001-NLR-NLR-V-41-NADARAJAN-CHETTIAR-v.-SATHANANDAN-et-al.pdf
NEW LAW REPORTS OF CEYLON.VOLUME XU.1939
Present: Wijeyewardene and Nihill JJ.NADARAJAN CHETTIAR v. SATHANANDAN et al.296—D. C. Colombo, 940.
Fidei commissum—Deed of gift by father to his sons—Revocation of gift bysubsequent deed—Power given to “ mortgage ", " hypothecate ” and" tender ” property as security—Prohibition of lease for certain period—Lease for longer term—Lease repugnant to deed.
By deed P 2 of June, 1917, R. gifted the property In question to histhree sons, N., S. (the first plaintiff), and M. (second plaintiff), in equalshares, reserving to himself the right to revoke the gift and subject tocertain conditions.
At the request of N„ the donor revoked P 2 and by P 1 gave him theundivided one-third share of the property by way of an irrevocable giftsubject to the following conditions: —
That the donee shall only possess the properties hereby gifted to him
during the term of his natural life and take and enjoy the issues,rents, and profits, but shall not be at liberty to sell, mortgage(except as hereinafter mentioned) or … . lease the samefor a term of more than five years at any one time ….
…. It is hereby expressly declared that it shall be lawful for
the donee to mortgage, hypothecate and tender the said property assecurity by him for all or each of the following purposes ….
That on the death of the donee or in the event of his share or interest
being seized in execution for his debts other than those herein-before provided for, the same shall devolve subject to anyexisting mortgage, hypothecation, tender or charge as hereinbeforeprovided, on the children of the said donee in equal shares ..
,. or failing issue then in equal shares on his brothers, S. and M.
In 1936 N. and his wife, calling themselves lessors, executed indenture1 D1 in favour of the-first defendant who is described as lessee.
By it the lessors let to the lessee an undivided one-third of the propertyfor seven years from July 1, 1936. N. died on January 21, 1937, withoutissue.
Held, that the deed created a valid fidei commissum.
Held, further, that the lease was bad as being repugnant to PI andthat the lessee was not entitled to claim any rights under it a3 againstthe plaintiffs, the heirs of N.
HE plaintiffs instituted this action for declaration of title to an
1 undivided one-third share of a property in St. Paul's Ward,Colombo. The facts are stated in the head-note. The question to bedecided was whether the first defendant was entitled to possess thepremises under the lease 1 D1 against the plaintiffs, who claimed underPI. The District Judge held in favour of the plaintiffs.
aJ. IT. B 17627 (5/52)
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Nadarajan Chettiar v. Sathanandan.
Thiagalingam (with him J. A. L. Cooray), for first defendant,appellant.—The deed PI does not create a fidei commissum. To createa fidei commissum, there should be an absolute prohibition againstalienation—either express or implied. In the present case, the donee istold at one stage that he cannot alienate the property and at a later stagehe is given the discretion to alienate it in a particular manner. “ Itshould never be left to the option of the fiduciary to decide whetherrestitution should be made or not. To make this clearer we mustpreface the remark that it cannot be considered a fidei commissumwhen it is left to the discretion of the person whom the testator thinks ofbinding whether he is willing to give or restore, but that it is a goodfidei commissum when it does not rest in the discretion of the personto whom the request is made to decide whether or no he shall make therestitution at all . ^..”—Voet 35. 1. 29 (Me Gregor’s Translation,
p. 76). See also Kirthiratne v. Salgado1 and Boteju et al. v. Fernandoet al.’
At the most, PI contains a fidei commissum residui—Lee on RomanDutch law (3rd ed.), 376. The lease, therefore, prevails in any event.
The word “ charge ” in condition 3 of PI has a wide meaning andwould embrace a lease contemplated in condition 1. See meaning of“ charge ” in Stroud’s Judicial Dictionary.
