042-NLR-NLR-V-25-MUTTIAH-CHETTY-v.-MOHAMOOD-HADJIAR.pdf
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Present: Ennis A.C.J. and Jayewaidene A.J.MUTTIAH CHETTY r. MOHAMOOD HADJIAR.
85—D. C. Colombo, 3,904.
Paulian action—No presumption of fraud—Claim to property seized—Claim rejected as being too late—No action instituted under s. 247of the Civil Procedure Code—Is claimant barred from assertingtitle to property as against purchaser at FiscaVs sale : —Paulianaction instituted nine years after sale—Prescription.
Plaintiff sued defendants for declaration of title to a certainproperty, and to set aside a deed of 1913 by which the firstdefendant sold the property to second defendant on the groundthat it was executed in fraud of creditors. The plaintiff obtainedjudgment and seized the property in September, 1916. In March,1917, the second defendant claimed the same. The claim wasrejected in October, 1919, on the ground that it was made too late.The second defendant did not institute an action under section247 of the Civil Procedure Code.
Held, that the second defendant was not barred by his failure toinstitute an action under section 247 from asserting his title tothe property.
Held, further, that a Paulian action must be instituted withinthree years from the cause of action. Though plaintiff wa9aware of the transfer in 1916, yet inasmuch as the claim proceedingswere before the Court till 1919, prescription did not run duringthat period.- The three years should be calculated from 1919,when the claim was rejected.
There is no presumption of fraud, and when it is alleged it mustbe fully proved.
HpHIS was an action for declaration of title to and possessionof premises bearing assessment No. 81 in Hospital street,Colombo.
The plaintiff's title was based on a Fiscal’s transfer No. 18,758dated October 26, 1920. The premises were sold by the Fiscal inexecution of a writ issued by the plaintiff against the first defendant
in case No. 37,003.
The first defendant had transferred the premises to seconddefendant by deed No. 3,602 of May 3, 1913. The seconddefendant by deed No. 316 of May 7,1920, transferred the premisesto third defendant.
The plaintiff alleged that deed No. 3,602 was executed fraudu-lently and collusively and to defraud his creditors. He also allegedthat deed No. 316 was executed fraudulently and without considera-tion. The District Judge entered judgment for plaintiff. Thirddefendant appealed.
1923.
1923.
Muttiah
Cfteity v.Mohanu odHadjiar
( 186 )
Samarawickreme (with him B. F. de Silva), for the appellantsin No. 85.
E. W. Jayeivardene, K.C. (with him H. V. Per era), for theappellant in No. 85a.
Elliott, K.C. (with him Hayley, Keuneman, and Schokman), forthe respondent*
July 27, 1923. Ennjs A.C.J.—
This was an action for a declaration of title to a certain propertyin Hospital street, and to set aside two deeds, namely, P13, No. 3,602of May 3, 1913, which was registered on May 7, 1913, by whichthe first defendant sold his property to the second defendant, andP 14, No. 316 of October 7,1920,. which was regitered on October 9,1920, by which the second defendant sold the property to the thirddefendant. The plaintiff in his plaint alleged that the first docu-ment was executed in fraud of creditors, and that the seconddocument was tainted with fraud, and that both were executedwithout consideration. The learned Judge accordingly allowedthe plaintiff’s action, and the three defendants ap[eal. Clearly,the first question for consideration on the appeal is the questionof fact as to whether the learned Judge was right in holding thatthe fraud was proved. There is no presumption of fraud, and whenit is alleged it must be fully proved. Now, in this case the plaintiffsought to prove that the first defendant was practically insolvent .at the time he alienated the roperty to the second defendant. Onthis point the learned Judge, relying upon the evidence of theplaintiff and his kanakapulle, and the list of actions P 11, againstthe first defendant, which was filed by the plaintiff, came to theconclusion that the e was no doubt that in 1913 and onwards thefirst defendant was in a hopeless condition financially. He thenheld that because the second defendant was the son-in-law of thefirst defendant, these two facts together were sufficient to establishfraud. The question as to what was sufficient to establish fraudin a Paulian action was discussed by Hutchinson C.J* in the case ofSaravanai Armugam v. Kardhar Ponnambalam.1 There it waslaid down that the evidence from which a fraudulent intention canbe inferred is usually some or all of the following circumstances :—
That there was no consideration; (2) that the transfer wassecret; (3) that the transferor had continued in possession not-withstanding the transfer; (4) that the transfer left him withoutany other property; and (5) or without enough to pay the debtswhich he owed at the time or was about to incur. Now, of theseitems of evidence, we find that the transfer on the face of it purportsto be a conveyance for consideration. It recites that the second
1 2 Leader L. R. 11.
