Sri Lanka Law Reports
(1998) 2 Sri LR.
SUPREME COURTDHEERARATNE, J.,
SC APPEAL NO. 7/97CA NO. 259/91 (F)
DC COLOMBO NO. 14585/L' 16TH JANUARY, 1998.
Karunasiri v. Ratnasiri Perera (Dheeraratne, J.)
Registration of Documents – Benefit of prior registration – Loss of benefit bycollusion in obtaining subsequent instrument – Registration of DocumentsOrdinance – Section 7.
Soma who was the owner of an undivided share in a land sold her right titleand interest therein to the defendants pending a partition action, on deed P8.The said deed was not duly registered due to a defect in registration. After thefinal decree was entered in the partition action Soma sold lot 4 allotted to herin the partition action by deed P3 to K who had been put forward by the plaintiffto buy the land for him, unknown to Soma. Prior to the. sale to K, Soma toldK that she had already sold her interests but K showed a Survey plan andpersuaded her to believe that she was still the owner of a portion of the land.The valuable consideration for the transaction came from the plaintiff.
The evidence led in the case was insufficient to prove collusion between partiesto obtain the deed P3 within the meaning of subsection 2 of section 7 of theRegistration of Documents Ordinance.
Cases referred to:
Karunanayake and Others v. Gunasekera and others (1962) 65 NLR 529.
Lairis Appu v. Tennakoon Kumarihamy (PC) (1962) 64 NLR 97.
Aserappa v. Weeratunga (F.8) (1911), 14 NLR 417.
Hall v. Pelmadulla Valley Tea & Rubber Co., Ltd. (P.C) (1929), 31 NLR 55.
Appusingho v. Leeiawathie (1958) 60 NLR 409.
Ferdinando v. Ferdinando (1921) 23 NLR 143 at 148.
Arumugam v. Arumugam (1951) 53 NLR 490.
APPEAL from the judgment of the Court of Appeal.
P. A. D. Samarasekara, P.C with Keerthi Sri Gunawardena for the plaintiff-appellant.
I. G. N. Jacolyn Seneviratne with Damayanthi de Silva for the defendant-respondents.
Cur. adv. vult.
February 17, 1998
The appellant (plaintiff) instituted this action against the respondents(defendants) in the District Court seeking for ,ar declaration of title toa land called lot No. 4 of Kahatagahawatfa which is 1.03 perchesin extent. Admittedly lot No. 4 was allotted to one Soma PiyawathieHettiarachchi (Soma) by the final Decree entered in partition action
Sri Lanka Law Reports
(1998) 2 Sri LR.
No. DC Colombo 1425/P. Pending the partition action, Soma had soldher right title and interest in Kahatagahawatta by deed P8 of 20.7.79to the defendants. After the final Decree was entered, Soma sold thedivided lot No. 4 allotted to her, by deed P3 of 12.9.1986, to oneKatriarachchi a friend of the plaintiff, who in turn sold it by deed P4of the same date to the plaintiff.
The defendants deed P8 was not duly registered in terms of theRegistration of Documents Ordinance (New LE Chap. 135), in that,the new folio in which it was registered was not properly connectedto the folio relating to the previous registration affecting the same land,with necessary cross-references in the latter. Although the trial judgeheld that deed P8 was duly registered, the Court of Appeal, quiterightly, reversed that finding and both parties were agreed before usthat the Court of Appeal was right on that matter, (see Karunanayakeand others v. Gunasekera and others<1> re cross-reference in theprescribed manner). However, it was the finding of the Court of Appealthat the plaintiff was guilty of collusion in terms of subsection 7 (2)of the Registration of Documents Ordinance and that he has therebylost the benefit of prior registration of deed P3, that was canvassedbefore us.
Subsection 7 (1) of the Registration of Documents Ordinanceprovides that unregistered instruments are declared void againstsubsequently registered instruments; subsection 7 (2) reads;
“But fraud or collusion in obtaining such subsequent instrumentor in securing the prior registration thereof shall defeat the priorityof the person claiming thereunder".
It is clear that for this subsection to operate there must be present,one of the elements fraud or collusion, in one of the acts of either(a) in obtaining the subsequent instrument or (£>) in securing the priorregistration. A person may be guilty of fraud without being guilty ofcollusion, and vice versa. Facts of some cases might demonstratethe existence of both elements of fraud and collusion in any of theacts (a) or (b) above, as exemplified in the case of Lairis Appu v.Tennakoon Kumarihamy (Privy Council)121. However, the specific positionof the defendants as crystallised in the argument before us, was thatthe plaintiff was guilty' of collusion (but not of fraud) in obtainingthe deed P3 in favour of Katriarachchi (but not in securing priorregistration).
