DE SILVA, Appellant, and SENARATNE et al., Respondents

083-NLR-NLR-V-50-DE-SILVA-Appellant-and-SENARATNE-et-al.-Respondents.pdf


JAVETILEILE S.P.J.—de Silva v. Senaratne
3(3
1949Present: Jayetileke S.P.J. and Canekerata^ J.
DE SILVA, Appellant, and SENARATNE ef al., RespondentsS. C. 418—D. C. Matara, 16,626
Specific performance—Agreement to transfer land—Registered—Stipulation fordamages on failure to transfer—Refusal to transfer—Right of election topay damages—Trust—Existing contract—Chdpter 72, section 93.
First to seventh defendants agreed to transfer to the plaintiff the lotallotted to them by the final decree in a partition action. The agreementwas registered. It was further stipulated that if the defendants failedto effect the transfer within one month of the decree they were to payto the plaintiff a certain sum of money. The defendants failed to conveythe land to the plaintiff but in breach of the agreement conveyed it to theeighth defendant. The defendants claimed the right to pay the stipulatedsum of money in lieu of performance of the agreement.
Held, that the defendants had no right of election.
Held further, that in the absence of evidence that the plaintiff hadwaived his right to specific performance, the contract was an existingcontract and that the eighth defendant having notice of the agreementwas in terms of section 73 of the Trusts Ordinance under ohligation-to convey the land to the plaintiff.
.A.PPEAL from a judgment of the District Judge, Matara.
H. V. Perera, K.C., with H. W. Jayewardene, for plaintiff appellant.M. I,, iS. Jayasekere, for 1st and 8th defendants respondents.
Vernon Wijetunge, for 4th defendant respondent.
U.A. Jayasundere, for 7th defendant respondent. '
Cyril E. S. Perera, for 3rd defendant respondent.
Cur. adv. vult.
March 9, 1949. Jayetilkke S.P.J.—
This is an appeal in an action to enforce the performance of an agree-ment for tie sale of certain shares of lands.
The material facts are the following :—The 1st to 7th defendantsclaimed to be entitled to 11/32 shares of three lands called Millagaha-deniya, K al a wel 1 agoda and Heen wilahena. The 2nd defendant in-stituted Action No. 11,203 of the District Court of Matara for the partitionof Kalawellagoda, and one Hendrick Wanigesekera instituted ActionNo. 11,331 for the partition of Heenwilahena. The plaintiff was madea party to the said action as he was entitled to certain shares of the saidlands. During the pendency of the said actions the plaintiff arrangedwith the said defendants for the purchase of their shares, and enteredinto the agreement PI with them dated November 5, 1938, attestedby J. P. Ranasuriya, Notary Public. PI provided that the said defendantsshall, within one month from the date of the final decree in actionNo. 11,203, sell to the plaintiff, and the plaintiff shall, within the saidperiod, buy from the said defendants the undivided share of Millagaha-14—X.
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JAYKTILERE S.f*. J.— da Silva v. Senaratne
deniya and the lots that would be allotted to them in the said actionsin lieu of their undivided shares for a sum of Rs. 1,829'50 subject to thefollowing conditions :—
That the party of the second part shall pay in advance to the
parties of thjs first part the said sum of Rs. 1,829 ‘50.
That the parties of the first part shall before the expiration of the
one month from the date of entering the Final Decree in. the sajd■ partition ease No. 11,203 convey to the party of the second parton ai deed of transfer free from all encumbrances, the lots thatwill be allotted to the parties of the first part in the said twopartition cases Nos. 11,331 and 11,203 and an undivided 11/32. share of Millagahadeniya, and everything belonging thereto.
That the .party of the second part shall bear the costs of stamps
and fees and all other expenses of the deed of .transfer thats!hall be executed by the parties of the first part in favour ofthe party of jthe second part as aforesaid.
That the party of the second part shall pay compensation and costs
that the parties of the first part shall, become liable to pay inthe said two partition cases Nos. 11,331 and 11,203.
That if there “be any compensation due to the parties of the first
part in the said two partition cases Nos. 11,331 and 11,203, theparties of the first part shall forthwith obtain and pay the sameto the party of the second part.
