RALEEHA v. BEE BEE

029-SLLR-SLLR-2004-V-1-RALEEHA-v.-BEE-BEE.pdf


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Raleeha v Bee Bee (Somawansa, J.)
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RALEEHAvBEE BEECOURT OF APPEALDISSANAYAKE, J. ANDSOMAWANSA, J.
A.229/93(f)
C.COLOMBO 5301/ZLAPRIL 30,
JUNE 11 ANDSEPTEMBER 23, 2003
Laesio enormis – Conditional transfer – Does the principles of laesio enormisapply to conditional transfers? – Who has the right of election?
The plaintiff-respondent instituted action seeking a declaration of title to theland in question and ejectment of the defendant-appellant on the basis that thedefendant-appellant (transferor) had failed to comply with the conditions setout in the conditional transfer deed. The defendant-appellant sought the dis-missal of the action and the cancellation of the deed on the ground of laesioenormis. The trial judge held with the plaintiff-respondent (transferee).
HELD:
Conditional transfers do not come within the exception to the principlesof laesio enormis.
A conditional transfer cannot be read to be in the nature of a specs noris the value of the thing sold or consideration paid not capable of defi-nite estimate.
Where the principle of laesio enormis does apply the right of electionas to restoring the thing or paying what is wanting to make up the justprice is with the plaintiff respondent (transferee).
In the instant case the plaintiff-respondent has failed to exercise thisright of election; however it is not justifiable to deny that right – at thisstage.
APPEAL from the judgment of the District Court of Colombo.
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Cases referred to:
Jayawardena v Amarasekera – 15 NLR 280
Wijesiriwardena v Gunaratne – 20 NLR 92
Kingsley v African Land Corporation Ltd., 1914 P.D.666
Couch v Lipschitz – (1918) WLR 78
Ponnupillai v Kumaravetpillai – 65 NLR 241
P.A.D. Samarasekera, P.C., with Kirthi Sri Gunawardena for defendant-appellant.
Sunil Cooray with Muditharo Prematilake for plaintiff-respondent.
Cur.adv.vult
February 16, 2004SOMAWANSA, J.
The plaintiff-respondent instituted the instant action seeking a 01declaration of title to the lands and premises described in the 1stand 2nd schedules to the amended plaint, ejectment of the defen-dant-appellant and those under him from the said lands andpremises and restoration to possession thereon and damages.
The position taken by the plaintiff-respondent was that thedefendant-appellant has failed and neglected to comply with theconditions as set out in the conditional transfer deed bearing No.3128 dated 06.10.1971 attested by T.Chelvadurai, Notary Publicmarked P3, in that the defendant-appellant had defaulted to pay 10the sum of Rs. 51,000/- plus interest at the rate of 12% per annumon Rs. 36,000/- within 5 years from the date thereof and obtain aretransfer of the said property at her own cost and expense asstipulated in the said deed marked P3.
The defendant-appellant while admitting the execution of thedeed of conditional transfer marked P3 prayed for the dismissal ofthe plaintiff-respondent’s action and the cancellation of the saiddeed of transfer marked P3 on the ground of (a) laesio enormis or(b) unjust enrichment or (c) non payment to the defendant-appel-
QARaleeha v Bee Bee (Somawansa, J.jig7
lant the consideration due on the said deed and in the event thesaid deed marked P3 is not set aside for the recovery of a sum ofRs. 1,50,000/- as compensation for improvements and for theright of jus retentionis until compensation is paid.
At the commencement of the trial parties admitted that thedefendant-appellant had been the owner of the said lands andpremises in suit and that the defendant-appellant executed thesaid deed of conditional transfer marked .P3. On behalf of theplaintiff-respondent 07 issues were raised while on. behalf of thedefendant-appellant 09 issues were raised. At the conclusion ofthe trial, the learned District Judge by his judgment dated12.05.1993 held with the plaintiff-respondent. It is from the saidjudgment that the defendant-appellant has preferred this appeal.
At the hearing of this appeal the only matter canvassed by thecounsel for the defendant-appellant was the question of laesioenormis. He contended that the defendant-appellant had raisedthe plea that she was entitled to have the deed marked P3 setaside on the ground of laesio enormis and the question of laesioenormis was put in issue in issues 07 and 08. But unfortunatelythe learned District Judge has not considered these two issuesstating that they were not relevant and in answer to issue 12raised by the plaintiff-respondent he has expressed the view thatthe rule of laesio enormis has no application to conditional trans-fers.
