MuUunaya-0dm v.Senatkiraja
( :*G4 )
• What remains for decision is whether the claims based on thesecond and. third bonds in suit are extinguished by operation of theprinciples of compensation in whole or in part in consequence of thereceipt by the second defendant of various sums of money in theperiod 1905 to the end of 1910 aggregating Bs. 47,839.
Compensation is the reciprocal extinguishment of debts betweenthe same parties by setting one against the other. (Vanderlinden
tit. 18 a. 4.) Compensation takes place by operation of law whena person who is a creditor of another becomes his debtor of a sumof money or other matter susceptible of compensation. The plea isonly available when there are mutual debts and credits.
Compensation must be pleaded, and when it is pleaded successfullyits effect, is to extinguish the debt in whole or in part as from thetime ,when the mutual debt accrued. “ Since this plea tends not tointroduce set off but rather to point out that it already existed ofright a jure as far back as when the mutual debt accrued; nor doesit extinguish an obligation, but ‘ shows that it is already extin-guished/'* (Voet XVI. tit. 2 s. 2; Searle and Joubert, p, 17.)
Compensation is glassed with payment under the head extinctionof obligations. Its effect is similar to payment in that the mutualdebt is extinguished or diminished pro rata. Compensation differsmaterially from set off as it is known to the English Statute Lawand our. own Code of Civil Procedure. It is not a claim to set onedemand against another. It is a plea that the claim is not sustain-able in whole or in part on the ground that it has been extinguishedin whole or in part as effectively as by payment.
For my own part I am not aware of a single case in which this pleahas been maintained or sustained in our Courts, and there is to myknowledge only one reported case in which the plea was raised orconsidered—the case of Vanderstraaten v. De Latre.1
It is convenient at this stage briefly to consider the submissionthat the effect of section 12 of Ordinance No. 22 of 1871 is to abrogatethe' Roman-Dutch law of compensation. The bar introduced bythat section relates to^“ claims in reconvention or by way of setoff/' The words themselves and the enactment in which theyoccur—which, is based on the English Statute—indicate that whatis barred is a claim to set pff a demand against another.- I do notthink that they can fairly be construed to shut out proof thatthe debt of the plaintifE has been extinguished in’ any jiianrierin which such a debt may be extinguished under the Common law.It must, I think, be admitted, in the absence of a more definitedeclaration of its intention by .the. Legislature that compensatioas known to the Roman-Dutch law is a p-v:t of the living lawof the land.
1 Ramanathent.
( 365 )
Compensation need not be pleaded. It. is open to a debtor if .he-wishes to pay. He may prefer to pay instead of pleading compen-sation, and it may be in his interests to pay and recover what is•due to him by separate action. {Voet XVI. tit. 2 *. 3.) Noauthority, however, has been cited for the proposition that it may bepleaded by one co-debtor on behalf of another, and in the absence ofsuch authority I should be reluctant to hold that one co-debtor mayinsist that a debt due by the creditor to his co-debtor should be set•off against their common debt.
This is exactly what the defendants are seeking to do, for theymaintain that the whole of these moneys, including ChristopherBrito’s half share, must be deemed as they reached the hands of thesecond defendant to have automatically gone in reduction of the-two mortgages in his favour.
-The evidence points clearly and unmistakably to the conclusionthat Christopher Brito did not want these moneys or any part ofthem applied in reduction of the debts due- by him to the seconddefendant or even in the regular payment of the interest on thedebts. He has had the full benefit of this money, and the plea that,his half, share should be set off against these debts is unsustainable.
The interests of Aloysia extend to one-eighth in her own right and•one-eighth by right of acquisition of the interests of C. M. Brito.The evidence shows that she regarded the whole of these moneys asthe separate property of her father and approved and ratified theapplication of the moneys in accordance with her father’s instruc-tions. She does not raise the plea of set off, and under the circum-stances it is impossible to admit any right in the third and fourth•defendants to insist on, her share-being applied in reduction of thedebt.,■
Assuming that the defendants can show the co-existence of allthese conditions which must be present before a plea of compen-sation can be admitted,. their plea is available to the extent of theone-fourth share of claim.
In the first place they must show that at all material times thesecond defendant by virtue of these mortgages was their creditor,and they his debtors. It was Christopher Brito who was personallyliable. on these bonds, and no personal judgment against them foreven a proportionate share of the debt could then, or can now, beentered against them. Their position is not different, so far as anyliability to pay this debt rests on them, from that of a person whopurchases land which is under hypothecation. Such a person is notthe debtor of the mortgagee.
If the plea of the third and fourth defendants is to succeed, theymust also show that, .as to a one-fourth of these moneys the seconddefendant was their debtor. The submission on this point ia that-
Gntyar J.
( aco )
(xAsms J.
a one-fourth of these moneys which reached the hands of the seconddefendant was money had and received by him to their use and assuch was a debt due to them.
