032-NLR-NLR-V-23-FERDINANDO-v.-FERDINANDOO-et-al.pdf
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Present; Bertram C. J. and De Sampayo J.FBRDINANDO v. FERDINANDO et at.
85-86—D. 0. Colombo, 920.
Land Registration Ordinance, No. 14 of 1891» a 17—Gift by father toeon—Subsequent sale to son-in-law—Prior registration—Fraud—Collusion.
The first delend&nt transferred to his son in 19089 by a deedwhich was never registered, a tract o£ land, subject to a life interestin his favour. The son, nevertheless, possessed and improved theland. He contracted a marriage distasteful to the family, and diedin 1918, leaving a widow and child. The widow (plaintiff) sent aletter of demand to the first defendant for the title deed. Threedays thereafter, by a deed which was registered, the first defendanttransferred the land to his son-in-law (second defendant), whowas aware of the earlier deed; the consideration was stated tobe Rs* 5,000, which included a debt of Rs. 2,750 which was alreadydue from the first defendant ’ to second defendant. The seconddefendant soon after transferred the property to the third defendant*.
Hetdt that in the circumstances of this case (see judgment)there was collusion between the first and second defendants, andthat, consequently, the' second defendant did not get a superiortitle by registration.
The mere existence in the mind of a man, who has obtained aconveyance for valuable consideration, of knowledge of the exist-ence of a prior and unregistered conveyance, is not sufficient todeprive him of the right tc gain priority by registration. Section 17makes an express exception in the case of (a) fraud and (5) collusion.This implies that a man may be guilty of collusion without beingguilty of fraud, and vice versd. Fraud may involve a conspiracy ofmind with mind, but it does not necessarily involve it. There maybe something in the position or the conduct of the subsequentpurchaser whioh may make his contract fraudulent, as, for example,a fiduciary relationship to the other party, the relationship ofsolicitor and client, the part which he played in the' previoustransaction, or implied representations in connection with the twotransactions. Further, though fraud may involve a .conspiring ofmind with mind, such a conspiring is not necessarily fraud. Itmay involve no oonscious moral dishonesty. Even where it doesinvolve such a conscious moral dishonesty, it may, nevertheless,be questioned whether this amounts to fraud if the object in viewdoes not involve any deprivation of a man's legal rights.
Collusion means, as the derivation of the word implies, " thejoining together of two parties in a common trick.*1 It carrieswith it the implication of something indirect and underhand.It is permissible for a person who knows of the existence of anunregistered conveyance to obtain another from the same source
1981.
1621.
Ferdinando
?*
Ferdinando
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and to gain priority by registration. But this is where the partiesare supposed to be acting independently in their own interests.
It is otherwise where, though to an exterior view they are simplyindependent parties to a transaction as vendor and purchaser,they are, in fact, acting together for a common and indirect end.There, even though the result they aim at is permitted by the law,their contract amounts to collusion.
^jj^HE facts are set out in the judgment.
Baioa, K.O. (with him Canakaratne), for third defendant,appellant.
Pereira, E.C. (with him Coor®$% ivr second defendant, appellant.
A. St. V. JayawardkK.C. (with him Croos-Dabrere), for
respondent.
. Our. adv. vuU.
