N. H. MOHAMED et al , Appellant, and K. M. S. ABDUL GAFOOR , Respondent

056-NLR-NLR-V-57-N.-H.-MOHAMED-et-al-Appellant-and-K.-M.-S.-ABDUL-GAFOOR-Respondent.pdf

1955Present: Sansoni, J., and Fernando, A.J.' N. H. MOHAMED et at., Appellants, and K. M. S. ABDULGAFOOR, Respondent
8. C. 416-417—D. C. Kegalla, 4.4S3
Constructive trust—Minor—Person in fiduciary relation entering upon and possessing■ minor's estate—His liability as trustee—Agent—His status as express trustee—
Prescription—Fraud—Trusts Ordinance [Cap. 72), ss. S2, 90, 92, 111.
Plaintiff was a minor and lived with his elder sister. Each of them wasentitled to a half sharo of tho business of a Tea Factory. Defendant, who wasthe husband of the sister, of liis own accord undertook to manago the businoss. on behalf of tho plaintiff and conducted tho entire business.
Held, (i) that tinder section 90, rend with section S2, of tho Trusts Ordinancotho defendant was a constructive trustee ns an agent who stood in a fiduciaryrelation to tho plaintiff and, accordingly, held the half share of tho business fortho benefit of the plaintiff.
that, inasmuch ns a person in the position of an agent is generally treatedby English law ns an express trustee, the provisions of section 111 (5) of thoTrusts Ordinance precluded the defendant from pleading the benefit of thoPrescription Ordinanco.
that tho liability of the defendant as trustee extended for a short periodbeyond tho period of minority of the plaintiff in regard to profits derived fromtransactions with third parties.
that section 111 (1) (b) of the Trusts does not reejuire the element of fraudto bo proved in order to avoid tho plea of prescription.
j^lPPEAL from a judgment of the District Court, Kegalla.
N.E. Weerasooria, Q.C., with V. A. Kandiah, >S’. IK. Walnita and O. S.31. Seneviralne, for the defendants (appellants in Appeal No. 416 andrespondents in Appeal No. 417).
O.Thiagalingam, Q.C., with II. W. Tambiah arid V. Ralnasabapalhy,
Cur. adv. vull.
for the plaintiff (respondent in Appeal No. 416 and appellant in AppealJSTo. 417).'’'
January.-3, 1955. Ferxando, A.J.—- The plaintiff instituted this action on February 1946, claiming as againstthe 1st defendant an accounting in respect of a business carried on atpremises known as “ The Mawanella Tea Factory ” for the period of threeyears prior to institution of action, and for judgment for Rs. 36,000representing a one half of the profits of the business for the same period.The 2nd defendant (wife of the 1st) was for reasons which will presentlyappear added as a necessary party. The claim was founded on theaverments :—
(а)that one Seyadu Bebbe, tiie father of the plaintiff and of the 2nd
.defendant, carried on the business of the manufacture of tea
at the Factory ;
(б)that Seyadu by two deeds of 1938 (P2 and P3) transferred, to the
plaintiff and the 2nd defendant, a half share each of the factorymachine and business;
(c) that from about 1939 (the year in which Seyadu died) the 1stdefendant managed the business for and on behalf of theplaintiff, who was then a minor, and of the 2nd defendant.
The defendant first filed answer on July 4, 1946, substantially admittingthe averments which I have summarized at (o) and (b) above, and inaddition referring to a Deed of lease of 192S (also numbered P3) whichpurported to be a lease to Seyadu of the Factory.and the land on whichit stood for a term of 50 years. They however denied the avermentmentioned at (c) above and stated instead that, in 1939, one NainaMohamed took charge of the Factory on an undertaking given by theplaint iff and the defendants to put the Factory in working order and on anagreement to pay Rs. 100 per month if the undertaking was carried out.The answer further stated that the Factory was only put into workingorder by 1942 (but solely by the 1st defendant and at a cost to him ofabout Rs. 6,000), and that Naina Mohamed paid Rs. 100 per month to.the 1st defendant from February 1942. They further answered that the1st defendant worked the Factory from May 1944 under his own name andwith his own capital. The 1st defendant was also stated to have spentRs. 1,600 on extensions to the Factory, and a further Rs. 1,300 in defend-ing an action No. 1883 of the District Court of Kegalle, and to have paidsums aggregating to Rs. 1,200 to the plaintiff. The answer concludedby allowing credit to the plaintiff in a sum of Rs. 2,550 being his halfshare of the monthly rents, and claiming in reconvention the amount ofthe difference between the expenses incurred by the 1st defendant andthe sum allowed as credit to the plaintiff.