It is beyond question that both Christopher Brito and Muttu-nayagam, the second defendant, believed that Dombawinne estatewas the separate property of the former. He had for several yearsafter the death of his wife remained in exclusive possession of theestate and had taken and appropriated the whole crop. The onlyone of the heirs to whom it seems to have occurred that the ante-nuptial agreement was ineffective to exclude the communio quaes-tuum was the fourth defendant, Mr. Senathiraja. For reasonsbest known to himself he did not bring his claim to the notice ofChristopher Brito. It was suggested that it was thought that sucha course may have antagonized this self-willed old gentleman andmight have resulted in his making dispositions of his property awayfrdm any child rash enough to incur his displeasure. However thatmay be, the fact remains that Brito was permitted till his death inDecember, 1910, to possess and enjoy the whole land exclusively.They knew that for ten long years after the death of Tangammahe appropriated the whole income of Dombawinne, which was formany years the sole source of his income, and spent and applied it ashe pleased. Not a single protest was raised. As to the income ofthis estate from 1904 they either knew that his attorney in Ceylohpaid it into the second defendant's account or they did not. If theydid know, then they must have known that he received it on behalfof Christopher Brito, and they must also have known that he held themoney's at Brito’s disposal. Indeed there are transactions referredto in the evidence which show that large sums of money whichcould only have come from this source were being disposed of byBrito to the knowledge of these defendants. If they did not knowthat these moneys passed through the second defendant’s bankaccount their position is no better and his no worse. At Brito’srequest and for his convenience he received what he believed wereBrito’s moneys and expended them in accordance with hisdirections. The defendants know that Brito was appropriating whatthey now allege was theirs and acquiesced in it. If it be the factthat they only came by the knowledge that these moneys were paidinto the. second defendant’s banking account after his death theymight possibly if they were his heirs—which they are not—seek anaccount of those moneys. They might if any part of that moneystill remains in the second defendant’s hands claim that a share ofthe moneys proportionate to their interests in Dombawinne estate,in so far as such a claim is not barred by prescription, should bepaid to them. But they may not under the circumstances seek torecover or obtain credit for a share of the whole of the amount as

( 367 )
money received by the second defendant under circumstances from 1926,which the Court will imply a promise on his part to pay them.Gabvix J
The one circumstance stressed by counsel for the appellants wasthe letter D 0 of January 5, 1901. This, as I have already said, was gamv.an offer by the fourth defendant, Senathiraja, to sell to the seconddefendant the one-eighth share to which he thought his wife wasentitled. The offer was declined. This notice, such as it is, was threeyears before a single one of these sums were paid into second defend-ant's account. The second .defendant’s own view of the matter wasthat the claim was without foundation. In the three years whichfollowed Christopher Brito remained ostensibly the sole andundisputed owner of the estate to the know-ledge of Mr. Senathi-raja, who now seeks to utilize this letter for a purpose which henever contemplated and to which, in my opinion, it cannot undercircumstances be put.
Before the second defendant can be called upon to set off thismoney against the debt which is undoubtedly due to him there mustbe evidence that he had clear notice that the moneys, or at least apart of the moneys paid into his account, were the moneys of the■defendants which they claimed in his hands.
It appears to me to be unnecessary to consider the plea that theappellants have failed to establish privity or any of the require-ments to an action for money had and received. Counsel for the.'appellants urged that he was entitled to relief on the broad principlethat “ where a person has received money which ex aequo et bono heought to refund the Courts will not permit him to retain it.' ’
'The facts and circumstances of this case leave no room for theapplication of this principle in the interest of the defendants.
They have been grossly negligent in the protection of their interests.
They have done more—they have acquiesced in the appropriationby Christopher Brito of the share they now claim of the income ofthis estate. They had it in their power to take measures whichwould have ensured the perception by them of their share of thefruits of‘this estate or the payment to them of their share of the rentsand profits. How can it now be contended that the second defend-ant, who was merely the conduit pipe through which these moneysor the benefit of the application thereof passed to ChristopherBrito, must in justice and good conscience pay this money tothe defendants?
The third and fourth defendants have failed to establish that asbetween them and the second defendant there existed at the dateson which these moneys were received by the second defendant suchmutual debts as must by operation of law be deemed to have beenextinguished or diminished as to the second defendant’s debt by thereceipt of these moneys.
( 368 )
, /
1926, It was urged that the second defendant had failed to prove thatGarvin «T. the moneys paid into his account had been paid to Christopher Brito
or expended by him on his account as alleged. There is on this
gam a, ' point the sworn testimony of Mr. Muttunayagam himself which theSenathfiraja District Judge has accepted. He produced two documents, P 36 andP 37, and a book of accounts kept by his wife, the first defendant,in which she entered from time to time the amounts expended onaccount of Christopher Brito and the particulars of such expenditure.All these documents were objected to by counsel for the third andfourth defendants. P 36 is a statement of accounts showing- theapplication of these moneys up to May, 1908. It was submitted toChristopher Brito and returned by him after some days withoutcomment. The second defendant claims for this document thevalue which would ordinarily be given to an account passed by theperson to whom it was submitted as correct. The District Judgehas accepted it as such, and I can see no reason why it should not begiven the value claimed for it. The evidence an.d documents filedof record in this case' indicate strongly that had Christopher Britoany reason for doubting the accuracy of the account he would haveexpressed himself vigorously by an endorsement on this document.As to the document P 37, it is merely a statement made by Mr.Muttunayagam prior to the trial and has no special value.
The document P 55, which is the account kept by Mrs. Muttu-nayagam, the first defendant, and which would clearly have beenavailable as evidence had she survived these protracted proceedings,is now objected to as not being a statement made in the ordinarycourse of business.
It is not necessary to consider this objection as the second defend-ant is not driven to rely upon this document. His own evidenceand the documents P 36, P 28, and P 29 sufficiently establish hisstatement that the moneys he received were expended in accordancewith Christopher Brito's instructions. He has accounted for themoneys which came into his hands and were received by him asBrito's money and held at his disposal.
