016-SLLR-SLLR-2007-V-2-KUMARASINGHE-v.-DINADASA-AND-OTHERS.pdf
sc
Kumarasinghe v
Dinadasa & others
203
KUMARASINGHEv
DINADASA AND OTHERSSUPREME COURTJAYASINGHE, J.
TILAKAWARDANE, J. ANDMARSOOF. (PC) J.
S.C. (APPEAL) NO. 56/2002FEBRUARY 07TH.2006
Registration of Documents Ordinance, No. 23 of 1927 – Fraud and collusionwithin the meaning of section 7(2), Evidence Ordinance – Presumption undersection 144 considered.
The defendants claimed title to the same land on deeds emanating from acommon owner on the basis of prior registration. The plaintiff disputed theclaim of the defendants on the ground that the said claim frustrates for thereason of fraud or collusion in obtaining the said deeds or securing priorregistration thereof by the defendants.
The main question considered by the Supreme Court was whether the benefitof registration that has accrued to the defendants-appellants can be negatedby the application of section 7(2) of the Registration of Documents Ordinance.
Held:
The plaintiff in order to seek benefit under section 7(2) has either toestablish fraud or collusion.
Whether the plaintiff had established fraud or collusion is entirely amatter for the District Judge to decide on the evidence unfolded inCourt. At the end of the case for the plaintiff, if the defendants chooseto keep quiet then they do so at great risk.
If fraud had to be proved on a balance of probability the failure on thepart of the defendants to give evidence could be held against them.
A Civil Court when considering a charge of fraud requires a higherdegree of probability than that it would require in establishingnegligence.
Per Nihal Jayasinghe, J:
"Even though it is unnecessary to establish collusion beyond reasonabledoubt all the items of evidence point to the fact that the registration of thedeed of the plaintiff in the wrong folio was as a result of a collusivearrangement between Podisingho and the defendants."
204
Sri Lanka Law Reports
[20071 2SriL.R
Per Nihal Jayasinghe, J:
'In the teeth of damning evidence it was inconceivable that the defendantscould have given evidence and subjected themselves to cross-examination.*
Cases referred to:
Lairis Appu v Kumarihamy 64 NLR 97.
Arumugam v Arumugam 53 NLR 490.
Ferdinando v Ferdinando 23 NLR 123.
Homelw Neuberger Products Ltd. 1957 1QB 247.
Baferv Bater 1956 3 AER 458.
Ceylon Exports Ltd. v Abeysundera 35 NLR 417.
APPEAL from the judgment of the Court of Appeal.
L.C. Seneviratne, P.C. with Lai C. Kumarasinghe for defendant-respondent-appellant.
Gamini Marapana, P.C. with Navin Marapana for the plaintiff-appellant-respondent.
Cur.adv.vult.
May 18, 2007
NIHAL JAYASINGHE, J.
Plaintiff-appellant-respondent (hereinafter referred to as theplaintiff) instituted action for a declaration of title to the landdescribed in the first schedule to the plaint and for an enjoiningorder, interim injunction and the permanent injunction restrainingthe defendarit-respondent-appellants (hereinafter referred to asdefendants) from entering the said land, disputing the title andpossession of the plaintiff and alienating the said land.
The defendants claimed title to the same land on deedsemanating from a common owner which they maintained were dulyregistered and claimed title to the said property as against theplaintiff on the basis of prior registration. The defendants furtherclaimed damages from the plaintiff for unlawful possession of thesaid land and for restoration of possession. The plaintiff disputedthe claim of the defendant based on prior registration by contendingthat the said claim is defeated on account of fraud or collusion inobtaining the subsequent instrument or securing prior registrationthereof. The plaintiff relied on section 7(2) of the Registration of
sc
Kumarasinghe v
Dlnadasa & others (Nihal Jayasinghe, J.)
205
Documents Ordinance. The matters that arose for determinationtherefore were whether –
the defendants were entitled to the benefits of priorregistration of their deeds over that of the plaintiff; and
the said claim of prior registration has been defeated onaccount of fraud or collusion in obtaining the saidinstruments or securing prior registration thereof.
The learned Additional District Judge held against the plaintiff onboth grounds aforesaid and dismissed the plaintiffs' action. Theplaintiffs appealed to the Court of Appeal and the Court of Appealby its judgment dated 22.03.2002 allowed the appeal and directedthat judgment be entered in favour of the plaintiff-appellant asprayed for in the plaint with costs. It is against this order that thisappeal has been referred to this Court.
