WALKER SONS & CO. LTD.,
COURT OF APPEAL.ISMAIL J„
A. 570/96 (REVISION)
C. COLOMBO 17455/TSEPTEMBER 16,1996OCTOBER 1,1996NOVEMBER 5,19.26,1996
Interim Injunction – Suppression of material facts – Finding without consideringthe contents of documents – Is it liable to be set aside.
It is now settled that a person who makes an ex parte application is under anobligation to make the fullest possible disclosure of all the material facts and thatif he does not make the fullest possible disclosure, then he cannot obtain anyadvantage which may have already have been obtained by him.
The plaintiff-respondent had wrongfully suppressed the material fact that hehimself acted in breach of his undertaking. If the letters D3 and D6 were placedbefore court it would have been apparent that the plaintiff-respondents lack offinances was either an additional or even the sole reason for not paying thesecond installment. These two letters put a different complexion on the case ofthe plaintiff-respondent as presented by him, at the stage of the application for anenjoining order and contain material facts which would have reasonably affectedthe mind of the Judge. The finding that the plaintiff-respondent could not pay theagreed sum to the Bank because the defendant-petitioner failed to obtain theNotice of disclaimer has been arrived at without an adequate consideration of D3and D6. The District Court had erred in finding that the plaintiff-respondent hasdisclosed all the facts at the stage of the enjoining order.
“A party cannot plead that the misrepresentation was due to inadvertence ormisinformation or that the Applicants was not aware of the importance ofcertain facts which he omitted to place before court.”
APPLICATION in Revision from the order of the District Court of Colombo.
Cases referred to:
Hotel Galaxy (Pvt) Ltd., and Others v. Mercantile Hotel Management Ltrf.,(1987) 1 SLR 5 at 36.
R v. Kensington Income Tax Commissioners -(1917) 1 KB 486.
S. A. Parathalingam P.C., with Kushan de Alwis and M. Faizer Musthapha fordefendant-petitioner.
K. N. Choksy P.C., with Nihal Jayamanne PC. and Nihal Fernando for plaintiff-respondent
Cur. ativ vuit.
The defendant-petitioner Company has in this application forrevision sought to have the order of the Additional District Judge ofColombo dated 22.8.96 set aside. By the said order an interiminjunction has been issued restraining the defendant-petitioner fromdisposing of and/or transferring the properties the subject-matter ofthis action and/or dealing with the said properties or any part thereofin any manner.
The plaintiff-respondent and the defendant-petitioner initiallyentered into two Sale Agreements bearing Nos. 666 and 667 bothdated 15th September 1995 attested by S I. de Silva, NP whereby thedefendant-petitioner as the vendor agreed to sell and the defendant-respondent as the purchaser agreed to purchase the following landsand premises which were mortgaged previously to the Bank ofCeylon, for a total consideration of Rs. 225 million andRs. 100 million respectively.
Lots 1-14 depicted in Plan No. 2186 dated 18th April 1995 madeby H. R. Samarasinghe, Licensed Surveyor, of the premisesbearing assessment No. 250 (part) Srimath RamanathanMawatha, Colombo 15 – in extent 5A. 3R. 18.5 perches; and
Lot A1 depicted in Plan No. 2104 dated 7th September 1995made by G. B. Dodanwela, Licensed Surveyor, of the premisesbearing assessment Nos. 213 and 215 Kollupitiya Road,Colombo 3 – in extent OA. 2R, 26.5 perches.
The parties agreed that payment would be effected in the followingmanner;
Rs. 7.5 million to be paid on 18.10.96 upon the vendor obtainingconfirmation from the Bank of Ceylon of the amount outstandingon Mortgage Bond No. 919 dated 21.7.90 attested by M. N.Jayawardena, NP to the satisfaction of the purchaser.