The learned District Judge has held that the plea of compensationis not available in this case, in that the debt which the third andfourth defendants seek to set off is not liquid. The claim as formu-lated by the defendants in their answer might possibly have beenresisted on this ground. But the trial which took place has clearedthe ground, and in so far as the plea is restricted, as it has been inappeal, to the specific amounts (which together aggregate the sum ofRs, 47,839 admittedly received by the second defendant), a measureof certainty as* to amount is disclosed. The defence of compen-sation fails for the reasons already given.
It is hardly necessary to say anything in regard to the claim inreconventiou. The third and fourth defendants have made no
c 369 )
attempt tci prove that the second defendant received any part of theincome of Dombawinne estate additional to or in excess of theamount admitted by him, either in his representative capacity orotherwise. In so far as it is a claim against the estate of ChristopherBrito it is not maintainable in this action. And whether it beregarded as a claim against the second defendant personally oragainst him as representing the estate of Christopher Brito it isbarred by lapse of .time.
The appeal fails on all points and must be dismissed, withcosts.
Statements of objections to the decree have been entered both bythe plaintiff and by the second defendant. The plaintiff contendsthat he should have been allowed interest on the aggregate amofuntof the principal and interest as from the date of the first decreeentered in this case, i.e.t October 20, 1919. His grievance is thatbut for the appeals entered by the third and fourth defendants andthe delay consequent thereon he would, in terms of the decreereferred to, have been entitled to be paid interest on that aggregateamount of that decree. But upon appeal to His Majesty the decreewas set aside, and upon the new trial the learned District Judgecould only allow the plaintiff interest on the principal sum claimedup to the date of the decree entered by him. The order made byhim on this point is correct and cannot be varied.
'The second defendant’s contention is that he should be allowedhis costs. The plaintiff, who has rightly been awarded his costs, isthe son of .the second defendant and only nominally plaintiff in thecase. The contest was between the second defendant and the thirdand fourth defendants. The interests of the plaintiff and the seconddefendant are identical. There was but one contest, and the thirdand fourth defendants should only be called upon to pay one set ofcosts. It is immaterial whether these costs be paid to the plaintiffor to the second defendant, for they are one. The District Judge,was, I think, right in awarding one set of costs.
As td the costs of the claim in reconvention, I am not satisfiedthat the second defendant has in consequence thereof incurred anyspecial costs additional to those of the main contest save those ofproctor and counsel. The second defendant was entitled to suchassistance as a decree against him was prayed for. He is entitledt-o the casts chargeable in respect of the appearance on his behalfof proctor and counsel at the trial. He is also entitled to his costsof appeal.
; Since the plaintiff and the second defendant have consented totake a decree against the first, third, and 'fourth defendants pro parteI would direct that the decree be varied and that a decree beentered in the terms set out in the judgment of my brother.
Garvin J
gam v,Senathiraja
( 370 )
H utttmcvya-gam v.
Maartexsz A.J.—
This is an action for the recovery of a sum of Es. 202,066 allegedto be due on three bonds executed by Christopher Brito andassigned to the plaintiff by the mortgagees.
The first bond No. 2,652 dated August 7, 1894, was to secure a loanof Rs. 60,000 with interest a.t 8 per cent, from William W. Martin.
The second and third bonds, Nos. 2,744 (dated January 27, 1896)and 1,122 (dated April 11, 1921), were executed to secure a loanoil Rs. 30,000 each with interest at 8 per cent, frofcn the seconddefendant.
The estate called Dombawinne was hypothecated by the saidbonds.
Martin by deed of assignment No. 18 da.ted July 27, 1912, assignedhis bond No. 2.652 to the second defendant.
The second defendant by deed No. 961 dated March 12, 1917.assigned all three bonds to his son, the plaintiff.
Christopher Brijto died December 26, 1910, leaving fourchildren—the first defendant, who died during the pendency ofthis action* Philip Brito, who was married to the third defendantshe is the executrix of his will; Theresa, who was married tothe fourth defendant; and C. M. Brito whose interests are nowvested in the first defendant.
The action was defended by the. third and the fourth defendants,who appeal from a decree entered against them.
The appellants set up various defences to the claim, and it isnecessary to refer to Christopher Brito's relations with his wife andchildren for the purpose of considering these defences.
Christopher Brito was married in June, 1866, to Tangamma NannyTamby. Before their marriage they entered into an ante-nuptialcontract, to which Tangamma’s father was a party, by which anestate called Plopalle was settled on the spouses and survivor in lifeinterest, and after their death on the children of the marriage, whomfailing, on the heirs of the lady. In consideration of .this settlementTangamma renounced all right to community so far as the property,estate, and effects of Christopher Brito were concerned.
Christopher Brito purchased Dombawinne estate in 1879, hiswife died in 1900, leaving her surviving the four children alreadymentioned.
Brito, till his death in 1910, dealt with the estate as his own, and byhis last will executed on December 23, 1910, left all his propertyto the first defendant and appointed the second defendant the•executor of the will.
371 )
No claim was made to a share of the estate to Brito by any of hischildren! but the fourth defendant by letter (D 5) dated January5, 1901, wrote to second defendant as follows:*—
We are also willing to sell you my wife’s interest in Dombawinneestate if you care to buy it. According to the ante-nuptialsettlement made at the time of the marriage of Mr. andMrs. Brito community of property between husband andwife was excluded. But community of profits was notexcluded. An estate purchased, during the marriage fallsin Roman-Dutch law—whioh governs the matter—underthe heads of profits. In the theory of Roman-Dutch lawcommunity is strictly a partnership, and everything thathas not been expressly excluded falls into the community.It is therefore as clear a proposition as any in law that onthe death of Mrs. Brito a half share of the Dombawinneestate passed to her heirs, viz., to the four children of themarriage. If you are willing to buy my wife’s share onthat estate, we shall be pleased to sell it tert you.”