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-defendant gave a consideration of Rs. 10,000 for tb.e property, asthe attestation clause recites that Rs. 1,000 was paid by cheque inthe presence of the notary, and that the remaining Rs. 9,000 wasset off against, an obligation incurred by the first defendant to give adowry to his daughter at the time of her marriage'With the seconddefendant in 1904. There is no evidence to show that no considera-tion was in fact paid ; nothing to show that the cheque forRs. 1#000 was a bogus one, or that no money whatever passed.All that was asserted was that there was an obligation under therules of evidences on the defence to show that the statements inthis deed were true; in other words, that the onus of proof hadshifted without some proof of fraud.
With regard to the next point, we find that there was nothingsecret about the conveyance to the second defendant in 1913,for the document was registered four days after its execution* Wefind, moreover, that the second defendant was in possession of theproperty from the time of the conveyance. In the result, we findthat the second defendant has three of the circumstances mentionedby Hutchinson C.J. strongly in his favour. With regard to theevidence that the first defendant was in a hopeless conditionfinancially at the time of this conveyance, we find merely theevidence of the plaintiff and his kanabapulle that the first defendantwas being hard pressed by creditors. But an examination of thedocument P 11 shows that in 1912 there was only one case againsthim, and in 1913 there were only three cases against the first'defendant, and that the bulk of the pressure against the first defend-ant came in 1915, two years after the alienation- We have noevidence as to the result of any of these cases, or when the cases in1913 were instituted, or whether they related to obligations incurredafter the execution of the conveyance to the second defendant,or prior to that conveyance. We find, moreover, that the plaintiffseized some property of the first defendant in 1914, and releasedthe seizure at the request of the first defendant. The evidence,therefore, does not seem to establish either that the first defendantwas hard pressed by creditors at the time of the execution of thedeed P 13, or that he was without other property to meet thedemands of his creditors. It would seem, therefore, that theplaintiff has not sufficient evidence to establish any of the pointslaid down in the judgment of Hutchinson C.J. already referred toas necessary to establish the presumption of fraud. Moreover, itappears from the plaintiff’s evidence that he made no attempt tohave the first defendant examined under section 219 of the CivilProcedure Code as to his property when he was seeking to executehis judgment. The plaintiff appears to have concentrated hisattention to a fact mentioned in the attestation to deed P 13.The first defendant alleged that Rs. 9,000 was to set off against anobligation entered into in 1904. It seems that the plaintiff put in
25/17
1923*
Ennis
MuttiahChetty v.MohamoodHadjiar
1928.
Ennis
A.C.J.
MuttiahChetty v.MohamoodHadjiar
i 188 )
evidence the document P 13 and commented upon the attestation.
It would, therefore, seem to be out of place to assert that none ofthe facts set out in the attestation had been proved, particularlywhen the onus of proof of fraud was on the plaintiff, who hasthrown no doubt upon the good faith of the statement. Thedefendant put in the dowry deed D 11, which showed that the firstdefendant and his brother Abdul Baheem undertook to convey' the lands to the first defendant’s daughter, on her marriage, withinsix months of the execution of the dowry deed, or in default to payBs. 15,000. The two properties mentioned were a property inPrince street and a property in Dam street, and the documentD 12 shows that Abdul Baheem duly performed his undertakingunder D 11, and conveyed the property in Prince street. It is saidthat the first defendant did not carry out his obligation, and wefind by the document D 13 that the first defendant in fact dealtwith the Dam street property in June, 1912, and mortgaged it.It was, therefore, out of his power to convey this property intactto his daughter until he had redeemed the mortgage. So we findthe first defendant^ in 1913 executing the document D 13, andconveying, not only the property in Hospital street, but otherproperties in 2nd Cross street and in Bambalapitiya, to the seconddefendant. It appears that these properties ware at the timesubject to two mortgages, one for Bs. 100,000 to the Loan Board,executed in January, 1913, and another mortgaged to one Alim,which was executed in March, 1913, for Bs. 10,000. It wouldseem, therefore, that up till March, 1913, the first defendant hadplenty of money. Now, the plaintiff bases his claim-on the followingfacts. He was the holder of five promissory notes for Bs. 2,000each, which were dated March 13,1913. He put the notes in suiton August 21, 1913, obtained a decree on September 24, 1913, andafter seizing certain property of the first defendant which hereleased, and making subsequent efforts to execute his judgment,he seized the property in Hospital street on September 29, 1916.The seizure was registered on January 11,1917. On March 13,1917,the second defendant claimed the land. The claim proceedingsseem to have been drawn out until October 7. 1919, when the seconddefendant’s claim was rejected on the ground that the claim hadbeen made too late. The plaintiff accordingly pleads that therejection of the second defendant’s claim in the claim proceedingsoperated as res judicata against him, and that the present claim isaccordingly barred, because he did not file action under section 247.It was argued that the case is analogous to the case of Meenachy v.Onanaptakasam.1 In that case, however, it appears that the claimwas not merely dismissed but was disallowed, because the claimantfailed to appear on the day fixed for inquiry, and it was, therefore,an order made under section 245. It would seem that prima facie
1 2 C. L. Rep. 97.
