SUGATHAPALA MENDIS AND ANOTHER v. CHANDRIKA KUMARATUNGA AND OTHERS (WATERS

037-SLLR-SLLR-2008-V-2-SUGATHAPALA-MENDIS-AND-ANOTHER-v.-CHANDRIKA-KUMARATUNGA-AND-OTHERS-WATERS.pdf


Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC( Waters Edge Case)339
SUGATHAPALA MENDIS AND ANOTHRVCHANDRIKA KUMARATUNGA AND OTHERS(WATERS EDGE CASE)o
SUPREME COURTS.N. SILVA, C.J.
TILAKAWARDANE, JRATNAYAKE, J.
SC FR 352/07.
MAY 29, 2008JUNE 25, 26, 2008JULY 14, 31,2008
Fundamental Rights – Article 12(1) – Public Interest litigation – Time limit -locus standi – Doctrine of Public Trust – Violation — Is the President subjectto the Rule of the Law? – What is public purpose requirement?
The petitioners/lntervenient petitioners complained of infringementpertaining to the acquisition of land on the premise that such land would beutilized to serve a public purpose whereas by the impugned executive oradministrative action the land was knowingly, deliberately and manipulativelysold to a private entrepreneur to serve as an exclusive private golf resort inSri Lanka. It was contented that, this was done through a process thatwasconniving and contrary to the equal protection of the law guaranteed byArticle 12(1) of the Constitution which assures to the people the Rule of Law.It was further contended that those alleged to have initiated, facilitated andor empowered to achieve this outcome were those from the highest echelonsof the executive and included senior officials members of the public sector,statutory bodies of the government, the former President (1st respondent)high government agencies.
Held:
The Nature of large scale developments is that they occur over-time. Inthe instant case, though communication with UDA commenced in1997,completion of the project was delegated extensions granted andparticulars changed, such that the project at the time this claim wasbrought remained unfinished. The nature of the project was such that it
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did not manifest itself until long after the expiration of such window ofopportunity for the public to object. There is compliance with the timerequirement.
As regards locus standi petitioners in such public interest litigations havea constitutional right given by Article 17 read with Article 12 and 126 tobring forward their claims. Petitioners to such litigation, cannot bedisqualified on the basis that their rights happen to be ones that extendto the collective citizenry of Sri Lanka. The very notion that the organs ofgovernment are expected to act in accordance with the best interest ofthe people of Sri Lanka necessitates*a determination that any one of thepeople of Sri Lanka may seek redress in instances where a violation isbelieved to have occurred.
To hold otherwise would deprive the citizenry from seekingaccountabilities of the institutions to which it has conferred great powerand to allow injustice to be left included solely because of technicalshortcomings – Petitioners have locus standi.
Held further:
Public purpose requirement has for its primary object the general interestof the community. Though in achieving the further purpose theindividual/s may be benefited, the benefit to such individual/s must onlybe indirect. The object to be arrived at must be the general interest of thecountry.
When the Court is satisfied that the view taken by government is contraryto the sanctity of the above declaration or otherwise arrived at on anentirely unreasonable, subjective arbitrary or capricious basis, the Courthas sufficient jurisdiction to interfere and conclude that the purpose forwhich the land was acquired was not a public purpose.
No single position or office created by the Constitution has unlimitedpower and the Constitution itself circumscribes the scope and ambit ofeven the power vested at with President who sits as the Head of thecountry. In exchange for a conferment of extensive executive power, theConstitution requires the President among other things, an affirmation byoath that she/he once elected will faithfully perform the duties anddischarge the functions of the President in accordance with theConstitution and the law and she/he will be faithful to the Republic of SriLanka and that she/he will to the best of her/his ability uphold and defendthe Constitution.
It is to be noted that all facets of the country its land, economicopportunities or other assets are to be handled and administered underthe stringent limitations of an trusteeship posed by the Public Trust
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC( Waters Edge Case)(Shiranee Tilakawardane,J.)341
Doctrine and must be used as a manner for economic growth and alwaysfor the benefit of the entirety of the citizenry of the country – not for thebenefit of granting gracious favours to a privileged few.
Per Shiranee Tilakawardane, J.
"Being a creature by the Constitution – the President's powers in effectingaction of the government or of State officers is also necessarily limited toeffecting action by him that accords with the Constitution. In other wordsPresident does not have the power to shield; protect or coerce the action ofstate officials or agencies when such action is against the tenets of theConstitution or Public Trust, and any attempts on the part.of the President todo so should not be followed by the officials"
The expectation of the 1 st respondent as a custodian of executive powerplace upon the 1st respondent a burden of the highest level to act in away that evinces proprietary of all her actions.
The transaction discloses a patient systematic failure of the public bodiescharged with adequately and accurately judging the viability of what wasostensibly a foreign investment project. The UDA and BOI both engagedin a cursory analysis of the particulars of the transaction and issued theirapproval largely on the face of the recommendations by other approvedauthorities and the directions of the Cabinet despite significant evidencethat, if properly, reviewed would have in all likelihood disclosed the falsityof the application.
Per Shiranee Tilakawardane, J.
"While Court cannot enact legislation Court is able to direct the appropriatestate authorities to accordingly pursue, concretize and legislate law that willserve as checks and balance to fill the void in the law of the lack ofsupervision, the UDA and BOI and all other agencies involved with theinvestment process in Sri Lanka must take steps to create publicly available
guidelines regarding the mechanisms of approval …" whatever the
legislations drafted it must ultimately accord with the sovereignty vested inthe people by furthering the doctrine of public trust.".
A review however of the financial aspects of the corporation reveal thatthough lofty aims were sought there was no in fact much in the way ofactual investment during the period the original shareholders owned thecompany.
Per Shiranee Tilakawardane, J.
"The fundamental law in the investment system I see is that despite suchalleged autonomy, the fact remains that, such bodies are ultimately underthe thumb goes to speak of the executive heads of the country whether it asthe Minister of Financeor even the President".
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The entire transaction – the transfer of the land to Asia Pacific, thesubsequent removal of the use and development restrictionsappurtenant to the land and the eventual freehold alienation ofunderdeveloped portions of the land – was a result of actions, omissionsand decisions made in violation of the doctrine of public trust.
Per Shiranee Tilakawardane, J.
“The transaction before us is one that in the 10 years of its existence hasserved to draw and make clear the negative effect of the politicization ofinvestment promotion on the success of Sri Lanka's economic liberalization.It is quite ironic that Singapore a country that once looked to Sri Lanka as amodel for the realization of its own economic blossoming has not onlysurpassed Sri Lanka in that regard but also in the words of Lee Kuan Yew"watched promising country go to waste".
APPLICATION under Article 126 of the Constitution.
Cases referred to:
De Silva v Athukorala 1993 1 Sri LR 283, 296-297.
Jayawardane v Wijayatilleke 2001 1 Sri LR 132, 149, 159.
Bulankulama v Secretary, Ministry of Industrial Development 2000 3 SriLR 243
Bandara v Premawardane 1994 1 Sri LR 301.
Egodawala v Dissanayake SCM 3.4.2001.
Sriyani v Iddemalgoda SCM 10.12.2002 SCM 8.8.2003.
Framji v Secretary of State 17 BOM LR 100 (PC).
People United for Better Living in Calcutta v West Bengal AIR 1933 Cal215.
Citizens Welfare Forum v Union of India 1995-5-SCL 647.
A.P. Pollution Control Board v Nayudu 1992 2 SCC 718.
Senerath v Kumaratunga 2007 SC FR 503/2005.
Karunatileke v Dissanayake 1999 1 Sri LR 157.
Premachandra v Major Montague Jayawickreme 1994 2 Sri LR 90.
ICECA v Union of India AIR 1997 SC 3519.
Hameed vs Ranasinghe – 1983 -1 Sri LR 104, 118. cur. adv. vult
FaizvsAG – 1990 1 Sri LR 372
J.C. Weliamuna with Maduranga Ratnayake for the petitioners.
M.U.M.AIi Sabry for the intervenient petitioner.
Manohara de Silva, P.C. with Dilhan Jayasooriya for the intervenientpetitioner.
Faiz Musthapha, P.C. with Ms. Faisza Markartor the 1st to 8th intervenientpetitioners.
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC( Waters Edge Case)(Shiranee Tilakawardane.J.)343
Nihal Jayawardane for the 3rd and 3A respondents.
Romesh de Silva, PC. with Harsha Amarasekera for the 6th respondent.
N. Pulle, S.S.C. with Rajiv Goonetilleke, S.C. for the 8th respondent and A.G.Uditha Egaiahewa with Ranga Dayananda for the 19th respondent.
Kuvera de Zoysa with Senaka de Saram for the 20th respondent.
October 8, 2008
SHIRANEE TILAKAWARDANE, J.This Court granted the petitioners leave to proceed on 12thNovember 2007 on an alleged infringement of Article 12(1) of theConstitution of the Democratic Socialist Republic of Sri Lanka.
The petitioners presented their case on the basis of aninfringement pertaining to the acquisition of land on the premisethat land would be utilized to serve a public purpose whereas, bythis impugned executive or administrative action the land wasknowingly, deliberately and manipulatively sold to a privateentrepreneur to serve as an exclusive and private golf resort in SriLanka, one carrying a membership fee of Rs.250,000/-. LearnedCounsel submitted that this was done through a process that was"conniving and contrary" to the equal protection of the lawguaranteed by Article 12(1) of the Constitution which assures tothe People the Rule of Law. Counsel also submitted that the factsin this case reflected a flagrant betrayal of the purported policy ofthe 1994 government under the 1st respondent to establishtransparent governance and eliminate corruption, and that thefacts disclose that this transaction "reeked of corruption".
Counsel submitted that the most disturbing factor of all wasthat those alleged to have initiated, facilitated and/or conspired toachieve this outcome were those from the highest echelons of theexecutive and included senior officials, members of the publicsector and statutory bodies of the government, the formerPresident (the 1st respondent), multiple government agencies,the 4th respondent Company, and as Counsel submitted inparticular, the 5th respondent Mr. Ronnie Peiris, who chose not totake part in the proceedings despite notices being served onhim,and who through tax declarations, was revealed to have
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obtained a sum of approximately Rs. 60 million in profit from thetransaction despite having no disclosed association with it.Counsel additionally submitted that there had been a series ofdeliberate acts of gross abuse of executive power by the 1strespondent.
Counsel submitted that given the executive or administrativepower wielded by those involved, the nature of the allegationsmade, and the seriousness of the implications of such allegationsupon the national interest and national economy and, importantly,the citizenry of this country, the ramifications of this case, thoughexceedingly complex, should be carefully and incisivelyscrutinized by this Court. He further submitted that this Court wasthe "last bastion of hope" to the People in whom sovereignty isreposed who are the most affected by the patent abuse ofexecutive or administrative power especially by the 1st, 3A, and7th respondents in this case.
The facts indeed are complex, as one would expect from thevoluminous pleadings presented to Court. Despite its scale andmagnitude, a detailed study of the facts of the case has beendone and it is appropriate to begin at the inception with ananalysis which chronologically unravels the basic, relevant andimportant sequence of events of the impugned transaction.
According to the petitioner, on or about 1984 Hon. GaminiDissanayake, then Minister of Lands, decided to acquire alarge tract of land situated in Kalapaluwawa, Rajagiriya,under the provisions of the Land Acquisition Act No. 9 of1950 as amended by No. 39 of 1954, No. 22 of 1955, No.28 of 1964, No. 20 of 1969, No. 48 of 1971, No. 8 of 1979and No. 12 of 1983 (referred to hereinafter as the "LandAcquisition Act"), for the public purpose of urbandevelopment and "ostensibly for increasing theParliamentary Administrative Complex and for providingwater retention as a low lying area". This fact has not beensubstantively contested by any of the respondents.
