084-NLR-NLR-V-28-HALL-v.-PELMADULLA-VALLEY-TEA-AND-RUBBER-CO.,-LTD.,-et-al.pdf
( 422 )
192T.
Present: Fisher C.J. and Garvin J.
HALL PELMADULLA VALLEY TEA AND RUBBERCO., LTD., et al.
326—D. C. Ratnapura, 4<t107.
Contract—A (free men I to transfer land—Registration—Sale to plaintiffs
Notice—Trusts Ordinance, No. 9 of 19171 s. 93.
By a notarial contract-, the added defendant, after reciting thathe had agreed to sell 1,000 acres of land to the defendantcompany, bound himself to give effect to that agreement and todeduce a good and valid title.
In pursuance of the agreement the company was placed inpossession of certain blocks of • land which form the subject-matterof the present action.
The plaintiff, with notice of the said agreement, purchased theland and sought to eject the company therefrom.
Held, that the contract was an existing enforceable contractwithin the meaning of section 93 of the Trusts Ordinance and thatthe plaintiff was bound to hold the property for the benefit ofthe company to the extent necessary to give effect to .the contract-.
The proviso to section 93 of the Trusts Ordinance does notprevent the application of • the section to contracts affectingimmovable property, which are not required by law to be registered.
T
HIS was an action instituted by the plaintiff for declarationof title to certain blocks of land and for ejectment of,the
defendant company. The added defendant had placed thecompany in possession of the .laud in .pursuance of an agreemententered into between him and the company, by which he under-took to sell to the latter 1,000 acres of land in the vicinity ofRilhena estate belonging to the company. In breach of the said .agreement the added defendant transferred the land to theplaintiff. The defendant company contended that the transferto plaintiff was void and asked for & declaration, ordering theadded defendant to execute a conveyance in their favour. Thelearned District Judge gave judgment for the defendant company.
Kcuvcvian (with Ferdinands),for plaintiff, appellant.—The
defendant company cannot rely on section 98 of the TrustsOrdinance because they have not registered the agreement totransfer the 1,000 acres. The document became registerable oncethe lands were ascertained. The company should have had asupplementary deed drawn up, giving the description of the lands,when ascertained, and registered that deed.
( 423 )
The agreement is not one of which specific performance can beenforced as it is Indefinite* There is ho definite corpus describedin it in respect of which the remedy can be granted.
Further, as it provides for payment of damages in the eventof a breach, the Court will not decree specific performance. Thecompany never at any time made a proper tender of the purchaseprice or of a draft conveyance. The company had committeda breach of the agreement and was not entitled to claim specificperformance.
Hayley (with Bartholomeusss and Choksy), for defendant, respond-ent.—The company is entitled to claim the land from the plaintiffunder section 93 of the Trusts Ordinance. The proviso requiringregistration cannot defeat tho company’s claim because the docu-ment was not registerable. The proviso can only apply to a casewhere a document is in fact registerable but has not been registered.It was so held by the Privy Council in White v. Neaylon.l Counselcited In re. Caloott and E Ivins Contract (1898), 2 Ch. 460; 13 Hals-buryt pages 86 (/), 87.
A purchaser, who finds a third party in possession, must makeinquiry as to his rights; otherwise he is bound by the equitiesbetween the party in possession and the vendor. If he does "notdo so, he is deemed to have notice of the rights and equities of theparty in possession. Daniel v. Davidson,2 Hunt v. Luck,* Barnhartvt Greenshields.'1
On the question of specific performance, it is submitted thatthe uncertainty created by the absence of any description of thecompany in the agreement to sell can be overcome by the electionof the party having the right to elect. Fry on Specific Performance,p. 160; Rumble v. Heygate s; Oxford v. Provand6; Howard v.Hopkins.7 Where the agreement is not strictly complied with, andif damages can remedy small non-compliances, and it is conscientiousto decree specific performance, and there has been no gross negli-gence, Courts of Equity will enforce. Storey on Equity, ;paragraph775; Lord v. Stevens 8; Parker v. Taswell.9
Keuneman, in reply.—The appropriation of lands to the agreement ‘‘to transfer can only be by a notarial- document in view of theOrdinance of Frauds and Perjuries, No. 7 of 1840. This requirementcannot be fulfilled by the company being merely in possession.
It is only when one party has completely fulfilled his obligationsunder a contract that a Court will declare that the other party isbound to fulfil his part. The company claimed a. set-off when
1 11 A. C. 171.5118 W. 12. 749.
a 16 Ves. (Jnr) 249.6 L. B. 2 P. (G. A.) 135.
