027-NLR-NLR-V-35-HAYLEY-et-al.-v.-NUGAWELA.pdf
Hayley v, Nugawela.
15V
1933Present; Drieberg J. and de Silva A.J.
HAYLEY et al v. NUGAWELA.
160—D. C. (Inty.) Kandy, 40,294
Trustee—Action on contract entered into as trustee—Personal libability—Decree entered against defendant as trustee—Right of defendant to com-pel judgment-creditor to levy execution against trust property—Trusteeunder Buddhist Temporalities Ordinance not a corporation.
Where a trustee contracts as trustee and judgment is entered againsthim as such, he is not entitled to compel the judgment-creditor, whoseeks to execute the judgment against him personally, to levy executioninstead on the trust property.
The mere use of the words “ as trustee ” in a contract is not sufficientto execute personal liability.
A trustee appointed under the Buddhist Temporalities Ordinance isnot a corporation.
T
HIS was an action to recover the value of cement delivered to thedefendent on a contract entered into by him as the Diyawadana
Nilame and Trustee of the Dalada Maligawa. The action was notdefended and judgment was entered against the defendant on March 3,
158
Hayley v. Nugawela.
1931. In the caption of the plaint the defendant was described as theDiyawadana Nilame, and Trustee of the Maligawa, and in the firstparagraph of the plaint, it was expressly averred that he was sued in thatcapacity, and he was so described in the decree.
On March 26, 1931, the plaintiffs-appellants issued writ and the Fiscalreported that the defendant was possessed of no property. Thereafterthe plaintiffs re-issued writ on serveral occasions and seized the defendant’sallowance as member of the State Council.
On May 25, 1932, the defendant moved that the prohibitory noticeor the seizure of his salary be recalled and the plaintiffs be directednot to proceed against the defendant in his personal capacity. Thelearned District Judge allowed the motion and the plaintiffs appealedfrom the order.
Choksy ' (with him D. W. Fernando), for plaintiffs, appellants.—In lawa trustee cannot sue or be sued in his capacity as trustee. He has not arepresentative capacity like that of an executor or administrator. He isnot an agent of the trust. He is personally liable, although he has aright of indeminity against the trust property, for expenses incurredin the bona fide execution of this trust. (Maraliya v. Gunasekera )
A creditor of a trustee has no direct right to claim payment out of thetrust estate even though the debt was incurred in the execution of thetrust. He has firstly the personal liability of the trustee that arisesfrom the general principle of contract, and secondly the equitable rightof being put in the place of trustee against the assets of the trust. (Inre Johnson: Shearman v. Robinson3.)
A trustee cannot contract so as to exclude personal liability. (Muir v.City of Glasgow Bank ”, Watliny v. LewisWilliams v. Hathaway",Farhall v. Farhall “.) He may by contracting in adequate, language limithis personal liability to the extent to which he has a right of recourse tothe trust property.(Muir v. City of Glasgow Bank (supra), Gordon v.
Campbell ’.
The trustee of a Buddhist temporality is not a corporation. Wherethe Legislature intends to make a trustee a corporation with power tocontract as such, it makes express provision for it. In the Co-operativeSocieties Ordinance, 1921, section 17, and the Nuwara Eliya Board ofImprovement Amendment Ordinance, 1921, section 4, the Legislaturehas expressly made the trustee a corporation.
H. V. Perera (with him Ranawake), for defendant, respondent.—Thetrustee of a Buddhist temporality is a corporation. It is a creature ofstatute with all the attributes of a corporation—perpetual succession,power to sue, and the liability to be sued in the name of trustee (8 Halsburyx. 164). Even if it is not a corporation, it is a quasi-corporation(Ex parte The Newport Marsh Trustees3). Where trustee is a corporationthe property of the corporation and not the property of the person consti-tuting it would be liable in execution for a contract entered into by thetrustee in his corporate capacity.
1 (1921) 23 N. L. R. 2G1.5 6 Ch. Div. 544.
