D. W. ATUKORALE and another, Appellants and D. C. ATUKORALE , Respondent

082-NLR-NLR-V-71-D.-W.-ATUKORALE-and-another-Appellants-and-D.-C.-ATUKORALE-Respondent.pdf


AtukorcUe v. Atutorale
369
1968Present: Samerawickrame, J., and Tennekoon, J.
_W. ATUKORALE and another, Appellants and D. C. ATXJKORALE,
Respondent
S. C. 124(64—D. C. Oampaha, 6935JL
Contract—Negotiorum geatio—Creditor and debtor—Payment of debt by a thirdpirty without debtor's permission—Right of the third party to recover the sumfrom the debtor—Scope—Unjust enrichment.
Paulian action—Fraudulent alienation of immovable property directed against a futurecreditor—Effect—Claim for unliquidated sum of money—Right of claimant toseek Paulian remedy in reconvention after obtaining decree—Computation ofperiod of prescription—“ Cause of action ”—Prescription Ordinance, s. 10—Death of transferor-defendant pending action—Whether substitution of his heirsis necessary—Civil Procedure Code, s. 398.
Where a person pays off a debt of another, he has an action on negotiagesta. Although, in this kind of notion, the gestor is normally required to showthat he acted with the intent of serving the interests of the debtor, the scope ofthe action is extended on equitable grounds to a gestor who intervened in badfaith and with intention of furthering his own interests, but in such a case his
. claim against the debtor is limited to the extent to which the debtor has beenenriched.
Subsequent to the execution of a mortgage of two lands Delgahawatta andKitulgahawatta, the 2nd defendant, who was the mortgagor, gifted the landKitulgahawatta to the 1st defendant. The gift contained a covenant that theland was free from all encumbrances. Thereafter the 1st defendant, withoutany mandate from the 2nd defendant, paid the mortgagee the sum of Rs. 6,000which was due to the mortgagee from the 2nd defendant and sued the 2nddefendant for the recovery of that sum. There was no doubt that when Del.gahawatta, whioh was worth about Rs. 26,000, became free of the mortgage,the 2nd defendant was enriched to an amount more than Rs. 6,000.
Held, that, on payment of the mortgage debt, the 1st defendant had a claimto be indemnified by the 2nd defendant to the extent to which the latter hadbeen enriched by the action of the 1st defendant.' The claim, however, was toan-unliquidated sum of moneys.'
Where a cause of action has accrued to A to claim an unliquidatedsum of money from B, and A has notified to B about suoh claim, a subsequentalienation of immovable property by B, with the intention of rendering himself
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Atukorale v. Atukorale
insolvent as against the time when th j decree in favour of A would come intobeing, can be impeached by A in a Paulian action when, on obtaining a decreein his favour, he act 'os the property in question in execution of the deoree.
Mukthar v. Ismail (64 N. L. R. 2. 3) distinguished.,
Where a Paulian action (or claim in reconvention) is based on a fraudulentalienation directed against future creditors, the right of action of a person whoclaims to bolon ; to the class of persons against whom that fraudulent alienation
directed arises only when he becomes a creditor. In the case of such anacti n. a cause of action arises and time begins to run under the PrescriptionO. dinanco only on the date when the plaintiff becomes a creditor.
A Paulian action is an action which is directed against the person towhom pr po ty was fraudulently alienated by the de-tor of th • plaintiff.Although, in such action, the debtor is made a party, failure to makesubstitution in place of the debtor, if the debtor dies pending the action, doesnot have the effect of rendering void the continuation of the action againstthe transferee and tho judgment and the decree entered in th ■ action, unlesstho h-jirs of tho debtor had participated in the fraud or were enriched thereby.
A.PPEAL from a judgment of the District Court, Gampaha.
