133-NLR-NLR-V-56-H.-M.-T.-B.-HERAT-Appellant-and-T.-M.-T.-B.-AMUNUGAMA-Respondent.pdf
GRATIAEN J.—Herat v. Amunugama
£29
1955Present k Gratiaen J. and Sansonf J.If. M. T. B. HERAT, Appellant, and T. At T. B. AMUNUGAMA,Respondent
S. C. 1—D. G. Kurunegala, 6,639
Fiduciary relation*—Administrator and beneficiary—Gaining of “pecuniaryadvantage ” by fiduciary—Constructive trust—Trusts Ordinance {Cap. 72),s. Utt- -Kandyan Imio—Adoption—Ordinance No. 30 of 1038, s. 7.
A, dm administratrix of her doctiu.su(l husband's estate, wus ontitlud, mxliir(ln> Kandyan l.nw, to a life-interest in the entire proporty of tho deceased, wlmdied issncless. Although, according to hor application Tor lutlors of udminis-tration, thu only other heir was B, the adopted child of tho docoasod, two otherpersons ((,’ and D), who wore the ohildron of tho deceasod’s sister, intervened inthe testamentary action und claimed that they were the sole intestate heirs oftho deceased (subject to the widow’s admitted life-intorost) ; 0 and D deniedthat the ‘‘ adoption ” of B was of a kind which ontitlod her to claim tho statusof an intestate heir. B, being a minor, was represented in the action by hernatural father.
A was advised about the difficulty of establishing by oral evidence B’sudopt inn for purposes of inheritance under tho Kandyan law (prior to thoonuci incut of.Section7 of Ordinance No. 39 of 1933). Accordingly, negotiationstook place for a settlomont oi the disputo, and in duo course tho trial Judge,having given consideration to the circuinstuucos placed before him und to thospecial interests of tho minor B, gave his judiciu! approval on October 9, 1930,to tho following bona fide settlement :
B, C and L) each received absoluto title to u j share of the estate Iroeof a lifniuterost in favour of A.
(J)A thus waived her undisputed and indisputable life-interest in J of theestate, and agreed to accept instoad absolute title to u J share (in whichshe already enjoyed a life-interest).
Twenty yenrs later B’s heir instituted tho present action alleging tlmt ii wasin fuel the adopted child of the decoasod in the testamentary euse. Ho claimedlluit tho share which was nllottod to A under tho settlement and which wasHuhscipicnt ly donated by A to tho defendant was impressed with a trust infavour of B and her heirs.
Held, that iL could not bo said that A was guilty of express fraud in regard totho settlement, in the testamentary cuso or that she had abused her fiduciaryposition and thereby derived a pecuniary advantage ut tho expense of B withintho meaning of section 90 of the Trusts Ordinance.
from a judgment of the District Court, Kurunegala.
Sis- Jsilita linjapakse, Q.G., with G. It. Gunaratne and G. 1). C.U'ecrasing/te, for tho defendant appellant.
-V. K. Wtcrasotnia. Q.C., with IV. D. Guna-sekera, for the plaintiffrespondent.
Cur udv. vult.
February 15, I Boo. Gbatiaen J.—-
A Kandyan landowner named E. Edward Banda Korale died issueleesand intestate on 3rd March, 1Q29, leaving a substantial estate valued for23— i. vi'''
– J. N. 11 J7JOI-1,&U2 (S/SS)
530
QRATlAEN —Herat v. Amunugama
purposes of duty at Bs. 129,918/09. HIs^ widow Bandara Monika wasduly appointed administratrix of the ostate in Testamentary ActionNo. .‘1,714 cf the District Court of Kurunegala and it is common groundthat under the Kandyan Law she was his heir to the extent of a life-interest in the entire property. She was about 49 years old at the timeof her husband’s death…
In or about the year 1913 Edward Banda and Bandara Menika hudadopted as their child Somawathio Kumarihamy who was .the infantdaughter of a kinsman of Edward Banda. She was 16£ years old whenEdward Banda died. Bandara Menika disclosed the fuct of the adoptionin her application for letters of administration, but her petition P5 dated9th July, 1929, expressed ignorance as to whether the adoption compliedwith “ the requirements of the Kandyan Law for the purpose ofinheritance ”. Somawathio’s natural father Appuhamy was appointedgeardian-ad-litem to protect her interests in the testamentary action.Shortly afterwards, two persons named Kumarihamy and Bam Menika(the children of Edward Banda’s sister) intervened and claimed that theywere the sole intestate heirs of the deceased (subject to the widow’sadmitted life-interest). They denied that the “ adoption ” of 8oma-wathio was of a kind which entitled her to claim the status of an intestatoheir.
