043-NLR-NLR-V-48-PUNCHI-APPUHAMY-Appellant-and-HEWAPEDIGE-SEDERA-et-al.-Respondents.pdf
130
Punchi Appuhamy v. Hewapedige Sedera.
1947Present: Howard C.J. and Wijeyewardene J.
PUNCHI APPUHAMY, Appellant, and HEWAPEDIGESEDERA et al., Respondents.
65—D. C. Kegalla, 3,350.
Paulian action—Person who has a claim for unliquidated damages—Rightof such person to be regarded as creditor.
Where A sues B on a claim for unliquidated damages and, pendingthe action, B fraudulently and collusively transfers his properties toa third party with the intention of defrauding creditors, a Paulianaction would be available to A if, at the time he institutes the action,he has already obtained a decree in his favour in respect of the claimfor* unliquidated damages.
PPEAL from a judgment of the District Judge of Kegalla.
A. Rajapakse, K.C. (with him C. R. Guneratne), for the plaintiffappellant.
N. Nadarajah, K.C. (with him H. W. Jayewardene and G. T. Samara-wickreme), for the first defendant-respondent.
No appearance for the second defendant-respondent.
Cur. adv. wilt. ■
WUEYEWARDENE J.—Puttchi Appuhamy v. Hewapedige Sedera. 131
March 20, 1947. Wueyewardene J.—
This is an action under section 247 of the Civil Procedure Codecombined with a Paulian action.
The plaintiff filed D. C. Kegalla, 2,091 on July 20, 1942, againstthe second defendant, claiming damages for defamation. Summonswas issued ten days after and was served on the second defendantin September, 1942. Decree was entered on June 24, 1943, award-ing the plaintiff Rs. 542.30 on account of damages and costs. Inexecution of the decree, the plaintiff caused the Fiscal to seize certainproperties including paddy fields and rubber lands, and the first defend-ant claimed them on deed PI of August 18, 1942, executed by the seconddefendant in his favour. That claim was upheld, and the plaintiff,thereupon, filed the present action against the two defendants. TheDistrict Judge dismissed the action with costs.
The second defendant is married to a sister of the' first defendant.The properties transferred by PI are all situated in the village of Dim-bulagama where the second defendant and his wife live. The firstdefendant, on the other hand, lives in the village of Atugoda, ten milesaway from Dimbulagama.
The deed PI purports to be a transfer of twenty-two lands, includingthe residing house and garden of the second defendant, for Rs. 1,500paid in the presence of the Notary. When the second defendant wasexamined in December, 1943, under section 219 of the Civil ProcedureCode (vide P2), he said that he sold the land to the first defendant “fora debt ” and that he was “ insolvent today ” and unable to pay thejudgment debt. Giving evidence in the present case the first defendantgave a different version of the transaction. He said that the seconddefendant sold the lands to him for Rs. 1,500, as the second defendantdesired to leave his village because he was afraid to live there as hisbrother had been murdered in that village. That murder * was aboutten months before the execution of PI. He admitted, however, thatthe second defendant did not leave the village after the transfer. Thesecond defendant himself did not give any evidence. The propertiesin question have been valued by the plaintiff’s witness, Mr. Sumana-sekere, a Court Auctioneer, at Rs. 6,742.50 and he submitted a detailedvaluation report P5. That valuation is supported by the evidencegiven by the plaintiff and the Vel Duraya of the village and standsuncontradicted by the evidence of the first defendant who alone gaveevidence for the defence. Even if the first defendant’s statement isaccepted that he paid Rs. 1,500 for the transfer, it is" clear from theevidence that the properties were worth more than four times theconsideration paid by him.
The oral evidence of the plaintiff and his witnesses is to the effect-that the second defendant has continued to be in possession of theproperties in spite of the deed PI. This evidence is supported stronglyby the documents produced in the case. The extracts from the AcreageTax Register of the village for the four years 1942 to 1945 <P6, P7, P8and P9) mention the name of the second defendant as the owner of.Yakadagalundurapuhena alias Kotilawatte which alon£K among the.