* L. R. 16 Ch. Div. 548.6 (1877) L. R. 7 Oft.App. 123.
(1879) 4 A. C. 337.» 1 Bell's App. 423.
(1911) 1 Ch. 414.8 (184S) 16 Simons's Reports 346.
Hayley v. Nugaweia.
159
Section 30 of the Buddhist Temporalities Ordinance excludes thepersonal liability of a trustee of a Buddhist temporality for costs forany act bona fide done by him. If the liability of the trustee is alwayspersonal then the exemption from personal liability for costs makes thesection meaningless. Even in the case of an ordinary trustee theremay be a contractual limitation of liability. It may be agreed thatsatisfaction of the debt should be out of a particular fund (Muir v. City ofGlasgow Bank (supra) ).
Wailing v. Lewis (supra) can be distinguished. It was dissentedfrom In re Robinson’s Settlement: Gant v. Hobbs'.
Where trustee dies the action must be against next trustee, not thelegal representatives of the deceased trustee.
If decree is against the trustee personally all that can be seized isproperty over which he has a disposing power, that is his own property,not trust funds. Where the trustee limits his liability in order tomake the trust estate liable, the plaintiff must state expressly thathe is suing the defendant as trustee apart from the mere description ofhim as trustee. Plaintiff in this case may have sued personally. Hehas elected to sue on the basis of a contract made in the capacity as'trustee.
Choksy, in reply.—Section 17 of the Buddhist Temporalities Ordinanceprovides for the election of “ one or three trustees ” for every temple.If trustees so appointed are a corporation then they are a corporationaggregate and must as a general rule act under its Common Seal*(8 Halsbury, p. 309.) The Ordinance makes no provision for a seal.
May 31, 1933. Drieberg J.—
The respondent, who is the Diyawadana Nilame and Trustee of theDalada Maligawa, entered into a contract on March 15, 1929, with theappellants for the purchase of 2,400 casks of cement to be delivered ininstalments between April and December, 1929. He was describedin the contract as the Diyawadana Nilame and Trustee of the DaladaMaligawa. As provided in the contract the respondents drew on himtwo bills of exchange, each for Rs. 3,090, which he accepted but failed tomeet. He later made certain payments and this action was brought torecover Rs. 3,799.46, the balance due from him. He did not defendthe action, and on March 3, 1931, judgment was entered against him.
In the caption of the plaint he was described as the Diyawadana Nilameand Trustee of the Dalada Maligawa, and in the first paragraph of theplaint it was averred expressly that he was sued in that capacity, and heis so described in the decree.
On March 26, 1931, the appellants issued writ and the Fiscal reportedthat the respondent was possessed of no property. On August 3, 1931,as the result of a notice on him under section 219 of the Code, the re-spondent filed a list of property. I take it this is the paper on page 62of the record, undated, signed by the respondent’s proctors. It mentionsas available for seizure and sale, Temple Hill estate of 68 acres 1 rood19 perches, situated at Panwillatenne in the District of Kandy; it was
' (1912) 1 Ch. Die. 717.
160
Hayley v. Nugawela.