In terms of Section 5 of the said Land Acquisition Act, asamended, a declaration was issued through the publication
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SC( Waters Edge Case)(Shiranee Tilakawardane,J.)345
of a Gazette notification dated 14th October 1988 (DocumentP1 (b) of the petitioner’s amended petition) to notice theowners of the land being acquired,some of whom haveintervened in this case as intervenient petitioners(hereinafter referred to as the "Intervenient petitioners").Section 5 of the Land Acquisition Act mandates that theMinister, before acquiring land, "shall" make a writtendeclaration that such land is needed for a "public purposeand will be acquired under the Act." In terms of this section,he accordingly named S. Sakalasuriya,- the DivisionalSecretary/Additional Government Agent, as the acquiringofficer. This officer made payment of compensation in asum of Rs. 312 per perch, and a Certificate of Vesting wasissued, vesting the land with the 3A respondent, the "UrbanDevelopment Authority" (referred to hereinafter as the"UDA"). It is to be noted that (i) Document P1(b)categorically declared that the land had been acquired for apublic purpose and (ii) the second annexure to theCertificate of Vesting granting the land to the UDA from theDivisional Secretary/Additional Government Agent(Document Pl(a) of the petitioner's amended petition)expressly declared that "the land should not be utilized forany other purpose than that for which it was originallyacquired. * (Vide Schedule 2)
• In spite of the supposed urgency for acquiring the land, noaction regarding the said land occurred for approximately 9years subsequent to the vesting of the land with the UDA.On 14th May 1997 the 7th respondent, the Board ofinvestment (referred to hereinafter as the "BOI") approvedby letter dated 5th June 1997 (Document F of the affidavitdated 13th June 2008) a BOI proposal dated 7th April 1997(Document B through B4 of the aforementioned affidavit),submitted by one Shantha Wijesinghe in is capacity asManaging Director of Asia Pacific Golf Course Ltd. ‘referredto hereinafter as "Asia Pacific") to establish an 18-hole GolfCourse on 150 acres of the aforesaid land. There areseveral matters of significance that must be noted at thispoint. This land was recommended to Asia Pacific by the
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UDA in response to Asia Pacific's original inquiry letter. Inaddition to the aforementioned golf course and despite apledge to "harmonize" the said golf course with the floodretention purposes of the land, Asia Pacific also proposedthe construction of a park, football pitch, cricket pitch, anda hawker centre, which was to be made available to thepublic, (vide B referred to above) ostensibly to satisfy insome minimal way the original purpose for which such landwas acquired. It is to be noted that the purpose for which itwas acquired being solely to serve a public purpose, was toserve the needs of the general public as distinct from theelitist requirements of the relatively small segment ofsociety in Sri Lanka. It is significant to note that under thelaw this public purpose was attached to the land at the pointit was acquired from the original owners. The enactment oflaws to allow for such land acquisition was only donebecause of a legislative belief that private ownership in SriLanka is subject to the paramount, essential and greaterneed to serve the general public, a significant segment ofwho lack even basic living amenities like runningwater,electricity, and housing.
• Through a Cabinet Memorandum entitled "Release of Landon Concessionary terms – Asia Pacific Golf Courses Ltd."and dated 9th February 1998 (Document P3 of thepetitioner's Amended petition and hereinafter referred to as"Cabinet Memorandum P3") the 1st respondent in hercapacity as the Minister of Finance and Planning,submitted a strong recommendation of the project, and ofits participants, or "promoters". In the CabinetMemorandum P3, the 1st respondent enumerated thenames of the promoters involved and acknowledged,underscored and advocated in favour of the promoters'request for special concessions accompanying the transferof the land, suggesting approval of the project with suchsignificant concessions solely (i) because of the proposedsize of the project and (ii) in light of the "benefit of havingan additional golf course in Colombo". Given the means bywhich the land was acquired, this benefit, whatever it may
Sugathapa/a Mendis and Another v Chandrika Kumaratunga and Others
SC( Waters Edge Case)(Shiranee Tilakawardane, J.)347
be, should necessarily have accorded with the publicpurpose of the land, but no such objective was everenumerated or alluded to, either succinctly orcomprehensively. Despite the obvious and clearlydeliberate omission to spell out the real and tangiblebenefits to the public so that the Cabinet could make aninformed decision, Cabinet approval was granted on 4thMarch 1998 in total accordance with the terms of theCabinet Memorandum P3, without query, clarificationand/or amendment.
After approval of the Cabinet Memorandum P3, a letterdated 27th April 1998 (Document U17 of the UDA's writtensubmission) from the Director-General of the BOIrequested the UDA to prepare and enter into a leaseagreement with Asia Pacific in conformity with the terms ofthe Cabinet Memorandum P3. The UDA, created by theUrban Development Act, and required to be anindependent, autonomous and accountable body, appearsto have hastily entered into a lease without any query orscrutiny as to whether it served, or accorded with, thepublic purpose for which the land was originally acquired.
On or about the 19th of February 2000, a CabinetMemorandum entitled "Development of Public Playgroundat Battaramulla in Kaduwela Pradeshiya Sabha Area"(Document U20 of the UDA's written submission), wassubmitted by Hon. Indika Gunawardhana, then Minister ofUrban Development, Construction & Public Utilities, toallocate another 7.8 hectares (approximately 19 acres) ofthe said land to the Kaduwela Pradeshiya Sabhawa for theostensible purpose of developing a public playground.Cabinet approval was granted on 23rd March 2000(Document U22 of the UDA's written submission). The landwas filled by the expenditure of public funds by the saidPradeshiya Sabhawa.
*
By letter dated 26th April 2000 (Document U23 of theUDA’s written submission), the BOI requested the Ministerof Urban Development to consider the feasibility of arequest by Asia Pacific to obtain, in order to "enhance the
348Sri Lanka Law Reports[2008] 2 Sri L.R
appearance of the entrance to their golf-course", the 7.8hectares of Acquired Land allocated a month earlier to theKaduwela Pradeshiya Sabhawa for the explicit publicpurpose of constructing a public playground.
Shortly thereafter, an internal Board Paper (Document U24of the UDA's written submission) prepared by K.L.W.Perera, Assistant Director; checked by R.M. Ariyadasa,Deputy Director; and approved, in addition to theabovementioned persons, by P.N. Fernando, ActingDirector (Western Province), Hester Basnayake, Director(Environment and Landscape); E.M.R.U.B. Dorakumbura,Director (Lands), C.S. Nagage, Deputy Director-General(F); D.P. Amarasinghe, Deputy Director-General (O); S.H.Fernandez, Director-General;, and Professor T.K.N.P. deSilva, Chairman on 3rd May 2000 allowed for a 'licenseIndenture' to Asia Pacific, free of charge, of 41 acres of low-lying land in addition to the 140 acres already leased to
Asia Pacific. On 30th May 2000, the Board of Managementof the UDA issued its approval (Document U25 of theUDA’s written submission).
® On 4th September 2000, Indenture of Lease No. 758/760(Document U26 of the UDA’s written submission andhereinafter referred to as the "Lease") was entered intobetween the UDA and Asia Pacific, providing Asia Pacificwith approximately 140 acres of the Acquired Land to AsiaPacific for a term of 99 years at a per annum rental amountderived using the Chief Valuer’s Rs. 300 Million valuation(hereinafter referred to as the "CV's Valuation") and using aconcession advocated by the 1st respondent in the CabinetMemorandum P3 and approved by the Cabinet.Concurrently executed with the Lease was Indenture No.759/767 (Document U27 of the UDA's written submissionand hereinafter referred to as the "First License") licensingto Asia Pacific, free of charge, 41 acres of low-lying landcontiguous to the leased land purportedly for maintenanceas a flood retention area.
An undated UDA Board Paper (Document U28 of the UDA'swritten submission) prepared by Hester Basnayake,
Sugathapa/a Mendis and Another v Chandrika Kumaratunga and Others
SC( Waters Edge Case)(Shiranee Tilakawardane,J.)349
Director (Environment and Landscape); checked by P.N.Fernando, Director (Western Province); and approved, inaddition to the aforementioned persons, by W.A.Siriwardena, Director-General; Ananda Gunasekera, ActingChairman, and E.M.R.U.B. Dorakumbura, Director (Lands);sought to effect the following changes to the transaction:
To licence to Asia Pacific, free of charge, a further 44acres of low-lying land situated in front of the leasedland, also for maintenance as a flood retention area, andfor a duration of 99 years.
To amend the First Licence for 41 acres to survive for 99years and narrow the rights of the UDA under it to revokethe license only upon Asia Pacific's failure to comply withthe terms of the license.
To reallocate to Asia Pacific, free of charge, the 7.8
hectares of land allocated to the Kaduwela PradeshiyaSabhawa for construction of a public playground and fwhich a large amount of public funds had beenexpended to fill up the land.
To allow Asia Pacific to build 100 luxury holiday villas onstilts in the marsh areas of the leased land previouslydesignated as unavailable for development, and
To remove the restrictions prohibiting sale of theAcquired Land to 3rd parties and permit Asia Pacific tosell the aforementioned holiday villas on a freeholdbasis.
® By a Cabinet Memorandum dated 18th January 2001(Document U30 of the UDA’s written submission), Hon.Mangala Samaraweera, the subsequent Minister of UrbanDevelopment, sought approval of the Cabinet for theabove-mentioned actions. Cabinet approval was grantedon 31st January 2001 (Document U31 of the UDA’s writtensubmission) in flagrant disregard of the public purposespecifically contained as a condition attached to this landand clearly documented in the file.
350^ Lanka LaW ReP°nS12008) 2 Sri
The BOI and Asia Pacific formally entered into anagreement through execution of Agreement No. 3146 on21st June 2001 (Document BB of the BOI's affidavit).
A Deed of Rectification No. 821 was executed on 9thAugust 2001 (Document U35 of the UDA's writtensubmission) to amend the Lease to reflect the changesimposed by cabinet approval of the abovementionedmemorandum. Licence Agreement No. 822 (Document U36of the UDA's written submission and hereinafter referred toas the "Second Licence") was entered into between theUDA and Asia Pacific on 9th August, 2001 to effectuate theapproved release of the further 44 acres of low-lying areareferred to above.
The UDA invited the Cabinet, as per the amended terms ofthe lease, to determine the sale price of the land to be soldto Asia Pacific (i) by market valuation or (ii) as a pro-ratashare of the CV's Valuation. The Cabinet once againdisregard of the public purpose, unquestioningly anddamagingly issued its approval on 18th September 2001(Document U37 of the UDA's written submission) to use thelatter.
Shortly thereafter, the 6th respondent, through AccessHoldings (Private) Ltd. (hereinafter referred to as "AccessHoldings"), a company of which he is majority shareholderand Chairman, became a beneficial owner of 50% of AsiaPacific through Access Holdings' purchase of 1,500,000shares of the company's stock at a per share price of Rs.10. Pursuant to the Shareholder Agreement dated 22ndJanuary 2002 that effected such purchase (Document U39of the UDA's written submission), the remaining 50% ofAsia Pacific’s outstanding shares continued to be owned byMr. Siva Selvaratnam, Mrs. Suwaneetha Selvaratnam,Mr. Shantha Wijesinghe, Mrs. Susan Jane Wijesinghe,Ms. Thuhashini Selvaratnam and Swami PandikoralageMahanama Perera (hereinafter referred to as the "OriginalShareholders").
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SC( Waters Edge Case)(Shiranee Tilakawardane, J.)351
On 19th June 2002 the Hon. Ravi Karunanayake, thenMinister of Trade & Commerce, submitted a CabinetMemorandum (not directly provided, but referred to inDocument U40 of the UDA's written submission) seeking tocancel the allocation of lands to Asia Pacific. Seven dayslater, the memorandum was withdrawn without reason.
Altering the original UDA Board approval on 4th March1998 which allowed for the sale of constructed villas andapartments by the UDA to willing buyers,, a Board Paper(Document U41 of the UDA's written submission) wasprepared by A.R.P.O.A. Rajapakse, Deputy Director;checked by E.M.R.U.B. Dorakumbura; and approved, inaddition to the aforementioned persons, by S.Karunanayake, Director (Legal Services); K.V. Dharmasiri,D.D.G. (P.&O); D.E.L.G. Perera, D.D.G. (Finance), andJ.M.L. Jayasekera, Director-General on 8th January 2003which allowed for the sale of land directly to Asia Pacificand to do so though no villas had yet been built (DocumentU42 of the UDA's written submission). The Minister ofUrban Development under Section 18(1) of the UDA LawNo. 41 of 1978 issued its approval on 28th November 2002(Document U43 of the UDA's written submission). Even acursory perusal of the basic documents would haveimmediately revealed the fact that this was not permitted bylaw and that the land was specifically acquired for publicpurpose and not for re-sale to private entities. The UDA wasnever intended by law to be a land sales agent orempowered by law to acquiesce indirectly or actively in landsales.
The UDA and Asia Pacific entered into Agreement to SellNo. 473 on 3rd March 2003 (Document U44 of the UDA'swritten submission), which effected the transfer of theaforementioned land for approximately Rs. 60 million.
