048-NLR-NLR-V-24-RANASINGHE-et-al.-v.-FERNANDO-et-al.pdf
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IMS.
Present: Bertram C.J. and Schneider J.RANASINGHE et al. v. FERNANDO et al.
35—D. C. Negombo, 14,913.
. Proof of trust—Oral evidence—If there a difference between express andresulting triwt t—Ordinanee No. 7 of 1840, s. 2.
Where a person has obtained possession of a property of another,subject to a trust or condition, and fraudulently claims to hold itfree from such trust or condition, he cannot be' allowed to claimthe advantage of the Statute of Frauds. Where such a state ofaffairs is alleged, oral evidence may be led to establish the trust.
In the application of this rule, no distinction is drawn betweenexpress and resulting trusts.
T HE facts appear from the judgment.
B«wa, K.C. (with him Croos-Ddbrera and C. ile Silva), for theAppellants.
Pereira, K.C (with him Canakeratne), for the respondents.
October 9, 1922. Bertram C.J.—.
This is an appeal'from a judgment of the District Court of Negombo.The subject of the action was a transaction between the first andsecond plaintiffs on the one side and the first defendant on theother. The seoond and third defendants play only subsidiary parts.The first plaintiff was in difficulties, and in the hope of being able torealize the best possible value for his properties, so as to dischargehis liabilities, be made an arrangement with the first defendant
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by which he and his wife and the third defendant, in whom two of 10Kthe three properties subsequently to be referred to, were vested, TTinUTiuwwere to transfer those three properties to the first defendant with a OJ.view to one of these properties—a valuable coconut estate—being rTLiiuiifiijftrsold, and the proceeds devoted first of all to paying the liabilities v. Fernandaof the plaintiffs to the first defendant, afterwards to settling the-liability of the plaintiffs to another creditor, tad finally with a viewto the balance being handed over to the first defendant for thedischarge of his other liabilities. That was the object of the trans-action as the learned Judge has found it, and 1 see no reason to differfrom that view.
In order to carry out the arrangement th6 first and most valuableof the properties, Katukenda, was transferred to the first defendant.
The plaintiff was indebted to the first defendant on a mortgage.
It was, therefore, stated that the transfer was to be in discharge ofthe mortgage, and a small incidental liability connected with thetransaction. The second property, Madangahawatta, was includedin this transfer. With regard to the third property, which consistedof the interests of the second plaintiff in a property subject to &partition suit, a transfer was impossible. But an agreement wasexecuted under which the seeond plaintiff agreed to convey herinterests in the land on the conclusion of the partition suit. Withregard to the consideration for this agreement, it was as follows:
The first plaintiff was indebted to the fii*st defendant, not only underthe mortgage bond above referred to, but also on a judgmentrecovered upon a promissory note. It is said that the promissorynote represented interest on file mortgage debt. But that pointappears to be disputed, and will be the subject of further inquiry.
This judgment debt was stated as the consideration for the agree-ment to convey the interest of the second defendant. It will thusbe seen that both these deeds were of a fictitious nature, and theirobject was to carry out a trust, a trust of which there is no writtenevidence. The learned Judge has found. that those were thefacts, and I entirely agree with the view he has taken as to thefacts.
The more one looks at the transaction, the more certain one is thatit is a case such as was found by the learned Judge, and that theaction of the first defendant almost from the first was fraudulentand unscrupulous. It is unnecessary for me to go into this partof the case more fully, as the learned Judge has himself dealt withit so adequately.. .
Certain questions of law, however, have been- raised. Mr. Bawa,who appears for the first defendant, insists that the learned Judgein the Court below had no right to. go into this question of the trust,inasmuch as the allegation as to the existence of the trust wassupported only by oral evidence. . With regard to that question,
1 have little or nothing to add to my recapitulation of the authorities
19fi2.
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to be founcl in my judgment in Nanayakkara v. Amiri*.1 It hag
Bjskkkam been established by a chain '"of authorities, which cannot now be .
C*J* disputed, both in England and in this country, that where a personBannHnghe bas obtained possession of a property of another, subject to a trustv. Fernando or condition, and fraudulently claims to hold it free from such trust orcondition, he cannot be allowed to claim the advantage of the Statuteof Frauds. This is settled law, notwithstanding the more drasticterms of our own Ordinance. On this latter point I observe a furtherexpression of opinion by Iiord Atkinson in Adaicappa Chetty v.Ca*uppen ChettyA I see no reason, however, to vary the opinionto which I have previously' given expression that the more drasticterms of our Ordinance do not prevent the application of the Englishequitable doctrine. Moreover, that English equitable doctrine hasbeen applied in a series of cases in our own Courts of which Gould v.Innaaitamby 3 is the best known and which are binding upon us.
Mr. Bawa, however, ingeniously attempted to draw a distinctionbetween all previous cases and this case. He insists that this is acase of an express trust, if it is a trust at all; and that all previouscases have dealt with implied or resulting trusts. I do not thinkthat that distinction can be supported. It is a distinction neverdrawn, to the best of iny recollection, in the numerous English casesby which the English equitable doctrine was gradually built up.That . doctrine is always stated in plain and unqualified terms.Nor has the distinction ever been recognized in our own Courts.Indeed, Moncreiff J. in Gould v. Innasitamby {supra) – statedexplicitly that all the English decisions to which he referred werequite independent of section 8 of the Statute of Frauds, whichrefers to implied or resulting trusts. In my opinion, therefore, thelegal point raised by Mr. Bawa cannot be sustained.
