016-NLR-NLR-V-64-A.-M.-LAIRIS-APPU-Appellant-and-E.N.-TENNAKOON-KUMARIHAMY-and-others-Respond.pdf
LORD DEVLIN—-Pair is Appu v. Teiinakooi?'Kflynarif^t^nlf^
[In the Privy Co unci A1
1982 Present: Lord Denning, Lord Hodson, Lord Gtfesk-lioFcfc.De.vIin,yand
Mr. L. M. D. de Silva
A. M. LAIRIS APPU, Appellant, and E. N. TENNAKOON KUMARI-
HAMY and others, Respondents
Privy Council Appeal No. 66 of 1060
S. C. 260—D. C. Kurunegala, 7015JL
Registration of Documents Ordinance—Section 7—Prior registration—“ Fraud or
collusion
A person donated certain proporty on 29th Juno 1919 to his son subject toaj fideicommissum, after the donee’s lifetime, in favour of the donee’s twochildren, one of whom was the plaintiff. On 12th April 1945 the fiduciary, inbreach of the fideicommissum, sold the land to the defendant.
1 The deed of gift of 29th June 1919 was never registered, while the deed oftransfer of 12fch April 1945 was registered on 19thApril 1945. It was established,however, beyond all doubt, that the fiduciary and the defendant knew of andaccepted the plaintiff’s title and wore relying solely on prior registration todefeat it. The fiduciary was unquestionably defrauding the plaintiff, andthe defendant was aware of it. Moreover it was impossible to suppose thatit was not implicit in the negotiation between the fiduciary and the defendantthat the father (the fiduciary), in breach of his duty and in fraud of his daughter(the plaintiff), would refrain from taking any steps to securo prior registrationof the deed of gift.
Held, that there was not only fraud but also collusion within the meaningof section 7 of the Registration of Documents Ordinance. Accordingly thounregistered deed of gift prevailed over the subsequent deed of sale, althoughthe latter was registered.
The words “ in obtaining such subsequent instrument ” in section 7 of thoRegistration of Documents Ordinance do not exclude the case of a collusionbetween the transferor and the transferee. Appicsingho v. Leelawathie (60N. L. R. 409), overruled on this point.
■A.PPEAL from a judgment reported in (1958) 61 N. L. R. 97.
Walter Jayawardena, for the defendant-appellant.
E. F. N. Oratiaen, Q.C., with A. R. B. Amerasinghe, for the plaintiff-respondent.
Cur. adv. vuU.
April 4, 1962.[,Delivered by Lord Uevxin]—
.This is an appeal from a judgment of the Supreme Court of Ceylonupholding a judgment of the District Court of Kurunegala, whereunderth© plaintiff in the action,' the respondent before the Board, obtained anorder-of ejectment of the defendant from a piece of land, the ownershipof which was in dispute between them,
5—lxtv
2—J. N. B 441 2—1,833 (8(53)
08LORD DEVLIN—Lairia Appu v. Tenndkoon Kumarihamy
The history of the matter sketches from 1919 to 1951 and involves threegenerations of the family of Tennekoon—the plaintiff’s grandfather, herfather and mother, her husband (for although when the story begins shewas a child, long before the end of it she was grown up and married) andher brother.. On 29th June, 1919, the grandfather by Deed of Giftdonated the land to the plaintiff’s father, subject to a life interest reservedfor himself, the grantor, and subject also to his right of revocation ; andfinally subject to a proviso whereunder the father was not to alienatethe land or lease it for a term of more than four years but to hold it onlyduring his lifetime so that after his death it devolved on the plaintiffand her brother. Thus there was created a fidei commissum in favour ofthe plaintiff and her brother with the father as fiduciary. The grandfatherdied on the 17th September, 1932. By his will, after a number of specificbequests, he left all his “remaining movable and immovable property”to the plaintiff and her brother. On 12th April, 1945, the father, inbreach of the fidei commissum sold the land to the defendant forRs. 10,000. On ISth August, 1945, the plaintiff and her brother enteredinto a Deed of Partition of their various interests with the result thatthe plaintiff obtained the brother’s interest in the land in question inthis case and so he drops out of the story. On 21st May, 1951, the fatherdied and his life interest thus ended. On 20th September, 1951, theplaintiff brought this action of ejectment to obtain possession of the landfrom the defendant.
The Deed of Gift of 29th June, 1919 has never been registered, while theDeed of Transfer of 12th April, 1945, by which the defendant bought theland was registered on 19th April, 1945. The Registration of DocumentsOrdinance Section 7 provides that an instrument shall, unless dulyregistered, “be void as against all parties claiming an adverse interestthereto on valuable consideration by virtue of any subsequent instrumentwhich is duly registered… but fraud or collusion in obtaining such sub-sequent instrument or in securing the prior registration thereof shalldefeat the priority of the person claiming thereunder.” The mainquestion now left in this case is whether this section provides the defendantwith a good defence to the plaintiff’s claim.
