Perumal and Harding
1944Present: Moseley S.P.J. and Wijeyewardene J.PERUMAL, Appellant, and HARDING, Respondent.
164—D. C. Galle, 38,843.
Trust—Claim to recover property—Constructive trust treated as express trust—
Prescription—Trusts Ordinance (Cap. 72) s. Ill (I).(b).
The plaintiff as cestuique. trustofaconstructivetrustsued the
defendantfor declarationof title to an immovable property.The
defendant had purchased the property with notice of the trust from thetrustee within ten years of the institution of the action.
Held, that the provisionsof section111(1)(b) of theTrustsOrdinance
read with section 111 (5) operated against the defendant relying on thepossession of the trustee in support of his prescriptive title, as the trustwas a constructive trust which would be treated as an express trust underthe Law of England.
^^PPEAL from a judgment of the District Judge of Galle.
1 (1915) A. C. 79.
WDEYEWABKENE J.—Perumal and Harding.
H. V. Perera, K.C. (with him N. E. Weerasooria, K.C., and Peri Sufi-Herarri), for the defendant, appellant./
• N. Nadarajah, K.C. (with him N. Kumarasingham), for plaintiff,respondent.
June 15, 1944. Wijbtbwahdenb J.—
Cur. adv. viilt.
The plaintiff-respondent filed this action in respect of an undividedhalf share of Kanapathy estate, the entirety of which was owned Originallyby one G. E. Gunasekere and mortgaged for securing the loans made tohim by Somasunderam Chettiar who was carrying on business 'under thevilasam of Ar. Ar. Sm. through his attorney and agent Narayan Chettiar,son of Murugandi Sami. In satisfaction of a mortgage decree enteredagainst G. E. Gunasekere the estate was sold and conveyed to Ar. Ar. Sm.Narayan Chettiar by P 2 of 1919. The plaintiff, as administrator of theintestate estate of Somasunderam Chettiar, filed action No. 24,593 in theDistrict Court of Galle in .1927 against Narayan Chettiar pleading thatthe latter was holding the land in trust for Somasunderam Chettiar andasking for a decree against him. During the pendency of that case,Narayan Chettiar died and his widow and son, Velayuthem Chettiar, whowas the administrator of Narayan’s estate, were substituted as defendantsand the decree entered against them in the District Court in February,1938, was affirmed in appeal in June, 1938 (see P 1). Neither that actionnor the decree in that action was registered. In spite of that decreeVelayuthem Chettiar executed an administrator's conveyance D 1 ofAugust 21, 1938, in his own favour as heir of his father in respect of ahalf share of the estate and conveyed the same to the defendant-appellantby D 2 of the same date. The consideration for the transfer is, accordingto the deed D 2, the payment of a sum of Rs. 250 and the discharge of adebt of Rs. 1,750 alleged to have been due from Velayuthem to the•defendant-appellant. The deeds D 1 and D 2 have been duly registered.
The present action went to trial on thirteen issues, six of which wereas follows: —
Issue 1.—Did Somasunderam Chettiar carry on business or money-lending under the vilasam of Ar. Ar. Sm. ?
Issue 2.—Was Narayan Chettiar at all times material the Agentof the said Somasunderam Chettiar?
Issue 3.—Was the property in dispute purchased by Narayan Chettiaras Agent and Trustee for Somasunderam Chettiar?
Issue 4.—Did defendant by deed 193 of August 21, 1938, purchasethe said property with notice of the said trust?
Issue 5.—If so, does the defendant hold the said property in trust forplain tiff?
Issue S.—Have the defendant and his predecessors in title acquired aprescriptive title to the premises in question?
The District Judge answered these issues and several of the remainingissues in favour of the plaintiff and entered judgment for him.
WUEYEWAJRDENE J.—Perumal and Harding.
It was admitted by the Counsel for the defendant-appellant that theDistrict Judge had answered correctly issues 1, 2 and 3 in the affirmativebut it was argued that the issues 4 and 5 should have been answeredin the negative and issue 8 in the affirmative.
