JAYASINGHE AND OTHERS v. JOTHIWARDANA AND OTHERS

027-SLLR-SLLR-2000-V-1-JAYASINGHE-AND-OTHERS-v.-JOTHIWARDANA-AND-OTHERS.pdf


JAYASINGHE AND OTHERS
v.JOTHJWARDANA AND OTHERS
SUPREME COURT
FERNANDO. J. WIJETUNGA, J. AND
GUNASEKARA. J.
S. C. (S. L. A.) No. 81/99
A NOS. 496/93 & 497/93
C. RATNAPURA No. 7175/L.
26™ OCTOBER, AND
18™ NOVEMBER, 1999
Vindicatory action – Purchase of land with notice of an existing agreementwith another person for the sale of that property – Constructive trust -Section 93 of the Trusts Ordinance.
One Wadood was the owner of an undivided one sixth share of RazeenaEstate about 60 acres in extent. His share vested in the Land ReformCommission (LRC) under the Land Reform Law No. 1 of 1972. Wadooddesired to transfer a portion of the land to his three children by way ofan inter family transfer under section 14 of the Law and to own thebalance himself. According to a Plan No. 211 made in 1976 and amendedin 1981 the extent which he wished to own eventually on a statutorydetermination under the Law was four acres whilst the extent which heproposed to transfer to his children was seven acres. The statutorydetermination of the four acres was made only in 1982 leaving outsevenacres which the LRC allowed Wadood to transfer to his three children byway of an inter family transfer.
Pending the statutory determination by the LRC and the inter familytransfer, Wadood and his children executed an agreement No. 19880 in1976 to sell a defined eleven acre portion of Razeena Estate indicated inPlan No. 211 for the sum of Rs. 30.000/-. That agreement was dulyregistered. The full consideration was paid and the defendants wereplaced in possession. The agreement recited that the LRC had not madeits determination indicating' that Wadood and his children had no title tothe corpus but that they were expecting to obtain title from the LRC. Theagreement also provided that if within a month after Wadood and hischildren obtaining full title and powers of alienation, they failed toexecute deeds of transfer of the property or if the said parties failed to
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receive rights and powers from the LRC in respect of the said property,then they shall pay the defendants Rs. 30,000/- and a further sum ofRs. 10,000/- as penalty.
After they received necessary title and powers in virtue of the statutorydetermination and the. permission to make the inter family transfer,Wadood and his children by Deed No. 7289 dated 25.4.1985 sold theproperty in dispute to the plaintiffs for a sum of Rs. 75,000/-. Thereafter,the plaintiffs instituted an action against the defendants for a declarationof title to the land and ejectment and possession.
Held :
TheCourtofAppealhadupheldthedefendants’pleathat agreementNo. 19880 was an existing contract of which specific performancecould have been enforced, and that therefore the plaintiffs held theland in trust for the defendants in terms of section 93 of the TrustOrdinance; and no substantial question of law arose in respect ofthat conclusion.
Per Fernando, J.
“ it cannot be said that the obligation to repay the
consideration, together with a penally of Rs. 10,000/-, was astipulation for the benefit of the vendors – to allow them analternative to specific performance. On the contrary, it wasintended to provide relief to the purchasers in the event that theLRC refused to release the land; and to give them the right toelect if the vendors defaulted in executing conveyances.”
Case referred to :
1. De Silva v. Senaratne (1949) 50 NLR 313.
APPEAL from the judgment of the Court of Appeal.
Ms. Maureen Seneviratne. P. C. with Eardley Seneuiratne, J. B. L. Peirisand Gamini Senanayake for the plaintiffs – respondents – petitioners.
L. C. Seneuiratne, P. C. with S. Mahenthiran for the defendants -appellants – respondents.
Cur. adv. viill.
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June 01,2000FERNANDO, J.