(1902) 1 Gh. 428 and IS T. L. B. 265.7 2 Atk. 378.
9 Moore P. G. 18.8 1 lr. and G. 222.
1927.
Hall €. Pel-madullaVaUet/^TeO'
Go., Ltd.
9 2 de J. and J. 559.
( 424 )
i9 ar.
HfUl ♦*. PrUmmlnUaVoftty/ Teaand HvbbrrCo,. Ltd.
offering to tender the purchase priqe. Specific performance willnot be allowed if there has been unreasonable procrastination.fiennet v. Stone.1
The sum of Rs. 10,000 is a fractional pre-estimate of the damages,and therefore there can be no specific performance.
Soertszt for added defendant, respondent*.
March 3, 1927., Fisher C.J.—
The history of this action begins in 1909, when, as stated in theprospectus, the defendant company was “ formed for the purposeof acquiring Rilhena estate in the Pelmadulla district ” from theadded defendant. It was also stated in the prospectus that ” thevendor further undertakes to transfer a block of 1,000 acres ofland … immediately adjoining Rilhena, for the purchase
and development of which a further issue of shares will be madeas required.” The subsequent proceedings in pursuance of thisundertaking gave rise to this action.
It is clear from the evidence that the added defendant took anactive part in the preparation of the prospectus, and was generallyconcerned in and responsible for many of the preliminary arrange-ments preceding registration. Subsequently to formation, thecompany on September 27, 1910, entered into a contract withthe added defendant with a view to his giving effect to the under-taking referred to. This contract was notarially executed. Itwas not registered under section 16 of Ordinance No. 14 of 1891,and it is admitted that it was, not so registerable.
The contract No. 693 (Di 40), after reciting that the addeddefendant had agreed to sell 1,000 acres in the vicinity of Rilhenaestate at the rate of Rs. 75 per acre, bound him to give effectto that agreement, to deduce a good and valid title, and providedthat th.e purchase price for the said land “ as and when the sameshall be sold and delivered ” should be paid to the added defendantin “ cash on the sale and delivery of such land or at his optionone-half of the price of all lands so sold in cash and one-half infully paid ordinary shares in the said company.” The agreementconcluded with a provision that either party committing a breachof the agreement should be liable to pay ” a sum of Rs. 10,000 byway of liquidated damages and not as a penalty.”
Subsequently difficulties arose with regard to title, and thingsdid not shape in all respects as it* was expected they would havedone. A paramount claim by the Crown with respect to three of thefour blocks of land with which this action is concerned was an incidentwhich was unexpected. It delayed matters very considerably, andwas met by a supplementary agreement—this with a view to givingeffect to the fundamental obligations of the contract No. G93.
1 {1903) 1 Ck. 509.
( 425 )
The company was put iuto possession of the four blocks of landwhich are the subject-matter of this action, in 1912, and* ultimatelythey all became vested in the added defendant, and he was in aposition to transfer them, to the company with a good title. Butunfortunately the relations between him and the company hadbecome strained; there were disputes and dissensions, andalthough at one period there seems to have been very little betweenthem, they were unable to adjust their differences. Finally, onOctober 25, 1923, the added defendant transferred these propertiesto the plaintiff, who instituted this action to eject the companyon May 15, 1924. The added defendant became a party at theinstance of the company, and the action eventually went to trialon several issues involving the discussion and consideration of alarge number of questions with which the learned Judge who triedthe case has dealt very industriously and exhaustively in hisjudgment in favour of the company.
Inthe view Itakeof this case, however, I do not think it is
necessary to dealwithall of them for thepurpose of deciding this
ap'peal.
The first question to be considered, in my opinion, is whetherthe provisions of section 93 of the Trusts Ordinance, No. 9 of 1917,apply to this case. That section is as follows: —
" Where a person acquires property with notice that anotherperson has entered into an existing contract affectingthat- propertyof which specificperformance could be
enforced,theformer must holdthe property for the
benefit of the latter to the extentnecessary togive effect
to the contract: Provided that inthe case ofa contract
affecting immovable property such contract shall havebeen duly registered before such acquisition.”
