Bank of Ceylon, Jaffna v. ChelHahpiUai
[In the Privy Council]
1962 Present: Lord Radcliffe, Lord Cohen, Lord Keith of Avonholm,
Lord Hodson and Lord Devlin
THE BANK OF CEYLON, JAFFNA, Appellant, and
K.A. CHELLIAHPILLAI, Respondent
Privy Council Appeal No. 52 of 1960
S.C. 693 of 1956—D. G. Jaffna, 10403
Mortgage—Execution of a second bond some time after the first bond—Second bondgiven “ by way of further and additional security ”—Hypothecary action broughton the second bond cdone—Maintainability—Mortgage Act of 1949, s. 7—Amendment of pleadings and framing of issues—Scope—Civil ProcedureCode, ss. 93, 146.
By bond No. 208 made on 27th February 1951 the defendant mortgagedcertain goods to secure an advance of Rs. 20,000. On 20th February 1952,when the sum owing to the creditor (a Bank) was Rs. 14,792, the mortgagorentered into a second bond No. 3427 whereunder he mortgaged certain land “ byway of further and additional security ” for the due payment of that amount.
The Bank instituted the present hypothecary aotion on the second mortgagebond No. 3427. The rpain defence to the Bank’s plaint Was put forward simplyas a point of pleading. The plaint referred only to the second or accessorymortgage bond, although there was no defect in the first or principal bond-Moreover, it was erroneously alleged in the plaint that the personal covenantto repay was contained in the second bond whereas it was contained only in thefirst; all that was done by the second bond was to give further security for thedebt. It.was pleaded in the Answer “ that no claim for the payment of anysum of money can be made on the said Deed No. 3427 ”.
Held, that the action was simply a hypothecary action; and to succeedin it the plaintiff needed to prove only the validity of the bond No. 3427 grant-ing the land as security and the existence of a debt so secured. How thedebt was created was for this purpose immaterial and the first bond was nottherefore an essential part of the cause of action. It could without beingpleaded he produced in evidence to prove the debt.
Held further, that the fact that a lorry, which was one of the goods mort-gaged under bond No. 208, was with the knowledge of the Bank seized andsold, subject to the mortgage, at the instance of a judgment-creditor of themortgagor, constituted no bar to the relief claimed in the present Motion.
Obiter : The Civil Procedure Code gives in section 93 ample power to amend,pleadings. Moreover, by virtue of section 146 of the Code, a oase must betried upon the “ issues on which the right decision of the case appears to th«Court to depend ” and it is well settled that the framing of supb issues is notrestricted by the pleadings.
B 8460—1,883 (6/02)
26LORD DEVLIN—Bank of Ceylon, Jaffna v. Chelliahpillai
Appeal from a judgment of the Supreme Court.
^E. F. N. Gratiaen, Q.G., with Walter Jayawardena, for the plaintiff-appellant.
Raymond Walton with W. H. Goodhart for the defendant-respondent.
Cur. adv. vult.
March 5, 1962.[Delivered by Lord Devlin]—
This is an appeal from the judgment of the Supremo Court of Ceylonin which that Court, upholding the decree of the District Court of Jaffna,refused to grant to the appellant, the Bank of Ceylon, any relief in ahypothecary action brought by the Bank to enforce a mortgage.
By a bond No. 208 made on 27th February, 1951, the respondentmortgaged certain goods, of which it is necessary to specify only onething, a Chevrolet lorry, to secure an advance of Rs. 20,000. On 20thFebruary, 1952, there being then owing to the Bank Us. 14,792, themortgagor entered into a second bond No. 3427 whereunder he mortgagedcertain land “ by way of further and additional security ” for the duepayment of that amount.
On 29th January, 1953, the lorry was seized by a creditor in executionof a money decree obtained against the mortgagor and on 7th Marchit was with the knowledge of the Bank sold subject to the mortgage.The mortgage debt at this time amounted to Rs. 12,861 and the purchaserpaid for the lorry subject to the mortgage Rs. 1,650. For the purposeof the mortgage the lorry had been valued at Rs. 9,000. It appearstherefore probable that the purchaser reckoned that he would be able tosettle with the Bank to release the mortgage on the lorry for somethingless than Rs. 12,861. In fact on 12th March, 1953, he offered the BankRs. 5,850 which the Bank were willing to accept in reduction of themortgage debt and in extinction of their claim upon the lorry ; but themortgagor was not.
On 8th October, 1953, the Bank brought an action on the secondmortgage bond in which they claimed relief in the terms of the followingprayer.
