121-NLR-NLR-V-58-NAGAMMAI-ACHI-and-another-Appellants-and-A.-R.-L.-LAKSHAMANAN-CHETTIAR-Respo.pdf
[lx the Privy Couxcil]
1957 Present – Viscount Simonds, Lord Oaksey, Lord Tucker,Lord Somervell of Harrow and Mr. L. M. D. de SilvaXAGA^OTAI ACHI and another, Appellants, and A. R. I#.LAKSHA3IANAN CHETTIAR, RespondentPrivy Couxcil Appeal Jfo. 27 of 1953
S. C. 234—D. C., Galle, X 56
fraud Burden of proof—Misdirection—Concealed fraud—Can agent*s knowledge
be imputed to the principal ?—Prescription.
Tho equitable principle of concealed fraud is part of the law of Ceylon. Itis not necessary to establish somo independent act of concealment in coses•where tho tort is itself done furtively so that its commission will be concealed.
The plaintiff was a money lender resident in Lidia and having a branch ofhis business in Ceylon. Tho branch was managed by tho defendant, whoheld a power of attorney from tho plaintiff. Two persons, A and B, werodebtors of the Ceylon business—the former under a decree which tho defendanthad obtained against him, and the latter upon a promissory note given by himto the defendant. On January 25, 1933, tho defendant assigned tho decreeand negotiated tho promissory note to one Alagappa without receiving anypayment for either transfer.- Three days Inter, on January 2S, 1933, he leftthe services of tho plaintiff, and one Sinninh was appointed as his substitute.Between 1033 and 193S Alagappa recovered sums on the decree and thepromissory note, but no part of these sums reached the plaintiff or his agentSinninh. Tho plaintiff had not heard of these transactions and the recoveryof tho monies until 1942. Ho then claimed these monies in tho present caseon tho ground that tho assignments were fraudulent and made in order thatAlagappa might recover tho monies for the defendant in fraud of tho plaintiff.The defondant’s main answer was that ho received express instructions fromthe plaintiff to assign tho decreo and endorse and deliver the promissorynote to Alagappa. He further pleaded that tho causes of action were prescribed.In answer to this plea tho plaintiff alleged that tho prescriptive period did notbegin to run until 1942 os there had been “ concealed fraud ”.
Held, that tho burden of establishing fraud on tho evidence ns a whole restedplainly on flio plaintiff. But once the Court was satisfied that tho plaintiff hadnot given express instructions to assign the decreo and negotiate tho promissorynote, it was for tho defendant to establish such expi-ess instructions if, other-wise, the only conclusion possible on tho cvidenco on the fraud issuo would bondverso to the defendant ; in this limited sense, therefore, there was no mis-direction when tho trial Court held that tho burden rested on the defendantto prove that he assigned tho decree and negotiated the promissory noto toAlugappa at tho instance of the plaintiff.
Held further, that the defence under the Prescription Ordinance failed becauseon the facts, in particular the entries or absence of entries in the books, there wasamplo evidence on which tho Court could find “concealed fraud The factthat Sinninh, Who succeeded tho defendant ns attorney of the plaintiff, wasprobably aware of the assignment could not necessarily import knowledge to' tho plaintiff in the absence of very precise findings of fact and, especially,as no point based on Sinninh’s alleged knowledge was token in the defendant’scase.
LVIII
J. X. B 66S46—1,503 (7/67;
-^^-PPEAL from a judgment of the Supreme Court, reported in50 N. L. R. 337.
Stephen Chapman, Q.C., with John Stephenson., for the plaintiffsappellants..
J. Chinna Dumi, for the defendant respondent.
Gar. ado. vail.
May 16, 1957. [Delivered by Loro Somekykli. oi' Harrow]—
This is an appeal from a judgment of the Supreme Court of Ceylonsetting aside a judgment of the District Court of Galle whereby therespondent (defendant) was ordered to pay to the plaintiff, since deceased,certain sums with interest. By Order in Council dated 17th March, 1955,the present appellants were substituted for the deceased plaintiff. Inthis judgment the original plaintiff will be referred to as the deceasedappellant..
The deceased appellant was a money lender resident in India and havinga branch of his business in Ceylon. That branch was managed up to28th January, 1933, by the respondent, who held a Power of Attorneyfrom the deceased appellant.
One Sainaranajrake was a debtor of the Ceylon business. He died andin 1929 the respondent obtained a decree in the District Court of Galleagainst-his executor for Rs. S,61S -20 with interest and costs.
M. S. Alies was another debtor of the Ceylon business. On 1stJanuary, 1931, the- respondent obtained from him a promissory note forBs. 7,000 with interest at 12 per cent.
The decree was obtained by and the note made payable toA. T. Iv. P. L. M. Letchumanan Chcltiyar. The initials are those of thedeceased appellant’s firm or business and the name, though differentlyspelt, is that of the respondent. It was not suggested that there wasanything irregular in the use by the respondent of his own name.