1923.
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an action under section 247 is only open to a party against whoman order under sections 244, 245, and 246 has been passed. Butthe order in the present case does not purport to have been madeunder any of these sections. It is expressly made under section 242,and the facts are not such as to show, as in the case of Meenachy v.Onanaprakasam (supra), that it was in fact an order made after inquiry 'into the claim. There is, therefore, no analogy between the presentcase and the case of Meenaichy v. Ghianaprakasam (supra). In thesecircumstances, the case oiPerera v. Fernando1 shows that an actionunder section 247 need not be brought. I would hold, therefore,that the rejection of the second defendant’s claim in the claimproceedings was not res judicata. But it was next urged that if notYes judicata it operated as an estoppel and prevented the defendantfrom setting up his title now. No issue of estoppel was raised inthe Court below, neither was there any assertion that the plaintiffacted upon any belief created by the second defendant’s deliberateaction. He was not bound to bring an action under section 247, ashe was in possession of the land and had title. Such a procedurewould appear to have been unnecessary. Estoppel is a matterof fact on the evidence, and no issue was raised, no evidence hasbeen directed to that point. Consequently one must disregardthis reference to estoppel at this stage of the proceedings, especiallyas there is no evidence to support it. There were further factsin this case which are really unnecessary to go into, but whichmay be briefly mentioned. It appears that the property in questionwas sold by the Municipal Council on May 7, 1917, for default ofpayment of rates. The property was purchased by the MunicipalCouncil, and a certificate dated July 28, 1920, was duly issued.That certificate was registered on August 4, 1920. The MunicipalCouncil then sold the property to the third defendant, who at thetime was the registered owner, and issued a certificate to him onApril 18, 1921, which was registered on April 26, 1921. So thatthe third defendant has title from two sources. But owing tosome unfortunate circumstance, these certificates of sale wereregistered in the wrong folio, and it was urged by the plaintiff thatthat being so, they came second to his claim, because he had priorityby virtue of registration. But in view of the fact that the seconddefendant had the title at the time, the Fiscal’s conveyance to theplaintiff, therefore, conveyed nothing to him, and as we have foundthat no fraud has been established, we need not go into this questionof registration. One other point must be mentioned in the case,and that is the appellant’s assertion that the action has beenprescribed. There is no doubt that a Paulian action must beinstituted within three years from the cause of action, and in thiscase we find- that the plaintiff states that he was aware of the seconddefendant’s conveyance about the year 1916. But, inasmuch
11 C. W. Rep. 17.
Erans
A.C.J.
MuttiahGhetty v.MohamoodHadjiar
( 190 )
1923.
Ennis
A.O.J.
MuttiahGhetty v.MohainoodHa-ijiar
as the second defendant made a claim in the claim proceedingswhich were before the Court until 1919, prescription would not runduring that period, and, therefore, it would seem that the threeyears should be calculated if at all from 1919, when the claim wasrejected. It would seem then that the action is not out of time.Inasmuch as we are of opinion that the deed to the second defendantis still good, it is unnecessary to go into the question relating tothe deed from the second defendant to the third defendant or tothe relations between the second and the third defendant, or thequestion of trust which the learned Judge has found in connectionwith the bolding of the property by the third defendant.
I would accordingly allow the appeals, with costs, and dismiss theplaintiff's action, with costs.
Jayewardene A.J.—I entirely agree.
Appeal allowed.