not stated whether it was Maligawa property or property of the respond-ent, but in his affidavit of May 16, 1932, the respondent says that inresponse to the section 219 notice he disclosed property of the Maligawasufficient to meet the claim of the appellants. The appellants did notproceed against this land, and on November 24, 1931, they moved for anotice on the respondent under section 12 of the Insolvent EstatesOrdinance of 1853. The notice was allowed and on December 23, 1931,there is a note that the notice was served. Failure to comply with thisnotice would amount to an act of insolvency. On December 2, 1931, theappellants re-issued writ and on several occasions seized the respondent’sallowance as a member of the State Council. This went on until May 25,1932, when the respondent moved that the prohibitory notice for theseizure of his allowance be recalled and that the appellants be directednot to proceed against the respondent in his personal capacity. Thiswas the first time that the respondent claimed such immunity. Thefirst appellant, Mr. C. P. Hayley, in his affidavit of June 4, 1932, makesit clear that the respondent treated this as a personal liability of his. .The respondent raised no objection until May, 1932, to the seizure of hisallowance. The appellants deferred taking proceedings under theInsolvency Ordinance on the promise of the respondent to settle theclaim' and he did not object to the appellants in the meantimeseizing his allowance. He produced a letter to the appellants fromMr. D. E. Weerasooriya, Proctor, of February 16, 1932, stating that therespondent was devising a scheme for a satisfactory settlement withall his creditors and that this scheme would be submitted to the appellantsbefore the 20th of that month. In September, 1931, he asked for timeto pay, tendering as security an estate of his which however proved to bevalueless owing to existing encumbrances. If the respondent under amistaken view of the law thought he was personally liable and submittedto execution, that should not bar him from now denying his personalliability, if it be that he is not personally liable. The learned DistrictJudge allowed the motion of the respondent of May 25, 1932, and theappellants appeal from that order.
The question before us is whether when a trustee contracts as trusteeand is sued and has judgment entered against him as such, he can compelthe judgment-creditor who seeks to execute his judgment against himpersonally to levy execution instead on the trust property. Thereis comparatively little local authority on the point. In Maraliya v.Gunasekera* the trustees of a certain body named the SaddarmodayaSociety, who were the defendants, mortgaged property with the trusteeof a Buddhist temple. The question for decision was whether thesuccessor of that trustee could maintain an action on the bond. It washeld that he could, but in the course of argument counsel for the defend-ants asked that judgment should be entered against them as trusteesand that they should be freed from any personal liability. Sir AntonBertram C.J. dealing with this request said, “ It is impossible to concedethis. They are personally liable on the bond, which also, though notquite logically, makes them liable as sureties. The law knows nothingof the idea of a trustee suing or being sued in his capacity of trustee.
» (1921) 23 N. L. R. 261 on p. 265.
DRIEBERG J.—Hayley v. Nugawela.
161
He has not a representative capacity like that of executor or administrator.If he incurs a liability in the bona fide execution of his trust, he has a rightof indemnity against the trust property.” This principle was referredto and approved in Abadda v. Abadda
– It is clear on the decisions in England that persons to whom a trusteehas incurred liability have no original or direct right to claim paymentout of the trust estate, and it follows therefore that the trustee cannotcompel them to resort to the trust estate for payment. Most of thecases deal with business carried on by an executor under the authorityof the will, the executor having then the character of a trustee. Theprinciple on which liability of the trust estate is based is clearly explainedin In re Johnson: Shearman v. RobinsonJ which deals with and explainsearlier cases on the point. It was a case of a creditor of a businesscarried on by an executor under directions in the will. Jessel M.R.there stated that the creditor had the personal liability of the executorand also a right to be put in his place against the assets. The first rightis his general right by contract because he trusted the executor or trusteeand he has a personal right to sue him and to get judgment and makehim a bankrupt. The second right he said “ is a mere corrollary right asin those numerous cases in equity in which persons are allowed to followtrust assets. The trust having been devoted to carrying on the tradeit would not be right that the cestui que trust should get the benefit ofthe trade without paying the liabilities”. If the trustee has no rightto be indemnified and paid out of the trust property for the reason thathe himself is indebted to the trust in a larger amount, then “ the title ofthe creditor, so to speak, to be put in the place of the trustee, is a title toget nothing, because nothing is due to the trustee”. The same resultfollows if the liability incurred by the trustee is not one authorized bythe trust.
It was contended for the respondent that the effect of his contractingexpressly as trustee was to negative a personal liability; this cannot be,for a liability as trustee is a personal liability as explained in In reJohnson: Shearman v. Robinson (supra).
