M. H. M. SHAFEEK, Appellant, and G. H. G. SOLOMON DE SILVA and 2 others, Repond

104-NLR-NLR-V-69-M.-H.-M.-SHAFEEK-Appellant-and-G.-H.-G.-SOLOMON-DE-SILVA-and-2-others-Repond.pdf


M. X. G. FERXAXDO, C.J.—Shafeek v. Solomon de Silva
481
1967Present: H. N. G. Fernando, C.J., and Sirimane, J.M. H. M. SHAFEEK, Appellant, and G. H. G. SOLOMON DE SILVAand 2 others, Respondents
S. C. 13416-1—D. C. Guile, 6611)
Mortgage—Hypothecary action—Order for iaatte of atiinmona—filing of declarationrequired by a. 8 of the Mortgage Act ia condition precedent—Failure to file a itchdeclaration—Effect—Principles applicable in determining whether or not «proviaion of procedural law ia imperative—Mortgage Act (Cap. 80), ae. ■>, 8,It, 10,12,13,14, 15,10, 18, 25, 29, 31, 37.
In a hypothecary notion, the failure of a Proctor to file, before the issue ofsummons, the declaration required by section 8 of the Mortgage Act regardingregistration of lie pendena, etc., renders null and void (and not merely voidable)the hypothecary decree ultimately entered and the sale in execution of it. Insuch a case, a person who bought the mortgaged property from the mortgagorsubsequent to the date of the mortgage bond and prior to the institution of thehypothecary action has valid title to it, as against the purchaser at the sale inexecution of the hypothecary decree, even if he was not entitled to notice of thehypothecary action by reason of his failure to register his address : soction10 of the Mortgage Act would not be applicable to him.
A,PPEAL from a judgment of the District Court, Gallo.
C. Ranganathan, Q.G., with M. T. M. Sivardeen, for 2nd Defendant-Appellant.
H. W. Jayewardene, Q.C., with D. R. P. GoonetiUeke, for Plaintiffs-Respondents.
S. Sharvananda, with C. Clutkradamn, for 1st Defendant-Respondent.
Cur. adv. vult.
July 4, 1967. • H. N. G. Fernando, C.J.—
There arises in this appeal a question of much importance and ofsome difficulty involving the construction of the Mortgage Act. (Cap. 89).
One Deen, a Notary, had on 1st March, 1952 mortgaged a land to thtTGrown as security for the due performance of his duties as a Notary,■the- bond was put in suit in action No. X 2203 D. C. Galle on 28thFebruary 1957, and upon Deen’s consenting to judgment, a hypothecarydecree was entered in September, 1957. The present plaintiff purchasedthe land at a sale in execution of t he hypothecary decree, and claimstitle under a Fiscal's conveyance in his favour dated 15th March 1961.
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H. X. G. FERNANDO, C.J.—Shafeeh v. Solomon de Silva
Deen had in November 1955 sold the land to the present 2nd defendant .The conveyance in the 2nd defendant’s favour was registered inNovember 1955 in the same Folio in which the mortgage bond wasregistered. The position taken for the 2nd defendant in this action isthat the decree and sale in. the mortgage action were void, and thatthe 2nd defendant continues to have title to the land by virtue of theconveyance of November, 1955.
Section 8 of the Mortgage Act provides that “ An order for the issue ofsummons in a hypothecary action shall not be made by any court unlessa declaration under the hand of a Proctor is filed of record Tiredeclaration must certify that the lis pendens of the action has beenduly registered in the proper Folio, and that the register has been per-sonally inspected by the Proctor or by some other specified Proctor, andmust contain a statement of the name and address of every person foundupon such inspection to be “ a person entitled to notice of the action ”.This latter expression is defined in a. 5 (1) of the Act:—
“ 5. (1) For the purposes of this Part—
‘ person entitled to notice ’ , in relation to a hypothecary actionin respect of any land, means any person who—
(«) has any interest in the land (whether by way of mortgage orotherwise), being an interest (i) to which the mortgage insuit in the hypothecary action has priority; and (ii) whichwas created or arises by virtue of an instrument duly regis-tered under the Registration of Documents Ordinance, asan instrument affecting the land, prior to the time of theregistration of the lis pendens of the hypothecary action, and
(b) has, prior to such time, registered an address for the serviceon him of legal documents in accordance with the provisionsof section 6 of this Act,
and includes a person declared by subsection (2) of this section
to be entitled to notice of the action ;
‘ registered address ’ means an address registered in accordance
with the provisions of seotion 6 of this Act. ” I
I must refer at this stage to the fact that, although the present 2nddefendant had duly registered the conveyance to him of November 1955,he had not registered an address for service. Because of bis failure toregister his address, he was not, in terms of s. 5 of the Mortgage Aot,a person entitled to notice of the hypothecary action No. X 2203. Ifthen the hypothecary decree in that action is not a complete nullity,the 2nd defendant will be bound by the decree and the sale as provided ins. 16 of the Mortgage Act!