Although the lease 1 D1 is for a period of seven years, in view of condition1 of P 1, it is good pro tanto for five years. There is no penalty or forfeitureimposed in PI in the event of a lease exceeding the prescribed period.The lease is bad, therefore, only for the period beyond five years—Saidu v.Samidu *; Sitty Naima v. Gany Bawa
V. Perera, K.C. (with him E. B. Wikremanayake and S. Mahadeva),for plaintiffs, respondents.—The lease is, in fact, for seven years and is,therefore, wholly bad inasmuch as it has exceeded the period for five yearsprescribed by PI. The term of five years fixed by condition 1 of PI isan essential term of the fidei commissum. The time or term of letting isan essential part of a lease. The whole of the lease under considerationis repugnant to PI—Jayawardene v. Jayawardene et al.*; 3 Maasdorp(4th ed.), p. 227.
The word “ charge ” in condition 3 of PI is ejusdem generis with“ mortgage ”,“ hypothecation ”, and “ tender ”. It has never been
used to include a lease. See meaning of “ charge ” in Salmond onJurisprudence (8th ed.), p. 464, and Misso v. Hadjear’.
PI is a conditional fidei commissum. A fiduciary may be given alimited power of alienation. Provided that “the three certainties” arepresent, any condition may be imposed and can be given effect to—Vol. 2 oj Burge’s Colonial Law (1st ed.) p. 166; Steyn on Wills, p. 207;1 Maasdorp (1903 ed.), p. 163 ; Sande on Restraints, p. 296.
W. Thambiah, for second defendant, respondent.
Thiagalingam, in reply.—It is one of “ the three certainties ”referred to by Sande, and in the text books, that is lackingin this case.
■ (1932) 34 N. L. R. 69.* (1930) 32N. L.R. 55.
* (1923) 24 N. L. R. 293.» (1939) 14P. L.tf 13.
» (1922) 2 N. L. R. 506.* (1916) 19 N. L.R 271 al 27S.
WIJEYEWAHDENE J.—Nadarajan Chettiar v. Sathanandan.
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It is a contradiction in terms to say of a donee who is allowed to putaway the property that he is prohibited absolutely from alienating it.
A conditional fidei commissum is one where the fideicommissaryis called to the inheritance .on the happening of an event or in the eventof a contravention.—Voet 36.1.4; Steyn, p. 208; Lee p. 316.
In the present case this question does not arise.
“ Charge ” must be given the dictionary meaning. See OxfordDictionary.
Cur. adv. tmlt.
September 29, 1939. Wijeyewardene J.—
The plaintiffs instituted this action for declaration of title to anundivided one-third of a property in St. Paul’s Ward within the Munici-pality of Colombo.
By deed P2 of June, 1917, Namasivaya Modeliar Ratnasabapathygifted the property in question and other properties to his three sons,Nagasen, Sathanandan (first plaintiff), and Muttusamy (second plaintiff)in equal shares, reserving to himself the right to revoke the gift andsubject, inter alia, to the following conditions: —
“That each donee shall possess the share or interest hereby gifted
to him in the said several premises during the term of his naturallife and take and enjoy the issues rents and profits thereofbut shall not be at liberty !v» sell or mortgage his said share orinterest or ir. any other manner alienate or encumber the sameor lease the same for a term of more than five years at anyone time or execute a lease thereof before the expiry of any leasealready existing.”
“ That it shall be lawful for any of the donees to tender the share
or interest hereby gifted to him in the said several premisesor any of them as security by him upon his appointment to anysituation under the Crown or otherwise for the faithful per-formance of his duties therein notwithstanding the prohibitionagainst alienation or encumbrance hereinbefore contained. ”
“ That on the death of each donee or in the event of his share or
interest in the said several premises being seized in executionby any Fiscal for his debts as aforesaid the same shall devolveabsolutely on the children of the said donee in equal shares andthe share that shall or may have devolved on any deceasedchild of the said donee if alive shall devolve on his or her issueand failing issue of the said donee his share or interest shalldevolve equally on the two other donees or their issues perstirpes. ”
Nagasen entered the service of Hull, Blyth & Company (Colombo),Limited, and experienced some difficulty in persuading the lawyers of theCompany to accept the properties donated to him under P2, as goodsecurity for the performance of his duties, in view of the conditionsset out in the deed. Nagasen requested his father to revoke P2 andre-gift the property to him, “ subject to the necessary conditions as willenable him to effect a valid tender and hypothecation of the said pro-perties to the said Hull, Blyth & Company (Colombo), Limited ”, and the
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WIJEYEWARDENE J.—Nadarajan Chettiar v. Sathanandan.
