038-NLR-NLR-V-22-JABBAR-v.-MARIKAR-et-al.pdf
( 129 )
[Fuw. Bench.]
Present: Bertram C.J., De Sampayo J., and Schneider A.J. -JABBAR v. MARIKAR el at.
52—D. G. Colombo9 48,197.
Partition—Agreement by co-owner to sell property to a third party when
he purchased it at the sale among co-owners — Is agreement
obnoxious to Ordinance ?
The plaintiff iD a partition case entered into an agreementwith a third party, who was to finance the plaintiff, to sell theproperty to him should the plaintiff become the purchaser whenit was sold among co-owners. The appellant (a cftfendant-)moved that the commission to sell the land should be subjectto the condition that the plaintiff should not have the right tobid for or purchase the property when put up for sale amongco-owners.
Held, that it was premature at that point to investigate thequestion whether the plaintiff had committed any fraud.
Held, further, that the agreement by a co-owner to purcliaseon behalf of a third party was not obnoxious to the FartitionOrdinance.
The law intends that co-owners shall have the privilege ofpre-emption; but it does not limit the privilege. It does notpreclude them from making an advantageous sub-sale subsequentto a purchase, nor does it preclude them from arranging for sucha sub-sale in advance.
Bertram C.J.—y If it appeared to the Court that a co-ownerhad put himself in such a position that his participation in theauction would be equivalent to an abuse of the Court’s process,I apprehend that the Court would have an inherent power torestrain such a participation.**
T
FTR plaintiff entered into a notarial agreement with one
L. Mohamado Haniffa, the clauses of which material tothe action were as follows :—
Whereas the said Abdul Jabbar was declared entitled to anundivided half share of the land …. and under thedecree in the said case the said land was ordered to be sold :
And whereas the said sale has been advertised to be heldon November 22,1919 :
And whereas the said Abdul Jabbar, as one of the co-owners,is entitled to bid for and purchase the whole of the said land at thesaid sale for a sum of Rs. 8,000, at which sum the said land has beenpurchased and valued by the Commissioner.:
14
1920*
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1920.
Jabbar i).Marikar
(4) And whereas the said Mohamado Haniffa has agreed to supplythe said Abdui Jabbar with money to purchase the said land at thesaid sale for a sum not exceeding Rs. 8,500 :
And whereas the said Abdul Jabbar has agreed to convey to thesaid Mohamado Haniffa by a valid and effectual deed the said land•… in the event of the said Abdul Jabbar bidding for and
purchasing the said land at the said sale for a sum not exceedingRs. 8,500, and a certificate of sale being duly issued tp the saidAbdul Jabbar by the District Court, Colombo, in the said actionNo. 48,197 :
Now this agreement witnesseth …. In the event ofthe said Abdul Jabbar becoming the purchaser of the said landfor the said sum of Rs. 8,500 or any lesser sum …. heshall convey by a valid and effectual deed the said land to the saidMohamado Haniffa.
The si^stituted defendant filed the above agreement in Court,and moved that the plaintiff be disqualified from bidding andpurchasing the land as a co-owner.
The District Judge "(W. Wadsworth, Esq.) made the followingOrder: “ I consider the objection premature. If there is anyfraud in the sale, the Court can be moved at the proper time.”
The substituted defendant appealed.
Tisseveerasinghe (with him Croos-Dabrera), for appellant.—Oneco-owner bidding for a stranger is a fraud on the other co-owners,for at that stage in the auction none but co-owners are admitted asbidders. See 2 Lor. 41, 2 Pereira's Laws of .Ceylon 212. By sucha proceeding the other co-owners and intending purchasers mightsuccessfully be defrauded. The sale practically would be nominallyto the plaintiff but virtually to Mohamado Haniffa, who is not aco-owner, and not entitled to bid when the land is put up amongstco-owners only. When rules under section 8 of the PartitionOrdinance have not been followed the sale was cancelled. ((1898)Matara Cases 10.)
The object of section 8 in confining the sale in the first instanceto co-owners is dear. See Indian Partition Act 4 of 1893, sections
3, and English Partition Act, 31 and 32 Vic., c. 43, sections
4, and 5.
The objection is not premature, as the contention is that theplaintiff on the day he entered into the agreement ceased to be aco-owner for the limited purposes of section 8, and there should,therefore, be a declaration-that he is not qualified to bid.
To allow a sale under these circumstances and then move to have-it set aside if the plaintiff purchased will create complications andinvolve parties in unnecessary expense. Sale under a PartitionOrdinance cannot be set aside as ordinary sales. (15 N. L. R. 135.)
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1920.
Jabbar v.Marikar
Tiaseveerasinghe, in reply.
' Cur. adv. wilt.