On 17th June 2003, the Original Shareholders and AccessHoldings executed an Agreement (Document 6R3 of the 6threspondent's objections) whereby (i) they terminated theabovementioned Shareholder Agreement and (ii) the
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Original Shareholders sold all of their shares of Asia Pacificto Access Holdings resulting in Access Holdings 100%ownership of Asia Pacific.
• The Sri Lanka Land Reclamation and DevelopmentCorporation (hereinafter referred to as SLLR & DC) issuedits approval on 24th December 2003 (Document U45 of theUDA's written submission) of the revised master plan whichnow contemplated the construction of villas and the use ofmarsh previously designed as not to be developed andspecifically kept for flood retention and demarcated aswetlands.
On the aforesaid, it is incumbent upon this court to analyze thefacts in the context of the "administrative and executive actions"taken, to determine whether there has been an infringement ofthe petitioners' fundamental rights.
The principle that those charged with upholding theConstitution – be it a police officer of the lowest rank or thePresident – are to do so in a way that does not "violate theDoctrine of Public Trust" by state action/inaction is a basic tenetof the Constitution which upholds the legitimacy of Governmentand the Sovereignty of the People. The "Public Trust Doctrine" isbased on the concept that the powers held by organs ofgovernment are, in fact, powers that originate with the People,and are entrusted to the Legislature, the Executive and theJudiciary only as a means of exercising governance and with thesole objective that such powers will be exercised in good faith forthe benefit of the People of Sri Lanka. Public power is not forpersonal gain or favour, but always to be used to optimize thebenefit of the People. To do otherwise would be to betray the trustreposed by the People within whom, in terms of the Constitution,the Sovereignty reposes. Power exercised contrary to the PublicTrust Doctrine would be an abuse of such power and incontravention of the Rule of Law. This Court has long recognizedand applied the Public Trust Doctrine, establishing that theexercise of such powers is subject to judicial review (Vide DeSilva v Atukorale^)', Jayawardene v Wijayatilake(2). The PublicTrust Doctrine application is only enhanced by the DirectivePrinciples of State Policy. In Bulankulama v Secretary, Ministry of
Sugathapala Mendis and Another v Chandrika Kumaratunga and
SC Others( Waters Edge Case)(Shiranee Titakawardane.J.) 353
Industrial Developmentw. It was stated with respect to theenvironment, and held that,
The Constitution today recognizes duties both on the part ofParliament and the President and the Cabinet of Ministers…."Article 27(14) states that "The State shall protect, preserveand improve the environment for the benefit of thecommunity.” Article 28(f) states that the exercise andenjoyment of rights and freedoms (such as the 5th and 7threspondents claimed in learned Counsel's submissions ontheir behalf to protection under Article 12 of the Constitutionrelating to equal protection of the law) "is inseparable fromthe performance of duties and obligations, and accordingly itis the duty of every person in Sri Lanka to protect natureand conserve its riches."
The Public Trust Doctrine, taken together with theConstitutional Directives of Article 27, reveal that all state actorsare so principally obliged to act in furtherance of the trust of thePeople that they must follow this duty even when a furtherance ofthis trust necessarily renders inadequate an act or omission thatwould otherwise legally suffice. In other words, it is not enough toargue that procedure has been followed, when proceduralcompliance results in a violation of the public trust. That actionwas either taken or not taken due to contravening ordersfrom a superior or because reliance upon another entity's orindividual's discretion was deemed sufficient, it simply not adefense afforded to state institutions or state actors. In DeSilva v Atukorale (supra) the Court, quoting Wade (AdministrativeLaw, 5th ed., pp. 353-354) observed that,
…. the powers of public authorities are therefore essentiallydifferent from those of private persons. A man making his willmay, subject to any rights of his dependents, dispose of hisproperty just as he may wish. He may act out of malice or aspirit of revenge, but in law this does not affect his exerciseof his power. In the same way a private person has anabsolute power to release a debtor, or, where the lawpermits, to evict a tenant, regardless of his motives. This isunfettered discretion. But a public authority may do neitherunless it acts reasonably and in good faith and upon the
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lawful and relevant grounds of public interest. Unfettereddiscretion is wholly inappropriate to a public authority, whichpossesses powers solely in order that it may use them for thepublic good.
The oral arguments and written submissions presented on behalfof the principal respondents in this case engage in precisely thisabdication of responsibility, that have come to be seen as ahallmark of Sri Lanka's governmental bureaucracy. FollowingBandara v PremachandraW in which the Court held that theState must, in the public interest, expect high standards ofefficiency and service from public officers in their dealings withthe administration and the public. In the exercise of constitutionaland statutory powers and jurisdictions, the Judiciary mustendeavour to ensure that this expectation is realized Werecognize that this duty has to be upheld not only in the name ofgood governance but also for sustainable economic developmentof the nation and all of its People, especially the economicallychallenged, the disadvantaged and the marginalised. In time thiswill empower the marginalised and disempowered members ofour society, and will in due course establish a true DemocraticSocialist Republic with equality for all.
Before an analysis of the substantive details can be dealt with,it is necessary to deal with a procedural defense asserted by atleast one respondent. It has been argued that petitioner'sallegations cannot be entertained because (i) they relate to aviolation that has occurred several years prior, and (ii) thepetitioner's Amended Petition is "invalid in law", as the petitionerslack standing or locus standi. In respect of the first point, thisCourt laid down in Bulankulama (supra) that "the respondentssubmitted that the application must be rejected, since it has beenmade out of time. However, no indication was given by therespondents of the date from which the period of one monthspecified in Article 126(2) of the Constitution is to be reckoned."The nature of large scale developments is that they occur overtime. In the instant case, though communication with the UDAcommenced in 1997, completion of the project was delayed,extensions granted and particulars changed – such changes are,in fact, central to the case – such that the project, at the time this
Ranaweera and Others v
SC Sub-Inspector Vinisas and Others (Gamini Amaratunga, J.)355
claim was brought forward, remained unfinished. For this Court toignore the continuing nature of a large-scale development projectwould be to ignore the continuing nature of any violations thatstem out of such a project. We are unwilling to accept therespondents argument that the public hearing afforded by theinitial EIA investigation provided for adequate time to launchobjections to the project for the simple fact that the project has notbeen a venture of static specifications – the nature of the projectas one including the same of luxury condominiums and a takeover of the company (with its sole asset being a lease and licenseof the acquired land) for approximately Rs. 150 million, did notmanifest itself until long after the expiration of such window ofopportunity for the public to object. Accordingly, we are of theopinion that the petitioners are, in the circumstances of this case,in compliance with the time requirement required by Article 126(2)of the Constitution.
With respect to the submission of standing, or locus standi, weconcur with the opinion of the learned Judge in Bulankulama(supra), namely that petitioner in such public interest litigationhave a constitutional right, given by Article 17, read with Articles12 and 126, to bring forward their claims. Petitioners to suchlitigation cannot be disqualified on the basis that their rightshappen to be ones that extend to the collective citizenry of SriLanka. The very notion that the organs of government areexpected to act in accordance with the best interests of thePeople of Sri Lanka, necessitates a determination that any one ofthe People of Sri Lanka may seek redress in instances where aviolation is believed to have occurred. To hold otherwise woulddeprive the citizenry from seeking accountability of the institutionsto which it has conferred great power and to allow injustice to beleft unchecked solely because of technical shortcomings. Thisposition is consistent with several instances where this Court hasheld standing to be adequate. (vide Egodawela v Dissanayake^;Sriyani v Iddamalgoda<6>. In light of the above, we hold that thepetitioners have locus standi.
Our substantive analysis begins with the UDA, the governmententity without whose approval the later questionable actions ofthe other respondents at issue, and the transaction itself, would
356Sn Lanka Law Reports/goggy g LR
not have come to pass. As evidenced by the preamble of UrbanDevelopment Authority Law No. 41 of 1978 (hereinafter referredto as the "UDA LAW"), the UDA was formed for the primarypurpose of promoting "integrated planning and implementation ofeconomic, social and physical development of certain areas"determined to be areas requiring urban development. Chargedwith this directive, the UDA's independent and autonomousdiscretion over the conveyance of state land in an extremelyimportant power, one so important that the UDA must err on theside of caution and exercise only the utmost care in making itsdecision where there may be questions as to the feasibility of aproposed project and/or the safety of the citizenry andenvironment posed by the same. In the context of land taken fromprivate owners, this already high threshold of their duty of care isfurther heightened as the land potentially conveyed is land which,when seen under the lens of the Public Trust principles, can besaid to have been taken from the very People who conferred suchpower upon the UDA. Despite the importance of attending tothese grave responsibilities, the evidence submitted reveals thatthe UDA dismally failed and neglected to discharge them, evenmarginally.
The first of many dubious actions on the part of the UDA wastheir "keenness" to allocate the Battaramulla land to Asia Pacificdespite having nothing more than a letter and a conversation togo on. A letter issued by the UDA dated 5th March1997(Document U2 of the UDA's written submission) suggeststhat Asia Pacific had approached the UDA by letter and engagedin conversation with the Chairman of the UDA. A result of thiscommunication led to the aforementioned letter which curiouslystates what, in essence, seems to be a determination by the UDAthat land in Battaramulla was suitable for a project they, withoutguidance and approval from environmental (CEA) or economic(BOI) agencies, could not have known anything about, apart fromthe information provided by Asia Pacific. This Court finds theUDA’s "overeager" behaviour unusual and, in retrospect, aforeshadowing of the UDA’s later decisions to ignore significantquestions as to the suitability of the land for such a project.
Ranaweera and Others v
SC Sub-Inspector Vinisas and Others (Gamini Amaratunga, J.)357
In defense of the propriety of their action and the sutability of thegolf course project proposed by Asia Pacific, the UDA has placedevidence that, shortly before Asia Pacific first contacted themabout the idea of their golf course project, several golf courseprojects had been received and considered. The UDA, however,claimed that it is somehow "unclear" for what reasons thoseseveral proposals failed to come to pass – a strangepropositionconsidering the predilection for detail they haveotherwise shown in compiling their written submission. While wecan only speculate as to the reason such projects did notultimately succeed, it is clear from the evidence submitted by theUDA, however, (i) that such projects were, at the very least, notoptimally suitable for the purposes of flood retention that wasrequired of the land and (ii) that the UDA was fully aware of thesignificant alterations that would be necessary to harmonize theexistence of a golf course with the flood retention purposes – apublic purpose – for which the Acquired Land was obtained in thefirst place.
The facts show that Kabool Engineering & ConstructionCompany had a few months prior to Asia Pacific's proposal,forwarded an application to the BOI to develop a Golf Course ona 136 acre block of low-lying land in Battaramulla – a propositionessentially identical in location and scope to that initially proposedin the instant case. Accepted "in principle" by the BOI accordingto a letter dated with a partially illegible date (25th September199_), the BOI thereupon requested the UDA (Document U61 ofthe UDA's written submission) to consider – though the UDAadmits in their written submission at page 12 that "the idea to setup Golf Courses in low-lying areas does not seem to have beenconceived by them – whether such land could be developed inconformity with the UDA's Master Plan for the area. The UDA, inturn, requested the expertise of the SLLR & DC, as it shouldhave, considering its lack of expertise with respect to determiningthe impact of the creation of a golf course on the flood retentioncapacity afforded by an untouched wetland. The SLLR & DCresponse letter dated 16th October 1996 (Document U61A of theUDA's written submission) advanced a list of several conditions towhich any development on an approximate 50 to 75 acres of landwould have to be subject to in order to avoid "any net change in
Sri Lanka Law Reports
358(2008) 2 Sri L.R
the volume of flood water which can be retained in the area."Notably, the remaining land requested for development wascategorically deemed by the SLLR & DC to be unavailable fordevelopment as it was "acquired by the government and reservedfor flood retention purposes under the Greater Colombo FloodControl & Environment Improvement project and therefore cannotbe allowed for filling."