The land which is the subject-matter of this action wastransferred to the five Plaintiffs-Respondents-Petitioners(‘'Plaintiffs'') by Deed No. 7289 dated 25.4.85. It is admittedthat the Plaintiffs then had actual (and not merely constructive)knowledge that their vendors had previously entered into aduly registered Agreement No. 19880 dated 2.6.76 to sell thesame land to the three Defendants-Appellants-Respondents("Defendants”). On 10.7.85 the Plaintiffs instituted this actionfor a declaration of title to that land, and for ejectment,possession, and damages. Although they succeeded in theDistrict Court, that judgment was set aside by the Court ofAppeal, which upheld the Defendants plea that AgreementNo. 19880 was an existing conLract of which specificperformance could have been enforced, and that thereforethe Plaintiffs held the land in trust for the Defendants interms of section 93 of the Trusts Ordinance.
What we have now to decide in this application is whethera substantial question oflaw arises as to the correctness of theconclusion of the Court of Appeal that Agreement No. 19880was indeed one of which specific performance could have beenenforced. This application was supported last year, and thedelay in the preparation of this judgment was because Counseldesired time till March this year to file written submissions.
The facts are not in dispute. One Wadood was the ownerof an undivided one-sixth share of Razeena (or Assina) Estateabout 60 acres in extent. His share vested in the Land ReformCommission (“LRC") under the Land Refonn Law, No. 1 of1972.
Wadood applied for permission to make transfers tohis three children under section 14 of the Law. By letterdated 13.9.74 the LRC informed Wadood that his applicationfor transfers within the family in respect of eight acres had
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been approved. That was subject to numerous conditions.(Although the Law refers to such transfers as inter-familytransfers, they are in fact intra-family transfers. However,Wadood did not fulfil the stipulated conditions, and executesuch transfers, at that time.)
Plan No. 211 dated 7.3.76 was made by D. W. Ranatunga,Licensed Surveyor, in respect of an eleven-acre block ofRazeena Estate. Lot 1 was three acres in extent, and wasdescribed as “Statutory Determination”, while Lot 2 was eightacres in extent, and was described as “I. F. T. area".
It was thereafter that Wadood and his three children(“the vendors”) entered into Agreement No. 19880 dated 2.6.76to sell a defined eleven-acre portion of Razeena Estate(namely, Lots 1 and 2 in Plan No. 211 dated 7.3.76) to thethree Defendants for a sum of Rs. 30,000/-; that Agreementwas duly registered; the full consideration was paid; theDefendants were placed in possession; and, in terms of theAgreement, the Defendants took over the entire labour force astheir employees, and took responsibility for the payment ofwages and EPF benefits.
That Agreement recited that althought the LRC had in itsfinal determination recommended divesting that land (andother lands elsewhere) to the parties of the first part (“thevendors"), the statutoiy Gazette notification had not yet beenpublished. Thus it was quite clear that the vendors had thenno title to the corpus, and were expecting to obtain title fromthe LRC – but the Agreement did not specify how: whether bymeans of a Statutory Determination under section 19 of theLaw, or intra-family transfers under section 14, or otherwise.
That Agreement is in Sinhala, and clauses 7 and 8 may betranslated as follows:
”7, Further, if the parties of the first part did not, withinone full month after receiving from the aforesaid LRC full title
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and powers of alienation, cause to be executed in favour of theparties of the second part transfer deeds of the said propertyat the agreed price, or defaulted in so doing, or
if the parties of the first part fail to receive from the LRCthe rights and powers which ought to be received in respect ofthe said property,
then there shall be paid by the four persons bound asparties of the first part to the persons bound as parties of thesecond part jointly and severally the sum of Rs. 30,000 paid bythe parties of the second part together with a further sum ofRs. 10,000 as penalty, and the income derived from the saidproperty during the said period shall be renounced in favourof the parties of the second part, and
further the parties of the first part shall not sell, mortgage,etc, to any outsider the property subject to this agreement tosell, or do any other act which will diminish the value of thesaid property.
Further, that all expenses of the deed of transfer to beexecuted during the said period, after the receipt from the LRCby the parties of the first part as aforesaid of approval andrights in respect of the said land, shall be borne by the partiesof the second part.
I must observe that the vendors obligation to transferarose only after they acquired “full title mid powers ofalienation”.
