PERERA v. TISSERA et al

054-NLR-NLR-V-35-PERERA-v.-TISSERA-et-al.pdf


Perera v. Tissera.
257
1933Present: Akbar J. and de Silva A.J.PERERA v. TISSERA et al
28 and 29—D. C. Chilaw, 8,811 and 8,812.
Trust—Administrator and heir—Settlement of accounts—Undue influence~-Mortgage bond in favour of third party—Presumption attaching againstthird party—Sale of property to administrator—Creation of trust infavour of heirs—Judicial settlement of accounts—Passing of final account—Trusts Ordinance, No. 9 of 1917, s. 90—English law.
Where the widow of an intestate transferred her half share of certainlands to the administrator under an arrangement, the object of which wasto preserve the property for the minor children of the intestate, andwhere by a subsequent deed, which purported to be a deed of agreementbetween the administrator and the guardian ad litem of the children, theadministrator undertook to sell to the children the share of the lands,which he obtained, upon payment of a certain sum of money withina stated period,—
Held, that, in the circumstances, a trust had been established in favourof the children and that all the pecuniary advantages obtained by theadministrator in dealing with the lands transferred to him must be heldby him in trust for the benefit of the minors.
The English law of undue influence has become part of the law ofCeylon.
The circumstances, under which the presumption of undue influencearises in the case of transactions between parent (or person placed inloco parentis) and child, and how that presumption may be rebutted underthe English law, indicated.
The presumption of undue influence would arise in the case of a settle-ment of accounts between the administrator and the heir of the intestate,who was living with the former at the time.
When at a settlement of accounts between the administrator and theheir a deed of agreement was entered into by which the heir acknowledgedliability to pay the administrator a certain sum of money, and in orderto discharge that liability mortgaged her property with a third party,who was aware of the facts and attendant circumstances,—
Held, that the presumption attached against the third party as welland that he took the mortgage bond at his peril.
Held, further, that in order to disentitle a party from seeking relieffrom a contract on the ground of ratification by acquiescence, theremust be proof not only of assent, but also assent after the party becameaware of the violation of his rights.
An administrator who desires to have a conclusive settlement ofaccounts and of the distribution of the assets must take steps underChapter LV. of the Civil Procedure Code. Under that Chapter, after aproper scrutiny of accounts, the Court will proceed to enter a decreeunder section 740 directing payment and distribution to persons entitledaccording to their respective rights.
The passing of a “final1* account after notice to all the partiesinterested does not constitute a judicial settlement and does not supersedethe procedure by v^ay of a judicial settlement.
I
N these two actions Nos. 8,811 and 8,812, which were tried together,the plaintiff sought to" set aside deed No. *3,418 dated March 12,
1926, executed by her in favour of the first defendant and bond No. 3,482of the same date executed by her in favour of the second defendant onthe ground of undue influence.
35/20
258
Perera v. Tissera.
The plaintiff is the daughter of one Albanu Tissera, who died on July 23,1915.
The first defendant is the brother of Albanu and took out letters ofadministration to his estate in testamentary proceedings No. 1,102 of theDistrict Court of Chilaw. The first defendant was admittedly in possessionof Albanu’s estate until March, 1926.
The plaintiff’s case was there was no proper settlement of accounts andthat the defendant caused her to execute the deeds by the exercise ofundue influence.
It was contended on behalf of the defendant that the accounts werelooked into in March, 1906, and that the impugned deed and bond wereexecuted in the settlement of accounts. The learned District Judgedismissed the plaintiff’s action.
H. V. Perera (with him N. E. Weerasooria, S. W. Jayasuriya, andKottegoda), for plaintiff, appellant.—First defendant’s position is anoma-lous, viz., that of a self-appointed curator. Accounts have not beenjudicially settled. Section 111 of the Evidence Ordinance would apply.
First defendant’s position is a position of* influence (Spencer Bower onActionable Non-Disclosure (1915 ed.), Chapter V., pp. 362 et seq.) Undueinfluence has been exercised (Spencer Bower, ss. 409 and 405; Hatchv. Hatch-, Melish v. Melish*).
This doctrine of presumption of undue influence applies not only togifts but also to contracts (Spencer Bower, p. 364 ; Grosvenor v. HarrattJ;Wright v. Carter4).
The presumtion of undue influence has not been rebutted:—SpencerBower, ss. 406, 470, 471, and 476; not only the moral soundness,but also the mercantile soundness of the contract made by the dominantperson, should be considered (Hugenin v. Basely5); advice must begiven to the servient party by an independent person, i.e., a personentirely free from the influence of the dominant party (Gibson v.Jeyes °); or sufficient independent legal advice should have been given(Inchnoriale v. Sheik Ali Bin Omar7).
As regards confirmation by the servient, confirmation necessarilyimplies an election between two causes. Otherwise, it is not a confirm-ation. The confirmation itself may be the result and evidence of thecontinuation of undue influence (Spencer Bower, s. 480).
First defendant is in the position of a trustee and had to render accounts(Saminathan Chetty v. Vander Poorten*).
As against second defendant, Counsel cited Kempson v. Ashbee9, Bain-brigge v. Browne 10, Espey v. Lake"
Hayley, K.C. (with him Croos Da Brera and C. Tf Olegasagarem), for firstdefendant, respondent.—The bringing in of English Law of Equity couldonly be justified on the basis of section 111 of the Evidence Ordinance.English Law of Equity is highly technical and has not been wholly
1(1804) 32 Eng. Rep. 615.
257 Eng. Rep. 27.
2 (1862) 54 Eng. liep. 520.
< (1903) 1 Ch. 27.s (1807) 33 Eng. Rep. 526.'
e (1801) 31 Eng. Rep. 1014.i (1929) A. C. 127.
8 2 Ceylon Law Weekly 123.8 (1874-75) 10 Ch. App. 15.(1881) IS Ch. D. 1SS.
“ 10 Hare 260.
AKBAR J.—Perera v. Tissera.
adopted here where the Roman-Dutch law is almost complete in con-nection with land cases. The doctrine of undue influence is entirely adoctrine of the English law. In Soysa v. Soysa1 a transaction was'setaside on the ground of duress and not of undue influence. In Lyles v.Terry 3, Lord Esher resorted to a peculiarly English rule of equity. Thisrule, viz., that where there is a transaction between members of a family,a solicitor’s advice should be taken first, cannot be insisted on in Ceylon,and there is no authority for it either here or in South Africa (3 Nathan,p 1548).
Wright v. Carter3, which considers Hatch v. Hatch (supra), is in ourfavour.
The question in our case is whether, in accordance with section 111 ofthe Evidence Ordinance, there was good faith or not. If not, was theconsideration for the deed PI inadequate or non-existent ?
Spencer Bower, s. 410, deals with “family arrangement”, when noteven a presumption of undue influence should be made. This cutsthrough all the authorities already cited on undue influence. See alsoSpencer Bower, pp. 448-449. Cases on family arrangement: Stapleton v.Stapleton Dimsdale v. Dimsdale % Jenner v. Jenner", Hartopp v. Hartopp Stewart v. Stewart’. Adequacy of consideration will not be minutelyweighed where there is a family arrangement (Parsee v. Persse9).
Francis de Zoysa, K.C. (with him L. A. Rajapakse), for second andthird defendants, respondents.—Deed P2 was subsequently ratified bypoymeni of interest. Counsel cited 15 Halsbury 104 and Mitchell v.Homfray10. There was bona fides on the part of second defendant.
H. V. Perera, in reply.—This is not a case of family arrangement.The purpose of family arrangement is to perpetuate the property in thefamily. The transaction which took place in this case was essentiallyone of accounting. Stapleton v. Stapleton (supra) will not apply, becausethere has not been even a fair compromise.
Section 5 of the Trusts Ordinance, No. 9 of 1917, and Ranasinghe v.Fernando " would apply.
May 31, 1933. Akbar J.—
These three cases were heard together in the circumstances mentionedby the learned District Judge at the beginning of his judgment. It willbe therefore necessary to discuss the appeal in case No. 8,811 first beforeI proceed to case No. 8,812.
C. 8,811 is a case brought by the plaintiff against her uncle the firstdefendant, who was the administrator of three testamentary cases inwhich the plaintiff was the principal heiress, for the cancellation of a deedmarked PI dated March 12, 1926, on the ground that it was obtained byundue influence (see amended plaint and issues) and for an accountingof the income of the lands. The learned District Judge has dismissed the
i IQ JV. L. R. 314.630 L. J. Ch. 201.
* (1896)'2 Q. B. 679, at p. 683.' 7 26 h. J. Ch. 471.
a (1903) 1 Gh. 27, at v W.*8 C. A F. 911.
4 1 Atk. 2.9 (1840) 7 C. <e F. 279 at p. 318.
8 26 L. J. Gh. 806.10 (1881) 8 Q. B. D. 687.
'J 24 N. L. R. 170.
260
AKBAR J.—fPerera v. Tissera.
plaintiff’s case preferring to believe the evidence of the first defendant tothat of the plaintiff and her witnesses. Most of the facts which led to theexecution of the deed PI are common ground between the parties.Plaintiff’s father was a man named Albanu, who married first Justina,the only child of a woman Maria, and he had two children by her, viz.,Margaret the plaintiff, who was born on October 17, 1903, and a sonMacarius, bom on April 10, 1905. Justina died and after her deathAlbanu married Agnes, and on Agnes* death without any children heagain married a young girl Isabella on June 8, 1915. Albanu died onJuly 23, 1915, intestate, leaving Isabella, without any issue by her, andthe two children by his first wife as his heirs, Isabella getting half andthe two children the other half. At the time of Albanu’s death therewere living the following : Albanu’s brothers, Liyano (first defendant) andGraciano, and two sisters Emerencia and Theresia whose husband was aman named Pemiyanu. Both their father and mother Simon Tissera andhis wife Anathasia were alive, the age of the latter being 70 years and theformer about 80 years. The former died on August 2, 1924, and thelatter was alive at the time of the trial and gave evidence. After Albanu’sdeath on July 23, 1915, Liyano applied for administration of his estate onSeptember 15, 1915, and in his petition named Isabella, Margaret, andMarcarius as respondents and also the grandmother Anathasia as fourthrespondent. On his application Anathasia was appointed guardianad litem over the two minor children. This appointment was in breachof section 495 of the Civil Procedure Code because Simon Tissera was thenalive. As the first defendant admitted in evidence, he was the chiefperson in the family after his brother’s death, Graciano being " a quietman and an unlearned man ” and Anathasia a feeble old woman, whocannot even read and write, she cannot even sign her name Margaretwas then only 12 years old, and first defendant entered into possessionof Albanu’s property as administrator and remained in such possessiontill 1926.