The main issue which has to be determined by this Court iswhether the plaintiff can obtain relief under section 7(2) of theRegistration of Documents Ordinance.
It is admitted between parties that one Podisingho Weerasinghewas at one time the owner of the land in suit on Deed No. 2143 (P2)of 10.04.1991 attested by Pinto Moragoda, Notary Public. It is alsoadmitted between parties that the said Weerasinghe by Deed ofTransfer No. 70636(P3) of 14.05.1991 attested by JayasekeraAbeyruwan transferred the said land to the plaintiff for aconsideration of Rupees One Million. It is also admitted that thesaid Weerasinghe thereafter on 11.07.1991 and 10.08.1991purported to convey the same land to the 1st to 4th defendants-appellants on Deeds Nos. 13499, 13571 respectively.
The said 1st to 4th defendants on 20.08.1991 by Deed No. 624sold the said land to one Chandrapala who on 08.11.1991 by DeedNo. 704 sold the same land to the 1st to 4th defendant-appellantsand the 6th appellant.
It is also admitted that as at the date of execution of Deed No.70636 in favour of the plaintiff the deed on which the saidPodisingho got title i.e. Deed 2143 (P2) had not yet been registeredand that in view of the delay in registering the said deed theregistration of the plaintiff's Deed No. 70636 (P3) was also held up.
206
Sri Lanka Law Reports
[2007] 2 Sri L.R
As Deed No. 2143 (P2) was yet to be registered the notary whoexecuted deed No. 70636 (P3) the said Jayasekera Abeyruwan,Notary Public specifically appended that the said Deed No. 70636(P3) should be registered in the same folio as Deed No. 2143(P2).
It has to be stated here that Deed No. 2143 (P2) dated 10.04.1991had been tendered for registration on 12.02.1991 and registered on
in folio B682/57. That Deed No. 70636 (P3) dated
was tendered for registration on 23.05.1991 andregistered on 27.08.1991 in folio B 683/073 with no cross referenceto folio B 682/57. Deed No. 13499 on 11.07.1991 has beenregistered in folio 682/201 cross referenced to folio B 682/57 andDeed No. 15371 dated 10.08.1991 registered in folio 682/203 crossreferenced to folio B 682/57. That Deed No. 13571 dated
registered in folio B 682/203 cross referenced to folio B682/57. Deed No. 624 dated 20.08.1991 registered on 06.11.1991in folio B 682/57. It appears that at the time Deed No.70636 (P3)was registered Deed No. 2143 (P2) has already been registered tofolio B 682/57 and despite specific instructions contained in DeedNo. 70636 (P3) by the Notary Abeyruwan, it was not registered inthe same folio as Deed No. 2143 (P2). However, all subsequentdeeds drawn up by the original owner in favour of the defendant-appellants have been registered in the correct folio. Thus, as setout before, the question to be determined by this Court is whetherthe benefit of registration that has ensured to the defendant-appellants can be negated by the application of section 7(2) of theRegistration of Documents Ordinance. That there was fraud orcollusion in the delay and/or improper registration of Deed No.70636 (P3).
The plaintiff in order to seek benefit under section 7(2) has eitherto establish fraud or collusion. In Lar'rfs Appu v Kumarihamy0), itwas held by Lord Devlin that for the purpose of section 7 of theRegistration of Documents Ordinance there must be "actual fraudin the sense of dishonesty1’, and that mere notice of priorregistration is not enough. It was also held that "the words ‘inobtaining such subsequent instrument' in section 7 of theRegistration of Documents Ordinance do not exclude the case of acollusion between the transfer or and the transferee." In Arumugamv Arumugarri2> the vendor having sold his share in the property had
sc
Kumarasinghe v
Dinadasa & others (Nihaf Jayasinghe, J.)