On the 25th January, 1933, the respondent by an instrument in writingassigned the decree to one Alagappa. The assignment recited thatBs. 2,095 of the judgment debt hacl been already paid by the judgmentdebtor. This was true and that sum had been accounted for by therespondent to the deceased appellant. It also recited that the respondenthad received Rs. 3,000 as consideration for the assignment. According tothe respondent this was not true. He said that lie received no pajmient.
On or about the same date the respondent endorsed and delivered thenote to Alagappa, also, according to his evidence, without any payment.The respondent left Colombo on or about 2Sth January, 1933, Sinniahbeing appointed as his substitute.t
Between 1933 and I93S Alagappa recovered Rs. 5,706 – SI on the decree.Alies had died and on 3rd October, 1931, his executor paid Rs. 8,500.No part of these sums reached the deceased appellant'or his then agentin Ceylon.
Tlic deceased appellant’s ease was tliat the assignments were fraudulentand made in order that Alagappa might recover the monies for therespondent in fraud of the deceased. The respondent’s main answer wasthat he received express instructions in writing from the deceased appellantto assign the decree and endorse and deliver the note to Alagappa.
The deceased ajrpellant gave evidence accepted by the learned trialjudge that he had not heard of these transactions and the recovery of themonies until 1942. The plaint was issued in July of that year.
Before tho District Court the respondent challenged the jurisdiction ofthe Court. That failed and is not pursued before the Board.
The first question, apart from jurisdiction, was whether fraud was estab-lished. The learned trial Judge held that it was. The respondent thenpleaded a discharge in writing dated 2Sth April, 1934, when books andaccounts were handed over. That defence was not relied on before theBoard. The respondent further pleaded that the causes of action wereprescribed under the Prescription Ordinance (Legislative Enactments ofCeylon, Vol. II, c. 55). In answer to this plea the deceased appellantalleged that the period in the Ordinance did not begin to run until 1942as there had been ‘'concealed fraud”, or alternatively because theresj^ondent -was a Trustee within the Trusts Ordinance {Legislative Enact-ments of Ceylon, Vol. II, c. 72) which by section 111 makes thePrescription Ordinance inapplicable in certain cases of which, it wassaid, this was one-.
The Supreme Court set aside the order of the District Court on theground that the learned Judge had misdirected himself.
There was no dispute as to many of the relevant facts. The followingis a summary of the learned trial Judge’s findings.
The debt from Alles was a good debt. Owing to his death it wasexpected in 1932 that it would take a year or two years to collect. Theslump had affected Ceylon and a number of debts were in effectirrecoverable. The deceased appellant instructed tho respondent towrite off bad or irrecoverable debts. On or about otli December, 1932,the debt due from Alles was written off as if it had been an irrecover-able debt and ceased to appear in the books. The Samaranayake debtwas also, as the respondent admitted, a good debt. That debt alsodisappeared from the ledger balances sent to the deceased appellant ator about the end of December, 1931.'
But for the subsequent assignment of the decree and delivery of thenote, the documents, that is the decree and the note, would have remainedin the files of the branch.
As has been stated the respondent alleged that the deceased appellanthad given him express written instructions to write off the debts, toassign the decree and endorse and deliver the note. The deceased appellantdenied that he had given any such instructions.
The learned Judge in a careful judgment considered the probabilitiesas well, no doubt, as the impression made on him by the witnesses.
He refers to a letter, the terms of which he thought supported the deceasedappellant. Tho respondent himself had said that the deceased appellant
personally did not know liis clients in Ceylon which would make itunlikely for him to refer to two particular debtors. He considered atsome length the position of Alagappa, who was related both to the deceasedappellant and the respondent. On the one hand he found that the deceasedhad asked Alagappa to exercise some degree of supervision over his affairsin Ceylon. He also had in mind that Alagappa already owed thedeceased appellant a large sum of money and it was therefore unlikelythat he would be chosen by the deceased appellant as an assignee for noconsideration. He also considered the respondent’s failure to callAlagappa, who had according to the respondent’s evidence, himselfbrought one of the letters of special instructions.
Their Lordships have thought it right to refer in a little detail to theconsideration given to the matter by the learned Judge in view of theground on which the Supreme Court set aside his judgment and thenheld on the evidence that fraud was not established.
The Supreme Court held that the learned trial Judge had j>laeed theburden of proof in regard to fraud on the defendant. This was based onthe following sentence in the judgment:—
" It is admitted that the defendant assigned the Samaranayakedecree and assigned Allcs note to Alagappah Ghetty. That being sothe burden rests on him to prove that he did so at the instance ofthe plaintiff. ”
Read in its context in a judgment in which the evidence and probabilitiesare carefully weighed the effect of the sentence is not in their Lordships’opinion as stated in the Supreme Court. The learned Judge was notspeaking of the burden of establishing fraud on the evidence as a wholewhich plainly rests on the plaintiff. He was dealing with one issue offact in the light of admitted facts and documents. Apart from the defenceof express instructions the learned Judge may well have held that only oneconclusion was possible on the fraud issue. The deceased appellant haddenied express instructions and in those circumstances it was for therespondent to establish express instructions unless the verdict was to goagainst him. When the word onus is used in this sense it may well bedesirable to make this clear. It is a dangerous Avoid. Their Lordshipsarc, however, satisfied that the learned Judge’s conclusion that no expressinstructions had been given was based on a consideration of the evidenceas a whole and not on any misapplication of the law as to onus of proofon an issue of fraud.