On 26th January 1950, the 2nd defendant mortgaged two lands Delga-hawatte and Kitulgahawatta to a Provident Association. On 26th July1953 he gifted Kitulgahawatta to the 1st defendant who, thereafter, soldthat land and with the proceeds of the sale paid off the sum of Rs. 6,000due to the mortgagee from the 2nd defendant. When .the mortgage bondwas thus discharged and the lands Delgahawatta and Kitulgahawattawere both free of the mortgage, the 1st defendant wrote to the 2nddefendant on 23rd March 1955 demanding payment of a sum of Rs. 6,000.After the 2nd defendant denied liability by letter dated 19th April 1955,the 1st defendant sued him in D. C. Gampaha 5103/M for the recovery ofthe sum of Rs. 6,000 and obtained decree in his favour on 19th July 1957.When he seized the land Delgahawatta in execution of the decree, the1st and 2nd plaintiffs claimed the land on deeds PI of 6th April 1955, P2 of27th May 1955 and P4 of 10th May 1956. Their claims were dismissed.Thereupon, on 6th May 1968, the plaintiffs filed the present actionpraying that they be declared entitled to the land Delgahawatta. The1st defendant pleaded that the deeds PI, P2 and P4 in favour of theplaintiff were executed by the 2nd defendant in fraud of creditors andasked that they be declared void so far as it was necessary for executionof the decree in his favour. The 2nd defendant, who was added as aparty, died pending the action and no substitution was effected inhis place.
The District Judge gave judgment in favour of the 1st defendant. Inthe present appeal by the plaintiff, it was contended on their behalf—
“ (a) that the 1st defendant was not a creditor and had no debtowing to him from the 2nd defendant until the entering of the decree on19th July 1955 in D. C. Gampaha 5103[M and therefore the alienation ondeeds PI, P2 and P4, which were executed prior to that date, could notbe said to have been made in fraud of a creditor.
8AMERAWICKRAME, J.—Atukorale v. Atukorale
371
(6) that In any event, the 1st defendant’s claim to have the saiddeeds declared void was barred by prescription.
that the 2nd defendant having died and no substitution having _been made in his place, the action was thereafter not' properly consti-tuted and was bad and the judgment and the decree entered thereinwere void.”
H. W. Jayeieardene, Q.C. with E. 8. Amerasinghe and S. 8. Basnayake,for plaintifFs-appellant8.
G. Banganalhan Q.G., with W. D. Gunasekera, for 1st defendant-respondent.*■-
Cur. adv. vuU.
July 7,1968. Samerawickrame, J.—
This is an appeal from the judgment and decree of the District Courtof Gampaha declaring the property described in the schedule-to theplaint liable to be sold in execution to satisfy the claim of the 1stdefendant and setting aside certain deeds executed by the 2nddefendant in favour of the plaintiffs, so far as it is necessary to do sofor the recovery of the amount due to the 1st defendant.