The second defendant says .that he thinks that he replied that hehad no money or that he did not want the property. He said onething or the other. He says in his evidence that he believed fourthdefendant had no right to the property and was trying to pass tohim a property to! whicli he (fourth defendant) had no right.
The-fourth defendant took no further action till 1908, when he.wrote letter (P 18) dated March 26, in which he says: —
“You are aware that my late .wife was entitled to one-eighthundivided share of the Dombawinne estate by right of hermother, subject of course to the mortgages. It is in thisway:When her father and mother married, the law of
Ceylon was that there was community between husband andwife in all the property and estate of one another. The lawrecognizes two kinds of community: First, community ofproperty, that is, all the property which either of thespouses possessed at the time of the marriage or whichthey inherited subsequently: and secondly, community ofprofits being any acquisition made bv them during themarriage. The community, however, can be excluded byan ante-nuptial contract. In this case there was an ante-nuptial contract which excluded the community of pro-perty only, but the community of profits was not excludedby the agreement. Dombawinne was admittedly anacquisition during the marriage, and so it is liable to thecommunity of profits. So when Mrs. Brito died her halfshare of , the property devolved on each of the children inequal share* Consequently my wife was entitled to an
Muttunayn-yarn r.Sewntfrimjtt-
{ 372 )
MuUunaya-gam v.Senaihiraja
undivided one-eighth share. I .think that undivided cine-eighth share after deducting debts is now worth aboutEs. 30,000. Year after year its value is likely to increase as itis a young plantation. I have taken out probate to my latewife's estate in the inventory of which, filed in Court, I hadincluded the above one-eighth share. I have a right to selland convey it, and can thereafter give a valid legal title.What I propose td do is this. If you approve of it Ipropose to sell and:i coftivey to you if you will take it infull satisfaction of my mortgage debt .to you over (Tamilcharacters) …
In the meantime Christopher Brito, whose relations with his otherchildren appear to have been strained, wenj> to live with first andsecond defendants in Trevandrum, South India, in 1904, and livedwith them till his death.
In 1914 the third and fourth defendants filed actions No. 9,993and No. 10,204 in the District Court of Negomho on July 7 andDecember 16 respectively against the first and second defendants.The latter was made a party both in his personal capacity and asexecutor of Brito's will, in which they each prayed for a declarationof title to a one-eighth share of the estate and for damages far threeyears immediately preceding the action.
They failed in .the District Court, but succeeded in appeal beforethis Court and before the Privy Council.
The contention of the fourth defendant was that set up inthe letters referred to, namely, that the ante-nuptial contract didnot extend to property acquired after the marriage of Brito andTangamma.
The third and fourth defendants filed voluminous answers in thispresent action, on which several issues were framed. In appeal,however, the questions between the parties resolved themselves intofour, viz.: —
Whether the right of action on the bonds was prescribed;
Whether there was a misjoinder of parties and causes of action;
Whether the defendants were entitled to plead compensatio in
respect to the income from Dombawinne estate; and
Whether the defendants' claim in reconvention could be
The defendants do not appear to have pressed the plea of pre-scription in the Court below in view of the endorsements of payment•of interests on the bonds, and there is no definite issue of prescription.
The contention in appeal is that the third and fourth defendantsare >not affected by the payments of interest made by ChristopherBrito.. The' appellant's counsel, however, conceded that-the case
•of Wijewardena v. Aponso (supra), where it was held that as the jointmatrimonial estate of the mortgagor and his spouse was originallyliable on the obligation incurred by the husband, such liabilitycould not be affected by the death of husband and that the heirs ofthe deceased husband could not resist the mortgagor’s action on theplea that the payment of interest by the widow after his death didnot keep his share of the obligation alive, was an authority againsthim, which is binding on this Court, as it was a decision of a Bench ofthree Judges.
The plea of prescription must, therefore, fail.
The main question argued in appeal was the one of compensation.
In dealing with this part of the appeal, I should state at the outsetthat it was admitted that compensation could not. be claimed againstthe bond executed in favour of Martin, and that it could not bepleaded in respect to the income during the period 1900-1904.
The claim is put forward in this way: The third and fourthdefendants allege that the second defendant received the incomederived from Dombawinne estate from 1904 up to the death of Britoon December 26, 1910, and that by operation of law the debts dueon the bonds had been reduced to that extent; in the alternativethey plead that they are entitled to claim that the debt has beenreduced by the second defendant receiving during that period one-half the income of the estate which had devolved on Tangamma’schildren.
The reply to these pleas is that (1) no contra debt was createdbetween the second defendant and Brito; (2) that the seconddefendant has accounted for all moneys he has received; (3) thatthe defendant’s claim is not a liquid claim; and (4) that the defend-ants are not entitled to plead compensatio as the claims are barredby prescription.
The last- objection of prescription may, I think, be convenientlydisposed of first, as it will enable me to consider the scope of thedoctrine of compensatio and determine whether it finds a place inthe law of Ceylon.
