086-NLR-NLR-V-35-CEYLON-EXPORTS,-LTD-v.-ABEYSUNDERE.pdf
Ceylon Exports, Ltd. v. Abeysundere.
417
1933Present: Dalton A.CJ. and Maartensz Ai.CEYLON EXPORTS, LTD. v. ABEYSUNDERE174—D. C. Kurunegala, 11,914.
Registration—Donation of property by father to son—Deed not registered—Sale of property to defendant—Knowledge of prior deed and of attemptto defraud son—Fraud and collusion in securing registration^Benefit ofpriority—Subsequent acquisition of Crown title by defendant—Conceal-ment of title in minor—Title held in £rust for minor—Registration ofDocuments Ordinance, No. 23 of 1927, s. 7.
By deed, dated September 20, 1908, B donated an estate consisting ofseveral allotments of land to his minor son. The gift was acpepted bythe mother on behalf of the minor but was not registered till December 17,1915. The deed was retained by B, who remained in possession of theproperty and mortgaged it on several occasions, concealing the fact of thedonation.
By deed, dated September 28, 1915, B transferred the property to thedefendant who registered it on October 1, 1915. Defendant was awarethat B’s action in not registering the deed was prompted by a fraudulentintention to deprive the minor of the property, and further induced B notto register the deed till he completed his transfer, which was done withoutsearch of encumbrances and despite the opinion of Counsel, who advisedthat the title was bad.
The estate consisted of Crown lands in the Kandyan Provinces forwhich B had village title and for which he covenanted with the defendantthat he would obtain Crown grants in defendant’s name or if the grantswere made in B’s name, he would execute the necessary conveyances infavour of the defendant.
The defendant with the help of B obtained the Crown grants in hisfavour, concealing the fact that the title was in the minor.
The minor came of age in January, 1924, and on November 30, 1926,instituted the present action for declaration of title to the property.By deed, dated February 24, 1927, the minor assigned his rights to thesubstituted plaintiff.
Held, that the' defendant had acted fraudulently and collusively insecuring registration of his deed and that he was not entitled to thebenefit of priority conferred by section 7 (1) of the Registration ofDocuments Ordinance, No. 23 of 1927.
Held, further, that the defendant had acted in fraud of the minor inobtaining the Crown grant, and that the title so obtained must be heldby him for the benefit of the minor and now for the substituted plaintiff.
A
PPEAL from a judgment of the District Judge of Kurunegala. Thefacts are stated by Maartensz J. as follows:—
*' This was an action instituted by John de Silva Rajapakse against thedefendant for declaration of title to a land called Raigamwatta aliasMalagama estate consisting of the six parcels of land described in theschedule to the plaint and for damages and costs.
John Rajapakse claimed to be entitled to the land under a deed of giftNo. 1,294 dated September 20, 1908 (PI) executed in his favour by hisfather Benjamin Rajapakse, and accepted by his mother as he was then aminqr of the age of five years and nine months; and alleged that the35/ 30 1
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Ceulon Exports, Ltd. v. Abey sundere.
defendant, on or about September 28, 1915, wrongfully and unlawfullyentered into possession of the land claiming title to the said land on a deedof transfer which had been fraudulently and collusively obtained by himfrom Benjamin Rajapakse, the prior registration of which had beenfraudulently and collusively secured.
The plaintiff assessed his damages at Rs. 100,000 up to date of actionand at Rs. 9,000 per annum from that date.
The defendant in his answer (a) denied that the land called Raigam-watta alias Malagama estate was identical with the allotments of landdescribed in the schedule to the plaint, and said that some of the allotmentsfell entirely and others partially outside the limits of the estate.
Admitted the execution of the deed of gift No. 1,294, but deniedthat the deed was delivered or acted upon in any way or registered beforethe date of the deed No. 5,487. He also denied Benjamin Rajapakse’stitle to the allotments of the land which he said were forest or chena landin the Kandyan Provinces and the property of the Crown, and purchasedby him, the defendant, from the Crown and.from Crown grantees upon theCrown grants and Final Orders under the Waste Lands Ordinance anddeeds set out in the answer.
Averred that Benjamin Rajapakse, who had improved a smallportion of the said allotments about 40 acres in extent, sold whateverinterest he had in Raigamwatta to him for Rs. 42,500 by deed No. 5,487(P4) dated September 28, 1915, and that the deed having been registeredon October 1, 1915, rendered the plaintiff’s deed No. 1,294 which wasregistered on December 17, 1915, void and of no effect.
Denied that the deed No. 5,487 or the prior registration of it wasobtained fraudulently and collusively.
Said that the defendant had improved the land and paid off amortgage over the said land created by bond No. 170 dated January 28,1915, registered on February 5, 1915.
The defendant prayed for a dismissal of the plaintiff’s action, and inthe alternative for compensation Rs. 140,000 for improvements and forpossessing till compensated for his improvements.
The original plaintiff John Rajapakse by deed No. 555 dated February24, 1927, (P 8) sold his rights of action and his interest in the land indispute to A. W. Rupesinghe as trustee on behalf of a company to be dulyincorporated under the name, style, and firm of the Ceylon Exports,Limited, for a sum of Rs. 5,000. Rupesinghe by deed No. 605 dated June21, 1927, (P 20) conveyed to the company which the deed recited hadbeen duly incorporated.
The company was substituted plaintiff on October 24, 1928.”
The learned District Judge found against the plaintiff on all the issuesand dismissed the action with costs.
N. E. Weerasooria (with him L. A. Rajapakse and J. R. Jayewardene),for substituted-plaintiff, appellant.—Is the defendant’s deed of salesubsequent in date but prior in registration to the donation to the minorplaintiff void by reason of fraud or collusion? Notice of the priordeed is admitted. But this is not a case of mere notice. There areother considerations.
Ceylon Exports, Ltd. v. Abeysundere.419
The grantor on both deeds was in a fiduciary relationship to theminor.
The grantor was in financial difficulties at time of second deed.
The grantee of the second deed had legal advice that a second deedwould defraud the minor, and acted contrary to that.
The value paid for the second deed was a bargain.
Every effort was made to strengthen his position under the seconddeed, viz., entering on land, dispensation from search, peculiar clauses inthe deed itself.
The grantor gave an undertaking not to register the first deed.
The defendant did not give evidence and explain the charges offraud and collusion against him.
In these circumstances the Courts have held there is fraud and collusion.The defendant took advantage of the financial difficulties of one whowas in a fiduciary relationship to the minor, to deprive the minor of hisproperty.
For fraud and collusion see Jayewardene on Registration, p. 123, whichdiscusses the Ceylon and English cases and see Ferdinando v. Ferdinando Since the case reported in Ramanathan (1877) p. 398, when the CeylonCourts departed from the English doctrine that mere notice is sufficientto defeat prior registration, it is clear that the extension of the principlebeyond mere notice has been very strictly confined. The slightest elementof moral blame in addition to notice would constitute fraud. In Baltisonv. Hobson1 actual fraud was construed. In. Ceylon it is not necessary to *prove actual fraud.
The possession of the defendant is possession for the minor. A longseries of English cases holds that a stranger who enters into a minor’sproperty possesses for the minor. See Morgan v. Morgan Doe v.Skeen and Keech v. Sandford*. A person in a fiduciary position may notsay, I tried to secure this land for the infant but could not do so. Thereis no difference between a person in a fiduciary position and a trusteeunder a constructive or express trust.
The defendant obtained Crown grants in- his favour through Rajapakse,the grantor of both deeds. Crown grants are based on Rajapakse’s title.
A person who gets a legal title with notice of a prior equitable interest getsthe legal title for this entitled to the equitable interest—see Munford v.Stowhasser*; Jared v. Clements7.
[Maartensz A.J.—If the later registered deed is valid, you cannot attackthe Crown grants obtained on that deed.]
I am assuming for the moment that that deed has been demolished. ACrown grant is merely a veil. It does not affect the rights of the partiesinter se. See Sinno Appo v. Dingirihamy Coudert v. Don Lewis0. TheCrown merely declares that it has no rights to the land. The English casei 23 N. L. R. 143.. t (1*74) 30 L. T. 859.
* (1896) 2 Ch. 403.7 (1903) 1 Ch. 428.
s (1737) 1 Atkyn 488.8 1» -V. L. R. 259.
« 7 Term Rep.; 386, p. 389.-9 4 B. N. C. 40.
5 (172$) White and Tudor's Leading Cases, p. 44i.
420
Ceylon Exports, Ltd. v. Abeysundere.
of Yem v. Edwards' decided that a widow who got land from the Crownon the strength of her husband’s possession held the land for the benefitof the estate of her husband; see also Biss v. Biss9.
The new Land Settlement Ordinance, No. 20 of 1931, in schedule 3 laysdown rules governing Settlement Officers. Equitable considerations arealways considered when making offers and settlements. This clearly putsdown in statute form the long established rules guiding settlements ofCrown land.
H. V. Perera (with him E. G. P. Jayetilleke, A. R. H. Canekeratne, andD. W. Fernando), for defendant, respondent.—The basis of plaintiff’s caseis that defendant’s deed is void. The defendant is an honest purchaserfor real and valuable consideration. Defendant buys on the deed sought tobe avoided with the knowledge of certain facts, (1) that the donees on theprevious deed are minors, (2) that the previous deed is unregistered,(3) Rajapakse in spite of the previous deed is dealing with the property ashis own, (4) Counsel’s opinion, but he acts as any prudent purchaser wouldact. Defendant and Rajapakse are two opposite parties. It cannot beargued that they put their heads together to deprive the minor donee onthe previous deed. Fraud arises when the subsequent purchaser is anunreal purchaser. The mere purchase must be a means to an end. Ifthe end is to deprive the donee on the first deed then there is fraud.Defendant’s end is to see that his title is good.
[Dalton A.C.J.—They were acting together but for different reasons.Rajapakse wanted money, the defendant wanted the land.]
Suspicious are not sufficient. Fraud and the particular acts whichconstitute fraud must be clearly proved. The vendor’s fraud does notaffect the vendee if he acted prudently. Mere notice of a prior deed is notfraud as required by the Registration Ordinance. When dealing with thisOrdinance it is not legitimate to graft on to it English rules of Equity. Inthis country there is no such thing as Equity.
Fraud apart from collusion must mean (1) a definite representationmade to some person who acts on that representation to his prejudice,(2) when a person stands in a fiduciary relationship to another, a duty is .cast on the first to safeguard the interest of the other—any breach of thisduty would amount to fraud.
Collusion exists when two or more persons put their heads together andachieve a common object which does not appear on the face of the trans-action. It implies something under-hand. It is the indirect, improperend which moves vendor and vendee.
The sameness of the means adopted does not amount to collusion if theparties wish to achieve different ends.
[Maartensz A.J.—What if the means adopted to attain your endwould result in defeating the prior deed ?]
There are a number of consequences of a man’s act which he does notintend. One cannot infer that defendant’s end was to defeat the priorgrant. It may be unfortunate that the prior deed is set aside, but that isthe law as it stands. Even if defendant asked the grantor not to registerthe first deed it would not amount to collusion as he did so merely to« 3 K. cf- G. SM.3 (1903) 2 Ch. 40.
