SIRISOMA et al , Appellants, and SARNELIS APPUAHAMY et al, Respondents

085-NLR-NLR-V-51-SIRISOMA-et-al-Appellants-and-SARNELIS-APPUAHAMY-et-al-Respondents.pdf


Siriaoma v. Sarnel-is Appuhamy
337
1950Present: Dias S.P.J., Gratiaen 3. and Palle 3.
SIRISOMA et al, Appellants, and SARNEUS APPUHAMYet al., Respondents
S. C. 30—D. C. Balapitiya, L 90
Coroner's alienation or hypothecation, pending partition proceedings, of what wouldbe allotted to him in the final decree—Validity and effect of such alienation orhypothecation—Partition Ordinance, Sections 9 and 17.
Section 17 of the Partition Ordinanoe does not prohibit the alienation orhypothecation, pending partition proceedings, of an interest to which a co-owner may ultimately become entitled by virtue of the decree in the pendingaction.
Where an instrument is oxocuted, pending partition proceedings, in respectof an interest to which the grantor may ultimately become entitled upon thedecreo, tho question whether it should be construed as an actual alienation orhypothecation of such contingent interest or merely as an agreement to alienateor hypothecate suoh interest {if and when acquired) must be decided inaccordance with the ordinary rules governing the interpretation of writteninstruments.
If such an instrument is in effect only an agreement to alienate or hypothecatea future interest, if and when acquired, no rights of ownership or hypothecaryrights (as the oaso may bo) pass to the grantee upon the acquisition of thatinterest by the grantor unless and until the agreement has been duly implemented;if, without implementing this agreement, the grantor conveys to a third partythe rights which he has acquired undor the decree, the competing claims of thatthird party and of the original grantee must be determined with reference to' other legal principlos such as tho application of Section 93 of the TrustsOrdinance.
If the instrument is in effect a present alienation or hypothecation of acontingent intoreet, tho right of ownership {or the hypothecary rights) vestin the grantee automatically upon the acquisition of that interest by thegrantor; and no further instrument of conveyance or mortgage requires to beexecuted for the purpose; the execution of “ a deed of further assurance ”confirming the result which has already taken place may in certain cases bedesirable but it is not essential in such a cose.
Tho provisions of section 9 of the Partition Ordinanoe do not invalidate atransaction whereby an interest (which is not presently vested in the grantorand which could only beoome vested in him, if at all, upon the passing of afinal doc roe for partition) is intended to pass to the grantee upon its acquisition.
Appuhamy v Babun Appu (1923) 25 Ni L. R. 370 and Fernando v. Atukorale(1926) 28 A L. R. 292:overruled.
Cf ASE referred by Wijeyevvardcnc C.J. to a Bench of three .fudges.
E. B. Wikramanayake, K.C., with C. V. Ranaivate and C. Seneviralne,for defendant appellants.—The question for decision is whether the saleof divided lots which may be allotted in a partition action operates as anactual conveyance or merely as an agreement to convey. Louis Appu-homy v. Funchi Baba1 and Subaseris v. Prolis2 are not helpful decisions* (1904) 10 .V. /,. R. 196.* (1913) 16 N. L. R. 393.
15LI-
1J. N. A 97028-1.042 (5/tOj
338
Sirisoma «. Sarnelis Appuhamy
as the question whether the transaction operates as a present conveyanceor an agreement to convey was not considered. The docision in KhanBhai v. Per era5 to the effect that persons desiring to dispose of theirinterests in property subject to a partition action can only do so bydisposing of tho interests to bo ultimately allotted to them in the actionwas obiter to the question at issue. That case does not bear the inter-pretation given by Soertsz A.C.J. in Manchanayake v. Perera 2. Seealso Fernando v. Atukorale a. If the deed in the present case passes titlethen section 9 of the Partition Ordinance destroys that title. If it doesnot pass title then there is only an agreement to convey giving rise to anaction for specific performance.
