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December 3. SUPRAMANIAN CHETTY V. GUNEWARDENE et al.
D. C., Malar a, 26,193-
Deed of gift—Fraud on creditors—Donor in possession of property gifted—Solvency of donor—Gifting away all property belonging to donor—Secret execution—Effect of registration as disproving secrecy -Evidence of conspiracy against creditors.
Neither a donation nor a sale would be considered fraudulent ifthe donor or vendor were solvent at the time he made it; but thegift by a solvent person of the whole or of the bulk of his propertymade deliberately intending to contract debts with people whomight believe him to be still the possessor of that property, and soto defraud them, should be held to be a fraudulent transaction.
The prompt ■ and regular registration of a deed of gift is acircumstance which shows that the gift was not fraudulently made,inasmuch as it removes secrecy, which is the usual badge of fraud,and affords every opportunity for any party to ascertain that theproperty gifted by it has passed from the donor to the donee; and thefact of a donor remaining in possession with his children of a partof his property gifted by him to them, taking some of the nuts ofthe land, does not prove that the family were living in a state ofconspiracy against creditors.
KIS action was raised by the plaintiff to have a deed granted
by one Pugita Gunewardene to the defendants set aside asa fraud on the creditors of the grantor. Plaintiff alleged that heobtained judgment against the grantor in suit No. 24,086 ; that hecaused the Fiscal to seize a garden called Battalawatta as theproperty of his judgment-debtor ; that the first, second, and third
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defendants, who are the sons of the grantor, and the fourth andfifth, who are the sons-in-law of the grantor, claim the land astheirs by virtue of the deed of gift above-mentioned. Plaintiffprayed that the deed may be set aside, and the land in questiondeclared liable to be sold under his writ No. 24,086.
Defendants pleaded that their claim was good under the deed ofgift and was not fraudulent. On the evidence led the DistrictJudge found that the grantor was not heavily indebted, nor wereall his properties gifted ; that the debt in question was not incurredtill nearly two years had elapsed since the date of the deed of giftand that though the donor was in possession of 'the land gifted,yet such possession was with the permission of the donees. Hetherefore dismissed the plaintiff’s case.
Cayley, Q.A., for appellant
Cur, adv. vvlt.
3rd December, 1872. Cbeasy, C.J., delivered the judgmentof the Court as follows :—
The distinct and sole issue in this case was whether (as allegedin the words of the libel) “ the deed of gift was a fraudulent onegot up for the purpose of defrauding creditors.” The pleadingsdid not raise the question whether at the time of the plaintiff’sexecution there was not other property of the donor’s to whichthe plaintiff ought to have resorted before he levied on the landwhich was the subject of the gift. The affidavits now tenderedby the plaintiff apply to this irrelevant question, and have only avery remote bearing on the question, whether the donor at thedate of the gift several years before had any other property, whichlast-mentioned question might certainly affect the inquiry as tothe donor’s motived when he gifted away this particular land.
The date of the gift of this land is 8th December, 1866. Oneof the donees personally accepted it on behalf of all; on the 31stof the following month they all registered the deed of gift in theRegistrar of Lands’ Office for their district. This is a veryimportant fact, and has weighed much with us in determining thiscase.
The plaintiff did not become a creditor of the donor until 14thNovember, 1867, when he lent him some money on a promissorynote.
We entered very fully into the law as to donations in two judg-ments delivered by us during the present sittings in D. C., Batticaloa,16,836 (reported at p. 274, supra), and in D. C., Jaffna, 20,463 (seep. 271 supra). Inthefirst-mentionedjudgmentwecitedapassagefrom
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Burge, vol. III., p. 607, that “ neither a donation nor sale would“ be considered fraudulent if the donor or vendor were solvent at“ the time he made it, and if the disposition had not caused him“ to cease to be so.” Now it does not appear that the donor in thepresent case owed any man anything at the time of this deed ofgift (we will mention presently what we consider to be the truesense of a certain phrase in the deed of gift, which might be quotedas implying indebtedness). The present plaintiff certainly didnot become a creditor till nearly a year afterwards, and he is theonly creditor whom we hear of. Unquestionably, if it were clearlyproved that a deed of gift of the whole or of the bulk of his propertyhad been made by a man solvent at the time, but deliberately intend-ing to contract debts with people who might believe him to be stillthe possessor of that property and so to defraud them we shouldhold such a transaction to be fraudulent and void. But this doesnot appear to be a case of the kind. So far as the evidence goes .(irrespectively of the list of property afterwards signed by theplaintiff, and as to which his affidavits are tendered), the deeddid not gift away all the donor’s property ; and (what is mostimportant of all) is the fact that the deed gifting this property waspromptly and regularly registered by the parties, so that any onewho chose could ascertain the fact of this deed’s existence andof the land having passed by it from the donor to the donees-Secrecy, which is the usual badge of fraud, is proved not to havebeen practised on this occasion.