“ Wherefore the plaintiff Bank prays :
(a) for judgment against the defendant in the sum of Rs. 13,461 • 77together with interest on the sum of Rs. 12,861*56 at the rate ofsix per centum per annum from the date hereof till date of decree' and .thereafter on the aggregate amount of the decree at’ fiveper centum per annuip. till payment in, full and costs of Quitpayable forthwith,
LORD DEVLIN—Bank of Ceylon, Jaffna v. Chdliahpillai27
that the lands and premises in the Schedule hereto* fully described
together with the buildings standing thereon and all rights,privileges, easements, servitudes and appurtenances whatsoeverto the said lands and premises belonging and all the estate,right, title, interest, property, claim and demand whatsoever ofthe defendant in to out of or upon the same be declared speciallybound and executable for the repayment of the said sum andinterest and costs of suit on the footing of the said mortgagebond No. 3427.
that in the event of default being made in the payment of the said
sum Rs. 13,461 • 77 interest and costs as aforesaid the lands andpremises declared specially bound executable as aforesaid andmore fully described in the Schedule hereto be sold by publicauction by the Fiscal, Northern Province, Jaffna or by anyother person authorised in writing by the said Fiscal, the Fiscalbeing hereby directed.”
The main defence to the Bank’s plaint is put forward simply as apoint of pleading. The plaint refers only to the second or accessorymortgage bond. There is no defect in the first or principal bond andno reason has been given to their Lordships why it should not have beenpleaded. Moreover, it is erroneously alleged in the plaint that thepersonal covenant to repay is contained in the second bond whereasit is contained only in the first; all that is done by the second is to givefurther security for the debt. This point was immediately taken inthe Answer which pleads “ that no claim for the payment of any sum ofmoney can be made on the said Deed No. 3427.”
The Civil Procedure Code gives in section 93 ample power to amendpleadings. Moreover, the case must be tried upon the “ issues on whichthe right decision of the case appears to the Court to depend ” and it iswell settled that the framing of such issues is not restricted by thepleadings ;_see section 146 of the Code, Attorney-General v. Smith1 andSilva v. Obeyesekera 2. By either of these means a point that is interestingand difficult but far removed from the merits of the case might havebeen taken out of the controversy. But this was not done and theirLordships must now deal with the matter as they find it.
The question is whether the first bond is an essential part of the causeof action leading to the relief claimed. The first paragraph of the prayerasks for a money decree which can be obtained only if the personalcovenant is sued upon. Since this is not contained in the bond pleaded,their Lordships, in agreement with both courts below, are of the opinionthat this part of the claim is not made out. But their Lordships, in
1 (1905) 8 N. L. I?. 229 at 241.
8 (1922) 24 N. L. R. 97 at 107.
LORD DEVXIN—Bank oj Ceylon, Jaffna v. Chelliahpillai
thus disagreeing with respect with the judgments below, hold that theBank is entitled to a declaration that the lands mentioned in paragraph(6) of the prayer are specially bound and executable for all sums securedby mortgage bond No. 3427 and for a sale decree on the lines of paragraph(c) of the same prayer. There should be an enquiry as to the preciseamount of those sums, if it is not agreed by the parties.,
The distinction between a claim to enforce payment of money due ona mortgage and a claim in a hypothecary action is clearly drawn insection 7 of the Mortgage Act, 1949, notwithstanding that by that sectionthe two claims may be joined. This action in relation to the second andthird paragraphs of the prayer is simply a hypothecary action ; and toBucceed in it the plaintiff need prove only the validity of the bondgranting the land as security and the existence of a debt so secured. Howthe debt was created is for this purpose immaterial and the first bondis not therefore an essential part of the cause of action. It can withoutbeing pleaded be produced in evidence to prove the debt. ' On thethird issue which he framed the District Judge found that the defendantdid “ by the said bond No. 3427 give further and additional sucurityfor the repayment of the sum of Rs. 14,792 with interest at 6 per cent,per annum which is due to the plaintiff on bond No. 208 of 27.2.51”.This finding is sufficient to sustain paragraphs (6) and (c) of the prayer.
The other ground of the defence was not accepted in the courts belowand their Lordships can deal with it shortly. It is pleaded in paragraph 5of the Answer that the Bank wrongfully consented to the delivery ofthe lorry to the purchaser and that thereby the second bond was dis-charged. Alternatively, it is pleaded in paragraph 6 that the Bank byconsenting to the sale of the lorry has lost the right to enforce the secondbond. Alternatively, it was urged in argument that the purchaser asa condition of the sale agreed to discharge the whole of the mortgagedebt and that the Bank must be taken notionally to have received themoney from him. Their Lordships will not consider whether any ofthese pleas has been made out in fact because none of them is good inlaw. The sale of the lorry subject to the mortgage is at best unusualand inconvenient and may lead to difficulties in the ultimate adjustmentof the parties’ rights, but it constitutes no bar to the relief claimed.
Their Lordships will therefore humbly advise Her Majesty that thisappeal should be allowed and that the case should be remitted to theDistrict Court of Jaffna so that an order may there be made in accordancewith the views they have expressed. The respondent must pay to theappellant the costs of this appeal and of the proceedings in the courtsbelow.
THE BANK OF CEYLON, JAFFNA, Appellant, and K. A. CHELLIAHPILLAI, Respondent