H. V. Verera, K.C., with N. E. Weerasooria, K.C., Af. M. Kumara-kulasingham, and J. E. R. Candappa, for plaintiffs respondents.—Anagreement to soli cannot be construed as a sale, and conversely a Balecannot bo construed as an agreement to sell. The nature of the trans-action depends on the terms of the document. Maartensz A.J. inFernando v. Atukorale (supra) thought that when a person sold a futureinterest it was only an agreement to sell. This view' is incorrect. Boththe Roman Law and the Roman-Dutch Law contemplated the presentsale of a future interest, If the purchaser’s rights come into oxistenc©only after final decree section 9 has no effect as there is nothing to wipoout. If a sale of a future interest is possible then the sale is completewhen the interest comes into being and nothing further need be done bythe aollor to perfect tho transaction. Whether the transaction is a saleis a matter of construction. The only point is whether there can be asale of a future interest. Under our law this is possible—Abdul Ally v.Kelaart1; I Amis Apjruhamy v. Punehi Baba*; Subaseris v. Prolis*. Theviow of Ennis J. expressed in Appuhamy v. Babun Appu ‘ regarding thedecision in Subascris v. Proli3 (supra) is not correct. The decision hiFernando v. Atukorale8 is incorrect as it is based on the fallacy thata vendor cannot convey in praesenti what he did not own at the momont.Rajapakse. v. Gunasekera9 is in point and the docision is correct thoughthe reasons given are doubtful. Salee v. Natchia10 is precisely in pointand lays down the correct principle. See also Manchanayake v. Perera11followed in Nazeer v. Hassim12. If tho matter is looked upon as resintegra no authority is required. The statute law prohibition againstalienation should bo kept within bounds. The prohibition only dealswith undivided shares. In tho present case there is a sale of a futureinterest, ex hypothesi not undivided.
E. B. Wikramanayake, K.C., in reply.—Even assuming that a presentsale of a future interest is possible when the interest comes into existencethe sale relates back to the date of the agreement. Section U wipes outthe right. Things not in existence can be divided into two classes :
things which must necessarily come into existence, and (2) things
1(1923) 26 N. L. R. 204.
2(1946) 46 N. L. R. 457.
a (1926) 28 N. L. R. 292.
' (1904) 1 Bed. 40.
5 (1904) 10 N. L. R. 196.« (1913) 16 N. L. R. 393.
■ (1923) 25 N. L. R. 370." (1926) 28 N. L. R. 292." (1928) 29 X. L. R. 509.10 (1936) 39 N. L. R. 259.n (1945) 46 N. L. R. 457.,s (1917) 48 A’. R. 282.
GRATIAEN J.—Siriaoma V. Sarnelis Appuhamy
339
which may or may not come into existence, A sale is possible only withregard to things in tho former class. With regard to things in the latterclass there can only be an agreement to sell—see Moyle’s Contract of Sale,
p. 32.
Cur. adv. vult.
May 29, 1950. Gratiae.n J.—
By a notarially attested deed of transfer No. 307 dated 14th March,1942, tho second dofendantappellant sold to the plaintiffs, daring thependency of partition proceedings in respect of certain premises, his“ undivided ” shares in the land “ or whatever rights, interests, lot orlots that may be allotted to (Aim) in the said partition action Ho furthercovenanted with the plaintiffs “ to do and execute or cause to be done andexecuted all suck and other acts, deeds, matters and things whatsoever forthe better and more effectually assuring the said promises and every partthereof ’* to the plaintiffs.
On 31st March, 1947, final decree in the partition action was enteredwhereby the second defendant became entitled, in lieu of his undividedshares, to certain defined allotments in the larger land. Five days later,ignoring the execution of tho earlier deed No. 307, he purported to conveythese defined allotments to the first defendant. The present actioDrelates to the competing claims of tho plaintiffs and of tho first defendantto ownership of tho allotments in question. After trial the learnedDistrict Judge entered judgment in favour of the plaintiffs with costs.
The defendants have appoaled to this Court from the judgment anddecree entered against them. The appeal camo up for hearing in thefirst instance before my brothers Dias and Basnayakc. Upon a preli-minary question of law the following order was made by my brother Dias(Basnavake J. concurring) :
“ In this case learned counsel for the appellants and respondentsagree that the case of Fernando v. Atukorak, (1926) 28 N. L. R. 292,is in conflict with the hater case of Manchanayake v. Per era, (1045)46 N. L. K. 457.