. Before I refer to subsequent history, it is helpful to note the obviousimplications of this answer :—
. (i) it is admitted that the plaintiff was entitled to a half share of the’ ‘ leasehold interest in the Factory as successor in title of hisfather Seyadu as from the date of Seyadu’s death, if not earlier ;
it is admitted that the plaintiff was entitled to a half share of the
rent of the Factory for 51 months from February 1942 (whenrent was first paid by Naina Mohamed), i.e. until February 1945(when the plaint was filed) ;':
in view of (i) and (ii) above, the 1st defendant was from May 1944
the sub-tenant of the Factory under the plaintiff and th’e 2nddefendant;
the plaintiff is liable to re-imburse the 1st defendant for the
expenses incurred by him in installing machinery and extendingthe Factory, which expenses must therefore be presumed to-have been incurred by the 1st defendant on behalf of the plaintiff.(The re-imbursetnent should correctly have been claimed onlyas to one half of the expenses, since the 2nd defendant heldthe other half share of the leasehold interest).
In January 1948 (18 months later !) the defendants filed an amendedanswer in which they sing quite another tune. They' say at this stagethat the interest which the plaintiff derived from his father wasextinguished by a Partition Decree of Slay' 1941 (which divided intoDots the estate on which the Factory stood among the co-owners of theestate and which did not expressly keep alive the lease granted to Seyaduin 192S), and that the plaintiff ceased to have anyr interest in the Factoryor business after that decree ; as a second line of defence, they refer toCase No. 18S3 (D13 of 1941) which was ended by' a consent decree (D13of 10th November 1943), and state that any rate the plaintiff ceasedto have any interest from the latter date. The averments as to expensesincurred by the 1st defendant arepleaded again, but no claim in reconven-tion is now made. Nor does this answer refer at all to Naina Mohamed’salleged tenancy of the Factory'. Furthermore the 1st defendant’s alleged‘ sole ownership ’ of the Factory' is now ante-dated to November 1943,instead of May 1944.
The plaintiff (or his advisers) also appear to have had second thoughts.He moved in December 194S to amend his plaint by deleting the referencesto the three year period before action, an amendment which in substancemeant that his claim for an accounting and half the profits would coverthe whole period from 1939 to the date of the plaint in 194G. The defend-ants objected to the amendment, but it was allowed by the District Judgeon condition that the defendants could raise a plea of prescription withoutfirst amending their pleadings. The following were the principal issuesraised at the trial. I have for convenience noted the answers of thelearned Judge to each of them :—
Did the 1st defendant from 1939 manage the said business for or
on behalf of the plaintiff who was a minor at the time ?
Answer—Yes.-
Is the 1st defendant the Manager and Agent of tho plaintiff's half
share of the said business ? Answer—Yes.
Is the plaintiff entitled to an accounting from the 1st defendant
from the year 1939 ? 'Answer—Yes. Up to the end of December1943.
If so what sum is due from 1st defendant to plaintiff ? Answer—
To be determined after an accounting is taken.
'8. Were the rights, if any, conveyed by deeds No. 53 and 54 wipedout by the partition decree dated 15th May 1941, in D. C.Kegalle Case No. 1415 ? Answer—No.*
After the date of decree in Case No. 1883 (10.11.43) is the plaintiff
entitled to claim any benefit under or on the basis of the said.deed No. 53 ? Answer—No.
Did the 1st defendant work the said Factory as his sole business
as from January 1944 ? Answer—Yes.
Does the plaint disclose a cause of action against the defendant ?
Arisicer—Yes.
Is the claim, if any, of the plaintiff before 1.2.43 prescribed ?
Answer—No.
In Case No. 1SS3 D. C. Kegalle, did the plaintiff acquiesce in the
position that he was not entitled to any right or benefit by virtueof deed No. 53 ? Answer—Yes.
If so, is the plaintiff now estopped from claiming rights or benefits
under the said deed ? Answer—Yes from December 1943.
