreement betweenthe petitioners and the NDB and making a claim against thepetitioners on the guarantee. Although the petitioners pleaded thatthe NDB was a necessary party, they took no steps to have it addedas a defendant till 17.5.93, that is one and a half years after filing theiranswer. The respondents objected to this application.
The Learned District Judge after inquiry refused to issue notice onthe NDB, to be added as a party defendant. The decision was basedon evidence of the officer of the NDB who stated at the inquiry that no
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originals or certified copies of the alleged agreements between thepetitioners and the NDB were available, and in any event, the 1stRespondent Bank was not a party to the alleged agreementsbetween the petitioners and the NDB. This application in revision isfrom that order. Parties agreed to be bound by this order in theconnected application CALA 81/94.
Learned President’s Counsel for the petitioners submitted that theDistrict Judge was in error when he concluded that the documentsE4 and E5 do not bind the 1st Respondent Bank. On a perusal of thetwo documents it is quite clear that by none of them has the 1 stRespondent agreed to release the petitioners from their liability on theguarantee X10.
Learned Counsel then submitted that Section 18 of the CivilProcedure Code requires Court to add a person as a plaintiff ordefendant in order to effectually and completely adjudicate upon andsettle all questions involved in the action, so that costs of litigationmay be diminished as much as possible and multiplicity of actions beavoided. He cited the decisions in Coomaraswamy v. AndirisAppuhamy(1) and Kanagammah v. Kumarakulasingham<2) in support.The facts of the first of these cases differ from the instant case in thatthe party sought to be added has shown no enthusiasm to be joinedas a party to this action. That judgment lays down the guidelinesapplicable to addition of parties thus;
"If a plaintiff can show that he cannot get effectual and completerelief unless the new party is joined or a defendant can show thathe cannot effectually set up a defence which he desires to set upunless the new party is joined, the addition should be allowed."
The 1 st Respondent to this application is content if judgment isentered in its favour against the petitioners. The petitioners havingadmitted the 1st Respondent's claim are now attempting to pass onthat liability to the NDB on an alleged agreement of which the 1stRespondent disclaims any knowledge. In other words, the intention ofthe petitioners is to obtain judgment against the NDB in the action
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brought against the petitioners by the 1st Respondent, which was nota party to any alleged agreement between the petitioners and theNDB. There is nothing to prevent the 1st Respondent obtainingcomplete and effectual relief against the petitioners without joiningthe NDB as a party. Similarly, there is no effective defence availableto the petitioners which they may raise against the 1st Respondent byadding the NDB as a defendant.
Learned President's Counsel submitted that the decision inKanagammah v. Kumarakulasingham (supra) supports theproposition that a defendant may add another as a defendant wherethe former has a claim against the latter and it is open to a Court toadjudicate upon adverse claims set up by defendants inter se. Thisdecision is based on the judgment of Jayawardene A.J., in Senaratnev. Perera(3). But on reading that judgment it appears that it does notgo so far, but supports the proposition that when the plaintiff cannotobtain relief the claims without an adjudication between thedefendant and another, such other party may be added asdefendant. In the instant case however the 1st Respondent does notsuffer from such a disability. Any claim the petitioners may haveagainst the NDB in no way precludes the 1st Respondent fromobtaining relief against the petitioners on agreement X10.
I would prefer to follow the decision in Kandavanam v.Kandaswamym where Gratien J. expressed the view that;
"The Civil Procedure Code does not empower a Court to entertainsubstantive claims preferred by defendants inter se. It is no doubtpossible, and sometimes necessary, to adjudicate uponcompeting claims of one set of defendants against the other, butonly in so far as would enable Court to determine whether the reliefasked for by the plaintiff (or against him in reconvention) ought tobe granted. Fernando v. Fernando(5)and Banda v. Banda (6). Butthe formal decree cannot award substantive relief except in favourof the plaintiff or against him. Accordingly the claim of the 3rd and4th defendants for a declaration of title and for damages againstthe 1st and 2nd defendants could only have been entertained inseparate proceedings."
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Therefore if the petitioners wish to proceed against the NDB on thealleged agreement by which the latter took over the liabilities of theformer, they should pursue such a claim by way of separateproceedings. I see no reason to interfere with the order of the learnedDistrict Judge. This application is accordingly dismissed with costs.
S. N. SILVA, J. -1 agree.
Application dismissed.