On June 9, 1916, by deed P6 Isabella purported to sell her half share inAlbanu’s lands to the first defendant for a consideration of Rs. 6,890 saidto have been paid to her, and she dropped out of the testamentary case.This deed was followed by another document D5 dated July 4, 1916,which purported to be a deed of agreement between Liyano and Anathasiaas guardian ad litem by which Liyano agreed to sell the shares of the landswhich he had obtained by deed P6 within 5 years after the expiration of12 years from the agreement to the two minors, and Anathasia on behalfof the minors promised to pay Rs. 3,000 within 5 years of the expirationof the 12 years. Both these deeds were not brought to the notice of theCourt in the administration case, and it was argued on behalf of theappellant that D5 was not binding on the two minors, because Anathasiahad not been appointed as curatrix over the minor’s property ancf noleave of Court had been obtained for the agreement.
The circumstances under which P6 was executed were as follows:—As Isabella was a young widow the family of the deceased Albanu wasvery anxious to buy her off, and to get her half share transferred to theminor children for otherwise she would have been entitled to administerthe estate. In first defendant’s own words “ we wanted to buy in Isabella’s
AKBAR J.—Perera v, Tissera.
261
share. We were all interested in Albania's children. I was also interestedin them. No one wanted to get lands for me. Isabella was a young girl.'Father Joseph said Isabella’s share should go to the children. So alsosaid Maria and Anathasia. I also said so … . The object ofeveryone was that this half share should be transferred to the children.No one troubled about exact figures. We all wanted to benefit thechildren ”.
It was argued for the appellant that if the evidence is scrutinized evenby leaving out Isabella’s evidence (as it was contended contra that undersection 95 of Ordinance No. 14 of 1895, she could not vary the terms of herown deed) the clear intention was that Isabella’s half share was to go to thebenefit of the children and P6 was drawn as a sale for Rs. 6,890 althoughonly Rs. 3,000 was paid as the parties apparently thought wrongly that atransfer in favour of the minors could not be drawn up without thesanction of the Court. There was a fear that the Court might not sanctionsuch a transfer and the family of Albanu was very anxious to get Isabellaout of the estate. It was urged that even supposing the full considerationof Rs. 3,000 was provided by Liyano, the deed P6 was a trust in favourof the minors, subject to a mortgagee’s right in favour of Liyano toreimburse himself in the sum of Rs. 3,000 lent by him with reasonableinterest (see Saminathan Chetty v. Vander Poorten’).
That this was the true construction appellant argued could be seenfrom many attendant and subsequent circumstances which I shall proceedto detail now. On Albanu’s death his two children lived together withLiyano in the house of their grandparents Simon Tissera and Anathasia.In 1917, Liyano married and went to live with his wife’s parents and theplaintiff was sent to a convent in Negombo where she stayed for two years.Margaret therefore had a semblance of an education from her 14th yeartill she was 16 and this is the education which the District Judge calls“ a fairly good education ”. On her return from the convent Margaretlived with Anathasia till first defendant built a house on one of Albanu’slands and Margaret lived with Liyano and his wife in this new house from1921 till 1926. In the meantime Liyano filed a final account in Albanu’stestamentary case. In this testamentary case (P18) the value of theestate is shown as Rs. 12,755, being the difference between the assetsvalued at Rs. 16,255 and debts on bonds Rs. 3,500 as required by theStainp Ordinance. On November 14, 1916, although notice was to beissued on the respondents to accept or reject the final account, no suchnotice was issued, but Anathasia who was present not only on behalf of theminors but also of Isabella accepted this account as correct. All thelands and other properties of Albanu remained in Liyano’s possession,who drew the income and spent it as he pleased till 1926. There wastherefore a liability on Liyano to account to the plaintiff for all the incomeand expenditure from the time of Albanu’s death till the year 1926. Inmy opinion he is liable even to account for the year 1915-1916, forAnathasia was wrongly appointed guardian ad litem as she was a feebleilliterate old woman, who had ho independent advice in the matter, andwhose significance of her acceptanc of the accounts could only be consi-dered as nothing more than a formality to wind up the estate. Both P6
1 2 Ceylon Law' Weekly 123.
262
AKBAR J.—Perera v. Tissera.
and DS had been executed when the final accounts were submitted, but theCourt was not informed of their existence. Instead of vesting the minors’property in a properly constituted curator under the Civil Procedure Code,who would have been liable to account to the Court periodically, the firstdefendant took control of all the minors’ property and having got rid ofeven the semblance of a supervision by the Court when the estate wasbeing administered he did as he pleased with the income from 1916-1926.He appropriated half the income of Albanu’s properties according to theaccount P27 which he had to submit to the plaintiff’s lawyers after thiscase began.
It was argued for the appellant that all the circumstances show thateven if Liyano had provided the full Rs. 3,000, which was paid to Isabella,he had no more than a mortgagee’s right to recover the Rs. 3,000 fromIsabella’s half share and he was not entitled to appropriate to himselfhalf the income from these lands. No Court would have sanctionedsuch an arrangement and that was why the deed P6 was not disclosed tothe Court. The deed D5 which was not binding on the minors wasapparently drawn up to meet the importunity of Anathasia, who probablyhad some qualms of conscience at that time as the whole title of Isabella’sshare was in Liyano’s name. There is an interval of nearly one monthbetween the two deeds. As the two deeds were not executed at the sametime, and as D5 is not valid in law so as to bind the minors, and the twodocuments F6 and D5 were hidden from the Court which was administeringAlbanu’s estate, there was a heavy burden on the first defendant to satisfya Court that D5 represented the actual terms of the trust. It was urgedfor the appellant that he had failed to discharge this onus as shown notonly by the evidence of the persons concerned, but also by his own accountof how the Rs. 3,000 was raised. But before I mention the steps takento raise this Rs. 3,000, let me allude to the incident of Isabella’s necklace.Isabella agreed to waive her claims to Albanu’s estate not only on paymentof Rs. 3,000, but there was another collateral agreement with regard tothe sale of a necklace by Isabella for Rs. 200. This necklace was givento her by Albanu on their marriage, and it was to be returned to thefamily on payment of Rs. 200 to Isabella.
By two mortgages, Rs. 3,200 was raised (P21 and P22). By P21Rs. 2,200 was raised on September 8, 1915, with Maria as principal debtorand Liyano as surety, Maria mortgaging her lands as security. By P22Liyano and Pemiyanu mortgaged four small lands for Rs. 1,000. Thesetwo sums make up exactly Rs. 3,200 to be paid to Isabella. And yetLiyano said (and he has been believed by the District Judge) that theextra Rs. 200 was paid as notarial fees, &c., and that it was he who paidRs. 200 from his own pocket for the necklace and that the necklacebecame his property. He then according to his own account sold thissame necklace to Maria for Rs. 200, which Maria repaid to him when shesold a land by deed 4,023 on October 26, 1918 (see D16 and Liyano’sevidence at pages 301-302 and 347-348). At the time this Rs. 200 waspaid to Isabella, Liyano obtained a promissory note from Isabella’sfather as security, and yet after Isabella signed P6 he sent a letter ofdemand P29 to Isabella’s father threatening to sue him on this note which
AKBAR J.—Perera v. Tissera.
263
he had failed to return. His evidence at pages 356*357 should be con-trasted with the evidence of Isabella and of C. G. de Alwis at pages 502,508, and 509.
The case for the plaintiff was that the full sum of Rs. 3,000 was reallyprovided by her grandmother Maria in the following circumstances: ByP21 Rs. 2,200 was raised, Maria mortgaging all her lands and as no furthersum could be raised on these lands, Liyano and Pemiyanu raised theextra Rs. 1,000 by a mortgage of their lands.
P21 was discharged on October 3, 1918, by P26 which replaced P21.By P26 Rs. 2,200 was raised which went to discharge P21. In P26 bothMaria and Liyano were co-mortgagors, Maria mortgaging two of the threelands in P21 and Liyano two of the lands to which he derived title fromIsabella on P6. It will be seen that as a result of this change one landAnji-tennaidui was released by Maria and sold by D16 of October 26, 1918,to Abaran Kurera, father-in-law of Liyano, for Rs. 850. The attestationclause says that out of this sum Rs. 500 was acknowledged by the vendorto have been previously received and the balance was set off in payment ofthe balance debt due from Liyano to the vendee upon bond P22. Thisconfirms to a remarkable extent the case for the plaintiff that this sum ofRs. 850 was really paid by Maria to wipe off Liyano’s liability on P22.To explain this attestation clause the first defendant gave an elaborateexplanation recorded at pages 346-358. At page 343 Liyano said thatMaria raised the Rs. 2,200 by P21 and P26 for his benefit. At pages354-355 he said that he was paying the interest on P26 and Maria paidnothing and yet he had debited Rs. 330 to Maria’s estate in Maria’stestamentary case (P20). At page 355 he could not account for it, butthe District Judge at page 89 of his judgment says that it was included byerror. It must be mentioned by me here, as I'have referred to Maria’stestamentary case, that she died on October 30, 1921, leaving a last willgiving all her property to her two grandchildren. Her estate was provedby Liyano as executor (see P20) in D. C., Chilaw, 1,421. Here tooAnathasia was guardian ad litem of the minors, and on April 11, 1924,Anathasia accepted the final account. P20, as I have said, debited theestate with Rs. 330 paid as interest on bond P26 and Rs. 1,100, i.e., halfshare of the debt due on bond P26 is shown as a debt due by the estate.
It is hard to believe that the old woman Maria raised the loan ofRs. 2,200 on P21 and P26 for the benefit of Liyano to enable him to paythis sum to Isabella so that he may buy her share of Albanu’s estate andenjoy its income in order that finally Liyano' may transfer it to the minorchildren within 12 years on the latter repaying the Rs. 3,000.
The District Judge comments on the omission of Maria to mention thefact that she was bequeathing the Rs. 2,200 to the children in her last willas a factor corroborating Liyano’s story. But why should she, when byP26 the mortgage is a joint and several one and the mortgage is one overher lands and these lands have now vested in Margaret ? But evensupposing we accept Liyano’s evidence as the District Judge has donewhat is the position ? We have only his word that he has paid half thisdebt of Rs. 2,200 to the Chettiar mortgagee and all interests up to date.He has produced no receipts. Maria’s lands have now devolved on theplaintiff with this mortgage over them. Further Margaret is the sole
264
AKBAR J.—Perera v. Tissera.
heir of Maria’s estate and is therefore responsible on the personal liabilityto repay the full Rs. 2,200 with interest to the mortgagee. Had it notbeen for this case the Chettiar could have brought an action to recover thefull sum with interest against Margaret and sold not only the landsmortgaged but the other lands of Margaret.
It may be interesting to note that the mortgagees on P26 are the sameChetty firm as the second and third defendants in' this case. It suits firstdefendant’s case in these proceedings to come now and say that he isresponsible to the Chettiar to pay the half of the full debt and that he haspaid the other half with full interest on the whole sum. But on paperP26 still exists undischarged. This state of affairs becomes a matter ofimportance when one considers the question of undue influence, as I shalldo later, for if Margaret had a competent adviser, who was in possessionof all the facts in this case, he would not have assented to Margaret signingthe document PI in the circumstances disclosed in this case.
