Deutrom v. Deutrom
Present: Akbar J. and Koch A.J.
DEUTROM v. DEUTROM et. al.
63—D. C. Colombo, 54,544.
Paulian action—Maintenance order in favour of wife—Distress warrant in
execution against the husband—Fraudulent transfer of mortgage bondby the husband to avoid payment—Paulian action by wife—No causeof action.
Where the plaintiff instituted a Paulian action to set aside the assign-ment of two mortgage bonds by the first defendant in favour of thesecond defendant in order to levy execution against them under a distresswarrant issued against the first defendant (plaintiffs husband) underthe Maintenance Ordinance,—
Held, that the plaintiff had no cause of action as the assets representedby the mortgage bonds could .not have been levied in execution of theorder for maintenance in her favour.
HIS was an action instituted by the plaintiff, wife of the first
defendant, to have a deed of assignment of two mortgage bondsby the first defendant in favour of the second defendant set aside asbeing void in fraud of creditors.
Plaintiff instituted maintenance proceedings against the first defendantand obtained an order and on March 7, 1933, notice was served on thefirst defendant to show cause why a distress warrant should not beissued against him for the recovery of arrears of maintenance. OnMarch 11, 1933, the first defendant assigned his interests in two mortgagebonds to the second defendant.
The learned District Judge gave judgment for the plaintiff, holdingthat the deed of assignment was executed in fraud of creditors.
H. V. Perera (with him D. W. Fernando and G. E. Chitty), for seconddefendant, appellant.—The plaintiff in this case is not a creditor in thesense that she would be entitled to bring a Paulian action. She has merelyan order for maintenance in her favour against the first defendant. Aliability for maintenance is not a civil liability (Menikhamy v. Loku Appu1).
AKBAR J.—Deutrom v. Deutrom
She cannot assign the order for maintenance to a third party nor can sheexecute it against the first defendant except as provided by the Mainte-nance Ordinance, No. Iff of 1889. Section 9 empowers a Magistrate in theevent of a breach of an order for maintenance to issue a warrant directingthe amount due to be levied in the manner by law provided for levyingfines by Police Magistrates in the Police Courts. Section 312 (2) of theCriminal Procedure Code provides for the recovery of fines by “ distressand sale ” of any movable property of the offender. Distress can onlybe levied on property title to which can pass by delivery. (See definitionof “ Distress ” in Bell’s Legal Dictionary.) The deed sought to beset aside is a deed of assignment of two mortgage bonds. A mortgagebond is a chose in action and cannot therefore be distrained and sold.(See B. Mutoscope Co. v. Homer ) A creditor who is entitled to bring aPaulian action must be one who is prejudiced by the alienation (PunchiMenika v. Dingiri Menikas). Further, he must satisfy the Court that theproperty fraudulently alienated was available to him for executionagainst the debtor (Fernando v. Feihiando'). The plaintiff in this case isnot prejudiced by the assignment of the bonds nor were the bondsavailable to her for execution against the first defendant. Even if theassignment is set aside the plaintiff cannot seize the interest of the firstdefendant on the two bonds. The decree in a Paulian action made afraudulent deed void only so far as it was necessary to make the propertyavailable for execution (Banda v. Pereras).
E. Garvin (with him S. Alles), for plaintiff, respondent.—Theplaintiff is prejudiced by the assignment of the mortgage bonds. Amortgage bond is a movable which can be distrained and sold. Thearrears of maintenance amounts to a large sum of money. It may bepossible for the plaintiff to obtain a decree of Court for the amount ofarrears and execute the decree against the property of the first defendant.Plaintiff is a creditor who is entitled to maintain a Paulian action.
V. Perera, in reply.—The interest under a mortgage bond cannotbe assigned by mere delivery. A notariaily executed document isnecessary for the assignment of a mortgage bond (Sockalingam Chetiiar v.Wijegoonewardane'). Certain class of choses in action may be assignedby mere delivery (The Noordam7).
Cur. adv. vult.