That the parties of the first part shall proceed on with the said
action 11,203 instituted by them till the final determinationthereof without neglecting same at the various stages.
That the parties of the first part shall put the party of the second
part in possession of the said premises till the said deed oftransfer is executed in favour of the party of the second partas aforesaid.
That if the said parties of the first part failed to transfer the said
premises before the expiration of one month from the dateof entering of the Final Decree in the said partition caseNo. 11,203 the parties of the first part shall pay to the partyof the second part a sum of Rs. 2,829*50, to wit, Rs, 1,000being damages that will be thereby sustained by the partyof the second part and Rs. 1,829*50 being the amount paidin advance by the party of the second part to the parties of thefirst part and that the party of the second part shall have thefull right to recover the said sum of Rs. 2,829 *50.
The plaintiff paid to the said defendants the frill consideration at thetime of the execution of the agreement and entered into possession of theundivided shares to which they were entitled. Final decree was enteredin action No. 11,331 on February 21, 1941, and lot No. 4 in plan No. 135dated March 8, 1940, made by John de Silva, licensed Surveyor, wasallotted jointly to the said defendants and to plaintiff. Final decreewas entered in action No. 11,203 on May 29, 1944, and lots Nos. 1 to 6 inplan No.. 782 dated April 30, 1944, made by the said John de Silva,were; allotted to the said defendants and the adjoining lot No. 7 to theplaintiff. The plaintiff paid all fees and expenses connected with the
JAYETTLEKE S.P.J.—de Silva v. Senaratne
31B
said actions and the costs and compensation payable by the said defend-ants. It was admitted by Counsel that the sums expended by theplaintiff amounted to nearly Us. 1,500.
After May 29, 1944, the plaintiff called upon the said defendants toexecute a conveyance in his favour in terms of their agreement but theyfailed to do so. Notwithstanding the said request, the first defendant, inbreach of his agreement, conveyed lot No. 1 and his interests in lot No. 4to-the 8th defendant by deed P23 dated September 22, 1944, attested byA; P. Daluwatte, Notary Public. Thereupon, the plaintiff institutedthis action against the defendants to enforce the performance of theagreement contained in PI.
The 1st to 7th defendants did not dispute that they failed to conveythe said lands to the plaintiff but relying on condition 8 they said thatthey had the option of either transferring the said lands to the "plaintiff orpaying him the sum of Its. 2,829 • 50.
The law that is applicable to the case is very clear. Our task lies'in the application of the law to the facts. In Mathes Appuhamy v.Baymond 1, which is a decision of a bench of three Judges, Withers J.who delivered the principal judgment, said :—
“ Can the intending buyer compel the intending seller specificallyto perform an agreement to sell a particular land if that agree-ment contains an express stipulation to pay damages generally, or afii certain sum by way of damages in the event of the seller not;conveying the land in terms of the agreement. The answer to thisquestion seems to me to depend on the wording of the agreementand the intention of the parties as indicated by their contract.
If the. penal stipulation is intended to be merely accessory to theprincipal obligation, then it i's surely open to the seller to exactspecific performance. If, on the other hand, the penal stipulation,is an alternative obligation, and it is intended that the party makingit may break the principal obligation, but shall pay consequentdamages, then the party is restricted to his right of action to recoverthose damages. He cannot enforce specific performance. A partywho breaks a binding contract is responsible' ip damages, whetherbe specially engages to pay those damages or not.'' J ',
To add a stipulation to pay damages may be of advantage to theparty for whose benefit it is made, especially when a definite sumis agreed to as a measure of damages, and that sum is secured by a- mortgage or otherwise.
The mere fact of such a stipulation being inserted in a: contractdoes not necessarily imply that it was put in as an alternativeobligation for the exclusive benefit of the stipulator. Rather, I•* think, that if such a stipulation intended to he alternative and notaccessory the intention should be clearly expressed or indicated. ”
In Appuharny. v de Silva 2 Lascelles C.J. said :—
“ Specific performance is an equitable remedy, and in deciding■ whether this remedy should be given, the Courts in Ceylon' afeguided by the same principles as the Courts of-Equity-at -hbfiie.
