013-SLLR-SLLR-1994-V2-PREMAWATHI-V-GNANAWATHI.pdf
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Premawathie v. Gnanawathie (G. P. S. de Silva, C.J.)
171
PREMAWATHI
v.
GNANAWATHI
SUPREME COURT.
G. P. S. DE SILVA, C.J.
KULATUNGA, J. ANDRAMANATHAN, J.
S.C. APPEAL NO. 51/93.
C.A. NO. 623/82 (F).
D C. GAMPAHA 22263/L.
NOVEMBER 8 AND 22, 1993.
Constructive Trust – Section 83 of Trusts Ordinance – Claim for retransfer of land -Agreement to retransfer on informal writing – Prevention of Frauds Ordinance,Section 2.
An undertaking to reconvey the property sold was by way of a non-notarialdocument which is of no force or avail in law under section 2 of the Prevention ofFrauds Ordinance. However the attendant circumstances must be looked into asthe plaintiff had been willing to transfer the property on receipt of Rs. 6000/-withinsix months but could not do so despite the tender of Rs. 6000/- within the sixmonths as she was in hospital, and the possession of the land had remained withthe 1st defendant and the land itself was worth Rs. 15,000/-, the attendantcircumstances point to a constructive trust within the meaning of section 83 of theTrusts Ordinance. The "attendant circumstances" show that the 1st defendant didnot intend to dispose of the beneficial interest.
Casa referred to:
Muttammah v, Thiyagarajah 62 NLR 559, 571.
APPEAL from judgment of the Court ol Appeal.
N.R. M. Daluwatte PC. with Mrs. Dhammika Dharmadasa for defendant-appellant.
P. A. D. Samarasekera P.C. with Hemasiri Withanatchi for plaintiff-respondent.
Cur. adv. vult.
December 2,1993.
G. P. S. DE SILVA C. J.
The Plaintiff instituted these proceedings for a declaration of title tothe land described in the schedule to the plaint, for the ejectment of
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the defendants and for damages. Admittedly the 1st defendant wasthe owner of the land in suit and she by deed No. 5755 dated4.2.76(P1) transferred it to the plaintiff for a sum of Rs. 6000/-. P1 wasex-facie an out and out transfer. Using her claim of title on P1, it wasthe plaintiff's a case that the defendants acting in concert hadwrongfully prevented her from possessing the land since 4.8.76.
The 1st defendant in her answer, in the issues, and in her evidenceclearly and specifically took up the position that by P1 she did notintend to dispose of the beneficial interest in the land to the plaintiff.In paragraph 5 of the answer she pleaded a constructive trust interms of section 83 of the Trusts Ordinance. Issues Nos. 3 and 4 readthus:
3 Did the 1st defendant transfer the beneficial interest in theland in suit to the plaintiff on deed No. 57557?
4. In any event, was the said land worth more than twice thesum of Rs. 6000/- at the time of the execution of the deed asaverred in the answer?
After trial, the District Judge answered the above issues as “Notproved” and entered judgment for the plaintiff. The 1 st defendantappealed against the judgment to the Court of Appeal, but withoutsuccess. Hence the present appeal to this Court.
The plaintiff in her evidence admitted that by an informal writing(which bears the same date as P1) she undertook to reconvey theproperty to the defendant upon the payment of the sum of Rs. 6000/-within a period of 6 months from 4.2.76. She further stated, (i) thatshe was in hospital for about 2 months from August 1976; (ii) thatwhile in hospital the defendant came to see her and discussed withher the question of the retransfer of the property; (iii) that the hospitalauthorities did not permit the notary to come to the hospital and thedeed of retransfer could not be executed; (iv) that she was willing toretransfer the property within the stipulated period of 6 months; (v) inanswer to court, that the value of the property was about Rs. 15000/-in 1976.
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Premawathie v. Gnanawathie (G. P. S. de Silva, C.J.)
173
The 1st defendant testified to the circumstances in which shecame to transfer her property to the plaintiff on P1. She was urgentlyin need of money and the plaintiff required a transfer of the propertyin order to lend her the money. By a non-notarial document theplaintiff agreed to retransfer the property upon payment of the sum ofRs. 6000/- within a period of 6 months. In cross-examination shestated that she met the plaintiff with the sum of Rs. 6000/- before theexpiry of the period of 6 months but the deed of retransfer could notbe executed because the plaintiff was in hospital.
Special leave to appeal to this Court was allowed on twoquestions:- (1) Can it be reasonably inferred consistently with theattendant circumstances that the 1st defendant intended to disposeof the beneficial interest in the property to the plaintiff? (2) If not, wasthe District Judge justified in rejecting the claim of a constructive trustin terms of section 83 of the Trusts Ordinance?