Learned Counsel for the UDA has suggested both during oralarguments and in his written submission, that the legitimacy of theUDA's decision to alienate the land to Asia Pacific issubstantiated by the existence of these approvals. Indeed, theSLLR & DC's response to the Asia Pacific proposal was a positiveone, formally approving the proposal subject to the establishmentof extensive drainage systems, and the EIA assessment preparedby the National Building Research Organization (hereinafterreferred to as the "NBRO") was ultimately approved by the CEAon 21st February 2000. However, while the UDA may well have"gone by the book", so to speak, with respect to the contemplationof approvals obtained in such a transaction, the mere fact that thevarious environmental authorities said the project could be done,does not in itself suggest that it should have been done. On thecontrary, such external approvals are to be seen merely asconditions precedent to the commencement of UDA analysis ofthe viability of any given project, and not as the basis for theirdecision. In the instant case, the approvals granted to the projectall shared a common theme – all provided approval for the projectsubject to significant alterations and changes in the fundamentalnature of the land in order to allow for adequate flood retention ofthe land to continue. Given the weight and extent of theseconditions, the UDA, as an autonomous body having solediscretion over conveyance of the land, was under a duty to weighwith the utmost care the perceived benefits of such adevelopment project against the significant and potentiallydamaging changes – the Environmental Impact AssessmentReport warned of irreversible ecosystem changes and habitatfragmentation – that would have to be made to the Acquired Land,land already fit and functioning for the water retention purpose forwhich it was originally acquired. The UDA's implication that theseapprovals constitute proof of the UDA's competency in this
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC(Waters Edge case.)(Shiranee Tilakawardane, J.)359
transaction is tantamount to suggesting that the decisions to bemade with respect to whether land should be developed are to bemade by entities other than the UDA, a repugnant abdication oftheir responsibility as an authority created specifically to handlethe multi-faceted nature of land alienation and development. Putsimply, if such approvals were all that were necessary, the UDAwould not need to exist.Nevertheless, the UDA also alleges that itdid engage in such an analysis, and it was only after aconsideration of the potential benefits such a project would bring,that approval of the project was granted. The benefits consideredby the UDA in its analysis, as gathered from their writtensubmission and oral presentation, can be summarized to thefollowing: (i) an increase in land value to surrounding landowners,(ii) a “beautification" of the area, (iii) the creation of a few hundredjobs, (iv) the prevention of unauthorised occupation and filling ofthe Acquired Land, (v) the creation of a public playground, cricketpitch, and hawking stand, and (vi) the ability to have the abovebenefits obtained at the expense of a developer, rather than at thehands of the State.
Apart from the creation of a handful of low-level jobs, what isnotably lacking from this list, and from any of the statementssubmitted in evidence by the UDA in this regard, however, is anysignificant benefit of a sufficiently direct nature to thecommunity of People of the Battaramulla area. Indeed leavingthe land alone would have retained it as a wetland which wouldhave prevented the flooding of this area. The "public purpose"requirement imposed as a condition on the land by means of itsacquisition under the Land Acquisition Act is one thatcontemplates a benefit of a sufficiently direct nature. Ourinterpretation of this requirement is guided by (i) the history oflarge-scale land alienations by the UDA – indeed a list of the 5other land alienation projects for which the BOI has grantedequivalent special concessions consists of 3 hospitals (Asiri,Apollo, Ninewells) and 2 housing developments (NivasiConsortium, Millennium City), and (ii) the accepted rules of legalconstruction in Sri Lanka jurisprudence. If the intent of thedrafters was to define the scope of "people purpose" in the LandAcquisition Act to include any benefit to the public whatsoever, nomatter how marginal, indirect or tenuous, then they would simply
360Sri Lanka Law Rep0rtS[2008/ 2 Sri L.R
not have articulated such a restriction in the first place. After all,even the most profit-minded of projects – the creation of anexclusive golf resort, for example – can be said to confer somemeasure of public benefit, it simply for the fact that, by virtue ofbeing a business, it spurs economic activity or increasessurrounding land value. We find it highly unlikely that the draftersintended this express restriction to be negated by such a broadinterpretation. From the definition in Framjiv Secretary of Stated),it is clear that this "public purpose" requirement has for its primaryobject, the general interest of the community. Though in achievingthe public purpose the individual or individuals may be benefited,the benefit to such individual or individuals must only be indirect.The object to be aimed at must be the general interest of thecommunity. When the Court is satisfied that the view taken bygovernment is contrary to the sanctity of the above declaration orotherwise arrived at on an entirely unreasonable, subjective (asdistinct to objective), arbitrary or capricious basis, the Courts hassufficient jurisdiction to interfere and conclude that the purposefor which the land was acquired was not a public purpose. It is tobe emphatically noted that public purpose connotes as theprimary object, public utility and benefit of the community as awhole. Accordingly, we are of the opinion that the tenuousbenefits advanced by the UDA, even taken together, fail to meeteven the threshold meaning intended by law of public benefitposed by the aforementioned "public purpose" restriction.
The alleged "beautification" of an area is simply too abstractand indirect a benefit to suffice as a reason to approve a projectto alienate the land at issue, in light of the potential detriment thatsuch beautification can bring as well as the high public purposethreshold posed by the nature of this land as one being acquiredfrom the citizenry, whose need for affordable housing is far moreurgent and paramount than the cosmetic improvement of land.Ironically the increase in market value of the land and itssurrounding area from a beautification of the land has made itmore it more difficult for the lower-income segment of the Peopleto obtain affordable housing. It is emphatically reiterated thatpublic purpose connotes as its primary object, public utility andbenefit of the community as a whole.
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC(Waters Edge case.)(Shiranee THakawardane.J.)361
Apart from having to assume that beautification is somethingobjectively achieved – we, for example, do not consideruntouched wetlands to be "ugly" – the grooming of land andneighbouring flora carries with in the risk of detriment to thefragile ecosystem hidden underneath. In the Indian case ofPeople United for Better Living in Calcutta v State of WestBengali), Umesh Chandra Banerjee, J. drawing from bothscientific research done in Australia and the United States ofAmerica, comprehensively ad succinctly explains the nature ofwetlands as follows:
…Wetlands, often called bogs, swamps, marshes, billabongsand a host of other names, are areas of wetland. The amount ofwater in them varies depending on the weather and the time ofyear. Sometimes they can be quite dry. Special, plants such asreeds grow in wetland areas. Wetlands also provide a home for ahost of different wildlife ranging from migratory and local birds tofish, reptiles, amphibians and insects. All these living thingsdepend on wetlands for their existence ….
…. Each wetland functions as an ecosystem that is a systemwhere all the parts (land, plants, animals, water and solar energy)depend on each other. If one part of the system, the amount ofsunlight for instance, is changed, all the other parts will beaffected too. Often change to one element of an ecosystemresults in the destruction of the whole.
Not only are the wetlands fragile ecosystems in themselves,but they form a vital parts of the world's ecosystem as well.
Wetlands rely on an established water drainage pattern. Anypopulation nearby with its paved streets, gardens, storm waterwaste etc. inevitably alters water drainage patterns and affectsthe wetland.
We need to take steps to prevent destruction of our wetlands
* t • «
As to the functional importance of wetlands, the Indian Judgefurther explains:
…. Even though many People never notice wetlands, they playa very important part in our lives.
362Sri Lanka Law Reportsfgpoaj 2 Sri L.R
Wetlands provide a haven for a vast number of livingcreatures, which rely on them for food, shelter and as a breedingplace. While they may not live permanently in the area, a hugenumber of birds, animals, reptiles, fish, amphibians and insectsregularly visit and use wetlands. Disappearance of wetlandsthreatens their very existence.
Many kinds of fish hatch and grow to maturity in the safety ofthe wetland mangrove swamps. When they are adults they movein to the ocean. Most of the fish we eat depend on thesemangrove ‘nurseries' for hatching their young and for the survivalof the species.
Many species of plants survive only in the special environmentof the wetlands. Loss of wetlands threatens their survival.
Wetlands play an important role in the water cycle, cleaningand purifying water as it passes through them. They can alsohelp control flood water by stopping and releasing it slowlythrough the ground.
There is growing evidence that wetlands are a vital link in thefood chain, 'processing' food for some species, and also play apart in nitrogen fixing, a process which alters nitrogen to a formwhere it can be used by living creatures ….
Therefore there is no doubt the long-term effect would be thatthe natural purity and cleanliness of the water in all the wells ofthe surrounding lands would be affected.
According to the Environment impact Assessment Report(Document U19 of the UDA's written submission and hereinafterreferred to as the 'EIA Report") prepared by the National BuildingResearch Organization in December 1999, the land that wasultimately alienated to Asia Pacific for the Golf Course Projectwas home to nine threatened species of animal including, forexample, the fishing cat. Met with evidence that explicitly raisedissues regarding environmental safety of the project, the UDA, ifsincere in its desire to subject the decision-making process to theappropriate level of diligence, would have, at the very least,investigated the viability of the mitigating measures in more detailto determine if this animal and the other resident fauna and flora
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC(Waters Edge case.)(Shiranee Tilakawardane.J.)363
would be adequately preserved, It seems that, though ampledocumentation exists to establish that the SLLR & DC as well asthe UDA did to some small extent deliberate on matters of floodregulation, there had been Little concern to deliberate asintensely on such other equally vital yet far more complex matterssuch as the degradation of fauna and flora and the long-termeffects of such development upon the underlying ecosystem,'microclimate and the surrounding water table content. The 49page-long EIA report includes only 1 page devoted to monitoringmeasures, and only contemplates the monitoring of pesticidesand sewage treatment, hardly sufficient treatment for an area ofland home to endangered species. Analysing the balance ofinterests in the impact of development projects upon theenvironment, the Indian Supreme Court in Vellore Citizens'Welfare Forum v Union of Indian, stated that,
… where there is an identifiable risk of serious or irreversibleharm, it may be appropriate to place the burden of proof onthe person or entity proposing the activity that is potentiallyharmful to the environment. The burden of proof in suchcases is therefore placed firmly on the developer orindustrialist who wishes to alter the status quo …
But apart from the direct economic values and other benefitsof the environment, preservation and commitment to theenvironment is a goal that must be sought for its own sake, as theIndian Supreme Court in A.P. Pollution Control Board v Nayudut'°>has made clear:
… the environment must not only be protected in the interestof health, property and economy, but also for its own sake.Precautionary duties are triggered not only by concreteknowledge of danger but also by a justified concern or riskpotential.
Likewise, the UDA's contention that illegal occupation, fillingand other prohibited actions were being committed on the land isinsufficient and inappropriate to justify a measure as radical asdeveloping land that was otherwise appropriately functioning forthe purpose for which it was intended, especially considering thatsuch acts could simply have been stopped by recourse to a legal
364Sn Lanka LaW Rep0rtS[2008) 2 Sri L.R
procedure encapsulated within the UDA Law for speedy andexpeditious removal of such persons who are in unlawfuloccupation. Such an argument on the part of the UDA, along withthe absence of any evidence to show otherwise, clearly disclosethat the UDA had failed to engage with the appropriategovernment institutions to rectify these issues, or had beendeliberately unwilling to do so for reasons best known tothem.
The written submissions have all correctly pointed to other golfcourses like the Digana Golf Course Project as successfulexamples of the introduction of this type of project to Sri Lanka.What is at issue, however, is not simply whether the kind ofproject itself was a viable one but whether, given the natureof the lands as one (i) acquired using the Land AcquisitionAct, (ii) consisting of valuable marshland, and (iii) reservedfor a public purpose, the decision to implement such aproject on this particular land involved an analysis ofadequate depth to ensure arrival at a decision that would bein furtherance of the trust that the People have reposed in theGovernment. A golf course may have proven to be appropriatefor Digana and may well prove to be appropriate for another areain the future, but such a project, on balance of conveniences, onthe proven facts before this court, was not an appropriate projectand not in accordance with the Public Purpose for the AcquiredLand.
Even if we are to assume that the UDA's consideration of thealleged benefits provided by the Golf Course Project as initiallyproposed by Asia Pacific, was, in fact, a product of duedeliberation and sound judgment, we simply do not see how theUDA's decision (i) to use the unrevised CV's Valuation as basisfor rent under the lease, (ii) to convey land free of charge, (whenthere are hundreds of thousands including middle classgovernment servants who desperately need housing, who couldhave benefited by such a conveyance of land), (iii) to alter theproject to effectively allow for freehold alienation of undevelopedstate land and (iv) to do so with prices derived from theaforementioned Valuation, furthered the apparent benefits theUDA claims to have sought. Rather, such actions seem to only
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC(Waters Edge case.)(Shiranee Tilakawardane.J.)365
have benefited a few persons and have been a result of mereunquestioned obedience to the 1st respondent's CabinetMemorandum titled 'Proposals to Streamline Land AlienationProcedures and Provide Relief to Large Scale BOI ApprovedProjects" and dated 22nd September 1997 (Document G of theBOI's affidavit and hereinafter referred to as the "Special ProjectsMemorandum").