If the plaintiff had been a creditor at the time of the deed ofgift, this would have been to a great extent immaterial; but it isvery important when we have to consider whether the donor intendedto trap and defraud future creditors by pretending to be still ownerof the land.
It is said that the donor continued to be in„possession. But itseems to us that the children, the donees, had possession; andthe fact that the donor, their father or father-in-law, continued tolive on part of the land and sometimes had some of the fruits ofthe land does not prove that the family were living in a state ofconspiracy against creditors.
It is urged that the father, the donor, held hirqself out to theworld as continuing owner by giving a certain notice to theDistrict Road Committee about opening a road over this land-But when the whole passage of the examination is read, andwhen it is remembered that this was a .hostile examination,during which words are almost put into a .party’s mouth withoutthere being any opportunity for him to explain them, there seemsto he little force in this objection. The defendant said: “ I
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“ remember the District Road Committee opening a road over 1872.
“ this land after the gift deed. My father-in-law gave Mr. Iiesching ®ecernf>er 3.“ notice of action; we took steps in the matter.” Here, again, Cbeasy, O.J.the fact of the registration of the deed is most important. Thedonor and his family could not expect that the execution of thisdeed would remain unknown to the authorities if any litigationabout this land ensued.
It is also urged that the peculiar phraseology of this deed, whereit speaks of the land not being liable for the donor’s debts, shows afraudulent intention, and also that the donor could have had nohonest intention in gifting the lands to these five donees, inasmuch asafter the donor’s death it would have become theirs by inheritancewithout the necessity of any deed.
These arguments deserved and have received consideration, buta careful examination of the special clause of the deed in questionhas bj' no means satisfied us that the donor framed it with a designof defrauding his creditors.
We will oite the material parts of the deed. The father andmother appear in the deed as donors. They give the land to bepossessed as follows : “to be possessed by our said five children“ according to the manner appointed by us from generation to“ generation : and have agreed that the shares of the said Battala-“ watta or Gedarawatta may be possessed by the said five children“ or their heirs; and in case if any of the said persons happen or“ their heirs happen to die having no issue, their shares should“ devolve on the surviving persons or their heirs, and no person“ becoming possessed of any tree or ground of said land can sell,
“ gift over, mortgage, or lease beyond a term of five years;
“ besides these restrictions after this our gift, this land cannot be“ subjected to any for our debts, or that of those who is to be the“ owners hereafter, or securities, or fines of Government, or the“ public, neither can it be sold under a writ; besides of the five“ persons who obtain this gift, should there happen not to survive“ any person by blood relationship, it should then revert to the“ then reigning Government, and cannot happen otherwise.”
It seems to us that this donor’s great object was to create anentail of this land, so that it should continue to belong to hisfamily without the possibility of any part of it being alienated orencumbered or taken away from them. He winds up by maltingan ultimate remainder man of the Government, as if he therebysecured what we. should call an effective protection of the settle-ment. Whether the donor was a good conveyancing lawyer ornot, matters nothing. But we think it clear that the desireof leaving an inalienable and thoroughly secured family estate,
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Creasy, C. J.
the desire that has been so common in all nations and all ages,was the ruling idea in the mind of this Sinhalese landowner. Hewished seemingly to have the satisfaction of feeling that he wasthe founder of a family, and to have that satisfaction at once.His mention of “ our debts ” among the things that were not toaffect the entail does not argue a consciousness of insolvency ora design to become insolvent, but is no more than the expressionof a purpose that the land should not, like the rest of his estate,be subject to contribution for any liabilities which he might beunder at his death, but that it should pass at once intact as familyproperty, and that it should remain intact to support the family aslong as any of the family existed. Whether he was not assumingentailing powers beyond the limits of law is immaterial; the questionis whether he made the gift for the purpose of defrauding his creditorsand that does not appear to have been the case.