DALTON A.C.J.—Ceylon Exports, Ltd. v. Abeysundere.421
protect himself as a purchaser. There is a strong presumption againstfraud and collusion. Intellectual precautions prohibit an inference offraud which must be affirmatively proved and not negatively disprovedby us. See S. Dey v. Gopaulchunder Dey' and Raheem v. Begum
On the question of the Crown grants, it is not denied that these lands arechena and in the Kandyan Province. The Crown has absolute title, andthere are no statutory or equitable interests which can be claimed bysquatters (Babappu v. Don Andris'). The Crown as owner has conveyedtitle to the defendant.
[Dalton A.C.J.—On what rights did you get title ?]
The Crown can ignore all rights. If the Crown as owner granted landon a misrepresentation, then an action would lie' to the grantor againstthe grantee. The defendant secured Crown grants on his own rights,under the second deed. It cannot be argued that the plaintiff can claimrelief under the Trust Ordinance. Our Trust Ordinance is complete. We
have not incorporated the whole of the English lawA trust
implies a legal title in the trustee and a beneficial interest in the beneficiary….. Even in a constructive trust the legal title is in the allegedtrusteeIn this case the Crown had both the legal and equit-
able interest in the lands. …. The proposition that a personwho enters upon minor’s property possesses for the minor does not applyto Ceylon. The principle is to prevent prescription running against theminor. In Ceylon we have special provisions as regards minors, who are
protected by the Prescription OrdinanceThe deed of gift
is bad. Roman-Dutch law permits a person to sell property not his own,
but he may not gift such property(Voet 39, 5, 10). At the
time of the gift, the Crown had title and not the donor.
Weerasooria, in reply—Referred to 2 Vesey (Sen) 125 on fraud. Roman-Dutch law permitted donations of property which may become the pro-perty of the donee. Crown land has a marketable value and the doneemay become owner. Voet further says a person may donate futureproperty (Burge—Vol. II (1st ed.), p. 142). The English principles of trusthave been codified in our Ordinance. Any coses omissus can be suppliedby section 118 which makes the English law applicable.
D. E. Wijewardene (with him S. Alles), for added defendant, respondent.
Cur. adv. vult.
October 23, 1933. Dalton A.C.J.—
The original plaintiff, John Rajapakse, instituted this action fordeclaration of title to property described in the plaint, called Raigam-watta or Raigam estate, made up, according to the plaint, of six parcelsof land, about two hundred and fifty-one acres in extent. John Raja-pakse was born on January 25, 1903, and came of age in January, 1924.This action was instituted on November 30, 1926. By deed (exhibit P 8)of February 24, 1927, this plaintiff assigned his rights in the action to oneA. W. Rupesinghe, as trustee of the Ceylon Exports, Ltd. By deed(exhibit P 20) of June 21, 1927, Rupesinghe as such trustee assigned and
1 11 Moore’s Indian Appeals US.2 11 Moore’s Indian Appeals Mil.
a IS jY. h. It. 278.
422DALTON A.C.J.—Ceylon Exports, Ltd. v. Abeysundere.
conveyed all his rights, in the action to the company. The company wassubstituted as plaintiff by order made on October 28, 1928. It is statedand not denied that the company is, to all intents and purposes, Mohan-diram D. P. A. Wijewardena, who made proposals for the purchase of thisproperty in 1915, and who is referred to later in the course of this judg-ment. The added-defendant, W. Benjamin Rajapakse, is the father of theoriginal plaintiff, and the defendant is a purchaser of the property, thesubject of the action, from Benjamin Rajapakse.
Benjamin Rajapakse is or was a landed proprietor and planter. Atdifferent times he seems to have got into financial difficulties. About1898 he was in difficulty from this cause and states his brother thensettled his debts, he conveying the properties he then possessed to hisbrother, who conveyed them to Benjamin’s children by his first marriage.In 1901 he was insolvent for the first time with liabilities of Rs. 250,000,but with the help of his father he settled with his creditors. In 1921 hewent through the insolvency court a second time and obtained a certificateunder the Ordinance. In 1908 also he got* into financial difficulties andhis father agreed to settle his debts, if he transferred the properties hethen possessed to the children by his second marriage. BenjaminRajapakse agreed to do so, and as a result Raigam estate made up of thefirst six parcels in the deed, and other lands, were conveyed by deed ofgift (exhibit P 1) of September 20, 1908, to his son John Rajapakse, thena child of five years of age, and another estate called Rawita was conveyedby deed of gift (exhibit P 33) the same day to his two minor daughters,Emma and Norah. In each case the gift was accepted in conformity withlaw on behalf of the minors by their mother, the deeds P 1 and P 33 beingretained by Benjamin. The deed P 1 was not registered under theprovisions of Ordinance No. 14 of 1891, until December 17, 1915. Thedeed P 33 was apparently never registered.
On September 28, 1915, by deed marked P 4, Benjamin Rajapaksepurported to transfer Raigam estate to the defendant. This deed wasregistered on October 1, 1915. The principal question arising for decisionis whether the deed of gift P 1 of 1908 is to be deemed void as against thedeed P 4 in favour of the defendant by reason of the prior registration ofthe latter deed, or whether the deed P 4 was obtained, or its registrationsecured by fraud or collusion. The learned trial Judge has found infavour of the defendant that there was no fraud or collusion andthat P 1 is void as against P 4, and the substituted plaintiff hasappealed.
There is no doubt that the gift to the minor John Rajapakse was dulyand properly accepted and that the deed was duly delivered. It wasretained by Benjamin Rajapakse as father and guardian of his son. Thecase put forward by the defendant in this connection, however, is that theagreement in 1908 by the father Mudaliyar Rajapakse to pay BenjaminRajapakse’s debts, in return for which Benjamin Rajapakse was toconvey his properties to his minor children, was never carried out by hisfather, who did not pay the debts he had undertaken to pay. ThereforeBenjamin Rajapakse was right in regarding himself as still the owner ofthe property. The learned trial Judge has found that Benjamin Raja-pakse’s father did not so pay as he had promised. He hold that on the
DALTON A.CJ.—Ceylon Exports, Ltd, v. Abeysundere.423
evidence and the probabilities of the case it is difficult to hold that thepromise was carried out. I regret I am quite unable to agree with thelearned Judge on this point.
The debt which was to be paid in 1908 in connection with the convey-ance of Raigam was a sum of Rs. 15,000 and interest secured by mortgageon the property. That this debt was paid and discharged in October,1908, there is no doubt whatsoever. It is admitted the father undertookto pay it in return for something being done. That something was doneand the debt was discharged within a month. Who paid it? There isevidence that the father paid it. There is some evidence also fromBenjamin Rajapakse that he paid it himself out of his own funds, but thisstory he changes, at times admitting his father .paid it. If he paid ithimself, whence did he obtain the money to do so? He does not say. Hewas in financial difficulties at the time, unable to pay his debts, and indanger of being sued and losing his properties. The learned trial Judgehas, it seems to me, lost sight of these circumstances in holding thatBenjamin Rajapakse paid out of his own moneys.
The evidence of Benjamin Rajapakse on all matters must clearly becarefully scrutinized before being accepted on any point. On thisquestion of the payment of his debts in 1908 he has at one time stated onething, and at another time another. The trial Judge is of opinion thatgreater weight should be given to earlier statements, because when thosestatements were made the validity of the transfer to the defendant wasnot in question. But Benjamin Rajapakse was not even consistent inthose earlier statements, for in 1916 he stated his father had dischargedthe mortgage over Raigama in 1908. Further, his inability to pay hisdebts in 1908 is entirely inconsistent with the truth of earlier statementsthat he had himself discharged the debt, and he makes no attempt to showhow he did this.
The notary who attested the deed P 1 in 1908 is fortunately alive andwas a witness in this case. The deed P 33 was also prepared and attestedby him the same day. He had done work for Benjamin Rajapakse andhis father before, and lived opposite the latter’s house. Having attestedP 1, he made an endorsement in the usual way on Benjamin Rajapakse’stitle deed (exhibit D 4) of the deed of donation. He also made an endorse-ment on Rajapakse’s title for Rawita estate of the conveyance (P 33) tohis two daughters. The witness then goes on to say that a bond, he hinksfor Rs. 15,000, was cancelled the same day, adding later that he thinks theRs. 15,000 was paid after the deed of gift had been executed. He knewof the arrangement between father and son for the conveyances and forthe payment of the debts of the latter by the former. Some of thepayments were actually paid in his presence. The learned Judge saysthat the witness appeared to be a respectable and disinterested witness,and ordinarily he would be quite prepared to accept his evidence. He isunable to do so in this instance, however, because it is proved that thebond for Rs. 15,000 was not discharged until October 21, a month afterP 1 was executed. The learned Judge is of opinion that the payment ofthe debt was more pressing than the execution of the deed, and, therefore,if the debt was paid, it would be paid at the time of the deed. That thedebt was paid within a month of the deed is admitted and clearly proved,
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DALTON A.CJ.—Ceylon Exports, Ltd. v. Abeysundere.
but the learned trial Judge does not give his mind to the question as tawho paid it in October. Only two persons are put forward as paying it,the father and the $on. I can only point out again that the son was infinancial trouble, unable to pay his debts in September and has disclosedno source when, a month after P 1, he was suddenly in funds again. Onthe other hand, speaking in 1932 of something that took place in 1908,the notary, when deposing to payment by the father in his presence,knowing in the ordinary way of business (this, be it noted, was not anordinary business transactions but an arrangement between father and son)a debt of this kind would generally be discharged at the time of the con-veyance, might well and truthfully say he thought the payment was madeat the time of the execution of the deed. The evidence of the notary, inmy opinion, strongly supports the plaintiff’s case that Benjamin Raja-pakse’s debt over Raigama was discharged by his father, whereas thestatement of Benjamin Rajapakse that he discharged the debt himself hasnothing to support it beyond his own contradictory statements.
There is one further circumstance in which the learned trial Judge findssupport of Benjamin Rajapakse’s statement that his father did not paythis debt There was some suggestion in 1915 that an application mighthe made to Court for an order to re-vest Raigam estate in BenjaminRajapakse. I refer to this later, and it was not pursued. In 1920,however, an application was made to the District Court, Negombo,supported by affidavit (exhibit D 24) for an order to re-vest in BenjaminRajapakse .the share of one of his minor daughters in Rawita estate(conveyed to her by deed P 33 before mentioned). This application cameup for disposal before an acting District Judge, the then Crown Proctorwho was acting for the District Judge for the day, a Mr. J. E. de Zoysa,and it was allowed by him. This Mr. de Zoysa is Benjamin Rajapakse’sbrother-in-law, having married one of his sisters, whilst one of hisdaughters later married John Rajapakse, the original plaintiff. It wasthis very proctor who according to the witness de Silva had drafted thedeed of gift P 1 in 1908. The learned trial Judge appears to be of opinionthat the application came before this near relative by design, since heexpresses the opinion that under the circumstances it was an applicationno other Judge could have been expected to allow, the debt, to settle whichthe application was made, having been created by Benjamin Rajapaksesubsequent to the deed of gift. Even Benjamin Rajapakse has to admitin his evidence in this case the impropriety of getting this order from hisbrother-in-law. In spite, however, of this episode, which seems to me to bealike most discreditable both to acting Judge and litigant, the learnedtrial Judge accepted the argument of defendant’s counsel in the lowerCourt in this trial, that Mr. de Zoysa allowed this application “ althoughlegally l^e could not have done so as he was satisfied from personal know-ledge that Rajapakse was not doing anything morally dishonest”. That,the learned Judge says, is a circumstance which supports BenjaminRajapakse’s statement that his father did not settle the debt in 1908 aspromised. I regret I am unable to agree with him. It must not bethought that the defendant had anything to do with this episode in 1920,but if it supports his case, it is admitted that Mr. de Zoysa is still aliveand therefore he could have been called for that purpose. In the absence
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425
of this witness the learned Judge was not entitled to draw the inferencehe did; if his view of the episode is the correct one, and I am quite unableto say he is wrong, it clearly reflects no credit on any of the participants,and the absence of Mr. de Zoysa from the witness box is not surprising.On this question then of the payment of debts in 1908,1 am satisfied thatBenjamin Rajapakse’s statements that his father discharged this debt are cor-rect, and that all die terms of the settlement in 1908 were duly carried out.