On 21st December, 1954, the District Judge gave judgment in favourof the plaintiff holding that there was fraud and collusion between thefather and the defendant and accordingly that the Deed of Gift prevailed.In the Supreme Court on 28th November, 1958, this decision was upheldbut not the finding of fraud and collusion. Basnayake, C.J. held thatfraud or collusion had not been established and Sinnetamby, J. found itunnecessary to go into that question.
On the footing that there is no fraud or collusion the legal situation isone of some complexity. Mr. Gratiaen has conceded that the plaintiff’sclaim under the Deed of Gift would then be defeated. But can she then!rely on the residuary bequest in the will of all regaining immovable ;property? Section 10 of the Registration of Documents Ordinance';provides that “a will shall not as against a disposition by any heir of the_.
LORD DEVLIN—Lairia Appu v. Tennakoon Kumarihamy
99
testator of land affected by the will, be deemed to be void or lose anypriority or effect by reason only that at the date of the disposition by theheir the will was not registered.” This must be a good answer to anydefence based on the Ordinance. But then the question arises, did theresiduary bequest cover this land ? If at the time of the death the landhad been alienated by a valid deed of gift, the grandfather could notdispose of it by will. Was there a valid deed of gift ? The defendant getsrid of the deed of gift, which would otherwise defeat his claim, by meansof an enactment which says that it is to " be void as against him Canhe maintain that the deed of gift is to be treated as void as against himwhen the Court is considering the effect of his deed of purchase, butvalid when the Court is considering the effect of the will? The ChiefJustice thought not. Moreover, the Chief Justice held that the residuarybequest in the will was an exercise of the power of revocation in the Deedof Gift. As to this, Mr. Jayawardena for the defendant contended beforethe Board that while a specific bequest might amount to a revocation, ageneral residuary bequest should be construed as excluding land whichthe testator had already donated.
Another point much discussed before the Supreme Court was the preciseeffect of section 7 of the Ordinance. Clearly it applies to two deedsmade by the same grantor. But suppose a purchaser relies upon a deedfrom a man who never had any title to the land; clearly he cannot merelyby registration obtain a title which his vendor never had. Can it thenbe said that the father, having only a life interest, had no larger titleto grant to the defendant ? In James v. Carolis1 the Supreme Court ofCeylon held that where the two deeds proceeded from the same source—inthe present case the source would be the grand-father’s title—section 7applied.
The Judges in the Supreme Court answered enough of these questionsin favour of the plaintiff to enable them to sustain the judgment whichshe had obtained below. But the difficulties to which some parts of thejudgments give rise were sufficient to lead Mr. Gratiaen for the plaintiffto place in the forefront of his argument before the Board a submissionthat the judgment of the District Judge on the issue of fraud and collusionshould be restored. Their Lordships accept this submission. Theywill not therefore express any opinion .on the other matters discussedbefore the Supreme Court but will proceed to examine the facts whichin their opinion prove fraud or collusion within the meaning of section7 of the Ordinance.
When the father received and accepted the Deed of Gift as fiduciaryhe gave it to the plaintiff’s mother for safe-keeping. He was howeverwell aware that under it he had only a life interest arising on the grand-father’s death. There has been exhibited a letter written by him on1st April, 1935, to the Commissioner of Stamps in which he states thathe has only a life interest.
1 (1919) 17 N. L. R. 76.
100
LORD DEVLIN—Lairia Appu v. Tennakoon Kumarihamy <■
The District Judge has described the father as a “thriftless drink’ 'addict ”. While this language is perhaps rather stronger than the facts?■warrant, there is acceptable evidence from the mother that the father]drank a good deal and was generally short of money. In-1944 he wanted^to raise some money on the land and there can be little doubt that it, wasvfor this purpose that he obtained possession from the mother of the Deedof Gift. The defendant is a rich man who had been engaged, the District ’Judge said, in some questionable deals. The father got money from himin the first instance by means of a lease of the land, made on 19th Decem-ber, 1944, for ten years. This was a breach of the Jidei commissum -. under.■'which his power of leasing was limited to four years. The consideration,for the lease was a lump sum of Us. 2,000 of which Its. 1,000 was payableforthwith. The defendant employed his regular notary to prepare theilease. The description of the land in the schedule to the lease is followedby the words “ to which premises the lessor is entitled to a life interest. •only
The plaintiff’s husband got to hear of the lease and had a conversation;about it with the father and the defendant. His object was to get an.assignment of the lease from the defendant to the plaintiff since she waseventually to come into the property. In this he was not successful asthey could not agree upon terms. However, he told the defendant that. ,there was a jidei commissum and that under it the father could not granta lease for more than four years.