Had this dispute as to heirship proceeded to a judicial investigation,cither Somawathio alone or Kumarihamy and Bam Menika jointly wouldhave boon declared entitled (subject to Bandara Monika’s life-interest)to Edward Banda’s estate to the complete exclusion of the contestinggroup or individual (as the case may be). This appears to have been thecontext in which negotiations took place for a settlement of the dispute,and in due courso the (then) District Judge of Kurunegala, havinggiven consideration to the circumstances placed before him and to thespecial interests of the minor Somawathie, gave his judicial approval mi9th October, 1930, to a settlement in the following terms:
Somawathio, Kumarihamy and Bam Menika each received absolute
title to a share of the estate free of a life-interest in favour ofBandara Menika ;
Bandara Menika thus waived her undisputed utul indisputable life
interest in f of the estate, and agreed to accept instead absolutetitlo to a £ share (in which she already enjoyed a life-interest).
This settlement was acted upon by all the parties and was assumed to bevalid even after Somawathie (who married the respondent in 1932)attained- majority under the Kandyan Law on 7th September, 1933.Bandara Monika died on 31st July, 1940, and it was only after her deaththat Somawathie and the respondent took steps to revive Somawathio'«claim to liavo inherited the entirety of Edward Banda’s cstat-o. In themeantime, Bandara Menika had in 1936 donated to the appellant (hernephew) the uudivided } share of some of the properties which passed toher under tlm settlement of 1930 together with an additional I/12 shai"»!iich she had subsequent ly purchased from Bern Menika (who had simi-larly acquired tlot>e interests under the same settlement). Tlu-re «<•»
GJiATlAEN J.—Herat u. Amunugatrta
r.ai
tin evidence, however, that, the subsequent donation STilh in auyl>ody’*contemplation in 1930..
On 21st July, 1942, the appellant, claiming title to the Bliures gifted tohim by Bandara Menika in 1936, instituted action No. 1,052 in the DistrictCourt of Kurunegala for a partition of the property between himself,Somawathie, Kumarihamy and Bam Menika on the basis of a commontitle proceeding from the terms of the settlement previously referred to.In paragraph 4 of the plaint he pleaded that the settlement was rexad judicata between himself and his co-owners. Somawathie, on theother hand, had by then taken steps, in concert with her husband, tochallenge the validity of the settlement of 1930 and she filed answerin the partition action denying all the material averments in the plaint.She specially denied that Bandara Menika had “ any riyfit or title t.<> conveyto the (appellant,) ”.
Beforo the trial of the partition action commenced, Somawathie, inpursuance of a compromise privately arrived at with Kumarihamy andI tarn Menika, had obtained an order in the testamentary action on 2()thSeptember, 1944, purporting to set aside the earlier settlement of 1930and to substitute in its idaco a declaration that Somawathie as theadopted child of Edward Banda was in truth his sole heir, (ft is nowconceded that, this compromise does not bind the appellant). On iithOctober, 1944, site applied in the partition action for leave to amendher pleadings *' owing to the order made on 20—9-44 in D. C., Testy :No. 3714 ”. The application was (rightly or wrongly) refused, anil noappeal was preferred against that decision.
On 20th October, 1944, an interlocutory decree for partition was entereddeclaring the parties entitled to shares on the basis of the settlement of1930. Somawathie was not present at the trial, and her lawyers statedthat they had received no instructions to appear for her. Her laterapplication to re-open the proceedings was unsuccessful. In due course,a final decree for partition was passed in terms of which the appellantwas declared the owner of a divided allotment of land (described inSchedule “ B ” annexed to the present plaint) in lieu of his formerundivided interests in the larger land (described in Schedule “ A ”).Similarly, Somawathie and the other co-owners received other dividedallotments. The title created by the settlement of 1930 clearly providedthe foundation for the adjudication as to the rights of the parties in thepartition action.
Somawathie herself died on 27th February, 1945, leaving a last willwhereby she appointed the respondent her sole heir. He instituted thisactym on 25th July, 1950, for a declaration that the defendant held theproperty described in Schedule “ B ” in trust for him. He alleged thutBandara Menika, “ well knowing that Somawathie was the adopted childof Edward Banda for purposes of inheritance under the Kandyan Law,and although bound in a fiduciary capacity to protect the interests ofSomawathie, took advantage of her fiduciary position and, acting infraud and collusion with the guardian-ad-litein of Somawathie in caseNo. 3,714, entered into a fraudulent and collusive agreement with the saidguardian-ad-litem and Kumarihamy and Ram Menika to divide the estato
n a*
OHATTAEN .T.—Herat v. Aniunugaina
of Kdword Banda to the ‘detriment of SomawathieAccordingly, it van
pleaded, tho benefits which Bandara Menika improperly derived from thisunconscionable compromise were held by her in trust, for iSomawnthie ;the appellant’s rights in the property as Bandara Menika’s donee wereimpressed with the same constructive trust.
