M. Sampath K. B. Wijeratne J.

Introduction -

The Plaintiff Appellant (hereinafter referred to as ‘Appellant’) in this matter is a businessman who was involved in a business ‘G. Seelanathakuruppu and Sons (Tea Export) limited’ since 1990s. According to the Appellant, owing to his health issues coupled with his age, he wanted to release himself from administering his affairs and wanted to delegate the same to a professional company. Therefore, he had approached the 1^st Defendant - Respondent (hereinafter referred to as ‘1^st Respondent’) who is a professional Asset Management Company for the purpose of managing, investing and administering his funds. Accordingly, a Fund Management Agreement (‘P4’) has been entered into between the Appellant and the 1^st Respondent on 18.08.2005.

The 1^st Respondent as already stated engages in the business of portfolio investment management whereas the 2^nd Defendant - Respondent (hereinafter referred to as 2^st Respondent) is a licensed stock broker operating in Colombo stock Exchange who is entrusted with the management of the funds of the Appellant entrusted with the 1^st Respondent Company.

Appellant originally filed this action against 1^st and 2^nd Respondents in the Commercial High Court of Western Province. The basis of his claim, as pleaded, is that the Appellant has suffered losses of Rs. 6,200,870 by wrongful acts and/or breach of contractual obligations and/or negligence and/or recklessness of the Respondents in managing and investing the funds of the Appellant and there was an unjust enrichment on the part of the Respondents.

In their answer, the 1ˢᵗ and 2ⁿᵈ Respondents denied the Appellant’s claim and sought to dismiss the action.

After trial, the learned Commercial High Court Judges held that the Appellant have failed to prove the purported cause of action and dismissed the action with taxed cost. Being dissatisfied with the judgment of the Commercial High Court, the Appellants preferred the instant appeal before this Court seeking to set aside the judgment of the Commercial High Court and to get the relief prayed in the plaint tendered to Commercial High Court in HC(Civil) 97/2008/MR.

Breach of contract

The relationship between the Appellant and the Respondents primarily arisen out of the Fund Management Agreement (‘P4’) where Appellant entrusted the management of fund constituting a sum of fifteen million Rupees to the 1^st Respondent, Bartleet Asset Management (Pvt) limited.

The Appellant states that the Respondents are in breach of following provisions of the said Fund Management agreement.

-Schedule 1 item 5 The manager shall make every effort to make the maximum possible return to the assignor that is not below the rate of - risk free return prevailing on the commencement date. That is nine per centum per annum.

-Schedule 1 item 5.1 However the manager thrives to make a minimum retune of sixteen per centum per annum. [emphasis added]

It is the submission of the Appellant that as per the said clause Appellant is guaranteed with minimum return of 9% per annum and obliges the Respondent to aspire to provide a return of 16% per annum.

When closely reading the aforesaid provisions, there is nothing in the provision that compel the Respondent to guarantee minimum return of 9% per annum as evident in the phase ‘shall make effort’ which only requires the Respondents to make best possible effort to achieve such target.

Here it is noteworthy that the agreement entered into between the Appellant and the 1^st Respondent is an agreement to manage and invest the funds of the Appellant in different portfolios, in essence a ‘risky business’ considering the fact there will always be a probability of incurring losses relative to the expected return on the capital one put into investment irrespective of the type of the investment you undertake.

In BP Southern Africa (Pty) Ltd v Mahmood Investments (Pty) Ltd, [2010] 2 All SA 295. (SCA) Lewis JA stated the following in a unanimous judgment at para [11],

“It is settled la