It may be well to deal with the cases in which the manner in which atrustee can contract so as to exclude personal liability has been consideredIn Watling v. Lewis ’ there was an arrangement regarding the estate of twopersons who were partners. The defendants as executors and trusteesof the will of one entered into an agreement with the beneficiaries underthe will of the other partner to pay the amount of a mortgage and tokeep them indemnified from all claims by the mortgagee. The mortgagewas one created by the partners but under the arrangement the land,and with it the liability on the. mortgage, was to be taken over by theestate of the partner of which the defendants were trustees. The wordsof the deed were that the defendants “ as such trustees, but not so as tocreate any personal liability on the part of. them hereby jointly andseverally covenant ”. Warrington J. said that in such a case the questionwas whether the words “ as trustees ” merely limited the liability of the1 (1927) 29 N. L. R. 205.* L. R. 15 Ch. Dio. 548.
35/14
* (1911) 1 Ch. as.
162
DRlEBERG J.—Hayley v. Nugawela.
covenantors or whether they in terms destroyed it altogether. An illustra-tion of the former is afforded by the case of Williams v. Hathaway1where the vicar of a parish church and the incumbent entered into acontract for the building of a church, binding themselves as long as theyshould be entitled to apply a certain fund but “not to bind either ofthemselves after he or they should have ceased to be entitled to applysuch fund”. It was there held that the words limited the liability ofthe trustees and did not destroy their liability altogether. Dealing withthe words of the covenant in Watling v. Lewis (supra) Warrington J. said“ Now, in the case before me, do the words beginning ‘ as trustees ’effectually limit the liability of the covenantors, or do they in termsdestroy it altogether? In my opinion they destroy it altogether. Inthe first place the words referring to personal liability are ‘ but not so asto create any personal liability’—that is, no personal liability of anykind is to be created by this covenant. Then do the preceding words' as trustees ’ show that the words that follow are not to be construedso widely as to destroy the personal liability altogether? Those words‘ as such trustees ’ in a covenant of this sort have, in my view, no effectat all. A covenant by a man ‘ as a trustee ’ does not render his trustestate liable; it is a covenant by himself. It is exactly as. if an executorentering into an obligation not merely in respect of some debt of histestator, but in respect of some obligation which he in his capacity asexecutor has himself undertaken since the death of the testator, covenants‘ as executor ’ to pay. That is a covenant by himself. It was pointedout by Williams J. in Williams on Executors, referred to and cited inFarhall v. FarhalV, that that is a covenant the only possible judgmenton which must be de bonis propriis. So here the covenant by the defend-ants ‘ as trustees ’ is a covenant by them. The expression, therefore,
‘ as trustees ’ does not in my judgment in any way effectually limit theliability which the words of the covenant purport to create. The resultis, I think, that first there is a covenant to pay the money and to indemnifythe plaintiff, and that the parties have attempted to qualify that cove-nant by using words the effect of which, if effect is to be given to them,would be to destroy their personal liability. That being so, the wordsthey have used can have no effect at law, and the liability remains.”
I can find no reference in Watling v. Lewis (supra) to the earlier case ofMuir v. City of Glasgow Bank and Liquidators ‘ decided by the House ofLords in 1879. In that case certain trustees accepted as part of the. trustestate shares in the bank, signing the deed of transfer as ‘ trust disponees’and accepting the stock ‘as trust disponees as aforesaid’. In theregister of shareholders they were entered ‘ as trust disponees’ for thebeneficiaries who were named. The liability of the shareholders, whichwas on the basis of a co-partnership, was unlimited. The bank suspendedpayment with great liabilities. It was held that the trustees werepersonally liable for all calls on them in respect of the stock they held.The decision proceeded to some extent on considerations regarding theliabilities of Shareholders in such undertakings and it was held that ashareholder in the bank could not become a partner with a limited1 6 Ch. Div. 544.* (1877) L. R. 7 Ch. App. 123.
» (1870) 4 A. C. 337.
DRIEBERG J.—Hayley t. Nugawala.