Compensatio was recognized by the Boman law as a way in whichan obligation might be extinguished. It is the reciprocal extinctionof debts between two persons each of whom is indebted to the other(Digest X'VI. tit 2 s. 1) and was adopted by the Boihan-Dutch law.
Vandeiiinden (1. tit. 18. s. 4) describes it as the reciprocalextinguishment of debts subsisting between-the same parties bysetting one against the other.
In order to constitute the right of set off it is necessary: first,that the thing due is of the same kind as the subject of the debtagainst which it is a set off, c.g., money may be set off againstmoney, but not money against grain; second, that .the debt whichis set off is pf such a nature that the time of payment has arrived;
MuU>/nag*~gam «.Stnathinifa
( 374 )
third, that the debt which is set off is liquid; fourth, that the debt-is due to the person himself who claims the set off; and fifth, thatthe debt which is set off is due by the person himself against whomit is set off (Vender Keesel 827).
As to debts of a liquid nature u debt is liquidated when it isevident that it is due and to what amount cum certum eet an etquantum debeatur. A disputed debt then is not liquidated andcannot be opposed in compensation unless the person who opposesit has proof at hand and is in a situation to justify his claim properlyand summarily. Even if it be evident that it is due, if it is not clearto what amount it is so, and if the liquidation depends upon anaccount of which a long discussion would be necessary, the debt isnot liquidated and cannot be opposed in compensation (Pothiet'111. tit. 4 s. 1).
The effects of set off by operation of law are: —
That in case my creditor with whom I have deposited effects
as a security afterwards becomes my debtor I can demandthese effects back provided I offer him the balance due tohim.
That when a debt carries interest and the debt to be set off
against it does not bear interest, the debt bearing interestis extinguished to that amount and the interest in thesame proportion.
That although my creditor is not bound to accept a partial
payment, yet, however, when he becomes my debtor for aless sum than I owe him, he is obliged to abate his demandpro tanto as the legal consequence of set off.
That having paid a debt already extinguished by set off, we
are entitled to recover back the money so paid as notbeing due unless such payment be paid in satisfaction ofa judgment. (Vanderlinden I. tit. 18 s. 4.)
Pothier says—
Compensation takes effect ipso jure, that is to say, by the mereoperation of law without being pronounced by the Judgeor opposed by the parties. As soon as a person who iscreditor of another becomes his debtor of a sum of moneyor other matter susceptible of compensation with that ofwhich he is creditor and vice versa, as soon as a person whois debtor of another becomes his creditor of a sum suscep-tible of compensation with that of which he is debtor acompensation is made and the respective debts are thence-forth extinguished to the extent of their concurrence byvirtue of the law of compensation.
( 875 )
Although a creditor is not bound to receive payment of the debtdue in instalments, yet if he becomes debtor to his debtorfor a less sum, he is obliged to suffer a partial discharge ofhis debt by virtue of compensation.
Where A is indebted to B on several separate accounts and he isB’s creditor in a certain sum of money the compensation,ought to be made against that debt which is most to A’sadvantage to discharge provided it had been contractedbefore B's debt to him. (///. tit 4 a. 3.)
Tn his Institutes of Gape Law (Vol. IV., p, 193) Maasdorp statesthe law thus: —
“ The effect of a debt which is capable of being set off is exactlythe same as that of actual payment, that is to say, itextinguishes or reduces pro tanto the debt against whichit may be pleaded. This extinguishment takes place ipsojure and requires no action or admission on the part of thepersons concerned in it, though it can only be given effectto by judicial decree.
■ At page 156 he says on the authority of the case of Binase v.Mdklutsana (supra) that prescription cannot be pleaded against aclaim in reconvention which is capable of being set off against theclaim in convention, such set off taking effect ipso jure, and actingas a payment from the time of the mutuality of debts coming intoexistence.
The Cape of Good Hope Act, No. 6 of 1861, for amending the lawregarding the period of time, by the lapse of which certain suits andactions become barred by prescription, has no section correspondingto section 12 of the Ceylon Prescription Ordinance, No. 22 of 1871.
Section 12 of the Prescription Ordinance, No. 22 of 1871, enactsthat “ no claim in reconvention or by way of set off shall be allowedor maintainable in respect of any claim or demand after the rightto sue in respect thereof shall be barred by any of the provisionshereinbefore contained.' “
The plaintiff contends that this section governs the plea set up bythe third and fourth defendants.
I am unable to accept this contention. The section speaks of aclaim by way of set off, but it is clear from the Boman-Dutch lawauthorities that a plea of compensation is not the same as a claim byway of set off.
In the former case the debt is extinguished by the coming intoexistence of the contra debt. It is, as stated by Maasdorp, tanta-mount to a payment of the debt to the extent of the contra debt.
In the latter case the defendant admits the existence of a debtsued for, but sets up a cross-claim on which the person against whomthe claim is brought is excusedf fi:om payment and is entitled tojudgment- on the plaintiff's claim.
( 376 )
The English law does not recognize set off as tantamount to apayment. Lord; Halsbury in his Laws of Engldnd (VoZ. XXV.s. 854 at p. 484) sets out the difference between payment andset off thus: —
“Where there has been payment the party against whom'theclaim is brought pleads payment or accord and satisfactionwhich in effect alleges that the claim no longer exists. Theplea of set off, on the other hand, in effect admits theexistence of the claim and sets up a cross-claim as beingground on which the person against whom. the claim isbrought is excused from payment and entitled to judgmenton the plaintiff’s claim. Until judgment in favour of thedefendant on the ground of set off has been given theplaintiff's claim is not extinguished. “
The concluding words clearly show the* difference between compen-sation under the Roman-Dutch1 law and -set off under the Englishlaw. In one case the debt is extinguished ipso jure; in the otherit is not extinguished until judgment is given. It is therefore agood answer under the English law to a plea of set off that thedebt sought to be set off was statute-barred at the date of actionbrought if the statute is pleaded in reply, but not that it has becomestatute-barred after the commencement of the action and before thedefence was delivered.