It is noteworthy that the defendants did not, even as a counter to issues4 and 5, put in issue the question (raised in the original answer) whetherNaina Mohamed took charge of the Factory on his own account in 1939and whether therefore the 1st defendant was not answerable to theplaintiff in respect of the profits derived during Naina Mohamed’s regime.But this question was the one mainly agitated at the trial, and by farthe largest part of the oral evidence and of the mass of documents in thecase were relevant only to that question. The learned District Judgehas, with admirable brevity, considered that question : he finds thatNaina Mohamed did in fact “ work the Factory ” from 1939 untilFebruary 1944, but that ‘'the 1st defendant was the real person ivho wasrunning the Factory ”, It is the latter part of his finding thatMr. Weerasooriya strongly challenges in appeal.
The parties are Muslims ; the plaintiff was in 1939 a youth of seventeen ;the 1st defendant was the husband of his elder sister by a former marriage ;when his father died, plaintiff lived with that sister and subsequentlyin the Factory, but often took his meals at the sister’s house near theFactory • he and his sister were at that time co-owners of the Factory ;the 1st defendant contrived at his own cost to settle a maintenance caseinstituted against the plaintiff. All these facts are not denied by thedefendants. . The plaintiff’s evidence, which the learned Judge hasbelieved in preference to that of the 1st defendant and Naina Mohamed,
is that the 1st defendant ‘ agreed to work the Factory for him and hissister If the business of the Factory had been conducted by the sisterupon a similar understanding, Section 90 of the Trusts Ordinance wouldundoubtedly hare applied to protect the interests of the minor plaintiff,and to my mind it makes no difference that the business was conductedby the sister’s husband ; he was either a trustee, or at best an agent, forhis own wife, and if he took charge of the Factory in either capacity bewas bound to ‘ protect the interests ’ of the minor plaintiff. Thesuggestion that the Factory was first worked after Seyadu’s death byNaina Mohamcd on his own behalf is contradicted by the documentaryevidence, because the books of Bartleet and Co. show that from Januaryto October 19-10 the account for the Factory was in the name of the 1stdefendant and not of Naina Mohamcd. If indeed it is true that NainaMohamed worked the Factory on his own account-, one would expect himto have dealt with the books in his own name ; the learned Judge hasrejected the specious explanation that dealings were conducted by the1st defendant because of Naina Mohamcd’s ignorance of commercialtransactions, and I feci quite unable to disagree with the Judge on thispoint. The finding which Mr. Weerasooriya attacks has therefore to besustained, subject only to the modification that I would hold that, duringthe period ending in November 1913, the 1st defendant did not merelymanage the business on behalf of the plaintifF, as respects a half share, butwas under Section 90, read with Section S2 of the Trusts Ordinance, aconstructive trustee, and accordingly held the half share of the businessfor the benefit of the plaintiff. The whole of the evidence in the ease wasread to us at the argument in appeal, parts of it more than once ; withoutnow referring to various items of evidence, I am content to say thatthe case presented by the defendants was so full of inconsistencies andimprobabilities that the learned Judge was rightly unable to rely upon theevidence they adduced ; the change of ground which they adopted whenthey filed their second answer was in the light of the admissions they werewilling to make originally j et another reason why their defence had tobe looked upon with deep suspicion.
There next arises for consideration the question of law raised byMr. Weerasooriya, namely whether the order allowing the amendment ofthe plaint on December 22, 194S, was bad in that it permitted the inclusionof a cause of action which was time-barred at that date. I am inclined tothink that the question does not arise, for the reason that the real effectof the amendment was not to add a new or distinct cause of action, butonly to seek fuller relief on the same cause of action as was originallypleaded. But it is unnecessary to consider that aspect of the matter,because even if the amendment had the effect of adding a new cause ofaction, the new cause would not itself have been barred by the lapse oftime..