June 21, 1935. Akbah J.—
This is a Paulian action by the plaintiff, wife of the first defendant,for a declaration that a certain deed of assignment by the first defendantin favour of the second defendant was void as it was in fraud of creditors.It appears that the plaintiff instituted a maintenance action (A. P. C.Colombo, No. 14,413) and obtained an order against the first defendant,her husband, and on March 7, 1933, a notice was served on the firstdefendant to show cause why a distress warrant should not be issuedagainst him for the recovery of Rs. 1,425 being arrears of maintenance.
1 Balasiiigham’s Reports 161.4 4 C. R. 143.
(1901) 1 Ch. D. 671.5 30 N. L. R. 355.
3 C. A. C. 93.0 13 Ceylon Laic Recorder 138.
2 (1920) ;4. C. 9(H.
AKBAR J.—Deutrom v. Deutrom.
The first defendant had lent moneys to plaintiff’s father on two mortgagebonds, viz., No. 92 of December 1, 1935, for Rs. 500 and No. 162 ofMarch 24, 1927, for Rs. 300, and by deed No. 839 of March 11, 1933 (just
days after notice was served on the first defendant in the maintenancecase), first defendant assigned his interests under the two bondsto the second defendant, his aunt, for an alleged consideration'. It is thisdeed of assignment which is the subject-matter of this action. There were
issues framed, the 5th being as follows: —
(5) Can the plaintiff have and maintain this action inasmuch as theclaim set out in the plaint as being due to her by the firstdefendant was a claim for arrears of maintenance due to herin case No. 14,413, A. P. C., Colombo ?
The District Judge gave judgment for plaintiff holding that the deedof assignment was executed in fraud of creditors and also on issue 5that plaintiff could maintain this action. The appeal has been pressedon us by second defendant-appellant’s counsel on the law on issue 5.Unfortunately the learned Judge has not discussed the law arising onissue 5, but as there is the issue and the learned District Judge has holdagainst the appellant on this issue, the appellant is entitled to askfor a decision from this Court on it. It is argued for the appellantthat the plaintiff was not a creditor in the sense that she would beentitled to bring a Faulian action on two grounds— (a) that she was not acreditor, and (b) that even if the deed of assignment is set aside she wouldnot be entitled to seize the interest of the first defendant on the two mort-gage bonds in satisfaction of the sum due to her on the maintenanceorders. It has been held in Menikhamy v. Loku Appu 1 that a liabilityfor maintenance is not a civil liability. All maintenance actions areregulated by the Maintenance Ordinance, No. 19 of 1889, and undersection 3 a Police Magistrate is empowered to make order directing ahusband who, having sufficient means, neglects or refuses to maintainhis wife, to pay a monthly allowance for such maintenance and also topay to such person as the Magistrate may from time to time direct. Undersection 9 if a person against v/hom a maintenance order has beenmade commits a breach of that order the Magistrate is given the powerto issue a warrant directing the amount due to be levied in the mannerby law provided for levying fines imposed by Police Magistrates in thePolice Courts. The Police Magistrate may also sentence such personfor the whole or any part of each month’s allowance remaining unpaidafter the execution of the warrant to simple or rigorous imprisonmentfor a term which may extend to one month. The method of recoveringfines imposed by Police Courts is provided for in section 312' (2) of the.Criminal Procedure Code, 1898, and under that section the levy of theamount is made “ by distress and sale of any movable property belongingto the offender ”. Now the word “ distress ” only conveys the idea of“ goods ” or “ chattels ” which can be seized (see definition of “ distress ”and “ goods ” in Bell’s Legal Dictionary). The form of the distresswarrant given in the old Criminal Procedure Code (Ordinance No. 3 of 1833)also conveys the idea of the movable property being capable of seizure*Further, the word “ sale ” in section 312 can only suggest the sale of such
1 Balasingham’s Reports '16.
KOCH A.J.—Deutrorn. v. Deutrom.
movable property which the Fiscal can seize and sell and pass the title in itto a purchaser by delivery of possession. The two mortgage bonds are notmovable property of this description. There is no provision in section312 for the passing of the rights of the mortgagee on a mortgage bondto a purchaser on the execution of a document by a specified person(see section 60 of the Criminal Procedure Code) or for the issue of anotice on the mortgagor not to make any payments to the mortgageeon the mortgage bond.