Nothing happened for over five years. There was neither aStatutory Determination nor an intra-family transfer. On9.9.81 Plan No. 211 was amended, by another surveyor,and the same eleven-acre corpus was sub-divided into Lot 1 A,four acres in extent (consisting of Lot 1 and a portion of Lot 2),and Lot 2A seven acres in extent (being the remaining portionof Lot 2). Lots 1A and 2A were described as "Statutorydetermination” and I. F. T. area”, respectively.
ERRATA
(2000) 1 Sri L. R., Part 5, Page 128, line 8, substitutefor the words and figures “SC APPLICATION NO.188/97”, the following :
“SC APPEAL NO. 188/97”
(2000) 1 Sri L. R., Part 8, Page 209, line 1, substitutefor the word “officer” the following words :
“officer. The learned D. S. G. stated”
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Thereafter Wadood obtained title to a four-acre extentof “Assina” Estate, described as Lots 1106 and 1108 in theSurveyor-General’s FVP Plan No 39, by virtue of the StatutoryDetermination dated 23.6.82 made under section 19published in the Gazette of 23.6.82. Both Counsel haveproceeded on the basis that this corresponded to Lot 1A inPlan No 211.
At this stage, the vendors only had title to Lot 1A – fouracres in extent. It seems probable that the approval granted in1974 for intra-family transfers had lapsed, and that thestipulated conditions had not been fulfilled. But even if it hadnot lapsed, the undisputed fact is that upto April 1982Wadoodhad not transferred Lot 2A to his three children. Consequently,Wadood himself could not transfer Lot 2A to the Defendants,because – if at all – the LRC had given him only a right totransfer to his children; and his children could not transferLot 2A to the Defendants because they themselves had not yetacquired title from Wadood. Thus the vendors did not have “fulltitle and powers of alienation” of the corpus.
Wadood then made an attempt to transfer title to hischildren. By Deed of Gift No 7139 dated 5.4.82 he purportedto transfer to his three children an undivided one-sixth shareof Razeena Estate, sixty acres in extent. That transfer was notdescribed as an intra-family transfer, and Wadood made noclaim to a right to transfer by virtue of section 14 of the Law orany authority from the LRC. The corpus was not described asLot 2A in Plan No 211. Accordingly, the transferees acquiredno title to Lot 2A.
Although the relevant document was not produced, it isnot disputed that in 1983 the LRC had granted approval forintra-family transfers in respect of Lot 2A.
That did not validate Deed No 7139. Wadood thenexecuted a Deed of Declaration No 1284 dated 26.9.84, whichrecited that by letter dated 20.7.83 the LRC had granted
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permission to transfer Lot 2A, by way of gift, to his children.By that Deed Wadood declared that the undivided one-sixthshare of Razeena Estate gifted by Deed No 7139 was “presentlydescribed as a divided portion as fully described in the secondschedule” (i. e. Lot 2A), and that the "covenants and conditionsin the said Deed of Gift No 7139 contained shall be applicablein respect of [Lot 2AJ”. Deed No 1284. read with Deed No 7139,amounts in my view to an intra- family transfer by Wadood tohis three children.
Thus it was only on 26.9.84 that the vendors had ”fulltitle and powers of alienation”, and were entitled to executeconveyances of the entirety of the eleven acres covered byAgreement No 19880.
There is no evidence that the vendors either informed theDefendants that they had obtained title to the entire corpus orcalled upon them to tender draft conveyances.
By Deed No 7289 dated 25.4.85, the vendors sold thecorpus to the Plaintiffs for a sum of Rs. 75,000/-. The Plaintiffsthen instituted this action on 10.7.85. The Defendants pleadedthat the Plaintiffs had purchased the corpus with notice of anexisting contract of which specific performance could havebeen enforced, and that therefore the Plaintiffs held the corpusin trust for the Defendants in terms of section 93 of the TrustsOrdinance.
I must digress at this stage to mention a matter which firstarose only during the hearing. Although eleven acres hadvested in the LRC, our attention was drawn only to the StatutoiyDetermination which divested four acres. Further, the 1974approval for intra-family transfers appeared to have lapsed.Was title to the remaining seven acres still vested in the LRC?If that was the position, two questions arose which 1 put toCounsel. First, the vendors had not acquired "JulL title andpowers of alienation”, and therefore the time for transfer interms of Agreement No 19880 had not yet arrived, and the
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period of one month specified in clause 7 had not expired,when Deed No 7289 was executed. Second, in any event, DeedNo 7289 could not have transferred title in respect of theseven-acre Lot 2A.
