SC directs Commercial HC to terminate cases against Harry J.

The Supreme Court this week directed the Commercial High Court (Colombo) to terminate proceedings in two cases pending before it in the contentious ongoing legal battles between the Directors of the multi-million turnover company, Milford Exports (Ceylon) Ltd.,

Directors R.K. Obeysekera and Z. Alif together with Ms. Sonia Williams (daughter of former Director the late Dr. V.P. Vitachchi) had filed action in the Commercial High Court against fellow Director Harry Jayawardene for the purchase of their Shares in the Company, or in the alternative, for the sale of Mr. Jayawardena’s shares to them at Market Value.

The dispute among the Directors arose over the handling of the affairs of the Company. Chief Justice Asoka de Silva delivering the judgment, with Justices Gamini Amaratunga and S. Marsoof concurring, held that, under sections 393 and 394 of the Civil Procedure Code, while the Plaintiffs in the case before the Commercial High Court viz., Messrs. Obeysekera and Alif together with Ms. Williams are entitled to continue with the case, following the death of Dr. Vitachchi, that they had failed to satisfy the requirement of making a fresh application by way of summary procedure substituting Ms. Williams as a party to the action against Mr. Jayawardena.

The Court held that, “with the demise of a complainant, his complaint loses sanctity. Clearly, it is available to the heir or any other shareholder to make a fresh complaint, but as far as the original complaint is concerned, it ceases to be of effect with the death of the complainant”.

The Court stated that they have gone into the issue of whether the right to sue, survives to the heirs as submitted by Counsel, and that, the issue before them was whether the right to sue, survives to the remaining complainants and the legal representatives of the deceased, jointly.

Citing the test laid down in Gajanand vs. Sardarmal (All India Reports 1961), the Court held that section 394 of the Civil Procedure Code in Sri Lanka (which is identical to the Indian provision) provides for the right to sue, to be survived by the heirs, but in this instance, the surviving Plaintiffs failed the legal requirement to make future prosecution of the case, jointly.

The original issue arose with the death of Dr. Vitachchi, a former Customs head who became Chairman- Stassen Group of Companies, of which Milford Exports is a subsidiary company. At that stage, parties were already before the Commercial High Court over the sale/purchase of their Shares. While the Plaintiffs took up the position that the case could proceed without any substitution in place of the late Dr. Vitachchi, and therefore did not seek to substitute any person, Counsel for Mr. Jayawardena submitted that an application for substitution was mandatory and that the action could not proceed any further without such an application having been made.

The Commercial High Court had held that the case could proceed without any substitutions being made. Counsel for the Appellant in this case, S.A. Parathalingam PC argued in the Supreme Court that the law makes it clear that every application for substitution must be made in writing, and that, this requirement was imperative. He added that the action filed in the Commercial High Court was a joint action by the Plaintiffs, and not a personal action between them.

The Supreme Court held that they were inclined to take that view, and that, it was clear that when a single complainant dies, a question arises as to whether a right to complain about the affairs of the company devolves on his or her heirs as well. But as the original complaint “loses sanctity” with death, the heirs must make a fresh complaint, and therefore, in the case where the action is a joint action, the action could continue only on the basis of the fresh application being made.

The Court held that, therefore, the Plaintiffs are prevented fatally from proceeding any further in the Commercial High Court, and ordered the termination of proceedings in the two cases before it.
S.A. Parathalingam PC, with Messrs. Rajindra Jayasinghe and Ranil Angunawela appeared for Harry Jayawardena.

Romesh de Silva PC, with Messrs. Aritha Wikramanayake, Chanaka de Silva, Aruna Samarajeewa, Sugath Caldera, Shanaka Cooray and Eraj de Silva, instructed by G.G. Arulpragasam, appeared for R. Obeysekera and Z. Alif. D.S. Wijesinghe PC, with K. Molligoda, appeared for the 2nd Respondent-Petitioner in the Appeal 23/2009. Nihal Fernando PC, with Ranjan Jayasinghe, appeared for the 3rd Respondent-Petitioner. Shanaka Amarasinghe appeared for the Secretaries and Registrar Ltd.

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