December 21,1921. Beeteam C.J.—
This appeal raises an important question under section 17 ofthe Land Registration Ordinance, No. 14 of 1891, namely, the mean-ing of the word (< collusion ” as raised in that section. The actionis brought by Gertrude Taylor Ferdinando, the administratrixof the estate of her late husband, Don Peter Richard Ferdinando,against his father, the first defendant, Rev. Don Peter GerardFerdinando, alleging that he, in collusion with the second defendant,conveyed to him (the second defendant) a property which had beenalready transferred to her husband, and that there was fraud andcollusion on the pari' of the first and second defendants in obtainingthe deed granted to her husband. Similar charges are made againstthe third defendant with regard to a subsequent transfer. The factsare as follows:—
On July 27, 1908, the Rev. Don Peter Gerard Ferdinando, whois a retired Wesleyan minister advanced in years, transferred tohis two sons, Don Peter Richard Ferdinando and Don CharlesGerard Ferdinando, a tract of land in the Salpiti korale, comprisingsome 68 acres of land, subject to a life interest in his wife BerthinaFerdinando. The younger brother, Charles Ferdinando, went toEngland. It is stated, and not denied, though no deed is producedin evidence, that ac some unstated point of time Charles Ferdinandore-conveyed the half share of the property so granted to him to hisfather. Richard Ferdinando was put in possession of the propertyfrom the date of the execution of the deed, and is said to have spent-considerable sums of money in planting and improving it. He wasallowed to draw the income derived from the estate, notwith-standing the fact that {us father and mother retained a life interest.In 1914 he married the present plaintifE, a lady belonging to anothercommunity. The marriage .was distasteful to the family. OnOctober 4, 1918, he died, leaving him surviving his widow and an
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infant daughter. The question of the right of this Tridoer and daugh-ter to succeed, to his interest in the estate in question seems at onceto have presented itself to both parties. On October 28 (betweenthree and four weeks after her husband’s death) the plaintiff hadwritten to her father-in-law a formal proctor’s letter calling uponhim to send to the proctor “ all the title deeds of the propertiesthat belonged to his late son, Mr. IK P* R. Ferdinando,” and inparticular the title deeds of the estate in question. The firstdefendant made no reply to this very formal communication, buttook immediate steps of another description. The deed cf July 22,1908, had never been registered. Three days after the receipt ofthe proctor’s letter the first defendant executed a transfer of thesame property to the second defendant, who was his son-in-law.The consideration was stated to be Rs. 5,000. Of this consideration,Rs. 2,750 had been previously advanced, and the balance waspaid shortly afterwards in the form of two cheques to the valueof Rs. 1,655. ThiB deed is said to have been immediately registered,though neither the deed nor the date of its registration has beengiven in evidence. About three months later, on February 9,1919,the second defendant,who had never taken formal possession of theproperty, transferred it to the third defendant. It appears that hehad put the matter into the hands of a third party in Moratuwa asa broker, asking him to find a purchaser. The second defendanthimself carried on business at Haputale. It happened that theperson acting as broker in Moratuwa found as a purchaser thethird defendant, who is himself living up-country, and had previouslyhad some years’ acquaintance with the second defendant. Thedeed for this second transfer was drawn by a Moratuwa notary,but attested by a notary practising at Bandarawela. The seconddefendant never saw the third defendant. Payment was madethrough an agent, who was retained by the second defendant atHaputale for the purpose of his business there.
In order to decide the question at issue, it is necessary to go intothe facts a little more closely. There is very little doubt that thefirst defendant regarded the deed of gift, which he executed in favourof his two sous, as being in the nature of a testamentary instrument.Its real object was to dispose of the property after his death, and hemay have looked uponit morally, if not legally, in that light. Hesays that it was understood that his son Richard would give himfinancial assistance in connection with the marriage of his daughters,but that this was not done. Instead of Richard, the first defendanthad to have recourse to his sou-in-law, the second defendant. Evenbefore theexecutionoftheconveyahee on July8,1908, second defend-ant had lent him Rs. 1,000, and had taken a mortgage of this veryland to secure it. On December 29,1915,hehad borrowed from hisson-in-law a further sum of Rs. 1,750 to assist him in connectionwith the marriage of one of his daughters. There can be little doubt
1921*
Bsbxbam
OJ.
Ferdinando
e.
Ferdinando
15-
( 146 )
1921.
CUT.
Perdinando
Perdinando
in my mind that the first defendant viewed with distaste the prospectof this estate, which he had intended to pass to his sons on his owndeath, passing instead to his son’s widow, with whom he was not onfriendly terms, and that realizing that he was already indebted tohis son-in-law to the extent of Rs. 2,760, and knowing that thedeed of July 22, 1908, had not been registered, concerted with hisson-in-law the scheme of transferring the estate to the latter, takingfor this purpose further consideration in the form of the chequesabove referred to. 1 can fed no doubt that the second defendantfully understood this soheme. He says that he didnot know of theexistence of the previous deed. I think it is impossible to acceptthis denial. He was familiar with the estate, and must have knownthat it was in the possession of his brother-in-law Richard. He musthave been acquainted withthegeneralfamily circumstances, andtherecan be little doubt that he shared the feelings of his father-in-law.
The question we have to consider, in the first place, isVhetherthis transaction constituted “ fraud or collusion in obtaining suchlast-mentioned deed ….- or in securing such prior
registration ” within the meaning of section 17 of the Land Registra-tion Ordinance. If it did, this of itself defeats priority of personsclaiming under the second deed, and there is no need to consider thefurther question, whether the transfer from the second defendantto the third defendant was collusive or without consideration.