H. N. Q. FERNANDO, C.J.—Shafeek v. Solomon de Silva
483
The lia pendens of the hypothecary action No. 2203 to which I havereferred above was not registered at all, and order for the issue of summonsin that action (and indeed all other orders), had been made withoutthere being filed the declaration required by s. 8 of the Act. The caseof the defendant has been that s. 8 is an imperative provision of law andthat the failure to file the declaration required by s. 8 rendered thehypothecary decree ultimately entered a complete nullity.
In a careful judgment, holding that s. 8 is not imperative, the learnedDistrict judge has been guided by the decision of this Court in Kanoga-sabai v. Velupillai1, where the statutory provision construed was theformers. 12 (1) of the Registration of Documents Ordinance (Cap. 101 ofthe Revised Edition 1938). That section provided that “ a precept ororder for the service of a summons in a partition action shall not beissued unless and until the action has been duly registered as a lispendens ”. In that case, the lis pendens of a partition action had beenregistered, but in an incorrect Folio. L. M. D. de Silva. J. stated thattwo points arose for consideration :—
Whether failure to comply with this section renders the decree
entered in a partition action void by reason of lack of juris-diction in the Court which entered it; and
whether, independent of the point just mentioned, such a failure
deprives the decree of the conclusive effect which it wouldotherwise have under section 9 by reason of the fact that it is adecree not entered “as hereinbefore provided” as required bythe section.
Ultimately, the Court decided the appeal only on the second ground,namely that a partition decree entered in an action the lis pendens ofwhich had not been duly registered does not have the conclusive effectconferred by s. 9 of the (former) Partition Ordinance. The decisionis therefore of assistance in the present appeal only in so far as it sets outbriefly the principles applicable in determining whether or not a provisionof procedural law is imperative. I cite the relevant observations
“ Under the procedure prescribed by section 12 (1) the Court hadafter acceptance of the plaint on the material placed before it primafacie to satisfy itself that the action was duly registered as a lis pendensbefore ordering summons to issue. It is clear that the Court hadjurisdiction to accept the plaint and to assume jurisdiction for thatpurpose so that the real question which arises is whether jurisdictionfor the further progress of the case was arrested until the lis pendenswas duly registered. If so the failure to comply with the provisionsof section 12 was such a fatal irregularity as would by itself haverendered the decree void.
» (1962) 64 N. L. R. 241.
484H. X. U. FEBXAXDO, C.J.—Shafcclc o. Solomon ile Silva
The one clear instance of a failure of jurisdiction laid down by thePrivy Council is where the breach of a procedural provision results inthe violation of natural justice. In the case before us there is nosuch violation. Beyond this as observed by Lord Goddard “NoCourt has ever attempted to lay down a decisive test ” which wouldhelp us. We find in consequence that a Court can answer the questionwhether there has been a failure of jurisdiction in the case before usonly with much less certainty than the second question referred toabove. As the view we have formed on the second question concludesthis case it is not necessary to pursue the question of jurisdiction anyfurther.”
In the instant case, as in Kanagasubai r. VelupiUai, the plaint in the.hypothecary action was duly accepted within jurisdiction. So on theauthority of the passages just cited, the real question which arises is“ whether jurisdiction for the further progress of the hypothecary actionwas arrested until the declaration from a Proctor required by s. 8 of theMortgage Act was filed in Court If s. 8 is an imperative provision oflaw, then a decree entered in an action, in which there has not beencompliance with that section, would be a nullity in the fullest sense.