donor thereupon revoked P2 and executed PI of June 29, 1928 in.compliance with the request made to him. (Vide recitals in PI.)
By PI the donor gave to Nagasen the undivided 1/3 share of theproperties gifted to him under P2, by way of an irrevocable gift subjectto certain conditions: —
“That the donee shall only possess the properties hereby gifted
to him during the term, of his natural life and take and enjoythe issues rents and profits thereof but shall not be at libertyto sell or mortgage (except as is hereinafter provided) or inany other manner alienates or encumber the same or lease thesame for a term of more than five years at any one time orexecute a lease thereof before the expiry of any lease alreadyexisting. ”
“That the properties hereby gifted to the said donee shall in
no event be liable (save as is hereinafter excepted) for hisdebts or for seizure on account of any debts and in the eventof any such seizure the donee shall cease thereafter to have anyright to or claim whatsoever in the said properties and thesame shall immediately devolve absolutely on his heirs inreversion (hereinafter referred to), provided however and it ishereby expressly declared that it shall be lawful for the doneeto mortgage hypothecate and tender the said properties or anyof them or part thereof as security by him for all and each orany of the following purposes …”
“ That on the death of the donee or in the event of his share or
interest in the said premises being seized in execution for hisdebts other than those hereinbefore provided for the sameshall devolve subject to any existing mortgage hypothecationtender or charge as hereinbefore provided for on the childrenof the said donee in equal shares and the share that shall ormay have devolved on any deceased child of the said doneeif alive shall devolve on his or her issue or failing issue thenin equal shares on his brothers Ratnasabapathy Sathanandanand Ratnasabapathy Muttusamy to their issues per stirpes.”
In 1936, Nagasen, his wife and one Charavanamuttu calling themselveslessors executed the indenture 1 D1 in favour of the first defendantwho is described as the lessee. By the indenture, the “ lessors ” let tothe “ lessee ” an undivided 1/3 of the St. Paul’s Ward property for sevenyears from July 1, 1936, in consideration of a sum of Rs. 3,100. Some ofthe terms and covenants of the indenture are : —
(i.) That the “ lessors ” shall “ see that the monthly rent is duly andpromptly paid to the lessee by the tenant for the time being”'of the leased premises.
(ii.) That in the event of the tenant failing to pay to the lessee themonthly rent of Rs. 80 “ the lessors jointly and severally agreeto pay the said sum of Rs. 80 or any portion thereof as mayremain unpaid by the tenant with interest thereon at 15 per cent,per annum.
WUEYEWARDENE J.—Nadarajan Chettiar v. Sathanandan.5
(iii.) That in the event of the said leased premises being vacant theperiod of the lease is to be extended to enable the lessee to makegood the consequential loss.
(iv.) That if the monthly rent is over Rs. 80 the excess shall be creditedto the lessors.
Nagasen died on January 21, 1937, without any issue.
The question that has to be decided is, whether the first defendantis entitled to possess the premises under the lease 1 D1 against theplaintiffs who claim under PI. The District Judge held in favour ofthe plaintiffs and the first defendant has appealed from this judgment.The second defendant who is made a respondent to the appeal claimsto be a monthly tenant under the first defendant. .