Section 12 was, I think, intended to apply to claims by way ofset off contemplated by the law of England. Either intentionallyor. inadvertently the Ordinance makes no provision with regard to aplea set up under the doctrine of compensation, according to which,as I have observed, before, a debt is extinguished by the cominginto existence of a contra debt as from the date the latter came intoexistence.
-The plea of compensation has not come up before within myexperience of' nearly' twenty-eight ’ years' on the Bench and atthe Bar, but it was pleaded and recognized in the old case ofVanderstraaten v. De Loire {supra). There the official administratorof the estate of one Kronenberg sued for the recovery of 797/2rix dollars due to Kronenberg on a contract with the defendant.Defendant admitted the amount but claimed damages for breachof .contract. The law regarding compensation was considered andthe plea rejected on the ground that it was not a liquid claim.
The plea of compensation, being one which might be set up underthe law of Ceylon and not governed by the provisions of section 12of the Prescription Ordinance, it becomes necessary to deal with theother objections to the plea raised by the respondents.
I am of opinion that the plea that it is not a liquid claim cannotbe sustained.
( 377 )
The second defendant in case No. 9,993 D. C., Negombo, agreed 1928.to damages being assessed at Bs. 20,000 per annum being the nettincome derivable from Dombawinne estate, and the third and fourth A.J.defendants set up a plea of compensation on that basis.Muttunayo-
In this action the second defendant took upon himself the burdenof proof and produced statements of accounts (P 36 and P 37) toestablish what sums had reached his hands on account of Domba-winne estate and how he had expended them, and the appellants arewilling to restrict their plea to the amounts shown as received inthese statements of accounts.
I therefore find it difficult to say that the claim suffers fromthe defects which under the Boman-Dutch law would disqualifyit from being pleaded as a liquid claim.
The accounts no doubt had to be looked into in the course of thetrial, but the inquiry was not on the plea set up by the appellantsbut the result of the second defendant’s plea that he had accountedfor the money received by him.
The next question is whether the second defendant has accountedfor the moneys received by him and, if so, whether it is a defence inlaw to the appellants’ plea of compensation.
I shall first deal with the second defendant’s contention. that hehas accounted for all moneys received by him.
He says in his evidence that when he received the second letterfrom the fourth defendant in 1906 he anticipated that he would haveto face litigation and prepared an account of all moneys receivedby him on Christopher Brito’s account and handed it to Brito, whoreturned it without any remarks. The second defendant hoped thatBrito would write something or initial it to indicate that it wascorrect. He says: I could not go and ask him like a banker to signand give me a receipt. I was dealing with a peculiar gentleman witha peculiar temperament. ”
The learned District Judge has accepted the second defendant'sevidence, and this statement with regard to his account P 36 must beaccepted.
Appellants’ counsel objected to the admission in evidence of theaccount P 37, which I shall presently refer to, but conceded that hecould not object to P 36 if second defendant’s evidence regardingit was accepted.
According to P 36 a sum of Bs. 23,874 was received by seconddefendant from Dr. Muttucumaru, who had been placed in charge ofDombawinne estate by Christopher Brito and a sum of Bs. 22,769expended.
The appellants contended that the second defendant was notentitled to debit Christopher Brito with the sum of Bs. 1,050 paidfor the property called Bartons Hill and Bs. 16,000 paid for the
( 378 )
1988* bouse celled Silver Oaks. It was argued that the District Judgewas wrong in accepting second defendant’s evidence with regard toAJ. these two items.
Mtdtomaya- j am unable tp accept this argument. The second defendant*appears to have given his evidence very frankly and to haveimpressed the learned District Judge veiy favourably.
His evidence with regard to Stiver Oaks is borne out by the.recital in the deed of sale (P 46) executed on November 2, 1907, thatthe sum of Rs. 16,000 is a sum given to .the vendee by her father forthe purpose of purchasing and owning absolutely, the property therebyconveyed.
It must be remembered that the recital was made before thefourth defendant’s second letter, and 1 see no reason to think thatthe recital wag made with the object of defeating any claim thatmight thereafter be made by the heirs of Tangamma.
The statement made by second defendant’s counsel at the Barthat the recital was .required by the law of properly in Ipdia was notchallenged./
With regard to Bartons Hill the defendant says he bought it onbehalf of Brito from the Indian Government, by whom it was soldfor an absentee owner. . After the sale considerable time elapsedbefore a conveyance could be executed because a power of attorneyhad to be obtained from the owner. When it was received a con-veyance was executed in the name of the bidder.
This evidence that Bartons Hill was bought* for Brito is corro-borated by the letter written by Brito to second defendant (P 50) inwhich he proposes to visit Bartons Hill next day to point out to the" overseer ” the place for building to be afterwards used as a store orkitchen. He adds that if he is not well enough £o go, Muttunayagamshould point out the place, and he ends by saying: " My pleasureneed not be much thought of as I cannot) hope to occupy it long;that is certain. So any spot that you select will suit me.”
