008-SLLR-SLLR-1991-V-1-DAYAWATHIE-AND-OTHERS-v.-GUNASEKERA-ANOTHER.pdf
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Dayawathie v. Gunasekera & another
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DAYAWATHIE AND OTHERSV.
GUNASEKERA & ANOTHER
SUPREME COURTAMERASINGHE, J.
DHEERARATNE, J. ANDWADUGODAPITIYA, J.
SC APPEAL 17/87; CA 329/74 (F); DC COLOMBO 12617/LAPRIL 4, 1991.
Trusts Ordinance, Sections 5 and 83 -Agreement to re-transfer – Evidence Ordinance,Section 92 – Oral evidence to vary contents of a notarial deed – Permissibility.
The Plaintiff bought the property in suit in 1955. He started construction work in 1959and completed in 1961. The Plaintiff, a building contractor, needed finances in 1966 andsought the assistance of the 2nd defendant with whom he had transactions earlier. Thisculminated in a Deed of Transfer in favour of the 1st Defendant, who is the mother ofthe 2nd Defendant and the 2nd Defendant being a witness to the Deed. The propertywas to be re-transferred within 3 years if Rs. 17,000/- was paid.The Plaintiff defaulted.In his action to recover the property, the Plaintiff succeeded in the trial Court in establishinga constructive trust. The Court of Appeal reversed the judgment on the sole ground thatthe agreement was a pure and simple agreement to re-transfer.
Held:
The Prevention of Frauds Ordinance and Section 92 of the Evidence Ordinance donot bar parole evidence to prove a constructive trust and that the transferor did notintend to pass the beneficial interest in the property.
(ii) Extrinsic evidence to prove attendant circumstances can be properly be received inevidence to prove a resulting trust.
Cases referred to:
Theevanapillai v. Sonnapillai (1921) 22 N.L.R. 316.
Walliamma Atchi v. Abdul Majeed (1947) 48 N.L.R. 289.
Fernando v. Thamil (1946) 47 N.L.R. 297.
Muttamma v. Thiagaraja (1961) 62 N.L.R. 559.
Shanmuganafhan Pillai v. Unjappa Kone (1944) 46 N.L.R 313.
Carthelis Appuhamy v. Saiya Nona (1945) 46 N.L.R. 313
Savarimuthu v. Thangavelayuthan (1954) 55 N.LR. 529.
APPEAL from judgment of the Court of Appeal.
P.A.D. Samarasekera P.C. with R.B. Seneviratne andHemasiri Vithanachchi for Substituted – Plaintiff – Appellants
H.L. De Silva P. C. with T.B. Dillimuni and P.M. Ratnasekera for Defendant – Respondents.
May 5, 1991
DHEERARATNE, j.The original plaintiff (since deceased) filed this action against the 1st
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and 2nd defendants who are mother and son respectively. The 1stdefendant died pending these proceedings and the 2nd defendant wasappointed as her legal representative. The original plaintiff sought adeclaration against the defendants that the property which is the subjectmatter of this action is held by the first defendant in trust for him andfor an order of court directing the first defendant to execute a deedtransferring the said propedy to him on hire payment of a sum of Rs.17,000 to the first defendant.
The learned trial judge gave judgment for the original plaintiff as prayedfor on the basis that a constructive trust has been proved; the Courtof Appeal set aside that judgment and dismissed the plaintiff's action.The original plaintiff died pending proceeding in the Court of Appeal andhis widow and children were, substituted as first to seventh substituted- plaintiffs, who have now preferred an appeal to this court against thejudgment of the Court of Appeal. Since then the first substituted-plaintifftoo died and the 2nd substituted-plaintiff was appointed as the legalrepresentative in her place.