After 1908 the three minors continued to live with their parents up to1918, near Negombo, Benjamin Bajapakse retaining the deeds of gift andpossessing, he states, die lands donated to his children on their behalf.In 1918 the parents appear to have separated and John Rajapakse livedwith his mother from 1918 to 1924. There is no doubt that in 1915, whencompensation had to be paid by Sinhalese owners' of lands after the riots.Benjamin Bajapakse gave the name of his son as owner of one of the otherpieces of land included in P 1. He recognized also that the deed P 33conveyed title to Rawita to his daughters, for in 1919 he took a conveyancefrom his daughter Nora of her share of Rawita. On August 30, 1919(exhibit D 23) he agreed to sell the whole of Rawita to Goonewardenabrothers, in February, 1920, moving the District Court at Negombo togrant an order for the reconveyance to him of the minor Emma’s share.
I have already referred to this proceeding. After the execution of P 1and P 33, however, Benjamin Rajapakse took no steps to have the deedregistered. The learned trial Judge believes that he kept back the deedsfrom registration in order to take advantage of the effect of non-registrartion. I am not prepared to say that I entirely disagree with him there,for the deeds in his favour were registered and he admits he knew of theeffect of registration. Even, however, if one were to accept the reason heputs forward for his failure to register, the fact remains that it was hisduty on behalf of the donees, his minor children, to see that the deeds wereregistered, and he failed in that duty. He took advantage of this failurelater. As was perhaps to be expected, he got into financial difficultiesagain, borrowing money again. When he was in want of more moneyand Chettiars wanted some security, he says “I discovered that owingto the non-registration of the ^feeds of gift I could deal with the propertyas my own”. He commenced mortgaging Rawita as early as 1909(exhibit D 36). In 1911 by deed D 35 he mortgaged small portions ofRaigam estate, with other properties including portions of Rawita,mortgaging further portions of both estates by D 37 in 1912. These twomortgages he paid off in 1913 with the proceeds of a further mortgage (D 7),executing a secondary mortgage (D 6) for a further amount later in thesame year, over portions of Raigama. There is no doubt that in thesedeeds he purported to deal with Raigama and also Rawita estate as hisown. At some time during this period also, I think from the evidencethere can be no doubt that the notary’s endorsement of the deed of gift(P 1) on Benjamin Rajapakse’s title for Raigama (D 4) was purposelyconcealed by a strip of paper being pasted over it. His title for Rawitawas a Crown grant, the endorsement thereon of the deed of gift to hisdaughters had also been covered up by a strip of paper. The personwhose interest it was to conceal these transactions in raising money onthe land was Benjamin Rajapakse, and I should certainly, under all the
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circumstances, hesitate to accept his denial that he was responsible for it,and his statement that the Chettiars had done it.' If the latter wereresponsible, Benjamin Rajapakse must obviously have been a most willingparty to the attempt to conceal the fact that the land belonged to his son.Up to 1915 Benjamin Rajapakse made no attempt to dispose of eitherRaigama or Rawita by sale, but in that year getting deeper into debt,he tried to obtain a purchaser for Raigama. As a result MudaliyarWijewardene, amongst others, got into communication with him andbegan negotiations for its purchase. Benjamin Rajapakse’s title deedswere left with Mr. A. Alvis, Wijewardene’s proctor, and then it wasdiscovered that a strip of paper was pasted over an endorsement on thedeed (D 4) of November 7, 1906. The witness Perera states how this wasdiscovered and the strip removed, the deed of donation (P 1) of 1908 beingthen disclosed to Wijewardene and his proctor for the first time. Ben-jamin Rajapakse was asked to account for it, and then produced the deed(P 1). He said there was nothing in it and that he had paid off a debt onthe property. There is no doubt that Benjamin Rajapakse told Alvisthis, and as a result the alleged payment of the mortgage by him was putforward as a possible ground upon which to base application to theDistrict Court to obtain an order for the retransfer of the property toBenjamin Rajapakse. The evidence shows, however, that Mr. Alvispointed out to Benjamin Rajapakse his duty to his son to have the deedof gift registered. He also pointed out to Wijewardene that the deedmight be registered at any moment. In the end counsel’s opinion wastaken on a statement of facts submitted by Mr. Alvis as to whether areconveyance could be allowed by the Court (exhibit P 9a) . The infor-mation in this statement must have been largely obtained from BenjaminRajapakse, and it is remarkable that there is no reference there at all toany agreement with his father. Mudaliyar Rajapakse to convey Raigamato his minor son John, on his father paying his debts, or to any failureon the part of his father to carry out such an agreement. If such anagreement had been mentioned, and if it had been suggested by BenjaminRajapakse at that point of time that Mudaliyar Rajapakse had notcarried out his part of the agreement, I cannot think the proctor wouldnot have set it out in tire statement drawn up for counsel’s opinion. Itmight have afforded some ground upon which to have an application fora reconveyance, and it is in fact the principal reason put forward in thecase now before us to support defendant’s contention that the deed wasnever acted on. that his part of the agreement was not performed byMudaliyar Rajapakse, and that therefore the conveyance by BenjaminRajapakse to his son was of no effect. When counsel’s opinion wasobtained it was to the effect that Benjamin Rajapakse had no title, andthe Court would not sanction any retransfer to him. The opinion goeson to explain the effect of the Registration Ordinance on a subsequentpurchase for value from the donor. Mr. Alvis pointed out to Wijewardenethe difficulties of the position and the possibility of litigation; whereuponWijewardene declined to take a – transfer from Benjamin- Rajapakse,unless he got the property revested in him. Some further correspondenceon this subject passed between them, when the present defendant cameforward as a possible purchaser.
DALTON A.CJ.—Ceylon Exports. Ltd. v, Abeysundere.427
The defendant has not himself given evidence in this case, and it mustnecessarily be a matter for comment, since there is a charge of fraud andcollusion made against him in respect of which some of the evidence givenmight reasonably have called for some answer from him. There areseveral points at which the case presented on his behalf is directly atvariance with the plaintiff’s case and with the added defendant’s evidence,but to assist the Court in arriving at a conclusion as to which is true, thedefendant has himself given no help. The added defendant’s evidenceon numerous matters, as I have already pointed out, needs very carefulscrutiny before being accepted, There are, however, some instances wherehis evidence is at variance with the case put forward on behalf of defend-ant and in those instances, with which I deal lateral see no reason why hisevidence should be rejected in the absence of any denial by defendanthimself. If it was untrue in the cases to which 1 refer, it was open todefendant to say so, but he has, preferred to remain silent. In thosecircumstances, there being no good reason otherwise to reject the partic-ular evidence in question, the presumption to be drawn is that defendantis unable to deny the truth of the evidence. It is apparent from theproceedings in the lower Court that counsel for the defendant did all hecould to keep the added defendant out of the witness box. Possiblydefendant thought he might now be unduly favourable to the claim putforward on behalf of his son, and one has to bear this in mind in estimatingthe worth of Benjamin Rajapakse’s evidence. Probably neither plaintiffnor defendant wished to call him as witness. Since, however, he wasa party to the proceedings, who wished to give evidence himself, bothplaintiff and defendant have had the opportunity of cross-examining himand have taken full advantage of that opportunity. After that evidenceparticularly I have great difficulty in understanding why defendant didnot himself go into the witness box to clear himself of the charges made inthe issues against him.
Counsel’s opinion for Wijewardene had been obtained at the end ofAugust, and shortly before September 11 Benjamin Rajapakse anddefendant called on Mr. Alvis, defendant stating he proposed to purchaseRaigam estate. The deeds for the property had been handed by BenjaminRajapakse to Alvis on August 11, and did not leave his possession untilNovember 23, so defendant had had no opportunity of seeing them beforedeciding to buy. It is suggested that an honest buyer would certainlywant to see the title deeds before deciding to purchase. It is obvious thata prudent purchaser would have wished to see them. Alvis then informedhim of the deed of gift to the minor and that the endorsement on BenjaminRapapakse’s title had been concealed by a strip of paper. Mr. Samara-wickreme’s opinion was also shown to him, whilst he was also aware thatthe deed of gift might be registered at any moment. Defendant repliedthat he knew all about it, and had taken counsel’s opinion on the matter.It seems clear he wanted no advise from Alvis, and merely required hisservices as a notary to put through the agreement between him andBenjamin Rajapakse. The correspondence (exhibit P 11) of September 11,
1915, shows that he was also anxious to complete the transaction assoon as possible. The next day, however, Mr. Alvis was informed bydefendant that the transaction for the purchase of the estate had fallen
428DALTON A.C.J.—Ceylon Exports, Ltd. v. Abeysundere.
through. Alvis says he kept the deeds because he understood the matterwould be settled almost immediately, and the next day, September 13,he received instructions to prepare a mortgage bond for Rs. 40,000 byBenjamin Rajapakse in favour of defendant over Raigama and Rawita.The parties to the mortgage authorized the notary to dispense with thesearch for encumbrances and the bond was completed the next day, theprior mortgagee, the Chettiar, being paid off in the notary’s presence.Benjamin Rajapakse says he had given defendant a written undertakingnot to register the deed of gift, although he had been informed and wasfully aware it was his duty to register it. I see no reason to doubt thisstatement in the absence of any denial of its truth by defendant. It mayin fact account for the defendant’s instructions to the notary to dispensewith any search. During this time Rajapakse was still continuing hisnegotiations with Wijewardene, apparently on the ground that he hadsome prospect of getting the District Court, Negombo, to grant an orderre-vesting the property in him. Wijewardene heard, however, of theexecution of the mortgage from Alvis and further that defendant wasgoing to purchase the property, whereupon he sent in a claim (exhibit D 3)against Rajapakse for damages. Wijewardene and Rajapakse met afterthe latter had received this claim, and the latter still persisted that he hadonly given defendant a mortgage. He also appears to have obtained asum of Rs. 3,000 from Wijewardene for the purpose of taking the proceed-ings he had suggested in the Negombo Court. Meanwhile he had alsopromised to repay defendant the Rs. 40,000 within a fortnight or a monthor to convey the property to him. He admits the raising of that sumwithin the time was for him impossible, and on September 24 (exhibitsP 16 and P 17) Alvis received final instructions from defendant respectingthe purchase of Raigama by him and for the preparation of the deed oftransfer. Again the necessity of putting through the transaction speedilyis stressed. He stated in that letter that he was taking possession of theestate on the following Wednesday at the latest, and that he had arrangedwith Rajapakse to sign the deed on the Monday preceding the Wednesday.These instructions were carried out and on September 28, Rajapakseexecuted the conveyance (deed P 4) in favour of defendant, after they hadagain instructed the notary to dispense with the search for encumbrances.This conclusively shows that defendant, who must have known that hewas not dealing with a very scrupulous person, had trust in Rajapakseand was confident that the latter, although he had got his liabilities to theChettiar discharged on September 14, would not register and had notregistered the deed of gift P 1 behind his back.