A chose in action is not movable property of this description (see
Mutoscope Co. v. Homer’) unless it is a chose in action where title to itcan be passed by delivery of a document (The Noordam No. 2 and otherShips"). So that it will be seen that the plaintiff could not have seizedfirst defendant’s interest in the mortgage bonds under a distress warrantissued under the Maintenance Ordinance. In Fernando v. Fernando3Bertram C.J. held that a Paulian action does not lie unless the plaintiffcan show not only a fraudulent intention “ consilium ” but also actualprejudice “ eventus ” demonstrated by a legal process, that is to say,that the action is only competent to a judgment-creditor who can showthat by reason of the alienation complained of the judgment-debtorhas no assets on which execution can be levied, or that assets on whichit has already been levied are insufficient to satisfy the debt. In thecase before me, the assets represented by the mortgage bonds could nothave been levied by the plaintiff on her maintenance order whether thedeed of assignment was executed or not by the first defendant. Hencethe plaintiff had no cause of action on which to sue in this action.
In Banda v. Pererai it was held that the decree in a Paulian actionmade a fraudulent deed void only so far as it was necessary to make theproperty available for execution. In my opinion, much as I regret itin view of the strong finding of fact by the learned trial Judge, the appealmust be allowed and the plaintiff’s action dismissed with costs in thisCourt and the Court below.
The plaintiff, who alleged that she was a creditor of the first defendant,sued the first defendant and the second defendant for a declarationthat a conveyance No. 831, dated MaTch 11, 1933, executed by the firstdefendant in favour of the second defendant be.declared null and voidon the ground that it was a fraudulent alienation collusively effected indeprivation of the plaintiff’s rights as a creditor.
The facts are briefly these. The plaintiff, who was the wife of thefirst defendant, instituted maintenance proceedings in A. P. C., Colombo,No. 14,413, against her husband and obtained an order, from theMagistrate for the payment of a monthly allowance of Rs. 50 for herselfand her child. The first defendant paid nothing on that order with theresult that the arrears stood at Rs. 1,425 on March 2, 1933. On thatday she filed an affidavit and moved for a distress' warrant against thefirst defendant. Notice was issued and served on him to show cause.The parties appeared in Court on March 17 and after hearing them the
Magistrate ordered a distress warrant to issue.
» (1901) 1 Ch. D. 671.
(1920) 1 A. C. 904.
2 26 N. L. R. 292.* 30 N. L. R. 355.
KOCH AJ.—DevLtrom v. Deutrom.
At this date there were outstanding in the first defendant’s favour,two mortgage bonds No. 92 of December 1, 1925, and No. 162 of March24, 1927, for sums of Rs. 500 and Rs. 300 respectively, with interest.These the first defendant purported to assign to the second defendant(appellant) by deed No. 839 of April 11, 1933, for a consideration ofRs. 850. It is the validity of this deed that is questioned in theseproceedings. It would appear from the maintenance proceedings thatthe two bonds in favour of the first defendant were seized under thedistress warrant that issued and were advertised for sale. Objectionwas taken to the seizure by the first defendant on the ground that theycould not be seized under the distress warrant, and argument was fixedfor June 23, 1933. On that day the plaintiff moved to withdraw thesteps she had taken without prejudice to her rights. This was allowed.She thereafter on August 16,1933, instituted the present action.
The learned District Judge held that the first defendant had actedfradulently and collusively with the second defendant in executing theimpugned assignment and declared the deed in question null and void.
One of the issues (No. 5) framed between the parties was in regard tothe maintainability of this action, as the alleged debt due to the plaintiff(respondent) was in respect merely of arrears of monthly allowancesordered in maintenance proceedings.