The matter arose in the following way. Don Thegis Atukorale,who was the 2nd defendant in the action, owned two lands calledDelgahawatta and Kitulgahawatta. On mortgage bond No. 3991of January 26, 1950 (1D6) he mortgaged the said two lands to thePublic Service Mutual Provident Association, as security for therepayment of a sum of Rs. 11,000/- and interest thereon. Thereafter,
. by deed of gift No. 760 of. July 26, 1953, he gifted the landKitulgahawatta to his son, the lBt defendant. In December 1954, the1st defendant Bold the land Kitulgahawatta and out of the proceeds ofsale, ho paid off tho amount due to the Public Service Mutual ProvidentAssociation and settled the amount duo on the bond 3991 (1D6). Byreason of the said payment, the mortgage bond was discharged and thelands Dolgahawatta and Kitulgahawatta were both free -of mortgagecreated by the said bond. The 1st defendant, thereafter, by letterdated March 23, 1955, made demand of the 2nd defendant for a sum ofRs. 6,000/-, said to be the appropriate amount due in respect of tho dis-charge of the mortgage of Delgahawatta. By letter dated April 19, 1955,a reply was made to the letter of demand, denying liability to pay the-amount claimed. The 1st defendant thereupon filed action in D. C.Gampaha 5103/M against the 2nd defendant for the recovery of the sumof Rs. 6,000/-. Answer was filed in that case but the defendant did not-appear and decree nisi was entered on April 1, 1957 and was made abso-lute on July 19, 1957. The 1st defendant applied for execution of tho .decree and seized the land Delgahawatta. The 1st and 2nd plaintiffs>
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SAMERAWICKRAME, J.—Atukoralc v. AtukoraU
thereupon, claimed the said land on deeds PI of April 6, 1955, P2 ofMay 27, 1955 and P4 of May 10, 1956. Their claims were dismissed.Thereafter, on May 6, 1958, the plaintiffs filed the present action prayingthat they be declared entitled to the said land Delgahawatta and thatthat land be released from seizure. The 1st defendant filed answerpleading that the deeds in favour of the plaintiff had been executed infraud of creditors and asked that they be declared void so far as it isnecessary for execution of the decree in his favour. He had the trans-feror on the said deeds, namely, the 2nd defendant, added as a party.The 2nd defendant died during the course of the proceedings and nosubstitution was effected in his place.
The District Judge gave judgment in favour of the 1st defendant andthe plaintiffs have filed this appeal against the said judgment. Onbehalf of the plaintiff-appellants, Mr. H. W. Jayewardcne, Q.C. Raisedthree matters :—
i
(а)that 1st defendant was not a creditor and had no debt owing tohim until the entering of the decree absolute in D. C. Gampaha5103/M of July 19, 1957 and therefore the alienation on deeds PI,P2 and P4, which were executed prior to that date, could not besaid to have been made in fraud of a creditor.
(б)that in any event, the 1st defendant’s claim to have the said deedsdeclared void is barred by prescription.
(c) that the 2nd defendant having died and no substitution havingbeen made in his place, the action was thereafter not properlyconstituted and was bad and the judgment and the decree enteredtherein are void.
In support of the first matter that he raised, Mr. Jayewardene contendedthat the only debtor under the mortgage bond in favour of the PublicService Mutual Provident Association was the 2nd defendant and thetransfer by him to the 1st defendant of one of the lands which was subjectto the mortgage did not make the latter a co-debtor of the 2nd defendant.Accordingly, the payment of the mortgage debt by the 1st defendant didnot give him a claim to contribution from the 2nd defendant as from a•co-debtor. He further submitted that on payment of the debt of the2nd defendant, the 1st defendant did not become entitled to any claimagainst the 2nd defendant in the absence of a cession of action by thecreditor or a novation. Accordingly, there was no debt or liability atall on the part of the 2nd defendant to the 1st defendant. He furthersubmitted that in any event, if there was any liability, it was liabilityin respect of an unliquidated amount and that, therefore, the 1stdefendant did not become a creditor, nor was there any debt due to him,until decree was entered in his favour. The alienations upon PI,P2 and P4 which were made before the date of the decree and,therefore, before the 1st defendant became creditor, would not bealienations made in fraud of a creditor.
SAMERAWICKKAME, J.—Atukorale v. Atukorale
373
Mr. Ranganathan, appearing for .the 1st defendant-respondent,contended that on payment by the 1st defendant of the mortgagedebt, there arose a liability on the part of the 2nd defendant andthat the latter had made the alienation in favour of the plaintiffsfraudulently to avoid having to make payment on the decree thatwould be entered against him and that, in . the circumstances, thePaulian remedy was available. He did not seek to support the findingof the District Judge that the 1st defendant-respondent was entitledto contribution. He submitted that he was entitled to show, on thefacts proved at the trial, that there was in law a liability on the partof the 2nd defendant to indemnify the 1st defendant to the extent towhich he had been enriched. In view of the terms of issue No. 10, Ithink that Mr. Ranganathan’s last submission is right.