The principles governing the determination of such a question werewell stated in the ease of Howard v. Bodington 1 :
“ I believe, as far as any rule is concerned, you cannot safelygo further than that in each case you must look to the subject-matter ;consider the importance of the provision that has been disregarded,and the relation of that provision to the general object intended to besecured by the Act; and upon a review of the case in that aspectdecide whether the matter is what is called imperative or onlydirectory.”
The principles are also stated by the learned District Judge in the presentjudgment, in a citation from Maxwell, Interpretation- of Statutes, 10thEd. p. 376 :—
“ It may, perhaps, be found generally correct to say that nullifi-cation is the natural and usual consequence of disobedience, butthe question is in the main governed by considerations of convenienceand justice, and, when that result would involve general inconvenienceor injustice to innocent persons, or advantage to those guilty of theneglect, without promoting the real aim and object of the enactment,such an intention is not to be attributed to the legislature.”
Let me, with these principles in mind, endeavour to examine theaim and object of the Mortage Act with special reference to s. 8, andto other relevant provisions, including the former Mortgage Ordinancewhich the Act replaced.
» (1876) 2 L. R. Pr. 203 at 211.
H. N. G. FERNANDO, CJ.—Shqfeek o. Solomon de Siloa
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Section 6 of the former Ordinance declared certain persons to be“ necessary parties ” to a hypothecary action. “ Every person whohas any mortgage on or interest in the mortgaged property to whichthe mortgage in suit has priority ” was a “ necessary party ” if hisinstrument of title was duly registered, and if he had also registeredan address for service of legal documents. If then a “ necessary party ”was not joined as a party to a hypothecary action, the hypothecarydecree ultimately entered would not bind him. But there was no pro-vision in the Ordinance to ensure that all necessary parties would bejoined. The Ordinance left the plaintiff in the action free to join suchpersons or not to join them as he chose, and the Ordinance containedno provision which declared the consequences of joinder or non joinder.
Section 5 of the Mortgage Act (Cap. 89) refers, not to “ necessaryparties ” but instead to “ persons entitled to notice of a hypothecaryaction ”. But the definition in the Act appears to comprise the samepersons as those comprised in the former definition, i.e. “ every personwho has an interest in the land to which the mortgage in suit has priorityand which was created or arises by virtue of an instrument duly registered
prior to the time of the registration of the lis pendens
of the hypothecary action ”. But the resemblance between the twostatutory provisions is illusory;
The new Act has in sections 8 and 9 a quite distinctive feature, namely,that summons must not issue until the declaration, stating that thelis pendens has been registered, and showing the names and addresses of“ persons entitled to notice ”, is filed, and that when summonses areissued on the defendants, notices of the action must also be issued by theCourt to all such persons. Further s. 8 requires the Proctor to- certifythat he has personally inspected the register. It seems to me perfectlyclear, from these two sections alone, that the Legislature intended thatthe lis pendens of a hypothecary action must actually be registered andthat all persons stated in the Proctor’s declaration to be entitled tonotice will actually be noticed. The possibility that this intentionmight be defeated by a defective search of the registers or by default ofan officer of the Court is no ground for doubting that the intention wasindeed present. Section 9 casts on the Court the duty to issue the notices ;that duty can only be performed by the Court if the declaration requiredby s. 8 is filed. The filing of the declaration is thus a necessary antecedentto the ability of the Court to perform its duty.
Section 8 of the Mortgage Act differs substantially from the formersection 12 of the Registration of Documents Ordinance and the presentsection 13 (1) of the Partition Act (Cap. 69). Section 12, which wasconsidered in Kanagasabai v. VelupiUai (supra) provided that summonsin a partition action shall not issue unless the lis pendens of the actionis duly registered. Such a provision may well be regarded as onlydirectory, and not imperative. It is doubtful whether a Court can,before ordering summons, be judicially satisfied that a lis pendens is duly
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registered, because a Court cannot be properly satisfied on such a matterwithout investigation of former deeds and the Folios in which they mayhave been registered. Even such an investigation, which would■ordinarily be impracticable at the stage when a plaint is filed, may notlead the Court to a correct conclusion as to due registration.
In significant contrast is th3 condition precedent laid down in s. 8 ofthe Mortgage Act. It is one which a Court can fulfil with perfect ease.The section requires the Court only to perform the simple duty of seeingthat a Proctor's declaration containing certain statements has in factbeen filed, and the Court is here not required to consider or decideanything. It is in my opinion only reasonable to suppose that theLegislature anticipated that a judge would not fail to perform that duty.