As the learned trial Judge points out, the adequacy of the considerationpaid by defendant has some considerable bearing on the question underdiscussion, but the fact that the consideration may be held not to beinadequate does not of itself rebut all suggestions of fraud or collusion inobtaining the conveyance or in securing its prior registration. There waslittle difference between the prices offered by defendant and Wijewardene.The value of the property at the time of these proceedings is admitted bydefendant to be Rs. 150,000, but there is no doubt also that it had beenconsiderably improved at that date and Crown titles had also then beenobtained for the property. Rawita of 151 acres was sold ir» 1010 for
DALTON A.C.J.—Ceylon Exports, Ltd. v. Abeysundere.429
Rs. 100,000, but it is stated to be situated some ten miles distance fromRaigam estate, and there is no evidence whence one can compare themtogether. There is no doubt that a person in financial difficulties may becompelled, however, to make a sacrifice in selling even his own property,whilst an unscrupulous person would undoubtedly take less than the realvalue for what was not his. 'Probably the learned trial Judge is correctwhen he says that defendant got a bargain, although the price was notso low that it could not represent the value which a bona fide purchaserwould have been prepared to pay.
In the deed P 4 Rajapakse also covenanted to apply for and obtain fordefendant from the Government of Ceylon grants or certificates of quietpossession of the various allotments of Raigama- conveyed by the deed.At the same time he executed the undertaking and bond P 5 hypothe-cating Rawita and Dagonne lands, whereby he undertook to carry out theconditions of the conveyance P 4, and, in the event of it being ascertainedthat the total extent of Raigama was less than 375 acres, to pay to defend-ant for such deficiency at the rate of Rs. 200 for every acre or part thereofof cultivated land, and Rs. 100 for every acre of uncultivated or unplantedland. He further undertook, in the event of defendant or his executors,administrators, or assigns being at any time disturbed or deprived of theownership or possession of Raigam estate, or being ejected therefrom andbeing compelled to pay any sums of money by way of compensation ormesne profits, to make good to defendant any loss or damage therebyincurred up to the sum of Rs. 50,000. A reason put forward by Rajapaksefor this bond was that defendant was afraid that any title he got to theproperty might be defeated by the minor, and that he declined to purchasethe property unless he was protected by this agreement. Rajapakse gavethis reason in his evidence in proceedings (exhibit P 35) as long ago asJuly, 1916, and he repeated it again in his evidence in this case. He seemsto have had no ulterior motive-in 1916 in making such a statement. I seeno reason to doubt that the reason he gives was one of the grounds forobtaining the bond P 5, especially having regard to the wording of clause 4of the deed, and in the absence of any denial of the truth of Rajapakse’sstatement by defendant. Defendant had received ample warning of therisk he ran in taking a conveyance from Rajapakse and of the danger oflitigation resulting with of course possible loss of the property in suchlitigation.f
The bond P 5 was discharged on August 16, 1920, at which date defend-ant had obtained Crown grants for the major portion of the propertyconveyed to him by P 4. He doubtless, therefore, felt secure from anyclaims being thereafter made against him. On that date defendant soldcertain lands at Dagonne to Rajapakse by deed ADI for Rs. 25,000.The same day Rajapakse executed a mortgage (A D 2) in favour of thedefendant for the sum of Rs. 50,000, mortgaging the lands he had pur-chased from defendant on A D 1 and other lands. Of that sum ofRs. 50,000, Rs. 25,000 was set off against the purchase price on A D 1;Rs. 10,000 was applied to pay off what was due from Rajapakse todefendant on the bond P 5, in respect of the shortage in acreage obtainedby defendant on the Crown grants, the shortage being roughly about 100
430DALTON A.C.J.—Ceylon Exports, Ltd. v. Abeysundere.
acres. The remainder was made up of sums, as set out in the attestationclause, which are not material to this case. The bond P 5 was thereupondischarged.
To return to the incidents of September, 1915, the deed P 4 wasduly registered three days after its execution on October 1. The deedP 1 was registered on December 17 following, by whom the evidence doesnot show. The learned trial Judge seems to think this was done at theinstance of Wijewardene, but that suggestion was not put to him whenhe was in the witness box.
The question that has to be decided on these facts is whether the deedP 1 of 1908 is void as against the deed P 4 of 1915 by reason of the priorregistration of the latter, or whether the deed P 4 was obtained or itsprior registration secured by fraud or collusion. The Ordinance in forcein 1915 was the Land Registration Ordinance (Ordinance No. 14 of 1891)which was repealed by Ordinance No. 23 of 1927, but section 7 of the latterOrdinance reproduces section 17 of the former Ordinance on this matter,and also provides that an instrument duly registered under any Ordinancerepealed by Ordinance No. 23 of 1927 shall be deemed to be duly registeredunder the latter Ordinance.
The authorities on this question are fully discussed by the lateMr. Justice A. St. V. Jayewardene in his book on The Registration ofDeeds, pp. 123-138. In Ceylon it has been held consistently since 1877that mere notice of a prior unregistered deed does not amount to fraud soas to deprive a person registering of the priority conferred by law. InD. C. Kandy, No. 67,295 (Ramanathan’s Reports (1877), p. 198) the PullBench in considering the question as between a second mortgage takenwith notice of an earlier mortgage, but registered before it and the earliermortgage, could find no grounds on which it could say that either hadbeen trying to mislead the other. The mortgages had been executed onthe same day, and were attested by the same notary, the second mortgageebeing informed of the execution of the first mortgage by the notary. Allthat was proved respecting the second mortgage was that knowing of thefirst mortgage, he took legal steps to secure himself; he had not, in thewords of Clarence, Acting Chief Justice, done anything underhand, norhad he been shown to have made any pretence. Each party stood onhis legal rights. In these circumstances it was held there had been nofraud on the part of the second mortgagee in securing prior registrationof his mortgage. In Siripina v. Tikiria Phear C.J. and Clarence J.came to a similar conclusion, holding that the mere purchase of land withthe knowledge that the vendor had previously sold to a third person,who had not yet registered his conveyance, does not amount to fraud asagainst that third party. Phear C.J. states, however, that had thepurchaser in the second transaction been party to anything in the way' of hindering or delaying the first purchaser in the registration of his titlefor the purpose of securing to himself priority of registration, then therewould clearly be fraud within the meaning of the proviso. (OrdinanceNo. 8 of 1863, section 39.) He adds that it is possible to put many casesof the like character.
* i s. c. c. a*.
DALTON A.C.J.—Ceylon Exports, Ltd. v. Abeysxmdere.431
This conclusion, that mere notice of a previous deed is not enough todeprive a person who has registered his deed of the prior registration, wasaffirmed by the Full Bench in Aserappa v. Weeratunga and it is notnecessary to refer to later cases following that and earlier decisions tothe same effect. It will be useful, however, to examine cases inwhich it has been held that something more than mere notice wasproved.
In Kirihamy v. Kiri Banda3, the facts were as follows:—A, on a deeddated November 29, 1887, purchased a property from a sister of B, buthe did not register his deed. On January 21, 1898, B obtained a deedfrom his sister for the same property apparently for value, and registeredthe. deed the next day. The property was subsequently seized by othersunder a writ on a judgment obtained by them against B. A claimedthe property but his claim was disallowed. He therefore brought thisaction under section 247 of the Civil Procedure Code, in which the twodeeds were in competition. It was proved that B had urged A in 1887to purchase the property from his sister, and was present at the executionof the deed. He was, however, in no fiduciary position with regard to A.After the deed was executed it was kept in the custody of B’s wife whowas A’s daughter, B and his wife enjoying the produce of the propertyunder the deed. The trial Judge held that under the circumstances, theconduct of B in taking a conveyance of the property from his sister in1898 amounted to fraud both in obtaining the deed and in securing priorregistration, and with this conclusion the Court of Appeal agreed. InLawaris v. Kirihamy'’, certain property had been conveyed to Y and hisbrothers and sisters. Y then prevailed upon his mother to convey theproperty to him, thereby taking a dishonest advantage of his youngerbrothers and sisters in order to deprive them of what they had obtainedon the earlier deed. He got this later deed registered befor the earlierdeed, but it was held he was guilty of both fraud and collusion in theobtaining and registering of his later deed. It was of course the motherwhose duty it was as guardian to have the earlier deed registered onbehalf of her children and to look after her children’s interests, but itappears that the latter also relied upon their elder brother for this purpose.He took advantage of his position, and of his mother’s failure to safeguardthe interests of her other children.
In the case of Marikar v. Fernando’, the vendor sold a property to theseventh added defendant by deed of transfer of March 25, 1900. He thensold it to plaintiff by deed dated November 26, 1913. The earlier deedwas registered in the wrong folio, and so was not duly registered. It wasthen urged that plaintiff’s deed was not entitled to any benefit from priorregistration since he and the vendor were guilty of fraud in respect of thesecond transaction. The trial Judge found that plaintiff was aware ofthe earlier transfer, and that he and the vendor conspired together to seewhat could be done to make a little more out of the rights which thevendor had already alienated. The plaintiff went in with open eyes tosee whether he could not get a bit of the land, for himself. In thp opinionof Wood Renton C.J. this conduct amounted to collusion in obtaining
3 8 Bal N. C. 88.
* 11 N. L. R. 481.
‘ 14 N. L. R. 411.= 14 N. L. R. 284.
432
PALTON A.C.J.—Ceylon Exports, Ltd. v. Abeysundere.
the deed. Ennis J. was of opinion that these facts disclosed that plaintiffand his vendor conspired together and were guilty of fraud in thetransaction within the meaning of section 17 of Ordinance No. 14 of1891.
In the case of Ferdinando v. Ferdinondowhere on the facts collusionwas held to have been proved, Bertram C.J. deals with the matter atconsiderable length, but stresses die limit to which previous decisionshave gone, namely, that the mere existence in the mind of a man, who hasobtained a conveyance for valuable consideration, of knowledge of theexistence of a prior and unregistered conveyance is not sufficient todeprive him of the right to gain priority by registration. On the subjectof fraud, without seeking in any way to define the term as used in theOrdinance, he points out that it may involve a conspiracy of mind withmind, but it does not necessarily involve it. It may further involve noconscious moral dishonesty, as was found in the case with which he wasdealing. On the subject of collusion he states, “ ‘ Collusion ’ means, asthe derivation implies, the joining together of two parties in a commontrick. It carries with it the implication of something indirect and under-hand. One can well understand that the law should say, ‘It is per-missible, even if you know of the existence of an unregistered conveyance,to obtain another from the same source and to register your own deedthus obtained and so obtain priority. All parties in such a case standupon their legal rights. The prior grantee knows the law as well as thesubsequent grantee. The person who registers first is entitled to a rewardfor his diligence’. But this is where all parties are supposed to beacting independently in their own interests. It is otherwise where,though to an exterior view they are simply independent parties to atransaction as vendor and purchaser, they are, in fact, acting togetherfor a common and indirect end. There, even though the result they aimedat is no doubt permitted by the law, their contract amounts to collusion ”.These latter words were spoken with direct reference to the facts of thecase being dealt with by Bertram C.J. The fact that the parties wereactuated by different motives would not make it any less collusion.