September 2, 1920. Bertram C.J.—
I have read the judgment of De Sampayo J. aud agree with theviews therein expressed. On one point, however, I should like toreserve my opinion. If it appeared to the Court that a co-own§rhad put himself in such a position that his participation in theauction would be equivalent to an abuse of the Court’s process,
I apprehend that the Court would have an inherent power torestrain such a participation.
But such a question does not in fact arise. The law no doubtintends that co-owners shall have the privilege of pre-emption,but it does not limit the privilege. It doe» not preclude them frommaking an advantageous sub-sale subsequent to a purchase, nordoes it preclude them from arranging for such a sub-sale in advance.
I have come to the conclusion that it was the intention that everyco-owner should be entitled to make the most advantageous possibleuse of the privilege which the law confers upon him. By such anarrangement a? the present the appellant does not prejudice theother owners. The effect of the arrangement is to enhance theprice so that every co-owner shares the advantage of the sale.
I agree, therefore, that the appeal should be dismissed, with costs.
De Sampayo J.— .
Certain points of law relating to the auction of a land under adecree for sale in a partition action have arisen for decision in thiscase. The plaintiff was declared entitled to an undivided halfshare of the land, and the defendants to the rest of the land in-certain proportions. The third defendant having died, the appellantwas substituted in his place. The Court entered a decree for sale,and a commission to carry out the sale was issued to John Peiris,an auctioneer. The land was valued by the Commissioner atRs. 8,000, and was advertised for sale on November 22,1919. Thesale was, as usual, to be first among the co-owners at the appraisedvalue. For certain reasons the sale did not take place on thatday, and the commission being returnable on November 25, 1919,the plaintiff’s proctor on December 8, 1919, moved that the
A. St F. Jayawardene, for respondent.—Agreement amongstco-owners not to bid against each'other is not inequitable (2 C. L.R. 33). It is not illegal for two parties to agree not to bid againsteach other at a public sale. In re Carew’s Estate?- An agreementbetween two co-owners in a sale under the Partition Ordinanceis not illegal, and the sale is not thereby vitiated. Wettesinghev. Jayan? There is no fraud in the agreement made by theplaintiff in this case, and the present application is premature.
1858) 26 Beav. 187.
* {1891) 2 C. L. K. 33.
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1920.
De SampayoJ.
Jabbcvr vfMarikar
commission be .extended and re-issued to the Commissioner, Whenthis motion came on for consideration on February 13, 1920, thesubstituted defendant produced a notarial agreement enteredinto by the plaintiff and a third party, and, by way of objection tothe extension of the commission, made a counter motion. Theterms of this motion were not embodied in any written memorandum,but it appears from the petition of appeal that the application toCourt was “ to have tho plaintiff disqualified from bidding atthe sale on the ground that he had entered into a notarial agree-ment with a stranger to bid at the sale nominally for himself but topurchase the land on behalf of the said stranger.” The agreement,which was dated November 8, 1919, was to the effect that theplaintiff should bid for the property up to Rs. 8,500 at the sale on -November 22, 1919, and that if he purchased the property at that"or any less sum, he should, after obtaining a certificate of sale,convey the property to the other party to the deed for such sum,the other party agreeing to advance to the plaintiff the purchasemoney and the charges connected with the sale. The DistrictJudge considered that the objection was premature, and that ifthere should be any fraud at the sale the Court could be moved atthe proper time, and he accordingly allowed the plaintiff’s motionto extend and re-issue £he commission.
There is no precedent for the order asked for, and I consider itimpossible for the Court to make such an order. I can understandthe Court setting aside or otherwise interfering with a particularsale, after it has taken place, on the ground of fraud or irregularity,but I do not think that the Court can or ought tg make an orderbeforehand that a co-owner shall not bid at a sale to be held underthe decree. Such an order, to say nothing else, will, I think,amount to contravention of the express provision of the PartitionOrdinance. For section 8 provides that the property shall be putup for sale first among the co-owners, and I cannot hold that theCourt has authority to exclude one or more co-owners and orderthat the sale shall be only among the rest of them. I entirely agreewith the District Judge that the objection in any event was pre-mature. If the plaintiff or any other party should become thepurchaser at any sale, it would then be. time enough for the Courtto consider any circumstances vitiating the sale and to make suchorder as it might think fit.
