Thangavelauthan v. Saverimuttu
1951Present: Gratiaen J. and Gunasekara J.THANGAVELAUTHAN, Appellant, and SAVERIMUTTU et al.,
S.C. 174—D. C. Point Pedro, 2,761
Trust-Sale of land by notarial deed—Parol evidence of trust or mortgage—Preventionof Frauds Ordinance, s. 2—Trusts Ordinance, s. 5 (3).
'Where a person transferred for consideration a land to another by a notarialdeed, and, thereafter, on the same day, the purchaser executed an independentnotarial lease of the land to the vendor for a certain period—
Held, that it was not open to. the vendor to prove by parol evidence thateither a trust or something resembling a mortgage or pledge was created.
ApPWAT, from a judgment of the District Court, Point Pedro.
N. E. Weerasooria, K.C., with H. W. Tambiah, for the plaintiffappellant.
H. W. Jayewardene, for the defendant respondent.
(1936) 1 Gh. Div. 365.
Cur. adv. wit.
GR ATIAETs J.—Thangavelauthan v. Saver imuttu
July 26, 1951. Gbatiaen J.—,
The first defendant and his wife Annamah were admittedly the ownersuntil 12th November, 1937, of the land which is the subject-matter ofthis action. Annamah died before these proceedings commenced, and thesecond to the eighth defendants are her legal heirs.
By a deed of conveyance PI of 12th November, 1937, attested by S.Sivagnanam, Notary Public, the first defendant and Annamah purportedto sell the land in dispute, as well as two other properties, to K. Iyaduraifor a consideration of Rs. 2,000 which was stated to be the full balanceamount due by the vendors to the vendee under the mortgage decree infavour of the latter in D. C., Jaflha, No. 265. Satisfaction of the decreewas duly certified of record. On the face of it, the deed is an out andout transfer..
Iyadurai was apparently arranging to leave for Malaya at this time,and immediately after the execution of PI he leased the property to thevendors for a period of six years at an agreed rental by 1)3 of the samedate. Here again, the terms of the lease afforded intrinsic evidencethat the legal title as well as the beneficial interest was acknowledgedto be in Iyadurai. The deed contains the usual covenants such as thecovenant to keep the property in good repair. On the face of thedocuments PI and 1)3, and by reason of the satisfaction of the decree inI). C., Jaffna, No. 265, the relationship of Iyadurai and the first defendanthad been converted from that' of creditor and debtor to that of lessorand lessee.
Some years after the expiry of the lease Iyadurai sold the land indispute to the plaintiff by the deed of conveyance P4 dated 24th June,1946. The plaintiff then instituted this action complaining that thedefendants were in wrongful possession of the property. He asked fora declaration that he was the lawful owner, and for ej'ectment anddamages.
The defence is that, notwithstanding the unequivocal terms of thedeed of conveyance PI, the first defendant and Annamah had retainedthe beneficial interest in the property. Their position is that they hadmerely conveyed the property to Iyadurai “ in trust ”, and subj'ect tothe terms of an informal agreement whereby Iyadurai had undertaken tore-convey the land to them within eight years on payment by them ofRs. 2,000 with interest calculated at the rate of 12 per cent, from the dateof PI. This defence was upheld by the learned District Judge, whodismissed the plaintiff’s action with costs.
There can be no doubt that, if one considers the claim of the defendantsapart from the alleged trust, the informal agreement relied on is byitself of no avail to them. It is obnoxious to the clear provisions ofsection 2 of The Prevention of Frauds Ordinance, and besides, the periodof 8 years within which a reconveyance could have been demanded, onpayment of the stipulated consideration, had long since elapsed. Theonly question which therefore remains for consideration is whether thecreation of the alleged “ trust ” has been substantiated. I shall assume,although I do not hold, that the evidence of the informal agreement isadmissible for the purpose of establishing such a trust.'
2*J. 5T. B 18636 (7/52)
GRATIAEN J.—Thangavelaulhan v. Saverimuttu
The case for the,, defendants is that before PI was executed Iyaduraihad for some time been pressing the first defendant and Annamah forrepayment of the balance sum due to him under the mortgage decreein his favour. Pin ally, according to the first defendant’s version, heinduced them to convey the properties, which were bound and executableunder the decree, to him “ in trust ” and on a promise that if they atany time within 8 years paid him the same consideration, i.e., Us. 2,000with interest, he would re-convey the property to them. No explanationhas been forthcoming either in the pleadings or in the evidence of thefirst defendant as to what precisely the parties intended or understood tobe the object or the purpose of this vague and nebulous “ trust ” whichis alleged to have been created. If there was any trust at all, it was,presumably, an express trust, and I concede that section 5 (3) permitsparol evidence to be led if its exclusion would otherwise operate so asto effectuate a fraud—Valliammai Atchi v. Abdul Majeed 1. Certainlythe transaction as it has been explained by the first defendant does notintroduce the notion of any resulting or constructive trust such as Iunderstand these terms. This is not a case, for instance, where Aconveys property to B for a consideration provided by C in circum-stances which indicate that the beneficial interest was to vest in C. Noris it a case where A purports to convey his property to B for a non-existent or fictitious consideration with a clear intention that only thelegal estate but not the beneficial interest should pass to the transferee.On the contrary, the facts here establish that the first defendant andbis wife sold the property to Iyadurai for valuable consideration which hehimself provided—namely, the full satisfaction of the decree which heheld and was entitled to execute against his vendors. The first defendantsuggests that the consideration was in fact inadequate. Even if thatwere true, it must be remembered that he was at the time in no positionto strike an advantageous bargain, and his remedy, if at all, would havebeen to claim relief under some other legal principle unconnected with thelaw of trusts. But in truth there is to my mind little substance in hissuggestion that the consideration was inadequate. In his plaint in D. C.,Jaffna, No. 2,625 instituted on 11th March, 1946, he valued all theproperties conveyed in 1937 by PI at Rs. 7,000 (vide P18). He admittedin evidence that the value of immovable property in this locality hadsince 1942 gone up “ even by 10 or 12 times ”. It cannot therefore besaid that the consideration of Rs. 2,000 paid in November, 1937, wastoo low.