Tho learned District Judgo held itt favour of the respondent thatBandara Menika had fraudulently abused her fiduciary position in enteringinto the settlement of 1930 and accordingly became a constructive trusteefor Somawathie to the extent of the improper benefits which passed to herthereunder. He hold that the appellant, being a mere volunteer, alsoheld tho property in trust; indeed.he took the view that the appellant hadhimself been a party to the fraud, but Mr. Weerasooria very properly didnot invito us to adopt that fanciful theory (baaed as it was on extremelyflimsy material). Ifinally, the learned Judge rejected the ploa that thedecree in the partition action operated in any event as res adjudicata andprecluded Somawathic’s successor in interest from reagitating any questionrelating to the validity or propriety of the settlement.
I have come to the conclusion that the judgment under appeal inuSt hoset aside because the respondent wholly failed to. establish his allegationthat Bandara Menika was guilty of express- fraud or that (even on aslightly low plane of criticism) she had abused her fiduciary positionand thereby derived a pecuniary advantage at the expense of herbeneficiary.'
Let us consider first tho allegation of express-fraud. When this actioncommenced, twenty years had elapsed since the settlement of 1930 wasreached in the testamentary proceedings. During this long interval oftime, Bandara Menika had died and could not give her version of themotives that induced her to agree to its termB ; Mr, Wanduragala (whoacted as her Proctor in the litigation) and Mr. V. I. V. Gomis (who actedfor the rival claimants) are also admittedly dead ; so are Somawathie andher guardian-ad-1 item who consented to the settlement on independentlegal advice. In the absence, therefore, of most of the principal partiesto the compromise, it is incumbent upon us to scrutinise the very belatedallegation of fraud with considerable caution.
Tho only direct evidence on which the learned Judge based his inferenceof express fraud was the testimony of a Proctor’s clerk who claimedin 1952 to have overheard parts of certain vague conversations whichtook place twenty-three years earlier in Mr. Wanduragala’s office. Tomy mind, this evidence (oven if true) was quite inadequate to establishfraud against a woman who had since died. As for the circumstantialevidence referred to in tbe judgment under appeal, it only proves thatBandara Menika knew (as she had herself always admitted) that herhusband in fact regarded Somawathie- as their adopted child ; it doesnot justify the further inference that she did not entertain a genuinedoubt as to the chances of convincing a Court of law in a contested litigationthat the adoption was of a kind which Constituted Somawathie tho sole heirof her adoptive father under the Kandyan Law. The entire evidence isquite consistent with the more charitable theory that, in her honest
GRATIAEN J.-r-Harat v. Atnunugama
$33
opinion, which was shared by honest lawyers, a settlement of thh dispute -was in the best interests of .the minor whom she too regarded as her*daughter….'
The difficulty of establishing adoption for purposes of inheritanceunder the Kandyan Law by oral evidence (i.e., before the legislatureenacted Section 7 of Ordinance No. 39 of 1938) is a matter of commonknowledge, and the law on the subject was even more controversial in1930 than it is now. Hayley’s Law and Customs of the Sinhalese, publishedin 1923, states at page 203 that there must be proof of “ an intention onthe part of the adopter to make the adopted person his child, and con-stitute him or her his successor, coupled with acts of adoption and,according to the authorities, an open declaration of the adoption ”. Thelearned author adds at page 207 that “ the numerous cases in which theCourts have refused to recognise adoption, although the intention to adoptseems to have been established, have apparently settled the law that theremust be a public declaration, but what constitutes such a declaration hasnot been defined ”. The uncertainty was not removed at the time of thosettlement which is now impugned, and could not but have been promi-nently before the minds of the experienced lawyers who represented thoparties at tho relevant time. Indeed, the controversy continued evenafter this Court pronounced in November 1937 that “ the declarationneed not be made on a formal occasion ”—Tilcirikurnarihamy v. hliyara-/tola *. For instance, this conflict of authority as to the requirementsof “ a public declaration ” was again emphasised six years later, whena Bench of three Judges was constituted to decide the questionauthoritatively in Ukku Banda v. Somawathiewhere the same Soma*wathie successfully established her adoption by the widow BanduraMenika. It is therefore quite wrong to infer that the settlement of1930 was necessarily prompted by any other motive than to avoid thorisks of a protracted and uncertain litigation which, if unsuccessful,would have completely disentitled Somawathie to any rights in heradoptive father’s estate.-
Has the evidence established a constructive trust against BaiularaMenika even though there was insufficient proof of express fraud ?That she stood in a fiduciary position towards Somawathie .is clearenough. But did she abuse that position in order to gain some personaladvantage at the beneficiary’s expense ? And, above all, did she infact derive any demonstrable advantage from the settlement ? Forthen only can the plaintiff invoke the well-settled principle of law'whichhas been incorporated in Section 90 of the Trusts Ordinance in thefollowing terms :
“ When a person bound in a fiduciary capacity to protect theinterests of another person, by availing himself of his character, gainsfor himself any pecuniary advantage, …. he must hold forthe benefit of such other person the advantage so gained. ”
When Somawathie’s adoption,for purposes of inheritance was challenged,by the rival claimants to heirship, she was represented by her natural
1 (1937) 44 N. L. R. 476.
