DAVID, Appellant, and MENDIS et al., Respondents

074-NLR-NLR-V-53-DAVID-Appellant-and-MENDIS-et-al.-Respondents.pdf


David v. JUendis
337
1952Present: Rose C.J., Gratlaen J. and Choksy A.J.DAVID, Appellant, and MENDIS et al., RespondentsS.C. 339—D. C. Tangalla, 5,691
Registration of Documents Ordinance (Cap. 101)—Sections 17 and 18, as amended by
Ordinance No. 18 of 1947—Scope of—Bill of Sale—Meaning of term.
In a contract of sale of movable property, a written acknowledgment givenby the seller to the purchaser after title to the goods had already passed to thepurchaser on payment of the price and delivery.of the goods is not a “ bill ofsale'1' within the meaning of section 17 of the Registration of DocumentsOrdinance. A bill of sale is necessary only where possession of the goodsintended to be sold is not given and the object is to pass the property in thegoods without possession of them being given.
Sections 17 and 18 of the Registration of Documents Ordinance do not applyto verbal contracts of purchase and sale.
ApPJiAIi from a judgment of the District Court, Tangalla. Thiscase was reserved for the decision of a Bench of three Judges undersection 38 of the Courts Ordinance.
N. E. Weerasooria, K.C., with H. W. Jayewardcne and W. D. Gutia-sekera, for the plaintiff appellant.—The document 2D6 is a “ bill of sale ”and comes within the provisions of the Registration of DocumentsOrdinance (Cap. 101). This is a transfer of movable property. Theremust be either delivery or registration. An unregistered bill of saleis not sufficient. On the facts of this case ostensible possession waswith the first defendant. Therefore 2D6 was void as against theplaintiff.
H. W. Jayewardene continued.—In the present case 2D6 was putforward as the document intended to pass title. It is therefore a billof sale which has not been registered—French v. Gething 1. Even apartfrom 2D6 the transaction itself was void for non-compliance with theprovisions of the Registration of Documents Ordinance. The definitionof “ bill of sale ” included transactions that were not in writing. Theearlier cases took this view. See section 18 (b) and Indian Bank v.Chartered Bank 2; Appuhamy v. Appuhamy 3; Mohamed v. EasternBank *.
H. V. Perera, E.C., with Christie Seneviratne, for the second defendantrespondent.—What was sold was the business. 2D6 is only evidence of atransaction and of the fact that the articles were handed over. It isnot a document which creates rights. Therefore it is not a “ bill of sale ”.The Registration of Documents Ordinance (Cap. 101) as amended byOrdinance No. 13 of 1947 deals only with documents. Inventories and
1 (1922) 1 K. B. 236.
* (1941) 43N.L.R.49.
* (1932) 35 N. L. B. 329.« (1931) 33 N. L. B. 73.
338
GRATIAEN J .—David v. Mendis
receipts are not bills of sale unless they are given as an “ assurance ”—Haydon v. Brown *. With regard to the meaning of “ ostensiblepossession ”, see Frenoh v. Gething 2.
C. Niles, for the first defendant respondent.
N. E. WeeTasooria, K.C., in reply.—The document, 2D6, is somethingmore than a receipt. It is a document of sale. One must consider thetransaction and not the mere form of the document. See Ramsay v. Mar-grett 3 and Charlesworth v. Mills *.
Cur. adv. vult.
January 16, 1952. Gratiaen J.—
This appeal was reserved for the decision of a Bench of three Judgesunder Section 38 of the Courts Ordinance.
On July 21, 1947, the plaintiff obtained a decree against the first-defendant for the payment of a sum of Bs. 4,000 and interest due to himon a promissory note dated March 6, 1946. In execution of this decreethe plaintiff caused certain furniture and fittings lying at Galiton Hotelin Hambantota to be seized by the Fiscal on July 22 and 23, 1947. Thesecond defendant, however, claimed the goods as his property, and hisclaim was upheld. The plaintiff thereupon instituted the present actionunder Section 247 of the Civil Procedure Code to have the propertydeclared liable to be sold in execution against the first defendant on thegrounds, inter alia, (a) that the furniture and fittings in fact belonged tothe first defendant at the date of seizure, and (b) that, in the alternative,their alleged sale to the second defendant was liable to be set aside asa transaction entered into between the defendants colusively and infraud of the first defendant’s creditors.