However it is argued by the counsel for the defendant-appel-lant that the learned District Judge has failed to realize that theconditional transfer is also a sale of property and on the execu-tion of the deed, ownership of the property passed to the plaintiff-respondent subject only to the defendant-appellant’s right ofrepurchase and that authorities relating to the subject of laesioenormis show that the learned District Judge’s view that the prin-ciple of laesio enormis has no application to conditional transferis incorrect and unsupported by authority.
Where a conditional transfer is effected the seller has a right torepurchase the property within an agreed time frame, However ifthe seller fails to repurchase the property within that time framethe seller loses the right of repurchase. In such a situation there
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is no room for complaint by the seller so far as the value of theproperty sold is not more than double the purchase price paid forthe sale. But if the value of the property so sold is more than dou-
ble the purchase price paid, then the question whether the trans-action is fair and equitable arises. In such circumstances itappears that the Roman Dutch Law remedy of laesio enormis ismade available. However if the value of the property was notmore than double the purchase price even though the seller mayhave suffered a great loss then he has no right to invoke relief onthe basis of laesio enormis.
Walter Pereira in his book Laws of Ceylon 2nd edition page657 states:
“If the seller or the purchaser has been prejudiced in the priceto the extent of more than half the real value even though no fraudhas been perpetrated on either side. The party so prejudiced maygive the other the option either cancelling the sale or of increas-ing or reducing the price in accordance with the real value. Thismode of restitution applies to almost all contracts. This is also theview taken by Grotious 3.17.1-5”.
In the case of Jayawardena v AmarasekeraW it was held:
■ “A person who knows the value of his property is not entitled torescission of the sale merely by reason of the fact that the priceat which he has sold the property is less than half its true value.
The case is otherwise where the property is sold at a pricegrossly disproportionate to its true value. In that case the law ison the side of the party who stands to lose by the transaction, andnot on the side of the party who stands to make an uncon-scionable profit.
On the execution of a notarial conveyance the sale is com-plete, and the mere fact that the whole of the consideration hasnot been paid cannot, in the absence of fraud or misrepresenta-tion, afford ground for the rescission of the sale and the cancella-tion of the conveyance.” .
Per Lascelles, C.J. at page 281;
“It is not the law that where a proprietor, who is in position to
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know the value of his property, sells it for less than half of what isafterwards held to be its true value, he is entitled to come intocourt and claim rescission. It is clearly laid down in Voet 18, 5, 17that a proprietor who knows the value of his property is not enti-tled to rescission merely by reason of the value of his property isnot entitled to rescission merely by reason of the fact that theprice at which he has sold the property is less than half its truevalue. The proprietor, in such a case, has only himself to thank forany loss he may have suffered. As voet puts it, ‘Neque damnum 100intelligatur esse, quod quis sua culpa sentit. “The case is other-wise where the esse, quod quis sua culpa sentit. “The case is oth-erwise where the property is sold at a price grossly disproportion-ate to its true value. In that case the law is on the side of the partywho stands to lose by the transaction, and not on the side of partywho stands to make an unconscionable profit”.
In the case Wijesiriwardena v Gunasekera (2) De Sampayo, J.was of the view that the principle of laesio enormis applied toleases as well.
It is submitted by the counsel for the plaintiff-respondent that nothe principle of laesio enormis can have no application to the factsof this case because deed P3 is not an absolute transfer but aconditional transfer for in the case of an unconditional sale thevalue of the thing sold can be ascertained on the basis of whatprice it would have fetched in the open market. However one can-not assess in money terms what price can be obtained on a salesubject to the condition that for example the transferor is entitledto reconveyance of the thing within 5 years on the payment ofRs.60,000/-. He contends that in such a conditional sale thetransferee is in reality purchasing a chance, firstly, the possibility 120that the thing sold will be absolutely his in the event the stipulat-ed amount is not tendered to him within the stipulated period andsecondly the possibility that at the end of the stipulated period hewill not be left, with the thing sold but only with the stipulated sumof money which was tendered within the stipulated period. As towhich of these two possibilities is more probable and which is lessprobable will depend on factors which cannot be ascertained atthe time of the conditional sale but must necessarily be merelyspeculated upon and that it is only a guess as to what will happen
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at the end of the stipulated period of five years. As such a guess 130cannot have an ascertainable market value. In this respectCounsel refers to Dr. C.G. Weeramantry on the “Law of contracts”vol.1 at pages 329-330 wherein the author lists eight instances inwhich the principle of leasio enormis does not apply.