The more important question, however, is whether the agreementbetween the plaintiff and the third party constitutes a good groundof objection if the plaintiff becomes the purchaser. For thispurpose I shall assume that the agreement is still operative, althoughthe particular sale which it contemplated had lapsed before thedate of the motion. Counsel for the substituted defendant-appellant put the matter as high as a case of fraud. I am unable totake that view.. I am not aware of any principle of law on which
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it can be declared that a co-owner is disqualified from pur-chasing the property with the intention of selling it again to another.The circumstance that he makes a previous agreement to sell inthe event of his becoming the purchaser at the sale does not surelymake any difference. It is said that the other co-owners would beplaced at a disadvantage, as they may not be able to compete on afooting of equality with the co-owner who has behind him a pros-pective buyer. That may be so in certain circumstanoes, but theprovision of the Ordinance for the sale among the co-owners isnot intended to ensure such equality. The disadvantage, if any,will be the same if one of the co-owners is possessed of more meansthan the others or is able to raise money beforehand for the pur-chase, but a co-owner in that position is not disqualified frombidding at the sale. On the other hand, a poof co-owner byentering into such an agreement as the present may be able toovercome the power of money on the part of a richer co-owner.The only authority cited on behalf of the substituted defendant-appellant is Sinne Lebbe v. Moonesinghe.1 That was a case whicharose under the old Partition Ordinance, No. 21 of 1844. It isnoticeable that the accepted fact in that case was not only that oneof the co-owners bid, not for himself, but for a stranger, but thatthe transfer was subsequently made out directly in favour of thestranger at the co-owner’s request. Moreover, it was a Court ofRequests case, and presumably the decision was that of a singleJudge only. I am unable to accept it as sound. So far as I know,it has never been followed. On the other hand, such transactionsas the present have not been uncommon since, and effect has beengiven to them without objection. Now that the question has beenraised, however, I am unable to agree that any element of fraudis involved in such an agreement as that between the plaintiff- andthe third party. It is a speculation which a co-owner, in my opinion,is at liberty to enter into if he chooses. It may be borne in mindin this connection that under the English law it is not illegal for. twoparties to agree not to bid against each other at a public sale, andthe sale is not thereby vitiated. In re Cwrew's Estate,2 Heffer v.Martyn? This principle has been extended in Ceylon-to an agree-ment between two co-owners in regard to a sale under the PartitionOrdinance. Wetlesinghe v. Jay an* It was suggested that thepolicy of the law was to keep the property in the family of theco-owners. This cannot be, because the co-owners may not belongto the same family, but may be persons deriving title by purchaseor some mode of acquisition other than inheritance. The factappears to me to be that the Ordinance has no further purpose inview than giving a right to the co-owners to bid and purchasein the first instance in preference to the general public, and is not
1 (1857) 2 Lor. 41.* (1867) 36 L. J. Ch. 372.
4 (1858) 26 Beav. 187.«(1891) 2. C. L. B. 33.
1920.
Dsi Samp a voJ.
Jabbar v.Marikar
( 134 )
1920.
De SaupayoJ. .
Jdbbar v.Marikat
concerned with anything which a coowner may intend to do afterpurchasing. Though the partition of a land is now the subjectof a statute, the principles of the Roman-Dutch law are still invokedin a case not expressly provided for. If the law were such asis contended on behalf of the appellant, one would expect someindication of it in the Roman-Dutch law, which is as strict as anysystem of law in regard to fraud ; but there is no such trace. Onthe contrary, Voet 10, 2, 22 on the actio familiee erciscundse contem-plates such an arrangement as the present. For, after alluding tothe determination of the preference by means of auction among theheirs, Voet proceeds “ admisso etiam quandoque ad licitationem emptorecxtraneo, si se non sufficere ad justa pretia ojferanda aut vincendoscoheredes vilius licitantes, heredum units profitealur.” It will benoticed that the reason stated for recognizing a stranger’s interven-tion is that any low bidding by one of the heirs may thus be metin the interest, of those who are unable to purchase with their ownmoney. This passage in Voet is based on the Code 3, 37; 3, whichlays down the same rule in connection with the action communidividundo. I do not, therefore, see any reason why a co-owner’sagreement to re-sell to a stranger, with the possibility of realizinga justum pretium, should bo regarded as involving any fraud on theother co-owners.
In my opinion the appeal fails, and should be dismissed, withcosts.
Schneider A.J.—
In this action, brought under the provisions of the Ordinance for, the partition or sale of lands held in common (No. 10 of 1863), thelearned District Judge decreed the plaintiff to be entitled to halfand each of the'three defendants to one-sixth of the property. Heordered a sale. Upon an application by the plaintiff for a re-issueof the commission for sale, the appellant, who is the defendant-substituted in place of the third defendant, deceased, opposed theissue of the commission unconditionally. He asked that it shouldissue with the condition attached that the plaintiff should not havethe right to bid for or purchase the property when it was put upfor sale'among the owners. He stated—and this is a fact—thatthe plaintiff had entered into an agreement notarially attested withA, who is a stranger to* the partition action, to sell and conveythe property to A should the plaintiff become the purchaser of itwhen-it was sold among the owners. By this instrument A agreed tofinance the plaintiff, to enable the plaintiff to purchase the propertywhen put up for sale among the owners for any price not exceedingRs. 600 above the upset price at which the property would be putup for sale, and the plaintiff agreed to sell and convey the properlyto A at the price at which he would purchase it should he become
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the purchaser, or in the event of the failure to perform this agree-ment specifically to repay to A with interest all moneys advancedby A to him.