Rs. 15 million to be paid on 31.10.95 upon the vendor obtainingconfirmation from the Bank of Ceylon of the amount outstandingon Mortgage Bonds bearing Nos. 839 and 918 dated 14thOctober 1988 and 27th July respectively both attested by M. N.Jayawardena, NP and said Mortgage Bond 919 to thesatisfaction of the purchaser.
The balance sum of Rs. Two Hundred and Ninety Two million FiveHundred Thousand to be paid on or before 15.1.96 provided thatthe purchaser shall settle direct to the Bank of Ceylon the amountoutstanding on the said Mortgage Bonds bearing Nos. 389, 918and 919.
The plaintiff-respondent paid sum of Rs. Ten million at the time ofthe execution of the two separate agreements on 15.9.95 and afurther sum of Rs. Seven Million Five Hundred Thousand on 16.10.95.The Bank of Ceylon, in the meanwhile, by its letter dated 2.10.95called upon the defendant-petitioner, to settle the entirety of theoutstanding amount of money due to it on the aforesaid mortgagebonds by 31st October '95, On receipt of this letter the defendant-petitioner made an appeal to the Bank in regard to the question of therepayment of the sums of money then outstanding but it appearsfrom the reply dated 27.10.95 (XII) from the Bank that the appeal wasnot successful. The Bank retreated its position that a sum of Rs. 200million is payable in full and final settlement of the liabilities of thedefendant petitioner but stated that it was prepared to accept thepayment of Rs. 50 million by 31.10,95, a further payment of Rs. 50million by 31.12.95 and the payment of the balance sum of Rs. 100million by 31.1.96.
Prior to the entering of the two sale agreements referred to abovethe defendant-petitioner entered into a Sale Agreement bearingNo. 1308 dated 25.5.95 with a Company named Sea Consortium,Lanka (Pvt) Ltd. to sell a part of its property at Mutwal, depicted aslots 9 and 10 in Plan No. 2186, and had accepted Rs. 3,199,750 asan advance against the total consideration payable but the sale ofthe property did not take place. The plaintiff-respondent thennegotiated with Sea Consortium Lanka (Pvt) Ltd. which indicated itswillingness to purchase 61.45 perches, depicted as lot 1 in plan No.2170 dated 19.10.95, made by G. B. Dodanwela. Licensed Surveyorfor a consideration of Rs. 22,736,500. The land and premises atMutwal referred to as lots 1-14 in Plan No. 2186 were amalgamatedand shown as lots 1 and 2 in Plan No. 2170.
As the properties of the defendant petitioner were mortgaged to theBank of Ceylon the defendant-petitioner authorised the plaintiff-respondent by its letter of 8th November '95 to negotiate with the Bankand to finalize the terms and conditions for the sale of the properties.
The plaintiff-respondent then by his letters dated 10.11.95 and
proposed the following schedule for payments to be madeto the Bank; – payment of Rs. 50 million on or before 30.11.95 (uponwhich a deed of release was to be executed for 61 perches out ofproperty at Mutwal), payment of second instalment of Rs. 50 millionon or before 31st December 1995 and the final settlement of Rs. 156million by the end of January 96.
The time schedule for payment proposed by the plaintiff-respondent was accepted by Ihe Board of the Bank of Ceylon and hewas informed that the Bank was prepared to accept a sum of Rs. 50million on or before 30.11.95, a further payment of Rs. 50 million on orbefore 31.12.95 and the final payment of the balance sum of Rs. 256million, (of which Rs. 56 million was due to Sampath Bank) on orbefore 31.1.96.
The plaintiff-respondent by his letter dated 30.11.1995 (D3)“agreed to abide by the schedule of payment as indicated in fullsettlement of the above liabilities" and stated that he has madearrangements to pay a sum of Rs. 50 million immediately, to pay asum of Rs. 50 million on or before 31st December 1995 and to makethe balance payment as indicated by the end of January 96.
The plaintiff-respondent made the first payment of Rs. 50 million inNSvember 95 as agreed and the Bank thereupon released an extentof 61,45 perches of the Mutwal property for sale to Sea ConsortiumLanka (Pvt.) Ltd.
