103-NLR-NLR-V-47-FERNANDO-Appellant-and-THAMEL-et-al-Respondents.pdf
HOWARD C.J.—Fernando v. Thamel.
297
1948Present: Howard CJT. and do Silva J.FERNANDO, Appellant, and, THAMEL et al., Respondents.
213—D. C. Chilaw, 12,024.
Trust—Sale of land by deed—Transferor's informal writing on same day^promising to reconvey—Circumstances indicating trust and establishingtransferee's fraud—Admissibility of informal writing in proof of trust—Evidence Ordinance, s. 92, proviso (3)—Trusts.r Ordinance (Cap. 72),ss. 83, 96.
By notarial deed the plaintiffs conveyed a land to the defendant.On the same day the defendant gave the plaintiffs an informal documentby which he undertook to give a retransfer of the land within a periodof three years on payment of a certain sum.
There were circumstances tending to show that the transfer of the landwas to be in trust and establishing fraud on the part of the defendant.It was proved that no money was paid by the defendant on the day oftransfer, that he merely undertook to free the property from a mortgagewhich it was subject to, that the plaintiffs were reluctant to grant thetransfer and only did so on an agreement to retransfer and that therewas gross disparity between the price and the value of the property.
Held, that the informal document was admissible to prove that thedefendant held the property in trust for the plaintiffs.
Held, further, that the informal document was not admissible underproviso (3) to section 92 of the Evidence Ordinance.
A
PPEAL from a judgment of the District Judge of Chilaw. Thefacts appear from the headnote.
H. V. Perera, K.C. (with him L. A. Majapakse, K.C., and S. R. Wijaya-tilake), for the defendant, appellant.
N. Nadarajah, K.C. (with him H. W. Thambiah), for the plaintiffs,respondents.
Cur. adv. will.
June 21, 1946. Howard C.J.—
This is an appeal by the defendant from a judgment of the DistrictJudge of Chilaw entering judgment for the plaintiffs as claimed anddeclaring that the defendant holds the land in dispute in trust for theplaintiffs.
By deed No. 4447 of September 22, 1941 (P2) the plaintiffs, who arehusband and wife, transferred to the defendant for a sum of Rs. 650 theland, the subject of this action. This deed on the face of it is an outand out transfer. The plaintiffs, however, claimed that the defendantheld the property in trust for the plaintiffs by reason of the circumstancesin which P2 was made. The plaintiffs at the time were indebted toope James Fernando in a sum of Rs. 650 on a mortgage bond. Beingunable to pay this amount they approached the defendant for a loan.The defendant agreed to pay off the mortgage and it was in these
14—H 16792 <8/68)
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HOWARD C.J.—Fernando v. Thamel.
circumstances that P2 which the plaintiffs now seek to set aside wasexecuted. On the same day that P2 was executed the defendant gavethe plaintiffs the document P3. This is an informal document by whichthe defendant undertook to give a retransfer of the land in questionwithin a period of 3 years if the plaintiffs paid him Rs. 671 within thesaid period and asked him to execute a deed of transfer at their expense.Before filing their action the plaintiffs offered Rs. 671, but the defendantasked for more money as the land had gone up in price:On the defendant
refusing to retransfer the property the plaintiffs instituted this actionasking for a declaration that the defendant held the land in trust for theplaintiffs and deposited the sum of Rs. 671 in Court. The District Judgeheld that P3 being an informal document subsequently made cannotbe used to vary P2 which is an outright transfer. He, however, admittedP3 to prove that the defendant held the property in trust for theplaintiffs. The only question that arises for consideration is whetherthe District Judge was right in so admitting P3. It is contended byMr. Nadarajah on behalf of the plaintiffs that P3 was admissible underproviso (3) to section 92 of the Evidence Ordinance (Cap. 11) as beinga separate oral agreement constituting a condition precedent to thetransfer of the property.
For proof that the agreement to retransfer constituted a conditionprecedent Mr. Nadarajah emphasised the evidence of the secondplaintiff. The latter stated that the defendant came to know that JamesFernando had demanded the money due on the mortgage. He offeredto pay off James Fernando’s mortgage and take the property on mortgagehimself. The second plaintiff says she told the defendant she wouldthink it over but would not sell the property. Eventually, accordingto the second plaintiff the defendant said he would give an undertakingto retransfer the land. It was after these preliminaries that the partieswent to the Notary’s office. The defendant had not brought the money,but agreed to settle James Fernando’s debt. The documents P2 andP3 were then made. The second plaintiff states that if the defendanthad not agreed to retransfer, she would not have given him a transfer.I do not think that P3 and the oral agreement referred to by the secondplaintiff constitute a “ condition precedent ” to the granting of P2 withinthe meaning of those words in proviso (3) to section 92 of the EvidenceOrdinance. These words mean that a written agreement shall not beof any force or validity until some condition precedent has been performedor that the 'written agreement was conditional on some event which hasnever occurred. No such condition has been proved in this case. Henceoral evidence or evidence supplied by a non-notarial document was notadmissible under this proviso. In this connection I would refer to the9th edition of Woodroffe’s Law of Evidence, pp. 666-668. Mr. Nadarajahalso maintains that there was an express trust. And alternatively thatthere was a constructive trust under section 83 of the Trusts Ordinance(Cap. 72) inasmuch as it cannot reasonably be inferred from the attendantcircumstances that the plaintiffs intended to dispose of the beneficialinterest. It is also argued that there was a constructive trust undersection 96 of the Trusts Ordinance (Cap. 72) as the defendant has notthe whole beneficial interest.