It seems to me that in recent years many litigants have, through a- misunderstanding of the judgment of the Privy Council in ValliammaiAtchi's case, been encouraged to import some vague element of a “ trust ”into perfectly normal transactions of purchase and sale. That casedealt with a conveyance to a transferee for the purpose, inter alia, ofapplying the income of the property in settlement of the transferor’screditors including the transferee himself. This transaction, said SirJohn Beaumont, created an express trust, and parol evidence could beled to establish it so as to meet a fraudulent attempt on the part of thetransferee to repudiate the trust and claim the property as his own.The present case is entirely different.
i (1947) 48 N. L. P. 289 P. C.
GRATBtiJEN" J.—Thangav&authan v. Saverinvuttu
I pointed out to Mr. Jayawardene that, if the defendant’s contentioncould be sustained, Iyadurai’s position seemed, after accepting theposition of a trustee with nebulous obligations imposed on him, to bevery much worse than it had previously been. He had, upon the ex-ecution of PI, discharged the debt due to him under the mortgage decree.Had Iyadurai, I asked, any remedy to claim either his money or thebeneficial interest in the property after the 8 years period covered by theagreement to recovery had elapsed ? I understood Mr. Jayawardeneto reply that some kind of mortgage was in truth created by PI, andthat it would have been open to Iyadurai to enforce this so-called mortgageif the transferors did not claim a reconveyance within the stipulatedtime. This seems to me an impossible contention.. I am not aware ofany principle of interpretation by which an instrument which is in termsa sale can be construed as a hypothecation of immovable property. InPerera v. Fernando 1, Ennis J. and Sampayo J. held that “ where a persontransferred a land to another by a notarial deed, purporting on the faceof it to sell the land, it is not open to the transferor to prove by oralevidence that the transaction was in reality a mortgage, and that thetransferee agreed to reconvey the property on payment of the moneyadvanced ”. Their Lordships decided in the same context that thealleged agreement, if enforceable, to reconvey the property was “ not atrust but a mere contract for the purchase and sale of immovableproperty The decision of the Privy Council in Saminathan Chetby v.Vanderpoorten 2 is another authority of the Judicial Committee whichlitigants should not misunderstand. That case was concerned with theinterpretation of two contemporaneous notarial instruments the effectof which, read together, was to create “ a security for moneys advancedwhich, in certain events, imposed upon the creditor duties and obligationsin the nature of trusts ”.
There is one further ruling of the Privy Council to which I desire torefer, because it distinguishes, in clear and unambiguous terms, thefacts of the present case from the type of case where a transactioncreates either a trust or “ something resembling a mortgage or pledgeThis authority is Adicappa Chetty v. Caruppen Chetty 3. Stated shortly,it was alleged that A had arranged for the purchase of a land from Bwith money provided by C. The transfer from B was however executedin the name of the money lender C as the ostensible purchaser, but infact (so A alleged) as security for the repayment by him of the consider-ation, upon which repayment C was to transfer the property to A.Their Lordships held that parol evidence was inadmissible to prove anagreement of this kind. “ Such an agreement ”, said Lord Atkinson,“ created something much more resembling a mortgage or a pledge thana trust ”, and was of no force or avail in law if it contravened the provi-sions of The Prevention of Frauds Ordinance. In this context LordAtkinson, in connection with a contemporaneous transaction, madecertain observations which seem to be very appropriate to the presentcase. “ It is certainly a novel application of the equitable doctrineof resulting trusts ”, he remarked, “ that where an owner of property…. sells and conveys it to a purchaser who pays him the purchase
1 (1914) 17 N. L. R. 486.* (1932) 34 N. L. R. 287.
3 .(1921) 22 N. L. R. 417.
Obiyas Appuhamy v. The Queen
price, all which the .deeds recite in the case to have been done or to hedone, the purchaser is converted into a trustee for the vendor whom hehas paid This observation perfectly fits the present transactionwhereby, under PI, Iyadurai paid the consideration for the conveyancein his favour by releasing his vendors from their pressing obligation topay the judgment debt in D. C. Jaffna, No. 265.
I need not refer specifically to the many decisions of this Court in whicha,trust has been held to be established by parol evidence. The factswith which they were concerned are readily distinguishable. Indeed,even if full effect were to be given to the parol evidence tendered by thefirst defendant, no trust of any kind could in my opinion have beenproved. This case is on all fours with Carthelis Appuhamy v. SaiyaNona 1 and I would respectfully follow the opinion there expressed byKeuneman J. with whom Soertsz J. agreed.
I would set aside the judgment appealed from, and enter a decree infavour of the plaintiff in terms of paragraphs (1) and (2) of the prayerof the plaint. Unfortunately, the learned Judge has not answered theissue as to damages. The case must therefore be remitted to the Courtbelow so that the present District Judge of Point Pedro may, afterhearing evidence, award damages to the plaintiff against the defendantsfor their wrongful possession of the property from 4th September, 1946,until date of ejectment. The writ of ejectment should, however, beissued forthwith.
The plaintiff is entitled to the costs of this appeal and of the trial inthe Court below. The other questions which were argued before usdo not arise for consideration.
Gunasekara J.—I agree.
Judgment set aside.
THANGAVELAUTHAN, Appellant ,and SAVERIMUTTU et al, Respondents