Section 111 of the Trusts Ordinance makes the Prescription Ordinanceinapplicable to a claim by a beneficiary against a trustee founded uponany fraud or fraudulent breach of trust, or to a claim to recover trustproperty or the proceeds thereof still retained by a trustee. Butby sub-section (5) the exception does not apply to constructive
trusts, exco$ c in so far'as such trusts are treated as express trusts byth6 law of England. The plaintiff’s evidence (accepted by the learnedJudge) shows that the 1st defendant of his own accord undertook tomanage the business on behalf of the plaintiff. The 1st defendant wasas I have held a constructive trustee as an ‘ agent ’ referred to in Section90 of the Trusts Ordinance, and such an * agent ’ is treated by Englishlaw as an express trustee and as such disabled from pleading the Statutesof Limitation. (Preston and Newsom—Limitation of Actions, 2nd Edn.,p. 102, Halsbury, Hailsham Edn., Vol. 20, p. 755). . This proposition isso clearly reasonable that I do not feel the need to examine it by referenceto the authorities. I will only add that a ‘ commercial agent * wouldnot necessarily bo treated as an express trustee by the English law ; butthe 1st defendant cannot be said, in the circumstances of this case, to havemerely acted in that capacity.
I pass now to consider the plaintiff’s appeal against that part of thejudgment and decree which denies to him an accounting in respect of theperiod commencing from December 1943. It is necessary in thisconnection to refer to the Action No. 1SS3 of the District Court of Kegallewhich was instituted in 1941. One Susila de Silva had in the earlierpartition action (to which I have already referred) been allotted theportion of the Estate on w hich the Tea Factory stood. In October 1941she filed plaint against the present plaintiff and Naina Mohamed allegingthat they were in wrongful possession of the Factory and claiming eject-ment and damages ; this plaint of course amounted to a denial by Susilade Silva of the plaintiff’s leasehold interests. The present plaintiff andNaina Mohamed filed answer in 1942, pleading that the prior partitiondecree was not binding on them and that they were in occupation underthe present 2nd defendant as successor of her father Seyadu. The present2nd defendant was also added and filed answer on the footing that shewas the lessee of the Factory. (I would point out, in passing, that thepresent plaintiff was then a minor and that according to the pleadings inthe present case the 1st defendant claims to have spent Rs. 1,300 onbehalf of the present plaintiff in connection with that Action No. 1SS3.In these circumstances, it is significant that the lawyers were not at thatstage instructed to plead that the present plaintiff had a share in theleasehold interest.)
The action No. 1883 was ultimately settled in terms set out in the decreeof 10th November 1943. The terms were that Susila de Silva will executein favour of the present plaintiff and the present 1st defendant a lease of theTea Factory for a period of 35 years at Rs. 75 per month. The leasewas to be executed before the end of November 1943 at the expense of thelessees. It has to be conceded that the plaintiff was present at the settle-ment. He had attained majority five days earlier (5th November 1943).The evidence of Susila de Silva’s husband was to the effect that, afterthe settlement, he wrote to both the plaintiff and the 1st defendantasking them to take up the lease, but that neither of them responded tothis-request. He says that thereafter (it is not clear when exactly), hegave an informal lease to the 1st defendant whom he thereafter regardedas his tenant.
The conclusion reached by the learned Judge upon the settlementdecree of November 1943 and the evidence to which I have just referredis that the plaintiff agreed by the settlement to give up all his rights underthe earlier lease to Seyadu and that his failure to take up the new lease interms of the settlement disentitles him from making any claim against the1st defendant in respect of the period subsequent to 1943.
I think this finding is open to criticism in one respect. The plaintiffhas stated that the 1st defendant * turned him out ’ of the Factory in July1944, and this was not contradicted. He must be taken to have been inthe Factory during the first half of that year. Further, as I stated earlier,it is not clear when exactly the 1st defendant became the informal tenantof the Factory. He too had been written to several times by de Silvain regard to taking up the lease, but did not respond. All this must havetaken some time. Moreover, although the defendants produced receiptsfor rent paid to Susila de Silva, the first of these is for the months ofJuly and August 1944, a circumstance- which supports the plaintiff’sevidence that he was expelled in July. Hence it would seem that boththe 1st defendant and the plaintiff (who as the Judge holds must betaken tohave abandoned his prior right as lessee) were in occupation of the Factoryin the faith of their rights under the decree of November 1943, so that theplaintiff was a joint lessee with the 1st defendant until July 1944, whichwas the month for which rent was proved to have been first paid by the1st defendant.