According to the explanation of the Chief Valuer (hereinafter,"CV") (Document U10 of the UDA's written submission), the CV'sValuation of Rs. 300 million was a value arrived at incontemplation of, inter alia, (i) the fact the land was to remain withAsia Pacific as a single unit and not be re-transferred in parcelsto others, (ii) the fact that a significant part of the land consistedof marsh that was not to be disturbed, and (iii) the fact that adevelopment restriction covered a significant part of this marsh,all such terms provided to the Chief Valuer by the UDA (videparagraph 4(xvii), Document EE of the BOI's Affidavit). It is to benoted at this point, that these terms provided by the UDA all seekto manipulate the valuation process by actively and deliberatelyreducing the land value for the specific and singular benefit of thepurchaser, when there were indeed compelling reasons toincrease the valuation. As is made clear in the case of PeopleMunicipalities in the United States have taken effort to ascribemonetary value to undeveloped wetlands as they contributeseveral functions including water purification – the destruction ofthe marsh land in this case would in the long-term affect thequality and purity of all the wells in all the surrounding andadjacent lands – and protection of wildlife, among other benefits,which this Court believes is no less direct in benefit than anyalleged beautification of such an area can be said to be: it hasbeen calculated in the United States of America that one acre ofwetland is worth tens of thousands of US dollars for the servicesit renders." It is apparent, given the above, that the UDA saw thisland as a place valuable only for its cosmetic and developmentpotential and not as a valuable natural resources providing bothenvironmental and long-term economic benefits in its unalteredstate. It is for this amongst many other reasons adverted toabove, that the UDA failed to adequately deliberate on the
366Sr/ Lanka Law Reports/g008; £Sn L.R
prudence of allowing the proposed golf project and engaged inthe illogical pricing procedure detailed below.
Despite the significant downward adjustment of the landvaluation by the terms provided by the Chief Valuer, the UDAnevertheless incorporated into the lease further rent concessionswhich had been advanced by the 1st respondent in the CabinetMemorandum P3, though such concessions were alreadytaken into consideration by the CV's Valuation which hadalready been adjusted by request of the UDA itself.Furthermore, in the later stage of the transaction when approvalhad been made to allow freehold alienation, the UDA Board, byMemorandum dated 29th June 2001 (Document U34 of theUDA's written submission), voluntarily offered the Cabinet theopportunity to use the CV's Valuation as the basis from which theland to be sold would be priced, despite that obvious value-adding changes in character of the land that the UDA itself hadauthorized. It is inexplicable why the UDA unquestioninglyconsented to the 1st respondent's suggestion with respect to thelease rental rate and invited such an inaccurate valuation of theland for sale purposes, given that one of the main reasons theUDA advances in defense of its approval of the transaction wasthe economic benefit to be obtained by having development occurat the hands of a private developer. Due to these UDA decisions,any benefit to have been had by the use of Asia Pacific wasnegated by the leasing and eventual conveyance of the land withan economic return so far below that which could have beenobtained had a market valuation been used. Even if this offeringof compounded concessions to Asia Pacific can somehow bejustified on the grounds that such concessions were necessary inlight of the "bleak outlook of investment" interest in a war-torn SriLanka – an argument advanced by the 1st respondent but fatallycontradicted by the UDA's own allegation of the availability ofmultiple golf course proposals for precisely this land – the UDA'sdecision to alter the originally approved plan and issue theSecond License, free of charge, is tantamount to providing a thirdround of concessions as well as rewarding Asia Pacific's profit-driven deviation from the originally approved plan. Through thisSecond License, like the First License, is advanced as a one-
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
sc(Waters Edge case.)(Shiranee Ti!akawardane,J.)357
sided bargain which places burden upon Asia Pacific to developand maintain a flood retention area, Asia Pacific's need for thisfurther 44 acres was due to a voluntary redesign of their golf planto develop a portion of the leased 140 acres initially agreed to beleft as undeveloped marsh.
The peculiarity of the transaction between the UDA and AsiaPacific is clear when the essence of it is summarized as follows:
Asia Pacific was conveyed land with concessions on the basisthat much of the land was to be set aside for flood retention,and the entirety of the land was restricted to a public purposeuse and inalienable to 3rd parties. Such concessions, however,were applied to a land valuation already discounted incontemplation of these same restrictions.
To increase profitability through the construction of luxuryvillas, Asia Pacific wanted to develop more of the land thanoriginally planned and approved. Such a development changerendered inadequate the flood retention capacity of theallocated land – the singular purpose for which the land wasoriginally taken from the citizenry.
Rather than reject such a drastic project change which servedto extend the physical layout and introduce an element ofexclusivity to the project, the UDA rewarded Asia Pacific’sdecision to alter its development project further away from thestated public purpose of flood retention by giving Asia Pacificeven more land, and did so free of charge on the ground thatAsia Pacific would have to incur heavy costs to achieve theflood retention levels the company, in fact, had itselfcompromised by altering the original plan, flood retention thatwould have naturally occurred had the land been leftuntouched altogether.
In addition to the UDA's cost free conveyance of more land, theUDA approved Asia Pacific's wish to sell the luxury villas, afterthey were to be constructed. However, the UDA ultimatelyentered into agreement with Asia Pacific to sell the landdespite the fact that no villas had yet been constructed, and didso at a price derived from the original CV Valuation, effectively
368Sri Lanka Law Reports/gooaJ g Sri L.R
underselling the land to Asia Pacific at an incredible and
unjustified discount.
Given the above, it is clearly apparent that the UDA's actionsin its dealings with Asia Pacific amount to a total abdication of theUDA's authority to the dictates of the 1st respondent and theprofit-minded activity of Asia Pacific, and accordingly, stands inviolation of the Doctrine of Public Trust and of Article 12(1) of theConstitution. It is no defense to this Court that such actions wereallowed or even encouraged by the Special ProjectsMemorandum, when the result of the actions were clearly tofacilitate a massive reduction of the value of the land so as toextinguish any economic benefit sought by the UDA in having anexternal developer maintain and develop the land.Though itshould go without saying, we emphatically note that the UDA isunder no duty to protect the profitability of the developers to whichthey have alienated land. Yet, the UDA somehow saw it fit toreverse each and every restriction that existed on the land at therequest of Asia Pacific's obviously profit-minded and self-servingrequests, and in so doing, effectively converted land acquiredfrom the citizenry for a public purpose into land optimized forpremium private benef it, all at a compounded discount custom-tailored and immensely profitable for Asia Pacific. A glaringexample that further suggests the UDA's failure to properlyprotect the land it has been entrusted with protecting anddeveloping was the failure of the UDA to appropriately deal withAsia Pacific though the company's filling of land prior to CEAapproval of the amended EIA report, in the UDA's own words,could be construed as "a violation of a material covenant in theagreement and imperative requirements under the environmentallaws of Sri Lanka.” Such a declaration was made by the UDA inits letter dated 11th November 2004 to Asia Pacific (DocumentU51 of the UDA's written submission) whereby the UDA orderedthe company to cease all development activities pending furtherinvestigation. While such a move was appropriate, strangely noevidence has been provided to suggest that the UDA actuallyinvestigated, punished or otherwise held Asia Pacific accountablefor this affirmative violation.
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC(Waters Edge case.)(Shiranee Tilakawardane.J.)369
Though the UDA cannot disclaim responsibility for thedecisions that were made by them, underlying their response inthis case is a notion that they were "compelled to cooperate andfacilitate the project" by the nature and the correspondence of theBOI (Section 21 of the UDA's written submission), as well asother individuals and entities. While an abdication of theirresponsibility will not be entertained – the autonomy andindependence of the UDA has, by now, been articulated severaltimes – we recognize that to view the excesses in the instant caseas resulting solely from the actions of the UDA would be grosslymyopic. There is no doubt that several other actors engaged inthe facilitation of this transaction.
The Board of Investment, another key player in this drama,was created under the Greater Colombo Economic CommissionAct No. 4 of 1978, and renamed by Act No. 49 of 1992, the BOI'sprime directive is, inter alia, to foster and generate economicdevelopment of Sri Lanka by promoting and facilitating primarilyforeign investment here. However, inherent to its role as afacilitator is a responsibility to properly ascertain viability ofproposed projects as well as the managerial competence andcreditworthiness of the parties who propose such projects – afterall, even the most well-conceived of projects may prove to be anexercise in disaster if those at the helm lack the requisite skill andfinancial strength to see a project through to its completion. Suchan analysis, at the very least, should include a review of the (i)managerial experience and financial strength of the promoters ofa project and (ii) the solvency, capitalization and asset profile ofthe project company, if such company has been formed.Furthermore, when tax concessions are requested – suchconcessions are almost invariably the reason for application tothe BOI in the first place – the BOI is under a duty to even morecarefully scrutinize the size and capitalization of the investmentand the quality and character of the investors. Apart fromensuring project feasibility and financial strength of the investors,the BOI's has a duty to use the utmost care in scrutinizing thecharacter and nature of the investors, a duty warranted by thevery real possibility that the individuals involved in a project mayharbour a criminal agenda and the nature of the funds fueling the
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project may have been ill-gotten. In order to avoid falling into arole as a facilitator of money-laundering or other illegal activity,the BOI must take extra care to understand the background of theinvestors – especially the foreign investors – involved. Lastly, theimportance of the BOl’s duty to provide such protective analysisis substantiated by the fact that, in most cases, BOI approval willhelp facilitate land alienation, as it did in the present case.Unfortunately, the submitted evidence reveals that rather thanacting in furtherance of the Public Trust, the BOI failed to engagein the required analysis of the Original Shareholders and of AsiaPacific, a review that, if property performed, would have raisedserious questions as to the existence of the principal foreigninvestor as well as the sincerity, integrity and bona tides of theOriginal Shareholders as developers.
Upon recommendation by the UDA, the 9th respondent in hiscapacity as then Managing Director of Asia Pacific,submitted tothe BOI a covering letter, completed BOI application, andannexure, which ostensibly proposed the specifics of the GolfCourse Project. The disclosed material reveals that Asia Pacifichad submitted very little of the particulars ordinarily expected tobe disclosed. The most notable example of this was the woefullyinsufficient response to the most important of questions, namelyQuestion No. 1 which requests the following information (takendirectly from the application):
(1) Names and addresses of Collaborators (Local and Foreign)with names and addresses of their Bankers. (Providedocumentary evidence relating to business background e.g.Company Profile, Current Annual Report, Bank References,etc)
To this broad and inclusive question which aims to obtaininformation for the BOI to determine creditworthiness andlegitimacy of the collaborators of a project. Asia Pacific simplymentioned that ”a Japanese individual, along with others fromabroad are joining our group (details attached) to design,construct, build and manage a Golf Course" as well as mentionedthat the UDA had agreed to provide them land in Battaramulla. Alook at those attached "details" reveals no project summary andmerely a description of the golfing accomplishments of the
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Selvaratnam family and and some board positions held by Mr.Wijesinghe. No bank references, financial audits or independenttestimonials as to financial and managerial backgrounds wereprovided. Despite this glaringly insufficient submission ofinformation, the BOI issued a letter to the 10th respondent 10days later informing him that the application was satisfactorilycompleted (Document U4 of the UDA's written submission).
According to the original application, the “Japanese individual"which would later be revealed as Mr. J. Yangihara, was to be thesole initial foreign investor and the stated total of the project costwould be Rs. 210 million, with Mr. Yangihara to invest Rs. 30million, the Original Shareholders to collectively invest Rs. 30million and the remainder to be raised through locating morecollaborators. Less than 2 months after submission of theapplication, notification of approval (Document U8 of the UDA'swritten submission) was sent to Mr. J. Yangihara – the investorwith the largest apparent individual investment obligation – to bethe principal investor, informing him of a 15% tax rate for 15 yearsprovided the initial investment in the project was not less than$250,000. Various time extensions were provided to Asia Pacificand an amended application was eventually submitted to the BOI,containing an amended project cost of Rs. 510 million. AsiaPacific subsequently gave notice to the BOI that the project wouldnow include the construction of villas, increasing the project costto Rs. 1.4 Billion, and later to Rs. 1.96 Billion – each increase,one that brought the project over the threshold of the next level oftax holiday, and served to help legitimize the reduce rental rate(2% of market value) ultimately drafted into the Lease. In light ofthese notices and requests for concessions, the BIO ultimatelyentered into Agreement No. 3146 on 21st June 2001, providing a12-year tax holiday to Asia Pacific.