The deed of gift, 1D1, executed by the 2nd defendant in favour of the1st defendant, contained a covenant that the land gifted was free from allencumbrances. It was, therefore, the understanding and arrangementbetween the parties that the 2nd defendant should be responsible for thesettlement of the mortgage debt: Further, as a question of fact, thelearned Judge, on a consideration of the evidence, including that relatingto the values of the properties gifted by the 2nd defendant to his differentchildren, rejected the suggestion that the gift in favour of the 1st defend-ant -was made upon the undertaking that he would pay off the mortgagedebt. When the 1st defendant paid and discharged the mortgage debt,he made payment of a debt that was due and owing by the 2nd defendantto the Public Service Mutual Provident Association. The 2nd defendantwas also enriched by the discharge of the mortgage because thereby hisland Delgahawatta was freed of the mortgage. In the plaint in thepresent action, the plaintiffs value the subject matter of the action atHs. 7,000/-. The learned Judge considered that a reasonable assessmentof the value of Delgahawatta is Rs. 26,000/-. There can be no doubt thatby Delgahawatta being freed of the mortgage, the 2nd defendant wasenriched to an amount more than Es. 6,000/-, which was claimed bythe 1st defendant. The enrichment is so obvious that it is hardlynecessary to cite authority, but in a case where a person had paid asum of money and obtained the release of a land from seizure and salefor non-payment of estate duty, Manicavasagar, J., while holding thathe could not claim compensation for improvements because paymentof a mortgage was not an improvement and the person was not abona-fide possessor, nevertheless, held that he was entitled to be paidback the money he claimed on the principle that no one should beenriched at the expense of another—vide 67 N. L. R. at 527.
Where a person pays off a debt of another, he has an action on negotiagesta. Digest May 3, 1943 is as follows :—
“ Whereas you paid money on behalf of a man who gave you nomandatum to do so, you have a good action on negotia gesta, as theresult of the payment was that the debtor was released fromhis creditor:—unless indeed the. debtor had some interest in thepayment not being mqjle.”
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S AMER AWICKR AME, J.—Atukorale v. Atukorale
The position appears to be that if a person pays off a debt of a thirdparty with the knowledge and consent or acquiescence of that party,ho acts upon a mandate from him and is thereby entitled to recover themoney paid as upon a contract. If he does so without.such knowledge,or consent, the debtor acts by way of a negotiorum gestio. The learnedDistrict Judge has made a finding that the 1st defendant acted with theconsent of the 2nd defendant, but that finding is not based on satisfactorygrounds and I prefer to decide the matter apart from that finding. More-over, the evidentiary material, from which the learned Judge inferredconsent, does not, in view of other relevant material, establish a mandatenor did the 1st defendant rely on any mandate.
A difficulty in the way of the 1st defendant claiming to have acted byway of negotiorum gestio and maintaining the action called actio negoti-orum contraria is that in the normal case, a gestor is required to show thathe acted with the intent of serving the interests of the debtor. The 1stdefendant appears to have paid off the mortgage debt because his ownland Kitulgahawatta was subject to the mortgage. It would appear thathe acted in his own interests. The scope of the action, however, wasextended on equitable grounds to a gestor who intervened in bad faith. and with the intention of furthering his own interests, but in such a case,his claim was limited to the extent to which the debtor had been enriched.Digest 3-5-6-3 spates, “ We may add that if a man has managedmy affair with no thought of me, but for the sake of gain to himself,then as we are told by Labeo, he managed his own affair rather than mine(and, no doubt, a man who intervenes with a predatory object aims athis own profit, and not at my advantage) : but none the less, indeed all themore, v ill such a one too be liable to the action on negotia gesta. Shouldhe himself have gone to any expense in connexion with my affairs, hewill hao a right of action against me, not to the extent to which he isout of pocket, seeing that he meddled in my business without authority,but to the extent to which I am enriched ” (Monro’s translation).
