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[In the Privy Council.]
Present: Lord Buckmaster, Yiscount Dunedin, and LordWarrington of Clyffe.
HALT, v. PELMADTJLLA VALLEY TEA ANDRTJBBEB COMPANY, LIMITED.
320—D. 0. Ratnapura, 4,107
Trust—Agreement to transfer land—Failure to register—Sale with
notice—Ordinance No. 9 of 1917, s. 93.
By a notarial writing, which was not registered, the addeddefendant agreed to sell and convey to the defendant companyall land he might be possessed of or might thereafter purchase incertain specified villages up to a thousand acres upon certainterms. In anticipation of the Bale the company was allowed totake possession of certain blocks of land. Fending sale, the addeddefendant executed a transfer of all the lands in question to theplaintiff, who registered his deed.
In an action by the plaintiff for declaration of title against thedefendant-company, the defence was raised, that * having regardto section 93 of the Trusts Ordinance, the property comprised inthe transfer was held by the plaintiff to the extent necessary togive effect to the agreement entered into with the defendantcompany.
Held, the prior registration of the contract was a conditionprecedent to the. application – to it of the benefit conferred bythe section.
^^PPEAL from a judgment of the Supreme Court.
June 27, 1929. Delivered by Lord Warrington of Clyffe.—
The question in this appeal is whether the first appellant (theplaintiff in the action) as purchaser from the second appellantis entitled to recover from the respondent company possession ofcertain lands the subject of such purchase, notwithstanding aprevious agreement on the part of the second appellant to sellthe same lands to the respondents, or whether, on the contrary,the respondents are entitled to specific performance of such previousagreement.
The action came on for trial before the District Judge ofRatnapura, and by the decree dated August 22, 1925, the plaintiffs’action was dismissed and an order was made in effect for the specificperformance of the agreement, certain inquiries and accountsbeing directed for the purpose of carrying such order into effect.
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Hall v.PelmadullaValley Teaand RubberCompany,Limited
The present appellants appealed from this decree to the SupremeCourt of Ceylon, and by their order dated March 8, 1927, it wasadjudged that the decree of the District Court should be modifiedin certain respects not material to this appeal, and that, subjectto such modifications, the decree of the District Court should beaffirmed and the appeal dismissed with costs. Leave to appealhaving been obtained from the Supreme Court the present appealto His Majesty in Council was in due course presented by the twoappellants.
The facts material to the present appeal may be shortly stated.
•The respondent-company was incorporated in the year 1909 forthe purpose, amongst other things, of purchasing from the appellantThornhill, an estate called Rilhena, which purchase was subsequentlycarried into effect. Thornhill, at the same time, undertook totransfer to the company 1,000 acres of adjoining land, of whichhe was not then possessed.
For the purpose of giving effect to this undertaking he enteredinto a contract in writing with the respondents dated September27, 1910, and conveniently referred to in the proceedings as agree-ment No. 693.
By this agreement Thornhill agreed to sell and convey to therespondents all land he might then be possessed of or might there-after purchase in certain specified villages adjoining the Rilhenaestate up to 1,000 acres at a price and upon terms which need notbe stated.
There prevails in Ceylon a system of registration of deeds, butagreement No. 693 was not registered, and was, in fact, incapableof registration for the reason- that it contained no sufficientlydefinite description of the lands affected by it.
This appeal relates only to certain blocks of lands, part of the1,000 acres acquired by the appellant Thornhill after considerabledelay, in fact, not until the year 1921, but in 1912 the respondentswere, in anticipation of such acquisition, allowed by him to takeand did take possession of such blocks of land and have sincebeen, and are now, in possession thereof.
Disputes arose between the appellant Thornhill and the respond-ents as to the mode of carrying into effect agreement No. 693,and a subsequent agreement was made modifying its terms incertain respects and pending such disputes the said appellantexecuted in favour of the appellant Hall the transfer on the validity.of which, as against the respondents, the question turns.
The transfer was dated October 25, 1923, and by it the appellantThornhill, in consideration of Rs. 45,624, stated to be paid to himby the vendor did sell, convey, transfer set over and assure untothe appellant Hall the lands in question described in the scheduleto hold the same to him, his heirs, executors, administrators, and
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assigns absolutely. The deed was attested by a notary, who1929.
certified that of the consideration Es. 30,624 were acknowledgedlord
by the executant to have been received prior .to the execution Warmnotowof the instrument, and for the residue Es: 35,000 a promissory note
was granted by the vendor in favour of the executant.Hall v.
This deed was, on October 29, 1923, duly registered at Batnapuru. Valley Teaand on May 33, 1924, the present action was instituted by the a^ll^^erappellant Hall against the respondents. The appellant Thornhill Liiidtedwas subsequently added as a defendant.
The defence raised two points material for the decision of thisappeal: (1) That having regard to section 93 of the Trusts Ordinance.
No. 9 of 1917, the property comprised in the transfer was held bythe appellant Hall for the benefit of the respondents to the extentnecessary to give effect to agreement No. 693, and (2) that failingthis defence the transfer was fraudulent and collusive and conferredno title on the transferee as against the respondents claiming underthe previous agreement No. 693.
The trial Judge decided both points in favour of the respondents.
In the Supreme Court the learned Judges agreed with the trialJudge on the first point, and, therefore, did not deal with the second,though they said they must not be held to dissent from the view ofthe Judge thereon.