Macarius died on April 17, 1924, leaving Margaret as his sole heir whothus became entitled to the whole of her father’s estate, if we excludeIsabella’s half share which had been dealt with by P6 and D5, Liyano wasagain the administrator and Anathasia the guardian ad litem of Margaret.Final account was filed on March 15, 1925, and Anathasia accepted thisaccount by signing with a cross on behalf of Margaret, although Margaretattained majority on October 17, 1924. I may say that in Maria’stestamentary case the petitioner Liyano stated that Margaret was 15years old in 1922, when she was in fact 19 years. If Liyano was reallymistaken as to the exact age of Margaret in 1926, he must have beenunder the impression that she was 19 years old in 1926, until the Chettiarproduced Margaret’s birth certificate P12 on March 10,1931 (see page 321).
We now come to the events directly leading to the signing of PI. Firstdefendant’s case was that PI was the result of negotiations betweenMargaret (assisted by Anathasia and Graciano) and himself and that thevarious instructions given to the notary (see the translation to P5 furnishedby Mr. Gunaratne, the Sinhalese Interpreter Mudaliyar of this Courtattached to this judgment which was furnished to us during the argumentof the appeal), on December 14, 1925, March 3, 1926, March 8, 1926, andMarch 10, 1926, were given in concert. The District Judge has discussedthe evidence at great length on this point. The salient facts that emergefrom the evidence of the defendant on this point are: (1) That these in-structions were not given by Margaret but by Liyano and at the laterstages by Liyano and the Chettiar. (2) The notary was in no sense anindependent legal adviser of Margaret. His duty was merely to draftthe deeds on the instructions given to him and to take the signatures ofthe executants after reading them to Margaret and the other executants.
On the date that Margaret actually signed the deeds PI and P2Margaret was living with the first defendant in her new house and theattempt of the first defendant to prove that he had left this house some timebefore and that Margaret was living with Anathasia was a bold attemptto deceive the Court which attempt failed (see-page 90 of the judgment).
Anathasia was not present in the house (see pages 490-492 of the firstdefendant’s own evidence). Even Graciano was not there. According'to Liyano “ on March 12, 1926, Anathasia was not present. On March 12,
AKBAB J.—Perera ti. Tissero.
235
1926, there was no independent adviser present on behalf of Margaret.Pemiyanu and Elaris were present, but no others besides me, the Chettiar,and the clerk. Elaris was a witness to the deeds. So was Pemiyanu.They came as witnesses. I did not think it necessary that any one shouldrepresent Margaret. In my view Margaret was quite capable of actingfor herself The evidence on this point is confirmed by the notary andcorroborates to some extent what Margaret said. But the first defendant atpage 492 (just a few lines below his evidence given by me above) contra-dicted his previous evidence by saying “ I think Anathasia was present
According to Liyano’s evidence accounts were looked into byPemiyanu, Anathasia, Margaret, and himself. Margaret was then ayoung girl who had just attained majority, Anathasia a feeble old illiteratewoman, and Pemiyanu is dead and cannot give evidence. His suggestionwas that D19 were the accounts which were looked into. His wholeevidence suggests that he regarded Margaret as quite competent to lookafter her affairs and that he treated her as an ordinary contracting party.But if Liyano was in a position of active confidence towards Margaretthis was not enough. Liyano should have explained all the pointsincluding the existence of P6 and D5 and it is hard to believe that Margaretwas told and that she understood all the details of the complicated accountswhich have now been put forward by Liyano and in which he himselfadmits that he has made gross blunders which he corrected in Court whengiving evidence. As far as I can make out from the English authoritieswhich I shall discuss later there was an obligation on a person in theposition of the first defendant to have explained all the details of this vasttransaction to Margaret and to have given disinterested advice as ifLiyano was advising Margaret in a transaction against a third person.There are certain recitals in the mortgage bond P2 which the first defendantattempted to explain at pages 425-430. He had to admit that he himselfdid not give the instructions which were embodied in the recitals, butthat they were given by a proctor's clerk on behalf of the Chettiar and thatsome of the recitals were not correct.
Further as I have already pointed out Liyano failed to explain toMargaret that the bond P26 was still undischarged and that she wasliable on this bond, unless he himself paid the full sum and the interest.There are many other points which Liyano seems to have failed to explainto Margaret. Did he for instance point out to Margaret that the accountsfiled in the testamentary cases, were not binding on Margaret and thatshe could ask for a judicial accounting under the Civil Procedure Code?And that the tavern profits were not inventoried ? Did he explain how adebt of Rs. 1,000 from Albanu’s estate in his favqur came to be includedin the accounts and about which he gave contradictory explanations inCourt ? Did he explain to Margaret why no income from the owita landswas shown and only pickings from the coconut lands were included ?
As far as I can see from Liyano’s evidence he has nowhere statedthat he had disclosed all the material facts to Margaret. Liyano assumedthat Margaret assented because she carried out his bidding. Did firstdefendant explain to Margaret the exact implications of P6 and D5,that according to him he was the absolute owner of half Albanu’slands ?
AKBAR J.—Perera v. Tissera.
At page 325 Liyano stated that he considered he was bound to pay halfAlbanu's debts and that he charged himself with half the expenditure on.his estate and testamentary expenses. And yet P27 shows the fulltestamentary expenses debited to Margaret. In spite of three mort-gagors being shown in D13 he charged the whole debt to Albanu’s estate(page 423).
Qn March 12, 1926, all the four deeds P1,P2,P3, and P4 were signedand, even if we accept the circumstances in which these deeds were signedas found by the District Judge, the first defendant has not explained thatMargaret agreed to the raising of the loan, the rate of interest or even asregards the choice of the properties which she purported to mortgage.If we turn to the instructions given to the notary by Liyano and theChettiar as regards the drafting of P2 (see translation of P5) the landsgiven in the instructions seem to be different to the lands actually mort-gaged by P2. P2 as signed- by Margaret includes Margaret’s residingland. The notary brought the deeds drafted for signature on March 12,1926, and there is no suggestion by Liyano that Margaret agreed to thealtered terms after March 3, 1926, when instructions were given. BothP2 and P3 mention Rs. 2,000 as expenditure incurred by Liyano inrespect of Macarius’ estate owing to his medical treatment, death andexpenses in connection with his estate, but this is in excess of the sumsshown in P27 in respect of these items. Was Margaret’s attention,drawn to this difference ?
It is time now that I come to the questions of law involved. TheDistrict Judge was right in holding that owing to the position occupiedby Liyano towards Margaret, there was a presumption of undue influenceand that section 111 of the Evidence Ordinance applied. In my opinionthe law that should be applied is the English lav/, not only because thereis an implied recognition of the English law by statute (see sections 91and 118 of the Trusts Ordinance, No. 9 of 1917) but also because the Roman-Dutch law seems to have been undeveloped (see Lee’s Introduction to theRoman-Dutch Law, p. 221 and also Soysa v. Soysa'). A large number ofEnglish cases was cited to us, but the law seems to be correctly statedin the cases in Spencer Bower’s Actionable Non-Disclosure (1915 ed.).ss. 406, 470, 471 and 476.
If we look upon these transactions as contracts between Liyano andMargaret, the defendant can only rebut the presumption by proof thatthere had been a full disclosure of all the material facts to Margaret, andthat Margaret had independent and competent advice either from a thirdperson or from the first defendant and Margaret got full and fair value atthe time of the contract. From the facts I have narrated the firstdefendant it seems to me has failed on all the three points. Even onLiyano’s evidence it is quite clear that Margaret was not acquainted bythe first defendant with all the facts which he himself had in his possession.P27 it will be remembered was put in after the case began, and D19 isobscure on many points. What is the meaning of the item “paid to theChetty Rs. 4,500 ” ? Were receipts, vouchers, and discharged docu-ments shown to Margaret ?. The first defendant’s evidence negatives thesuggestion that Margaret was given that degree of competent and
«19 N. L. R. 314.
AKBAR J.—Perera v. Tissera.267
independent advice which the law requires. In my opinion it is idle tosuggest that that advice was given by Anathasia, Graciano, and Pemiyanuor by the notary.
As regards the fair value, I may mention one circumstance. PI.states that Margaret transferred the eight lands mentioned in it for aconsideration of Rs. 3,000 which is negatived by first defendant’s ownpleadings, for by paragraph 9 of his answer Liyano says that three of theeight lands were conveyed to him for a consideration of Rs. 1,250 andinterest paid by him and also owing to the trust mentioned by him in theparagraph. Paragraph 9 goes on to say that the remaining five landswere conveyed in payment of the sum of Rs. 3,000 due on P4.
First defendant’s whole case depends on the correct construction of P 6.His evidence and the document D5 come to this: that the title to thewhole of Isabella’s share was vested in him, with only an obligation toconvey these shares to the minors within a period of 5 years from andafter the expiration of 12 years from the date of D5, i.e., July 4, 1916,upon payment of Rs. 3,000 by the minors. The very fact of the existenceof document D5 proves that there was a trust, and even though thatdocument does not bind the minors yet it can be used against Liyano,for it is put forward by him as a valid document. To my mind the recentdecision of the Privy Council in Saminathan Chetty u. Vander Poorten(Privy Council Appeal No. 117 of 1930) (supra) will apply if one takes intoaccount all the circumstances leading up to P1-P4, the first defendant’sevidence and documents PI and D5. To my mind Liyano’s interest onPI was that of a mortgagee and he had to account for all the income withinterest on Isabella’s lands for the whole period 1915-1926, which he hadno right to claim as his. In spite of deed 472 in Saminathan Chetty v.Vander Poorten (supra) the decree framed by the Privy Council directedthe defendant in that case to account for all the rents and profits whichthe defendant not only received, but which he might have received butfor his default, with -reasonable interest from the dates of receipt to thedate of decree.
Even under our Trusts Ordinance, No. 9 of 1917, the circumstancesunder which P6 was executed would appear to bring it within section 90.Liyano was in a fiduciary capacity towards Margaret ■ and he hasgained* by availing himself of his character, a pecuniary advantagefor himself, or Liyano being bound to protect Margaret’s interest hasentered into PI under circumstances which are adverse to Margaret.He must hold this advantage for the benefit of Margaret, In this con-nection it might be noted that by section 5 of that Ordinance it is speciallyenacted that the Ordinance of frauds cannot be pleaded to create a fraudand the chapter on constructive trusts does not seem to be exhaustive.As far as I can understand Mr. Hayley’s argument on the law, he did notdispute the law set forth by me above from Spencer Bower as regards theduty of a person in a fiduciary capacity similar to Liyano’s towards theperson to whom he stands in that relation when a Court is consideringcontracts between the two. Mr. Hayley’s argument was that these rulesdid not apply when the contracts had been entered into as the result ofa family arrangement. The cases he cited can be differentiated from the
DE SILVA A.J.—Per era v. Tissera.
facts of this case. In none of these cases (Dimsdale v. Dimsdale', Jennerv. Jenner, ‘ Hartopp v. Hartopp, ‘ Bellamy' v. Sabine,' Stewart v. Stewart *) ,did the question arise whether the defendant was under a liability toaccount for income wrongly received by him on behalf of the plaintiff.Most of the cases were concerned with the resettlement of estates inwhich both plaintiff and defendant had interests and the resettlementwas effected to preserve the family honour and dignity. The case nowbefore me is not a case of that kind and it would be unfair for a personin the position of Liyano to be able to plead that the transaction was afamily arrangement in order that he may evade his liability to accountto his former ward.