Voet 3-5-9 permitted the action in accordance with the principlestated in the above passage from the Digest. Voet (Gane’s Translation,Vol. 1, p. 563) is :—“ But it ought not to be passed over that he whointerfered in another’s affairs with a view to his own advantage does notrecover in the action to a greater extent than in so far as he whose affairsthat are has been enriched by his so doing
There is also a passage from Rubin “ Unauthorised Administration(Negotiorum Gestio) in South Africa (1958) p. 42 cited at 82 South AfricanLaw Journal, p. 469 which is in point:—
. “ The high-water mark in the process of extending the scop© of theactio contraria on equitable grounds is reached by the granting of theaction (though only to the extent of the dominus’s enrichment) to agestor who intervened in bad faith and with the intention of furtheringhis own interests.”
*
SAMF1RAWICKRAME, J.—Atukorale v. Atukorcde
376
I am, therefore, of the view that on payment of the mortgage debt,the 1st defendant had a claim to be indemnified by the 2nd defendant tothe extent to which the latter had been enriched by the action of the 1stdefendant. The claim, however, was to an unliquidated sum of money.
The next mattor for consideration is whether a claim for an unliquidatedBum of money is a debt and a person ontitled to such a claim is a creditorfor the purposo of a Paulian action. The term “ debt ” is in my view, notapplicable to a claim for an unliquidated sum of money. It has beendefined to be “ a sum payable in respect of a liquidated money demandrecoverable by action”—vide Stroud’s Judicial Dictionary (3rd Ed.,p. 733). Again, in decisions of this Court, it has been held that a personwho has a claim for an unliquidated sum of money cannot maintain aPaulian action until his claim has been reduced to a decree. In Fernandov. Fernando1, the Paulian remedy was denied to a person, who at the timeof the. action, had only an unliquidated claim for damages, uponwhich he had filed action, but had not obtained a decree. In the case ofFernando v. Fernando8, Keuneman, J. carefully examined the groundsgiven by the two Judges, who decided the ^arlier case, and stated, “ Atleast one point can be regarded as settled in that case, namely, thatwhere the claim is for unliquidated damages, the person who has such aclaim cannot maintain a Paulian action, until his claim has been reducedinto the form of a decree ”. In Punchi Appuhamy v. Hewapedige Sedera8,the action was held to lie because plaintiff had obtained a decree on hisclaim on unliquidated damages at the time he instituted the Paulianaction.
The 1st defendant, therefore, became a creditor entitled to institutea Paulian action only on the entering of the decree in D. C. Gampaha5103/M filed by him against the 2nd defendant. Decree in that actionwas entered on July 19, 1957.
Subject to an exception, a person may maintain a Paulian action onlyin respect of an alienation made by the debtor after he became a creditorand after a debt was owed to him. The grounds for this requirement andthe exception are stated by Planiol—Elementaire Traite de Droit Civil,Vol. II, Pt. 1, para 316, at page 186 (Louisiana State Law InstituteTranslation). “ In the normal state of affairs, the creditor who attacksthe act of his debtor should prove that his credit arose prior to the actattacked. In fact, if he has not dealt with the debtor until afterwards,what can he complain of ? He could not have counted on propertywhich had already left the hands of his debtor ; he has dealt with a manalready impoverished and has taken him as such ”. Later, in the sameparagraph, he says, “ Those who become creditors kfter the fraudulentact have therefore no right to attack it. They have such a right, how-ever, if the fraud was directed against them. Examples of this areseen in practice: certain debtors commit fraud against their futurecreditors in arranging in advance the manner of withdrawing the pledge1 (1924) 26 N. L. B. 292.• (1940) 42 N. L. R. 12.
a (1947) 48 N. L. B. 130.