Despite the extent of the communication between the BOI andAsia Pacific (and its Original Shareholders in the earlier stages) -the written submission reveals no less than 9 pieces ofconcession-related correspondence between the parties duringthe period leading up to execution of the BOI agreement on 21stJune 2001- no evidence has been provided to suggest that anyactual investigation occurred whatsoever into the credit-
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worthiness or managerial competency of either Mr. J. Yangihara,the Original Shareholders, or Asia Pacific. In fact, it does notappear that any inquiry was made as to whether Mr.Yangiharaeven existed, with the entirety of the evidence submittedregarding communication with this individual being the letter ofapproval sent by the BOI to him in Japan. Given the details of thewritten submission on behalf of the BOi, the lack of such evidenceis disturbing and, to this Court, a clear indication that no effort wasspent on investigating the economic and managerial particularsalleged by the Original Shareholders in their BOI application. Asnoted above, the BOI granted approval within 2 months to anapplication that failed to contain any concrete financial orindependent references of the collaborators. This Courtbelieves that the BOI, at the time of issuing its approval, hadnever even learned of Mr. Yangihara's first name. Such a lack ofinformation on the part of the BOI lends much credibility to thesubmission of the petitioners' Counsel that (i) Mr. Yangihara wasa fictitious individual, merely introduced to inject a foreign flavourto the transaction so that it would appear on its surface to be atypical BOI investment, and that (ii) the BOI could not havepossibly performed the due diligence required for a prudentdetermination of project feasibility.
While the above allows for this Court to conclude that the BOI,without a shadow of a doubt, failed to discharge its dutiesappropriately, further concrete proof that the BOI effectivelyallowed an otherwise entirely undercapitalized company to obtainsignificant tax concessions only available to highly-capitalizedprojects is revealed both by Nihal Hettiarachchi & Co., CharteredAccountants in the audited financial statements of Asia Pacific forthe 2001 tax year, as well as an internal BOI Memorandum. Theaudited financials for the fiscal year ending March 31, 2001- theBOI had entered into agreement with Asia Pacific 3 months earlier- reveal that Asia Pacific had nearly no capitalization and noassets other than this land which had, by then, been leased tothem by the UDA. The BOI's failure to ascertain, or decision toignore, these facts is unequivocally proven by an InternalMemorandum of the BOI dated 13th March 2003 (Document FFof the BOI's Affidavit) which states, in part, that "although the
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Monitoring Dept, has requested the company to provide details ofactual investment and paid up capital, the company had notcomplied with this request to date" (Italics added). In other words,Asia Pacific had alleged a projected investment increase 3 timesbefore ultimately arriving at a projected cost Rs. 1.96 Billion andthe BOI had approved such downward adjustment inconcessionary offerings each and every time without having everheld a shred of knowledge as to the actual, or likelihood of,capitalization of the company and the project. By the date of thisletter, it is revealed that nearly 3 years after entering intoagreement with Asia Pacific, the BOI still had not yet known thefinancial particulars of the company. Such egregious inaction is aclear violation of the Public Trust.
The foregoing, taken in total, leave this Court to view theactions of the UDA and BOI, not as a series of discrete andotherwise unintended missteps, but rather as all part of a largeragenda to successfully consummate the transaction, in spite of aprocedural process that, if properly executed, would haveprevented it. With this realization, we now turn to an analysis ofthe actions of the 1st respondent as well as those of theshareholders behind Asia Pacific to gain insight into this largeragenda.
In considering the part played by the 1st respondent, it isimportant to specifically understand that no single position oroffice created by the Constitution has unlimited power and theConstitution itself circumscribes the scope and ambit of even thepower vested with any President who sits as the head of thiscountry. In exchange for a conferment of extensive executivepowers, the Constitution requires of the President, among otherthings, an affirmation by oath that s/he, once elected, will"faithfully perform the duties and discharge the functions of theoffice of the President in accordance with the Constitution of theDemocratic Socialist Republic of Sri Lanka and the law", and thats/he will be faithful to the Republic of Sri Lanka and that s/he willto the best of her/his ability uphold and defend the Constitution ofthe Democratic Socialist Republic of Sri Lanka, (vide Chapter VII,§33, 4th Schedule). Similarly, a Minister is required to giveaffirmation by oath of the same attestations, and in the same
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manner. Common to both roles is the expectation andunderstanding that any person who is elected to the Presidencyor appointed to Ministerial service — and as in the case of the 1strespondent, serves in both capacities due to self-appointment asMinister of Finance using the power of the Presidency are sochosen because they are deemed able to embrace, uphold, andset example as a follower of the Rule of Law created pursuant tothe Constitution and they hold in trust the executive power of thePeople acquired through the Sovereignty of the People. Whilethe exercise of Presidential power is a duty that must accord withthe Rule of Law, such compliance should also come from one'sown conscience and sense of integrity as owed to its People. Thismeans that whilst they can use their private power and theirprivate property in an unfettered manner when granting anyprivileges or favours and, even in an overwhelming act of greatgenerosity, give all their private property away, their publicpower must only be used strictly for the larger benefit of thePeople, the long term sustainable development of thecountry and in accordance with the Rule of Law.
Consequent to this framework, it is to be noted for ourpurposes that all facets of the country – its land, economicopportunities or other assets – are to be handled andadministered under the stringent limitations of the trusteeshipposed by the Public Trust Doctrine and must be used in a mannerfor economic growth and always for the benefit of the entirety ofthe citizenry of the country and we repeat, not for the benefit ofgranting gracious favours to a privileged few, their family and/orfriends. Furthermore, being a creature of the Constitution, thePresident’s powers in effecting action of the Government or ofstate officers is also necessarily limited to effecting action by themthat accords with the Constitution. In other words, thePresident does not have the power to shield, protect orcoerce the action of state officials or agencies, when suchaction is against the tenets of the Constitution or the PublicTrust, and any attempts on the part of the President to do soshould not be followed by the officials for doing so will (i) result intheir own accountability under the Public Trust Doctrine, betrayingthe trust of good governance reposed in them under the
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Constitution by the People of this nation, in whom sovereigntyreposes and (ii) render them sycophants unfit to uphold thedignity of public office.
At the base of her defence, the 1st respondent principallyalleges that her involvement in the instant transaction wasminimal, and limited to only the action she was expected to takein her capacity as Minister of Finance and as head of the Cabinetof Ministers. Moreover, she argues that when she saw the projectundergoing "substantial change", she immediately sought tocancel the transaction. Such statements, however, fail to explainthe submitted evidence, resulting in a series of contradictions andinconsistencies that lead us to no other conclusion than adetermination that the 1st respondent has failed to function in amanner consistent with the expectations of a Public Officer, muchless an Executive President, and in doing so, has completelybetrayed the position of trust bestowed upon her by theConstitution and by the People of Sri Lanka. The 1st respondenthas grossly abused her power.
The first action of the 1st respondent significant to the presentcase involved the issue of the Special Projects Memorandum.Only 4 months after the initiation of the Asia Pacific project, the1st respondent issued the Special Projects Memorandum that,quite conveniently, aimed to facilitate and "streamline" thealienation of land in situations precisely, like the kind at issue. Incontemplation of the Special Projects Memorandum, was the laterissuance of the Cabinet Memorandum P3 which, as set out in thefacts above, sought to facilitate the approval of Asia Pacific's GolfProject and sought, among other things, significant economicconcessions for the project. Though the 1st respondent arguesthat the issuance of this Memorandum was both customary and inresponse to a recommendation of the project by the BO), the BOIhas expressly stated (vide para, 3, Document FF of the BOI'sAffidavit) that at no time was a recommendation ever made tothe 1st respondent to issue the special concessions sheadvanced. The BOI's assertion is substantiated by the fact thatletters dated 25th August 1997 (Document JJ(1) of the BOI'sAffidavit) and 3rd September 1997 (Document JJ(2) of the BOI'sAffidavit) reveal that the Digana Golf Course was still under
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construction and encountering financial difficulty which wouldresult in a 2-year delay to complete the project. Such a blatantmisrepresentation by the 1st respondent only strengthens theallegations of the petitioners that such behaviour had ulteriormotives unrelated to furthering the Public Trust.
Regardless of the 1st respondent's argument that herbehaviour was 'customary', the fact remains that the promotersthemselves received payment for transfer of the shares of AsiaPacific, whose sole significant asset at the time of sale was theleasehold of the land with the UDA and the approval agreementwith the BOI, both containing provisions exceptionally andunusually favourable to Asia Pacific – such provisions she hadsuccessfully lobbied for approval. Given such a result, it was theduty of the 1st respondent to, at the very least, inform the Cabinetthrough a subsequent memorandum – it must be rememberedthat the 1st respondent was the Minister of Finance during theyear of the sale (2002) – of the material change to the projectresulting from the sale of Asia Pacific to Access Holdings. Whilethe 1st respondent argues as evidence for the normality of thistransaction that "it is an everyday commercial reality that the verybasis of commercial transactions is to make a profit", the sale ofa development company after obtaining state-subsidizedassets and inordinately favourable tax incentives, beforesignificant investment into the company or thecommencement of development is anything but an"everyday commercial reality". Given the fact that the 1strespondent actively and successfully lobbied the Cabinet forconcessions for Asia Pacific beyond and in excess of theguidelines she herself had promulgated in her capacity asPresident, it is patently disingenuous for the 1st respondent tonow abdicate responsibility and claim ignorance of thenefariousness of the transaction. Quite simply, it is unacceptableand reprehensible for the 1st respondent to have made use of thepower conferred upon her by the People to advance this Project,and now distance herself from the responsibilities inherent tosuch power.
Notably, this is not the only instance in which she hasinterceded in land alienation procedures for the purpose of
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"actively facilitating," if not seeking to bypass the appropriateapproval process. According to a report of Committee of Inquirydelivered on 6th November 2002 regarding, in part, the proprietyof alienation of land in Narahenpita to Lifestyle Health Services(Private) Limited, the 1st respondent issued several pieces ofcorrespondence through which she, inter alia, expressedrepeated concern over procedural delays and instructed the BOIto expedite the process of vesting of the land by "eliminatingsome of the steps outlined or by accelerating the same."(Document EE of the BOI Affidavit page 9 paragraph ix) From thedocumentation presented to this court it appears this transactiontoo was another ’favour' granted – and as submitted by thepetitioner, according to some in the media, a favour to hermasseur. This court directs the BOI and the SLLR & DC toimmediately investigate this dubious alienation and to actforthwith to restore the public purpose for which the said land wasacquired especially as the affidavit of the SLLR & DC reveals thatseveral installments amounting to approximately Rs. 25 millionhave not yet been paid. This is of particular importance given thepressing problem of the lack of housing for middle classgovernment officials who reside in Colombo, since nodevelopment whatsoever has taken place on this land.
In her written submission for the instant case, the 1strespondent advanced as reasons for her submission of suchextensive concessions (i) the fact that the country had faced lowlevels of foreign investment due to the country’s extensivepolitical strife and terrorist violence, (ii) the fact that a significantportion of the property was to be preserved as undevelopedmarsh, and (iii) the success of the Digana Golf Project. However,the concessions the 1st respondent sought do not accord with theguidelines she herself had promulgated earlier on in herPresidency, and the reasons provided in defence of such actiondo not accord with the facts then available to her and of which shewas reasonably expected to be aware of even if she had onlysuperficially scrutinised this transaction. In the CabinetMemorandum P3 advanced by the 1st respondent to obtaincabinet approval of the project, the 1st respondent put forth theuse of a rental rate based at 2% of the market value of the project,
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excluding the land value. Such rate, however, pursuant to herown Special Projects Memorandum, was only available toprojects costing in excess of Rs. 1 billion, a project size Rs. 490million more than the proposed project cost at the time the 1strespondent issued the Cabinet Memorandum P3. In addition tothis concession, the 1st respondent also saw fit to seek a Rs. 90million offset against the CV's Valuation of the land inconsideration of the fact that the property was not to bedeveloped, and because the "promoters" had suggested that theCV's Valuation would make the project untenable. However, the1st respondent’s request for a Rs. 90 million offset evidences herdeliberate dismissal of the UDA-issued terms – enumeratedsupra – by which the Chief Valuer had already downwardlyadjusted his valuation for this very issue. Why this desire toviolate her own guidelines and offer concessions in excess ofthose she saw fit to earlier promulgate as "special concessions"for select projects? Furthermore, despite a suggestion that theCountry was in great need of foreign investment due to theunstable political climate of the country and that her enthusiasmfor such project was fuelled by the success of the Victoria GolfCourse in Digana, the UDA and BOI have revealed, respectivelythe interest by multiple golf course companies with respect to landat the Battaramulla location and the fact that, at the time of theCabinet Memorandum P3 was issued, the Digana project wasonly at most 50% complete. In light of such evidence, thelegitimacy and purpose of the 1st respondent's request for suchextensive and non-compliant concessions is based on falsehoodand is called into question.