The Counsel for the first defendant-appellant argued before this Court—(i.) that the deed did not create a fidei commissum and that the leasefor seven years was good against the plaintiff;
(ii.) that even if the deed created a fidei commissum, the fidei com-missum was more or less of the nature of a residuary fidei com-missum and that the properly would devolve on the plaintiffsubject to the “charge” of a lease of five years, that being theperiod for which Nagasen was permitted to lease the property.The first point does not appear to present much difficulty. The deed PIdesignates the persons on whom the property should devolve, and statesthat such devolution should take place either on the death of the doneeor the seizure of the property by the Fiscal, if the property is seized bythe Fiscal during the lifetime of the donee for any debts save thosespecifically mentioned. The property that would devolve would be theproperty mentioned in the deed, subject to such transactions as havebeen specifically provided for. I hold that the deed creates a good fideicommissum.
The second point is not free from difficulty. The Counsel for theappellant argues that, even if the deed creates a fidei commissum, theplaintiffs can claim according to condition 3 of PI only the undivided1/3 share of the property subject to any existing “ mortgage hypothe-cation tender or charge” as provided for under that condition.He contends that the words “mortgage”, “hypothecation ”, “tender”in condition 3 refer to the transactions contemplated by condition 2,which are expressly referred to by these terms and that, therefore,the word “ charge ” could only have been intended to refer to the leasesmentioned in condition 1. He concedes that 1 D1 which he calls alease for seven years has been executed in contravention of condition 1. .but states that 1 D1 should be regarded as a valid lease for five years,and that, therefore, the first defendant could under the joint operationof conditions 1 and 3 of PI claim to possess the property against theplaintiffs for five years from July 1, 1936. This is a very attractiveargument and should be examined in detail.
It is best to examine at the very outset the terms “ hypothecate ”.
“ mortgage ”“ tender ” and “ charge ”. Under the Roman law
the term Pignus was used to signify “ a right created over a thing infavour of a creditor by which he was allowed to possess the thing and to
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WIJEYEWARDENE J.—Nadarajan Chettiar v. Sa.thananda.7u
sell it in order to recover the debt from the price. ” The Jus Pignorisof the Roman-Dutch law embraced two divisions, Pignus and Hypotheca.In the case of Pignus the subject-matter of the transaction was deliveredinto the possession of the creditor, while in the case of Hypotheca thedebtor remained in possession of the property and the creditor had only ajus in re for the satisfaction of his claim. The real distinction betweenthe two classes of transactions lay in the fact that in the former thecreditor got possession of the property while in the latter the possessionremained with the debtor (Voet 20.1.1). The term “mortgage” wasnot known to the Civil law but was an invention of the Middle Ages.This term “ mortgage ” used in a comprehensive sense applied equallyto Pignus and Hypotheca (Berwick’s Translation of Voet, page 269note). It is difficult to ascertain the special significance of the word“ tender ” in the context in which it occurs. It may be that the donorand donee of PI contemplated the possibility of an agreement underwhich the employers of Nagasen would be given the properties to possessduring the term of his employment or it may be that they were thinkingof a usage in mercantile circles in pursuance of which a debtor depositedhis title deeds with a creditor though, of course, under our law such adeposit would not create a legal obligation in respect of immovableproperty (Vanderstraaten’s Reports 267). It is perhaps more probablethat the draftsman of PI was influenced by the use of the word “ tender ”in condition 2 of P2—“ it shall be lawful for each of the donees to tenderthe share …. hereby gifted …. as security by himupon his appointment …. ”—and adopted the word withoutattaching any special meaning to it when he drafted PI. It appears tome that the draftsman of PI could have conveniently embraced all thetransactions intended to be permitted by condition 2 by the use of theterm “ mortgage ”. He seems to have used the words “ mortgage ”“ hypothecation ” “ tender ” without a clear appreciation of the differenttransactions which these terms describe in strict law and the use of thesewords merely reveals an attempt on his part to describe by certain termsthat occurred to him the transactions known to our law as mortgages.This view makes it highly probable that when the draftsman proceededto use the terms “ mortgage ”“ hypothecation ”“ tender ” and
“ charge ” in condition 3 he was not intending thereby to refer to separateand distinct transactions but only to the transactions known to our lawas “ mortgages ”, In other words, he used in condition 3 a group offour words to describe one kind of transaction just as he used a group ofthree words to describe the same kind of transaction in condition 2,though, in fact, he could have very well described these transactionsby the single term “ mortgage ”. If, on the other hand, he selectedhis words in condition 3 carefully and intended that the terms** mortgage ”“ hypothecation ”“ tender ” should refer only to the
transaction previously described by him in condition 2, one would haveexpected him to exercise the same amount of care and use in condition 3the term “ lease ” instead of “ charge ” in referring to the transactionalready described by him as a lease in condition .1, if he intended toprovide by condition 3 that the property devolving on the reversionersshould be subject to the “ mortgage ” “ tender ” and “ hypothecation ”
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WIJEYEWARDENE J.—Nadarajan Chettiar v. Sathananthan.