The learned District Judge .has avoided the decision of thisquestion by finding that the transfer to the second defendant wasmade without consideration. He points out that the mortgagedebt of Rs. 1,000 was prescribed, and holds that the payment of theprescribed debt is no consideration at all. He believes that theother debt of Rs. 1,760 was not seriously treated as a debt by theparties, and would never have been paid but for this transaction.He says nothing about the cheques. This is not a satisfactoryfinding. It is clear, at any rate, that there was a legally enforceabledebt for Rs. 1,760, and whether or not payment of a prescribeddebt is “ valuable consideration ” within the meaning of section17, it seems to me clear that the payment of the debt of Rs. 1,760was sufficient valuable consideration for the purpose. We mustnext ask ourselves, therefore,whether the transaction was a fraudu-lent transaction. I am not satisfied that it was. 1 do not thinkthat there was any element of conscious dishonesty about theproceeding. I think that the first defendant may very well havesupposed that he had a moral right to do what he was doing. Hemay have thought that his son’s widow had no moral claim to theproperty; that he would never have conveyed it to his son if hehad not thought that his son would survive him, and he may havefelt himself justified in giving priority to the claims of his son-in-law. Any reasoning he may have so employed may. have beensophistical, but I do not think that it would be correct to describe
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his action as fraudulent.' But the further question arises: Wasthere “collusion” in obtaining the deed or securing its registration ?That is the substantial question to be decided on this appeal.
For this purpose it is neoessary to examine the authorities. Itis settled beyond question that for a man to take a conveyancefrom a person whom he knows already to have granted a priordeed and to register its conveyance in advance of that deed is not“fraud” within the meaning of the section. (See D. 0. Kandy,67,295; Bamanaihan; 1877, 198; Kirihamy v. Kirtbanda;1and numerous other cases discussed in Mr. Jayawardene’s book onThe Registration of Deeds in Ceylon.) But this is as for as the casesgo* That is to say, they simply decide that the mere existence inthe mind of a man, who has obtained a conveyance, for valuableconsideration of knowledge of the existence of a prior and unregis-tered conveyance, is not sufficient to deprive him of the right togain priority by registration. The section, however, makes anexpress exception in the case of (a) fraud and (5) collusion. Thisimplies that a man may be guilty of collusion without being guiltyof fraud, and vice verst. There are several cases in which thisreference to fraud has been exemplified. Fraud may involve aconspiracy of mind with mind, but it does not necessarily involveit. There may be something in the position or the conduct of thesubsequent purchaser whioh may make his contract fraudulent,as, for example, a fiduciary relationship to the other party (Lamsv. Kirihamy*), the relationship of solicitor and client (Battison v.Hobson8), the part which he played in the previous transactionIKirihomy v. Kiribanda (supra)), or implied representations*inconnection with the two transactions. (Dasenaike v. Abeysekera 4).Further, though fraud may, as I have observed, involve a conspiringof mind with mind, sucha conspiring is not necessarily fraud. It mayinvolve no conscious moral dishonesty. Even where it does involvesuch a conscious moral dishonesty, it may, nevertheless, be ques-tioned whether it amounts to fraud if the object in view does notinvolve any deprivation of a man’s legal rights. It was, I think, forthis reason that the word “ collusion ” was used as an alternative tothe word “fraud.” “Collusion” means, as the derivation of theword implies, “the joining together of two parties in a commontrick.” It carries with it the implication of something indirectand underhand. One can well understand that the law shouldsay: “It is permissible, even if you know of the existence of anunregistered conveyance, to obtain another from the same sourceand to register your own deed thus obtained and so gain priority.All parties in such a ease stand upon their legal rights. The priorgrantee knows the law as well as the subsequent grantee. Theperson who registers first is entitled to a reward for his diligence.”
1921.
BBRfcBAM
GJ;
Ferdinando
v.
Ferdinando
H1911)14N.L.R. 284.* (1894) 3 Bid. N. 0.88.
*(189$) 2 Oh. 40$.4 (1911)7 Tam. 6.
1921*
Bwbtram
CJ.
Ferdinando
v.
Ferdinando
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But this is where all parties are supposed to be acting independentlyin their own interests, it is otherwise where, though to an exteriorview they are simply independent parties to a transaction as vendorand purchaser, they are, in fact, acting together for a commonand indirect end. There, even though the result they aim at isno doubt permitted by the law, their contract amounts to collusion.This has been held by Wood Benton G. J. in the case of Marika v.Fernando.1 There the District Judge said: “ My belief is that he
(plaintiff) and the vendorconspired together to see
what could be done to make a little more out of rights which thevendor had already alienated.” Wood Benton C.J. expressed theopinion that that amounted to collusion in obtaining the deed itself.