4‘ This ease deals with the question of the effoct of a deed executedby a co-owner during the pendency of partition action, wherein hetransfers the divided shares which he will be allotted in tho final decrcj.It is important that the question whether such a deed prevails overa subsequent conveyance by the co-owner should be settlod by anauthoritativo decision of this Court.
“ My brother and I agree that in terms of section 51 of the CourtsOrdinance, Chapter C, this is a proper case to be decided by a FullBench. We accordingly refer the matter to His Lordship tho ChiefJustice.”
Upon this recommendation tho question was referred by Sir ArthurWijeycwardone, Chief Justice, for the decision of a Divisional Benchconsisting of three Judges of this Court. Wo are indebted to Mr. II. V.Pcrera and Mr. E. B. Wickramanayake for the assistance which theyhave given us in our endeavours to elucidate tho present state of the lawregarding tho validity and effect of transactions relating to interestsin land during the pendency of proceedings under the Partition Ordinance.
340
GRATIAEN J.—Sirie&ma v. Sarnelts Appuhamy
The deed No. 307, in so far as it purports to dispose of “ undivided ”interests in property during the pendency of a partition action, is clearlyobnoxious to the provisions of the Partition Ordinance. The onlyquestion which remains for decision is as to the effect of that part of thedeed which disposes of the “ rights, interests, lot or lots which may beallotted ” (and which were in fad subsequently allotted) to the seconddefendant under the partition decree. The matters which we havebeen called upon to consider in regard to this purported conveyanceare:—
Is such a grant obnoxious to tho provisions of section 17 of the
Partition Ordinance ?
If not-, should it be interpreted as an actual conveyance of the allot-
ments which might ultimately pass to the second defendantunder the final decree for partition or merely as an agreementto convey his interests in those allotments if and when theypassed to him ?
If the first of these alternative interpretations bo correct, is such
a purported conveyance invalid and inoperative either by reasonof the provisions of section 9 of the Partition Ordinance orbecause it offends some principle of the Roman*!.Hitch Lawwhich regulates contracts of sale of this description ?
The conclusions at which I have arrived is that those questions shouldbe answered as follows •.
(1) No ;
{2) As an actual conveyance of the allotments which might pass (andwhich in the present case did eventually pass) to the seconddefendant under the partition decree ;
(3) No ; tho conveyance is not affected by the provisions of section 9of tho Partition Ordinance; nor is it invalidated by any principleof the common law which governs the case.
It is convenient at this stage to review the judicial opinions expressedin earlier decisions of this Court as to the extent to which the provisionsof section 17 of the Partition Ordinance impose a fetter on the freealienation of interests, present or contingent, in property during thependonoy of partition proceedings. In Adbul Ally v. Kelaartx Wendt J.and Sampayo J. held that an assignment by anticipation of “ so muchof the proceeds realised by the sale (i.e., under a decree for sale in apending partition aetion)as shall represent the (vendor's) undivided share”was not obnoxious to section 17. In Louis Appuhamy v. Punch* Baba2,Layard C.J. and Moncrieff J. took tho samo view, and decided thatsection 17 was “ not intended to hinder or prevent persons from alic*nating or mortgaging the rights to which they become entitled after apartition had been decreed in respect of the land f In Subaseris v.Prolis 3 Wood Renton J., sitting alono, hold that a party to a pendingpartition action could deal by anticipation with whatever divided interestho might ultimately obtain. In Khan Bhai v. Per era* the question came
{1904) 1 Bol. 40.* {191$) 16 X. L. R. $93.
{1904) 10 X. L. R. 196.* {1923) 26 X. h. li. 204.