In condition 2 and “ lease ” in condition 1. Though perhaps it may notbe quite possible to say that the term “ charge ” cannot be used inreference to a lease it is undoubtedly an unusual word to be so used.
I have, therefore, come to the conclusion though, not without somehesitation, that by using the term “ charge ” in condition 3 the donornever intended to refer to leases and that the whole group of words“ mortgage, hypothecation, tender or charge ” was used by him to referto transactions commonly known as “ mortgages ” and mentioned incondition 2. A comparison of P2 with PI with which it is clearlyconnected seems to support this view. Condition 3 of P2 providedthat the property gifted should, on the death of a donee or a seizureby the Fiscal, devolve absolutely on the reversionary heirs and therebyrendered somewhat precarious the posi ion of the mortgagees in whosefavour the donee might have executed a mortgage bond under condition
It was, no doubt, the difficulty created by condition 3 that madethe employers of Nagasen refuse to accept the security tendered by himunless P2 was revoked. The revocation of P2 was accordingly effectedby PI which aimed at securing the position of the employers of Nagasenby providing that the property devolving on the reversioners should besubject to such mortgages. Is it possible to credit the donor furtherwith an intention to safeguard the lessees whom he had not protectedby P2 and about whose interests no question appears to have arisenat the time of the execution of PI?
It is not sufficient for the appellant’s Counsel to argue that “ charge ”in condition 2 means “ lease ” but he should go further and establishthat I D1 is a lease as contemplated by condition 1. A study of thecovenants of 1 Dl, which I have set out earlier, shows that 1 D1 is amost unusual kind of document. It appears to me to partake more of thenature of a mortgage bond than an indenture of lease. I think that theappellant who wanted some security for the repayment of his moneyfound that he could not obtain a valid mortgage from Nagasen andthought that by making the document 1 Dl appear as a lease he couldsafeguard his interests. If 1 Dl is in fact a mortgage, then it is a mort-gage prohibited by PI, and the property in that case would devolveon the plaintiffs independent of the obligations created by 1 Dl.Moreover, even if 1 Dl could be considered as a lease, is it a lease whichthe donor authorized the donee to execute by PI? By condition 1the donor prohibited the donee from leasing the property for a term ofmore than five years. It was an express prohibition against leases subjectto the exception that the donee could lease the property for five years orless. I do not think the word “ charge ” should in any event be givensuch an extensive interpretation as to include any leases other thanthose covered by the restricted authority given by condition 1 and shouldnot be made applicable to a lease, which is in fact a lease for seven yearsand which could only be regarded as a lease for five years by a processof special reasoning adopted to meet the exigencies of the present case.The prohibition against a lease for more than five years was, I think,inserted in PI primarily for the benefit of the donee whom the donorwanted to protect against the consequences of an improvident leasefor a long term which would result in the donee getting a reduced income
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Fernando v. Rode.
during his lifetime. It is difficult to gather from PI any intention onthe part of the donor to protect against the reversionary heirs a lesseewho has taken a lease prohibited by him. I hold, therefore, that theappellant is not entitled to claim any rights under 1 D1 against theplaintiffs.
I would dismiss the appeal and order the appellant to pay the costs ofthe first respondent. The second respondent will not be entitled to any
costs.
Nihill J.—I agree.
Appeal dismissed.