An attempt to define the term “fraud” as used in section 14 of theYorkshire Registries Act 1884 was made by Stirling J. in Battison v.Hobson*. That was a case of solicitors who was held to be guilty ofactual fraud in taking advantage of a defect in a security lodged with abank to defeat the interests of his clients. In dealing with the caseStirling J. states that he understands “actual fraud”, as used in thesection, to mean fraud in the ordinary popular acceptance of the term,that is fraud carrying with it grave moral blame, and not what has some-times been called legal fraud, or constructive fraud, or fraud in the eyeof a Court of law or a Court of equity. This is what I understand is meantby the term as used in our Ordinances under consideration, and Mr. Pererafor the respondent agrees with this conclusion. It seems to me also toconform to what has been held in earlier decisions, even if the partiesthemselves in any given case may not be conscious of any dishonesty.This latter state of mind may of course be due to various reasons, althoughin fact grave moral blame exists.
1 S3 N. L. R. 143.
(1896) S Ch. 4037.
DALTON A.CJ.—Ceylon Exports, Ltd. v. Abeysundere.
433
The case for the defendant as represented to us during the argumenton the appeal was that he had done nothing more throughout his trans*actions with Rajapakse than an ordinary prudent man would have done.It was suggested for him that in 1915 he was aware that BenjaminRajapakse’s father had promised to pay the latter’s debts, but thatinasmuch as he was informed by Benjamin Bajapakse that he had not doneso, Benjamin Rajapakse continued as owner of the property from 1908,not having registered the deed of gift because the agreement betweenthem had not been carried into effect. I have already called attentionto the absence in the statement of facts prepared on information suppliedby Benjamin Rajapakse for the opinion of counsel in August, 1915, ofany reference to any agreement between father mid son in 1908, or of anyfailure to carry out that agreement on the part of the father. I can findno reliable evidence that defendant was ever told of this alleged breachof the agreement by the father, and there is of course no evidence bydefendant himself that he was so told. There was no doubt a statementto the effect that Benjamin Rajapakse had paid off the mortgage, but itdid not go beyond that. Even if defendant had been told of the agree-ment between father and son which was come to between them owing tothe financial difficulties of the latter, one would have expected him tohave been anxiotis to ascertain how Benjamin Rajapakse had himselfsettled the debt after all from his own funds.
It is not denied now by either side that Benjamin Rajapakse hascommitted a fraud on his son in 1915 by conveying the property todefendant, after having donated it to the former in 1908. What is urgedfor defendant in addition to what I have stated is that he had in 1915 noknowledge of this fraud, that he owed no duty to that son, and was in nofiduciary position or position of trust as regards him. When, however, heobtained the conveyance in 1915 he knew of the earlier conveyance, andit seems to me that on the facts he was aware of a great deal more thanthe mere existence of a prior and unregistered conveyance. He knewthe earlier conveyance was to the minor son of his grantee, he knew anattempt had been made to conceal it and must have suspected thatRajapakse was the author of that attempt, he knew that conveyance wasunregistered, he knew it was the duty of Rajapakse as father and guardianof his son to have the earlier deed registered, he knew counsel had advisedthat Rajapakse had no title to the property, and was not entitled to haveit reconveyed to him, he knew Rajapakse was in the hands of moneylenders who were pressing him, he knew Rajapakse was trying to sell thisproperty to others to raise money, he was told that if he took a conveyancelitigation might result in view of the earlier deed, and it was a dangerousthing to do, and he knew if Rajapakse registered the deed to his son ashe was told he should do, he (defendant) could not even plead the benefitof the Registration Ordinance. Knowing all this, although it probablydid not require any persuasion, he got Rajapakse during the course ofthe transaction to undertake not to register the deed to the minor; hepushed through the conveyance to nimself with-great celerity, he showedno desire to want the advice of Mr. Alvis who nevertheless cautioned himas to the risk he was taking; he dispensed with searches, lent Rajapakse*Rs. 40,000 on mortgage, which in the circumstances put the latter in his35/31
434DALTON A.C.J.—Ceylon Exports, Ltd. v. Abeysundere.
power, and could only result in the* conveyance which to judge from hisactions he seemed bent on obtaining. In my view of the facts he obtainedthe deed by fraud within the meaning of the Ordinance, for under thecircumstances disclosed he cannot in my opinion be in any better positionthan his grantee. He, knowing of the fraud of the latter, took advantageof it for his own purposes. To apply some of the tests used in the casescited, both he and Kajapakse had clearly a common end, although themotives that actuated them were different. Defendant must haveknown his conduct was underhand as against the minor if he gave anythought to the matter. His eyes were fully open as to all the circum-stances and as to the risk he was taking, in spite of which he completedthe transaction to see if he could not get the land for himself by gettingthis deed and having it registered at once. In addition to fraud therewas also, in my opinion, on the facts collusion proved between him andKajapakse in his obtaining the deed, and also in securing its prior regis-tration. In those circumstances the deed P 4 obtains no benefit by itsprior registration.
The next question to be decided is, since the deed P 4 does not conveyany title to defendant, whether the land vests in him by virtue of theCrown grants subsequently obtained by him.
The land in question, it is urged, is Crown land within the meaning ofsection 6 of the Ordinance No. 12 of 1840. The defendant, subsequent tohis obtaining the conveyance from Kajapakse and after the inquiry by theSettlement Officer, obtained with Rajapakse’s help grants from the Crowncovering the same land up to 222 acres and 23 perches on payment ofRs. 4,962. He purchased in addition 11 acres 3 roods and 36 perchesof the extent conveyed to him under the Waste Lands Ordinance, forwhich he paid Rs. 226. He purchased from the Crown and obtaineda grant for a further 12 acres 2 roods and 18 perches of Crown forest,for which he paid Rs. 505, and he also appears to have purchased fromoutsiders, who had themselves at the settlement obtain Crown grants,an extent of 8 acres 16 perches for the sum of Rs. 131. He got in all byhis subsequent grants and deeds a total of 274 acres 3 roods and13 perches.
With regard to the settlement it is clear that sometime before thedefendant appeared on the scene, that is in 1913, Benjamin Rajapakseemployed a surveyor, the witness Murray, to make a survey of Raigam-watta estate for the purpose of obtaining from the Government Agent acertificate of the Crown having no claim to the land under section 7,Ordinance No. 12 of 1840, or as it is commonly called a certificate of quietpossession. Murray made the survey and prepared a tenement sheet(exhibits P 31 and P 30). This survey and tenement sheet were subse-quently used in the settlement proceedings that preceded the issue ofthe Crown grants to the defendant. The witness described the procedurefollowed when a person wants a settlement of land in the Province inquestion, which procedure he followed in this instance, and it is clear from^ his evidence and also from the evidence of the witness F. A. Wickrema-singhe, the Land Settlement Office clerk, that at the settlement inquirythe deeds" obtained by an applicant, usually called village deeds, are recog-nized for the purpose of making the settlement, having regard to the age
DALTON A.CJ.—Ceylon Exports, Ltd. v. Abeysunders.
435
of the plantations on the land, the object of the settlement being, as thelatter witness states, to see that the party who is entitled to the landunder the documents gets a grant for the land. Any payment made onsettlement usually represents, I understand, the bare value of the landwithout improvements
After the employment of Murray as stated above in 1913, BenjaminRajapakse took no further steps for the time being. In the course,however, of his negotiations with the defendant he agreed to help him toget Crown grants to which the owner under the village deeds would havehad a claim and as has been seen, in exhibits P 4 and P 5, covenanted todo so. The letter (P 16) from defendant to Mr. Alvis contained hisinstructions on this point (see 2b of Instructions P 17), the costs ofobtaining the grants, however, to be borne by the defendant. The letter(P 37) of April 24, 1917, from defendant’s proctors to the SettlementOfficer in making the claim forwards Murray’s tenement sheet of 1913.In reply to a request from the Settlement Officer to forward the title onwhich the claim was based, the proctors forwarded the title deeds of theproperty. These, it is conceded, must have been P 4 and BenjaminRajapakse’s title deed D 4 and probably the earlier deeds. The Settle-ment Officer’s reply is D 57 of June 1, 1917. He points out that the deedsforwarded do not rebut the legal presumption that the land is the propertyof the Crown and that what is really sought is a settlement, and that theclaim will be inquired into upon that footing. That the claim was infact made in Benjamin Rajapkse’s name seems clear. (See blocksurvey tenement list D 56.) He and defendant were present, with otherclaimants at the inquiry. The Settlement Officer was aware that BenjaminRajapakse had purported to convey his village title to defendant, butwas not informed that in fact Benjamin Rajapakse had already conveyedthat title to his son. There is evidence to show that twenty acres of theland dealt with tinder the deed P 4 and earlier deeds were paddy lands,which would come under section 8 of Ordinance No. 12 of 1840. Apartfrom that portion, the claimant had no statutory right to obtain a grantunder section 8 of the Ordinance in respect of lands that come within theprovisions of section 6 (vide Babappu v. Don Andris'). It is clear, however,from the evidence that the purpose of the settlement inquiry is to settlethe land, subject to what the witnesses say as to the age of the plantations,upon the persons entitled thereto under the village title. In other words,the Settlement Officer for the purpose of deciding who is entitled to thegrant recognizes the equitable interests of the claimants as disclosed bytheir village titles, in practice applying the provisions of section 8 of theOrdinance as regards possession and payment This, I think I might wellsay, is common knowledge and was of course known to Benjamin Raja-pakse, and there is not the least reason to doubt it was known to thedefendant. It is the recognized policy of the department in settlementmatters. The fact of the earlier conveyance was not disclosed to theSettlement Officer, for it is clear that had it been produced, any grantobtained by Rajapakse must have been obtained on behalf of, and for thebenefit of, his son, who had village title in his own name and possessionthrough his father.
> 13 N. L. B. 273.
436DALTON A.C.J.—Ceylon Exports, Ltd. v. Abeysundere.