Section 83 of the Trusts Ordinance reads as follows:- “Where theowner of property transfers or bequeaths it, and it cannot reasonablybe inferred consistently with the attendant circumstances that heintended to dispose of the beneficial interest therein, the transferee orlegatee must hold such property for the benefit of the owner or hislegal representative." As stated by Dr. L. J. M. Cooray in his book onTrusts (p. 129)) the “pivotal words" in the section are “intended todispose of the beneficial interest" in the property.
Mr. Samarasekera for the plaintiff-respondent submitted that thequestion which arises for decision is, what was the true“arrangement" between the parties in regard to the disputedtransaction? It was Counsel’s contention that the real “arrangement*was for the defendant to sell the property to the plaintiff and theplaintiff to convey the property back to the defendant upon thepayment of a sum of Rs. 6000/- within a period of 6 months. Deliveryof possession was postponed only for a period of 6 months. The 1stDefendant failed to tender to the plaintiff the sum of Rs. 6000/- withinthe stipulated period of 6 months, and hence it was the 1st defendantwho was in breach of the agreement arrived at between the parties.In these circumstances. Mr. Samarasekera argued, that no question
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of a constructive trust arises at all in this case, and that the plaintiffmust succeed in her action.
There are two matters which militate against these submissions.The first is that the undertaking to reconvey the property to thedefendant was by way of a non-notarial document which is of no“force or avail in law." (Section 2 of the Prevention of FraudsOrdinance). The “true arrangement" (to use Counsel's own words)between the parties cannot be based on an agreement which isinvalid in law. Secondly, as rightly pointed out by Mr. Daluwatte, forthe 1st defendant-appellant, there is clear evidence to show that the1st defendant in fact tendered the money to the plaintiff within theperiod of 6 months. The deed of retransfer could not be executedbecause the plaintiff was in hospital.
On the other hand, upon a consideration of the totality of theevidence on record, I am of the opinion that, the following facts havebeen established:-
1st Defendant was in urgent need of money at the time shesold her land to the plaintiff on P1 for a sum of Rs. 6000/-.
The plaintiff by a non-notarial document agreed to retransferthe land to the defendant upon payment of the said sum ofRs. 6000/- within a period of 6 months. (The non-notarialdocument is relevant not to enforce the promise but only toestablish an “attendant circumstance" within the meaning ofsection 83 of the Trusts Ordinance – Muttammah v.Thiyagarajah.'"
The plaintiff entered hospital and the retransfer of the landcould not be effected within the period of 6 months; thedefendant however, tendered the money to the plaintiff withinthe stipulated period.
The consideration on P1 was Rs. 6000/-. The Plaintiffadmitted that the value of the land was about Rs. 15,000/-.
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Premawathie v. Gnanawathie {G. P. S. <Se Silva, C.J.)
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The plaintiff’s evidence was that she was ready and willing tore-transfer the land to the 1st defendant within the period of 6months. This is indicative of the fact that the plaintiff realisedthat there was an obligation attached to her ownership of theland.
The possession of the land remained with the 1st defendant.
In my view, the above facts and circumstances point to a"constructive trust" within the meaning of section 83 of the TrustsOrdinance, as rightly contended for by Mr. Daluwatta. In other words,“the attendant circumstances" show that the 1st defendant did notintend “to dispose of the beneficial interest" in the land by P1.
Both the District Court and the Court of Appeal failed to evaluatethe evidence having regard to the 1st defendant's plea of a“constructive trust" within the meaning of section 83 of the TrustsOrdinance. Accordingly, the judgment of the Court of Appeal and theDistrict Court are set aside and the appeal is allowed with costs inthis Court, Court of Appeal and the District Court.
I accordingly direct –
the 1st defendant to deposit a sum of Rs. 6000/- with legalinterest from date of action to the credit of this case on orbefore 28th February 1994;
if the said sum of money is paid as aforesaid, the plaintiff totransfer the land in suit in favour of the 1st defendant, on orbefore 15th April, 1994;
if the said sum of money is paid as set out in (1) above and ifthe plaintiff fails to effect a transfer as set out in (ii) above, theRegistrar of the District Court to effect the transfer on orbefore 31st May, 1994;
the plaintiff is entitled to withdraw the said sum of money setout in (i) above only after the execution of the conveyance byher or by the Registrar of the District Court.
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the 1st defendant to bear all expenses of the conveyance inher favour;
The Registrar of this court is directed to return the record forthwithto the District Court so that the parties could comply with theaforesaid directions.
KULATUNGA. J. – I agree.RAMANATHAN, J. – I agree.
Appeal allowed.Directions given.