With regard to the further point that this deed was a deed infraud of creditors, I am not satisfied that the first plaintiff had anyreal fraudulent intention… It is quite true that after the arrange-ments he had made for the sale of the property had broken dowu,and he had been left in the lurch by the first defendant, he did takerefuge in this deed to procure his liberty from arrest. That, how-,ever, ^as a subsequent proceeding, and does not to my mindnecessarily show that he had an original fraudulent intention.In the result, with regard to the main aspects of the case, I am ofopinion that the appeal must be dismissed with costs.
But there are certain matters of detail which require working out.The learned District Judge has set aside three of the deeds executedin this case, and has awarded mesne profits to the plaintiff. Thisappears to leave the first defendant at large to enforce his mortgagedebt. I think that this would not be a satisfactory result, as itwould only .lead tc further litigation, and it is most desirable that in
1 (1921) 23 N. L. R. at p. 197.* (1921) 22 N. L. R. 417.
* (1904) 9 N. L. R. 177.
I
this case all the matters between the parties should be finally settled.I think, therefore, that the right course for us to pursue is to canyput the arrangement which the parties originally .intended. Forthis purpose, in my opinion, the deeds referred to by the learnedJudge, together with two earlier deeds by which the first plaintiffhad conveyed his interests in Katukenda and Madangahawatta tothe third defendant, and tile Fiscal's transfer of Periyamulla to thefirst defendant, should be. cancelled, and the former property shouldbe sold, and an account taken between the parties. Various inciden-tal matters will require to be adjusted in the course of the account,and the second defendant, who has not contested the action but willbe interested in this account, should, I think, be heard.
With regard to all these points and the other incidental matterswith which he deals, 1 agree with the order proposed by my brotherSchneider.
Schnbidbr J.—
I have already agreed with the judgment delivered by my Lordthe Chief Justice immediately upon the conclusion of the argumentof this appeal. At his request I have drawn up this formaldeclaration of our order upon the appeal.
The decree appealed from is set aside, and the case remitted forfurther hearing for the purposes indicated below.
After the further hearing: (1) the District Judge should declarethe firet and second plaintiffs entitled to the lands Katukenda andMadangahawatta in the shares to which they were' entitled in thesaid lands before April 20, 1918, but subject to the mortgages whichexisted over them at the said date, to wit*, the mortgage created bybond No. 4,523 dated April 15, 1915 (D 15) in favour of the firstdefendant over the said land Katukenda, and the mortgage createdby bond No. 14,452 dated September 17, 1917, over the land Madan-gahawatta, which said bond is referred to in deed No. 8,725 markedD 4, if the existence at that date be proved of that, bond.
He should declare the second plaintiff entitled to lot Jawarded in partition action No. 12,405 in lieu of her, undivided one-eleventh share of the land Periyamulla.
He should award to the plaintiffs as against the first defendantthe mesne profits of the land Katukenda as found by the decreeof the District Court, but subject to an allowance for expenses ofcultivation as from the month of June, 1918, until the plantiffsare restored to the possession of it, or until it is sold in execution ofthe decree herein. In the calculation of the mesne profits allowanceshould be made in favour of the plaintiffs, for the fact that suchmesne profits might have been paid as often as the crops were 'pickedby the first defendant, but were not paid.- This allowance shouldbe made in view of the fact that the amount decreed payable to thefirst defendant on the bond in his favour carries interest at 9 per
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tm.
SOHMUDBR
J.
Rannsingkef. Fernando
centum per annum from April 29, 1920. The amount so ascertainedto be due to the plaintiffs should be set off against the amountpayable by them Upon the bond ascertained as hereinafter indicated.
He should ascertain the amount due as principal* ami interestupon the said bond No' 4,528 (D 15) up to April 20, 1918, and includein the decree an order in the form of a mortgage decree as of thatdate in favour of the first defendant for such amount, declaring theland Katukenda specially bound and executable under that decree.Such amount should be decreed to carry interest at 9 per centumper annum.
As between the first defendant and the second defendant beshould take an account of the moneys paid by the second defendantto the first defendant as consideration for deed No. 15,515 (D 9)upon the sale of Madangah&watta, and as consideration for deedNo. 164 (D 1) upon the sale of lot J. After such accounting, heshould include in the decree an order in favour of the second defend-ant against the first defendant, upon the footing that the moneysso paid by her carried interest at the rate of 9 per centum perannum as from the dates of such payments. The amount decreedis to carry interest at 9 per centum.. If the second defendant shouldprove that she paid or discharged bond No. 14,458 of September,1919, mentioned in D 9 at any time after the date of that deed, viz..September 21, 1918, he should include in the decree an order in theform of a mortgage decree in her favour for the sum paid by her,declaring the land Madangahawatta bound and executable underthat decree as from the date of that payment.
He should expressly declare that the first defendant’s right tolevy execution to recover the whole of any sum which'may be due tohim from the plaintiffs upon decrees already obtained by him, suchas the decree in action No. 12,686, or his right to recover in theseproceedings or otherwise moneys which he may have paid to anyof the creditors of the plaintiffs, is untouched by the decree in thisaction. •
As regards the costs of parties in the lower Court,- the District•Judge should direct that the first defendant should pay to theplaintiffs their costs of the action, and that the second defendantshould bear her own costs.
Sent back.