Karunasiri v. Ratnasiri Perera (Dhaeraratne, J.)
Let me now refer to some basic facts relating to the executionof the deed P3. Soma, the executrix of that deed is a close relativeof the defendants and was even called to give evidence at the trialon their behalf. The plaintiff inquired from Soma whether she wouldsell her interests in the land to him; that was before she sold herrights to the defendants. Soma refused. About 7 years after she soldher interests to the defendants, Katriarachchi asked whether she wouldsell her interests in the land to him. She told him that she had alreadysold her interests. Katriarachchi showed a survey plan to her andtold her that she was still the owner of a portion of that land. Sheagreed to sell the land to Katriarachchi for valuable consideration.Unknown to her, Katriarachchi was put forward by the plaintiff to buythe land for him and Katriarachchi transferred the property to theplaintiff the same day he purchased it. The valuable considerationfor the transaction came from the plaintiff.
It is the settled law that mere notice of the existence of a priordeed, or for that matter, of the fact that such deed was registeredin a wrong folio, will not deprive a subsequent purchaser of propertyfor valuable consideration, of the benefit of prior registration. SeeAserappa v. Weeratunga; (Full Bench);'3’ Hall v. Pelmadulla ValleyTea & Rubber Co., Ltd. (Privy Council);(4> Appusingho v. Leelawathie151and Lairis Appu v. Tennakoon Kumarihamy (supra). It is contendedon behalf of the plaintiff, that if at all, the evidence of Soma disclosesthe mere knowledge on the part of Katriarachchi and the plaintiff, ofthe existence of a prior deed.
“Collusion" is an agreement between two or more persons to actto the prejudice of a third party or for an improper purpose (The OxfordCompanion to Law – David M. Walker). In the case of Ferdinandov. Ferdinando<6> at 148 Bertram: CJ stated "Where, in these circum-stances, anything underhand or anything involving a pretence is donein concert, there is in my opinion, collusion. And in my opinion boththese elements figure in the present case".
The Court of Appeal appears to have thought that the facts ofthe instant case were on all fours with those of the case of Arumugamv. Arumugam171 and it relied heavily on the dicta of Gratiaen, J. inthat case. In Arumugam's case (supra), the dishonest intention ofThambimuttu, the common seller to both contesting parties, and aclose relative of the 2nd purchaser, was well-established and
Sri Lanka Law Reports
(1998) 2 Sri L.R.
Gratiaen, J. referred to those circumstances in following terms: “Theevidence clearly establishes that shortly before 1st October, 1947,if not earlier, Thambimuttu (whose financial condition during that periodmay be gauged from the circumstance that at the time of the trialhe was drawing a charitable allowance from the Ceylon Government)conceived the idea of dishonestly defeating the appellants rights ofownership by purporting to sell again some part of his interests whichwere no longer his to dispose of. The plaintiff, with full knowledgeof the true position, fortified by his recent discovery that the earlierconveyance 102 had in fact been registered in the wrong folio, agreedto purchase from Thambimuttu a share (which had already beeneffectively disposed of) in order that he may secure to himself apersonal advantage to the appellants' detriment. In pursuance of thiscommon design he secured the execution of the deed 102 andpromptly caused it to be registered in what he had discovered to bethe correct folio. In other words, he entered into a collusive transactionwith Tambimuttu and lent himself to the latter's intended fraud on hisprevious vendors. This thoroughly disreputable transaction took placewithin a short time of the date on which the appellants' rights under1D2 would have been strengthened by the acquisition of prescriptivetitle to the 1/4 share purchased by them in 1938".
Learned counsel for the plaintiff contended that in order todemonstrate that there was “collusion in obtaining such subsequentinstrument" within the meaning of the subsection, at least, it mustbe shown that Katriarachchi, as agent of the plaintiff, did collude withSoma the executrix to do something underhand to the detriment ofthe defendants. None can collude with oneself. A suggestion was noteven made to Soma, that she was a party to a collusive act. I findthat evidence led in the case is insufficient to prove collusion betweenparties in obtaining the deed P3.
For the above reasons I set aside the judgments of the Court ofAppeal and the District Court and enter judgment for the plaintiff asprayed for in the plaint. The appeal is allowed with costs of this courtfixed at Rs 10,000.
PERERA, J. – I agree.
GUNAWARDANA, J. – I agree.