There is some analogy, it seems to me, to cases where Crown grantshave been made after settlement proceedings under the provisions of theOrdinance No. 12 of 1840, in the class of cases in England that may ariseunder the Enclosure Acts. Yem v. Edwards cited to us in the course ofthe argument, was one of the latter class. Grants of property made there-under are subject to equitable interests that may exist, the legislaturenever intending, as stated by Page Wood V.C., to disturb existing equitiesor to give more than a legal title to the party who at the time of thepassing of the Act might happen to be the holder. In the case before usthe Claimant had no statutory right under the Ordinance to any portionof the land, the subject of his claim, beyond twenty acres, but as I havepointed out, for the purpose of granting Crown title, the policy andpractice in settlement is to recognize and give effect to claims based uponvillage title and possession. In a local case, Sinnonappu v. Dingirihamy %where a Crown grant in favour of several grantees conveyed property tothem simpliciter without specifying the respective shares of the parties ona plea that the grant was made in equal shares, Wood Renton J. pointedout that there was nothing to prevent the Court considering the natureof the grant and of the intention of the parties who had applied for andobtained it. A consideration of the nature of the grant would, I take it,include, if necessary, a consideration of all the equities arising in the case.Such a view of the law seems to have been also given effect to in Covdertv. Lewis*. These decisions cannot be reconciled with the argumentadvanced on behalf of the defendant, that the Crown grants having beenissued in his name and to him personally, however they may have beenobtained, that fact is now conclusive of the case, and that he has nowacquired a conclusive title to the lands claimed by the plaintiff in theschedule to the plaint. He and Benjamin Rajapakse, having been partiesto the deed P 4 and its registration in the circumstances I have alreadydescribed, acted further in fraud of the minor and collusively in obtainingthe Crown grants and final order mentioned in issue 11, concealing thefact that the village title was in the minor, and misrepresenting the truestate of affairs at the settlement inquiry. Any rights therefore grantedto the defendant thereunder must, in my view of the law, be necessarilyheld by him on behalf of the minor from the date of the grants, and nowon behalf of the substituted plaintiff.
There was one further ground put forward, somewhat tentatively, soit seemed to me, and briefly at the end of a long argument on behalf ofthe defendant, of which it is necessary to say very little. It was urgedthat the deed of gift by Rajapakse to his minor son was void as he wasdonating something that did not belong to him. We were referred toVoet, bk. 39, tit. 3, s. 10 on this point. It is not denied, however, that therewere interests in Raigamwatta in others than the Crown which weresalable, for defendant himself purported to buy these rights fromRajapakse. If Rajapakse could sell these rights to defendant, * he couldequally donate them to his son. It is not denied also that land heldunder village titles is frequently the subject of purchase and sale, andtherefore it may be the subject of donation. I do not think there isanything in the argument raised on this ground.
> 3 K. <(• J. 56V.2L. R. 250.
3 4 BaL N. C. 40.
437
MAABTENSZ A.J.—Ceylon Exports, Ltd, v. Abeysmdere.
For the above reasons the appeal must be allowed, and the decreeentered dismissing plaintiff’s action must be set aside.
The case must now go back to the lower Court for further inquiry onthe question of identity of the lots in the different grants, with the sixparcels of land set out in the schedule to the plaint, and for the DistrictJudge to draw up the necessary decree (as mentioned in his judgment)setting out the lots to which the plaintiff is entitled. The eighth issue,relating to the question of compensation for improvements alleged to bedue to the defendant and the question of damages to plaintiff, the trialJudge stated he also reserved until after the final decision on the otherissue. These questions will also now have to be dealt with in the lowerCourt.
The appellant is entitled to his costs of this appeal, and to his costs inthe lower Court. The added respondent must pay his own costs in bothCourts. The plaintiff is also entitled to his* costs in the lower Court upto the time he assigned his rights.
Maartensz A.J.—His Lordship, after dealing with the facts, proceeds asfollows: —
It was admitted that the conveyance by Benjamin Rajapakse to thedefendant, deed No. 5,487 dated September 28, 1915 (P 4 was dulyregistered on October 1, 1915, and would have priority over the deed ofgift No. 1,294 (P 1) in favour of John Rajapakse unless the plaintiffproved that the deed (P 4) or its registration had been obtained by fraudor collusion.
Those deeds were executed and registered in 1915, but the Ordinancewhich is applicable is the Registration of Documents Ordinance, No. 23of 1927.
Section 7 enacts that—
“ (1) An instrument executed or made on or after January 1, 1864,whether before or after the commencement of this Ordinance shall,unless it is duly registered under this chapter, or, if the land has come. within the operation of the Land Registration Ordinance, 1877, in thebooks mentioned in section 26 of that Ordinance, be void as against allparties claiming an adverse interest thereto on valuable consideration byvirtue of any subsequent instrument which is duly registered under thischapter, or, if the land has come within the operation of the LandRegistration Ordinance, 1877, in the books mentioned in section 26 ofthat Ordinance.
“ (2) But fraud or collusion in obtaining such subsequent instrumentor in securing the prior registration thereof shall defeat the priority of■he person claiming thereunder.
" (3) An instrument duly registered before the commencement ofthis Ordinance, under the Land Registration Ordinance, 1891, or anyOrdinance repealed by that Ordinance, shall be deemed to have beenduly registered under this chapter.
“ (4) Registration of an instrument under this chapter shall not cureany defect in the instrument or confer upon it any effect or validitywhich it would not otherwise have except the priority conferred on itby this section.”
35/32.
438. MAARTENSZ AJ.—Ceylon Exports, Ltd. v. Abeysundere.
The learned District Judge applied the Ordinance of 1891. Section 17of that Ordinance corresponds to section 7 of the later Ordinance. Butas there is no difference in the effeGt of the two sections nothing turns on it.
The learned District Judge found on the facts that Benjamin Raja-pakse’s father had not settled the debts as promised and that “whenthere was a failure of the condition on which the gift was made BenjaminRajapakse ignored the deed of gift, kept it without being registered anddealt with the property as his own”.
Earlier in the judgment he said: “ In my opinion he (BenjaminRajapakse) must have been fully aware of the consequences of non-registration and he held back the deed P 1 and P 33 from registrationdeliberately in order to take advantage of the effect of non-registrationand after the execution of the deeds of gift dealt with the properties bymortgaging them from time to time as if he were still the owner. ”
He held that if Benjamin Rajapakse attempted to sell the property “ insuch circumstances it would be difficult to say that he was trying tocommit a fraud on the donee ”.
He also held that there was no collusion between Abeysundere andBenjamin Rajapakse. In arriving at this conclusion he relied on pass-ages from the judgment of Bertram C.J. in the case of Ferdinando v.Ferdinando et al.'
He observed that there would have been collusion if Benjamin Raja-pakse had asked Abeysundere to help him in nullifying the effect of thedeed of gift and that the main object of the subsequent transaction shouldhave been to deprive the donee of the property gifted. “There shouldbe ”, he said, quoting from Bertram C.J.'s judgment, “ the joining togetherof two parties in a common trick ” and they should have been “ actingtogether for a common and direct end”. He then puts himself thequestion, “can it be said that Rajapakse and Abeysundere were actingtogether for a common and indirect end ? ” and said “ I think the answeris clearly in the negative ”.
This answer is based on the fact that, in his opinion, Abeysundere hadno interest in Benjamin Rajapakse and was working entirely in his owninterests and worked on the basis that in no circumstances would Benja-min Rajapakse have registered the deed of gift, and perhaps on a promiseby Rajapakse that he would not register the deed of gift in the interval.
In support of this view the District Judge referred to the evidence ofRajapakse at page 213 that “ his fixed intention was not to register thedeiied of gift” and “that as a matter of fact under no circumstanceswould he have registered the deed of gift ” (page 220).
The District Judge-further held that even if Benjamin Rajapakse hadcommitted a fraud on his minor son, it would be necessary to prove thatthe defendant was aware before he got the transfer that a fraud wasintended to be committed and actually joined in perpetrating it, and thatthe contention on behalf of the plaintiff that the fraud in this case wasplanned by Benjamin Rajapakse and “defendant allowed himself to bejoined in perpetrating it ” could not prevail as “ it would apply to every
1 (mi) 88 N. L. R. 148.
MAARTENSZ AJ.—Ceylon Exports, Ltd. v. Abeysundere. 439
case where a subsequent purchaser takes a transfer with the knowledgeof the existence of a prior or registered deed which is clearly not theintention of the legislature or the authorities on the point
As regards consideration the District Judge was of opinion that thoughthe defendant got a bargain, the price was not so low as not to representthe value which any bona fide purchaser would have been prepared to payif the deed of gift was not in existence.
The learned District Judge finally held that deed No. 1,294 (P 1) wasnot delivered and not acted on (issue 3), that the deed of gift (P 1) wasvoid against deed No. 5,487 (P 4) by reason of the registration of the laterdeed (P 4), that deed No. 5,487 or its registration was not obtained byfraud or collusion.
It was contended in appeal that the findings of fact and the decisionon the law were incorrect, particularly the finding that the mortgage debton Raigam estate was not paid by the defendant’s father and that thecondition on which the deed of gift (PI) was executed was not performedby the father.
The only evidence on this point is that of Benjamin Rajapakse, whojudging by his evasive answers must have been a very unsatisfactorywitness, and the notary Silva.
Benjamin Rajapakse said in examination-in-chief, after relating theoffer made by his father, . . . . “ My father paid the debts ”.
In the course of his cross-examination by the defendant’s counselhe was confronted with this statement made by him in case No. 12,105of the District Court of Negombo regarding Rawita estate which hadbeen gifted to his daughter by deed (P 33). “When my father waswriting a cheque, my brother Wilfred asked my father to give himRs. 50,000 if I was to be given Rs. 50,000. Therefore my father failed
to give me money as promisedAfter that I dealt with the
property as if it had not been gifted. I did not register the deed ”. Hesaid in reply “ I heard the evidence read out now. I am bound to saythat the statements I made in the Negombo case were true ”
Question: As a matter of fact is that evidence true ?
Answer: (After much hesitation.) Yes, it is true.
The District Judge was of opinion that Benjamin Rajapakse wasclearly trying to help the plaintiff and deliberately went back on state-ments which he had made in previous cases when the validity of thetransfer to the defendant was not in question, and said “ I think greaterweight should be attached to the statements made by Benjamin Raja-pakse in previous cases material to this case than what he states now ”.
He observed that if the debts had been paid by his father BenjaminRajapakse would not have left the deeds of gift unregistered and themembers of his family would not have allowed him to deal with theproperty as his own. He also pointed out that in the case stated byMr. Alvis (P 9a) there is an averment “ that the' donor out of his fundsdischarged the mortgage which was in existence at the date of the deedof gift ”, and came to the conclusion that on the evidence and probabUitiesof the case it was difficult to hold that Benjamin Rajapakse’s father
440MAARTENSZ AJ.—Ceylon Exports, Ltd. v. Abeysundere..
settled the debt as promised. In coming to this conclusion he did notlose sight of the fact that one of the lands gifted by P 1 called Seguwattaalios Dawatagahawatta was said by Benjamin Rajapakse to belong tohis son at the time of the assessment for Biot Compensation (P 36).
It was contended that the District Judge was wrong in his opinion thatthe statement in case No. 12,105 of the District Court of Negombo wasmade when the validity of the deed of gift was not in question.
The subject of the action was, it was argued, the deed of gift (P 33),and the claim against Benjamin Rajapakse was made by the broker whonegotiated a sale on the ground that the sale fell through owing toBenjamin Rajapakse’s title being defective as he had gifted the propertyto his minor children, and it was to Benjamin Rajapakse’s interest toestablish, if possible, that the deed of gift was ineffective to divest himof title.
This contention is, in my opinion, a sound one, for it was clearly toBenjamin Rajapakse’s interest to contest the validity of the deed of gift.
It was also urged that the District Judge had lost sight of BenjaminRajapakse's evidence in case No. 43,890 of the District Court of Colombo,where he said:—“There were mortgages on Raigam before I gifted itto my son John. My father paid off that mortgage. There was nomortgage on the property when I gifted it to my son John”.