The circumstances leading ;o the filing of this action are briefly as follows.The original plaintiff became owner of the property in suit by right ofpurchase in 1955. About 1959 he commenced the construction of aresidential house in the land and for this purpose borrowed a sum ofRs. 15,000 from the National Housing Department on a Mortgage ofthe property. The construction was completed in about 1961 and soonthereafter he went into occupation with his family. He was engaged inthe business of a building contractor and was in need of some moneyfor his business somewhere in the middle of 1966. This led him to seekfinancial assistance from the 2nd defendant from whom he had borrowedmoney even earlier. The first defendant was a total stranger to him. Thenegotiation for money culminated in the execution of deed P1 dated10th August 1966transf erring his residential house and property in favourof the first defendant, the second defendant remaining in the backgroundonly to be one of the attesting witnesses. Deed P1 is ex facie a deedof transfer for a consideration of Rs. 17,000 and according to theattestation of the notary Rs. 10,000 passed in his presence and thebalance Rs. 7,000 was acknowledged to have been received earlier.
The original plaintiff alleged that on execution of P1 he obtained onlya sum of Rs. 10,000 from the second defendant, who showing reluctanceto figure in a notarial transaction while being a government servant,
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wanted the property transferred in the name of his mother the 1stdefendant, however, undertaking to get the property retransferred onreceipt of a sum or Rs. 17,000 within a period of three years. This versionis reflected in the letter of demand P10 sent on behalf of the originalplaintiff to the first defendant preparatory to filing the action, to whichtetter there had been no reply.
After a meticulous examination of the oral and documentary evidence,the learned trial judge accepted the version of the original plaintiff onthe transaction in toto and no serious attempt was made either in theCourt of Appeal or in this Court to challenge the correctness of the learnedtrial judge's findings of fact. The sole basis of the reversal of the judgmentof the trial judge by the Court of Appeal appears to be that it regardedthe transaction between the parties as a pure agreement to re-transferthe property, of which agreement time was the essence and that theplaintiff's action perforce fails in consequence of his default to tenderthe money within the stipulated period of 3 years.
On the arguments presented to us, it seems to me that two questionsrequire our determination; firstly whether to prove a constructive trustwithin the meaning of section 83 of the Trusts Ordinance, oral or extrinsicevidence could be admitted of facts in violation or in disregard of section92 of the Evidence Ordinance; and secondly if such evidence is admissiblewhether the facts so adduced in this case are sufficient to establish aconstructive trust.
As far as express trusts (as opposed to constructive trusts) relating toimmovable property are concerned, section 5(1) of the Trusts Ordinancemakes their validity depend upon a declaration by a last will or by anon-testamentary instrument which is notarially executed. The relaxationof this rule by the provisions of section 5(3), so as to prevent its operationas to effectuate a fraud had already persuaded courts to treat section5(3) as an exception to the application of section 2 of the Preventionof Frauds Ordinance and section 92 of the Evidence Ordinance. SeeTheevanapillai v. Sinnapii!ai{') Walliamma Atchiv. Abdul Majid P.C.(2)and Fernando v. Thamel<3). These authorities afford little assistance tothe resolution of the present problem except perhaps to the limited extentof finding somewhat of an analogous situation.
An examination of section 83 of the Trusts Ordinance reveals the mostmaterial words in that section are "it cannot reasonably be inferred
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consistently with the attended circumstances that he (the owner) intendedto dispose of the beneficial interest therein". Mr. H.L. de Silva P.C. forthe respondent submits that one cannot surmount the barrier createdby section 92 of the Evidence Ordinance in order to lead parol evidenceto establish a trust, because section 92 makes no exception and is ageneral provision applicable to all cases governing proof of facts. Hefurther submits only if fraud or want of consideration are sought to beestablished in terms of proviso (1) to section 92 that an inference ofconstructive trust may be drawn.