It was urged that in view of the proviso and of the fact that thecontract No. 693 was not registered the section can have noapplication. I do not think that the proviso can be taken toexcludethis contract from the operation ofthe section.It applies,
only,inmy opinion, to contracts that areregisterable.1 can see
no reason why it should have been intended to make this sectionless extensive in the case of land than in the case of other propertyexcept for the purpose of ensuring that the existing law as toregistration, where applicable, should be complied with. Thenon-registration of this contract involved no breach of the registra-tion law. Therefore, in my view the provisions of this -sectionapply to this case if the other conditions mentioned in the sectionare present.
In the first place, had the plaintiff notice of ” an existingcontract *' between his vendor and the company ?
1927.
Fisher
G.J.
Hall v. Pel*madujltyValley Teaand RubberCo., Ltd.
1927:
( 426 )
Firstly as to notice. On this point the evidence is most clear-tad
Fisher precise. It might be almost described as overwhelming. ®heC.J. added defendant said in his evidence:—
Hail v. Pel- 'maduUaValley TAuand * RubberCo., Lid.
lt Mr. Hall was well aware of the main fact deposed to by me of theagreement between the Company and me and the breachof that agreement and the settlement I had obtainedfrom the Crown and the fact that the defendant companywas in possession and had opened out the land. Further-more, I referred him to Mr. J. A. Perera, who was/mylawyer, well acquainted with the facts of the case. Beforethe transfer in my presence Mr. J. A. Perera went intothe position with Mr; Hall."
The plaintiff was an intimate friend of the added defendant. anda shareholder in the company, and the effect of the evidence. -isthat what the plaintiff himself knew and what his proctor, whomhe said in his evidence he " assumed to be in a position to find outeverything," knew was the entire circumstances and facts of- thesituation. In short, it must be taken that the plaintiff, as regardsknowledge of the circumstances, was in precisely the • same' position as the added defendant.•
It is said, however, that the company broke the contract,, and theadded defendant puts forward the refusal of the company, indicatedin their proctor's letter of March 20, 1922 (D 96), in which theystated that the company were not " prepared to agree to the termsproposed in your letter to them of February 10 last," to pay theentire purchase money ultimately due to him in. shares, as con-stituting a breach which entitled him to deal with the propertyas his own. This is what he told the plaintiff. He says in hisevidence: —
" I told Mr. Hall that the company had declined to pay a certainbalance in shares, and I told him I considered that a breach of the agreement by the company."
I do not think that that can be regarded as a refusal to pay thepurchase consideration or as anything approaching wilful repudi-ation of the contract by : the company. They differed from theviews of the added defendant as to their respective rights underf;he contract and the subsequent development of the situationbetween them, but it is obvious that their special interest all alonghas been to have the property duly vested in thein, and ever sincethey were let into possession of the -land they have bhefi 'ownersin everything, except in being clothed with the legal title *;which?t lay with the added defendant to vest in them.
The situation created by the letter of March 20, 1922, did hottherefore, in my opinion, constitute a final breach of the contractby_.the: company, nor did it- entitle -the added -defendant * to treatit as such.
( 427 )
Moreover, the evidence shows that he did not so regard it. Thesubsequent history is as follows:—On March 28, 1922, the added Kishhrdefendant wrote (letter A, D 4) asking that his deeds might bereturned, and saying that he will be shortly placing the matter HaU v. Pel*in the hands of his proctor. He made no reference to his demand x'^^Team his letter of February 10 that in default of meeting his claims ami JRutoerbefore the 15th instant the company, should surrender posses- ('*>” ud'sion of the lands of which they were “ in wrongful possession/*
In point of fact no further communication was at that time madeto. the company. He left them in possession, and lie .says in hisevidence; —
“ I did not make any endeavour to sell tile land. I did not engagea broker. I did not let it be known that 1 wanted to sellthe land/*
In their annual report (D 105) dated November 24, 1022, thedirectors put the matter before the shareholders as follows: —
44 The directors regret to report that they have not yet been ableto arrive at a settlement with Mr. * 33. A. Thornhill inrespect of some 150 acres purchased through him underagreement/*
That report was before the annual meeting held on December 6,
1922, which the plaintiff and the added defendant attended. Thematter was briefly referred to by the chairman in terms whichthe added defendant seeks to show conveyed to his mind that thematter was ripe for litigation, but he made no comment on themotion to pass the report. It seems to me clear that he must haverealized that—so far a.s the board were concerned—they did notregard the agreement as at an end. Later on in the meeting theadded defendant expressed a wish to make a few remarks whichhe said were in explanation of and “ not antagonistic *’ to the report.