The pos,J-ion taken up by the second defendant was that he had ingood faith purchased the property for valuable consideration from thefirst defendant 2J months before the date of the plaintiff’s decree. Theplaintiff strenuously attacked the genuineness of this transaction, andalleged that the defendants, acting in collusion, had, with the assistanceof certain other persons and in order to bolster up a fictitious sale,fabricated a document 2D6 bearing the date May 6, 1947, but in factexecuted after the property had been seized by the Fiscal. The plaintiffalso contended that in any event this document (or, in the alternative,the transaction of which it purported to be a record) was a void orvoidable “ bill of sale ” by reason of non-compliance with the provisionsof either Section 18 (a) or 18 (b) of the Begistration of Documents Ordi-nance as amended by Ordinance No. 13 of 1947 which had come into-operation on May 1, 1947.
The main points of contest between the parties in the Court belowinvolved decisions on questions of fact. The learned District Judge,who had the inestimable advantage of seeing and hearing the witnesses,was satisfied that the 2nd defendant had purchased the furniture and
1 (1888) 59 L. T. (N. S.) 810 at p. 811.* (1922) 1 K. B. 236 at p. 247.
3 (1894) 2 Q. B. 18.* (1892) A. G. 231.
< !H ATT A P.W J.—David v. Men fit*
330
fittings from the first defendant bona fide for valuable consideration onMay 6, 1947. He accordingly dismissed the plaintiff’s action with costs.We are now concerned with the appeal against this decision.
There were no doubt certain aspects of the transaction which werejirima facie sufficiently suspicious to call for an explanation from thedefendants, but eaeh of these circumstances was explained by the seconddefendant and his witnesses to the satisfaction of the learned trial Judge,in ray opinion, the judgment under appeal was free from misdirection inregard to any controversial issue of fact. The decision that the trans-action which took place between the defendants on May 6, 1947. was agenuine sale of movable property, contemporaneously implemented bydelivery of the goods, must therefore be regarded as unassailable. Mr.Wt-erasuriya very frankly conceded that in this view of the matter,he could not press the alternative argument that the transaction wasvoidable as having been executed in fraud of creditors.
There remains for consideration the final submission urged on behalfof the plaintiff—namely, that the second defendant’s claim, to protecthis goods from seizure was vitiated for non-compliance with the provisionsof Section 18 (in its amended form) of the Registration of DocumentsOrdinance.
It is convenient in the first instance to set out in some detail the factsand circumstances relating to the sale which took place on May 6. 1947.The first defendant was at that date the sole proprietor of a hotel businesscarried on by him at Galiton Hotel in which a number of Governmentclerks (some of whom gave evidence at the trial) were accommodatedas permanent lodgers. He had got into financial difficulties throughhaving undertaken, with insufficient funds at his immediate disposal, abuilding contract for a Government Department. On April 2, 1947, heprevailed upon the witness Sivapraksam, a Government clerk residing atthe hotel, to purchase a part of the hotel furniture and fittings forRs. 1,000. Sivapraksam’s primary motive was to prevent a situationwhereby a sale to an outsider might result in the hotel being closed downto the inconvenience of himself and the other lodgers. Shortly afterwardsthe first defendant was again in difficulties, and he was obliged toadvertise the rest of his furniture for sale. It was at this stage that thesecond defendant, who was a comparatively wealthy stranger from theMadampe District, arrived in Hambantota for a period of convalescenceafter a serious illness. He obtained a room at the Galiton Hotel owingto the scarcity of accommodation at the local Resthouse, and was onthat occasion induced by some of the Government clerks to purchasethe hotel business from the first defendant as a going concern. Heagreed to do so for a consideration of Rs. 2,000, which sum representedthe agreed value of the first defendant’s remaining furniture as well asthat which Sivapraksam had previously purchased. Sivapraksam verywillingly released his furniture for Rs. 1,000 which was paid back to himout of the total consideration.