“355. When the Action does not Lie. Laesio enormis does notlie in the following cases:
1. Where the thing sold is in the nature of a spes. Two reasons 'underlie this rule – the consideration that a man who purchases achance must abide the consequences, and the difficulty of ascer-taining the true value of a spes at the time of the sale. Thus the 140sale of rights in a gem pit in Ratnapura District would not give riseto the remedy of laesio enormis.
28. Where either the value of the consideration paid is notcapable of definite estimate”.
In this respect counsel also cited two South African casesreferred to by Dr. Weeramantry in his book at page 329. Kingsleyv African Land Corporation LtdS3) and Couch v LipschitzP). I amunable to see how these two decisions would support th^ argu- 150ment of the counsel for the plaintiff-respondent. In fact thdse twodecisions support the argument of the counsel for the defendant-appellant.
In Kingsley v African Land Corporation Ltd. (supra) facts werethe plaintiff in that case was a farmer residing on the farm Grootfontein in Orange Free State Province which the defendant wasan Incorporated Company with its head office in Johannesburgand was the owner of a certain township named Mountain View inthe neighbourhood of Pretoria. On 27 August 1913 the plaintiffpurchased from the defendant certain four lots in the said town- 160ship at the rate of 50 Pounds each. The plaintiff paid to oneSchravesande the defendant’s agent the sum of 200 Pounds aspurchase together with 20 Pounds in payment of transfer fees.
The said Schravesande had induced the plaintiff to purchase thesame by means of false and fraudulent representations as to their
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situation, quality, development value and cost. The plaintiff hadnot yet taken transfer of the property. The purchase price of 200Pounds was more than double the value of the said property atthe date of sale and the plaintiff had therefore suffered laesioenormis. He therefore claimed a rescission of the sale togetherwith a refund of the sum of 220 Pounds with interest and costs. Itwas held that the plaintiff was entitled to claim the rescission ofthe contract of sale and a refund of moneys paid thereunder onthe ground of misrepresentation and laesio enormis.
Per De Villiers, J.P. at page 674 –
“Parties to a transaction of purchase'and sale are allowed, asone authority puts it, to circumvent one another up to a certainpoint, and it was laid down that they can do so even up to half thevalue again. But anything which goes beyond that is consideredto be unconscionable, and the person, whether he be the pur-chaser or the seller, is entitled to relief. This is upon the well-known principle of our law that one party is not allowed to enrichhimself at the expense of another. Judging from the circum-stances, which have come out in this case, there is no reason whythe Court should seek to weaken any remedy or doctrine which isbased upon equity and which has been introduced for the protec-tion either of a purchaser or of a seller. I admit readily that theremay be cases in which it would be difficult to ascertain the realvalue of a particular article or property which is sold. Our lawmakes the limitation that whenever an uncertain thing is sold (aspes, or a mine or a quarry, or marshy ground, as in the examplegiven in the definition of Sande) the purchaser cannot afterwardsbe heard to complain. But when there is a definite piece of landupon which there are no uncertainties, which is not bought for itspossible mineral value or because it is considered that it canafterwards be drained. I see no reason why the doctrine shouldnot be equally applicable’, even if the purchaser bought it for spec-ulative purposes. To my mind, the object with which a party buysa particular thing is immaterial. Whether he buys land with theobject of making a profit eventually or for residential purposes, heis equally to be protected by the law if he has been overreachedto the extent of more than double the value”.
In the case of Couch v Lipschitz (supra) the facts were –
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“The plaintiff alleged that he had purchased a quantity of sec-ond-hand steel rope from the defendant, and that the latter hadfailed to deliver more than a portion of this quantity. The defen-dant pleaded that the quantity delivered was the whole quantitypurchased; and, in the alternative, if the quantity purchased wasas claimed by the plaintiff, that he, the defendant, had sufferedlaesio enormis and Was entitled to have the contract set aside on 210that ground”.
Per Ward, J. at page 79 –
“(after dealing with the evidence and finding that the plaintiff’sclaim failed on the first defence pleaded ): It is not necessary forme, therefore, to consider the alternative defence of laesioenormis, but I think I should state my findings of fact.