He was refused a hearing on grounds which may or may not havebeen sound—the question is not material—and accepted thesuggestion that he should put the shareholders in possession ofwhat he wished'’ to say by a letter to the press. Accordingly hepublished in the “ Times of Ceylon *’ of December 6 a documentwhich he had brought typewritten to the meeting. The first andsecond paragraphs run as follows: —
“ I wish to make a few remarks with reference to my relationswith the company regarding land, as it has been broughtto my notice that there is a feeling of anxiety as regardsthe position.; A short while back a difficulty arose overthe question, whether I should be paid in cash or sharesand as to whether certain portions of jungle land shouldbe taken, over or not. Speaking without prejudice to mylegal position with the company, I would like to assure
( 428 )
the shareholders that- I hope a satisfactory settlementwill be reached. In the meantime, as I have been standingout of my money for over ten years, and my jungle landshave remained unplanted and unremunerative, I decidedto plant up this area in tea. This is now in progress,and should be completed next year. It is my intentionultimately to offer this area to the company—some 160acres. I would also like to say that I am the largestshareholder in the company. I therefore have theinterests of the company at heart, and although differenceshave arisen between the directors and myself, I canassure theshareholdersthat no actionprejudicialto
their interests will be taken by me without reference tothe shareholders at a general meeting.”
Thispronouncement seems tome to speak foritself. Inhis
cross-examination the added defendant was given an opportunityof explaining whathe meant. His attention wasdrawn tohis-
wordsassuring theshareholdersthat “ no actionprejudicialto
their interests would be taken by me without reference to theshareholders at a general meeting.” But he failed, in my opinion,to show that they could be interpreted by any shareholder to meananything else than what they say.
The position he then took up is entirely irreconcilable withthe view that he at that time regarded the letter of February 10,1922 (D 93), as a termination of the contractual relationship betweenhimself and the company. And, moreover, in my view, it wouldnecessarily lead the company to act and think on the footing thatthere was no idea on his part that such a situation had arisen.
The contract therefore being, in my opinion, “ an existing con-tract ” at the time of the transfer, why should it not be specificallyeuforced as regards the four blocks of land transferred to theplaintiff ? The company have been for several years in possessionof this property. In the events that have happened these fourblocks stand out clearly as property which was expressly allo-cated by the added defendant to that contract in recognition andperformance of. his obligations thereunder. The company, withthe added defendant's full knowledge and concurrence, spentmoney on it and have put the land to the use which both partieshad in view in fulfilment of the objects for which, with the insti-gation and co-operation of the added defendant, the companycame into being. They cannot be held responsible or, at all events,entirely responsible, for the long drawn out discussions, proposals,and counter-proposals which took place between the parties. Thatbeing so, I can see nothing in their conduct or any circumstanceswhich would have disentitled them at the date of the transfer tothe plaintiff to a decree of specific performance.
1927.
C.J.
HaU r. Pel-madvllaValley Teaand RubberGoLtd.
( 429 .)
The contract is therefore, in my opinion, an existing enforceable 1927-
contract of which the plaintiff had notice within the provisions of Fisher
section 98, and, that being so, not only is he disentitled to succeed . ■S'-'*:
in his action, but he must be taken to hold the property for the Hall *:. Pel-
benefit of the company to the extent necessary to give effect to vMwUTen
the contract No. 693.and Hubber
Co.. Ud.
It was contended that there are previous decisions of this C.ourt(see Fernando v. Penes1) upon which independently of section 98the defendant might be held to be entitled to a decree of specificperformance against the plaintiff on the ground that he has knowinglymade himself a party to a transfer which is in, fraud of the rightsof the company under the contract with the added defendant. But,under the circumstances, I do not think it is necessary to deal withthis contention, nor with the other findings upon which the learnedJudge has based his judgment, though I must' not be taken todissent from them.
In rny opinion, therefore, the judgment of the District Judgemust be affirmed with one .or two slight modifications upon whichthere was no argument, but to which the company throughtheir counsel expressed themselves ns agreeable, namely: First,giving credit to the added defendant for the sum of Rs. 5,000damages, to which it was at one time conditionally agreed he shouldbe entitled; and secondly, that he should bp entitled, should he s.oelect and give notice in writing of his election to the companywithin one month from the date of this judgment, to receivepayment for the lands in question, partly or entirely, in fully paidordinary shares of the defendant company.
The appeals are dismissed, with costs. The plaintiff and theadded defendant must pay the costs of these appeals.
Gaevijc J.—I agree.
-Appeal dismissed.