It was, I think, rightly urged that this statement is of greater probativevalue, as in the Colombo action Benjamin Rajapakse’s title to the landwas not in issue.
As regards P 9a it was urged that Benjamin Rajapakse was theretrying to establish his title to Raigam estate, and P 9a shows that hedid not disclose to Mr. Alvis the arrangement with his father. As I havesaid before if this arrangement had been disclosed to Mr. Alvis, asBenjamin Rajapakse said he did, he would no doubt have mentioned itin his statement to counsel. It would certainly have been an additionalreason for moving the Court to revest the property in Benjamin Rajapakseif the deed of gift had been executed in pursuance of an agreement withhis father which his father had not performed.
As regards the family it was pointed out that the father was dead in1915 and there was no evidence of the existence in 1915 of any one whocould properly object.
The District Judge rejected the evidence of notary Silva that the fatherpaid the mortgage because he said the mortgage debt was paid on theday P 1 was executed, September 20, 1908, whereas it was dischargedon October 21, 1908 (Encumbrance Sheet P 41).
It was urged that the notary was speaking to events which had takenplace some 24 years ago and did say in cross-examination that he thoughtthe Rs. 15,000 paid on the bond was paid after the deed of gift had beenexecuted.
The only circumstance therefore which points to the mortgage debtnot having been paid by Benjamin Rajapakse’s father is the fact that hedid not take steps to have the deed of gift registered. Against that is thefact that the bond was discharged within a month of the execution of thedeed of gift and there is not a tittle of evidence that Benjamin Rajapaksegot the money to pay off the debt from another source than his father.
441
MAARTENSZ A.J.—Ceylon Exports, Ltd, v. Abeysundere.
Benjamin Rajapakse’s statement in case No. 12,105 of the DistrictCourt of Negombo that his father did not pay the debt because WilfredRajapakse demanded an equal sum, I find difficult to believe consideringthat Wilfred had come to his brother’s assistance a few years before.
I am of opinion that the weight of evidence is in favour of the allegationthat Benjamin Rajapakse’s father’s money was used to pay off themortgage debt over Raigam estate in existence in 1908.
The deed of gift P 1 was accepted by John Rajapakse’s mother on hisbehalf and Benjamin Rajapakse’s possession of the estate must bepresumed to have been for and on behalf of his minor child whose naturalguardian he was.
I am of opinion that the third issue (was deed'No. 1,294 (P 1) deliveredand acted upon ?) should be answered in the affirmative.
Whether the deed P 1 was delivered or not, Benjamin Rajapakse wasthe natural guardian of his son and any act by him derogating from therights of the son, would be a breach of the duty cast upon him in hisfiduciary character to protect the interests of his son. His first stepagainst the interests of his son was to mortgage both Raigam andRawita by the bonds to which I have already referred, D 35, D 37, D 7,D 6, and P 14. His evidence as regards the mortgages is that the Chettiarsdiscovered what lands he owned and insisted on their being mortgaged.He added, “that is why I did not tell the Chettiars about the deeds ofgift. I discovered that owing to the non-registration of the deeds of giftI could deal with the property as my own ”.
This evidence that he did not tell the Chettiars about the deeds of giftentirely negatives Benjamin Rajapakse’s evidence that the piece of paperwas pasted on the margin of the deed by the Chettiar. His evidenceleaves no doubt in my mind that knowing or having discovered he coulddeal with the estates as the deeds of gift were not registered, he concealedthe endorsement on his title deeds by pasting paper over it and executedmortgages and ultimately sold the estate. The endorsement of the giftto his daughter on the Crown grant of Rawita in favour of BenjaminRajapakse was also covered over by a piece of paper.
The evidence of John and Benjamin Rajapakse establishes that Johnlived with his father till about the year 1915 and that John did not attainhis majority till the year 1924.
Benjamin Rajapakse in selling the estate clearly committed a breachof the duty he owed to his minor son. It is I think equally clear fromthe facts I have set out regarding the circumstances in which the deed ofsale, No. 9,487 (P 4), was executed, that Abeysundere knew that Benja-min Rajapakse was committing a breach of the duty he owed to his son.It was however contended by the respondent that mere knowledge of theexistence of the unregistered deed of gift did not deprive the defendantof the priority gained by his deed by registration (D. C. Kandy, CaseNo. 67J295Kirihamy. v. Kiribanda‘, and that there was no fiduciaryrelationship between John Rajapakse and the defendant, as was the casein Lawaris v. Kirihamy % and Battison v. Hobson and it was argued that
'1 (1877) Ram. Reports. IDS.3Balasingham, Notes of Cases, p. 38.
» (2911) 14 N. I,. R. 281.' l.mr.i 2 Chancery, p. 103.
442 MAARTENSZ A.J.—Ceylon Exports, Ltd. v. Abeysundere.
on the facts of this case all the minor was entitled to was the price paidby the defendant to Benjamin Rajapakse for the estate as provided bysection 90 of the Trusts Ordinance of 1917.
It was also contended that the District Judge was right in holding thatBenjamin Rajapakse and the defendant did not act in collusion inobtaining the deed of sale or securing its registration.
Section 90 of the Trusts Ordinance, No. 9 of 1917, enacts as follows:—“Where a trustee, executor, partner, agent, director of a company,legal adviser, or other person bound in a fiduciary character to protectthe interests of another person, by availing himself of his character,gains for himself any pecuniary advantage, or where any person sobound enters into any dealings under circumstances in which his owninterests are, or may be, adverse to those of such other person andthereby gains for himself a pecuniary advantage, he must hold for thebenefit of such other person the advantage so gained. ”
It was submitted that the Ordinance contained the whole law of trustsin Ceylon, and that the rule of English law set out thus in Lewin on Trustsat page 877 : “ But if the alienee be a purchaser of the estate at its fullvalue, then subject as aforesaid (that is, any bar arising out of the Statuteof Limitations) if he take with notice of the trust, whether the notice beactual or constructive, he is bound to the same extent and in the samemanner as the person of whom he purchased ” did not apply in Ceylon.
Section 118 of the Trusts Ordinance, No. 9 of 1917, appears to negativethis argument.
I shall deal with the question more fully when dealing with the defend-ant’s claim to title from the Crown. In view of the conclusion I havecome to, that the deed of gift is not void as against the deed of sale, thequestion of trust does not arise on the third, fourth, fifth, and eleventhissues.
The plaintiff must establish that the deed of gift is not void as againstthe deed of sale to the defendant under sub-section (2) of section 7 of theRegistration Ordinance, that is, “ that the last mentioned deed on theprior registration thereof was obtained by fraud or collusion ”.
The respondent invoked the case of Ferdinando v. Ferdinando (supra).in support of his contention that there was no fraud in obtaining the deedof sale or its prior registration.
In that case “ The first defendant transferred to his son in 1908, by adeed which was never registered, a tract of land, subject to a life interestin his favour. The son, nevertheless, possessed and improved the land.He contracted a marriage distasteful to the family, and died in 1918,leaving a widow and a child. The widow (plaintiff) sent a letter ofdemand to the first defendant for the title deed. Three days thereafter,by a deed which was registered, the first defendant transferred the landto his son-in-law (second defendant), who was aware of the earlier deed ;the consideration was stated to be Rs. 5,000, which included a debt ofRs. 2,750 which was already due from the first defendant to seconddefendant. The second defendant soon after transferred the property tothe third defendant ”.
MAARTENSZ AJ.—Ceylon Exports, Ltd. v. Abeysundere.
443
Bertram C.J. came to the conclusion that there was no fraud. Hesaid: “ I think the first defendant may well have supposed that he hada moral right to do what he was doing. He may have thought that hisson’s widow had no moral claim to the property, that he would never haveconveyed it to his son if he had not thought that his son would survivehim, and he may have felt himself justified in giving priority to the claimsof his son-in-law. Any reasoning he may have so employed may havebeen sophistical but I do not think it would be correct to describe hisaction as fraudulent
I think he took a lenient view of the conduct of the first defendant inview of the construction of the words “ actual fraud ” in the case ofBattison v. Hobson (supra).
The words were construed as meaning fraud in the ordinary popularacceptance of the term, i.e., fraud carrying with it grave moral blame andnot what has sometimes been called legal fraud or constructive fraud orfraud in the eyes of a Court of law or a Court of equity.
On this construction of the word fraud I have no doubt that BenjaminBajapakse was guilty of fraud when he executed the deed of sale in favourof the defendant, as he knew or must have known that he was deprivinghis son, who was unable to protect himself, of property which had beengifted to him, and the deed was the culmination of a course of actionpursued by the defendant to use the property as his own to finance him-self by not registering the deed of gift. But the words of the proviso tothe section suggest that the fraud must be fraud on the part of thetransferee, such as a fiduciary relationship to the other party as in Lawarisv. Kirihamy (supra), the relationship of solicitor and client (Battison v.Hobson) (supra), or the part which he played in the previous transaction(Kirihamy v. Kiribanda) (supra).
The defendant does not come within the category of these cases, buthe knew that Benjamin Rajapakse had gifted the estate to his son, thatthe son was a minor and unable to register or have the deed of giftregistered, and that Benjamin Bajapakse had taken advantage of hisposition and not registered the deed of gift with a view to financing him-self when pressed for money. In these circumstances I do not think itcan possibly be said that he was not guilty of grave moral blame andtherefore not guilty of fraud. And there can be no- doubt that he musthave arranged with Benjamin Bajapakse not to register the deed of giftbefore the deed of sale was registered.
I am accordingly of opinion that the deed of sale No. 5,487 datedSeptember 28, 1915, (P 4) was obtained and its prior registration securedby fraud.
I am of opinion that there was- collusion ~as _well7 The—respondentcontended again on the authority of the case of Ferdinando v. Ferdinando(supra) that there was no collusion as the vendor Benjamin Bajapakseand Abeysundere the vendee were, to use the words of the Chief Justicein that case, “ acting independently in their own interests ”.
The argument on behalf of the respondent was put in this way: —
If two persons conspired together to deprive another of his property bythe prior registration of a subsequent deed it was collusion. But if each
444 MAARTENSZ AJ.—Ceylon Exports, Ltd. v. Abeysundere.
was acting in his own interests there could he no collusion, although toattain this object it was necessary that they should act together to securethe prior registration of the deed.
I am unable to accept this argument; as the law stands mere knowledgeof the existence of a prior registered deed will not deprive the subsequentregistered deed of its priority. But if the grantor and the grantee of thedeed had to act together to secure the prior registration I am of opinionthat the prior registration must be held in law to have been secured bycollusion.
Here Abeysundere knew that the deed of gift existed and that tosecure the prior registration of his deed of sale he had to act with BenjaminRajapakse whose duty it was to register the deed of gift. In other wordsthere had to be an arrangement with Benjamin Rajapakse that he shouldnot register the deed of gift before the deed of sale (P 4) was registered.The arrangement was nothing less than a collusive act to secure the priorregistration of the deed of sale. The fact—if it is a fact—that BenjaminRajapakse had, before Abeysundere came on the scene, made up his mindnot to register the deed of gift cannot affect this view of the transaction.
I accordingly hold on the fifth issue that deed No. 5,487 and its priorregistration was obtained by fraud and collusion, and on the fourth issuethat the deed of gift (P 1) is not void as against deed No. 5,487 (P 4).