So far as the Chettiar respondent is concerned, he too is affected withthe taint of undue influence exercised by Liyano over Margaret. Thevery recitals in P2, which are unnecessary and unusual in an ordinarymortgage bond where the mortgagee bona fide lends money, fix him withnotice of the relationship between Liyano and Margaret. According toLiyano’s evidence the instructions relating to the recitals were given bya solicitor’s clerk whose services the Chettiar had requisitioned for thepurpose, and this proceeding shows not only that the Chettiar knew of theunusual nature of the transaction but that he was uneasy about it.Liyano’s evidence at pages 426-430 and 462-466 is strong evidenceagainst the Chettiar and he has not gone into the witness-box to refute it.Document D9 purporting to be a receipt signed by Margaret and producedby the Chettiar for interest paid by Margaret to the Chettiar on P2 issignificant. The receipt should have been given by Margaret to theChettiar and its execution and production in evidence are on a par withthe unnecessary recitals in P2. The same remarks apply to D8. Thispayment cannot be pleaded as a confirmation by Margaret of all thetransactions on March 12, 1926, for she and her witnesses have given anexplanation which appears to be perfectly natural.
According to the English authorities, notably Baibrigge v. Browne*,the second and third defendants-respondents are affected with the undueinfluence exercised by Liyano over Margaret in the circumstances of thiscase. But as the District Judge has accepted the evidence led by thedefendants and of the notary that money was paid on P2, our orderallowing this appeal must give effect to this portion of the trial Judge’sjudgment, but there is no reason why plaintiff should not be allowed toreopen the question whether the money that went to pay Isabella wasnot after all Maria’s money and not Liyano’s. I have had the advantageof reading my brother’s order at this stage of my own judgment and Iagree with the order proposed by him both as to costs and the furthertrial of the case.
de Silva A.J.—
By consent of parties cases Nos. 8,811 and 8,812 have been triedtogether. The question for decision in these' cases is whether deedNo. 3,481 dated March 12, 1926 (PI), executed by the plaintiff-appellant
1 25 L. J. Ch. p. 806.* (1847) 2 Philips Reports, p. 425.
a 30 L. J. Ch. p. 201.3 Clerk <t Finnelly, 911.
3 28 L. A. Ch. p. 471.* (1881) 18 Chancery Division, 188.
DE SILVA A-T.—Perera v. Tissera.
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in favour of the first defendant-respondent, and bond No. 3,482 of the samedate executed by her in favour of the second defendant-respondent areliable to be set aside on the ground of undue influence. Mr. Perera forthe appellant confined the appeal to this point.
The plaintiff is the daughter of one Albanu Tissera who died on July23, 1915. The first defendant is the brother of Albanu and took outletters of administration to his estate in testamentary proceedingsNo. l,102 of the District Court of Chilaw. Albanu’s father was a humblepadda boatman but Albanu advanced himself considerably in life, and,at the time of his death had been appointed a headman. He had marriedseveral times, his last marriage having been contracted 45 days before hisdeath. He left as his heirs his last wife and two children, by an earlierwife Justina, Margaret the plaintiff and a son Macarius. Margaret,bom on October 17, 1903, was at the time 11 years and some months old,Macarius, born on April 10, 1905, was 10 years and some months. Besidestheir uncle the first defendant the following relations of the plaintiff werealive : Maria, plaintiff’s grandmother, mother of plaintiff’s mother Justina;Gracianu an uncle, elder brother of the first defendant; two aunts,sisters of first defendant, Theresia married to one Pemiyanu and Eme-rencia married to one Augustinu. Also Simeon and Anathasia, Albanu’sparents.
The first defendant was admittedly in possession of Albanu’s estateuntil March, 1926. His position (paragraph 8 c. of the answer) was thataccounts were looked into in that month and that the impugned deedsand others were executed in the settlement of the accounts. The plain-tiff’s position is that there was no proper settlement of accounts and thatthe defendant caused her to execute the deeds by the exercise of undueinfluence. Undue influence was pleaded in case No. 8,812 but was notspecifically pleaded in case No. 8,811. It has however been raised inthe issues and counsel for the respondents did not argue that it had notbeen adequately put in issue.
The examination of the events between July, 1915, and March, 1926,is necessary to form an opinion on the state of affairs which existedin March, 1926, immediately before the execution of the impugneddeeds.
The learned District Judge after a lengthy trial has rejected the evidenceof the plaintiff and her witnesses and accepted the evidence of the firstdefendant. The earlier part of my observations will be based entirelyupon the evidence of the first defendant himself and upon materialfurnished by him in the various proceedings to which he has been aparty.
The first question of importance for consideration in the case is, asstated by the learned Judge (page 66), “ Whether Albanu died in solvent orinsolvent circumstances”. The learned Judge has found (page 70), “It isclear that on July 23, 1915, when Albanu died, he died in debt” andagain (page 71) “ The position of affairs at the time of Albanu’s death was(a) he had lands, (b) he was in debt ” but he has not answered the specificquestion raised by him, namely, whether when Albanu died his estatewas in solvent or insolvent circumstances. This question and the nett
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value of Albanu’s estate at the time of his death has an important bearingon the reasonableness or otherwise of the transactions of March, 1926,•between the first defendant and his niece, the plaintiff.
– The answer then to the first question is that Albanu’s estate was solventeven on. the figures submitted by the first defendant and that it was infact solvent to a greater extent than those figures indicate. What thatextent is it is not possible nor necessary to determine exactly for thepurposes of the order which I propose to make.
We have next to examine the position in law of a transfer made byIsabella to first defendant by deed P6 on June 9, 1916, of the half shareof Albanu’s lands, to which she as his widow was entitled. This deedwas executed as a result of an effort made by the family to get rid of Isa-bella and to preserve Albanu’s property for his children. It is claimedby the plaintiff that the first defendant held this half share in trust forherself and her brother Macarius. It -is common ground between theparties that Isabella received a total sum of Rs. 3,200, Rs. 3,000 for thelands conveyed on P6, and Rs. 200 for a necklace which Albanu hadgiven her and which she returned to the family. This sum of Rs. 3,200was raised in the following manner. Rs. 2,200 on bond P21 (October 14,1915) executed by the first defendant and Maria, by which certain landsof Maria were hypothecated and in which the first defendant joined onlyas surety. Rs. 1,000 on bond P22 (September 11, 1915) executed by thefirst defendant and Pemiyanu, in which the lands of both were hypothe-cated. P21 was cancelled on October 3, 1918, and replaced by bond P26for the same amount of Rs. 2,200. By P26 lands of Maria were hypothe-cated as well as lands which had passed to the first defendant under deedP6, but no lands of first defendant which had not belonged to Albanuwere hypothecated. It is claimed by the first defendant that althoughhe was not the only person liable on the bonds, the whole of the sum ofRs. 3,000 paid to Isabella on P6 must be regarded as his. His story isthat the arrangement between himself and the other members of thefamily was that this sum should be regarded as his money and that heshould pay off the liabilities on the bonds referred to. The co-debtorson the bonds are unfortunately dead. The learned Judge has acceptedthis evidence and I proceed to consider the transaction on the basisasserted.
For reasons which I have given I am of opinion that the half share ofAlbanu’s lands (subject to a half share of Albanu’s debts and testa-mentary expenses) transferred by Isabella on P6, was definitely more thanRs. 3,000, in value. According to the first defendant’s own affidavit of1915 the value of the interest conveyed by Isabella was half of Rs. 14.815(value of lands) less half of Rs. 6,908.08 (amount of total debts), viz.,Rs. 3,953.46, but for reasons which I have already given I am of opinionthat it was worth considerably more. Now this fact might or might nothave been known to Isabella but it was without doubt known to the firstdefendant.
It has been found by the learned Judge and I think found correctly,that “ the predominant wish of their (of the family) hearts at this stagewas firstly to get rid of Isabella and secondly to benefit the minors.
DE SILVA AJ.—Perera v. Tissera.
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tbifi is common ground in the case ” (page 74 of the judgment). The firstdefendant himself says, “we wanted to buy in Isabella’s share. Wewere all interested in Albanu’s children. I was also interested in them.No one wanted to get the lands for me”, (page 334), then again, “theBs. 2,200 was raised by Maria. I admit she raised this to benefit thechildren ” (page 341), and again, “ Maria trusted me to transfer the halfshare to the children. It was on this understanding that this Rs. 2,200was raised ” (page 349). The defendant no doubt in certain otherpassages of his evidence tried to qualify the evidence which I have setout, for instance he said “ I say that Rs. 2,200 was raised by Maria forme ” (page 343), but I have no doubt that when the money was raised noone intended to benefit the first defendant. The sole object was tobenefit the children.
The first defendant’s financial position at this time is relevant. Refer-ring to it he said “I could not raise Rs. 3,200. I had no property to-aise Rs. 3,200. I mortgaged my own land and raised Rs. 1,000”(page 339). “I mortgaged these lands and Pemiyanu his lands to raisethat Rs. 1,000 for Isabella. Then I had nothing left” (page 340). It isclear therefore on his own evidence that the utmost limit of his financialcapacity was to raise Rs. 1,000 and that he had nothing more than thelands mortgaged by the bond on which he raised it. He was thereforehimself not in a position to purchase the half share of Albanu’s lands fromIsabella even if he desired to do so. The document P6' sets out theconsideration as Rs. 6,890 although it is common ground that onlyRs. 3,000 was paid. The reason for this has not been explained and theonly reason that I can think of was that for stamping purposes the pro-perty could not be valued at less than the amount stated. This wasprobably the reason although I could not be sure of it.
The learned Judge (page 76 of judgment) thinks it probable that every-one imagined that the lands could not be conveyed to minors and I thinkthe evidence strongly supports this view.
In these circumstances what was the effect of the transfer P6 ? Theother members of the family, if not defendant himself, were assertingthemselves on behalf of the minor children. They do not appear tohave had recourse to legal assistance and it is clear on the Judge’s findingsas well as from the evidence that at this time they trusted the first defend-ant implicitly. I think a great deal has to be gathered from the impli-cations arising from the circumstances attending the transaction.Accepting, the learned Judge’s view that the Rs. 3,000 paid must beregarded as the money of the first defendant, I think the position is thatthe lands were held on trust by the first defendant for the minor childrento pay himself the Rs. 3,000 and interest accruing thereon and thereafterabsolutely for them. A long chain of decisions—Nanayakkara v. Andris',and the decisions referred to therein, Ranasinghe .v. Fernando*, NarayananChetty v. James Finlay & Co.*—of this Court supports this view.
It is necessary in this connection to consider the observations ofLord Atkinson in Adaicappa Chetty v. Caruppen Chetty'. The questionwas whether a trust arose on a certain agreement. His Lordship *observed “ The object of the agreement was, in their Lordships’
i (1921) 23 N. L. B. 193.3 (1927) 29 N. L. B. 63.