The appellant contended that this agreement amounted to fraud.The learned District Judge held that it was premature at thatpoint of the proceedings to investigate the question whether theplaintiff had committed any fraud or not, and that the questionshould await developments after the sale had actually taken plaoe.It is from this ruling the appellant has appealed. In my opinionthat ruling is right. But whatever be the view taken, I do not thinkthe plaintiff’s act could be called a fraud. Even granting that it isfraud for one owner to purchase as a mere nominee of a strangerto the action property when put up for sale among the owners, itdoes not follow that the plaintiff is guilty of fraud because he enteredinto the agreement mentioned. It is quite possible that the plaintiffmay not bid at all, or become the purchaser, or that having becomethe purchaser he may not transfer to A, and the terms of his agree-ment may not entitle A to compel specific performance. I wouldaccordingly have dismissed the appeal for the same reasons as theDistrict Judge gave for his order, but the appeal was pressed onthe ground that the agreement entered into by the plaintiff wascontrary to the provisions or the object of the provisions of thePartition Ordinance, and especially of section 8 of that Ordinance.It therefore becomes necessary to consider this argument. I haveno fault to find with the contention that the intention of the Ordi-nance is to keep the property as far as possible among the owners.The preference given to a partition over a sale of the property, theright of pre-emption of the interests of the mere planter given tothe soil owner, the provision that the sale of the property shall beamongst the owners in -the first instance in every case of sale—allpoint unmistakably to that being the intention. But it seems to'me that the real question is not what the intention of the Ordinanceis, but whether, granting the intention to be that which it iscontended it is, was it intended to fetter the owners in the exerciseof their ordinary rights, that is to say, whether, when the provisionwas enacted that the sale shall be held first amongst the owners,was it intended that any of the owners who desired to purchaseshould not purchase with money he has borrowed for the purposeof so purchasing, or that when he had become the owner of theproperty by purchase at the sale amongst the owners he should notsubsequently sell that property to a stranger to the action ? If thecontention submitted on behalf of the appellant is to prevail, it isnot possible to stop short of those conclusions. -It seems to me unreasonable to hold that it was intended to fetteran owner who is a purchaser or an intending purchaser in the mannercontended. Why should not an owner who has not the moneypurchase the interests of his co-owners with money he borrows ?.
1920.
Schneider
A.J.
Jabbar v.Marikar
( 136- )
1920.
SCHNEIDHB
A.J.
Jabbar v.. Marikar
It is possible that if he should not purchase by that means, that oneof his co-owners may purchase the property for a trifle beyond theupset price to the prejudice of all the other owners. The greaterthe liberty given to the owners to promote competition amongstthemselves, the more likely it is that the property will fetch a goodprice. It was contended that an owner should not be permittedto purchase in his own name really but virtually as the nominee ofan outsider. Why not ? It must be conceded that once an ownerhas become the purchaser, there is no legal impediment to his sellingthe property to any one and at any price he pleases. He may dothis the moment he acquires title. What is the practical differencebetween his doing that and entering into an agreement to rersell toa stranger who finances him to enable him to purchase, and sellingto that stranger the moment he acquires title ? I see no difference.
I am therefore of opinion that it was never intended by the provi-sions that the sale shall be amongst the owners to fetter any one ofthe co-owners from the exercise of his right to borrow money, or topurchase with money supplied by strangers, or to enter into anagreement with a stranger to sell when he had become the purchaser,or to purchase having previously entered into an agreement to sellto a stranger. It is possible that facts may be proved which mayshow that one owner had become the purchaser in circumstancestantamount to a fraud upon his co-owners. In such a case theintervention of the Court might be invoked to prevent the perpe-' tration of the fraud. But such a case is quite different from thepresent. Here all the owners stood to benefit if the plaintifLabidedby his agreement and became the purchaser. He was not to benefitany more than any other owner, as his agreement was to sell at thesame price at which he purchased, and he was to purchase at anyprice not exceeding Hs. 500 over the upset price. The upset priceis the market price of the property as ascertained by the Commis-sioner’s valuation. The fact should not be lost sight of, that if theowners fail to purchase the property, it is put up “ immediately ”for sale by auction to the highest bidder. In that sale there is.noupset price. It is quite possible that the property may then besold for less than the upset'price at which it was put up for saleamongst the owners. Therefore, an owner^ who enters into anagreement similar to that into which the plaintiff had entered will,in such a case, have done that which was in the best interests ofall*the owners.
The appeal should therefore be dismissed, with costs.
Appeal dismissed.