163
liability, or with any other liabilities than such as were borne in commonby all the partners, and that the directors had no power to enter into acontract with shareholders which would limit their liability in the mannerclaimed. On the question whether the words used were sufficient toexclude personal liability is was observed by Lord Cairns that there wasnothing to prevent a trustee by appropriate words from stipulating thathe will make payment, not personally, but out of trust funds. Referencewas made in this connection to Gordon v. Campbell a Scotch case, thereport of which is not available. From the reference to it in Muir v. Cityof Glasgow Bank (supra) it appears that trustees borrowed money for thepurpose of the trust, granting a heritable bond over the trust property tosecure the loan. They bound themselves ‘ qua trustees only ’. It was heldthat they were not personally liable. Lord Cairns said that this wassuch a case as he referred to where the contracting parties could stipulateexcluding personal liability. But regarding the words ‘as trust dispo-nees ’, it was held that they did no more than mark the stock as the pro-perty of the particular trust and that they did not as in Gordon v. Camp-bell (supra) amount to an exclusion of personal liability. Lord Penzancesaid that “ to exonerate a trustee something more is necessary beyond theknowledge of those who deal with him that he is acting in that capacity,and it would not be sufficient in all cases to state that fact on the face ofany contracts he may make. To exonerate him, it would be necessaryto show that upon a proper interpretation of any contract he had made,viewed as a whole—in its language, its incidents, and its subject matter—the intention of the parties to that contract was apparent that his personalliability should be excluded; and that although he was a contractingparty to the obligation the creditors should look to the trust estate alone.”The question arose again incidentally in Robinson’s Settlement; Gant v.Hobbs’. There trustees borrowed money and executed a mortgage inwhich they covenanted ‘ as such trustees but not otherwise ’ to repaythe money. The lender was an unregistered money lender. Warrington
J.held that in the circumstances the- lack of registration did not effectthe plaintiff's claim; on the question of the liability of the trustees heheld, following his own decision in Watling v. Lewis (supra), that the words‘as such trustees but not otherwise’ were repugnant to the covenantand void and that the trustees were personally liable. In appeal Muir v.City of Glasgow Bank (supra) and Gordon v. Campbell (supra) were cited andthe Court was asked to overrule the decision in Watling v. Lewis (supra).The decision of the Court of Appeal proceeded on the ground that the wholeof the transaction was void by reason of the non-registration of the lender’sbusiness under the Money Lender’s Act; it was therefore nut necessaryto decide the question of the nature of the liability of the trustees. Theonly reference to it is in the judgment of Buckley L.J.; he said thatthat as the case might be taken to the House of Lords he felt he shouldexpress his opinion on the point, and his opinion was that it was such acase as Lord Cairns in Muir v. City of Glasgow Bank (supra) said was anexpress stipulation to exclude personal liability and of which Gordon v.Campbell (supra) was an illustration; the covenant he said was notone that bound the trustees personally.
1 Bell’s App. 428.
(1912) 1 Ch. Din. (C. A.) 717.
164
DRIEBERG J.—Hayley v. Nugawela.
Can it be said, to use the words of Lord Penzance in Muir’s case, thaton a proper interpretation of the contract viewed as a whole, its language,its incidents, and its subject matter, that the intention of the partieswas to exclude the personal liability of the trustee ? In my opinion •the agreement cannot be so interpreted. The parties used no wordsas in Gordon v. Campbell (supra) and the case of Robinson’s Settlement(supra). The respondent merely contracted as trustee. In Muir v. City ofGlasgow Bank (supra), Lord Penzance, while recognizing the right of atrustee by express stipulation to exclude personal liability, said, “Butmeanwhile it will not be doubted that a person who, in his capacity oftrustee or executor, might choose to carry on a trade for the benefitof those beneficially interested in the estate, in the course of which tradedebts to third persons arose, could not avoid liability on those debtsby merely showing that they arose out of matters in which he acted inthe capacity of trustee or executor only, even though he should beable to show, in addition, that the creditors of the concern knew allalong the capacity in which he acted.
“ The case of an agent who acts for others is, of course, entirely different.His contracts are the contracts of his principal; and the liabilities fromwhich, as a general rule, he is personally exempt, fall upon his principalwho acted through him.”