» (1922) 24 N. L. B. 170.* (1921) 22 N. L. B. 417.
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DE SILVA A.J.—Perera v. Tissera.
view, to create something much more resembling a mortgage or pledgethan a trust. The arrangement differed absolutely in nature and essencefrom that entered into where one man with his own proper moneysbuys landed property and gels the conveyance of that propertymade to another. In such a case the other has no claim upon theproperty vested in him. It would be a fraud upon his part tocontend that it belonged to him, or to insist that he was entitled to acharge or incumbrance upon it, or had a right to retain the possessionof it against the will of the man who purchased it”, and again“It was not a formal mortgage in that respect, but the agreementthe parties entered into was much more an agreement to create asecurity resembling a mortgage than to create a trust. It was in effecta parol agreement providing for the conveyance of land to establish asecurity for money, and creating an incumbrance affecting land, thatPerera desired to prove the existence of by parol evidence”. I thinkthat the agreement in the case before me was more of a trust than amortgage or pledge. The money paid for the property in AdaicappaChetty v. Caruppen Chetty (supra) was entirely the money of the transfereewhich no one had helped to raise, and with which the transferee couldhave done what he liked. P6, however, does partake of the nature of asecurity for money, although as I said before it was intended by itsexecution to create a trust rather than a mortgage. In the course ofthe argument before the Privy Council the case of Rochefoucauld v.Boustead' was referred to. It was held in that case that in certain cir-cumstances, which I need not go into, a person who bought property withhis own money held it nevertheless in trust for another person subject tothe repayment to him of the amount which he paid for it, and of theexpenses which he incurred in managing it. (Vide judgment of LordJustice Lindley.) That is to say the transferee held the property trans-ferred in trust but also as security for money advanced. Lord Atkinsonin Adaicappa Chetty v. Camppen Chetty (supra) has not referred to thiscase, but Viscount Haldane in the course of the argument remarked thatit had been fairly proved in Rochefoucauld v. Boustead (supra) that thetransferee (purchaser) was acting as the agent of the other party and itmay be that it was on this ground that a distinction was drawn. In thecase before me the first defendant was the uncle of minor children. Hewas the administrator elect and the chief person in the family, and I think.it can fairly be concluded that in dealing with Isabella he was acting asthe agent of the minor children in the sense in which the defendant inRochefoucauld v. Boustead (supra) could be considered to have been actingas an agent.
Lord Atkinson in the course of his judgment observed that our Ordi-nance No. 7 of 1840 was much more drastic than the 4th section of theStatute of Frauds, and it may be for this reason that it was not possibleto establish a trust in the case considered by him, because the parolagreement before him provided for the conveyance of land to establishsecurity for money, and as such was not “ of any force or avail in law ”for any purpose under our Ordinance, but as against this Lord ChancellorHalsbury in the case of Rochefoucauld v. Boustead (supra) appears to have
i (1897) 1 Ch. (C.A.) 196.
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observed that our local Ordinance did not appear to affect equitable rights.This view was definitely taken in Narayanan Chetty v. James Finlay(supra).
In the case of Saminathan Chetty v. Vander Poorten1 the PrivyCouncil considered not merely the language of an agreement relating toland but considered also the circumstances leading up to and surroundingits execution and came to the conclusion that a trust had been established.The attendant circumstances in the case before me point very stronglyin the direction of a trust. On a consideration of the decisions I havereferred to I am of opinion that apart from the reasons set out in thenext paragraph a trust in favour of the children has been established.
The effect of section 90 of our Trusts Ordinance No. 9 of 1917, appearsto me to put the matter beyond doubt. The section reads thus:
“ Where a trustee, executor, partner, agent, director of a company, legaladviser, or other person bound in a fiduciary character to protect theinterests of another person, by availing himself of his character, gains forhimself any pecuniary advantage, or where any person so bound entersinto any dealings under circumstances in which his own interests are, ormay be, adverse to those of such other person and thereby gains forhimself a pecuniary advantage, he must hold for the benefit of suchother person the advantage so gained The first defendant wasthe administrator elect, he was I think acting as the agent of theminors and he was in the circumstances in which he was acting bound ina fiduciary character to protect the interests of the minor children. If heobtained on the transaction anything more than the Rs. 3,000 and theinterest payable thereon, he gained for himself a pecuniary advantage byacting in a fiduciary character. The facts show that he could not havegained this advantage if he had not acted in the fiduciary character inwhich he did act. I am of the opinion that under the section, if for noother reason, all pecuniary benefits obtained by him in dealing with theland transferred to him under P6, over and above the repayment ofRs. 3,000 and interest, are “ pecuniary advantages ” which he must holdin trust for the benefit of the minor children. the result from themoment when he became entitled to property under P6 he was bound toaccount for the whole of its income, to repay himself the money spent byhim and interest, and thereafter to hold the property and the incomederived in trust for the minor children.
The first defendant’s view of his rights and liabilities is clear from thedocument D5 which was executed on July 4, 1916, within one month ofthe execution of D6. This was an agreement between the first defendantand Anathasia the grandmother of the minor children who purported toact on their behalf. By this agreement the first defendant undertook totransfer to the minor children the property acquired by him under P6after the expiration of a period of 12 years on the payment to him of asum of Rs. 3,000. If this agreement was valid the first defendant wouldhave received the income from the half share of the estate for himself fora period of 12 years, he would have paid therefrdm the interest on a sumof Rs. 3,000 advanced by him and perhaps interest on a half share of thedebts of Albanu and appropriated the balance. The income from half35/ 211 2 Ceylon Lau> Weekly 123.
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DE SILVA A.J.—Perera v. Tissera.
(the estate is on the first defendant’s own showing Rs. 9,002 (P 27).He would definitely have received a benefit for himself by the transactionand it is this benefit which he still attempts to keep. Anathasia Fer-nando was appointed guardian ad litem of the minor children in testa-mentary case No. 1,102. She was not even curator of the estate of theminors in properly constituted proceedings. It is clear law that she hadauthority to act for the minor children only in the testamentary caseand that she had no authority whatever to act for them in the wayshe has purported to do. D5 therefore is not binding on the minorchildren. It serves to indicate the course which the first defendantsought to take and to impose upon the children.
I will next proceed to consider the settlement of accounts in March,1926. At this date both Maria and Macarius were dead and the plaintiffwas the sole heir of both. Letters of administration to their estates hadissued to the first defendant in testamentary cases Nos. 1,421 and 1,602,respectively, and “ final accounts ” relating to periods terminatingAugust 4, 1916/September 19, 1916, February 26, 1924, and March 23,1925, respectively, had been filed in cases Nos. 1,102, 1,421, and 1,602.
It is necessary to examine the effect of these “ final accounts ”, inparticular to find out whether they preclude the plaintiff from questioningthe accounts furnished by the first defendant, and if so to what extent.It is the duty of an administrator to wind up an, estate as soon as possibleand to distribute the assets. If he desires to have a conclusive settlementof the accounts and of the distribution of the assets he must take stepsunder Chapter LV of the Civil Procedure Code. Under that Chapter,after a proper scrutiny of the accounts, a Court will proceed to enter adecree under section 740, directing payment and distribution to personsentitled according to their respective rights. The effect of sections 739and 740 is to make the settlement, of the accounts and the distribution ofthe assets final and conclusive. The scheme submitted to the Court forscrutiny and adoption under Chapter LV would be comprehensive, andwould make provision for all the property of a deceased personappearing in the inventory. It would show what has been donewith the property during the period of administration. The finalaccount which has been filed in case No. 1,102 in which Albanu’s estatewas administered is clearly not such a scheme as would have been neces-sary under Chapter LV. All that it purports to do is to set out the incomeand out-goings for the period to which it relates. It does not show whathas happened to the debts due to Albanu nor does it show what hashappened to his movable property. The official value of the estate isdebited on one side and credited on the other but no distribution of theproperty is made. No decree under section 740 has been entered directinga distribution. It was held by Pereira J. and de Sampayo A.J. in thecase of Vallipillai v. Ponnusamythat there is no provision in the CivilProcedure Code for the filing of a “ final account ” in the administrationof testamentary proceedings, and that where a “final account” was“passed” by tire Court after notice to the parties interested and theestate declared closed, a party could still ask for a judicial settlement.What was held is that such steps as these do not constitute a judicial
‘ (1913) 17 N. L. R. m.
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settlement under Chapter LV of the Code and that they do not supersedethe procedure by way of a judicial settlement. I venture respectfully tosay that this is good law. If finality had been claimed for the accountsfiled, the fact that Anathasia, the guardian ad litem and mother of theadministrator, employed the same proctor as himself would have throwngrave doubt on the regularity of the “ consent ” given by her. More-over the consent would never be regarded as anything more than anacquiescence in the actual matter of the accounts submitted, viz., the incomeand out-goings for the period in question, it could not have related to themovable property of Albanu, or to the debts due to him, or to thedistribution of his estate which were all matters not dealt with by theaccount. In the case under consideration, as in the case of Vallipillaiv. Ponnusamy (supra), the estate was in fact not closed. We see fromthe journal entries in case No. 1,102 that after the account was filed theadministrator continued to act as administrator and asserted the rightto deal with property on that basis. I am of opinion that there has beenno binding final settlement of accounts between the plaintiff and the firstdefendant either in case No. 1,102 or in the other two cases.
The first defendant in this case as administrator of three estates hasnot obtained a judicial settlement of his accounts in any of them. Hedid not even transfer to the heirs such property of the deceased personsas belonged to them, according to his own showing, until March, 1926.The correct legal position is that he should have obtained judicial settle-ments, distributed the property and obtained letters of curatorship, underChapter XL, to the property of the minors and administered such propertyin curatorship proceedings. Although he did not do this he admittedlywas in possession of the property of the plaintiff till March, 1926,.and Ihave no doubt that at that date the plaintiff had a right to call upon thedefendant to file accounts in the testamentary cases and to have thoseaccounts judicially settled under the close scrutiny of a Court whichwould have been watchful of the interests of a minor who had justbecome a major.
I next proceed to examine the basis of the settlement of the accountsbetween the plaintiff and the first defendants in March, 1926, as statedby the first defendant himself. In the first place he treated himself onthat date as the absolute owner of the property conveyed to him on thedocument P6, subject only to certain obligations which I have dealt withand in this respect he was settling accounts with the plaintiff on a basiswhich was not warranted by law. On this basis it is his case, thatRs. 10,800 was due to him (page 316) with a corresponding obligation onhim to convey to the plaintiff the property transferred to him by P6The plaintiff, according to the defendant, was to get the property oAlbanu and Maria and Macarius free from all debt and she was to findRs. 10,800 in payment of outstanding liabilities. The defendant was toget also three lands which he alleged (vide paragraph 9 of his answer)were held by Albanu in trust for his parents in respect of which the firstdefendant had paid off a mortgage debt of Rs. 1,‘250.