GRATIAEN J.—Siriaoma v. Sarnelia Appuhamy
341
before Bertram C.J. and Porter J. as to the precise point of time up towhich the prohibition against the alienation or hypothecation of a co-owner’s interests continued in cases where the decree in the action was fora sale and not for a partition of the land. Bertram CJ. referred thisquestion for a ruling of the Full Bench of the Court consisting of himself,Ennis J., Schneider J., Garvin J. and A. St. V. Jayawardene ,J. Theunanimous ruling of the Court in regard to the immediate question sub-mitted for its decision was that- “ the prohibition must be deemed tocontinue so long as the common bond of co-ownership exists, that is tosay {where there in a decree for sale) until the issue of the certificateunder Section 8 Apart from the authoritative decision of the FullBench on this particular point, the occasion was considered appropriateto give a ruling of general application on the question “ as to the trueinterpretation of the prohibition against alienation or hypothecation ofthe undivided shares or interests in property subject to a partition action ”.The Judges unanimously decided on this general question that personsdesiring to charge or dispose of their interests in a property subjectto a partition action could do so “ by expressly charging or disposing ofthe interest to be ultimately allotted to them in the action It seems to meto be a question of academic refinement whether the ruling wliich waspronounced on this occasion by five distinguished Judges of great learningand experience is, in effoct, only an obiter dictum—per Maartonsz J. inFernando v. Atukorale 1—or whether it would be more correct to say,with Soertsz J. in Manchanayake v. Perera2 that “the pronouncementis of the very essence of the ratio decidendi in the case I am convincedthat, apart from technicality, the view expressed in Khan Bhai v. Perera 3which I have quoted above should now be regarded as having the forceof binding authority. The ruling has influenced the actions of countlessvendors and purchasers for over a quarter of a century, and it confirmsthe opinion previously pronouneod by an exceptionally .strong Bench ofJudges of this Court. Besides, it is unquestionably a correct statementof the law on the point. Section 17 of the Partition Ordinance prohibitstho alionation or hypothecation of undivided interests presently vestedin the owners of a land which is the subject of pending partition pro-ceedings. There is no statutory prohibition against a person’s commonlaw right to alienate or hypothecate, by anticipation, intorosfcs whichhe can only acquire upon the conclusion of the proceedings. That rightis in no way affected by the pendency of an action for partition, underthe provisions of the Ordinance. “ Section 17 imposes a fetter on thefree alionation of property, and the Court ought to see that that fetteris not made more comprehensive than tho language and the intention ofthe section require Subaseris v. Prolis4.
It has boon argued before us that a conveyance by anticipation ofwhatever interests a party may acquire upon the termination of partitionproceedings must always be interpreted as an agreement, to convoythose interests. This cannot bo so. The contrary view' is implicit in theruling of the Full Bench in Khan Bhai v. Perera 0 and in the earlier1 {1926) 28 N. L. R. 292.3 {1928) 26 N. L. R. 204.
a {1945) 46 N. L. R. 467.* (1913) 16 N. L. R. 393.
0 (2923) 26 N. L. R. 204.
342
CJKATIAF.X J.—Sirisonui v Sarmlia Appuhamy
decisions to which T have referred. Even if the matter were res Integra,I would say with little hesitation that the proper interpretation of aconveyance cannot be affected by the question whether or not it wasexecuted during tho pendency of a partition action. Whore, upon anapplication of the normal rules governing the interpretation of writteninstruments, it is in terms a conveyance of a contingent interest (whenacquired), effect can only be given to the document, if at all, uponthat basis. If such a conveyance were invalid (which it is not) itscharacter could not properly be altered, by invoking somo insupportable“ cquitablo ” doctrine, into that of a mere agreement to convey. Certainobservations of Ennis J. in Appuhamy v. Babun Appu1 and of LyallGrant J. and Maartensz J. in Fernando v. Atukorale2 indicate that intheir opinion the validity of a sale by anticipation of a contingent interestwhich the vendor may acquiro in a particular action cannot bo recognisedexcept by regarding the transaction, contrary to its true intent, ashaving the effect of an agreement to convey. I venture to doubt ifthese Judgos had the advantage which we have enjoyed of a full argumenton this quostion. With great respect, I think that Fernando v. Atukorale2should bo over-ruled by tho present Divisional Bench, and that Appu-hamy t Babun Appu 1 should similarly be over-ruled in so far as it pur-ports to decide that a sale by a co-owner, pending a partition action, ofthe interests which he may ultimately acquiro under the partition decree“ remains merely an agreement to convey, and would not operate as aconveyance or alienation I prefer to follow on this point the laterrulings of this Court in Rajapakse v. Gunesekera 3, Salee v. Natckia *, andManchenayake v. Pereras. In Hetvavuaan v. Gunesekera8 there wasdisagreement between Garvin J. and Dalton J. on the one hand, andJayawardcnc J. on tho other, as to the proper construction of a particulardocument. On general principles, however, they seem to have agreedthat a completed agreement intended to pass an immediate interest inhind, 'pending partition proceedings, was obnoxious to Section 17, butthat a dealing by anticipation with divided interests to be ultimatelyobtained by the vendor was unobjectionable. One should not forget,that two of tho Judges concerned had contributed to the decision inKhan Bhai v. Perera 7 and that neither of them, or Dalton J., indicatedany doubts as to the correctness of its comprehensive ruling.