But even where there is an agreement to exclude personal liabilityit does not necessarily follow that it must be excluded. In Muir’s caseLord Hatherley, dealing with a claim of a trustee that personal liabilitywas excluded, said “ But when a person says that you must see whethertlje person with whom he is dealing had power to deal with him on these-terms”. We have no proof of the purpose for which these goods wereordered. If as the learned District Judge suggests it was for the purposeof erecting a new building in the Maligawa premises, a question will arisewhether that is one of the purposes set out in section 20 of the BuddhistTemporalities Ordinance of 1905, to which alone the income of theMaligawa can be applied. The respondent asks that the Court shouldorder execution to be levied on the immovable property of the Maligawawithout any proof before it that the contract was one for the purposes ofthe Maligawa and, if so, for a purpose authorized by the Ordinance.He asks that this should be allowed for the reason only that he hascontracted as trustee and has been sued as such.
The respondent therefore is personally liable on this contract. It isnot possible in these proceedings to give effect to the appellants’ right,if they have such a right in the circumstances of this case, to be put inplace of the trustee against the trust estate by subrogation. Theappellants do not ask for this and I can find no case where a trusteehas been allowed to compel a creditor to proceed against the trust pro-perty; this is a right which a creditor may exercise if he so desires.When such a right is sought to be exercised it must necessarily be in aproceeding in which all parties interested in the trust are represented,for it is only in such a proceeding that the right of the trustee to beindemnified can be determined and there can be no question of subroga-tion where this does not exist. Where a creditor has been allowedto claim by way of subrogation it has been in proceedings of this nature.
DE SILVA AJ.—Hayley v. Nugavoela.
165
It was allowed in Wat ling v. Lewis (supra) and Dowse v. Gorton1 whichwere administration suits to which all persons interested in the trustwere parties. In In re Raybould: Raybould v. Turner *, which was anaction of another nature, Byrne J. allowed it on the ground that he hadbefore him all the parties interested in defending the trust.
It is not possible in these proceedings to say whether the respondentis entitled to be indemnified for the cost of the cement bought from theappellants. The learned District Judge suggests the possibility of itbeing used for the purpose of the new building in the Dalada Maligawagrounds. As he remarks, there is no proof of this but he thought he wasentitled to presume that the trustee bought it for a legitimate purpose.I cannot agree with the trial Judge that this is a'presumption which canbe drawn under section 114 of the Evidence Ordinance. It is sufficientto say that there is no proof that it was used for this building and evenif it was, it does not necessarily follow that it is an expense for whichthe respondent has a right to be indemnified. These are matters whichcan only be determined in proceedings such as I have mentioned.
I agree with my brother de Silva that the trustee is not a corporation.The appeal is allowed. The order of the District Court of September 12,1932, is set aside. The appellants are entitled to proceed with executionagainst the respondent personally. The respondent will pay the appel-lants the costs of this appeal and of the proceedings in the District Courtconsequent on his motion of May 25,1932.
de Silva A.J.—
The facts of this case are set out fully in the judgment of my brotherDrieberg, and I need not repeat them. As stated by him the questionbefore us for decision is, whether when a trustee contracts as trusteeand is sued and has judgment entered against him as such, he can compelthe judgment-creditor who seeks to execute his judgment against himpersonally to levy execution instead on the trust property. When aparty contracts with a trustee he has as a general rule the same rightsagainst the trustee as though the latter were not a trustee at all. If thetrustee has a right to be indemnified by the trust estate in respect of theliability incurred by him to another party then the latter has, in addition,a right to be placed in the trustee’s place against the assets of the trustestate. This additional right can be asserted only in proceedings inwhich the administration of the trust is being dealt with, with noticeto all parties interested in the trust. The Court must be satisfied insuch proceedings not only that the trustee is liable to the party contract-ing with him, but also that the trustee has a right of indemnity againstthe trust estate in respect of such liability. If, for instance, it is foundon going into accounts that the trustee is the debtor of the. estate, then theperson to whom he is liable will have no right against the estate itself.Again if the transaction entered into by the trustee is such that no rightof indemnity arises, for example, if the transaction is one unauthorizedby the trust, then the creditor has only the personal liability of the trustee* (1891) A. C. 190.■2 (.1900) 1 Ch. 199.
