IN THE SUPREME COURT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA In the matter of an appeal in terms of Section 5C of the High Court of the Provinces (Special Provisions) Act No. 10 of 1996 as amended by High Court of the Provinces (Special Provisions) (Amendment)

Act No. 54 of 2006.

1. Pallocci Donatella, S.C. Appeal No. 08/2017 145, via Leornadi, SC/HCCA/LA No. 322/2016 Roma, Italy.

SP/HCCA/MA/45/2012 (F) And presently resident in Unawatuna.

D.C. Matara Case No. 9844/M

2. Palermi Luca, 07, via Benucci, Roma, Italy.

And presently resident in Unawatuna.

Plain Vs.

Yamuna Kanthi Stein, No. 158, Kapparatota Road, Weligama. Defendant AND Yamuna Kanthi Stein, No. 158, Kapparatota Road, Weligama.

Defendant-Appellant Vs.

1. Pallocci Donatella, 145, via Leornadi, Roma, Italy.

And presently resident in Unawatuna.

2. Palermi Luca, 07, via Benucci, Roma, Italy.

And presently resident in Unawatuna.

Plaintiff-Respondents AND NOW BETWEEN 1. Pallocci Donatella, 145, via Leornadi, Roma, Italy.

And presently resident in Unawatuna.

2. Palermi Luca, 07, via Benucci, Roma, Italy.

And presently resident in Unawatuna.

Plaintiff-Respondent-Appellants Vs.

Yamuna Kanthi Stein, No. 158, Kapparatota Road, Weligama.

Defendant-Appellant-Respondent Before: Hon. Yasantha Kodagoda, P.C., J.

Hon. Janak De Silva, J.

Hon. Arjuna Obeyesekere, J.

Counsel:

Geoffrey Alagaratnam, P.C. with Lasantha Garusinghe and Nilakshi Silva for Plaintiff-

Respondent- Appellants Saliya Pieris, P.C., with Pasindu Tilakaratne for Defendant-Appellant-Respondent Written Submissions:

Appellants on 24.03.2017 Respondents on 06.06.2017 Argued on: 17.03.2025 Decided on: 03.04.2025 Janak De Silva, J.

The Plaintiff-Respondent-Appellants (“Appellants”) and the Defendant-Appellant- Respondent (“Respondent”) entered into a lease agreement No. 13548 dated 23.08.2004 (P1) (“lease agreement”). In terms of the lease agreement, all that soil plantations and buildings bearing new assessment No. 524 at Pelana more fully described in the schedule to the lease agreement was leased to the Appellants for a period of five (5) years commencing on 15.11.2004. The leased premises included all fixtures, fitÝngs and equipment therein described in a separate inventory signed by the parties. In fact, parties entered into agreement No. 3125 (V1) for the furniture, fitÝngs and other movable property at the property forming the subject matter of this application. In terms of this agreement, the movables described therein becomes part and parcel of the lease agreement (P1).

Monthly rental for the first year commencing on 15.11.2004 was Euro 1400 per mensem making the annual rental Euro 16800. Out of this, Euro 1500 was paid by the Appellants on the date of execution of the lease agreement i.e. 23.08.2004. The Appellants further credited Euro 5500 as part of the entire rental due for the first year immediately after one week from the signing of the lease agreement. The entire balance of the lease rental for the first year was paid by the Appellants on 15.11.2004 on which day the vacant possession of the property was handed over to the Appellants. The Appellants also paid Euros 2000 being the security deposit. These are admitted facts.

The dispute between the parties revolves on the damage caused to the property by the tsunami that occurred on 26.12.2004. According to the Appellants the property was destroyed resulting in the frustration of the contract.

Hence, the Appellants instituted this action to recover a sum of Euro 16840 (Sri Lankan Rupees 21,50,299.60) being the balance from the lease rental paid after deducting the rental due for the period 15.11.2004 to 26.12.2004. The Respondent denied this claim.

The learned District Judge held that although the property was not completely destroyed, it was destroyed to the extent that it could not be used for the intended business and entered judgment as prayed for in the plaint.

The Respondent appealed to the Civil Appellate High Court of the Southern Province holden at Matara (“High Cour