I now proceed to deal with two arguments which Mr. Wickrama-nayako submitted for our consideration. He first argued, but (if myimpression be correct) with little enthusiasm, that a salo by anticipationof a contingent interest in land is obnoxious to the Roman-Dutch l^.w.In my opinion this submission is without merit. In Gunatilleke v.Fernando8 the Privy Council, although somewhat handicapped by thefailure of learned Counsel to cite express authority to them on the point,took the view that there was nothing to indicate that the alienation of acontingent interest in land was prohibited by the policy of the Roman-Dutch Law. Indeed, this view is amply supported by authority whichwe have had tho advantage of considering. As far as the Roman Law
» (1923)25 N. L. R. 370.*(19:5)16 N.L.R.157.
(1926)28 N. L. R. 292.*(1926)28 A'.R.33.
(1928)29 N. L. R. 509.'■(1923)26 A’.L.R.204.
« (/»3S)39 N. L. R. 269.•(1921)22 N.L.R.385.
GRATIAEX J.—Sirisoinn v. Sarnelis Appuhamy343
is concerned, it is stated in unambiguous terms in the Digest (18-1-18)that “ the law recognises the purchase of re-9 futurae in the sense that onthe occurrence of * the birth ’ (that is, on the happening of the anticipatedevent) the sale is regarded as relating back to the time when the bargainwas made These words mean in their context that, if and when thecontingent interest intended to be transferred is in fact acquired, itimmediately and automatically becomes vested in the purchaser byvirtue of the contract of sale which has already taken place. Thisprinciple has been taken over in its entirety by the Roman-Dutch Law(Voet J8-1-13). When an expectation (spes) has been purchased, “theBale is considered as made iam tunc when it comes into existence (videthe footnote to Berwick's translation at page 18). What does this meanwhen the principle ia applied to suit the requirements of modern con-veyancing l. It can only mean, I think, that when an instrument hasbeen executed whereby a present right is convoyed in respect of a contin-gent interest which the parties to the transaction expect to be realisedat some future date, the instrument already executed operates so as tovest that interest in the purchaser as soon ns it has been acquired by thevendor. No further conveyance is needed to secure the intended result—although it may wrell bo desirable, as is often stipulated by prudentconveyancers, that the result already achieved should be “ confirmed ”in a further notarial instrument which will place the purchaser’s rightsbeyond the possibility of controversy. In my opinion Manckanayake v.jPerera1 was rightly decided on this point.
Mr. Wickramanayako’s other submission was that the sale by anti-cipation of a contingent interest during the pendency of a partitionaction can never be crystallized into a vested right because, immediatelyupon the passing of the final decree for partition, section 9 oj»erates toextinguish the purchaser’s rights under the earlier conveyance. Irespectfully think that the decision of Maartensz J. to this effect inFernando ■«. Atukorale2 is wrong and should be overruled. Undersection 9, the title to a divided allotment acquired by a co-owner undera decree for partition is no doubt conclusive against interests in thatallotment which were vested or were claimed to be vested in any personat $ome point of lime preceding the date of the. decree. On the other hand,section 9 has no bearing on a purchaser’s right to claim that, upon thevesting of the divided allotment in his vendor under the decree, theallotment has automatically passed to him by virtue of the earlier con-veyance. This conclusion necessarily follows, in my opinion, from ananalysis of the language of the soction ; there is no need, and indeed thereis no scope for reliance on the Roman-Dutch Law doctrine of erceplio reivenditae et traditae in this context.