The lease had run only for four months when on 12th April, 1945:theJDeed of Transfer, the material document in this case, wasi executed.Presumably the father wanted more money and he in fact obtained a!further Ks. 10,000 as the sale price. The same notary who had prepared5the Deed of Lease for the defendant and attested it attested also the Deedof Transfer. In the Deed of Transfer the father is described as beingentitled to the land “ by right of paternal inheritance from my deceasedfather ”.•
On these facts there appears to their Lordships to be a perfectly clear *case of fraud. It has however been urged upon them that these,are notthe full facts and that their Lordships ought to fill out the story with thefollowing suppositions. Fraud, it is said, ought not lightly to be attri-buted to a dead man and any sinister inference from the facts as statedabove can be explained away if their Lordships were to supposethat between the granting of the lease and the execution of the Deed: ofTransfer the father took legal advice. As a result of that advice he wouldhave learned that, so far from having only a. life interest as stated in thelease and as up till then ho had believed, he was in truth the absoluteowner of the land. The lawyer who would have given him this advice'would have based it on-the case of Carolis v. Alwis1. It is undoubtedlythe law that a Jidei commissum to be effective must be accepted; andJ
1 (1944) 45 N. L. R. 156.
LORD DEVLIN—Lair is Appu v. Tennakoon Kumarihdmy
101
in the case referred to it was held by the Supreme Court of Ceylon thatan acceptance by the immediate donee, the daughter of the donor, wasnot a sufficient acceptance on behalf of her brother and sister who werefidei commissaries. On this authority it is said that the acceptanceby the father (which is now admitted) in the present case was nota sufficient acceptance for his children ; accordingly, the fidei commissum.in favour of the plaintiff fails, leaving the donation to the father to operatewithout curtailment.
Of course if Carolis v. Alwis and the conclusions which are supposed tohave been drawn from it were good law, they would provide a completeanswer to the plaintiff’s claim. Their Lordships were not invited to saythat. An argument of a similar sort, based on non-acceptance by thefather, was originally advanced but abandoned in the Supreme Court.It is now agreed that the dictum cited from Carolis v. Alwis cannot standas good law in the light of the Board’s decision in Abeyawardenev. West LBut it is argued that before 1957 it would have been believed to be goodlaw and therefore would have formed the basis of advice tendered to thefather.
It can and has been objected that all this is very speculative. TheirLordships will go further than that and say that even as a hypothesis itwill not stand cursory examination. The father is dead and cannot speak,but the defendant is alive and can. What does he say caused him to buyland, which he had been told was subject to a fidei commissum, from thefiduciary who a few months before had been described in the lease ashaving only a life interest ? Before he put down his money, he mustat least have been told by the father that he had consulted a lawyer andbeen advised that the fidei commissum was ineffective. One would haveexpected the defendant to consult his own lawyer and that his notarywould have obtained at least the name of the hypothetical lawyer whoseevidence could have turned the hypothesis into fact. But the defendantin the witness box, so far from supporting the hypothesis now advanced,testified that he never knew that the father had not complete power ofdisposition. He denied any conversation about the matter with theplaintiff’s husband and his denial was disbelieved. He said that hisnotary who read through the lease to him, must have omitted to read thereference in it to the father’s life interest. The notary, although presentthroughout the trial, was not called to give evidence.
That is one ground for dismissing the hypothesis. The second is thatif the supposed advice has been given and taken the defendant wouldhave based his title as vendor of the land on the deed of donation, heedfrom the fidei commissum. In fact he based it on his “ right of paternalinheritance from my deceased father ”. This is the point that it wasattempted to argue in the courts below. It was said, not that the dona-tion remained effective without the fidei commissum but that it wasaltogether invalid for want of acceptance ; and that in some way, whichtheir Lordshps do not understand, the land was not covered by the generalresiduary bequest'in the will but passed to the father as on an intestacy.
1 (1957) A. C. 176; 58 N. L. R. 313.