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DE SILVA AJ.—Hayley v. Nugaioela.
These principles are to be found in the judgment of Jessel M.R. inIn re Johnson: Shearman v. Robinson1 which was decided in 1879, andwhich reviewed earlier decisions.
The position being generally as I have set out above, the questionarises by what means and to what extent a trustee can limit the liabilityI have referred to. In the case of Robinson’s Settlement: Gant v. Hobbs ’where the trustees contracted ‘ as trustees but not otherwise ’ Buckley L.J.relying on the cases of Muir v. City of Glasgow Bank *, and Gordon v.Campbell*, held that the trustee had not incurred ‘personal liability’.Jn the case of Muir v. City of Glasgow Bank (supra) (a House of Lordsdecision) Lord Cairns thought that an executor who contracted ‘asexecutor and as executor only ’ had not incurred similar liability, and inGordon v. Campbell (supra) the position of trustee, who contracted ‘astrustees qua trustees only ’ was held to be the same. I venture to thinkthat all that was decided in these cases was that trustees who contractin adequate language can protect their private property in that theirliability is limited to the extent to which they have a right of recourseto the trust property. Once they redeem their liability to the creditorto such extent they are not liable any further. I venture to think alsothat to the extent indicated their liability was personal and that thecreditor could not have proceeded against the trust estate except in themanner I have set out in paragraph 1. Lord Blackburn in Muir v. Cityof Glasgow Bank (supra) said “ I have myself no doubt that if individualsenter into a contract because they are trustees, and for the benefit oi: thetrust, it would be prudent in them to stipulate that, though they bindthemselves to see that the trust funds are properly applied to fulfil thatcontract, their contract shall extend no further, and that they will not bepersonally liable to make good the deficiency, if any ; and if they expresssuch a limitation with sufficient clearness, and the other contractingparty (being sui juris) accepts such a limited engagement, he cannotcall on the trustees to do more than to fulfil that limited engagement ”.
However that be, it appears from the cases I have referred to that themere use of the words ‘ as trustees ’ in a contract, although they makeclear to the parties the capacity in which trustees contract, places nolimitation whatever on their ordinary liability. Lord Penzance inMuir v. City of Glasgow Bank (supra) said " But to exonerate a trusteesomething more is necessary beyond the knowledge of those who dealwith him that he is acting in that capacity, and it would not be sufficientin all cases to state that fact on the face of any contracts he may make.To exonerate him it would be necessary to show that upon a properinterpretation of any contract he had made, viewed as a whole—in itslanguage, its incidents, and its subject matter—the intention of theparties to that contract was apparent that his personal liability shouldbe excluded.”
The words ‘ as trustee ’ do appear on the face of the contract and onthe face of the decree. No attempt was made by the defendant to askfor a decree limiting his liability. It is clear that he was acting orpurporting to act in the capacity of a trustee, but there is nothing as far
> (1880) 15 Ch. 1). 548.* (1878-9) 4 Appeal Cases 337.
s (1912) 1 Ch. D. 717.* 1 Bell's App. 428.
DE SILVA AJ.—Hayley v. Nugawela.HUT
as I can see in the language, incidents and subject matter of the contractand decree which limits his' liability. The soundness of the principleof law involved is illustrated by the facts of this case. The defendanthas filed a list of temple property and he contends that this property isliable to execution and that his private property is not. The defendantdid not contest the claim. Even if he had contested it I doubt whetherthe scope of this action would have permitted an examination of thequestion whether the defendant has a right of indemnity against thetemporalities of which he is trustee in respect of the transaction he hasentered into with the plaintiffs. It is vital for the proper protection ofthe Buddhist temporalities that this question should be fully exploredby a competent Court in proper proceedings before they are held to beliable. There may be other difficulties in issuing execution against thetemporalities (as the defendant has invited the Court to do) but intothese I need not enter as I am of opinion, for the reasons given, that onthe decree in this case no execution can issue against the trust estate.