I will examine first the last part of this arrangement. The deed PL.executed by the plaintiff in favour of the first defendant conveys eightlands and the consideration is set out as Rs. 3,000. The defendant’s
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DE SILVA A.J.—Perera v. Tissera.
position with regard to the consideration is set out thus in paragraph 9of his answer: “ Three out of the eight lands described in deed No. 3,481of March 12, 1926, and inventorized in D. C. Chilaw, testamentary caseNo. 1,102, was transferred to the said Albanu Tissera in trust by hisparents in order to raise a sum of Its. 1,250 referred to in the inventoryin case No. 1,102. The defendant paid the said sum of Rs. 1,250 and theinterest thereon. In consideration of the said payment in view of thesaid trust the plaintiff transferred the said three lands to the defendant.The remaining five lands in the said deed No. 3,481 were transferred bythe plaintiff to the defendant in payment of the sum of Rs. 3,000 due tothis defendant from plaintiff on deed No. 3,480 of March 12, 1926, executedin pursuance of the agreement referred to in paragraph (2) of this answer ”.
Mr. Hayley for the first defendant stated that the averments in thisparagraph of the answer were incorrect and were due to a mistake. Hesaid that all the eight lands (not merely five), were conveyed in paymentof the sum of Rs. 3,000, and that reference was made to the three landsin respect of which the first defendant had redeemed the mortgage ofRs. 1,250, merely to indicate that those three lands among others hadbeen selected to fall to the lot of the first defendant because the firstdefendant had paid the mortgage debt, the reference thus being ofsentimental but not of financial interest. The language of paragraph 9of the answer is too clear and definite to admit of this view. It saysdefinitely that “in consideration of the payment (of Rs. 1,250) and inview of the trust, the plaintiff transferred three lands to the defendant.The remaining five lands …. were transferred by the plaintiffto the defendant in payment of the sum of Rs. 3,000 due to the
defendant” It is clear therefore that the first defendant
induced the plaintiff to let him have three of Albanu’s lands on theground (a) that these lands were held in trust by Albanu for Albanu’sfather, Simon, (b) that the first defendant had paid up the amount ofRs. 1,250 for which they had been mortgaged.
I will now examine the allegation of a trust. . . . These trans-actions do not indicate to my mind in any way that Albanu held thelands in trust for his parents. They indicate what the first defendantadmitted at one stage of the proceedings (page 419) that Albanu mort-gaged the property together with other lands of his parents in order toraise Rs. 1,200 for the benefit of his parents. I think that the allegationof a trust is unfounded.
Assuming there was a trust there is no reason why the first defendant(who no doubt did pay a sum of Rs. 1,250 for which the lands weremortgaged by raising the money on D17) should keep the lands. Icould see no reason why he should have got the sole benefit of the propertyof his parents even if he paid the mortgage. When questioned on thistransaction he gave evidence, pages 418 to 424, which was inconsistent,and unsatisfactory and which affords no adequate explanation.
It was argued by Mr. Perera for the plaintiff that the transaction withregard to this sum of Rs. 1,250 does not rest at this. He argued that thedefendant not only prevailed upon the plaintiff to let him have the landsin question in satisfaction of the amount paid by him alleging a trust,but that he has also debited the plaintiff with half the amount by
DE SILVA AJ.—Perera v. Tissera.
vn
Including it among the debts of Albanu at the settlement of accounts….. Although I think it very probable that Mr. Perera’sargument is right, I do not feel inclined to accept it as established in theabsence of cross-examination. It shows however the necessity for anascertainment of the true position by proper accounting.
I next proceed to examine that part of the settlement under whichaccording to the first defendant the plaintiff parted with Rs. 10,000,Rs. 3,000 worth of immovable property and Rs. 7,000 in cash, in settle-ment of a claim of Rs. 10,800, Rs. 800 having been waived by thedefendant. The arrangement was, according to the defendant, that byparting with this consideration the plaintiff was to have the property ofAlbanu, Maria, and Macarius free of all charges. There is no questionthat the plaintiff did part with the consideration stipulated. Did sheget what according to the first defendant she should have got ? Thedefendant stated at page 302, that there was a balance of Rs. 1,100 stilldue on the mortgage P26 of Maria’s lands. At page 430 he said in cross-examination referring to P26 “ I have paid off this debt except Rs. 1,100which has still to be paid. Maria’s heir is the debtor for the balance. Theplaintiff is Maria’s heir. I am liable to pay them as I undertook to payit ”. In the course of the argument certain items in encumbrance sheetsthat had been produced were pointed out by Mr. Hayley indicating thatcertain parcels of land mortgaged on P26 have since been released, butMr. Hayley admittedly could not establish by this document that thedebt referred to was not outstanding and that some at least of Maria’slands were liable for the payment of the debt. Even if there had been asubsequent release the fact that Margaret did not get what she was entitledto get when the impugned deeds were signed still remains. The positiontaken by the first defendant is that he is liable to obtain a release ofMaria’s lands and that it is his duty to keep the plaintiff indemnified inrespect of the amount for which Maria’s land is liable to the Chettiar.No deed of indemnity has been given by the first defendant and at thetime the impugned deeds were signed no document of any sort wasexecuted which contained a record of his undertaking. There is nothingmore than the first defendants’ mere word, and I doubt whether he even,verbally gave this undertaking in March, 1926. However that may be,the settlement was grossly improvident from the point of view of theplaintiff to whom the undertaking by the first defendant, even if given,would have afforded no defence against the Chettiar.
I do not know to what extent the learned Judge has appreciated theeffect of the admission that P26 has not been completely discharged.At page 79- of his judgment he says: “ I believe Liyanu when he says thedebts on P21, P22, and P26 were taken over by him. Had this notbeen the case I would have expected some clear evidence to that effect.In terms of agreement D5 he shouldered the whole debt, and had he madedefault I am sure there would have been some definite evidence provingsome protest at least from Maria, Pemiyanu, and Anathasia. I hold thatthe money raised by Maria by P21 and P26 was intended to be repaidby Liyanu and that he did in fact repay the'same ”. He has been influencedby the absence of positive evidence for the plaintiff but he seems to haveoverlooked the fact that the first defendant admitted that money raised
278DE SILVA A.J.—Perera v. Tissera.
on P26 has not been repaid. The first defendant at some stage of theevidence swore that he repaid the principal and interest on P26 and thisseems to have misled the learned Judge because he says at page 78 “ Liyanuswears that he paid the principal and interest on this bond”. I say 1am not sure whether the learned Judge has appreciated the question ofnon-payment because at the bottom of page 80 he says that the defendantadmits that P26 is still in force and that if it is put in suit he will haveto pay the sums due thereon. It appears to be inconsistent with theearlier finding that the first defendant “ did in fact repay the same ”.However that may be the learned Judge has not commented on theimprovident nature of the transaction entered into by the plaintiff inparting with a consideration of Rs. 10,800 without at least obtaining adischarge of P26.
The settlement was improvident also for another reason, because theplaintiff was entitled as I have said before to have the accounts judiciallysettled by a competent Court of law which would have been particularlywatchful over the interests of the plaintiff in an accounting rendered bythe first defendant. By entering into the transaction of March, 1926,she deprived herself (at first defendant’s instance) of this very salutaryprotection. The learned Judge has held that the plaintiff and thosearound her were not what they pretended to be. With regard to Ana-thasia, the first defendant’s own mother who has thought it fit in theseproceedings to give evidence against her son, the first defendant, thefirst defendant himself stated at page 433 that she “ is a feeble old lady,she is capable of listening …. but is unable to write or make anaccount ”. He immediately retracted this evidence and said “ I do notadmit she is a feeble old woman. She is well able to understand things ”.Later at page 444 he was compelled to admit “ my mother cannot read orwrite, she cannot even sign her name ”. Pemiyanu now unfortunatelydead was a cultivator as was admitted by the first defendant (page 487),Gracianu was an “ unlearned man ”. In 1923 Margaret was 23 years old.She had had an education of 2 years in a convent and was then living withthe first defendant and had been so living under his care and protectionfor 11 years. Up to that time she was being treated as a minor becauseit was not known that she had attained majority, her exact age havingbeen ascertained “ in 1925 when a settlement was mooted ” (page 483). Shehad in ;fact attained majority when Macarius died in 1924 but she wastreated /as a minor in testamentary proceedings 1,602 relating to Macarius’estate and Anathasia was appointed her guardian. Even if I acceptthe view which the learned Judge has formed of the capacity of theseparties I still think it was prejudicial to the plaintiff to enter into asettlement of accounts which was not subject to the scrutiny of the Court.
The learned Judge has found, and I think quite properly, that‘at thetime of the settlement of the accounts the plaintiff was living with thefirst defendant and had been so living for several years. He is of opinionon the authorities cited by him, Hylton v. Hylton1, Hatch v. Hatch', that“ the relationship of guardian and ward ceased in law on the ward attain-ing age, but in equity the influence continued till the accounts betweenthem were settled ”. The learned Judge discusses the law and proceedsi (1754) S Vcs. Sell. 547.s (1804) 9 Ves. 293.
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to state:—“ Applying the above principles to the facts of this case wefind that in March, 1926, Margaret and Liaynu were living in the samehouse, and that although Margaret was a major, probably everyoneimagined until her baptismal certificate had been obtained by the Chettiarthat she was still a miner. In such a case the Court should not take toonarrow a view, and I think a presumption of undue influence would arise,and the onus is cast upon Liyanu to prove not merely, that Margaretintended the transfer, but also that her intention was produced fairly byplacing around her all the care and providence which he himself wasbound to exert on his own behalf. In my view that onus has been fullydischarged not only by the cross-examination of the plaintiff’s witness,but also by the evidence called for the defence and'from the circumstancesof the case.”
The general principles relating to transactions between parent (or personplaced in loco parentis) and child has been well established in England in along series of cases, and are summed up in Spencer Bower on ActionableNon-Disclosure, pp. 363 and 372, ss 405 and 409. The law presumes infavour of the child against the parent (1) that the relation placed theparent in a position to exercise influence and dominion over the child,
that such influence and dominion operated upon, and procured, thetransaction, and (3) that the influence was improper and unfair, or(to use the accepted phrase) an “ undue influence ”. In the case of acontract in order to rebut the presumption and to sustain the contract itis necessary for the parent to prove (1) that the child had full disclosurein the widest sense of the term of the position he was placed in from theparent, (2) that the child received honest and disinterested advice againsthimself as he would have given him against a stranger, and placed at hisdisposal for that purpose the whole of his natural or acquired skill,judgment, and discretion, and (3) that the child received not less or partedwith not more than a fair and proper consideration (section 470). Theparent must establish that before the transaction took place he placedthe child “ in possession of all the knowledge in both senses of the wordwhich he then actually or presumptively himself possessed, that is to sayhe must be in a position to show not only that he had communicated tothe child all material facts within his exclusive cognizance but also thathe had placed at his disposal the whole of his knowledge in the sense ofnatural or acquired skill or judgment as to the wisest mode of dealing withthose facts in the interests, not of himself, but of the child. In a word,he must make all such disclosure, and give all such advice, to the childas would or might put him back in that position of equality of which therelation has in contemplation of law deprived him”. (Section 471.)