The evidence of Rudrapathy shows that the defendant went withYelayuthem to Court in connection with the action No. 24,593 in theDistrict Court of Galle and asked him to bring about a settlement of thedispute in that action. That evidence stands uncontradicted and hasbeen accepted by the District Judge. The defendant’s witness Mr. deSilva, the Notary employed by the defendant to attest the deed D 2,states that he searched the Register of Encumbrances at the request oftbe defendant before the execution of the deed and that " he must havetold Perumal (the defendant) that there were entries showing thatAr. Ar. Sm. were interested in this (property) and there were seizures ”.The document D 3, which appears to be an incomplete part of the extractfrom the Register of Encumbrances produced in the District Court, con-tains an entry referring to a caveat entered by Ar. Ar. Sm. Anamalay Chettyand appears to have contained, according to Mr. de Silva's evidence,a further entry in respect of a prohibitory notice against the estate ofAr. Ai. Sm. dated May 2, 1929. The deed P 2 mentioned the purchaseras Ar. Ar. Sm. Narayan Chettiar while the deeds D 1 and D 2 refer toNarayan Chettiar as Murugunanda Swamiar Narayan Chettiar otherwiseknown as Ana Roona (Ar.) Ana Roona (Ar.) Savanna Mana (Sm.) NarayanChettiar while it refers to his son as Moona Roona (Mr.) Navanna (N.)Velayuthem Chettiar. In view of the descriptions given in these threedeeds I am unable to entertain the suggestion that the defendant mayhave thought that Narayan Chettiyar was known in his personal capacityboth as Mr. S. Narayan Chettiar and as Ar. Ar. Sm. Narayan Chettiar,The defendant could have given evidence on most of these points andexplained his position but was not called as a witness. In thesecircumstances the defendant cannot complain if it is presumed that heknew that the property was held under deed P 2 in trust for SomasunderamChettiar or that he wilfully refrained from making any inquiries regardingthe description of Narayan Chettiar in the deeds and the entries in theextract from the Register of Encumbrances. Taking into considerationall these facts I hold that the defendant had notice of the trust. It maybe noted that under section 3 of the Trusts Ordinance the defendantwould be considered as having the necessary notice “ when, but forwilful abstention from inquiry or gross negligence, he would have knownit, or when information of the fact is given to or obtained by any personwhom the court may determine to have been his agent for the purpose ofreceiving or obtaining such information ".
By virtue of sections 65 and 66 of the Trusts Ordinance the plaintiff is,therefore, entitled to institute a suit against the defendant for a declarationthat the property is comprised in the trust as the defendant had noticeof the trust when D 2 was executed. I hold' that the District Judge,has answered issues 4 and 5 correctly.
On issue 8, the Counsel for the defendant-appellant argued that NarayanChettiar and his administrator had adverse possession from 1927 to 1938
WIJEXEWAKDENE J.—Perumal and Harding.
and that the character of that possession was not altered by the proceed-ings in D. C. Galle, 24,593 so far as the defendant-appellant was con-cerned. lie contended that the title of his client based on the registered,deed D 2 should remain unaffected by any fictional change in the characterof the possession wrought by the entering of the decree in that case,as that decree was unregistered. It is not necessary to examine closelythe soundness of this argument, as this argument even if sound, does nothelp the defendant in view of section 111 (1) (b) which enacts that a claimto recover trust property shall not be barred by the provisions of thePrescription Ordinance. It was sought to overcome this difficulty byarguing that under the deed P 2 Narayan Chettiar held the property as atrustee of a “ constructive trust ” and not as a trustee of an expresstrust as contemplated by the Trusts Ordinance and therefore theplaintiff was not entitled to relief under section 111 (1) (6). It is, I think,correct to say that Narayan Chettiar was the trustee of a constructivetrust as known to our Ordinance- But the Privy Council decision inArunasalam Chettiy v. Somasunderam Ghetty1 shows that under the English-Law he would have been regarded as the trustee of an “ express trustThe true position therefore of Narayan Chettiar was that he was a trusteeof “ c constructive trust ” which would be “ treated as an express trustby the Law of England ’ ’. The plaintiff is thus enabled by section 111 (5)to claim the benefit of section 111 (1) (b).
In view of the decision I have reached on issues 1, 2, 3, 4, 5, and S'it is not necessary to express any opinion on the questions of res judicataand registration. I may, however, state that I am of opinion that theunregistered decree P 1 could not have been pleaded as res judicataagainst the defendant, if the deed D 2 had been executed for valuableconsideration and there was no fraud or collusion in obtaining the deed.But the evidence in the case shows that Velayuthem acted in concertwith the defendant dishonestly and devised a scheme for depriving theplaintiff of the fruits of his victory in D. C. Galle, 24,593. They schemed"to bring about this result by bringing into existence a subsequent deedand went to the Notary and got him to attest the deeds D 1 and D 2.Though Velayuthem and the defendant appear on the face of I) 2 asindependent parties to the transaction, they were, in fact, acting inconcert and having a common interest in their attempt to render thedecree P 1 nugatory. I hold, therefore, that the defendant cannot claimpriority for his deed under section 7 of the Registration of DocumentsOrdinance, and the decree P 1 could be pleaded as res judicata againsthim.
I would dismiss the appeal with costs.
Moseley S.P.J.—I agree.
(1920) 21 N. L. B. 389,
PERUMAL, Appellant, and HARDING, Respondent