' {fSffG) 2 N. t: ii. 270.i [1914) 17W. E. 'R?-2&8. v *
3l6JAYET-iLEKE S.P.J.— de Silva v. Senaratne
(Holmes v. Alia Marikar). The real reason is, what is the trueintention of the parties ? Was it intended that the plaintiffs shouldhe entitled to re – conveyance on payment of the agreed sum, a penaltyof Rs. 460 being annexed to secure performance ? If this is the trueconstruction, the fact of a penalty being annexed will not prevent theCourt enforcing performance of what is the real object of the contract.Or, does the contract mean that one of two things has to be done,namely, the re-conveyance of the property or the payment of thepenal sum at the election of the defendant ? If this is the case, thecontract is satisfied by the payment of the penalty, and there is noground for claiming performance of the other alternative. ”
In a case from Australia, Fullers Theatres Ltd. v. Musgrove 1, which isreferred to in Wessels on Contracts, Volume 2, page 275, it was held thatthe inclusion of a clause providing for the payment of a certain sum ascompensation in the event of a party failing to carry out his obligationsdoes not entitle that party to determine the contract on payment of thespecified sum.
The principal question for our decision is whether condition 8 givesthe 1st to 7th defendants, who have broken their undertaking to sell,the option to purge their default by the payment of money.
The condition provides that the said defendants “ shall ” sell to theplaintiff the said lands and if they fail to do so, they “ shall ” pay tothe plaintiff Rs. 2,829 50
I am quite unable to see anything in the condition which gives thesaid defendants such a right. I think the right to elect is rather with theplaintiff. It seems to me that the legal intention and effect of thecondition is to give the plaintiff the right to recover the amount paidby him and a further sum of Rs. 1,000 as damages if, for instance, the1st to 7th defendants were unable to make a complete title to all theshares they agreed to sell.
A condition s'milar to condition 8 was considered in the case of Appu-hamy v. de Silva (supra). It provided that if the defendant was unwillingor neglected to transfer the property on demand and tender of the agreedsum within the stipulated period he should pay to the plaintiff a sum ofRs. 450 as a penalty. In the course of his judgment liaseelles C. J. said :—
“ What is this but an ordinary penal clause to enforce the principalobligation ? It cannot be inferred from the word ‘ unwilling ’that the defendant had any option in the matter ; for the phraseis be ‘ unwilling or neglect to transfer ”
Counsel for the respondent relied very strongly on the judgment ofthis Court in Paiva v Marikar 2. I have considered that judgment verycarefully, and, with great respect, I would wish to say that it should belimited to the special facts of that case.
For the reasons I have given I am of opinion that condition 8 does notgive the 1st to 7th defendants a right of election whether they wouldperform their contract or only pay damages for the breach of it.
1 (1923) 31 Commonwealth L. R. 524.2 (1936) 39 N. L. R. 255.
Mohoii.ha.my v. A.lninona
317
There remains the question whether specific performance could beenforced against the 8th defendant. Section 93 of the Trusts Ordinance(Cap. 72) reads :—
“ Where a person acquires property with notice that anotherperson has entered into an existing contract affecting that property,of which specific performance could be enforced, the former musthold the property for the benefit of the latter to the extent necessaryto give effect to the contract:Provided that in the case of a contract
affecting immovable property, such contract shall have been dulyregistered before such acquisition. ”
This shows that if a person agrees to sell a land, and afterwards refusesto perform his contract and then sells the land to a purchaser who hasnotice of the agreement, the latter will be compelled to perform thecontract of his vendor. In Silva v Salo Nona 1, it was held that registra-tion of an agreement to sell land is of itself notice, within the meaningof the Trusts Ordinance, to a person who acquires the land subsequentto such agreement.
The learned District Judge took the view that PI is not an existingcontract. That finding cannot, in my opinion, be supported in the absenceof evidence that the plaintiff waived his right to enforce specific per-formance of the contract.
In all the circumstances of the case, therefore, it seems to me thatthere must be judgment for the plaintiff. I would accordingly set asidethe judgment appealed against and direct that judgment be entered for theplaintiff as prayed for in his plaint. The plaintiff will also be entitled tothe costs of the appeal.
Cakekeeatne J.—I agree.
Appeal allowed.