The purpose of the issue of a notice to a “ person entitled ” is apparentfrom other sections. Section 12 gives a person served with notice theoption to have himself joined as a party to the action. But once servedwith notice, such a person is, by reason of s. 15, bound by the hypothecarydecree, whether or not he exercises his option to be made a party.
One argument for the plaintiff in this appeal has been that a breach ofs. 8 (and perhaps in addition a consequential breach of s. 9) will onlyrender the ultimate hypothecary decree voidable at the instance of aperson prejudiced by the breach. Even accepting that argument forthe moment, the apparently peremptory effect of these sections indicateat least a contemplation that there will ordinarily^ be compliance withthese sections. It is only reasonable therefore to ascertain the Legis-lature’s purpose by reference to the consequence of actual compliance.That oonsequence is that every person entitled to notice will becomebound by the hypothecary decree and the sale.
The intention to bind persons by the ultimate decree is evidencedin other provisions of the Act: s. 9 (2) empowers the Court to issue noticeof the action to a “ person entitled ” at any stage before sale ; s. 13enables a “ person entitled ” to intervene at any time before sale; andin both these cases, the person thus noticed or intervening will unders. 15 be bound by the decree and sale. Then section 18 contains pro-vision under which a “ person entitled ”, but not in fact noticed, canintervene even after a sale for the purpose of challenging a former findingof the Court as to the amount due on the mortgage in suit (cf. sec. 18 (1)).On such an intervention, he becomes bound by the decree for sale, butcan share in the proceeds of sale. Here again is evidenced an intentionof the Legislature to bind persons who do not propose to challenge thepriority of the mortgage in suit, but who desire to assert in the hypothecaryaction their rights as puisne encumbrancers to share in sale prooeeds. I
I must further observe that (in addition to the sections of the Act towhich reference has already been made) sections 10, 14, 25, 29, 31 and37 inter alia all contain provisions which would be inapplicable in asituation in which the lis pendens of a hypothecary action is not infeet registered. Numerous provisions refer to “ persons entitled to
H. N. G. FERNANDO, C.J.—Sha/eek v. Solomon de Silva
487
notice The definition of this expression, in s. 5 of the Act pre-supposesthat there is a registration of the lis pendens, and it is only by referenceto the time of such registration that it is possible to determine whoare persons entitled to notice of the action. The unusually compre-hensive attention given in the Act to the fact that certain persons areentitled to notice of the action, to the consequences of due notice beinggiven or not being given to them, and to the steps they may take in thehypothecary action, strongly evidence an intention that jurisdictionfor the progress of such an action is arrested unless and until thedeclaration required by s. 8 of the Act is filed.
The matters discussed in the preceding paragraphs of this judgmentestablish the strong contrast between the Act and the former Ordinance.The Act, unlike the Ordinance, is clearly aimed at the object of securingthe settlement of possible claims by persons whose interests are sub-sequent to the interest of a mortgagee, and I must accept the submissionof Counsel for the defendant-appellant, that the object would not besecured if the prohibition enacted in 8. 8 of the Act is not construed tobe imperative.
What then is the practical result of the intended compliance with8. 8 and of the fact that as many prospective claimants as possible willbecome bound by the decree ? The result obviously is that a personwho purchases a land at a sale under a hypothecary decree is reasonablyassured that the land is sold free of all encumbrances created after theexecution and registration of the mortgage. Defeasance is only possibleat the instance of a claimant under an instrument having priority overthe mortgage (whether because of prior execution or of a defectiveregistration of the mortgage itself), or of a party omitted (i.e. a personwho does not receive due notice under s. 9). I need add only that thisprecisely is the result which the Mortgage Commission in SessionalPaper V of 1945 hoped to achieve when it recommended the draft Actfor enactment by the Legislature. This result will fail of achievementif the basic provisions of s. 8 are not construed to be imperative. Thepractical result expected to flow from compliance with s. 8 is one ofpublic importance, rather than of advantage to persons interested in amortgaged land, and this affords general justification for regarding therequirement of the section as being imperative.
