Order on Case No 42/2013/CO by Mahinda Samayawardhena, High Court Judge, Commercial High Court

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In the Commercial High Court of the Western Province Holden in Colombo in the Democratic Socialist Republic of Sri Lanka In the matter of an application in terms of Section 224, 225 and 521 of the Companies Act No. 7 of 2007. Petitioner Dishan Amrit Jitendra Kumar Warnakulasuriya, 345, R.A. de Mel Mawatha, Colombo 3 Case No 42/2013/CO Vs Respondents 1 Serene Pavilions Pvt Ltd. (formerly known as Serene Villas Pvt Ltd.) 40/2 Lake Gardens Rajagiriya and/or 20 Upali Mawatha Wadduwa 2 Anura Samarawickrama Lokuhetty No. 40/2, Lake Gardens, Rajagiriya 3 Menaka Dilani Lokuhetty No. 40/2, Lake Gardens Rajagiriya 4 Clive William Leach, The White House, Barkstone-Ash, North Yorkshire, LS249TT, England 5 Stephanie Miriam Leach, White House, Barkstone-Ash, North Yorkshire, LS249TT, England 6 Sumith Chandrasiri Galamangoda Guruge, No. 27 Anula Road, Colombo 6 7 Chart Business Systems Ltd., No. 141/3, Vauxhall Street, Colombo 2 8 Nipuna Devinda Samarawickrama Lokuhetty, No. 40/2, Lake Gardens, Rajagiriya 9 Wasantha Kumara Galagoda, No. 9/31E, Perera Mawatha, Divulapitiya 10 Don Gamini Chandrathilake Nethicumara, 466 Union Place, Colombo 2 11 Business Management House Pvt Ltd., No. 70/B/8/SP, Old YMBA Building, Colombo 8 12 South West Holdings Pvt Ltd., No. 40/2, Lake Gardens, Rajagiriya Before Mahinda Samayawardhena, High Court Judge Date 23.12.2013 Order This case is directly connected to case No. 41/2013/CO, and since the factual matters involved in this dispute were discussed in the order of the aforesaid case pronounced a little while ago, there is no necessity to repeat them here. This action was instituted by the petitioner (Jit Warnakulasuriya) as a shareholder and a director of the 1st Respondent Company (Serene Pavilions Ltd.) in terms of sections 224, 225 and 521 of the Companies Act No. 7 of 2007 upon the same facts as in the other case and also naming more or less the same parties as respondents seeking several declaratory and interim reliefs against the 2nd respondent (Anura Lokuhetty) and his associates. "The connected case No. 41/2013/CO which has been instituted before the institution of the instant case had also been called in the morning of the same day in another division of this court i.e. in Court 3 as per the proceedings of 23.09.2013 of that case. As per the said proceedings, the petitioner in the instant case who is also the 3rd respondent in that action had been present through his Lawyers when the Judge in Court No. 3 has made the following order: “Court orders the parties to maintain the status quo as it is of today.” It is a common ground that the two petitioners in both cases (41 & 42) are in one side supporting each other against Mr. Lokuhetty and his associates. The same learned President’s Counsel appears for him in both cases Learned President’s Counsel for the petitioner in case 41/2013/Co was also present in court when the application for ex parte interim orders were supported in open court in the instant case It must also been mentioned that notwithstanding the fact that this application was supported in a mighty hurry at about 3:40 p.m. on 23.09.2013, formal interim order was not filed by the petitioner for my signature and to be served on the respondents until 27.09.2013 for the reasons best known to the petitioner. There is a grave suppression of material facts. Hence I vacate the interim orders issued forthwith. " Upon application for interim reliefs supported ex parte this Court issued the interim orders predominantly preventing the 2nd and 3rd respondents (Mr and Mrs Anura Lokuhetty) from functioning as directors of the 1st respondent company. The 2nd and 3rd respondents have filed papers to vacate the interim orders forthwith on several grounds including suppression of material facts at the time of supporting the ex parte interim orders It is the trite law that suppression of material facts inter alia warrants outright dismissal of the application for interim relief in limine without going into the merits of the application. When an application for an interim relief is made ex parte it is the duty of the party who makes that application to place before court a full and truthful disclosure of all the material facts, he must act with uberrima fides 1. If he is remiss in his duty and has failed to carry out his imperative legal duty and obligation to court disclose all the material facts fully and frankly 2. the court will