207
placed the vendee in possession. Thereafter the vendor havingdiscovered that the Deed of Sale has been registered in the wrongfolio sold it to another who promptly had his deed registered in thecorrect folio. His Lordship held that there was collusion. Courtfollowed a dictum of Betram CJ.( in Ferdinando v Ferdinand^3)where it was stated that there was collusion within the meaning ofthe Registration of Documents Ordinance where the evidenceestablishes the joining of two parties in a common trick. Gratiaen,J. stated further that
"human ingenuity is such that the categories of fraud andcollusion are far too varied to permit any comprehensivedefinition which would fit every possible case which might arise for adjudication between competing instruments affectingland under the Registration of Documents Ordinance. Theprovisions of section 7(2) are by no means confined totransactions where some fiduciary relationship exists or wherethe subsequent purchaser to whom fraud or collusion isimputed is proved to have taken an active part in the earliersale over which he claims priority. If any person knowing thathis proposed vendor had effectively parted with his interest ina property in favour of someone who has entered intopossession of the property as its lawful owner, nevertheless,and in the hope of taking advantage of some recently detectedflaw in the registration of earlier deed purports to purchasefrom that vendor certain right in the property which havealready been disposed of, he is guilty of ‘collusion’ within themeaning of section 7(2) of the Ordinance. The law does notgrant benefit of such prior registration to transactions of thiskind."
Mr. Marapana, President’s Counsel in support of his submissionthat the defendants are guilty of both fraud and collusion arguedthat the notary who attested the Deed No. 70636 (P3) had clearlyindicated therein that it should be registered in the same folio as theDeed No. 2143 (P2) and that the officials of the Land Registry andPodisingho Weerasinghe were aware of. He submitted further thataccording to the Deputy District Registrar of Land, KurunegalaDeed No. 2143 (P2) had been tendered for registration on
but that due to a fault that the relevant ’Paththuwa’ had
208
Sri Lanka Law Reports
120071 2 Sri L.R
not been set out it was to be sent by the registered post to the saidWeerasinghe on 20.06.1991 and mysteriously the saidWeerasinghe had come to the Land Registry the very next day andhad personally taken delivery of the deed which was supposed tobe sent to him under registered cover, filed an appeal in theRegistrar of Lands in Colombo and obtained an order in his favourand got the deed registered on 25.06.1991 in folio 682/57.
Mr. Marapana, President's Counsel adverting to the evidence ofthe District Deputy Registrar that when a deed is sent forregistration and subsequently returned due to some flaw in it all thedetails regarding the said deed are entered in the folio maintainedfor it. It is only the relevant details about the transfer are left blankuntil such time the flaw is corrected and the deed sent back forregistration. Mr. Marapana urged very strenuously that at the timethe Deed No. 70636 (P3) was registered i.e. on 27.08.1991 in folioB 683/173 the details of the Deed P2 were already entered in therelevant folio, and there is no reason why the officials of the LandRegistry could not have followed the lawful instructions on DeedNo. 70636 (P3) and entered it in the same folio in which the detailsof P2 already were. But what the officials of the Land Registrychose to do was to register Deed No. 70636 (P3) in a different foliototally disregarding the notary's detailed instructions. There was noexplanation forthcoming from the witnesses of the Land Registry asto why the express instructions given by the Notary Abeyruwanwere not followed.
It is relevant at this point to advert to the evidence of oneDayananda who gave evidence before the learned District Judge.He had stated that the defendants had said to him that this land inquestion has already been sold to a gentleman in Minuwangodaand that they could resell the said land before the registration iseffected by the purchaser from Minuwangoda. That he does notwant to get involved in transactions and that he only required themoney that he had advanced to Weerasinghe. Dayananda hadstated in his evidence that the defendants discussed amongthemselves that they should get the property written in their names,in order to recover the monies they had advanced to Weerasinghe,despite the knowledge they had that the property had already beensold to the plaintiff. The learned President's Counsel went on to
sc
Kumarasinghe v
Dmadasa & others (Nihai Jayasinghe, J.)
209
submit that the conduct of the defendants cannot be consideredmere notice and that there was a concerted effort on the part of thedefendants to get another deed in their favour before plaintiff'sdeed was registered. Learned President's Counsel submitted thatthe conduct of the defendants and the said Podisingho clearlyestablished beyond doubt that they acted not only fraudulently butalso in collusion and has support of reasoning in both Lairis Appu vKumarihamy and that of Arumugam v Arumugam. Mr. Marapanainvited attention of Court to the fact that none of the defendantsgave evidence to controvert the evidence of Oayananda or toexplain their conduct.
Mr. L.C. Seneviratne, President's Counsel for the appellantsubmitted that it was unnecessary for the defendants to have givenevidence for the reason that fraud had to be proved beyondreasonable doubt and since that has not been proven to thatdegree the defendants were not obliged to give evidence tocontradict Dayananda's testimony.