(1943) 44 N. £.. R. 457.
534
W
GRATIAEN J.—Serai v. Amunugama
father'who’had recourse to independent-legal advice. In addition,her interests as a minor were protected by a very experienced Judge whoapproved the settlement. (The suggestion that he had perhaps sane–tioned iSo&pae different compromise seems to be quite fanciful; the subse-quent transactions negative this theory, and on this point at least the'later partition decree places the matter beyond all controversy.)
I am very, far from satisfied (even if one reconsiders the matterretrospectively) that Bandara Menika herself did gain any demonstrablepecuniary advantage from the settlement. _ Her own claim to a life-interest in the entire estate was certainly not in jeopardy. How thencould it have been argued at the relevant date that she necessarilybenefited by taking an absolute interest ,in, a J share of the estate in•exchange for a life-interest in the entirety ? She had waived in favour of.Somawathie and the other claimants her legal right to receive an assuredimmediate income during her life-time from the outstanding £ share of& valuable estate ; at the same time Sopaawathie herself had gained someimmediate benefit by being assured of the title to and the income fromJ of the estate in exchange for the bare possibility (let us even call it theprobability) of becoming owner of the entirety, but without any right toany income until Bandara Menika's death. It would indeed have requirednn actuary to predict the financial advantages and disadvantages whichwould flow from the compromise‘agreed upon ; and, as to the greaterrisks presented by a contested litigation on the issue of heirship, nolawyer jealous of his reputation would, I fancy, have hazarded aconfident opinion in 1930. Indeed it was in recognition of these risksthat the Kandyan law of adoption for purposes of inheritance wasAmended in 1938. In this situation, one would hesitate to pronounceeven now that the settlement of 1930 was in fact unwisely reached.
The learned District Judge has emphasised the fact that, according t°the evidence, Bandara Menika appropriated her income of the entireproperty during her life-time. Even if that be true, it has no relevancyto the present cause of action, because such appropriation was contraryto and not a consequence of the terms of the impugned settlement.Similarly, no constructive trust could be imposed by law on BandaraMenika in respect of the benefits'derived by Ram Menika and Kumari-iiamy. Indeed, I see no reason for assuming that she was in any wayimproperly concerned to promote their interests to her adopted daughter’sprejudice.
For all these reasons, I am satisfied that the provisions of Section 90 ofthe Trusts Ordinance do not apply. In addition, I am inclined to thoview that the decree in the partition action-Ho. 1,052 instituted in 1942precludes the plaintiff from attacking the validity of the settlement of1930 on which that decree was based. It has no doubt been authoritativelydecided that Section 9 of the Partition Ordinance does not necessarily ex-tinguish constructive trusts—Ma> ikarv. Marikar1. But in action No. 1,052Somawathie, as she was entitled t o do, ekprfessly put in issue the validity©f any rights which the appell tnt (as Bandara Menika’s successor in.1 (1920) 22 N. L. It. 137.
Sinnathamby v. Kandiah035
title) claimed by virtue of the settlement. She also attempted unsuccess*fully to set up the subsequent rescission of the settlement as a bar to theappellant’s title. In that situation I would have been prepared to hold,if necessary, that the decree in favour of the appellant operates as resadjudicate against the respondent. In Afarilcar’s case (supra) the bene-ficiary (although a party) had not put in issue the bare legal estate of theconstructive trustee. In action No. 1,052, by way of contrast, the allegedbeneficiary asked for a dismissal of the action because she virtuallydenied that the alleged trustee had “ any right or title ” in the propertysought to be partitioned. I would allow the appeal and dismiss therespondent’s action with costs in both Courts.
Sansoni J.—I agree.
Appeal alloived.