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SAMERAWICKRAME, J.-—Atukorale v. AtuJcorcUe
in which creditors will count in dealing with them In the report ofcase of Silva v. Mack 1 there appears the judgment of Berwick D. J. inwhich he considers the position exhaustively. Two passages from hisjudgment may be referred to. At page 135 he states, “ It appears to methat the Civil Law requires a concurrence of prejudice and fraudulentintention immediately directed against the person who seeks to impeachthe deed ; that is to say, there must be both those circumstances and theymust also meet in the same person After considering the rules of thedifferent systems of law, he states at page 138, “ This opinion, however,does not necessarily infer that in no case is a person who only became acreditor after its date outside of that category. For the fraudulentintention may have been to defeat future as well as antecedent creditors.Whatever contrarities exist among different systems of. jurisprudenceas to the rights of subsequent creditors when there was no actual inten-tion to defraud any one, or an intention to defraud any one, or anintention to defraud antecedent creditors only, I think there is no roomto doubt that, where there has been an actual intention to defraud futurecreditors as well, any one of them who is prejudiced may set aside thedeed ”. Bertram C.J. in a dictum in 26 N. L. R. 295 expressly adoptedthe view of Mr. Berwick. He said “ One feels reluctant to adopt a viewwhich would seem to. imply that, if a person committed a gross fraud orwrong against another and then disposed of his property with a view toavoiding the result of any consequent action, the person defrauded wouldnot be a creditor for the purpose of a Paulian action. There is, however,a solution of this difficulty, namely, that such a person may be consideredto have formed a design to defraud future creditors, and prejudice causedby such fradudulent design is declared to be within scope of this remedy.This view is expounded by Mr. Berwick in the judgment above referredto ”. The case of Fernando v. Fernando 2, is in point. In holding thatthe Paulian action lay at the instance of a person who had obtained adecree for damages, in respect of his alienation that had been madefraudulently after the cause of action ex delicto had arisen, Keuneman, J.said, “ In this case, it has been established that the alienation was made-by the second defendant fraudulently and with the express intention ofhindering and defeating the claim of the first defendant. It is clear thatprior to the date of alienation, a cause of action ex delicto had accrued tothe first defendant, and that the first defendant had notified to the seconddefendant,-his intention of bringing an action for damages. I hold thatthe second defendant knew that, in consequence of the alienation, thefirst defendant would not be able to realise his decree, in other words,that he acted so that when the decree came into being, there would beno assets or insufficient assets to levy execution on. In fact the seconddefendant was deliberately rendering himself insolvent as against the timethat the decree would come into being. In the result, the claim of thefirst defendant has been defeated **.
1 (1876) 1 N. L. R. 131.
*o(1940) 42 N. L.R. p 12.
8AMERAW1CKRAME, J.—Atukorale v. Atukorale
377
Hie learned District Judge has held that the deeds PI, P2 and P4 havebeen executed for no consideration ; that alienations were made fraudu-lently by the transferor for the purpose of placing his assets beyond thereach of his creditor and that they left him with no property from which,the claim of the 1st defendant could be satisfied. On the findings of thelearned District Judge, the 2nd defendant had of set intent or designmade the alienations with the object of defeating the right of the 1stdefendant on any decree which he might obtain upon the unliquidatedclaim that had arisen in his favour and which had been notified by the1st defendant by the letter of demand dated 23id March, 1955. Onthese facts, having regard to the authorities cited above, the 1stdefendant was entitled, on obtaining decree, to maintain a Paulianaction to impeach those alienations. I, therefore, hold that a rightto the Paulian remedy had arisen in favour of the 1st defendant tohave the deeds PI, P2 and P4 set aside.