The point of law raised by Mr. Thiagalingam is that, even though theinformal lease was taken by the 1st defendant alone, he took it in rightof an interest which he had jointly with the plaintiff, and must thereforehold it for the benefit of the plaintiff to the extent of the latter’s interest.We have in this connection been referred to the leading cases. Keechv. Sandford (reported in White and Tudor’s leading cases in Equity) andRe Biss h The principle enunciated in the former case decided in 172Gis that if a person who holds a lease as trustee for an infant obtains a leaseof the same property in his own name, he will still hold as trustee and beliable to account for the profits—this despite the fact that he may havetaken the lease for himself only after the lessor had declined to renewit for the benefit of the infant. Snell (Principles of Equity, 21st Edition,page 124) states that “ this principle has been extended to other personswho clearly occupy a fiduciary position, such as executors, administratorsand agents, and the rule is in their case an absolute one just as in the caseof an express trustee. ” He says also that the rule has been extended“ to persons who have a partial interest in a lease such as …. joint
tenants and tenants in common, although such persons do not standin a definite fiduciary relationsliip to the other persons interested ..-
but the presumption of trust is in these cases rebuttable, and if they canshow that they did not in any way abuse their position …. they
can keep the renewed lease for their own benefit ” (idem page 125). Theseprinciples of the English Law have been incorporated into sections 90and 92 of our Trusts Ordinance, which sections must be applied in. thesame manner as these principles are applied by the English Courts.
* 1903, 1 Oh. 40.
Having regard to these principles, I think that the settlement decree■of November, 1943, is of no assistance to the 1st defendant. The decreerecognised a prior claim (if not also the right) of the plaintiff to be ajoint lessee, and gave him a right to a lease for approximately the balanceperiod of the original 50-year term granted in 1928.; it gave him thatright jointly with the 1st defendant (presumably as husband of the 2nd);the two were accordingly jointly interested in obtaining the grant of thelease “ although they may not have stood in a definite fiduciary relation-ship to each other ”. I think therefore that the. case is at least onewhere there is a rebuttable presumption of trust, and there is nothingin the evidence in this case which does rebut it. The continued jointoccupation until July, 1944, “the turning out” of the plaintifF, andthe contemporaneous assumption by the 1st defendant of the positionof informal lessee indicate rather that he “ abused his position ”. Anydoubt I might have had on the question whether the 1st defendantstood in a fiduciary capacity in July, 1944, is removed by the followingobservations :—Halsbury (Vol. 20 p. 717) :— “ The entry on and posses-sion of an infant’s land by some person other than the father or mothermay make the same rule applicable to such entry and possession. Wherethe person so held to be guardian or bailiff continues in possession afterthe infancy has ceased, he is supposed to continue in possession in thesame capacity as before, unless something is done to change the characterof the possession, and the statute will not run even after the infancy hasceased, until such character is changed. ” Lord Hardioicke (cited inHoward v. Earl of Shrewsbury.*):— “ Where any person, whether a fatheror a stranger, enters upon the estate of an infant and continues the posses-sion this Court will consider such person entering as a guardian to theinfant, and will decree an account against him, and will carry on suchaccount after the infancy is determined. ”
The case of Wadnganathan Chettiar v. Sena Abdul Cassini 2 does notassist the defendants. Pulle J. was of opinion that a trust of the naturealleged in that case would not be treated in English Law as an expresstrust and he distinguished the case from that of Arunasalain Chetly v.Somasunderam Chetty which was decided by the Privy Council 3, wheretheir Lordships approved the distinction stated by Lord Justice Bowenin Soar v. Ashicell 4 :—“ An express trust can only arise between thecestui que trust and his trustee. A constructive trust is one whicharises when a stranger to a trust already constituted is held by the Courtto be bound in good faith and in conscience by the trust in consequenceof his conduct and behaviour. ” In the case before us the 1st defendantwas no stranger who becomes bound by a trust, already constituted,but an agent who stood in a fiduciary relation to the plaintiff.
It is claimed also for tho defendants that fraud has not been pleadedand cannot therefore be regarded as having been established. Butneither section 90 nor section 92, on which the appellant relies, rendernecessary the element of fraud those sections apply when two conditionsexist, namely that a person is placed in a fiduciary relationship to another,and that he derives a personal advantage to the prejudice of the interests1 1873 L. R. Equity Cases, at page 399.'3 (1920) 21 AT. L. R. 3S91'
5 (1952) 54 N. L. R. 185.._. .* (1893) 2 Q. S. 390.
of the other. The failure to aver fraud might also have been reliedupon by the defendants as a ground for excluding the operation of section111 of the Trusts Ordinance. But sub-section (1) (6) of that sectiondoes not require the element of fraud to be proved in older to avoid theplea of prescription..