The findings of fact of the learned District Judge in favour of therespondent on the 1st, 2nd, and 3rd issues, which were concernedwith the assignment No. 839 being fraudulent and executed in collusionwith the second defendant, were hardly challenged, and I see no reasonto interfere with them.
The remaining issue runs as follows: —
“ Can the plaintiff have and. maintain this action inasmuch as theclaim set out in the plaint as being due to her by the firstdefendant is a claim for arrears of maintenance due to herin case No. 14,413 of the Additional Police Court, Colombo?
This is an issue of law and the learned District Judge has also heldon this issue in favour of the respondent. The correctness of this finding,however, has been seriously challenged by the appellant, and the successof the appeal solely depends on whether the view put before us by theappellant’s counsel is right.
Now the present action is in the nature of a Paulian action. Thisaction was permitted to a person in certain circumstances by the Roman-Dutch law. The action could only be brought by a creditor, and it wasnecessary that he should be in a position to prove two conditions ; firstly,that there was fraudulent intent on the part of the debtor to defraud hiscreditors—not necessarily any particular creditor—secondly, that thecreditors have been thereby prevented from – recovering their debts.(Voet 42, 8, 14.)
KOCH A.J.—Deutrom. v. Deutrom.
The law stated above was followed by Berwick D. J. in Brodie’s case and approved by Bonser C.J. in Baba Etana v. Daru Terunanse
The creditor must be one to whose prejudice the alienation has beeneffected. (Punchi Menika v. Dingiri Menika=.)»
The creditor need not necessarily be a judgment-creditor, but he mustbe such a creditor as can establish to the satisfaction of the Court thathe was a creditor at the time of the execution of the fraudulent deed.
(Baronchi Appu v. Siyadoris Appu4.) In doing so he must show thatthere was a debt actually due to him. It is insufficient if he merely helda claim for unliquidated damages, whether founded on contract or tort.(Fernando v. Fernando".) Further, he must satisfy the Court that theproperty fraudulently alienated was available to him for executionagainst the debtor. (Fernando v. Fernando ”.)
In the case before us the respondent (plaintiff) is in the position of onein whose favour an order has been made by a Magistrate in maintenanceproceedings against her husband, the first defendant, for the paymentof a monthly allowance which had at the date of the fraudulentassignment run into arrears. It is argued by the appellant’s counselthat in these circumstances she is not a creditor of the type contemplatedunder the Roman-Dutch law.
This is a question which judging from the authorities I have alreadyreferred to, is not easy to determine, and although I do not dissent fromthe view taken by my brother Akbar J., I do hot decide, and will confinemy judgment to the second point raised by Mr. Perera which in myopinion should succeed. He argues that the plaintiff’s action must failif she is herself unable to proceed to execution to recover what is dueto her in the ordinary way that a creditor proper could do, and that isby executing the decree when obtained by seizure and sale accordingto the procedure laid down in the Civil Procedure Code. He furtherargues that it does not matter that other creditors who are affected bythe fraudulent alienation are entitled to proceed in this way. It isthe plaintiff’s own remedy that concerns us, and if the plaintiff has notthe remedy by seizure and sale under the Civil Procedure Code in theordinary Vvay, the action must fail.
T agree that it is the plaintiff’s own remedy that has to be considered.The ruling in Punchi Banda v. Perera' helps me to this conclusion.
Now the procedure laid down for the enforcement of such an orderas the plaintiff in this case has obtained is to be found in section 9 of theMaintenance Ordinance, No. 19 of 1889. The section provides that forevery breach of his order the Magistrate may issue a warrant directingthat the amount due be levied in the manner provided by law for levyingfines imposed by Magistrates in Police Courts. He may also sentencethe party neglecting to comply with his order made under section 3 forthe whole or any part of the month’s allowance to simple or rigorousimprisonment for a term which may extend to one month.
1 (1887) Ramnnnliian 80.“1C. .1. C. 05.
1 2 Br. 355.- 2ti N. L. R. 2H;>.
C. A. C. 'M.‘1C. If. !(. 143.
* 30 N. L. R. 355.