In consequence the parties entered into a SupplementalAgreement bearing No. 684 dated 30.11.95 which provided that onthe execution of the transfer of the said extent of 61,45 perches fromand out of the land at Mutwat to Sea Consortium Lanka (Pvt) Ltd. thatthe said extent of land would be excluded from the originalAgreement No 666 dated 15.9.95. It was also agreed by the partiesthat aggregate sum of money payable by the plaintiff-respondent onthe earlier agreements for the purchase of the said properties shallbe reduced from Rs. 325 million to Rs. 254,300,250/- giving theplaintiff-respondent credit for the various sums of money paid to thedefendant-petitioner and on his behalf to the Bank and also by givinghim credit for the advance previously received by the defendantpetitioner from Sea Consortium Lanka (Pvt) Ltd.
The plaintiff-respondent and the defendant-petitioner had eachfailed to fulfil certain conditions and undertakings agreed upon bythem in the two initial Agreements Nos. 666 and 667 both dated
and the supplemental Agreement No. 684 dated 20.11.95and as such they agreed by further Supplemental Agreementsbearing Nos. 61 and 62 both dated 12.1.96 to extend the date of thestipulated transactions from 15.1.96 to 31.3.96.
The plaintiff-respondent instituted action by plaint dated 4.6.96 inwhich it was averred that the defendant-petitioner has acted inbreach of the terms and conditions of the said agreements in failingto obtain a letter of confirmation from the Ceylon PetroleumCorporation that a notice of disclaimer pertaining to the land referredto in the notice of claim published in the Government Gazette dated
will be Gazetted prior to 31.3.96. The Sale agreementNo. 667 dated 15.9.95 relating to the sale of the property atKollupitiya provided in paragraph (k) that the defendant-petitionerwould make available to the purchaser within 60 days of the date ofthe execution of the agreement a letter from the Ceylon PetroleumCorporation stating that a notice of disclaimer will be gazetted priorto 15.1.96.
The position of the defendant-petitioner as set out in its letter dated
(X33) in regard to the said letter of confirmation to beobtained from the Ceylon Petroleum Corporation and referred to inparagraph 7(k) in each of the agreements Nos. 666 and 667 was thatit was negotiating with the Corporation to obtain the same.
The plaintiff-respondent further alleged in his plaint that thedefendant-petitioner without being in a position to handover vacantpossession of the lands and premises sent two letters dated 25.3.96to the plaintiff-respondent informing him that the Company was in aposition to give vacant possession by 31.3.96 and requested theplaintiff-respondent to pay the balance sum of money due on the saidagreements.
In regard to the giving of vacant possession of the land andpremises at Mutwal, the defendant-petitioner confirmed the severalverbal intimations to the plaintiff-respondent that it would be in aposition to give vacant possession before 31.3.96. In regard to thehanding over of vacant possession of the land and premises atMutwal paragraph 9 of the Sale Agreement No. 666 dated 15.9.95provided as follows:
"9. Immediately after the execution of the Deed of Transfer asaforesaid the vendor shall hand over quiet, peaceful and vacantpossession of the said property and premises to the Purchaser orhis nominee as the case may be."
Similarly paragraph 9 of the Sale Agreement No. 667 dated
in regard to the property at Kollupitiya is as follows:
"9. Immediately after the execution of the Deed of Transfer asaforesaid the vendor shall handover quiet and peaceful vacantpossession of the said property and premises to the purchaserexcluding the area now occupied by the petrol shed andoperated and managed by the Sri Lanka Army. However, in theevent the vendor is unable to hand over vacant possession asaforesaid to the purchaser, the purchaser shall withhold Rs.10million of the said purchase price until the purchaser is placed inquiet and vacant possession."
