Background of the Case

The dispute arises from a contractual agreement between the Plaintiff and Defendant, entered in 2012, regarding the construction of chalets on a beachfront property. The Plaintiff, as the contractor, carried out construction based on certified Interim Payment Certificates (IPCs) issued by Mano Ponniah Associates Pvt. Ltd., the project’s appointed chartered architects and engineers. Payments were to be made by the Defendant upon receipt of the IPCs.

The Plaintiff claimed that the Defendant failed to settle IPCs No. 08 to 11, resulting in outstanding dues amounting to Rs. 38,772,993.82. This sum included costs for site overhead, remobilization, retention fees, and interest. The Defendant contested the claim, arguing errors in calculation, lack of contractual provisions for interest, and disputing additional costs.

Court: Commercial High Court of the Western Province, Colombo
Case Number: CHC/791/19/MR
Judge: Hon. Pradeep Hettiarachchi, H.C.J
Date of Judgment: May 31, 2024

Parties Involved:

• Plaintiff: Siem Constructions (PVT) Ltd., a company engaged in the building construction industry.
• Defendant: Anilana Hotels & Properties (PVT) Ltd., a company owning a land development project.

Key Issues

1. Whether the Defendant failed to remit payments for IPCs No. 08 to 11 as agreed.
2. Whether the Defendant is liable for site overhead costs, preliminary costs, site remobilization costs, and retention fees.
3. Whether interest can be charged on the outstanding amounts in the absence of an explicit contractual provision.
4. The credibility and sufficiency of the evidence presented by the Plaintiff.

Evidence Presented

By the Plaintiff:

1. Witness Testimony:
   • C.E.M. Ponnaiah, Chartered Architect:
     • Explained the process of preparing IPCs, conducting site inspections, and issuing valuations.
     • Confirmed that IPCs No. 08 to 11 were issued for Rs. 646,899.63, Rs. 4,412,806.76, Rs. 5,039,490.74, and Rs. 5,755,712.73 respectively.
     • Testimony remained uncontested as the Defendant did not cross-examine him.
   • M.L.M.P. Devinda, Accountant:
     • Testified that Rs. 38,772,993.82 was due, including Rs. 12,538,986.88 as interest.
     • Highlighted Defendant’s acknowledgment of Rs. 15,013,547.10 in payments owed (excluding disputed costs).
2. Documentary Evidence:
   • IPCs No. 08 to 11 (P3(a), P4(a), P6(a), P8(a))
   • Statement of account (P12)
   • Letter dated 04.04.2016 (P13): Acknowledgment by the Defendant of certain outstanding payments.
   • Demand letter dated 30.06.2016 (P14)

By the Defendant:

• No witnesses or evidence were presented. The Defendant primarily contested calculations and the interest claim.

Court’s Analysis and Findings

1. Failure to Settle IPC Payments:

The Defendant acknowledged amounts due in their letter (P13), particularly regarding IPCs No. 08 to 11. The court found no evidence suggesting these claims were disputed or resolved. Therefore, the Plaintiff’s claim for these payments was upheld.

2. Liability for Additional Costs:

The Defendant disputed preliminary costs, remobilization costs, and retention fees but did not provide evidence to counter these claims. Furthermore, these costs were not challenged during cross-examination. The court accepted the Plaintiff’s claims as proven on a balance of probabilities.

3. Interest on Outstanding Payments:

While the Defendant argued that the contract did not allow interest charges, the court noted the Defendant’s failure to fulfill payment obligations within a reasonable timeframe. Relying on legal precedents, the court determined that the Plaintiff was entitled to claim legal interest despite the absence of an explicit provision.

4. Sufficiency of Evidence:

The Plaintiff’s witnesses provided uncontradicted and credible testimony. The Defendant neither cross-examined key witnesses nor objected to the Plaintiff’s documents at the trial’s conclusion. Citing relevant case law (“Sri Lanka Ports Authority v Jugolinija” and “Cinemas Ltd. v Sounderarajan”), the court admitted the Plaintiff’s documentary evidence.

Key Legal Precedents Referenced

1. Edrick de Silva v Chandradasa de Silva (1967):
   • Unchallenged evidence strengthens the Petitioner’s case.
2. Cinemas Ltd. v Sounderarajan (1998):
   • Failure to contradict evidence or present rebuttal testimony results in its acceptance as proof.
3. Sri Lanka Ports Authority v Jugolinija-Boal East (1981):
   • Documents unobjected at the close of a case become admissible as evidence.

Conclusion and Judgment

The court concluded that the Defendant failed to remit payments for IPCs No. 08 to 11, settle additional costs, or counter the Plaintiff’s claims effectively. Despite the absence of an interest provision in the contract, the court allowed legal interest on delayed payments. Accordingly, the Plaintiff was awarded:

• Principal Amount: Rs. 26,234,006.93
• Interest: Rs. 12,538,986.88
• Total: Rs. 38,772,993.82

Significance of the Judgment

This case underscores the importance of:

1. Timely Payment Obligations: Failure to settle payments may attract legal interest even without explicit contractual terms.
2. Presentation of Evidence: Unchallenged evidence and failure to rebut claims significantly weaken a defense.
3. Documentary Precision: Acknowledgments of dues and lack of objections to evidence can decisively influence outcomes.

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