I am of opinion therefore that the second defendanti has accountedfor the sum of Rs. 22,769.
Account P 37 was objected to as inadmissible in evidence. It isnot necessary for us to decide that question as the bulk of the item®can be otherwise proved.
The items which cannot* be proved are the sums entered as paidfor Brito’s personal expenses, and certain other sums such as funeralexpenses, doctor’s bills, and donations amounting to Rs. 7,857.Personal expenses amount to Rs. 5,907, which, apart from accounts/seems to be an extremely reasonable amount.
1 see no reason to doubt that the other amounts were expended inthe way set out in the statement.
( 37» )
The sum of Bs. 1,500 for building a bungalow on a hill was parti-cularly challenged; this was the money expended in building thebungalow on Bartons Hill, and for the reasons given by me foraccepting the second defendant's evidence that Bartons Hill wasbought for Brito I accept his evidence that the bungalow was builtfor Brito.
As regards the other items, the fourth defendant himself hassigned on the book, P 56, for the cheque for Bs. 1,722.
The payment of the sum of Bs. 5,000 is proved by the letters P 28and P 29, written by Muttucumaru to Muttunayagam on December1 and 7, 1908.
The payment of interest Bs. 6,500 is proved by the endorsementson the secondary and tertiary mortgage bonds.
Apart from the evidence that the second defendant has accountedfor all moneys received by him, I am of opinion that there is noevidence that- the Dombawinne estate money received by him.created between Philip Brito and him the relationship of debtor andcreditor.
It is clear from the evidence that Muttucumaru was in charge ofDombawinne estate on behalf of and under the control of ChristopherBrito, and that the nett income was deposited to second defendant’saccount in, the Madras Bank, Colombo, for the sake of convenienceand to save commissions.
I have also no doubt that the second defendant kept’ this moneyin his account on behalf of his father-in-law.
With regard to Tangamma’s half share of the income, the appellantscontended that second defendant is liable for the amount in anyevent as money “ had and received ” for their benefit..
It was argued that second defendant was fixed with notice offourth defendant’s claim by the letter D 5 written in 1901 and laterby the letter P 18 written in March, 1906.
This is a startling proposition, and I am unable to accept it.
At the time the letter D 5 was written Christopher Brito was inCeylon and in full possession of the whole of Dombawinne estate andno part of the income reached second defendant.
No action of any sort was taken on this letter, and Britto, afterhe went to India—so far as the evidence goes—continued in activepossession of the whole estate. Brito and the second defendanthad not the slightest reason for thinking that the fourth defendantreally believed he had a claim to the estate.
What Brito’s views may. have been with regard to his title we donot know. The second defendant says that he (second defendant)believed that fourth defendant had no right to the property. Thebelief formed by him when he received letter D 5 cannot but havebeen confirmed by fourth defendant’s neglect to pursue the matterfurther.
( 380 )
I am, therefore, of opinion that the letter D 5 cannot be construedas a notice to the second defendant to hold any moneys received byhim on account of the Dombawinne estate for the benefit of thefourth defendant.
With regard to his letter P 18 written in 1908, beyond a mere offerto sell his share the fourth defendant lays no claim to any share ofthe profits. Here too the second defendant had every reason tobelieve that it was a mere attempt on the part of the fourth defend-ant to induce him to enter into a compromise and avoid enteringinto litigation—a view also confirmed by the fourth defendant’sneglect to take any proceedings in the matter.
With regard to the income after the death of Brito betweenDecember 26, 1910, and the date from which damages were claimedin D. C. Negombo, Nos. 9,993 and 10,204, there is only a period ofabout- seven months in the case of the third defendant and oneyear in the case of the fourth defendant. For this sum the seconddefendant has accounted in the testamentary action, and the amount,cannot be pleaded as compensation in this case.
The third and fourth defendants have claimed the sum ofRs. 53*840 in reconvention against the second defendant. Thisclaim is clearly prescribed and must fail. Appellants’ counselsuggested that Brito and Muttunayagam were trustees for the thirdand fourth defendants. Christopher Brito could at the most havebeen only a constructive trustee, and a constructive trustee isnot precluded by section 111 of the Trusts Ordinance, 1917, frompleading prescription.
It tvas next argued that the second defendant could hot set lipthat defence as there was an express trust created by the will.
I am quite unable to appreciate this argument, but I need notdiscuss it as, if the plea of prescription fails, they cannot escape fromthe plea that the sum claimed in reconvention on account of incomereceived after Christopher Brito’s death should have been claimedin the Negombo actions; and not having been claimed in thoseactions, the claim is barred by the provisions of section 207 of theCivil Procedure Code, which provides that—
“ All decrees passed by the Court shall, subject to appeal, when anappeal is allowed, be final between the parties; and noplaintiff 6hall hereafter be non-suited.
41 Explanation.—Every right of property or to money, or to damagesor to relief of any kind which can be claimed, set up, or putin issue between the parties to an action upon the cause ofaction for which the action is brought, whether it be actuallyso claimed, set up, or put in issue or not in the action,becomes, on the passing of the final decree in the action, ares adjudicata, which cannot afterwards be made the subjectof action for the same cause between the same parties. **
( 381 )
The pleas of misjoinder of parties and causes of action werereduced in importance by reason of the -fact that the plaintiff andsecond defendant agreed to accept a decree similar in form to thedecree entered on October 20, 1919.
The appellants relied on the following passages in Voet,.XXIII.tit. 2 8. 80 where after dealing-, with debts contracted. by thespouses prior to the marriage he says;—.