Interestingly, as part of a plea of propriety, the 1st respondentblames the issuance of the Cabinet Memorandum approving theconstruction of villas and apartments as an action taken while shewas out of the country and a result of the shift of governmentcontrol to the UNF in 2001, and further submits that she moved toterminate the transaction "no sooner" than when "it took adifferent turn during the period of the UNF Government." Severalpeculiarities arise, however, when viewing this abdication ofresponsibility in light of the submitted evidence. Apart from thefact that such an assertion implies that the position of Executive
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President was essentially powerless during the latter part of herPresidency – an assertion belied by the inordinate constitutionalpower held by the President as Head of the Cabinet thatremained unchanged from prior to that period and, frankly, astatement unbecoming of a former holder of such post – theassertion ignores the fact that the Memorandum she issued toseek cancellation of the transaction (Document U46 of the UDA'swritten submission), by her own words, states that the"substantial changes" at the basis of her objection had, in fact,been approved prior to this alleged shift in power; a time in whichshe, by her own logic, was in control. Furthermore, the need toissue such a cancellation appears to have been obviated by thefact that the CEA had already issued an order one year earlier tocease activity pending CEA approval of the environmental impactof the proposed villas and the SLLR & DC had subsequentlygiven its approval to the revised master plan (Document U45 ofthe UDA's written submission) – apparently, a resolution for whichthe 1st respondent felt unnecessary when declaring withoutsubstantiation that the villas posed a flooding hazard. Evenassuming the legitimacy of the above suggestions, a questionremains as to why the 1st respondent waited till the end of 2004to act upon the results of an investigation she reinstated andwhich were delivered in late 2002 (Documents EE and FF of theBOI's Affidavit) revealing, inter alia, the inconsistency in the useof the CV's Valuation with respect to the freehold sale of theluxury villas and associated land. Given, then her presumedawareness in 2002 of the "substantial change" to the plan toinclude villa construction, such a delay to cancel the transactionbelies the 1st respondent's assertion that she took action "nosooner" than she found out about such change, and gives rise tothe idea that the cancellation sought was for reasons other thana newly-found appreciation of environmental protection.
The irregularities of the above actions cannot be dismissed.Such actions can be seen to be, at best, revealing anincompetence and an unacceptable abdication of responsibility ofthe most powerful state official of Sri Lanka, and at worst, apattern of behaviour evidencing an agenda at odds with ensuringoptimal use of public lands (the Court at this stage will not deal
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with the submission of Counsel for the petitioner that her “lapses"were deliberate, merely to secure a favour to her friend, the 5threspondent, Mr. Ronnie Peiris). His Lordship, Sarath N. Silva inSenerath v Kumaratunga<11), espoused in the context ofinappropriate action by the 1st respondent, that:
The case of the petitioners is that the 1st respondent and theCabinet of Ministers of which she was the head, being thecustodian of executive power should exercise that power intrust for the People and where in the purported exercise ofsuch power a benefit or advantage is wrongfully securedthere is an entitlement in the public interest to seek adeclaration from this Court as to the infringement of thefundamental right to equality before the law.
I am in full agreement with the spirit of His Lordship'scharacterisation of the 1st respondent's responsibility. Theexpectation of the 1st respondent as a custodian of executivepower places upon the 1st respondent a burden of the highestlevel to act in a way that evinces propriety of all her actions.Furthermore, although no attempt was made by the 1strespondent to argue such point, we take opportunity toemphatically note that the constitutional immunity preventingactions being instituted against an incumbent President cannotindefinitely shield those who serve as President from punishmentfor violations made while in office, and as such, should not be amotivating factor for Presidents – present and future – to engagein corrupt practices or in abuse of their legitimate powers. Thatthe President, like all other members of the citizenry, is subject tothe Rule of Law, and consequently subject to the jurisdiction ofthe courts, is made crystal clear by a plain reading of theConstitution, a point conclusively established in Karunathilaka vDissanayake(12) by Justice Fernando:
The immunity conferred by Article 35 is neither absolute notperpetual. While Article 35(1) appears to prohibit theInstitution or continuation of legal proceedings against thePresident, in respect of all acts and omissions (official andprivate), Article 35(3) excludes immunity in respect of theacts therein described. It does so in two ways. First, itcompletely removes immunity in respect of one category of
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acts (by permitting the institution of proceedings against thePresident personally); and second, it partially removesPresidential immunity in respect of another category of acts,but requires the proceedings be instituted against the
Attorney-General It is also relevant that immunity
endures only "while any person holds office as President". Itis a necessary consequence that immunity ceasesimmediately thereafter, indeed it would be anomalous in theextreme if immunity for private acts were to continue. Anylingering doubt that is completely removed by Article 35(2),which excludes such period of office, when calculatingwhether any proceedings have been brought within theprescriptive period. The need for such exclusion arises onlybecause legal proceedings can be instituted or continuedthereafter. If immunity protected a President even out ofoffice, it was unnecessary to provide how prescription was tobe reckoned.
I hold that Article 35 only prohibits the institution (orcontinuation) of legal proceedings against the Presidentwhile in office; it imposes no bar whatsoever on proceedings
against him when he is no longer in office, and (b) otherpersons at any time. That is a consequence of the verynature of immunity: immunity is a shield for the doer, not theact. Very different language is used when it is intended toexclude legal proceedings which seek to impugn the act.Article 35, therefore, neither transforms an unlawful act intoa lawful one, nor renders it one which shall not be questionedin any Court. It does not exclude judicial review of thelawfulness or propriety of an impugned act or omission, inappropriate proceedings against some other person whodoes not enjoy immunity from suit; as, for instance, adefendant or a respondent who relies on an act done by thePresident, in order to justify his own conduct.
Such a conclusion is unequivocal. To hold otherwise wouldsuggest that the President is, in essence, above the law andbeyond the reach of its restrictions. Such amonarchical/dictatorial position is at variance with (1) theDemocratic Socialist Republic that the preamble of the
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Constitution defines Sri Lanka to be, and (ii) the spirit implicit inthe Constitution that sovereignty reposes in the People andnot in any single person. As His Lordship G.P.S. De Silvaexplained in Premachandra v Major Montague Jaya-wickremai13>(quoting Wade):
Statutory power conferred for public purposes is conferredas it were upon trust, not absolutely – that is to say, it canvalidly be used only in the right and proper way whichParliament when conferring it is presumed to have intended.Although the Crown's lawyers have argued in numerouscases that unrestricted permissive language confersunfettered discretion, the truth is that, in a system based onthe rule of law, unfettered governmental discretion is acontradiction in terms.
In light of the foregoing, which has given much credibility to theemphatic allegations of Counsel for the petitioners. I can saywithout reservation that the 1st respondent has failed to act withthe requisite level of responsibility warranted by her position,abused her power and has acted in a manner that reveals adesire to accommodate an interest or interests other than that ofthe People of Sri Lanka.
Accordingly, the Court finds that the 1st respondent has failedto further the Public Trust, has betrayed such trust and stands ininfringement of Article 12(1) of the Constitution.
The next issue to be dealt with is the role of the OriginalShareholders of Asia Pacific, as well as the company itself. Asgathered from the various documentation provided – including theoriginal and amended BOI application – the Original Shareholdersapparently had experience on several company boards, wereactive in golf and headed several golf clubs both in Sri Lanka andabroad. Based upon their belief that Golf was ’’the passport toInternational Business" and the means by which tourism andinvestment could be drawn to Sri Lanka, they suggested a projectto build a golf course with little more than their proposed personalinvestment, that of "a Japanese Individual" and the collection ofmore collaborators. Asia Pacific was the vehicle by which theirdesire to build a golf course was to be achieved.
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A review, however, of the financial aspects of the corporationreveal that though lofty aims were sought, there was not, in fact,much in the way of actual investment during the period theOriginal Shareholders owned the company – in fact, despiterequesting and obtaining a BOI agreement based upon a projectcost of 1.96 billion dollars, at the time Access Holdings boughtinto the company in 2002, the company had a paid-up capitalamount of only Rs. 15 million (vide Para. 7 of the 6th respondent'swritten submission). The Court notes and understands therealities of business, namely that projects of this scope requiresignificant investment, often much of which is not immediatelyavailable upon the project's commencement. It is precisely for thisreason that BOI agreements contemplate a grace period forwhich project completion is to be completed (and precisely for thisreason that the BOI, as mentioned above, needed – but failed -to take great pains in assessing the realistic expectation that suchpromoters would be able to obtain the financing necessary forsuch an endeavour before issuing approval).
Any credibility of the Original Shareholders' declarations ofsincerity with respect to this project, however, is fatallyundermined by what this Court has come to see, from itsdiscovery of materials from the Inland Revenue Department, as awillful decision on the part of the Original Shareholders to concealcertain information from this Court, and by doing so, casts doubtupon their claims that their sale of Asia Pacific, and moreimportantly, their decision to initiate this project in the first place,was a product of sincere ambition and not just a ruse by which tomake use of the laws of land alienation to turn an immense profit.An analysis of several documents submitted by the InlandRevenue Department reveal that the 5th respondent, a Mr.Ronald Srikanth Peiris (hereinafter referred to as "Mr. Perns"),was, in fact, an original shareholder in the transaction. Ratherthan buying shares outright and being party to the variousincorporating documents and shareholder agreements laterexecuted to bring in, and eventually sell Asia Pacific to, AccessHoldings, Mr. Peiris held shares through a trust arrangement bywhich a certain amount of shares were allocated to, or"held intrust" for him, to be held and disposed of at his behest. A concise
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explanation of the arrangement appears in correspondenceissued in connection with an investigation by the Inland RevenueDepartment of Mr. Perns' taxable income (the particulars of whichare not given to preserve the confidentiality of the investigatorsand the investigatory process):
You have asked for documentary evidence in proof ofacquisition of shares by Mr. R.S. Peiris in Asia Pacific GolfCourse Limited. The best evidence of acquisition of shares ina company would be the share certificates themselves. But,in the case of Mr. R.S. Peiris no such evidence is available.The reason for this was that Mr. Peiris did not acquire theshares in his own name. They were acquired in the names ofthe other shareholders of the company who held the sharesin trust for Mr. Peiris. In these circumstances the legalowners of the shares were the shareholders who were thetrustees in respect of the shares. Mr. Peiris was the beneficialowner of the shares. Since Mr. Peiris was the beneficialowner of the shares the trustees paid to him the entirety ofthe proceeds of the sale of the shares when the shares werefinally disposed of.
Reviews of the several trust agreements which were executedby Mr.Siva Selvaratnam, Mrs. Suwaneetha Selvaratnam andMr.Shantha Wijesinghe to provide for the above arrangementreveal that Mr. Peiris was a beneficial owner of 600,020 Rs. 10par value shares of Asia Pacific, having an amount at sale ofRs. 57,200,000 million according to the Inland RevenueDepartment. This amount represents the profit Mr. Peiris derivedfrom the sale of the company to Access Holdings and for whichhe was ultimately held liable by the Inland Revenue Departmentto pay tax.
The above discovery raises two important questions beforethis Court: (1) why was this arrangement not disclosed by theOriginal Shareholders to this Court, and (2) why was such anarrangement made in the first place? While this Court can onlyspeculate as to the broader reasons for such an arrangementapart from what appears to be a failed attempt at tax evasion, it isclear that, as the very least, the arrangement was made todisguise Mr. Peiris' involvement in the transaction, such
Sugathapala Mendis and Another y Chandrika Kumaratunga and Others
SC(Waters Edge case.)(Shiranee THakawardane.J.)385
concealment that could be for no other purpose than to effectsome result – whatever it may be – that would have not beengotten, facilitated and/or concealed, had he been included as aknown investor. It is to be noted in this vein, that Mr. Peiris has,to date, failed to respond to the petitioner's Amended Petition orin any other way defend himself in the case at hand, largely, webelieve, because to do so would require him to explain thispeculiar arrangement. The petitioner's allege that this transactionwas facilitated by Mr. Peiris1 relationship with the 1st respondent,and that such an arrangement was in essence a disguisedbrokerage fee for his "influence peddling". Such silence, if notdeceit, on the part of the Original Shareholders regarding Mr.Peiris' involvement certainly lends credibility to the petitioners’allegations referred to above. In light of the Original Shareholders’lack of forthrightness with this Court, we, as noted below, directan investigation by the Commission to investigate Allegations ofBribery or Corruption for further inquiry into Mr. Peiris' and theOriginal Shareholders' actions.
