002-SLLR-SLLR-2007-V-1-UNIVERSAL-MARKETING-SERVICES-PVT-LTD.-AND-ANOTHER-v.-INDIAN-OVERSEAS-BA.pdf
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CA
Universal Marketing Services (Pvt) Ltd. and another v
Indian Overseas Bank
UNIVERSAL MARKETING SERVICES (PVT) LTD.AND ANOTHERv
INDIAN OVERSEAS BANK
COURT OF APPEALROHINI PERERA, J.
CA 729/95DC 9372/MRFEBRUARY 2, 2007
Civil Procedure Code – S86(2), S839 – Vacation of an ex parte judgment -Refusal – Summons served on the Managing Director- Validity? – Carr-BraintRule – Failure to serve summons – Fatal?
The District Judge of Colombo refused to vacate the ex parte judgmententered against the defendant-appellant company. The contention of thedefendant-appellant was that, summons were not served, the plaintiff-respondent contended that summons were served personally on the ManagingDirector of the Company the 2nd defendant-appellant.
Held:
It is clear in company law that the Secretary of the Company is therightful person to receive summons.
It is only by service of summons on the defendant the Court getsjurisdiction over the defendant. The failure to serve summons is afailure which goes to the root of the Court to hear and determine theaction against the defendant.
If the Court has no jurisdiction, it is of no consequence that, theproceedings were formally concluded for they are 'Corum NonJustice."
Per Rohini Perera, J.
“In cases where the defendant is a company it is always best that thesummons be effected by registered post in the first instance, in case of acompany, the summons shall also disclose as to whom that summons shall bedelivered to. The plaintiff cannot be silent on this and expect any person in thecompany to accept the summons and expect Court to presume that, the
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correct person had been served with notice" – When a person is not named on
the precepts as the person to whom it should be delivered, it is always safe to
deliver the summons by registered post.
Applying the Carr-Braint Rule – (when Court has to form an opinionas to the truth of such evidence, any fact which may slightly even tiltto one side be regarded as a fact in favour of such party). Upon abalance of probabilities it is seen that summons had not beenserved on the defendant-appellants.
APPEAL from a judgment of the District Court of Colombo.
Cases referred to:
De Fonseka v Dhanawardane – 1994 – 3 SLR 29.
Panorama Development (Guildford) Ltd. v Fidelis Furnishing Fabrics Ltd.
– 1971 2QB71 (CA).
1943 KB 607
SC Spl LA 90/80- SCM 7.12.1981.
S. Amarasinghe for defendant-appellant.
N. Jayasundara for plaintiff-respondent.
Cur.adv. vult.
March 2, 2007ROHINI PERERA, J.
The case was argued before Balapatabendi, J. and RohiniPerera, J. It was thereafter postponed for written submissions.During this period Justice Balapatabendi took oaths as a Judge ofthe Supreme Court. When the case was called on the 9th February,2007 both Counsel agreed to a single Judge writing this judgment.Therefore this judgment is written by Rohini Perera, J.
The defendant/appellants sought unsuccessfully to have theex parte judgment dated 24.10.90 vacated on the basis thatsummons were not served on them. This appeal is with regard tothe judgment dated 14.12.95 by which the learned District Judgerefused the application to vacate the ex parte judgment.
Section 86 (2) of the Civil Procedure Code which is therelevant section for these proceedings is as follows:
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Universal Marketing Services (Pvt) Ltd. and another
v Indian Overseas Bank (Rohini Perera. J.) _
"Where, within fourteen days of the service of the decreeentered against him for default, the defendant with notice to theplaintiff makes application to an thereafter satisfies Court, that hehad reasonable grounds for such default, the Court shall set asidethe judgment and decree and permit the defendant to proceed withthe defence as from the stage of default upon such terms as to costor otherwise as to the Court shall appear proper."
It has been held in the case of De Fonseka v Dharma-wardeneb).
That "an inquiry on an application to set aside an ex partedecree is not regulated by any specific provision in the CivilProcedure Code. Such inquiries must be conducted consistentlywith the principles of natural justice and the requirement of fairness,section 839 of the Civil Procedure Code recognizes the inherentpower of the Court to make an order as may be necessary to meetthe ends of justice."
The burden is on the defendant to satisfy Court that to hisdefault there was a reasonable ground, and this ground must beproved on a balance of probabilities. In an instance if a party isclaiming the grounds of non service of summons as a “reasonableground" he has to prove facts upon a balance of probabilities. If theCourt is satisfied on that point on a balance of probabilities theCourt should vacate the judgment and decree and permit thedefendant to proceed with the defence.
The inquiry to have the ex parte judgment vacated was heldon the 30.8.1991. The evidence of the fiscal at the inquiry was thathe served summons on both the 1st and the 2nd defendant-appellants personally by delivering them into the hand of the 2nddefendant/appellant. The report was marked as R1.
In this action the 1 st defendant is a company duly incorporatedunder the Companies Act. The 2nd defendant/appellant was theManaging Director of the 1st defendant/appellant company. It isalleged that the summons in these proceedings were served uponthe 2nd defendant personally and the summons directed to beserved on the 1st defendant was also served upon the 2nddefendant. One issue in question was whether the service ofsummons upon the 2nd defendant which were directed at the 1 st
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defendant was a proper service. There was no service of summonsupon any member of the 1 st defendant Company other than uponits Managing Director. The issue therefore on this point resolvesto a single question, namely whether summons could beserved upon a company duly incorporated, by serving it uponits Managing Director.