’The second defendant, though somewhat illiterate, was apparentlya shrewd man of business. At an early stage of the negotiations hesecured .the tenancy rights of Galiton Hotel from the first defendant’s
340
GRATIAEN J.—David v. Mendis
landlord, and arranged that tho first defendant should run the hotel infuture as his manager for a monthly salary. The transaction was finallycompleted on May 6> 1947, on which date he took delivery of the furniturewhich he had purchased, but here again he took the additional precautionof leaving it at the hotel premises in the charge of his friend Wiekrema-ratne who was one of the Government clerks residing at the hotel. Shortlyafterwards, the second defendant left Hambantota.
As from May 6, 1947, the first defendant ran the hotel on the seconddefendant’s account, and the furniture and fittings remained on thepremises for the benefit of the business. So matters stood until theplaintiff, who was unaware of the true position, caused the Fiscal toseize, the furniture and fittings in July, 1947, in execution of his decreeagainst the first defendant.
It is now convenient to consider the terms of the document 2D6 whichthe second defendant had obtained from the fist defendant contem-poraneously with the purchase which was concluded on May 6,1947.
The second defendant, not unnaturally, required a document signed bythe first defendant acknowledging that he had now become the ownerof the hotel business and of the furniture. The document 2D6j whichwaa stamped as a receipt and not as a “ bill of sale ”, was drafted by someGovernment clerks who had interested themselves in the completionof the transaction and who seem to have regarded themselves as possessingsome degree of skill as amateur conveyancers. The document draftedby them and signed by the first defendant is in the following form: —
" I, M. M. Galapathy of Galiton Hotel, Hambantota, do herebysell the under-mentioned furniture to Mr. S. D. Peter Appuhamy ofMadampe, Kahawatte, for the sum of rupees two thousand only andhaving received the said amount do hereby hand over the furnitureto the said buyer ”. (A catalogue of the furniture purchased is thenenumerated.)
O
Mr. Weerasuriya contends that this document is a “ bill of sale ” withinthe meaning of Section 17 of the Registration of Documents Ordinance(Cap. 101) and that it is void as against the plaintiff inasmuch as it hadnot been duly registered in terms of Section 18 (b) and because thefurniture had not, since the date on which the second defendant pur-ported to purchase it, remained “ ostensibly ” in his custody andpossession within the meaning of Section 18 (a).
In the circumstances of the present case, the document 2D6 cannot,in my opinion legitimately be regarded as a “ bill of sale ” within themeaning of the Ordinance. This term has a well-recognised connotationin commercial law and practice, and its definition in Section 17 (asamended by Ordinance No. 13 of 1947) is now substantially the sameas that appearing in the Bills of Sale Acts} 1854 and 1878, of England.
AsXiord Esher has pointed put in Johnson v. Diprose ’, a “ bill of sale ”,in the sense in which that term is commonly understood, is " a documentgiven in respect of a sale of chattels, which is necessary in cases wherepossession of the chattels intended to be sold is not given, and the object is to- *
* (1893) i Q. B. 512.
GBATTAEN J.—David v. Mendis
341
pass the property in the goods without possession of them, being given ".I can find no words in Section 17 of the Ordinance—either in its originalor in its amended form—from which a wider meaning can be imputedto the term in so far as it applies to contracts for the sale of goods. If.therefore 2D6 be examined in relation to the transaction now underconsideration, one is driven to the conclusion that it was clearly notintended by either party to the contract that the title to the furnitureshould pass to the second defendant by virtue.of the document■ On thecontrary, he became the lawful owner under the transaction on paymentand delivery of the goods. It must be remembered that the seconddefendant was a person unable to read the English language and he didnot claim to share the amateur draftsmen’s pretentions to understandthe mysteries of conveyancing. He had merely stipulated, at the timewhen the transaction went through, that he should be given for his •future protection a written acknowledgment confirming that he hadbecome the owner of the goods. In the course of his evidence he con-sistently described 2D6 as a “ receipt ” ; it was stamped as a receipt ;and nc questions were put to him in cross-examination to suggest thatthe document was intended to have any other significance. It wouldtherefore be introducing a sense of unreality into the transaction, andgiving it a significance and purpose not even remotely intended orcontemplated by the parties to it, to take the view that the inclusion inthe document of certain words, which are doubtless appropriate to a“ bill of sale ”, had necessarily converted it into a “ bill of sale ”. As Ihave already pointed out, the true position was that the title to thegoods had passed and was intended to pass to the second defendant underthe transaction, implemented as it was by payment and delivery, andnot under the document itself. This result was achieved as an incidentto a normal contract for the sale and purchase of goods. Charlesworth v.M:lls 1. The position would have been very different in a ease where“ if the document falls, the transaction falls with it ”. On the contrary,the validity of the transaction was entirely unaffected by the validity orotherwise of the document 2D6. In re Hardwick ; ex parte HubbardThe observations of Cockbum L.C.J. in Woodgate v. Godfrey 3 in construingthe English Act of 1854 sgem to be equally apposite to the local Ordinancewhich was ‘‘ not intended to apply to an out and out sale, whereby itwas never contemplated that the possession should remain in thegrantor ”. In my opinion the document 2D6 was not a “ bill of sale ”within the meaning of the Registration of Documents Ordinance, asamended by Ordinance No. 13 of 1947.
