GRATIAEN J.—Justin de Silva v. f>on Niculas
1954Present : Gratiaen J. and Gunasekara J.M. JUSTIN DE SILVA, Appellant, and P. DON NICULAS,
S. C. 20Q—D. C. llegombo, 15,839
Paulian action—Conveyance of ■property in fraud of creditors—Several colourabletransactions—Civil Procedure Code, s. 247.
Alienation of property in fraud of creditors may consist of a series ofcolourable transactions in respect of the same property.
J^^.PPEAL from a judgment of the District Court, Negombo. .
N.E. Weerasooria, Q.C., with H. A. Koaltegoda, for the 1st defendantappellant.1
E. G. Wikramanayake, Q.C., with W. D. Gunasekere, for the plaintiffrespondent.
Cur. adv. milt.
May 10, 1954. Gratiaen J.—
This is an appeal against a judgment in a “ 247 action ’’.declaring thatthe property in dispute belongs to the plaintiff and is not liable to beseized and sold in execution of a money decree dated 21st February 1950in favour of the appellant against the 2nd defendant.
GRATIAEN J.—Justin de Silva v. Don Niculaa
Admittedly the property belonged to the 2nd defendant until he con-veyed it by P3 dated 16th June 1949 to his wife the 3rd defendant. Shein turn conveyed it by P4 dated 12th November 1949 to the 4th defendantwho purported to. sell it to the plaintiff by P5 dated 20th March 1950.
The appellant alleges that P3, P4 and P5 were all colourable trans-actions whereby the 2nd defendant, who at all times continued in occu-pation of the property, fraudulently contrived to defeat his creditor theplaintiff. He accordingly asked in reconvention that P5 be set asideos having been executed in fraud of creditors.
The learned Judge took the view that the evidence was insufficientto establish the fraud alleged against the plaintiff and the 2nd to the4th defendants. In my opinion, however, the allegation has been provedbeyond reasonable doubt, and the facts established at the trial are quiteinconsistent with the theory that P3, P4 and/or P5 were genuinetransactions..
Certain dates are very material to the issue of fraud. On 16th June1949 the appellant sued the 2nd defendant and another person underChapter 53 of the Civil Procedure Code in D. C. Negombo No. 15,343 forthe recovery of R;. 1,950/77 due to him on a promissory note. On thesame day the 2nd defendant purported to sell this property (which wasadmittedly his only valuable asset) to his wife the 3rd defendant for a“ consideration ” of Its. 500j- which did not pass before the notary. (The2nd defendant had himself paid four times this sum when he purchasedthe property 10 months earlier.) It is not seriously pretended that thiswas a genuine transaction, and.it is quite clear that the 3rd defendantwas in truth her husband’s nominee. This was the first step in the fraudwhich he had planned to defeat the appellant’s claim.
In the promissory note action, the 2nd defendant was granted leaveto defend the action on condition that he deposited security in the sumof Its. 1,000/-in cash or Rs. 2,000/—by hypothecation of immovable pro-perty. He failed to comply with this condition and, in order to gainfurther time, he filed an appeal to this Court on 12th September 1949.Pending the hearing of this appeal, his wife purported to sell the propertyto the 4th defendant (a relation of the 2nd defendant). The attestingnotary was the 2nd defendant’s proctor in the promissory note action,and (if he searched the register of encumbrances as he said he did) hemust have discovered that the appellant had registered a caveat on 4th July1949 in respect of this property. No doubt the purported “ consideration ”passed before the notary, but as the 4th defendant has not had a day’spossession of the land since his so-called purchase, I am perfectly satis-fied that P4 was also a colourable transaction. This was the second stepin the fraud.
The 2nd defendant’s appeal in D. C. No. 15,343 was dismissed withcosts, and the record was returned to the District Court of Negombo on28th January 1950. Judgment in favour of the appellant was enteredagainst the 2nd defendant on 21st February 1950. The 2nd defendantwas examined under section 219 of the Civil Procedure Code on 16th. March 1950 and disclosed no realisable assets against which executionproceedings could be taken. He mentioned however that he had ownedthe property in dispute until he “ sold ” it to his wife.
GRATIAEN J.—Justin de Silva v.’Qon Ntcxdae
On 17th March 1950 a writ was issued to the Fiscal to seize and sellthe 2nd defendant’s property. The final stages of the fraud were thentaken in hand. A relative of the 2nd defendant (one Vincent de Paul)instructed notary Payoe to prepare a conveyance from the 4th defendantin favour of a man named Femandopulle. A draft deed and protocolwere accordingly prepared, but Femandopulle apparently declined togo through with the transaction. At 9.15 a.m. on 20th March 1950 theFiscal’s officer attempted to seize the property, but was forciblyprevented from doing so by the 2nd defendant’s wife, who “ said that ifthe seizure notice was affixed on the land she would assault him ” (1D13)and eventually “ began to cry out saying that if the land was seized shewould die on the spot ” (1D14). This hysterical demonstration clearlyindicates that she regarded the property as still belonging to herselfand her husband and not to the 4th defendant. The 4th defendant wasnot present to protect his alleged title.
In consequence of the incidents which took place at 9.15 a.m. on20th March, the Fiscal’s officer was unable to effect a seizure in pursuanceof the writ until two days later. In the meantime, the man Vincent dePaul (who was also closely related to the plaintiff) arrived at notaryPayoe’s office and said that the plaintiff was prepared to purchase theproperty in the place of Femandopulle. Accordingly, the name ofFemandopulle was erased from the protocol and from the draftconveyance, and the plaintiff’s name was substituted as purchaser. Inall the hurry which took place, the plaintiff “ dispensed with a searchfor encumbrances ”.
In spite of this purported purchase, the 2nd defendant and his wifecontinued to occupy the land. The plaintiff says that they did so per-missively, but that he took the produce from the trees. His proctor’sunqualified admission to the Court at the claim inquiry, however, wasto the effect that the 2nd defendant v/as in possession.
We have here a strong body of circumstantial evidence which compelsone to infer that the plaintiff had merely lent his name to a transactionwhereby the 2nd defendant fraudulently attempted to defeat his creditor.In -view of all these circumstances, the purported payment of the“ consideration ” in the notary’s presence was, I am convinced, a colour-able device. The plaintiff has not led any independent evidence toprove that he possessed sufficient funds of his own with which to makea genuine but speculative purchase at very short notice and withoutinvestigation of title, and the 4th defendant has not given evidence fromwhich we can test the reality of his participation in this impugned trans-actions. The 2nd defendant and his wife did not make the slightestattempt to explain away the many incriminating features of their conductwhich calls for explanation.-
I would allow the appeal and dismiss the plaintiff’s action with costsin both Courts in favour of the appellant. I would also order a decreein favour of the appellant in terms of paragraphs (6) and (c) of his answerdated 9th October 1950.
Gunasekara J.—I agree.
M. JUSTIN DE SILVA , Appellant , and P. DON NICULAS Respondent
GRATIAEN J.—Justin de Silva v. f>on Niculas