Since its independence in 1948, the world has been witness toSri Lanka's economic transformation from a country primarilysubject to the closed-system economic socialist policies of theinitial years of independence to an open system of foreigneconomic investment, ushered in by a wave of economicliberalization policies adopted by the United National Partygovernment with the assistance of guidelines established by theWord Bank. Rather than standing as an illustrious example of thebenefits that have come from an open economy, however, thetransaction before us is one that, in the 10 years of its existence,has served to draw and make clear the negative effect of thepoliticization of investment promotion on the success of SriLanka's economic liberalization. It is quite ironic that Singapore, acountry that once looked to Sri Lanka as a model for therealization of its own economic blossoming, has not only farsurpassed Sri Lanka in that regard, but has also, in the words ofLee Kuan Yew, "watched a promising country go to waste."
The transaction before discloses a patent systematic failure ofthe public bodies charged with adequately and accurately judgingthe viability of what was ostensibly a foreign investment project.
386S" Lanka LaW R6p0r1S[2008] 2 Sri L.R
The UDA and BOI both engaged in a cursory analysis of theparticulars of the transaction and issued their approval largely onthe basis of the recommendations by other approvals authoritiesand the directives of the Cabinet, despite significant evidencethat, if properly reviewed, would have in all likelihood disclosedthe falsity of the application.
The fundamental flaw in the investment system I see is that,despite such alleged autonomy, the fact remains that such bodiesare ultimately "under the thumb", so to speak, of the executiveheads of this country, whether it be the Minister of Finance at thehelm of the BOI, the Minister of Urban Development at the helmof the UDA, the President-appointed Board of the BOI, thedirectives of the Cabinet of Ministers or even of the President.There can never be any expectation that corruption will not rearits ugly head when no definitive, public guidelines to ensuretransparency and accountability exist. As long as the investmentinfrastructure remains politicized to the extent as revealed in thiscase, coercive forces will continue to relegate the autonomyafforded to these agencies to the realm of theory and transactionslaced with characteristics of fraud and corruption will continue tobe shuffled through to completion.
The main method by which such imbalance can be counteredis through establishing appropriate and complete guidelines bywhich state actors are to operate, a terrain largely left empty bycurrent legislation. While Court cannot enact legislation, Court isable to direct the appropriate state authorities to accordinglypursue, concretize and legislate law that will serve as checks andbalances to fill the void in the law of the lack of supervision. TheUDA and BOI, and all other agencies involved with the investmentprocess in Sri Lanka must take steps to create publicly availableguidelines regarding the mechanisms of approval. The analysisthat each agency undertakes will necessarily be germane to theiroperating purpose, but all such agencies should, at the least,provide for an open auditing and tendering process including, butnot limited to, (i) an analysis of the direct costs of proposedprojects, (ii) an analysis of any indirect costs incurred by theproject or the general public, including social costs, (iii) ananalysis of the basis for calculation, including any independent
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC(Waters Edge case.)(Shiranee Tilakawardane.J.)387
assessments of calculations, (iv) a detailed analysis andpublication with all approvals of the reason for choosing theapproved project in light of relevant alternatives, and (v) apublication of the analysis in significant detail of the potentialbenefits and detriments. Whatever the legislation drafted, it mustultimately accord with the Sovereignty vested in the People, byfurthering the Doctrine of Public Trust.
The Indian Supreme Court emphatically stated in ICELA vUnion of Indian*) that "the enactment of a law and tolerating itsinfringement, is at times worse than not enacting a law at all." Inthe instant case, the end result of a tainted investment processwas the approval of a project aimed at reaping profit through thecreation of exclusivity on land originally acquired for a publicpurpose – a result directly contravening the public purpose natureinherent to acquired land, and not made any less so by theattempt to disguise it with patches of altruism like a publicplayground and cricket pitch. That such a project was allowed toproceed to finish on land taken from the citizenry is testament tothe breakdown of the procedural process that was meant toprotect the Public Trust and the repugnant actions of severalprincipal actors in this case, causing government losses runninginto hundreds of millions of Rupees.
On the basis of the aforesaid findings, I hold that the entiretransaction – the transfer of land to Asia Pacific, the subsequentremoval of the use and development restrictions appurtenant tothe land, and the eventual freehold alienation of undevelopedportions of the land – was a result of actions, omissions anddecisions made in violation of the Doctrine of Public Trust.
For these reasons I allow the application and grant to thepetitioners and intervenient petitioners the declaration prayed forthat their fundamental right to equality before the law guaranteedunder Article 12(1) of the Constitution has been infringed byexecutive and administrative action. Having been executedwithout lawful authority, the operative documents by which thetransaction was consummated – including, but not limited to, theLease, the First Licence and Second Licence, and the Agreementto Sell – and all other instruments made in furtherance of thetransaction in relation to the land referred to in this case is
J88Sri ^ LaH' ReP°nS(20081 2 Sri L.R
declared invalid in law and thereby declared null and void. Giventhis finding, this Court makes the following further orders anddeclarations:
Transfer of Title of the approximately 225 acres transferredto Asia Pacific by way of (i) a leasing of Lot 1 in Plan No.1481 under Deed of Lease No. 758/760 dated 4thSeptember 2000 and 18th September 2000 and attested by
S.Jayamaha of Colombo, Notary Public, (ii) a licensing ofLots 2 to 6 in Plan No. 1481, and Lot 1 in Plan No. 1484,under Deed of Indenture No. 759/767 dated 18th October,2000 and attested by S. Jayamaha of Colombo, NotaryPublic and (iii) a licensing of Lots 1 to 4 and Lots 6 in PlanNo. 1456 under License Agreement No. 822 dated 9thAugust 2001 attested by S. Jayamaha of Colombo, NotaryPublic, is hereby declared null and void (ab initio void) andall subsequent conveyances up to the date of this judgmentare declared null and void and shall have no force or avail inlaw. The total extent of land reverts back to the UDA. Suchreversion is to be executed by the UDA by a Deed ofCancellation and registered with the Registrar of LandsColombo, executed in terms of the declarations contained inthis judgment within one (1) month of the date of thisjudgment. A copy is to be filed of record.
This Court is well aware that, despite all argumentsotherwise, the land's flood retention capacity has onlydiminished since the commencement of this misguidedproject nearly 10 years prior. Given that part of this land hasalready been built upon, this Court finds it prudent to makeuse of that part of the effectively irreversible development toprovide for relocation of governmental agencies as a meansof decentralizing it from Colombo's commercially sensitiveareas. Therefore, within (3) months of the date of thisjudgment, the SLLR & DC and CEA and the UDA shalldeliver to this Court a joint Master Plan to accord with theaforesaid public purpose, and to bring as much of the land aspossible back to the flood retention purposes for which theland was initially taken, so that flooding of the surroundingsuburban areas will cease or be minimized.
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC(Waters Edge case.)(Shiranee Tilakawardane.J.)389
"__r*
In consideration of the construction of buildings by AsiaPacific, the UDA will pay to Asia Pacific, a sum representingthe cost of construction of the buildings as at the date ofconstruction, excluding all other development on the saidland by Asia Pacific, to be assessed by the Chief Valuer ofthe Valuation Department, and paid within four (4) months ofthe date of this Judgment. From this amount the UDA willwithhold the sum of public funds spent by the KaduwelaPradeshiya Sabhawa, which was clearly deceived intoexpending public funds on the mistaken belief that this wasfor a public purpose, in filling up the 7.8 hectare portion ofland originally vested to the Kaduwela Pradeshiya Sabhawafor the building of a playground and which was, however,subsequently allocated to Asia Pacific. This money sowithheld is to be returned to the Pradeshiya Sabhawa by theUDA. The Pradeshiya Sabhawa shall expend this money forprojects that benefit the public.
Asia Pacific, its assignees, successors, servants, agents andall those holding under it, are permitted to remove allmovables within four (4) months of the date of this judgementand shall hand over vacant possession of the said land freeof all or any encumbrances whatsoever on or before 8th ofFebruary, 2009.
The decisions that have been made from time to time by theCabinet of Ministers – including, but not limited to, theirApproval dated 4th March 1998 which approved the 1strespondent's Cabinet Memorandum P3 without query,clarification and / or amendment (Document U16 of theUDA's written submission) and the Cabinet Approval datedJanuary 31, 2001 (Document U31 of the UDA's writtensubmission) which approved the removal of the freeholdalienation restriction of the Acquired Land – are of no forceor effect in law insofar as they are ratifications of actions inviolation of the Public Trust and, therefore, an infringement ofArticle 12(1) of the Constitution.
As Head of the Cabinet which made such ratifications, andherself responsible for issuance of the CabinetMemorandum P3 that set in motion the entire transaction,
390SriLanka Law Reportfg008; g s„ L R
the 1st respondent is hereby ordered to pay Rs. 3 million tothe State as compensation by a deposit in this case, no laterthan January 31,2009. We believe such a token payment ofthe real loss to the state of several hundreds of millions, willserve to "remind" present and future state actors andagencies (i) of their paramount duty to further the PublicTrust and (i) that their actions are subject to the Rule of Law.
The 5th respondent has procured favours by the executive inviolation of the Public Trust doctrine in infringement of Article12(1) of the Constitution. He has profited from thetransaction through a carefully concealed ownership of AsiaPacific, and which concealment, this court believes, waseffected to hide what was in essence a commission forpeddling executive favours of the 1st respondent.
Similarly, the 9th, 10th and 11th respondents whosedeclarations of propriety regarding their intentions towardsthe Golf Project are fatally and fully negated by theirproactive concealment of the 5th respondent’s hand in theownership of Asia Pacific (i) from all operative and materialdocuments relating to this transaction, and (ii) from theirwritten and oral submissions to this Court, actions which theevidence convincingly reveals were an effort to mask thearrangement by which they procured the approvals neededto obtain and profit from the alienation. As was noted inHameedv Ranasinghe (15) and affirmed in Faiz v Attorney-General, (16) "This Court has the power to make anappropriate order even against a respondent who has noexecutive status where such respondent is proved to beguilty of impropriety or connivance with the executive in thewrongful acts violative of fundamental rights…"
The above makes it amply clear that this Court is well withinits powers to determine and mete punishment for privateactors who, like in the instant case, make use of governmentcorruption to procure special benefit, and by doing so,deprive the citizenry of their fundamental right to equality.Accordingly, the 5th respondent is ordered to pay Rs. 2million, and the 9th, 10th and 11th respondent are each
Sugathapala Mendis and Another v Chandrika Kumaratunga and Others
SC(Waters Edge case.)(Shiranee Tilakawardane.J.)391
'r *
ordered to pay Rs. 1 million, to the State by a deposit in thiscase no later than January 31, 2009.
We direct the 15th respondent, the Director-GeneralCommissioner of the Commission to Investigate Allegationsof Bribery or Corruption, to conduct an immediate inquiry ofthe entire transaction in terms of Section 17(a), Section 70and all other relevant Sections of the Bribery Act No. 11 of1954, as amended (hereinafter referred to as the "BriberyAct") with particular scrutiny on the actions of the 1st, 3A,4th,5th, 7th, 9th, 10th, and 11th respondents.
In accordance with our findings on the alienation of the landin Narahenpita to Lifestyle Health Services (Private) Limitedreferred to above, we order a full investigation into the
particulars of that transaction by the Commission toInvestigate Allegations of Bribery or Corruption in terms ofSection 17(a), Section 70 and all other relevant sections ofthe Bribery Act, as amended.
We order Costs in a sum of rs. 500,000/- to be paid to eachof the petitioners and also costs of Rs. 100,000/- to each ofthe intervenient petitioners who came into this court as someof the owners of the original land, by the 1st, 3A, 4th, 5th,7th,9th, 10th, and 11th respondents in equal proportion. Theapplication is allowed.
S.N. SILVA, C.J.-I agree.
RATNAYAKE, J.-I agree.
Relief granted.
Dec/arations/orders issued.