It is my considered view that whether the plaintiff hadestablished fraud or collusion is entirely a matter for the learnedDistrict Judge to decide on the evidence unfolded in the Court andit is not for the defendants to make that decision. At the end of thecase for the plaintiff if the defendants chose to keep quiet then theydo so at great risk. If as contended by Mr. Seneviratne, President'sCounsel the plaintiff fell short of establishing his case then thelearned District Judge who is adjudicating the issues is quite likelyto hold against the plaintiff. The learned President's Counsel for theappellant conceded that if fraud had to be proved on a balance ofprobabilities the failure on the part of the defendants to giveevidence could be held against them. The standard of proofregarding allegation of crime in civil proceedings was considered inthe case of HorneI v Neuberger Products LtdS4) The plaintiff in thatcase claimed damages for breach of warranty or alternatively forfraud. The matter for determination before Court was whether adirector of the defendant company had made a fraudulentmisrepresentation to the effect that the machine which was thesubject matter of the sale was a reconditioned machine. If theDirector did so represent, there was fraudulent misrepresentationbecause he knew that the machine had not been reconditioned.
210
Sri Lanka Law Reports
12007} 2 Sri L.R
The Court dismissing the claim for damages for breach of warrantyon the ground that the parties did not intend the Director'sstatement to have contractual effect, nevertheless held that it wassatisfied on a balance of probabilities but not beyond reasonabledoubt that the statement was in fact made and accordinglyawarded damages for fraud. On appeal it was held by the Court ofAppeal that on an allegation of a crime in civil proceedings thestandard of proof was on a balance of probabilities. In the case ofBaterv Bateffi where Lord Denning observed that in civil cases thecase must be proved by preponderance of probabilities but theremay be degrees of probabilities within that standard. The degreedepends on the subject matter. A civil court when considering acharge of fraud will naturally require for itself a higher degree ofprobability than that which it would require when asking ifnegligence is established. It does not adopt so high a degree as acriminal court, even when it is considering a charge of criminalnature. Even though mere notice of prior registration is consideredinsufficient to establish fraud as held in Ceylon Exports Ltd. vAbeysundera^ the slightest element of moral blame in addition tonotice would constitute fraud. Section 7(2) has two elements, fraudor collusion. If fraud has to be established on a balance ofprobabilities and quite naturally standard of proof in respect ofcollusion shall be the same standard of proof. The conduct ofPodisingho in retrieving the Deed No. 2143 from the Land Registrysuggests a strong motive to commit a fraud. It is most unusual thatPodisingho the owner of the land having sold the property to thedefendants and having obtained the full consideration would seekto regularize a defect in the deed and waste his time to travel all theway to Colombo to obtain an order for the registration of the deed.The element of collusion can be gathered from the conduct of bothWeerasinghe and the defendants. It is in evidence that thedefendants along with Weerasinghe visited the Land Registry inKurunegala many times. That they considered various options ofobtaining the monies that had been advanced to the saidWeerasinghe. Obtaining a conveyance of the land in their favourand reselling it to recover their money, whilst being aware that theland has already been sold to a buyer from Minuwangoda was anoption that was also considered. There was an element of urgencyin obtaining the defendants deeds registered before the original
sc
Kumarasinghe v
Dlnadasa & others (Nihai Jayasinghe, J.)
211
buyer could effect his registration. On the facts disclosed theirresistible inference would be that Weerasinghe along with thedefendants were guilty of collusion. Even though It is unnecessaryto establish collusion beyond reasonable doubt all the items ofevidence points to the fact that the registration of the deed of theplaintiff in the wrong folio was as a result of a collusive arrangementbetween Podisingho and the defendants. The defendants whenthey sought to have the subsequent instrument registered wereaware that the plaintiff has been placed in possession by the saidWeerasinghe. In the teeth of this damning evidence it wasinconceivable that the defendants could have given evidence andsubjected themselves to cross examination. The Court was entitledto draw the presumption under section 114 of the EvidenceOrdinance.
Mr. Seneviratne the learned President's Counsel also submittedthat the defendants were aware that the Instruments No. 70636(P3) has not been registered and sought to take advantage whichthe defendant could rightfully do. There can be no dispute on that.But the circumstances here are entirely different. The defendantshaving advanced money to Weerasinghe in order to recover thesaid sum sought to contrive a scheme which was both fraudulentand collusive. I see no reason to interfere with the judgment of theCourt of Appeal. Appeal is accordingly dismissed with costs.
TILAKAWARDANE, J.-I agree.
MARSOOF, (PC) J.-I agree.
Appeal dismissed.