A point was made' in the course of the argument that the words ‘ astrustee ’ appear not only in the contract but also in the decree. In thereported cases which we have considered the words never occurred in adecree. I do not think this makes any difference. As I have said beforetrust property can be made liable only in proceedings dealing with theadministration of the trust, in which the accounts of the trustee are goneinto, in which it appears that the trustee is not a debtor of the estateand that he is entitled to an indemnity from the trust estate. Theposition of a creditor against the trust estate can never be higher thanthat of the trustee, and the position of the trustee must be explored inproper proceedings with notice to all parties interested before a creditorof the estate is allowed to reach trust property. Now the proceedingsunder consideration are not of this nature and it appears to me clear thatno decree entered in these proceedings can affect trust property eventhough the defendant is described ‘ as trustee ’. This description willonly entitle the. creditor to pursue his claim against the trust property inother proceedings if in fact he finds that the conditions necessary for suchpursuit exist. Whether he does so or not the personal liability of thetrustee remains unimpaired, and the trustee cannot prevent a creditorfrom proceeding against him personally..
One other point was dwelt upon in the course of the argument.Section 30 of the Buddhist Temporalities Ordinance, No. 8 of 1905,enables the trustees to sue and be sued as trustees. The section reads:—“It shall be lawful for the trustee to sue under the name and style of‘ trustees of (name temple) ’ for the recovery of any property vested inthem under this Ordinance or of the possession thereof, and for anyother purpose requisite for the carrying into effect the objects of thisOrdinance. They shall also be liable to be sued under the same nameand style, but shall not be personally liable in costs for any act bona fidedone by them under any of the powers or authorities vested in themunder this Ordinance.”
The question was considered whether this section and the Ordinanceas a whole made the trustees a corporation with power to contract as such.If it does, then the property of the corporation and not the property of
168
DE SILVA Ai.—Hayley v. Nugawela.
the persons constituting it would be liable in execution when trusteesenter into a transaction in a corporate capacity. In the first place it isto be noted there is no express provision such as is to be found in theSocieties Ordinance, 1891 (section 9 (1) ), the Co-operative Societies Ordi-nance, – 1921 (section 17), the Nuwara Eliya Board of Improvement(Amendment) Ordinance, 1924 (section 4), and a number of other Ordi-nances making the trustees a corporation. Such provision is notabsolutely essential so long as the intention to create a corporationis evident from the Ordinance (8 Halsbury, p. 320). Is such an intentionevident ? Section 17 of the Ordinance provides for the election of ‘ oneor three trustees ’ for every temple. If trustees so appointed are acorporation then they are a corporation aggregate and “ can as a generalrule only act or express its will by deed under its common seal ” (8 Hals-bury, p. 309), but the Ordinance does not provide for such action. Noseal is provided. The non-existence of a seal in the case of a bodyalleged to be a corporation, though not conclusive is cogent evidenceagainst incorporation (8 Halsbury, p. 309). Then again if the trusteesare to be regarded as a corporation the only properties possessed by itwould be the temporalities. The view that the trustee is a corporationwould therefore take away from the temporalities the protection ordi-narily afforded by law to trust property, namely, that the right of a credi-tor of a trustee against trust property is no higher than that of the trustee.The corporation could incur a debt, and the temporalities would be madeliable without the interposition of an inquiry by Court as to whether ornot the debt was properly incurred on behalf of the trust estate. I donot think the legislature can be presumed to have taken away thisprotection from the Buddhist temporalities when, as it appears fromthe Ordinance, it has not done so by express provision.
For these reasons I think the appeal must be allowed with costs.
Appeal allowed.