There is another case in which the facts show collusion, butwhich Layard C.J., who heard the case on appeal, decided on theground that “ mere knowledge of the person obtaining a subsequentlease or transfer that there was a prior deed in existence does notamount to fraud or collusion” (Brown v. Vannissatamby *). Butin that case the facts found by the learned District Judge were some-thing more than that. What the District Judge said was, referringto the person concerned in that case, “ They had laid their headstogether to oust the plaintiff.” It is this “ laying of heads together ”for an indirect purpose, particularly when it is accompanied bypretence, that it is the essence of collusion, and it may be notedthat in the leading case on the subject, D. G. Kandy, 67,295(supra), it was observed with reference to the second inortgage:“ All that is proved respecting the second mortgagee is that knowingof the first mortgage he took steps to secure himself. He is notsaid to have done anything underhand or to have made any pre-tence.” Where, in these circumstances, anything underhand oranything involving a pretence is done in concert, there is, in myopinion, collusion^ And in my opinion both these elements figurein the present case.*
This view of the case makes it unnecessary for us to discusswhether or not the transfer from the second defendant to the thirddefendant was a collusive transaction. Had it been necessary todo so, one point of comment would have been this. Three materialwitnesses were: The third defendant himself, who was in Court;the person who acted as broker; and the notary who drew the deed,both of whom lived at Moratuwa. Not one of these witnesses wascalled. It looks as though those who advised the third defendantdeliberately, and, no doubt with good reason, put before the Courtthe minimum evidence possible for the purpose of dischargingthe onus which rested on them. It is, therefore, not surprisingthat the learned Judge regarded this part of the case with suspicion.
There is no appeal on the question of the improvements. Therecan be little doubt that plaintiff's intestate spent much money
* See, however, 75 D. O. Jaffna, 13.170, reported later in this volume.
1 (1914) 17 N. L. R. 481.* (1905) 4 Turn. 147.
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in improving the estate, and that the purchaser of the firstdefendant’s life interest (for that is what the third defendantnow becomes) will get the benefit of those improvements. It isunfortunately the case, however, that on the previous decisionsof this Court the plaintiff’s intestate, who merely occupied by thepermission of his father and mother, is not a “ bona fide possessor,”and is therefore not entitled to compensation for improvements.No doubt, however, he had already received a certain amount ofcompensation in the revenue, which he drew from the estate up tothe time of his death.
I have already noted two circumstances in connection with theevidence in the case. Among the most important documents, thetwo cheques said to have been paid by second defendant to the firstdefendant in connection with the purchase, and the deed by whichfirst defendant’s younger son is said to have re-conveyed to him hisinterest in the property. All these documents were referred to;none of them was produced. This loose procedure is muoh to beregretted. It would, I think, have been better if the learned Judgehad noted these facts and declined to admit the evidence, excepton production of the documents, or on their admission by the otherside, more particularly in view of the fact that he appears to havedisbelieved the bonafides of the cheques.
There is an oversight in the judgment of the learned Judge andin the consequential decree. He directs judgment to be entered forthe plaintiff “ as prayed in paragraphs (a), (6), and (c) in the prayerof the plaint.” Paragraph (c) is the claim for compensation forimprovements, which the learned Judge rightly disallows. Para-graphs (a) and (6) contain claims in the alternative, whereas thedecree in pursuance of the judgment gives both the remediesasked for. In my opinion the second alternative—paragraph (ib)—is the one in respect of which the plaintiff is entitled to judgment,that is to say, the claim that she be declared entitled to anundivided half share. Her husband, it is true, occupied a definedhalf share, but this was by permission of his father, and he couldnot convert an undivided share into a divided share in thismanner. The decree should be amended accordingly.
In my opinion the appeal should be dismissed, with costs, andI think that first defendant should be equally responsible forplaintiff’s costs with third defendant in the Court below. Thelearned Judge has exempted him from this liability. I think thatsecond defendant was rightly made a party. He was himselfcharged with fraud and collusion, and he was interested in the resultof the action, inasmuch as third defendant, if unsuccessful, wouldhave a remedy against him. But it will be 'sufficient if he payshis own costs here and below.
De Sampayo J.—I agree.
1081.
Bertram
c.j.
Ferdinando
v.
Ferdinando
Appeal dismissed.