simply say: “We will not listen to your application because of what you have done.” 3 What is a material fact? The test is simple. “Every fact is material which would if known reasonably affect the mind of the Judge. In other words, is it possible that the Judge would have given a different order if the fact not disclosed was known?4 It is a cursus curiae of the Commercial High Court and to the best of my knowledge there is a Standing Order also, to file papers at least in the evening of the previous day when there is an application for interim reliefs/enjoining orders to be supported ex parte for the Judge to have some space to be acquainted with the facts of the case and the true nature of the application to be supported ex parte before he is called upon to make a decision impromptu which invariably entails serious repercussions and far reaching consequences. In the instant case, to my knowledge, papers have been filed in the afternoon of 23.09.2013 and application for interim reliefs was supported ex parte around 3:40 p.m. on the same day as a matter of great urgency. However, the connected case No. 41/2013/CO which has been instituted before the institution of the instant case had also been called in the morning of the same day in another division of this court i.e. in Court 3 as per the proceedings of 23.09.2013 of that case. As per the said proceedings, the petitioner in the instant case who is also the 3rd respondent in that action had been present through his Lawyers5 when the Judge in Court No. 3 has made the following order: “Court orders the parties to maintain the status quo as it is of today.” It is a common ground that the two petitioners in both cases (41 & 42) are in one side supporting each other against Mr. Lokuhetty and his associates6. It must also be remembered that the petitioner in 41/2013/CO expressly acknowledges Mr and Mrs. Lokuhetty as lawfully appointed directors of the 1st respondent company7 and goes even to the extent of protecting their rights against misdemeanours8. It is in that backdrop, the Judge in Court 3 has ordered to maintain the status quo as at that time in the presence of the parties including the petitioner of the instant case. In 41/2013/CO there is no application for interim relief against Mr and Mrs Lokuhetty. However, the petitioner in this action i.e. in 42/2013/CO (who is also the 3rd respondent in 41/2013/CO) did not disclose the said order made by the Judge in Court No. 3 a few hours ago when he successfully supported the application for interim orders ex parte to prevent Mr and Mrs Lokuhetty from functioning as directors. Simply stated had it been disclosed, I would never have issued those interim orders ex parte. It must also been mentioned that notwithstanding the fact that this application was supported in a mighty hurry at about 3:40 p.m. on 23.09.2013, formal interim order was not filed by the petitioner for my signature and to be served on the respondents until 27.09.2013 for the reasons best known to the petitioner. There is a grave suppression of material facts. Hence I vacate the interim orders issued forthwith. In any event, admittedly lawfully appointed two directors of the company, more importantly one being a founder member and the second largest individual shareholder of the company who claims to have made lots of scarification to make the company (the hotel) to what it is today, cannot summarily be sacked from the Board of Directors pending inquiry into the main matter. If he has done some wrongdoing, he must be dealt with separately. After all, both of them (Mr and Mrs Lokuhetty) cannot be a serious threat to the other directors because still those two are in the minority camp in the Board of Directors. The 2nd and 3rd respondents are entitled to costs of this inquiry from the petitioner. Signed Mahinda Samayawardhena, High Court Judge, Commercial High Court, Colombo 12. Alponso Appuhamy v Hettiarachchi (1973) 77 NLR 131 Blanca Diamonds Pvt Ltd. v Wilfred Van Els (1997) 1 Sri LR 360 at 362, 363 Collettes Ltd. v Commissioner of Labour (1989) 2 Sr LR 6 at 16, 17 Stroshein v Wawanesa Mutual Insurance Co (1943) 3 W.W.R. 509 at 512 The same learned President’s Counsel appears for him in both cases Learned President’s Counsel for the petitioner in case 41/2013/Co was also present in court when the application for ex parte interim orders were supported in open court in the instant case Vide paragraph 2 of the original petition of the petitioner dated 13.09.2013 in 41/2013/Co Vide paragraph (c) of the prayer to the petition in 41/2013/Co