KOCH A.J.—Deutrom v. Deutrom.
The manner in which fines imposed by Magistrates in Police Courtsmay be recovered is to be found in section 312 (2) of the CriminalProcedure Code, i.e., by issuing a warrant for the levy of the amountof the fine by distress and sale of any movable property belonging to theoffender. It will be seen that the words used are “ by distress and sale ”and not by seizure and sale as is found in the Civil Procedure Code.
It is argued that “ distress ” can only be levied on property that iscorporeal in its nature, on something that can pass by delivery.
In the Encyclopedia of the Laws of England, vol. IV., p. 626,“ distress ” is explained as “ a remedy for the redress of an injury or thesatisfaction of a demand which consists in the taking without legal processof a personal chattel from the possession of the wrong-doer or defaulterinto the hands of the party grieved to be held as a pledge for the satisfac-tion required ”.
It has been held in England that only corporeal property can be madeliable, but rights of an incorporeal nature (e.g., patent rights) cannot beaffected by distress. (British Mutoscope Co. v. Homer )
In Bell’s Legal Dictionary (South African), 2nd ed., distress is referredto as an English term signifying the taking of the goods of another tosatisfy some claim.
I think there is ample authority that “ distress ” can only be leviedon goods.
Can a debt due on a mortgage bond be brought within the word“ goods ”? Such a debt is a chose in action and incorporeal in its nature.The right to recover such a debt cannot pass by the mere delivery of thebond which records it. It cannot pass even by a mere endorsementsuch as a negotiable instrument or a coupon or a bearer bond known incommerce.
In the case of " The Noordam ” on appeal from the Prize Court,England, to the House of Lords=, the point came up for decision whetherbearer bonds and coupons shipped by letter mail in Dutch steamshipsfor carriage from Dutch ports to New York, which were seized in thecourse of the voyage, could be detained'under the Reprisal Order inCouncil of March 11, 1915. These securities had been bought inGermany. The question turned on whether they were “ goods ”within the meaning of the Order. The judgment of their Lordshipswas delivered by Lord Sumner, who was of opinion that they were recordsof proprietary rights that were transferable by mercantile usage applicableto them by delivery, and that they required no separate assignment norexecution of any instrument of transfer. In addition, their Lordships,being of opinion that this Order was made for the purpose of furtherrestricting the commerce of Germany and in retaliation of the sinkingof ships by that country with all they contained, felt that the wordgoods ” in the Order ought to include goods that having been enemyproperty may become neutral property at a definable date, and that the1 (1901) 1 Ch. 671.- (1920) Appeal cases 904
AKBAR J.—Saravanamuttu v. Sittampalam.
language in the Order should be interpreted with reference to thegeneral scope of the Order, and that if securities such as these are notcovered by the word'*1 goods ”, the Order as a means of carrying out itsdeclared policy would contain a large and lamentable lacuna. Theywere also of opinion that these documents were not mere symbols of aright or title to be transferred by the operation of other instruments.If lost, they could not be proved and given effect to by secondaryevidence. They themselves were things of price, the subjects of saleand delivery irreplaceable and unalterable. Their Lordships thereforeheld that these documents came within the descriptive word “ goods
Can the same be said of mortgage bonds? They are symbols of rightthat must be transferred by the operation of other instruments. ThisCourt has so held in the case of Sockalingam Chettiar v. Wijegoonewardena 1They are not irreplaceable, and if lost could be proved and given effectto by secondary evidence. I do not think that any doubt can be enter-tained that a mortgage bond, which is a mere symbol of a right, a chosein action and of an incorporeal nature, and which cannot pass by a mereformal endorsement or delivery, does not come within the word “ goods ”which only can be’ distrained.
For these reasons I hold that the respondent has failed to satisfy theCourt that the property fraudulently alienated by the first defendantto the appellant is available to her for execution against her debtor.
The judgment of the District Court is set aside and the plaintiff’s actionis dismissed with costs. The appellant is entitled to the costs of thisappeal.