I come to the point which was argued, namely, that the princi-ple cannot be applied to a speculative contract of which this isone. I think the authorities show that what is meant is that it can-not be applied in those cases where the just value of the thing 220sold at the time of the sale cannot be determined. Referring to aright of succession Pothier says (at page 121): “Such are allaleatory contracts; for, although the risk which is undertaken byone of the contracting parties may admit of appreciation, it mustbe admitted to be extremely difficult to determine what the justprice is”.
For the above reasons, I am unable to agree with the counselfor the plaintiff-respondent that a conditional transfer would comewithin the 1st or 8th exception to the principle of laesio enormisas enumerated Dr.C.G. Weeramantry in his book “The Law of 230Contracts” vol.1. Certainly conditional transfer cannot be read tobe in the nature of a specs nor is the value of the thing sold orconsideration paid not capable of definife estimate for in theinstant case the thing sold is an immovable property of 50.9perches in extent with buildings, the value of which could easilybe estimated and as in fact been estimated by the Valuer and theprice paid is a definite sum of money.
According to the evidence of Senarath Bandara Weerakoon, aCourt Commissioner, Auctioneer and Valuer called by the defen-dant-appellant has valued the properties at Peer Saibo Street at 240
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Rs.1,33,560/- and the properties at New Moor Street atRs. 1,56,340/- both valuations being as at 1971. Thus the totalvalue of the several properties in 1971 was Rs. 2,89,900/-. Therewas no other evidence as to the value of the properties and noth-ing on record challenging or contesting the accuracy of his valua-tion. The plaintiff-respondent did not get any valuation done andthe evidence of the plaintiff-respondent was that she does notknow what was the value of these properties. Thus the evidenceof Weerakoon and his valuation report marked V1 and V2remains uncontradicted. The consideration on* the deed'marked 250P3 is mentioned as Rs. 51,000/-.
Thus it could be seen that in the instant action as evidencereveal where the property was worth Rs. 2,89,900/- as at the dateof the execution of the deed of conditional transfer marked P3 itis a grossly unfair and a unconscionable bargain made by theplaintiff-respondent. The plaintiff-respondent has got propertiesworth more than five times. It must also be mentioned that theadmission by witness Weerakoon that his valuation was not con-cerned with a conditional sale but with an absolute sale does notalter the situation.260
It is also contended by the counsel for the plaintiff- respondentthat as suggested by issue no. 13 the principle of laesio enormisdoes not entitle the defendant-appellant to a cancellation of deedmarked P3 but entitles the defendant-appellant to compel theplaintiff-respondent to select either to pay the difference in valueor to have the deed marked P3 cancelled and to get back the con-sideration he paid on the said deed marked P3. That what isimportant is that this right of election is available to the plaintiff-respondent who is the transferee on deed marked P3 and not tothe defendant-appellant who is the transferor. In this respect he 270refers to Dr. C.G. Weeramantry’s book on “The Law of Contracts”page 328 where he states:
“A contract may be avoided by Court on the ground of laesioenormis either when the purchaser pays more than double thetrue value of the thing or the vendor sells the thing for less thanhalf its value. The person sued has the option of restoring thething or paying what is wanting to make up the just price. Wherethe consideration is less than half (or more than twice) the value
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of the property, the sale is voidable on the ground of laesioenormis unless there is some special consideration present in the 280case which bars the application of the principle. The difference inprice must exist at the time of the transaction and not thereafter".
Counsel also cites the case of Ponnupillai v KumaravetipillaW.While conceading that where the principle of laesio enormis doesapply the right of election as to restoring the thing or paying whatis wanting to make up the just price is with the plaintiff-respon-dent. It is to be noted that up to now the plaintiff-respondent hasfailed to exercise this right of election. However considering thecircumstances of this case, I do not think it would be justifiable todeny the right of election even at this stage.290
For the above reasons, I would allow the appeal subject to theright of election of the plaintiff-respondent either to pay the differ-ence in value or to have the deed marked P3 cancelled and to getback the consideration paid by him. The judgment of the learnedDistrict Judge is set aside. The plaintiff-respondent will pay to thedefendant-appellant Rs.10,000/- as costs of this action.
DISSANAYAKE, J. – I agree.
Appeal allowed.