The first question is one solely of the construction of section93 of the Ordinance of 1917, which is in the following terms: —
Where a person acquires property with notice that anotherperson has entered into an existing contract affectingthat property, of which specific performance could beenforced, the former must hold the property for thebenefit of the latter to the extent necessary to give effectto the contract: provided that in the case of a contract' affecting immovable property such contract shall havebeen duly registered before such acquisition.
The trial Judge and the Supreme Court found in fact that theappellant Hall acquired the property with notice of the existingcontract No. 693, and that nothing had occurred to prevent specificperformance of the .contract, and they further held that on thetrue construction of the section the provision as to registrationdid not affect its application to the contract in question, inasmuchas the non-registration thereof was due to the fact that it was no!:capable of registration.
The appellants did not, and, indeed, could not, before -thisBoard raise again the questions dealt with by the concurrent find-ings of fact, and the question, therefore, is solely one as tothe construction of the final words of the section.
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Hall r.PtlmatlullaValley Teaand RubberCompany,Limited
On this point the Chief Justice said that in his view the objectof the proviso was to secure compliance with the law as to registra-tion. and that as the non-registration of the contract involved nobreach of the registration law the proviso in such a case had noeffect.
Their Lordships are unable to concur in this view. The priorregistration of the contract is .made a condition of the applicationto it of the benefit conferred by the section. The object in themind of the Legislature in imposing such a condition even if itcould be known, would not affect the meaning of the words used.Under these words it is plain that the contract is one which doesnot satisfy the condition upon which alone it is entitled to the benefitconferred by the section. If, therefore, the rights of the respondentsdepended on the Trusts Ordinance alone the appeal would succeed,and it is therefore necessary to consider the second question men-tioned above. This turns on the proper construction and effectunder the circumstances of this case of section 17 of the LandRegistration Ordinance of 1891 (No. 14 of 1891).
Section 17 is in the following terms: —
Every deed, judgment, order, or other instrument as aforesaid,unless so registered, shall be deemed void as against allparties claiming an adverse interest thereto on valuableconsideration, by virtue of any subsequent deed, judgment,ordeif, or other instrument, which shall have been dulyregistered as aforesaid. Provided, however, that fraud orcollusion in obtaining such last-mentioned deed, judgment,order, or other instrument, or in securing such priorregistration, shall defeat the priority of the person claimingthereunder, and that nothing herein contained shall bedeemed to give any greater effect or different construc-tion to any deed, judgment, order, or other instrumentregistered in pursuance hereof, save the priority herebyconferred on it.
Piima facie, therefore, under the provisions of the first sentence,the agreement No. 693 would be void as against the appellant Hallolaiming an adverse interest on valuable consideration by virtueof the subsequent registered conveyance of 1923. Moreover, it isadmitted that according to decisions in Ceylon the mere fact thatthe appellant Hall had notice of the existence of the agreementwould not affect his right to the priority given by the Ordinance.The question then is, was there fraud or collusion on his part inobtaining the deed of 1923, or in securing its prior registration?If there was, it would defeat his priority.
The Judi’r.the District Court said, dealing with this point:
“ There is only one conclusion that I can come to after a carefulperusal of the evidence on this point, and that is that the sale and
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purchase of these lauds was a concerted device on the part of the1929.
added defendant to circumvent the company.” It will be observedjjOR„
that this is a finding only that there was a concerted device on the Warrington
part of Thornhill, but inasmuch as it appears from other parts of
his judgment that he found the appellant to be practically in the Hall v.same position as Thornhill so far as knowledge of what had happenedand was being done was concerned, it is not unreasonable to infer andkitbberthat when the Judge says the sale and purchase was a concerteddevice on the part of one he really means to involve the otherparty to the “ concert. ” But in truth this point is not of muchconsequence. Facts emerged in reference to the transfer whichshow clearly in then- Lordships’ opinion, that it was fraudulentand collusive in that it was not intended to be the out and outtransfer to Hall which it professed to be. It is on the face of it asale of the land out and out for a sum of money (Rs. 45,624) paidto the vendor by the vendee. It is admitted that of the Rs. 45,624a sum of Rs. 30,654 is the amount of a number of loans alleged tohave been made at various times and in various amounts over aperiod extending from December 8, 1922, to October 17, 1923,and interest thereon. The evidence in support of the existenceof these loans is of the slightest description, and it is quite evidentthat the Judge had difficulty in accepting even such evidence asthere was, but accepting the story as true, it shows a state of thingsutterly at variance with the transaction as it appears on the faceof the deed. The transaction, so far as the Rs. 30,624 was con-cerned, was not a sale for money thus paid as consideration for thetransfer, but a transfer of land in consideration of moneys paidalio intuitu, viz., by way of loan by the purchaser to the vendorto be- accepted, presumably, in satisfaction of the debt. As to theRs. 15,000 there is no evidence that it was ever paid. A promissorynote was, as appears by. the notaiy’s certificate, given by thepurchaser to the seller for the amount. This note has never beenproduced; in fact, it is said to have been tom up when later on theappellant Hall says he gave Thornhill a cheque for Rs. 15,000 inpayment of the note. No evidence of this except the bare state-ment of Hall was given. The cheque was not produced nor wasany bank book or other evidence of payment. Their Lordshipscannot but come to the conclusion that the whole transaction wasa sham never intended to be anything more than a device forgetting priority over the respondents’ claim, and that this amountsto fraud or collusion within the meaning of the Ordinances.
For these reasons they are of opinion that this appeal fails,and ought to be dismissed with costs, and they will humbly adviseHis Majesty accordingly.