Counsel also argued that the existence of a trust has been urged forthe first time in appeal. This is not- strictly so, because plaintiff’s counselhad at the trial relied on the Trusts Ordinance. In any event, theplea and the issue that “ the first defendant managed the business forand on behalf of the plaintiff, who -vvas a minor at the time ” were in myopinion quite sufficient to enable the trial Judge to decide the case on thefooting of a trust. He erred in holding that the period for which theplaintiff is entitled to an accounting terminated in December 1913.
would accordingly dismiss with costs the appeal of the defendantsand allow the plaintiff's appeal with costs. The decree of the District-Court will be set aside pro forma, and a decree entered ordering an accountto be taken of the profits of the business of the Factory from 1939, untildate of action and ordering the 1st defendant to pay to the plaintiffone half of the profits of the business until that date, together with thecosts both of action and of these appeals.
Sansoki, J.—
I agree. I do not- wish to recapitulate the facts. TJ1C3' establish theproposition, in support of which Mr. Thiagalingam cited authorities,that the 1st defendant Avas in a fiduciary position in relation to the'plaintiff. He took charge of the Factory and worked it Awhile the plaintiffAvas liTing with him and looked upon him as his guardian. It is probablethat he sometimes put forArard Naina Mohamed and sometimes himselfas the proprietor of the business A-hile they A-erc in league to cheat theIncome Tax Department and their creditors. It is almost impossibleto unravel the tangled skein of their mutual dealings between the years1939 and 1914. During that period their accounts seem to haA'e beeninextricably mixed together and both of them haA-e represented themselvesat different times as owners of the business. But I am satisfied thatthroughout that period it AA_as the 1st defendant aa-Iio Avas tho actualmanager, and not his brot-her-in-laAv Naina Mohamed. The legal positionthen is plain. When the 1st defendant entered into possession of theFactory he must be considered to have done so as the plaintiff’s guardianand for the jdaintijT’s benefit ; he became a trustee for the plaintiffand he is therefore liable to account from the time the plaintiff’s titleaccrued. Leach, C. J., in Kalhorni Bi v. Abdul II ahab 1 had a similarcase to decide. He refers to the earlier English cases and points out thatthe eqAiitable principles which they established ha'e been embodiedin sections 90 and 92 of the Trusts Ordinance (Cap. 72)..
I shall assume that the lease in favour of Scyadu Avas Aviped.out by theFinal Decree AA-hich Avas entered in May 1941 in the partition action.But that AA'ill not help tho 1st defendant, because once I10 enteredas the agent of the plaintiff, who at that time Avas regarded as a co-lcssocwith his step sister (the defendant’s AA'ife), his continued possession of the• A. I. n. {1039) Madras 313.
Factory must be considered to have been on the same footing. Onwhat other basis can the 1st defendant claim to liave remained in posses-sion ? It cannot be argued that the fiduciary relationship between theplaintiff and the 1st defendant could hot exist apart- from the lease whichmade no mention of either of them ; that relationship arose by operationof rules of equity, and the character of trustee with which the 1st defend-ant was clothed when he entered into possession could not be takenaway from him by the acts of third parties, any more than he could ridhimself of it by his own unilateral acts.'
The settlement of 10th November, 19-13, in case No. ISS3 does notavail the 1st defendant either. The first point to be noted about it isthat it was entered into only five days after the plaintiff attained theage of twenty-one. Where, as in this case, the relationship of guardianand ward had existed between the plaintiff and the 1st defendant forsome years previously, there is a presumption in equity that undueinfluence continued for a short period after the relationship had ceased.See the cases cited by de Silva, A. J., in Perera v. Tissera 1 where a similarsituation arose. Even at the time of the settlement and for some monthsthereafter the plaintiff was still working in the Factory and was clearlyunder the influence of the 1st defendant. No evidence at all lias beenled to show that before the plaintiff entered into the settlement he receivedhonest and disinterested advice, nor has any attempt been made toestablish the good faith of the transaction as required by section 111 ofthe Evidence Ordinance (Cap. 11). All tlmmghout that case, it mustbe remembered, the plaintiff was under twenty-one years of age and noguardian ad litem was appointed to represent him. The 1st defendant,on his own admission, was conducting the defence of the plaintiff andfinancing it. This strengthens the presumption that any settlemententered into was reached in a situation where the 1st defendant consideredhis own interests, rather than the duty he owed to' the plaintiff. Anyadvantage which the 1st defendant gained under that settlement—which was obviously made while the jiarties had in mind the earlier leaseto Seyadu—must be held by him for the benefit of the plaintiff for hegained it by availing himself of his fiduciary position. It is not opento him to say that he ceased to be a trustee merely because of this settle-ment. Under Section 90 he continued to be subject to the disabilitiesof a trustee even though the terms of settlement do not make a referenceto the earlier position of the parties.