“ The onus is on the parent to establish, and the plea fails at the outsetunless he establishes, by evidence which must be ‘cleair and decisive’,that he made complete and exact disclosure to the child of all materialfacts within his exclusive cognizance relating to or affecting, the subject-matter of the transaction; such as, where property other than money is inquestion, all facts relating to the title to the property, or the extent andparticulars thereof, or its value; or, where it is a question of a series ofloans, or services rendered or other matter of account, all items anddetails required in order to explain the account, and show clearly how it is
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DE SILVA AJ.—Perera v. Tissera.
made up. Further, the parent must be prepared to establish that hegave the fullest and most candid information as to the exact nature of thetransaction, as well as of its subject-matter; accordingly, his plea fallsto the ground whenever he is unable to prove that he clearly explained tothe chUd the character of the instrument recording the transaction, orthe purposes which it was designed to accomplish, or the child’s rights,liabilities, and position at the moment immediately preceding it, withreference, to the matters proposing to be dealt with thereby, or the effectwhich it was calculated to have on those pre-existing rights and liabilitiesor the right of the child both to reject it when in fieri, and to repudiateit after execution”. (Section 472.) “The parent must next establish,in order to make good a case of disclosure in the fullest comprehensionof the word, that, before the transaction took place, he put at the disposalof the child the whole of his knowledge, in the sense of capacity, skill,and judgment; which means that he gave him ‘ all that reasonableadvice against himself that he would have given him against a thirdperson’. ‘He must show to demonstration, for this must not be leftin doubt, that no industry he was bound to exert would have got a betterbargain ’ for him. In all cases of failure to satisfy the Court on this pointthe plea has failed ”. (Section 473.)
These principles have been established in a series of cases which I neednot go into at length. In many of them it was difficult to apply theprinciples to the facts which had been elicited. In the case under con-sideration I find no difficulty at all in applying them. Far from thepresumption being rebutted we find facts supporting the presumption.The first defendant has stated that Margaret and the other members ofhis family took part in the discussion which preceded the execution of theimpugned deeds but nowhere does it appear that there was a completeand exact disclosure to the plaintiff of all the material facts within thecognizance of the first defendant. The advice which was given to theplaintiff and which she accepted resulted (even if the facts be as theywere stated to be by the first defendant in a very improvident settle-ment. Moreover the basis of settlement was incorrect in law and it hasnot been shown that the plaintiff received a fair and proper consideration.I think therefore that it must be held that the impugned deeds weresigned by the plaintiff under the exercise of undue influence and that theyare liable to be set aside on this ground.
The learned Judge has been influenced very largely by the view whichhe has taken that the transaction of March, 1926, was the result of afamily arrangement. He has cited a passage from Westby v. Westby1,to the following effect “ from the case of Stapleton v. Stapleton’ to thepresent day, the current of authority has been uniform and whereverdoubts and disputes have arisen with regard to the rights of differentmembers of the family, and fair compromises have been entered into topreserve harmony and affection, or to save the family honour, thesearrangements have been sustained by the Court, albeit resting upongrounds which would not have been considered satisfactory if the trans-action had occurred between strangers”. Now I cannot see in the
i 2 Or. if War. 502.
-1 Aik. i.
DE SILVA A.J.—Perera v. Tissera.
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settlement of accounts of March, 1926, u a fair compromise ” or any com-promise at all. It is not the case of the first defendant that the plaintiffgifted any portion of her rights or entered into any form of compromise.It is his case that accounts were stated and settled on a comparativelyexact basis. The position taken up by the first defendant and acceptedby the plaintiff was however materially different from the position hewas entitled to take up in law with regard to his rights and liabilities,and the element of fairness has not been established. I would hesitatewithout a proper accounting to state with any degree of accuracy how theaccounts between the plaintiff and the first defendant should have stoodin March, 1926, but it is sufficient to state that the basis on whichaccounts have been looked into is very different from the basis that shouldhave obtained. The question of a family arrangement has been pressedbefore us on appeal and Mr. Hayley has cited a number of authorities.In all of them schemes involving figures were no doubt adopted but innone of them have I been able to find a liability on the part of one partyto account to the other, previous to the adoption of the arrangement.In this country, and no doubt in England, a member of a family is fre-quently appointed administrator, executor or curator. Where a personso appointed is liable to render accounts and where the transaction whichtakes place is essentially one of accounting, I do not think there is muchroom for the plea of a family arrangement. In the year following Albanu’sdeath, efforts were no doubt made by the family, and made successfully,to win back for the family the share of the property that would have goneto Isabella. The arrangements made up to that date partook more ofthe nature of an arrangement to raise money than of a family arrange-ment. If Isabella is to.be regarded as not being one of the family, therewas no redistribution of the family property among the members ofthe family although there is an acquisition of property for the familyfrom parties outside it. I fail to see either in the purpose or in thescope of the transactions of March, 1926, a family arrangement. Ac-cording to the first defendant neither he nor the plaintiff was toforego any part of what was due to either of them. It was a purematier of accounting. The family property was not freed from debtor protected even temporarily from the pressure which creditorscould have placed upon it. It was not intended to, and could not haveafforded any means of preservation of the family property. It has beensuggested that the transactions were entered into to facilitate marriagefor the plaintiff by deceiving suitors into the belief that the plaintiff wasan heiress. I do not see how this result was or could have been achievedby the transactions in question. Admittedly all the bonds and deedswere registered and the registers which were open to the inspection of thepublic would have revealed a heavy debt for which- all the property ofthe plaintiff was hypothecated. Assuming that the position before theexecution of the documents of March, 1926, was unsatisfactory, I do notsee how the position after their execution could be said to have beenbetter from the point of view of a would-be suitor. Even if it was Idoubt very much whether an arrangement, the object of which waspurely and solely to deceive a suitor, and could in no way be said topreserve the family property, would come within the category of “ family
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DE SILVA AX—Perera v. Tissera.
•arrangement” in respect of which a counter presumption arises. Sucha settlement would not be a settlement of the doubts and disputes withregard to the rights of different members of the same family, I doubtwhether such an arrangement could be said to preserve “ harmony oraffection in the family or save the family honour ”.
I think for these reasons that the plea of family arrangement fails.It was also argued by Mr. Hayley that the doctrine of undue influence isentirely a doctrine of the English law and he doubted whether the Englishprinciples were applicable to Ceylon. In the case of Soysa v. Soysa itwas observed by Chief Justice Wood Renton that under the Roman-Dutchlaw the doctrine of undue influence did not appear to be recognized “ exceptin the form of duress or what the authorities describe as fear ”. He pro-ceeded however to say that the case before him was argued with specialreference to the rule of English law and that it was immaterial for thepurpose of the view which he took whether the evidence was consideredfrom the stand point of Roman-Dutch law or the English law. It wasnot held in that case that the English principles relating to undueinfluence were not applicable in Ceylon. The English principles of undueinfluence have been applied in our Courts for a Very long period of time ina long series of cases among .which I need only mention Peries v. Peries *and the cases referred to therein, Croos v. Croos*, and the more recentcase of Udalagama v. Banda I am of opinion that the English law.ofUndue Influence has1 been assimilated and become part of our law.Lee on Roman-Dutch Law states at p. 204:—“The topic of undueinfluence, as distinct from metus, is not developed in the Roman-Dutchcountries. However the books contain hints which might have beenworked out by judicial decisions without the aid of English precedents ”indicating that there is nothing in the Roman-Dutch law inconsistentwith or contrary to the doctrine of undue influence. It is probable thatif the Roman-Dutch texts are examined one would find principles fromwhich the modern principles of the English law can be developed. I donot propose to pursue this point further because I find that the doctrinehas in fact been adopted in Ceylon during a very long period and I amconsequently of opinion that it is now without doubt a part of ourlav/. '
The English doctrine of undue influence is recognized also by section 114of our Evidence Ordinance which, while laying down no substantial lawon the subject, provides a rule of evidence which is necessary for theproper application of the doctrine;
As I have referred to the case of Soysa v. Soysa (supra) I would like tomake another observation. In Soysa v. Soysa a proctor notary who attesteda deed of gift was regarded as the independent adviser of the donor. Thelearned Judge thinks that by expansion that finding can be made appli-
t
able to the circumstances of the present case and that the non-proctorotary who attested the impugned deeds can be regarded as an inde-
pendent adviser of the plaintiff. He has looked upon the matter simplyirom the point of view as to whether something which is true of a proctor
1 9 N. L. R. 314.a (1919) 21 N. L. R. 208.
2 ttfW) 9 N. L. R. 14.< (1930) 32 N. L. R. 74.
DE SILVA A.J.—Perera v. Tissera.
notary may not be true of a non-proctor notary. In the case of SoysaSoysa (supra) it appears from the reported judgment of Mr. Justice Shaw(1916,19 N. L. R.) that the deeds " were prepared by the family solicitor ofthe de Soysa family, who was not in any way acting for the first defendantin the matter, at the sole instance, and even insistence of the plaintiffA large portion of the judgment of Chief Justice Wood Renton isomitted fromr the report, but I have referred to the original and Ifind that in setting out the facts His Lordship stated that, according tothe proctor, the plaintiff (who was the disputing party) gave the proctorminute and rational instructions in regard to each of the instruments Andthat each of them was in fact his voluntary act. In the case under coh-sideration the notary received all his instructions from the first defendantwho employed him and he cannot be regarded in any way as the adviserof the plaintiff. The mere fact that he explained the purport of thedocuments to the plaintiff does not make him an independent adyiser forthe purpose of rebutting the presumption of undue influence.
I come now to examine the position of the second and third defendantswhose position is the same and to .whom I shall hereafter refer as the seconddefendant. The second defendant has been found correctly by the learnedJudge (page 98) to be the “family money lender”. The learned Judge hasfound on the evidence of the notary that Rs. 7,000 was paid by the seconddefendant to the plaintiff on bond P2. I think this finding must beaccepted. I have already taken the view tljatNhe documents PI andP2 were executed as a result of undue influence^xercised by the firstdefendant on the plaintiff. The question arises to what extent thesecond defendant Chettiar is affected by this fact. I think the positionin law is that if the second defendant knew of the facts, which in law gaverise to the presumption of undue influence in the execution of the docu-ment P22, then he took the document at his peril and the presumptionattaches to it against him to the same extent that it attaches against thefirst defendant. To hold otherwise would make it possible for a moneylender, with knowledge of the facts giving rise to a presumption of undueinfluence, to lend money with impunity and by this means it would b§quite a simple matter for a person in loco parentis acting in concert witha money lender to defeat the law.