I should refer to the decision of the Divisional Bench in Mulethar x>.Ismail1. In that case, it was held that a claim for unliquidateddamages is not a debt and a person entitled to such a claim is nota creditor for the purpose of a Paulian action until he has obtained adecree. It was further held that the plaintiff in that case, who had'obtained a decree for damages, was not entitled to maintain a Paulianaction to set . aside the alienations made prior to his obtaining the decree.Basnayake, C.J. who delivered the judgment in that case, referred to thefirst part of the passage from Planiol which I have set out above, butdid not refer to or consider the second part of that passage (also set outabove) which deals with the exceptions in the case of alienations directedagainst future creditors. It appears to me that he did not refer to orconsider it because, on the facts of that case, the question of the exceptiondid not arise. The property that was alienated did not belong to thedebtor at the time the claim for unliquidated damages arose and, there-fore, it was not property which the. creditor could have counted upon atthe time of the transaction which resulted in damages. Apart fromthat fact, it also appeared that the property had been both purchasedand sold after the action for damages had been instituted and beforedecree was entered. I am, accordingly, of the view, that the decision inthe Divisional Bench case dealt with a set of facts which were both peculiarand far different to that in the present case and that that decision is,therefore, not of assistance in deciding this matter.
Mr. Jayewardene also contended that the 1st defendant’s claim torelief was barred by prescription. He submitted that the fraudulentalienations constituted the 1st defendant’s cause of action and that asthe claim in reconvention in which he sought the Paulian remedy was
1 (1982) 64 N. h. B. 293.
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SAMERAWICKRAME, J.—Atukorcde v. Atukorale
made more than three years after the alienation, tlie said claim wasbarred by prescription. The relevant Section is ..Section 10 of the. Prescription Ordinance. Section 10 provides “.No action shall bemaintainable in respect of any cause of action not hereinbefore exprosslyprovided for, or expressly exempted from the operation of thisOrdinance, unless the same shall be commenced within three yearsfrom the time when such cause of action shall have accrued
The term “ cause of action ” has more than one moaning. What isperhaps the primary meaning is to be found in a definition made in Cooke(Cook) v. Gilll. Brett J. said, “ cause of action has been hold from theearliest time to mean every fact which is material to be proved toentitle the plaintiff to succeed—every fact which the defendant wouldhave a right to traverse ”, The term has also a narrower meaningof ‘ the act on the part of the defendant which gives the plaintiff hiscause of complaint vide Jackson v. Spittal 2. By statutory dofinitionthis narrower meaning is given to “ cause of action ” when it appearsin the Civil Procedure Code. The torm as it appears in the Prescrip-tion Ordinance has not been defined. In the vast majority of cases,it is the act on the part of the defendant which gives rise to a right ofaction in the plaintiff and in such cases the cause of action would arise,and time would begin to run under the Prescription Oidinance, on thedoing of the said act by the defendant. But there are. cases where rightof action does not arise immediately upon the doing of the act by thedefendant, but only on the happening of some subsequent event andin such cases, a cause of action would arise and time would begin to rununder the Prescription Ordinance, only at the happening of suchsubsequent event. The most common example is a tort where theright of action does not arise on an act being done by the defendant,bacause damage is an essential element of the liability, vide Nelson v.Municipal Council, Colombo 8. In such ■ cases, cause of action wouldarise and time would begin to run under the Prescription Oidinance,not necessarily on the doing of the act by the defendant, but ondamage being suffered if this takes place later. In the case ofthe tort of malicious prosecution, the act done by the defendant isthe institution of criminal proceedings maliciously and without reason-able or probable cause, but a person is not entitled to institute an action" for malicious prosecution, until there has been a termination of thecriminal proceedings in his favour. Accordingly, cause of action wouldarise and time would begin to run under the Prescription Ordinance inrespect of an action for malicious prosecution only on the terminationof the criminal proceedings. In the case of a Paulian action brought on afraudulent alienation directed against future creditors, the right of actionof a person, who claims to belong to the class of persons against whom
1 (1873) Law Reporta O. P. 107, at page 116.* Law Reporta 5 C. P. 542.