However, it is now clear, upon a scrutiny, of DeedsNos 7139 and 1284, that the LRC did approve an intra-familytransfer in 1983; and that Deed No 1284 was an intra-familytransfer.
Learned President's Counsel for the Plaintiffs has dealtextensively in her written submissions with the question oftitle to the seven acres, maintaining that only four acres hadbeen divested by the LRC; that the Plaintiffs now confine theirclaim to a declaration of title only to those four acres; and thatthe balance seven acres remain vested in the LRC. Thesesubmissions are mistaken. Either they assume that approvalfor an intra-family transfer is not enough, and must befollowed up by a divesting of the land, or they fail to take noteof the fact that Deed No 1284 (read with Deed No 7139)amounts to a valid intra-family transfer.)
Learned President’s Counsel’s contentions during theoral hearing were that special leave to appeal should begranted because (a) Agreement No 19880 provided for analternative or substituted obligation in the event of default inperformance, and thereby excluded specific performance: and(b) clauses 7 and 8 cast obligations on the Defendants totender draft conveyances, etc, within one month after thevendors obtained title, which the Defendants had failed to do,and accordingly, in any event, they were no longer entitled tospecific performance of the Agreement.
I entirely agree with the judgment of the Court of Appealthat Agreement No 19880 does not provide for an alternativeor substituted obligation. The purchasers had done everythingthey possibly could: nothing more remained to be done by
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them except to tender the draft conveyances when the vendorshad acquired full title. In regard to the vendors, however, therewas a total and absolute prohibition on alienating theproperty, and that was not restricted to the period of onemonth after acquiring full title. Taken in the context of theentire clause 7 (and the whole Agreement) it cannot be saidthat the obligation to repay the consideration, together with apenalty of Rs. 10,000, was a stipulation for the benefit of thevendors – to allow them an alternative to specific performance.On the contrary, it was intended to provide relief for thepurchasers in the event that the LRC refused to release theland; and to give the purchasers the right to elect if the vendorsdefaulted in executing conveyances. De Silua v. Senaratne,l)is on all fours.
As for the second contention, clearly Agreement No 19880made it the purchasers’ responsibility to tender draftconveyances. However, they could do so only after theybecame aware that the vendors had acquired full title. Inthat context, was it the vendors' duty to inform the purchaserswhen they had acquired full title or did the purchasers have tofind that out for themselves?
Agreement No 19880 is silent on that matter. The fact thatthey had acquired full title was a matter especially within theknowledge of the vendors. Indeed, it would be fair to say thatit was exclusively within their knowledge, because there wasno way in which the purchasers could be certain of finding thatout within a month. The grant of approval for an intra-familytransfer was a matter between the LRC and the vendors;and even when the vendors executed the conveyances thepurchasers would not know. It is true that the purchaserscould search the Land Registiy at frequent intervals, buteven monthly searches would not have ensured discoverywithin one month, as there was no obligation to submit theconveyances for registration, within one month or otherwise.It was suggested that the purchasers might have filed a
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caveat – but although that might have delayed or preventeda transfer, that would nevertheless not have ensured themtimely information as to the acquisition of title by the vendors.
I hold that it was an implied term of the Agreement that thevendors should notify the purchasers when they had acquiredfull title, and that the period of one month must be reckonedonly from the date of such notice.
In accordance with the usual principles governing theburden of proof, the burden was not on the Defendants toprove that the vendors had not informed them; if the Plaintiffsdesired to prove that the vendors had given notice to theDefendants, the burden of proving that was on the Plaintiffs.That they have failed to do.
On none of the above questions is there any doubt ordifficulty. Special leave to appeal is therefore refused withoutcosts.
WIJETUNGA, J.- I agree.
BANDARANAYAKE, J. I agree.
Special leave to appeal refused.