I find that the reported cases support the view which I have taken. InKempson o. Ashbee the transaction was set aside on the ground of undueinfluence, and James L.J. said “ the first question is whether the bondwas obtained by the undue exercise of influence /of the step-father, andwas it obtained under such exercise as that the knowledge of it can beimputed to the creditor”? This question was answered in the affirm-ative. Justic Fry in the case of Bainbrigge v. Browne2 following thedecision referred to said :“I must inquire whether they (creditors) had
notice or knowledge of the circumstances upon which the equity which isalleged against them arose Commenting1 upon those passages Rahimin his book on the Law of Undue Influence at page 258 says: “What thenare those circumstances? The answer would depend on the nature of therelation. Where the relation by itself would give rise to the presumption,. ■i (1874-5) 10 Ch. App. 15.2 (1881) 18 Ch. D. 188.
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DE SELVA AJ.—Per era v. Ti&sera.
notice of that relation would suffice”. I venture to agree with thelearned writer. In the case of Espey v. Lake', a step-father gave thesecurity of his step-daughter, who was then in her twenty-second yearand living with the step-father, to his creditor Lake. Turner V.C. said:
“ Lake knowing these circumstances nevertheless took the note. Iimpute no moral fraud to Lake in the course of the transaction. I donot believe there was any moral fraud on his part, nor might he havebeen aware of the principles which guide the Court with regard to secu-rities taken from a person in the situation of Miss Espey at the time
In the application of the principles of this Court I see no
distinction between the case of one who exercises a direct influence, or ofanother who makes himself a party with the guardian who obtains sucha security from his ward …. Such a security cannot be main-tained in this Court ”.
I proceed to examine whether in this case the second defendant hadknowledge of the facts which would have given rise to a presumption ofundue influence …. I think that the documentary and oralevidence establish that all the facts upon which the presumption ariseswere known to the second defendant and that his position with regardto the plaintiff can be no higher than that of the first defendant. Theattestation to the bond P2 shows that part of the consideration was setoff against a promissory note, presumably a promissory note grantedby the first defendant. I am therefore of opinion that the bond P2 isalso liable to be set aside on the ground of undue influence, althoughconsideration has in fact passed upon it.
This action has been brought within the period required by the Statuteof Limitations but the question has been considered by the learned Judgeand pressed upon us in appeal that there has been delay on the part ofthe plaintiff in seeking a remedy and that she has been guilty of lacheswhich disentitle her to relief. It has also been argued that by reason ofcertain acts she “ ratified ” the transactions of March, 1926.
The learned Judge after referring to certain authorities states that thelaw regarding laches is summarized in the 13th Volume of Halsbury’sLaws of England,. p. 169 para 204, in the following words:—“ TheLegislature in enacting a Statute of Limitation specified fixed periodsafter which claims are barred ; equity does not fix a specific limit, butconsiders the circumstances of each case. In determining whether therehas been such delay as to amount to laches, the chief points to be con-sidered are: (1) acquiescence on the plaintiff’s part, and (2) any changeof position that has occurred on the defendant’s part. Acquiescence inthis sense does not mean standing by while a violation of a right is inprogress, but assent after the plaintiff has become aware of the violation.It is unjust to give the plaintiff a remedy where he has by his conductdone that which might fairly be regarded as equivalent to a waiver of it,or where by his conduct and neglect, he had, though not waiving theremedy, put the other party in a position in which it would not bereasonable to place him, if the remedy were afterwards to be asserted.In such cases lapse of time and delay are most material; under theseconsiderations rests the doctrine of laches ”.
‘0 Hare 260.
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285
It appears from this passage that in order to constitute acquiescenceor “ ratification ” by acquiescence there must not only be assent butassent after the plaintiff became aware of the violation of her rights.Knowledge of the violation of her rights does not mean mere knowledgeof the facts of the transaction which she has entered into, but knowledgethat that transaction was in violation of her rights, in short that it wasinvalid. In the case of Kempson v. Ashbee referred to above, the plaintiffsigned a bond as surety at the age of 22 at the instance of her step-father.In 1886 more than six years later, on pressure being put upon her by thecreditor she signed a second bond as surety and it was held by Cairns L. C.that as there was no proof that the plaintiff was aware of the invalidityof the first bond the execution of the second bond was not a confirmationof the first. Both bonds were set aside and it was further held that theplaintiff was not barred by laches notwithstanding the time which hadelapsed before which she asserted her right to relief. The second bondwas given in the words of Cairns L.C., “ under clear pressure. Here wasa creditor saying he would insist on his rights against her and her step-father unless there was a new bond for the sum already due with arrearsof interest and she was ignorant of the fact that she had only to apply tothis Court to get the previous bond declared mere waste paper. Is itpossible that this can be held to be a confirmation of the first bond? Toconstitute a confirmation there must be knowledge of the invalidity ofthe document but here there was no knowledge of invalidity”. In thecase before me the pressure placed upon a person in the position of theplaintiff by the production by the first defendant of a notarially executeddocument and a birth certificate must have been overwhelming. I donot think she was aware of her rights to have set aside a deed which sheas a major had signed before a notary until she was advised by counsel inthe case. I do not think that the payment of interest by her can beregarded in any way as an act which precludes her from seeking relief.In this connection it is to be remarked that the receipt D9 taken by thesecond defendant is a curious document. On July 25, 1926, the plaintiffpaid a sum of Rs. 280 to the second defendant as interest. In the normalcourse of things the second defendant would have signed a receipt andhanded it to the plaintiff. Instead of this we find that the second defend-ant causes the plaintiff to sign a receipt and to hand it to him. Therewas no receipt of money by the plaintiff and the object of this so-calledreceipt was without doubt to serve as an acknowledgment of the pay-ments of interest by the plaintiff on the date in question. This tends toshow that the mind of the second defendant was uneasy with regard tothe transaction and that he sought to obtain evidence of its confirmation.There is no evidence and it was not contended that second defendant’sposition had changed in any way before the date of action.
I have arrived at the conclusions which I have set out on the evidenceof the first defendant, accepting largely his version of what happened.For instance I have proceeded on the basis of his assertion of fact that theRs. 3,000 paid for P6 was to be regarded as his money and his moneyalone although other members of the family helped materially to raise itand although the property belonging to him which was hypothecated forthe purpose of raising it was not of a large extent …. On this
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DE SILVA A.J.—Perera v. Tissera.
and on several other matters I do not think it is necessary or rightthat I should come to a definite finding. They indicate to my mind thatthe accounts should be reopened to the fullest extent and that an oppor-tunity should be created to test the veracity of the accounts which arefurnished. In particular I think that the first defendant’s assertion thatthe sum of Rs. 3,000 paid on P6 was to be regarded as his own has to besubjected to closer scrutiny.
It has been pointed out by Mr. Hayley for the respondent that theplaintiff seeks to have the deed PI and the bond P2 set aside withoutasking for a declaration at the same time that the deeds P3 and P4 inher favour should also be set aside. The answer of the plaintiff is thatthe document P3 was rightly executed as it was an administrator’s deedand that the document P4 was rightly executed because it was a con-veyance to the plaintiff of property held in trust for her. Mr. Pereracontends that there is no reason why they should be set aside if thegrounds urged by the plaintiff are accepted. I think it was for thedefendants, if they desired that deeds F3 .and P4 should be set aside inthe event of PI and P2 being set aside, to have prayed in the alternativefor such relief. They have claimed in re-convention but have omitted toask for any such relief. If it transpires at an accounting that moneyis in fact due by the plaintiff to the first defendant, there would besome difficulty in setting aside the deeds PI and P2 until the claims ifany of first defendant in March, 1926, are settled. Mr. Perera stated thathe would- be content if we directed that an accounting should be takenand made it a condition to the setting aside of deed PI and bond P2 thatany money found on such accounting to be due from the plaintiff to thefirst defendant was brought into Court. The position taken by him inthis respect is entirely reasonable and I propose to give effect to it.
I set aside the order of the learned District Judge and I direct thefollowing inquiries to be made and accounts to be taken:—
Within six weeks of the time of the reaching of this record in thelower Court the plaintiff will ask for a judicial settlement of the adminis-trator’s accounts in testamentary cases Nos. 1,102, 1,421, and 1,602 of theDistrict Court, Chilaw, up to the date of execution of the documents PIand P2, viz., March 12, 1926. If she fails ^so to do this action will bedismissed.
(a) In accounting in case No. 1,102 the first defendant will creditthe plaintiff with all income and other monies received from the wholeof the estate possessed by Albanu at the time of his death.
He will account for the movable property and for debts shown inthe inventory as having been payable to Albanu. If he urges that hehas failed to recover any of them the Court will inquire whether failure torecover was due to his wilful default and in such case it will debit himwith the amount of such debt.
The first defendant will be debited on January 1 and June 1 ofeach year during the period in question with interest at 9 per centum per
DE SILVA AJ.—Perera v. Tissera*
287
annum on such residual sums as appear to have been, or shouldhave been, in his hands and which have not been deposited inCourt.
He will be entitled to credit in respect of all debts paid by him andof all the testamentary and other expenses with which Albanu’s estate couldproperly have been debited.
If it is found that any of the payments made by him could not havebeen met with moneys which were or should have been in his possession,and that in fact they were met with moneys of his own, he will beentitled to payment of interest at 9 per centum per annum on such sumspaid in excess till such time as he did reimburse, or could have reimbursedhimself with funds of the estate.
(/) The question as to how much of the Rs. 3,200 paid to Isabella was.provided by the first defendant will be gone into and first defendant willbe credited with the amount found to have been paid by him and interestthereon at 9 per centum per annum.
(g) Accounts in testamentary cases Nos. 1,421 and 1,602 will be settledon the same basis.
The District Judge will then on a day fixed by him consider inthis case the nett result of the settlement of the accounts in the three •eases.
If it is found that no money was due and owing from the plaintiffto the first defendant on March 12, 1926, the deed PI and the bond P2will be set aside. The second and third defendants will be directed toreturn to the plaintiff the amount of interest already paid by her. Firstdefendant will also pay to plaintiff the profits derived from the landstransferred by PI from the date of its execution.
If it is found that a sum of less than Rs. 7,000 was due and owingfrom the,plaintiff to the first defendant on the date given, the deed PIwill be set aside and the bond P2 will be declared good and valid to theextent of the amount found to be owing. The plaintiff will be creditedwith the amount of interest paid by her against interest payable by her.First defendant will pay to the plaintiff the profits derived from the landstransferred by PI from the date of its execution.
If it is found that a sum of over Rs. 7,000 was due and owing onthe date given, the bond P2 will be held to be good and the deed PI willbe set aside on the bringing into Court by the plaintiff of the differencebetween the sums so found and Rs. 7,000 with interest thereon at 9 percent, less the amount found by the District Judge to have been derivedas profits by the first defendant from the lands transferred by PI fromthe date of execution. The District Judge will fix a day for the depositof such money and in default of such a deposit the deed PI will stand.
The District Judge will award costs of the fresh proceedings orderedin such manner as he thinks fit.
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DE SILVA AJ.—Perera t>. Tissero.
The appellant will be entitled to the* costs of appeal and of theproceedings in the lower Court up to date in all the cases.
I have looked at the original and I find that the valuation report ofthe Mudaliyar in case No. 1,102 has been incorrectly copied in the certifiedcopy P18 and I direct the plaintiff to file a correct copy.
Appeal allowed.