The evidence established that the 1st defendant had ajnple means toobtain a lease for 35 years ; the husband of Susila de Silva was anxiousthat the lease should be executed ; 3ret for obvious reasons the 1stdefendantdid not choose to enter into the lease. He preferred to becomea monthly tenant in respect of the Factory, fondly thinking that he wouldthereby extinguish the rights of the plaintiff. I do not believe that theplaintiff did not wish to enjoy the benefits of the contemplated lease.
The receipt dated 10th Hay, 1944, which was issued to the plaintifffor rent paid by him to de Silva for the months of March and April j 1914,shows that the plaintiff's attitude was anything but one of indifferenceas regards his continuing as a tenant of de Silva. The defendant did1 (1933) 35 -V. L. R. 257.
not even pay the costs of the action No. 1SS3. His conduct throughout■ lias been dishonest and he crooned his dishonest dealings, which hadbegun from the time he entered into possession of the Factory, by turningthe plaintiff out of the Factory in July 1914, and becoming the monthlytenant of de Silva. How aptly do the words of Lord King, L. C., inKccch v. Sit ml ford (supra) fit this situation when he said :—“ If a trustee,on the refusal to renew, might have a lease to himself, few trust estateswould be renewed to cestuis que trusts ”. The monthly tenancy whichthe 1st defendant created for himself alone, as he thought, must be pre-sumed to be a tenancy for the benefit of the plaintiff and the 2nd defendant.As I hold that the 1st defendant was a trustee for the plaintiff both atthe time of the settlement and at the time he became a monthly tenant,the presumption that he did so for the latter’s benefit is absolute andirrebuttable according to the rule in In re Biss (supra). Homer, L. J.,said in that case:—“The equitable doctrine I am considering is notlimited in its application to cases where the old lease was renewable byagreement or custom, or where the new lease -was obtained by surrender
or before expiration of the old leaseAnd further I may
note here that the cases show that, with x-egard to a person obtaining arenewal, who occupies a fiduciaiy position, it is contraiy to public policyto allow him to rebut the presumption that in obtaining a renewal heacted in the interests of all persons intei'ested in the old lease ”. The1st defendant continued to be a trustee for the plaintiff throughoutand I hold therefoie that the 1st defendant is liable to render an accountfor the entire period up to the time of filing this action.
On the question of the amendment of the plaint, this is one of thoseexceptional cases where, even if the claim covered by the amendmenthad been barred at the time of the amendment, the judge was fullyentitled to allow the amendment. Lord Eshci-, M. R., in Wehlon v. Neal1said that under very peculiar circumstances the Court might perhapshave jxower to allow such an amendment. Hut the plaintiff need notrely on this exception because the amendment did not set up a new causeof action. Further, the claim was not barred at the time of the amend-ment because a person in the position of the 1st defendant cannot pleadthe benefit of the Prescription Ordinance.
Finally, I do not agiee with the submission of the 1st defendant scoxinsel that the question of a trust was not raised until the hearing ofthe appeal The averments in the plaint .are sufficient to enable theplaintiff to rely on the equitable principles which we have applied inour judgments. It was not necessaxy for the plaintiff to plead thoseprinciples in his plaint ; their application to the facts as found is auto-matic. If there were any doubt in the matter I think the course suggestedby Lord Atkinson in Jai/awickreme v. Amarasuriya – could be adopted.;The plaintiff has “ established a good and meritorious cause of actionaccording to the system of law applicable to the case " and the absence •of the word " trust ” from the plaint and issues should xiot bar his right 'to relief.- –
Appeal 416 dismissed.Appeal 417 allowed. –
* (13S7) 19 Q. B. U. 391.
■ * (191S) 20 -V. L. 11. 2S9.