* {1909) 13 N. L. R. 43. 0
8AMERAW1CKRAME, J.—Atukorala v. Atukaralt
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that fraudulent alienation is directed only arises when he becomes acreditor. I think, therefore, that in the case of such an action, a causeof action arises and time begins to run tinder the Prescription Ordinanceonly on the date the plaintiff becomes a creditor. This is such an actionand I hold accordingly that prescription began-to run ohly when the 1stdefendant became a creditor and that was on the entering of the decree in
C. Gampaha 5103/M. This took place on 19th July, 1957, and theclaim in reconvention in the present action seeking the Paulian remedywas filed on 25th July, 1958. Accordingly, that claim is not barred byprescription.
The last matter urged on behalf of the appellants was that by reason ofthe failure to make substitution in place of the 2nd defendant who diedpending the action, the continuation of the action, was bad and thejudgment and the decree entered therein were void. A Paulian actionis one that is directed against the transferee because'the object' of theaction is to have his property declared liable to be sold for the purposeof satisfying a debt due to the creditor. Planiol—Elementaire Traitede Droit Civil, Vol. 11, p. 189, para 320 (Louisiana State Law InstituteTranslation) states, “A Paulian action is always exercised against athird party, that is, against the person who has benefited from the frau-dulent act ”. In a very early case, in which it was held that an aliena-tion could be set aside on the ground of fraud only in proceedings wherea transferor was a party, Layard C. J. gave the reason why it was necessarythat he should be a party. In Dissanayake v. Baban 1 he states “ Ithink before any person can be held to have committed fraud on hiscreditors that he is entitled to be heard in defence of himself Ithas also been laid down that a Paulian action does not lie againstthe heirs of the debtor unless they have participated in the fraudor have been enriched thereby—vide Voet 42-8-5. It has not beensuggested that any of the children of the 2nd defendant participatedin the fraud. The children who were benefited by it are partiesbeing the 1st and 2nd plaintiffs. The statement in Voet would seem toindicate that if a debtor dies before the institution of a Paulian actionand his heirs have neither participated in the fraud nor benefited thereby,the action may be instituted against the transferee alone. The CivilProcedure Code contemplates the substitution of a legal representativeof the deceased Defendant where there are more defendants than oneonly in the case where the right to sue does not survive against thesurviving defendant alone—vide Section 398. It appears to me thatin a Paulian action, on the death of the transferor-defendant, the rightto sue survives against the other defendant alone. I am, therefore,inclined to take the view that the failure to make substitution in placeof the 2nd defendant who died pending the action had not the effect ofrendering the action bad. The matter may be tested in another way-1 (1902) 1 McUara Oaata 211 at p. 216.
380
Jayawardena v. Kandidh
The legal representative, who can be substituted in place of the deceaseddefendant, is either his executor or administrator or his heirs who havealienated the inheritance. The character of the persons who may besubstituted shows that the substitution is made so that they may defendthe action in the interests of the estate of the decased. The decree that. could be entered on 1st defendant’s claim in reconvention in this actionwould not adversely affect the estate of the deceased, for it would onlydeclare the property of the plaintiffs liable to be sold in execution forthe satisfaction of the 1st defendant’s decree. In point of fact, it ismore advantageous to the estate of the deceased defendant that the claimin reconvention should succeed rather than that it should fail, for if theclaim in reconvention is successful, the writ of the 1st defendant willbe satisfied out of the property of the plaintiffs-appellants, but if theclaim in reconvention is unsuccessful, it is possible that the 1st defendantmay reissue writ and seek to levy execution out of the assets belongingto the estate of the deceased defendant even if they are not capable offully satisfying his claim. I, accordingly, hold that the failure to makesubstitution in place of the deceased 2nd defendant did not make thecontinuation of the action bad and did not render the judgment andthe decree void. I
I am, therefore, of the view that the order made by the learnedDistrict Judge is correct, and I accordingly dismiss the appeal withcosts.
Tennekoon, J.—I agree.
Appeal dismissed.