Meanwhile it appears from the letter dated 29.3.96 (D8) sent b
the Bank to the defendant-petitioner that the Bank had decided at the
Board Meeting held a few days previously to proceed with the sale of
the mortgaged properties by public auction if the entirety of the sums
Of monies due to it was not paid by the end of April 1996. thereby
extending the time for payment of the outstanding sums of money by
a further period of one month.
The defendant-petitioner did not pay the Bank the secondinstalment of Rs. 50 million which he agreed to pay on or before
nor did he pay any further sum thereafter.
The plaintiff-respondent averred in his plaint that he was ready andwilling upto midnight of 31.3.96 to conclude the transaction bypaying the balance sum of money if the defendant-petitioner hadobtained the notice of disclaimer from the Petroleum Corporation andif the plant and machinery on the premises at Mutwal were removedand if the employees who were in occupation of the premises had leftthe premises so as to make it possible for him to get vacantpossession of the premises. However, as seen from paragraph 9 ofthe agreement referred to above the defendant-petitioner wasobliged to hand over quiet, peaceful and vacant possessionimmediateiy after the execution of the deed of transfer and theparties were nowhere near to signing the deed of transfer at thisstage. It is also to be noted that in regard to the land vested with theCeylon Petroleum Corporation that the plaintiff-respondent in his letterdated 22.2.96 (D6) to the Bank has appreciated the fact that it wouldtake at least a further two months to obtain the notice of disclaimer.
The plaintiff-respondent relying on the alleged breach of theagreements as aforesaid by the defendant-petitioner has on theresulting cause of action sought to recover Rs. 68,300,000/- paid asadvance and or part payment and to recover a further sum ofRs. 68,300,000/- as liquidated damages. He has also on an alternatecause of action sought to enforce specific performance of theagreements and in the event of his obtaining a transfer of the saidpremises to recover a sum of Rs. 50 million as damages from thedefendant-petitioner.
The plaintiff-respondent also sought an enjoining order and aninterim injunction as he feared that the defendant-petitioner coulddispose of the properties and that he would in that event not be ableto enforce his decree for specific performance and also that thedefendant-petitioner would not be left with sufficient assets to satisfythe judgment if entered in his favour. He also alleged that the plaintiff-respondent was in dire financial straits and that he was unable torepay the advance and damages claimed by the plaintiff-respondentwithout disposing of the said properties.
The objection to the issue of the interim injunction was on theground that the plaintiff-respondent has wrongfully suppressed thematerial fact that he himself acted in breach of his undertaking tomake the specified payments of money and that he was unable to doso because he was admittedly in financial difficulties. LearnedCounsel for the defendant-petitioner submitted that the plaintiff-respondent has deliberately suppressed the letters dated 30.11.95and 22.2.96 marked 03 and 06 at the stage of the application for anenjoining order and that the plaintiff-respondent has not established aprima facie case for the issue of an enjoining order or an interiminjunction. It was contended in reply by learned Counsel for theplaintiff-respondent that the contents of these two letters howeverhave been referred to in the letters dated 10.11.95, 15,11.95 and
produced marked X14, X16 and X17 respectively and in thelast of which it was stated that the breach of the conditions of theagreement by the defendant-petitioner was the reasons for seekingextension of time to pay the agreed instalments to the Bank, Theparties have each written several letters in regard to the timeschedule for making payments to the Bank and in this context theletters D3 and D6 are significant. The plaintiff-respondent himselfmade proposals for making the first payment of Rs. 50 million on
the next instalment of Rs. 50 million by 31.12.95 and thebalance by the end of January 1996 by his letters X14 and X16 whichproposals were accepted by the Bank by its letter of 20.11.95 (X17).The plaintiff-respondent then readily agreed to make the paymentsaccordingly in his reply of 30.11.95 (D3) and paid the first instalmentof Rs. 50 million immediately. The letter dated 22.2.96 (D6) assumesgreater significance because the plaintiff-respondent pavingdefaulted in paying the second instalment of Rs. 50 million by
as undertaken by him in his letter D3, informed the Bankthat financial constraint also prevented him from making any furtherpayment. He therefore suggested the following alternate methods ofsettling the outstanding liabilities as follows:
we shall be glad if you could allow us to settle theoutstanding liabilities in either of the following two alternatemethods.
a. Payment of Rs. 20 million of five monthly instalmentscommencing in March 1996 and the balance payment ofRs. 106 million at the end of the five instalments or,
b. Provision of Rs. 150 million of project loan for the abovementioned development project against the equivalent of theabove liability ^nd the payment of balance sum of Rs. 56million at the end of the fifth month."