HOWARD C. J.—Fernando v. Thamel-
290
Our attention has been invited to a number of authorities.Mr. NacLarajah. in particular has relied on the case of Nanayakkara v.Andris 1. Bertram C.J. after referring to a dictum of !Lord Redesdalein Lindsay v. Lynch 2 in regard to the equitable doctrine that “ Courtsof Equity will not permit the Statute of Frauds to be made an instrumentof fraud stated that the application of the doctrine is confined to twoclasses of cases of which the first is :
“ Cases where the defendant has obtained possession of the plaintiffs*property, subject to a trust or condition, and claims to hold it freefrom such trust or condition. ”
This equitable doctrine was comprehensively explained in the judgmentof Stirling J. in the case of In re Duke of Marlborough 3. The headnoteof this case is as follows :—
“ By an indenture dated in 1890 the Duchess of M., in considerationof natural love and affection, assigned to her husband the Duke aleasehold house belonging to her. The deed was in form an absoluteassignment. The Duke subsequently mortgaged the house for thepurpose of raising money to pay his debts. The Duchess joined withthe Duke in covenanting to pay the mortgage debt, but the equityof redemption was reserved to the Duke alone. Upon the death ofthe -Duke in 1892, the Duchess claimed to be entitled to the housesubject to the mortgage. There was evidence that she had assignedthe house to the Duke solely to enable bim to mortgage it in his own.name, and that it was part of the arrangement between them thathe should reassign to her, which, if he had lived, he would have done :—
Held, that the case fell within the authorities which forbid theStatute cf Frauds to be used to cover what would amountto a fraud, and consequently that the statute could not besuccessfully pleaded in opposition to the claim of the Duchess.’*
This equitable doctrine has also been recognised by the Ceylon Courtsin the case of TheevanapiUai v. SinnapiUai 4. At pages 317–318 Ennis
C.J. stated as follows :—
“ It was contended on appeal that the plaintiff-respondents shouldnot have been allowed to lead evidence in proof of the trust in theCourt below. This was the substance of the contention. It was alsourged that prior to the Trusts Ordinance, No. 9 of 1917, there was nocase of a trust on all fours with the present case. It is, however,unnecessary to consider whether there were any previous cases,because this matter has now to be dealt with on the basis of the TrustsOrdinance, 1917, and on the basis of the Evidence Ordinance. Therespondents urge, and I think rightly, that this case is not a case ofa constructive trust within the meaning of Chapter IX. of the TrustsOrdinance, and if that be so, it can only be an express trust. But
1 {1921) 23 N. L. R. 193 at p. 197.
* (1804) 2 Sch. Lefr. 4.
(1894) 2 Ch. 133.
(1921) 22 N. L. R. 316.
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it was urged for the appellant that such would not be valid unless inwriting as required by section 5 of the Trusts Ordinance. Thiscontention was met by Mr. Pereira, for the respondents, by pointingout that section 118 of the Trusts Ordinance allowed of the applicationof English Law where there was no specifio provision in the Ordinance,and he pointed out that by the English law of secret trust that is anexpress trust which has not been clothed in the legal formalitiesrequired by law a failure to perform the trust is itself an act of fraud,and Mr. Pereira urged that the proviso at the end of section 5 coveredthe present case in consequence. In my opinion this contention isright.”
It is to be observed that with regard to the facts in this case it was notevidence of fraud preceding the agreement that was sought to be proved.It was the subsequent conduct of the defendant in failing to convey theproperty that constituted fraud. Mr. Perera has cited various cases insupport of this appeal. In Sanmugampillai v. Anjappa Kone1 Soertsz J.at p. 467 stated that it was not possible for the appellants to succeedsince there is no evidence to establish their case of a trust. But in thiscase there is the evidence of the second plaintiff with regard to thecircumstances in which P2 was given. In CartheLia Apjouhamy v. SaiyaNona* it was held that a non-notarial document containing an agreementto retransfer and signed by the defendant the same day as the deed oftransfer was of no force or avail at law as it was not contained in a notarialdocument. Further that there were no circumstances that could bringthe case within the sections of the Trusts Ordinance relating toconstructive trusts. I am of opinion that this case is distinguishable.In the present case there are circumstances tending to show that thetransfer was to be in trust. The evidence of the 2nd plaintiff that nomoney was paid by the defendant on the day of transfer, that he merelyundertook to free the property from the mortgage, that she was reluctantto grant the transfer and only did so on an agreement to retransfer arecircumstances indicative of a trust. Moreover there is a gross disparityin the price under P2, namely, Its. 650 and the value of the property atthe time of the transfer which is put by the second plaintiff at Rs. 1,750or Rs. 2,000. Mr. Perera also relied on the judgment of Mohamadu v.Paihumah 3. In that case, however, fraud was not established and hencethe equitable doctrine to which I have referred was not applicable.Fraud was not even alleged in the plaint. In the present case the issueof fraud has been determined in favour of the plaintiffs. Nor can thatdetermination be questioned.' In this connection one has to bear in mindnot only the evidence of the second plaintiff with regard to the real natureof the transaction and the circumstances in which P2 was granted butalso the evidence of the defendant himself. The latter admits theagreement to retransfer the property and also that he had no money atthe time of the transfer. He also says that when he gave P3 he had nointention of retransferring the land, but would do so now if he was paid 1
1 {1944) 45 N. L. B. 465.* {1945) 46 AT. L. B. 313.
(1930) 11 C. L. Bee. 48.
KEUITEMAN J.—Chandrawathie v. Peer is Appnhamy.
301
Ub. 2,000, and his expenses. It is difficult to conceive a clearer case offraud or one in which Equity would grant relief to prevent the defendantfrom taking advantage of the statute of Frauds to keep the plaintiffs'property.
For the reasons I have given the appeal is dismissed with costs.de Silva J.—I agree.
Appeal dismissed.