It was finally submitted on behalf of the plaintiff-appellant that,apart from the document 2D6, the verbal transaction, however genuine,was itself a *' bill of sale ”, and was therefore vitiated because Sections17 and 18 of the Local Ordinance, unlike the corresponding English Acts,aim not only at documents of title but also at transactions. This propositionseeks to extend the doctrine laid down by a Bench of two Judges inIndian Bank v. Chartered Bank et al. * to verbal contracts of purchaseand sale. To my mind the proposition is unsound.
1 (1892) A. C. 231.3 (1879) 48 L. J. Exeh. 271.
3 (1886) 55 L. J. Q. B. 490.* (1941) 43 N. L. R. 49.
342
GRATIAEN J.—David v. Mendis
Indian Bank v. Chartered Bank (supra) was decided before the Ordinancewas amended, and at a time when the term “ bill of sale ” was definedso as to “ include …. pledges and conventional mortgagesIt is not necessary for the purpose of this appeal to consider whether thatdecision was right or not at the time of its pronouncement, but it certainlyhas no application to contracts of sale, still less to contracts of saletransacted after the amending Ordinance of 1947 came into operation.Section 17 now excludes pledges and conventional mortgages from thestatutory meaning ascribed to the term “ bill of sale ”, and the localdefinition is now substantially the same as that which had been adoptedin the corresponding English Acts. Having regard not only to themeaning generally ascribed to the word *' bill of sale ” but also to thecircumstance that this term appears in au Ordinance designed to providefor the registration of documents, it seems to me that very compellingwords indeed would be required to justify the view that a verbal trans-action was intended by the legislature to be regarded as a ” bill of sale ”whose validity would in certain circumstances depend on its registration.1 am content to say, without expressing any view as to whether IndianBank v. Chartered Bank, Ltd. (supra) was correctly decided, that—asfai as verbal contracts of sale are concerned—X can find no such compel-ling words in the language of Sections 17 or 18 of the Ordinance in theirpresent amended form.
To summarise my conclusions, I would hold that neither the document2DB nor the bona fide transaction which .took place between the defendantson May 6, 1947, was a “ bill of sale ” within the meaning of the Registra-tion of Documents Ordinance. Sections 18 (a) and 18 (b) do not thereforeapply to the present case, and the question whether the goods remained” ostensibly ” in the second defendant’s possession up to the date ofseizure does not arise for consideration. The ownership of the goodsseized at the instance of the plaintiff had passed absolutely to the seconddefendant at the moment when he paid for and took delivery of them interms o.f a verbal contract whose validity was unassailable as from themoment of delivery. The contemporaneous execution of the document2D6 did not and was not intended to affect the legal rights of the parties.In the result, the goods were not liable .to seizure in execution of theplaintiff’s decree against the first defendant.The true principle of law
which applies to the case is “ the ordinary rule by which a creditor is notentitled to seize the goods of one person for the debt of another ”. Ramsayv. Margarett li In my opinion therefore the plaintiff’s appeal should bedismissed with costs in favour of both defendants.
Rose C.J.—I agree.Choksy A.J.—I agree.
Appeal dismissed.
* (1894) 2 Q. B. 18.