132 WIJEYEWARDENE J.—Punchi Appuhamy v. Hewapedige Sedera.
rubber lands transferred by PI, was liable to pay an Acreage Tax,being the only planted land over five acres in extent. The documentsPll, P12, P13, and P14—copies of Form C referred to in section 8 ofthe Rubber Thefts Ordinance, and signed by the second defendant—show that the second defendant claimed to be the owner of that rubberland in 1944. The Superintendent of Gracelyn estate produced docu-ments P15, P16, and P17 in support of his evidence that the seconddefendant sold the rubber from his lands in 1942, 1943 and 1944 andbrought rubber sheets to the factory on Gracelyn estate for smokingin April, October, November and December, 1944. The first defendantattempted to take away the effect of all this evidence by stating thathe asked the first defendant’s wife to “ take ” the rubber and that“ she gave (him) Rs. 25 or Rs. 20 for rubber ”. He was very vagueabout this arrangement and did not state when and how often thesepayments were made. As regards the paddy fields he said, “I toldmy sister (second defendant’s wife) that I would possess the fields inmy village ”. This could only mean that he possessed none of the paddyfields transferred, by PI, as all the fields were in another village, tenmiles away from his village. He admitted that the second defendantcontinued to live in the village Dimbulagama even after the executionof PI and that the second defendant’s wife was still residing in thehouse conveyed by PI. He admitted further, that before he obtainedthe transfer PI he was aware that the plaintiff had filed an actionagainst the second defendant for damages.
In view of all the evidence referred to by me I hold that the defendantsacted fraudulently and collusively in respect of the transfer with theintention of defrauding the creditors of the second defendant, and thatthe transfer did, in fact, prevent Jhe plaintiff from obtaining satisfactionof his decree in D. C. Kegalla, 2,091.
The Counsel for the first defendant sought to support the judgmentof the District Judge by contending that it was not open to the plaintiffto bring a Paulian action, as at the time of the execution of the transferPi the plaintiff had only filed an action in respect of his claim forunliquidated damages and had not obtained a decree. In supportof his argument he relied on the following passage in the judgment ofJayewardene A.J. in Fernando v. Fernando
“ The action to set aside a transaction as being fraudulent, that is,the Paulian action, is given to creditors, to whose prejudice thingshave been fraudulently alienated. Voet XLII 8, 3. The defendantis not, in my opinion, in the position of a creditor of Manuel Josephat the present time. There is no debt due to him, and his claim isone for unliquidated damages only. A person who has such a claimagainst another cannot be regarded as a creditor. A creditor con-notes the existence of a debt and a debtor. It cannot be said that theclaim for damages is a debt, or that the person against whom theclaim, is made is a debtor. It is only when the claim is found by theCourt to be due and is embodied in a decree that the relation ofcreditor and debtor would arise in such a case. ”
1 (1924) 26 New Law Reports 292.
WIJEYEWARDENE J.—Punchi Appuhamy v. Hewapedige Sedem. 133
The above passage appears to be in conflict with the decision inBaronchi Appu v. Siyadoris Appu It is, however, sufficientfor the purpose of the present action to state that the judgment ofJayewardene A.J. is, in fact, an authority against the contention of thedefendant’s Counsel that a person who had not obtained a, decree at thetime of the execution of the impugned deed cannot bring a Paulianaction, even after he has obtained a decree on his claim for unliquidateddamages. The facts in Fernando v. Fernando (supra) are brieflyas follows:—A entered into an agreement with Manuel Joseph aboutJanuary, 1924, for the use of .a boat in connection with some fishingoperations. Differences arose between A and Manuel Joseph aftersome time, and A filed an action against Manuel Joseph in March, 1924,to recover damages for an alleged breach of- the agreement. Actingarbitrarily A seized and detained the boat during the pendency of theaction without taking steps under Chapter 47 of the Civil ProcedureCode to sequester the boat before judgment. Manuel Joseph trans-ferred the boat to X in May, 1924, and X, thereafter, filed an actionagainst A for the recovery of the boat. A who had not obtained a decreein his case filed answer pleading that the transfer of the boat to X wasfraudulent and moved to add Manuel Joseph as a party to the actionin order to prove his allegations of fraud. The Supreme Court heldthat A was not entitled to ask Manuel Joseph to be added as a party,as at that time A had not obtained a decree in the action brought by himagainst Manuel Joseph. After setting out the facts and consideringvarious authorities Jayewardene A.J. concluded his judgment asfollows: —
(
“ In my opinion, therefore, the defendant (A) is not a creditorat present, and cannot ask for the cancellation of the transfer in favourof the plaintiff (X) on the ground of its being a fraudulent alienation.It may be that if he obtains a decree in his favour in his actionagainst Manuel Joseph before the trial of the present action, he wouldbe entitled to maintain his claim in reconvention. When that happenshe can ask the Court to add Manuel Joseph as a party to the action.But, for the present, it would be useless to add him. This is theonly question arising in the appeal. ”<•
The judgment of Jayewardene A.J. does not, therefore, help thedefendants, as the plaintiff had obtained a decree against the seconddefendant on his claim for unliquidated damages at the time heinstituted the present action.'
I allow the appeal and direct judgment to be entered in favour ofthe plaintiff in terms of the clauses (a) and (b) of the plaint. I awardthe plaintiff costs here and in the District Court.
Howard C.J.—I agree.
Appeal allowed».
1 (1914) 4 Court of Appeal Cases 65.