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1927.Present: Garvin J.
MEERA SAIBO v. AY AN SINNAVAN et al.
203—C. B. Batticaloa, 4,295.
Paulian action—Consideration paid by alienee—Participating in fraud—Defence.
In a Paulian action the fact that consideration was given by thealienee does not afford him a complete defence where he hasparticipated in a scheme to defraud the creditors.
PPEAL from a judgment of the Commissioner of Requests,Batticaloa.
V. Perera, for plaintiff, appellant.
H. Bartholomeuse, for defendants, respondent.
May 20, 1927. Garvin J.—
This is an action under section 247 of the Civil Procedure Code tohave certain allotments of land declared liable to be seized and soldin satisfaction of a judgment obtained by the plaintiff in caseNo. 4,271 of the Court of Requests of Batticaloa. During thependency of that action the first defendant conveyed the premisesto the .second defendant. This transaction is impeached as analienation in fraud of creditors.
It would seem that this plaintiff had also obtained judgment inanother case against K. Sinniah and seized his interests in certainother allotments of lands. The second defendant claimed them byright of purchase, and that transaction was also impeached in anaction No. 5,810 of the District Court of Batticaloa, which waspending when the case now under consideration came up for trial.The transactions impeached in these two cases are intimatelyconnected, and all matters relating to the two alienations were fullygone into in this case by agreement of parties.
It is beyond question that the first defendant and Sinniah madethese alienations with the intention of defrauding their creditor theplaintiff. It is said that they thought they were morally justifiedin so acting, because though they had no defence to the claims madeby the plaintiff as endorsee of certain promissory notes inasmucha6 the debt due by them on those notes had been paid to theoriginal payee. This was doubtless the moving cause. Thissomewhat distorted view of the morality of the matter does not,
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however, affect the question. Their purpose was to put thisproperty beyond the reach of the plaintiff and thus defraud him ofwhat has been held to be justly due to him.
It is also evident that if this transaction is to be permitted tostand, their purpose will be fully effectuated, as they will then haveplaced all their property out of tfhe reach of* the plaintiff.
The District Judge has found, and I think quite rightly, that thesecond defendant took these transfers with full knowledge of theclaim of the plaintiff and well knowing that the object of the alienorswas to defeat that claim if possible. “ It is quite likely, ” says theJudge, “that second defendant thought he was morally justified inrendering whatever help he could to Sinnavan (first defendant) andSinniah against the plaintiff, who was suing as endorsee of adischarged promissory note. *’
He has also found that these transfers, though they purport on theface of the deeds to be out-and-out conveyances on sale, were in factmade subject to the condition that the lands which formed thesubject of these transfers were to be reconveyed by the seconddefendant to the first defendant and Sinniah when they dischargedtheir debt to him. The first defendant and Sinniah remained inpossession of their lands, and have continued to add to* and improvethe buildings standing thereon.
Despite this clear finding of the second defendant’s participationinfurtherance of the intention of the first defendant and Sinniahto defraud the plaintiff, the learned District Judge thought thatinasmuch as the second defendant gave consideration for thetransfers he obtained an indefeasible title. The transfers in questionmarked D 3 and D 4 purport to have been made in consideration ofEs. 600 and Es. 993 respectively, making a total of Es. 1,593. Theplaintiff denied that any consideration was given. No moneywas paid at the time these transfers were executed. But thesecond defendant contended that he was a creditor to whom thefirst defendant and Sinniah owed a sum of Es. 2,500. Upon theevidence, which is not very satisfactory, I do not think the amountdue to the second defendant can fairly be assessed at more thanEs. 2,000. He says now that he took the conveyance in full settle-ment of the debt due to him, but this is not the considerationexpressed on the deeds.
With full knowledge of the circumstances, and in furtherance ofthe scheme to defeat the claim of the plaintiff, this defendant took atransfer of property worth at least Es. 2,900 when the debt due tohim was approximately Es. 2,000, upon the understanding that ifat a later date the amount found due to Him be paid the propertywas to be retransferred.
It may be that the first defendant and Sinniah will have difficultyin enforcing the agreement to reconvey should the second defendant
Mura Saibov. AyanSinnavan
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Meera Saibov. AyanSinnavan
refuse to do so. Those who enter into agreements of this nature doso with persons whom they believe they can trust to abide by them,and necessarily take the risk of possible loss in the event of theirconfidence proving to be misplaced. This consideration does not,however, alter the true nature of the transaction, which is a devise todefraud the plaintiff, in which the first defendant, Sinn rah, and thesecond defendant jointly participated.
The fact that good consideration was given by the alienee isa circumstance which is entitled to great weight in consideringwhether or not there was good faith on. the part of the alienee. Butin the absence of express authority for that proposition I cannotagree that the mere fact that consideration was given by the alieneeaffords the alienee a complete defence to a Paulian action, evenwhere it is plain that he has participated with the defraudingdebtors in a scheme to defraud creditors. The second defendantis a creditor who in collusion with , the defrauding debtors and infurtherance of that fraud took this conveyance of property by atransaction which was designed to defeat the claim of the plaintiff,while at the same time securing to him the repayment of his debtand to the defendants an opportunity of recovering their propertyon payment of the debt due to him alone.
He cannot claim to be in the position of a person who takes atransfer of property in good faith and for valuable consideration.
The plaintiff is entitled to the relief he claims. The appeal isallowed, with costs in both Courts.
MEERA SAIBO v. AYAN SINNAVAN et al