While the plaintiff respondent's position in his plaint was that he didnot make any further payments to the Bank due to the failure of thedefendant petitioner to obtain the said notice of disclaimer, theseletters D3 and D6 show that he could not abide by his undertaking tothe Bank to make the specified payments due to his financialdifficulties. The failure of the defendant petitioner to obtain the noticeof disclaimer as being the reason for his not making payments to theBank has been given by him for the first time in the letter D6 writtenon 22.2.96 and after he defaulted in depositing a sum of Rs. 50million as agreed by 31.12.95. The undertaking given by the plaintiffrespondent to pay the agreed sums of money to the Bank was notconditional on the plaintiff respondent obtaining the notice ofdisclaimer. If the letters D3 and D6 were placed before the AdditionalDistrict Judge at the stage of the plaintiff respondent’s application foran enjoining order, it would have been apparent that the plaintiffrespondent’s lack of finances was either an additional or even thesole reasons for not paying the second instalment of Rs. 50 million bythe end of December 95 or any sum thereafter.
Atukorale J. said in Hotel Galaxy (Pvt) Ltd. and Others v.Mercantile Hotel Management Ltd. "> as follows;
"…a misstatment of the true facts by the plaintiff which put anentirely different complexion on the case as presented by himwhen the injunction was applied ex parte would amount to amisrepresentation or suppression of material facts warranting itsdissolution without going into the merits.”
It is now settled that a person who makes an ex parte applicationis under an obligation to make the fullest possible disclosure of all thematerial facts and that if he does not make the fullest possibledisclosure, then he cannot obtain any advantage which may havealready have been obtained by him. – R. v. Kensington Income TaxCommissioners'A party cannot thereafter plead that themisrepresentation was due through inadvertence or misinformation orthat the applicant was not aware of the importance of certain factswhich he omitted to place before court.
The two letters D3 and D6 put a different complexion on the caseof the plaintiff-respondent as presented by him at the stage of theapplication for an enjoining order and contain material facts whichwould have reasonably affected the mind of the judge. The finding ofthe judge that the plaintiff-respondent could not pay the agreed sumof money to the Bank because She defendant-petitioner failed toobtain the notice of disclaimer has been arrived at without anadequate consideration of the two letters D3 and D6. The AdditionalDistrict Judge has erred in finding that the plaintiff-respondent hasdisclosed all the facts at the stage of the application for the enjoiningorder. The judge also erred in finding that the defendant-petitionerhas referred to the sale of 61.45 perches of the property at Mutwal asa fact that was suppressed, whereas the defendant-petitioneraverred that the fact that a sum of Rs. 19,536,750/- realised on thesale of the said property was handed over to the plaintiff-respondent,has been suppressed. The Additional District Judge has alsoweighed the injury which would be caused to the plaintiff respondentagainst the injury which the defendant-petitioner will sustain if theinjunction were refused and has held that the balance of conveniencefavoured the granting of the injunction as prayed for by the plaintiffrespondent. This finding too has been arrived at without consideringthe contents of the two letters D3 and D6 and without considering, inthe circumstances revealed therein, whether the plaintiff respondentwould be entitled to specific performance or whether damages wouldbe an adequate remedy.
For the reasons set above the order of the Additional DistrictJudge dated 22.8.96 is set aside. The application for revision isallowed with costs fixed at Rs. 5,250/-
Interim Injunction dissolved.