As was emphasized by Sir John Beaumont in Walliamma Atchiv. AbdulMajid (supra) one has to bear in mind that the Trusts Ordinance is alater enactment, and it deals expressly with trusts. Naturally in any conflictof the provisions of the Evidence Ordinance with the provisions of theTrusts Ordinance the later must undoubtedly prevail. I think the bestof all guides on this question is the observation of H.N.G. Fernando J.(as he then was) in Muttamma v. Thiyagarajah (4) when he stated asfollows
"The plaintiff sought to prove the oral promise to reconvey not inorder to enforce that promise but only to establish an "attendantcircumstances" from which it could be inferred that the beneficialinterest did not pass. Although that promise was of no force or availin law by reason of section 2 of the Prevention of Frauds Ordinance,it is nevertheless a fact from which an inference of the naturecontemplated in sectior 83 of the Trusts Ordinance properly arises.The Prevention of Frauds Ordinance does not prohibit thp proof ofsuch an act. If the arguments of counsel for the appellant basedon the Prevention of Frauds Ordinance and on section 92 of theEvidence Ordinance are to be accepted, then it will be found thatnot only section 83, but also many of the other provisions in chapterIX of the Trusts Ordinance will be nugatory. If for example "attendantcircumstances" in section 83 means only matters contained in aninstrument of transferof property, it is difficult to see how a conveyanceof property can be held in trust unless indeed its terms are suchas to create an express trust". I
I am in most respectful agreement with Fernando J. and I hold thatextrinsic evidence to prove "attendant circumstances" had been properlyreceived in evidence at the trial.
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On the next question as to the adequacy of evidence to prove a resultingtrust the following "attendant circumstances" have been accepted bythe learned trial judge as pointing to the fact that beneficial interest ofthe property was not parted with by the original plaintiff.
The oral promise to reconvey the property in suit on receipt of Rs.17,000 comprising of money advanced and the interest thereon.
The original plaintiff (transferor) continuing to remain in possessionand enjoying the property.
The original plaintiff's agreement to pay all instalments that will falldue on account of the loan obtained from the National HousingDepartment.
The gross disparity between the consideration on the face of thedeed (Rs. 17,000) and the market value of the property (Rs. 70,000- 80,000)
The first defendant's failure to take any steps to assert her ownershipin persuance of the purchase until she received the letter of demandP10, namely, the failure to get her name registered as the ownerin the assessment register of the local authority and non paymentof instalments payable to the National Housing Department.
The original plaintiff taking steps to obtain a loan from the StateMortgage Bank soon after the transaction to pay off debts due tothe defendants and to the National Housing Department.
These "attendant circumstances" in my view are sufficient to demonstratethat the original plaintiff hardly intended to dispose of his beneficialinterest in the property. I find that the facts in the instant case are differentfrom those of Shanmuganathan Pillai v. Unjappa Kone(5); CarthelisAppuhamy v. Saiya Nona(6) and Savarimuttu v. Thangavelauihan(7),in all of which the attendant circumstances were found to be inadequate.
It appears that the Court of Appeal ignored all circumstances provedabove and fell into error by treating the transaction between the partiesas a mere contract to re-purchase in which class of contract, time isthe essence. This conclusion could be arrived at only on the footingthat the original plaintiff transferred both his legal and beneficial interests
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by deed P1. For the above reasons the judgment of the Court of Appeal
is set aside and the judgment of the District Court is affirmed.
I direct that:-
The 2nd – 7th substituted-plaintiffs do deposit a sum of Rs. 17,000and a further sum of Rs. 5200, latter sum being what the defendantspaid to the National Housing Department, both sums with legalinterest from 4.10.1974 to 4.05.1991 to the credit of this case onor before 31.5.1991.
If the said sum of money is paid as aforesaid, the 2nd defendant(legal representative of the 1st defendant) do transfer the propertydescribed in the schedule to deed No. 559 of 10.08.1966 in favourof the 2nd – 7th substituted – plaintiffs in equal shares on or before30.06.1981.
If the said sum of money is deposited as set out in (1) and the 2nddefendant fails to effect a transfer as stated in (2) above, the Registrarof the District Court do effect the conveyance in favour of the 2nd- 7th substituted-plaintiff on or before 31.07.1991.
The 2nd defendant be entitled to withdraw the said sum of moneyreferred to in (1) above, only after the execution of a conveyanceby him or by Registrar of the District Court as stated above.
The 2nd – 7th substituted-plaintiffs do bear all expenses of theconveyance of the property in their favour.
The Registrar of the Supreme Court do send the record of this caseback to the District Court as expeditiously as possible to enable theparties to conform with these directions.
The appeal is allowed and the substituted-plaintiffs will be entitled to
costs of action in this Court and in both Courts below.
AMERASINGHE, J. – I agree
WADUGODAPITIYA J. – I agree
Appeal allowed