Counsel for the plaintiff-respondent adduced a full and helpful argumentin opposition to the construction that s. 8 must be regarded as animperative provision of law and that failure to comply with thatprovision renders void (and not merely voidable) a decree entered withoutcompliance with that provision. Counsel relied principally on the testlaid down by Lord Denning in Macfoy v. United Africa Co. Ltd.1 for thepurpose of distinguishing between an imperative rule and one that isonly directory. The test suggested is “ to suppose that the other sidewaived the flaw in the proceedings or took some fresh step after knowledgeof it ”. The test was suggested in a case in which there had been a
* (1961) S A. E. R. 1169.
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breach of a rule providing that a statement of claim may not be deliveredin the Long Vacation. If in fact the defendant had delivered a defenceto the statement of claim so delivered in breach of the Buie, then thedefendant could not afterwards have asserted that no statement of claimhad been delivered. The test then is that if non-compliance with arule can be effectively waived, the rule is not to be regarded as imperative.
In Re Pritchard1 the Court of Appeal held in a majority decision thatan originating summons issued out of a District Registry was a nullitybecause the particular writ was one which the Buies required to beissued out of the Central Office. Upjohn L.J. there said that, whilethe test suggested by Lord Denning is a good common sense test, “ itcannot be a completely legal test, for until one has decided whether theproceeding is a nullity, one cannot decide whether it is capable of waiver ”.This comment serves to explain the statement of Lord Denning himselfthat “No Court has ever attempted to lay down a decisive test fordistinguishing between an act which is a nullity and an act which is onlyvoidable ”. In fact, Lord Denning who dissented in this particularcase was confident that the issue of the summons out of the wrongRegistry was only a technical defect.
Applying in the present case the suggested test whether waiver of arule of procedure is possible, the question is whether the defendant in ahypothecary action, i.e. the mortgagor, can directly or by implicationwaive the requirement of s. 8 of the Mortgage Act. I have stated alreadythe opinion that the purpose of s. 8, considered in the context of theAct, is to secure that persons other than the mortgagor will be boundby the hypothecary decree. That purpose would not be achieved ifthe requirement of the section can be waived by the mortgagor, who isnot a person in the category which the section is designed to reach.And on general principles it seems clear that the breach of a positiverequirement cannot be cured by waiver on the part of a person who isnot intended to be affected or protected by the requirement. The** other side ”, in the context of s. 8, is not the defendant to the action.
At the same time, I must note that the Mortgage Act (in provisionsrelating to a “party omitted, &e. ”) does contemplate the possibilitythat a person entitled to notice of a hypothecary action may not in factbe served with notice. Such a person may, however, intervene in theaction, and, if he does so, he will be bound by the ultimate decree andsale (s. 15). This means that there can be a waiver of the requirementin Section 9, and Lord Denning’s test therefore provides the answerthat s. 9 is not an imperative requirement. If the lie pendens is regis-tered, then the persons affected by s. 9 become determinable, and anyof these persons may waive the requirement for notice on him. Butunless and until the lie is registered, it is not even possible to determinewhich persons, if any, may waive the requirement of s. 9.
1 (1963) 1 A. E. B. 873.
Seyed Mohamed v. Ibrahim
489
Counsel for the plaintiff fears that a decision that s.8 of the MortgageAct is imperative might be only the first of a series of decisions holdingthat the procedural requirements of the Act are imperative. Suchdecisions, if they are in fact given, will tend to discourage purchasesat Bales in execution of hypothecary decrees. But I have already statedthe opinion that s. 9 of the Act is not an imperative provision, and thefairly full examination, which Counsel and the Bench have made in thiscase of other provisions of the Act applicable to a hypothecary actionto enforce a mortgage of land, does not reveal that any provision, otherthan s. 8, should be regarded as imperative. The decision I now reach hasonly the consequence that, when a land is to be sold under a hypothecarydecree, a prospective purchaser must ascertain from the recordwhether the declaration required by s. 8 has actually been filed.
I hold for these reasons, that the Legislature intended that a hypothe-cary action must not proceed unless the provision in section 8, that therequisite declaration by a Proctor must be filed in Court, has been infact observed. I cannot leave this matter without expressing surprisethat in a mortgage action instituted by the Attorney-General therewas a failure to notice so elementary and simple a requirement as thatimposed by s. 8.
In the result, the hypothecary decree and sale in action No. X 2203
C. Galle are null and void. Accordingly, the appeal is allowed,and the plaintiff’s action is dismissed with costs in both Courts.
Shumane, J.—I agree.
Appeal allowed.