It is clear in Company Law that the Secretary of the companyis the rightful person as the chief administrative officer to receivesummons. In Panorama Development (Guildford) Ltd. v FidelisFurnishing Fabrics Ltd.M, Denning M.R. and Salmon L.J. at 716 60and 717 it is stated:
"That a Company Secretary is a much more important personnow than he was in 1887. He is the chief administrative officer of thecompany with extensive duties and responsibilities. This appears notonly on the modern Companies Act but in the role which he plays inthe day to day business of the company. He is no longer a mereclerk. He regularly makes representations on behalf of the companyand enters in to contracts on it's behalf which come within the day today running of its business. So much so that he may be regarded ashaving authority to do such things on behalf of the company. He is 70certainly entitled sign contracts connected with the administrativeside of the company’s affairs, such as employing staff and orderingcars. All such matters come within the ostensible or apparentauthority of a Company's Secretary", (quoted from Charlesworth andMorse Company Law – Geoffrey Morse 14th ed. 427).
It is now alleged that the 2nd defendant while being theManaging Director of the 1st defendant company was served withthe summons. If such were the truth of the matter of service ofsummons two questions immediately arise. First, whethersummons were actually served. Second, if they were served, then 80were they served and received by the 2nd defendant as theSecretary of the 1st defendant company. This indeed is a questionof fact. If the first question posed here is one that this Court wereto answer in the negative then the answer to the first question willnot arise.
The evidence of the Fiscal claiming that the summons were infact served and accepted by the 2nd defendant/appellant stand in
CA
Universal Marketing Services (Pvt) Ltd. and another
v Indian Overseas Bank (Rohinl Perera, J.)
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contrast to the 2nd defendant's assertion that the summons werenever delivered to him. The 2nd defendant/appellant namedGunaratnam Ravinranath Pathmarajah, the Managing Directorgave evidence on oath. Wijamuni Sirisena Silva also gaveevidence on oath and marked the fiscal report as R1. The evidenceof both these witnesses were not contradicted on any materialpoint. It is now necessary for this court to determine this issue on abalance of probability based on the well known Carr-Briant RuleS3)Applying that rule one must now look at the facts as to whetherthere are reasons to shift this balance in favour of one party – theFiscal or other. The learned district judge in the judgment statesthat the appellants have not given a satisfactory reason as to theirinability to be present in court on 7.9.1990. This conclusion cannotbe accepted as correct when the appellant in unequivocal termshave stated in the evidence, the affidavits and the writtensubmissions that they did not receive summons. And furthermore toascertain the genuineness of this application the court should havedetermined as to a probable reason to stay away from court. On theother hand the 2nd defendant had every reason to appear anddefend the alleged claim. The 2nd defendant/appellant was notonly the Managing Director of the 1st defendant company, but alsothe guarantor of the loan (Documents A and B) received by the saidcompany on which he is being now sued. Additionally in thedocument marked "B" the 2nd defendant/appellant hadsurrendered his privileges as a surety laying him exposed to besued at anytime before the debtor is sued. This places aconsiderable responsibility upon him, compelling him to appear anddefend the claim. The plaintiff/respondent has countered bysubmitting to Court that the 2nd defendants' principle aim was todelay the proceedings by his failure to appear in Court. Thisexplanation holds little water, in the sense that the 2nddefendant/appellant's positions in these proceeding were too graveas to warrant his absence from the hearing. By delaying it does notensure him with a decree in his favour, but only an accumulationof further interest and being liable to pay legal costs aswell.
It is only by service of summons on the defendant the Courtgets jurisdiction over the defendant. The failure to serve summons
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is a failure which goes to the root of the Court to hear anddetermine the action against the defendant. If a defendant is notserved with summons or is otherwise notified of the proceedingsagainst .him, the judgment entered against him in thosecircumstances is a nullity.130
"In Oder to have validity of a judgment, the court must havejurisdiction of the persons, of the subject matter and of theparticular section which it assumes to decide. It cannot let uponpersons who are not legally before it, upon one who is not a party
to the suitupon a defendant who has never been notified of the
proceedings. If the court has no jurisdiction, it is of no consequencethat the proceeding had been formally conducted, for they are'corum non justice'. A judgment entered by such Court is void anda mere nullity. (Black on Judgments p 261) (S.C.Special LA/90/80decided on 7the December 1981)<4> This quote aptly explains the 140consequences of a judgment that had been delivered without theproper parties before it. It is a basic principle of natural justice thatall parties are heard. Therefore it is not only the responsibility of theplaintiff but also the Court to be sufficiently satisfied that reasonablemethods have been followed to have the defendants noticed of theaction before court. This notice may be by personal service,substituted service or by registered post or on behalf of thedefendant/appellants. According to the Carr-Briant Rule 'when thecourt has to form an opinion as to the truth of such evidence, anyfact which may slightly even tilt to one side be regarded as a fact in 150favour of such party1. Therefore, applying the Carr-Briant Rule upona balance of probabilities this court finds that there had not beenservice of summons upon the defendant/ appellants.
This Court vacates the ex parte judgment delivered on24.10.90 and also the judgment delivered on 14.12.95 and permitdefendants/appellants to file answer. This case is now remitted tothe District Court of Colombo.
The Appeal upheld. No costs.
Appeal allowed.