Whether each question which 1 have discussed be examined byreference to the trend of past decisions of this Court or on the assumptionthat it may legitimately be considered as res Integra, I think that thefollowing propositions should now bo accepted as settled law :—
(1) Section 17 of the Partition Ordinance does not prohibit thealienation or hypothecation, pending partition proceedings, of1 (1915) 46 AT. L. It. 457.* (1926) 2H S. L. It. 292.
344
GRATIAEX J.—Sirisomu v. .Samelitt Appuhami)
an interest to which a co-owncr may ultimately become entitledby virtue of the decroo in the pending action ;
Where an instrument is executed, pending partition proceedings,
in respect of an interest to which the grantor may ultimatelybecome entitled upon tho decree, the question whether it shouldbe construed as an actual alienation or hypothecation of suchcontingent interest or merely as an agreement to alicnato orhypothecate such interest (if and when acquired) must bedecided in accordance with the ordinary rules governing theinterpretation of written instruments ;
If such an instrument is in effect only an agreement to alienate or
hypothecate a future interest, if and when acquired, no rightsof ownership or hypothecary rights (as the case may be) passto the grantee upon the acquisition of that interest by thegrantor unless and until the agreement ha* been duly implemented ;if, without implementing this agreement, the grantor conveysto a third party the rights which he has acquired under thedecree, the competing claims of that third party and of theoriginal grantee must be determined with reference to otherlegal principles such as the application of Section 03 of theTrusts Ordinance ;
If the instrument is in effect a present alienation or hypothecation
of a contingent interest, the rights of ownership (or the hypothe-cary rights) vest in tho grantee automatically upon the acqui-sition of that interest by the grantor ; and no further instrumentof conveyance or mortgage requires to be exocuted for thopurpose; the execution of “ a deed of further assurance ”confirming the result which has already taken place may incertain oases be desirable but it is not essential in such a case ;
The provisions of section 9 of the Partition Ordinance do not
invalidate a transaction whereby an interest (which is notpresently vested in the grantor and which could only becomevested in him, if at all, upon the passing of a final decree forpartition) is intended to pass to the grantee upon its acquisition,
Any earlier decisions of this Court which express or appear to expressopinions in conflict with the general propositions enumerated aboveshould now be regarded as ovor-ruled to that extent. Owners of land,and the practitioners who are called upon to advise them, should notbe left in a state of continual doubt as to the scope of the restrictionswhich the Partition Ordinance imposes upon the alienation and hypothe-cation of interests in land. As Dr. C. K. Allen points ont, it would bedisastrous to the public interest if “ the vaunted ‘ certainty ’ of oursystem of precedents has too much in common with the kind of' certainty ’which is to be found on tho raco-course and tho dog-track ” h
For the reasons which I have given, I think that the answer to thequestion referred for the decision of the Divisional Bench is that thedivided allotments of land which passed to the second defendant underthe partition decree of 31st March, 1947, became automatically vestedin the plaintiff by virtue of the deed of transfer No. 307 dated 14th March,1 63 Law Quarterly Review, page 437.
Yafcoob iiai u.H-lr>
1942. Subject therefore to any other defences which properly arise onthe defendants’ appeal, the conveyance to the plaintiffs must prevailover the later conveyance of the same allotments of land in favour of thefirst defendant in April, 1947.
The appeal must now be listed for argument in the norma! way beforea Bench of two Judges for the consideration of any otV.or questions oflaw or fact which may arise upon tlio petition of appeal. The defendantswill in any event pay to the plaintiffs the costs of the argument beforethe present Bench.
Bias S.P.J.—I agree.
Vulle J.—I agree.
Appeal h> be Haled in due course.