There being therefore no misdirection the issue was clearly one of factfor the trial Judge who saw the witnesses. The various points which inthe opinion of the Supreme Court raised a doubt were points whichwere open to be taken before the learned trial Judge and most if notall of them are expressly referred to by him. There was ample evidenceon which the learned trial Judge could come to the conclusion as he didthat the respondent fraudulently converted to his own use the note andthe decree.
Turning to the defence based oil the Prescription Ordinance, the learnedtrial Judge held that there was “ concealed fraud ” down to 1042 applyingthe principle originally established in the Courts of Equity in this country
1 (1SS2) 0 Q. B. D. 50.
. (1915) IS JV. L. R. 133.3 (19IS) A. C. 563.
2*J. X. B CGSJ6 (7757)
but applicable ill all Courts since the Judicature Act {Gibbs v. Guild)l.The application of the principle as part of the law of Ceylon was inaccordance with precedent-. In Dodicell cf> Co. Lid. v. John z, the questionwas whether the time for prescription could be extended, by “ concealedfraud ” as against a defendant who had got no benefit from the fraud.There was a difference of opinion on this point in Ce3-lon but all the Judgesproceeded on the basis that the principle of concealed fraud was part ofthe law of Ceylon. The case came before this Board, Dodicell A- Co. Ltd.v. John 3. The issue was considered in the light of English equitableprinciples and of the views held by Roman lawyers “ on whose systemthe law of Ceylon is founded ” (p. 574). Lord Haldane who delivered thejudgment of the Board treated the English equitable principles asapplicable but thought it relevant to refer to the Roman law.
In Punchi fla mine v. Ukku Menika *, the judgment in Dodicell Co.Ltd. v. John was treated as deciding that the equitable principles wereapplicable in Ceylon. In Dodicell *0 Co. Ltd. v. John s, Pereira, J., said,“ This Court lias often pointed out that our Coui-ts (in Ceylon) are Courtsof Law and Equity, and it would bo quite in order to give here the samel-elief as is given in England in cases of fraud As the basis of Ceylon lawis Roman Dutch law the generality of the first part of this sentence mayrequire qualification. That can be dealt with if and when it arises butthere are no grounds for doubting the application by the Courts of Ceylonof the equitable principle of concealed fraud in the present case. Counseldid not suggest otherwise.
The next question is whether the learned trial Judge was right infinding that there was here a concealed fraud. In Balli Coal Mining Coy:v. Osborne 6, this Board rejected the argument that it was necessaryto establish some independent act of concealment in cases where the tortwas icself done furtively so that its commission would be concealed.
“ Two men acting independently, steal a neighbour’s coal. One is soclumsy in his operations, or so incautious, that he has to do somethingmore in order to conceal his fraud. The other chooses his opportunityso warily, that he can safely calculate on not being found out for manya long day. Why is the one to go scot free at the end of a limited periodrather than the other {loo. cit. p. 3G4). ” On the facts here, in particularthe entries or absence of entries in the books there was.ample evidenceon which the learned Judge could find 11 concealed fraud. ”
Sinniah, who succeeded the respondent as manager, gave evidence. Hesaid he was not aware of the assignment. The learned Judge doubtedthis; he thought he was aware of the assignment. He added, Butthat does not import knowledge to the plaintiff. ”
It is possible that, in a case of concealed fraud, facts might cometo the knowledge of an agent not himself a party to the fraud ; that thesefacts might be such that the agent’s knowledge would be imputed in lawto tho principal : and that the principal who in fact knew nothing mightfind himself precluded from relying on tho “ concealment ” as preventing
the prescription period running. Such a case "would want very precisefindings of fact and it is sufficient to say here that no point based on■Sinniah’s alleged knowledge is taken in t-he respondent’s case.
There was no suggestion that the deceased appellant was guilty oflaches in not discovering the fraud before 1942. The defence under thePrescription Ordinance therefore fails.
This makes it unnecessary to consider the appellant’s alternativesubmission under the Trusts Ordinance.
Although the proceeds were not traced to the respondent there was nodispute as to the quantum of the learned trial Judge’s judgment on thebasis that lie was right as their Lordships have ln-ld on the various issues.
For these reasons their Lordships will humbly advise Her Majesty thatthe appeal bo allowed and the judgment of the District. Court restored.The respondent must pay Use appellants’ costs of this hearing and of the.appeal to the Supreme Court.
Appeal alloivsd.