I shall now deal with the first, sixth, seventh, ninth, tenth, and twelfthissues.
The first and ninth appear to overlap, so do the sixth and tenth. Theseissues arise from a title set up by the defendant on certain Crown grantsand a Final Order published under the Waste Lands Ordinance.
The first question for decision is whether the parcels of land describedin the schedule to the plaint were forest and chena lands. The DistrictJudge’s finding that the land comes within section 6 of Ordinance No. 12of 1840, that is, that it is forest, waste, or chena lands was not seriouslycontested in appeal, nor was it contested that the lands are situated in adistrict comprised in the Kandyan provinces.
Section 6 of Ordinance No. 12 of 1840 enacts—
“ All forest, waste, unoccupied, or uncultivated lands shall bepresumed to be the property of the Crown until the contrary thereof isproved, and all chenas and other lands which can be only cultivatedafter intervals of several years shall, if the same be situate within thedistricts formerly comprised in the Kandyan provinces (wherein nothombo registers have been heretofore established), be deemed to belongto the Crown and not to be the property of any private person claimingthe same against the Crown, except upon proof only by such person ofa sannas or grant for the same, together with satisfactory evidence asto the limits and boundaries thereof, or of such customary taxes, dues,or services having been rendered within twenty years for the same ashave been rendered within such period for similar lands being theproperty of private proprietors in the same districts; and in all otherdistricts in this Colony such chena and other lands which can only becultivated after intervals of several years shall be deemed to be forestor waste lands within the meaning of this clause. ”
MAARTENSZ AJ.—Ceylon Exports, Ltd. t>. Abeysundere. 445
The lands described in the schedule to the plaint therefore belongedto the Crown when the deed of gift (P 1) was executed. Abeysundereacquired them from the Crown or from Crown grantees and his contentionis that he has a title to the lands in dispute which is not affected byconsiderations of collusion or fraud.
On the other hand, the appellant contends that the Crown issued grantsto Abeysundere because he was the holder of a transfer from BenjaminRajapakse and that, if that transfer does not take priority over the deed .of gift, Abeysundere must be deemed to have acted as John Rajapakse’sagent and to hold the lands in trust for him.
Up to a point in this Court the arguments proceeded on the footing thatBenjamin Rajapakse had acquired a statutory right to a Crown grant forthe parcels of forest and chena lands which he had planted and improved.
But there is a ruling to the contrary in the case of Babappu v. DonAndris'. The plaintiff in that case prayed for declaration of title to aland which he had acquired by purchase from the Crown. The defendantsalleged that the land had been planted by one of their predecessors intitle 30 years before and that he and they had possession ever since. TheDistrict Judge held that the land was jungle or chena and probably Crownproperty, that the planting took place about 20 years before action, andthat at the date of the sale to the plaintiffs in 1907 by the Crown thedefendants had acquired a statutory right under section 8 of Ordinance-No. 12 of 1840, and dismissed plaintiff's action.
In appeal it was held that:“ A person who possesses and cultivates
chena (jungle) land for a period under thirty years does not acquire anyright under section 8 of Ordinance No. 12 of 1840. The effect of section 2of Ordinance No. 9 of 1841 being to exclude the application of sectibn 8of Ordinance No. 12 of 1840 to any land referred to in section 6 of thatOrdinance ”.
Wood Renton J. who delivered the main judgment said in conclusion : —“The construction that we are placing in this case on section 2 ofOrdinance No. 9 of 1841 will, I fear, revolutionize for the future thepractice that has grown up under Ordinance No. 12 of 1840, of acknow-ledging in cases like the present a statutory interest under section 8 ofthat Ordinance as a matter of strict legal right . . . . ”
According to the evidence of Wickremesinghe, a clerk in the LandSettlement Office called by the defendant, the practice has continued.
The proceedings under Ordinance No. 12 of 1840 are started after theblock surveys are received from the Surveyor-General with a tenementsheet showing the names of the people who claimed the lots.
The Settlement Officer visits the lands and goes through the various-claims with the Headman, and the names of other claimants, if any, areincluded in the tenement sheet.
The Settlement Officer next advertises the lots for sale or settlementin the Government Gazette. If the plantation is over 30 years old the landis declared to be private, if under 30 years the Settlement Officer comesto terms with the claimant and issues a Crown grant after examining histitle deeds.
Mr. Murray, the Surveyor, gave evidence to the same effect.
i (1910) 13 N. ].. R. 213.
446 MAAHTENSZ AJ.—Ceylon Exports, Ltd. v. Abeysundere.
In 1913 Benjamin Rajapakse- began taking steps to arrive at a settle-ment with the Crown regarding his title to Raigamwatta. For thatpurpose he got Mr. Murray to make what is called a C. Q. P. (Certificateof Quiet Possession), plan P 31, and a tenement sheet (P 30). Theboundaries were shown to the Surveyor by Benjamin Rajapakse and heshows the land in his survey divided into blocks according to the “ con-dition” (cultivation) of the land. The extent shown in the plan is 360acres and 13 perches. The aggregate extent of the lots described in theschedule to the plaint aggregate 251 acres 2 roods and 28 perches. Thelots are not located in plan P 31. The District Judge, on the question ofthe identity of the lands sued for, said that that the lots described in theschedule to the plaint and in the deed of gift (P 1) were identical with sixof the lots conveyed to the defendant, and “ it was clearly these lots thatthe defendant claimed through Rajapakse before the SettlementOfficer ”.
He therefore thought “ that the land claimed by the plaintiff must beheld to be within the estate claimed by the defendant under the name ofRaigamwatta
On April 24, 1917, the defendant’s solicitors, Messrs, de Vos &Gratiaen, sent the plan and tenement sheet made by Mr. Murray to theSettlement Officer, Colombo, with a request that a C. Q. P. (Certificateof Quiet Possession) should be issued to the defendant (P 37). TheSettlement Officer requested the solicitors to set out the defendant’s title(P 39). The title deeds were sent to the Officer with letter (P 40).
The Settlement Officer by letter (D 57) dated June 1, 1917, informedMessrs, de Vos & Gratiaen that the defendant will not be entitled to a
Q. P. for any of the land except a few acres of old garden, as the privatedeeds forwarded by him do not rebut the legal presumption that wasteland in a Kandyan province is the property of the Crown.
The Officer added :“ If what your client is really seeking is a settle-
ment of his disputes as to title with the Crown, the matter will come upin the ordinary course of business within the next two years, as Giritalanekorale will shortly be taken up for settlement purposes and half of thekorale is already surveyed, the claim will then be inquired into ”.
The claims of the defendant were investigated and Crown grants issuedto him.
Benjamin Rajapakse’s evidence is that he was present at the inquiryand was questioned by the Crown officers, that Abeysundere was alsopresent, and that the Crown officers were aware that he had transferredhis “ village title ” to the defendant.
Later he said :“ I got Mr. Murray to make a plan of the lands of
Raigamwatta which I was going to claim from Government. I pointedout the boundaries. Mr. Murray made a plan and gave it to me. WhileI was negotiating with Government I sold that land to defendant. Isaid I would get the Crown grants or C. Q. P.’s in my name, but thedefendant’s lawyers said that they would go forward and get them.Defendant also told me so and went before the Settlement Officer. I saidI would help the defendant in getting the Crown titles ”.
MAARTENSZ AJ.—Ceylon Exports, Ltd. v. Abeysundere. 44?
This part of the case has not been fully inquired into in the DistrictCourt, but I think it is clear from the evidence that the Crown grants wereissued to Abeysundere because he had on P 4 apparently acquired theland and the plantation from Benjamin Rajapakse.
The learned District Judge rejected the contention of the plaintiff thatif there was fraud or collusion in the execution or registration of thedeed of transfer in favour of the defendant, the Crown grants and theFinal Order would enure to the benefit of John Rajapakse. If thiscontention was based on the principle that title subsequently acquiredby a vendor who has voluntarily sold a land to which he had no titleenures to the benefit of the vendee, I agree with the decision of theJudge.
The principle does not extend to title acquired by another transfereefrom another vendor.
It was also argued in the District Court as well as in this Court thatAbeysundere held the estate or so much of it as was sued for for thebenefit of John Rajapakse.
It will in this connection be necessary to determine whether the Englishlaw of trusts is limited by the provisions of Ordinance No. 9 of 1917.
The answer turns on a construction of section 118 of the Trusts Ordi-nance which enacts that—
“All matters with reference to any trust, or with reference to anyobligation in the nature of a trust arising or resulting by the implicationor construction of law, for which no specific provision is made in thisor any other Ordinance, shall be determined by the principles of equityfor the time being in force in the High Court of Justice in England
Respondent’s counsel contended that this section provided for theapplication of the English law only in matters incidental to a trust orobligation provided for in the Ordinance for which the Ordinance had notprovided.
I am unable to accept this contention. The section, I think, has theeffect of making the English law applicable to trusts or obligations inthe nature of a trust arising or resulting by the implication or constructionof law which has not been provided for by the Ordinance.
I accept the District Judge’s finding that the consideration for thedeed (P 4) was not so low as not to represent the value which any bona fidepurchaser would have been prepared to pay if the deed of gift was not inexistence.
The principle of English law applicable in such a case is set out thus inHalsbury’s Laws of England, vol. xxviii. p. 88, s. 193 :—
“ Where a person, whether gratuitously or for valuable consideration,acquires properly, or an interest in property, which is subject to asubsisting trust, he becomes a trustee of it for the purpose of the trust,if he has either actual or constructive notice of the trust ”.
and section 194 says that—
“to constitute a person who takes a trust property for his ownpurposes a constructive trustee of it he must have notice that it is beingmisapplied by being transferred to him ”.
448 MAAHTENSZ A.J.—Ceylon Exports, Ltd. v. Abeysundere.
The District Judge was of opinion thit the defendant could not be heldto have had notice that the property was being misapplied by the transferto him.
I am unable to agree with the District Judge that the defendant hadno notice that the property was being misapplied by the transfer in thiscase.
It is clear from the evidence that he knew of the gift to John Rajapakse,.that John Rajapakse was a minor, and that Benjamin Rajapakse wasdepriving the minor of his rights under the deed of gift (P 1) lay executingthe deed of sale (P 4), and the evidence stands unrebutted, for the defend-ant has not chosen to go into the witness box and deny the charges offraud and collusion made against him.
I accordingly hold that the defendant was a trustee of the property forJohn Rajapakse, and that the Crown grants and Final Order on which herests his title from the drown were obtained by him as such trustee anddo not give him a title which can prevail over the deed of gift.
The Madras case referred to by the District Judge does not apply inthis case and need not be discussed.
I agree for the reasons given by the Chief Justice that the gift to JohnRajapakse. is not invalid because the Crown had title to the parcels of landgifted.
I accordingly hold that the plaintiff is entitled to judgment for thelands described in the schedule to the plaint. The case must go back tothe District Court to determine of what lots the defendant is in possession,the damages plaintiff is entitled to and the compensation and right ofretention, if any, to which the defendant is entitled.
The appellant will be entitled to the costs of the trial in the DistrictCourt and the costs of the appeal.
The costs of the further inquiry will be in the discretion of the DistrictJudge.
The added defendant will pay his own costs in both Courts.
Appeal allowed.
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