“It is otherwise with those debts which were contracted duringthe marriage, since after the dissolution of-the marriage-thewife or her heirs can be sued for the half of them and thehusband and his heirs for the whole. ” (Stoney’s Trans!)
But in an earlier passage (section 52) after stating that in Hollandthe husband alone or his heir in sotidum can -be sued for a debtcontracted during the marriage, because the husband is' the chiefparty to the contract, and he can afterwards proceed against hiswife or her heir for the half of the debt, but the wife or her heirsought not to be sued except for the half, he adds this proviso; —
“ Provided that the husband during the marriage has not pledgedthe property of his wife for such a debt, which he can do byvirtue of his marital power, because a pledge is not releasedexcept by payment of the whole debt.
And in Lib. XX. tit. 4 s. 4 he lays down that:—
“ Neither by the Boman Law nor by our usages can a .'creditor becompelled against his will to divide the hypothecary ■ actioncompetent to him, and to sue a plurality of persons proparte each for a part, pledge being considered indivisible.For on the one hand, if a single thing has been mortgaged(by a deceased), and been adjudicated to one of a numberof heirs of the debtor or been divided in shares amongthem, or a part of the pledge been alienated by the debtor orhis heirs, it is both open to the creditor to discuss for theentire debt either the entire thing so assigned to one of theheirs, or the portion of it which has come to one person bydivision or alienation; so that no possessor can prevent adiscussion either of the whole or of the portion possessedby him, although he may be willing to pay a rateable shareof the debt or even has already done so. ’ ’
The passage relied on by the appellants cannot therefore apply tomortgage debts contracted hy a husband during the marriage, andthe pleas of misjoinder of parties and ■ causes of action mustfail.
I accordingly affirm the judgment appealed from, but vary thedecree as hereinafter directed.
As regards' costs, the third and fourth defendants must pay thecosts of the plaintiff both here and in Court below.
Multunaya-gam v.SenitMraja
( 382 )
In view of the plaintiff’s consent to a decree against the third andfourth defendants in proportion to their shares the following decreeis substituted for the decree dated October 2, 1925: —
Decree:—It is decreed that the substituted first defendant and thethird and the fourth defendants do pay the plaintiff the sum ofBs. 202,066, together with interest on Bs. 115,000 at the rate of 9 percent, per annum from April 7, 1919, to October 2, 1925, and furtherinterest at 9 per cent, per annum on the aggregate amount fromOctober 2, 1925,. in the proportion of three-fourths by the firstdefendant, one-eighth by the third defendant, and one-eighth by thefourth defendant, being the shares in which the property mortgagedand hypothecated as security for the due payment of the saidaggregate amount is seized and possessed by the first, third, andfourth defendants respectively on or before March 22, 1927.
It is further ordered and decreed that the third and fourthdefendants do pay the plaintiff’s costs of this suit.
It is further ordered and decreed that the following property, towit—all that land called and known as Dombawinne estatedescribed in the title deeds thereto as all that tract of land calledDombawinne mukalana, situated between Udugaha pattu ofHapitigam korale and Dungaha pattu of the Alutkuru korale,in the District of Negombo, Western Province, with the buildingconstructed thereon, bounded on the north, east, south, and westby land belonging to private individuals, containing in extent sevenhundred and twelve acres one rood and thirty-three perches, whichsaid estate is at present said to contain in extent seven hundred andfifty-eight acres and qne rood or thereabouts, specially mortgagedby bonds No. 2,652 dated August 7, 1894, and attested by W. M.Bajapakse, Notary Public; No. 2,744 dated January 27, 1896, andattested by V. B. de Fry of Colombo, Notary Public; and No. 1,122dated April 11, 1904, and attested by P. A. Prins, Jr., Notary Public—and the same is hereby declared bound and executable for thesaid sum of Bs. 202,066 and interest. And in default of paymentby any of the said parties of his or her proportionate share of thesaid sum, interest and costs of suit that the share of the saidpremises to which such party is entitled as legal representative of adeceased child of Christopher Brito be sold by Mr. A. Y. Daniel,licensed auctioneer, by public auction after such advertisement inthe Government Gazette and in at least one of the local newspapersas the said auctioneer may consider sufficient upon the annexedconditions of sale, and the said auctioneer is hereby authorized anddirected to allow the plaintiff or anyone else on his behalf to bid forand purchase the said premises and in the event of the plaintiffbecoming the purchaser thereof to allow the plaintiff credit to. theextent of claim and costs.
( 383 )
It is further ordered and decreed that the Secretary of this Courtdo execute the necessary conveyance in due form of law in favourof the purchaser or purchasers at such sale on his or their complyingwith the conditions of sale. And on being satisfied, if the purchaserbe the plaintiff, that he has been allowed credit, and in the eventof the purchaser or purchasers bong a third party or parties thatthe purchase money has been deposited in court.
It is further ordered and deoreed that the proceeds of such salebe applied in and towards the payment of the proportionateshare of the stun of Rs. 202,066, interest, and costs of suit.
With regard to the costs of the claim in reconvention, 1 agreewith the order made by my brother Garvin.
The plaintiff has filed objections claiming interest on the aggregateamount of principal and interest from October 2, 1919. I am ofopinion that this objection cannot succeed as the amount duewas not ascertained till the decree appealed from was enteredon October .2, 1925. I accordingly dismiss the plaintiff’s crossobjection mid make no order as to costs.
Judgment varied.