2*II 4412 (8/02)
102
LORD DEVLIN—Lairis Appu v. Tennakoon Kumarihamy
. Finally, it is not suggested that the father, although he lived ffor sixyears after the transfer ever asserted to anyone that the fidei commis-.sum was ineffective. The plaintiff came to hear of the transfer and on17th September, 1945, her proctors wrote to the defendant to say that hisvendor had only a fiduciary interest in the property due to be determinedat his death and that the plaintiff, could not accept the defendant’s bona,fides in. the matter. There was no reply to this letter. Their Lordships• have no doubt at all that the father and the defendant throughout knewof and accepted the plaintiff’s title and were relying solely on prior regis-tration to defeat it.-
While the main weight of the argument for the defendant before theBoard was put on the hypothesis which their Lordships have rejected,reliance was also placed on the reasons given by the Chief Justicefor setting aside the finding of fraud and collusion. The Chief Justicesaid :—
“ For the purpose of bringing a deed within the ambit of section 7 (2)it is not sufficient to establish that the person who obtained the deed -was an unscrupulous person who would take undue advantage of anysituation for the purpose of gain or that he had been punished forevasion of revenue laws or that he had committed fraud on previousoccasions. Fraud or collusion in obtaining the particular deed inquestion must be established. It is contended on his behalf thatneither fraud nor collusion has been established. I have in my judg-ment in S. C. 68S, D. C. Tangalla L-393, delivered on 13thNovember,1958, dealt with the meaning of fraud and collusion in this context.Learned Counsel’s contention that fraud or collusion within the meaningand content of those expressions in section 7 (2) has not been establishedis in my view correct and must be upheld. ”
Their Lordships respectfully agree with the opening observations inthis passage and consider, as the Chief Justice evidently did, that theDistrict Judge has somewhat exaggerated the importance of materialwhose only relevance was to discredit the defendant as a witness. Butthat does not affect the really significant finding of fact by the DistrictJudge—a finding which was not challenged on appeal—that the defen-dant was told of the fidei commissum in the terms of the conversation thattheir Lordships have recorded
Tliere was another finding by the District Judge on this topic which wasattacked in the argument before the Board and which it is convenient toconsider here. That is the finding that the consideration of Rs. 10,000was altogether inadequate. The learned Judge appears to have.basedthat finding on his own estimate that the land in question was worththree or four times that sum. It was proved that the defendant hadmortgaged the land for Rs. 15,000 and that at first sight makes it look asif Rs. 10,000 was too low a price. But none of these matters was put tothe defendant in cross-examination and there was no proper evidenceof value. Accordingly, their Lordships cannot accept the finding that
LORD DEVLIN—Lair is Appu v. Tennakoon Kumarihamy
. 103
the consideration was inadequate. But while inadequacy of considera-tion is good evidence of collusion, it is not an essential element; CeylonExports Ltd. v. Abeysundere
Dalton, A.C. J. in the case just cited reviews all the important decisionson the meaning of fraud and collusion in section 7 and his judgment wasupheld by the Board in 38 N. L. R. 117. Mere notice of a prior unregis-tered instrument is not enough. There must be actual fraud in the senseof dishonesty. In this sense of the term the father was unquestionablydefrauding his daughter and the defendant was aware of it. Moreover,the defendant was aware that the father was a fiduciary and that thereforeit was his duty, both as father and fiduciary, to protect his daughter’sinterests by registering the instrument by which she derived her title.If at any time before 19th April, 1945, the father had registered that titleas he should have done, the common purpose of the father and thedefendant, namely, the exchange of land (which the defendant wanted)for money (which the father wanted) would have been frustrated. It isimpossible to suppose that it was not implicit in the negotiation betweenthe two that the father, in breach of his duty and in fraud of the plaintiff,would refrain from taking any steps to secure prior registration of thedeed under which she claimed. Thus there was collusion in the fraud.
In the case which he mentioned in his judgment, Appusingho v. Leela-wathie 2, the Chief Justice was applying to the facts of that case the well-established principles to which their Lordships have referred ; and theirLordships do not doubt that on the facts of that case he did so correctly.But their Lordships with respect reach a different conclusion upon theapplication of those principles to the facts of this case.
In the course of his judgment in the earlier case the Chief Justice saidat 413 :—
“ The words ( in obtaining such subsequent instrument ’ exclude thecase of a collusion between transferor and transferee, because thetransferor cannot be said to be party to obtaining the subsequentinstrument; but to granting or giving it. The * collusion ’ musttherefore be between persons other than the transferor who combineto obtain the subsequent instrument. ”
If this construction of section 7 is correct, it would provide an answer tothe charge of collusion in the present case ; and it may be that the ChiefJustice was proceeding on this view of the law when he held in the presentcase that the District Judge’s finding should be set aside. Counsel for thedefendant did not in his argument before the Board seek to uphold thisconstruction and their Lordships with respect think it to be wrong.
Their Lordships will humbly advise Her Majesty that this appeal shouldbe dismissed. The appellant must pay the costs.
{1933 ) 35 N. L. R. 417 at 428.
a
Appeal dismissed.(1958) 60 N. L. R. 409.