Present: The Hon. Sir Joseph T. Hutchinson, Chief Justice, o&. 19,1910and Mr. Justice Wood Benton.
SOMASUNDEBAM CHETTY v. TODD et al.
D. C., Jaffna, ft,868.
Evidence Ordinance, s. 92—Sale of land—Notarial agreement to re-conveythe land if price is repaid within six months—May oral evidence beled to prove that sale was intended to be a usufructuary mortgage ?
A deed of sale of land for value was accompanied by a deed ofagreement between the parties for purchase bade by the vendor ofthe land on payment by him of the money to the vendee withinsix months. The vendor did not exercise his right of re-purchase,but after many years entered into possession of the land. In anaction by the vendee for. declaration of title and ejectment thevendor pleaded that the conveyance to the vendee was not anabsolute conveyance,butthatit wasintended to be only a usu-fructuary mortgage,andthatanteriorto its execution there was
an oral agreement to the effect that the vendee should possess thelands until he hadreimbursedhimselfwith interest the amount of
the advances made by him, and that thereafter he should re-conveythe property to the vendor.
Held, that, as the parties had formally expressed in writing the.terms on which the vendee was to re-transfer, it was contrary tothe provisions of section 92 of the Evidence Ordinance to allowevidence of the oral agreement to be adduced.
NE Todd, first defendant-appellant, who was the owner of theestate in dispute, which was burdened with three mortgages,
sold it by deed No.319dated April28, 1898, for the sum of
Bs. 125,500 to one R. M. A. B. A. B. Supramaniam Chetty, whowas to retain Es. 93,930.97 and Bs. 13,000 to pay off the first twomortgages, and the balance Bs. 18,569.03 to pay off his own thirdmortgage.
By deed No. 320 of the same date . Supramaniam Chetty cove-nanted to re-convey the land to Todd if he paid the sum of .Bs. 125,500 to Supramaniam Chetty on or before October 1, 1898,and it was further agreed by the said deed that if the said sumof Bs. 125,500 was not paid on that date the deed No. 320 was tobe no force or avail in law.
By deed No. 911 dated May 1, 1900, Supramaniam Chettytransferred the land to plaintiff-respondent (Somasundaram Chetty).Todd did not exercise his right of purchase under deed No. 320;but .several years afterwards the third defendant, who held a powerof attorney from Todd, entered into possession of land.
Somaeun-deram Ghettov, Todd
( sea )Plaintiff brought this action for declaration of title, ejectment,and damages.
The defendants pleaded, inter alia, that the transfer of April 28,1898 (No. 819), was not an absolute conveyance, but was intendedto be only a usufructuary mortgage, and that anterior to its executionthere was an oral agreement to the effect that Supramaniam Chettyshould possess the land until he had reimbursed himself, with interestthe amount of the advances made for the discharge of the encum-brances on the property, and that thereafter he should re-conveythe land to. the first defendant-appellant. They claimed that eitherthe action should be dismissed, or that plaintiff should renderaccounts of the income and expenditure in the working of theestate. The District Judge (R. N. Thaine, Esq.) held that deedsNos. 319 and 820 did not operate as a 'mortgage, and he gavejudgment for the plaintiff.
The first and second defendants appealed.
A. St. V. Jayewardene, for the appellants.
[The arguments of counsel are summarized in the judgment ofWood Renton J.].
Bawa, for. the respondent (not called upon):
Cur. adv. vult.
October 19, 1910. Hutchinson C.J.—
The claim in this action is for declaration of the plaintiff’s titleto about 278 acres of land, and for recovery of possession, anddamages. The plaint says that the first defandant, being the ownerof the land, conveyed it by deed No. 319 of April 28,, 1898, toR. M. A. R. A. R. Supramaniam Chetty, who conveyed it to the plain-tiff in 1900. The first two defendants in their answer (paragraph 2)denied that by deed No. 319 Supramaniam Chetty acquired any titleto the land. They said (paragraph 7 to 10) that the first defendantwas the owner of estates of about 647 acres in extent (of which thelands which are the subject of this action form part); that on April28, 1898, he was indebted to various persons on mortgages of theestates and otherwise, and that in the early part of 1898 he agreedwith Arunachalam Chetty, through his agent, the send SupramaniamChetty, to convey the said estates to Arunachalam, who should payoff the mortgages and take the rents and profits until he had paidhimself all sums so advanced by him, with interest, and should thenno-transfer the estates to the first defendant. They then allege(paragraph 11) that subsequently it was agreed between Aruna-chalam and tiie first defendant, in order to carry out the saidagreement, that the first defendant should sign a mortgage bond in
( 868 )
the form of a conveyance in favour of Arunachalam, and that Oct. 194910Arunaehalam should pay the first defendant Rs.* 2,000 in certaininstalments, and that the deeds No. 819 and No. 820 were executed OL J.on April 28, 1898, in accordance with that agreement. Theyalleged that Arunachalam made default in payment of the Rs. 2,000, deram Ch&yand (paragraph 13) that he entered into possession of the estates in ^.ToddApril, 1898j and that he was in possession as usufructuarymortgagee, on the terms that he should work the estates at his ownexpense and pay himself all the working expenses and the moneyexpended in satisfaction of the mortgage debts,. with interest, andshould then transfer the estates to the first defendant; and that(paragraph 14) Arunachalam and his heirs and assigns having takenincome from the estates far exceeding the sums so due to him, thefirst defendant is entitled to have the. estates transferred to him.
They said (paragraph 15) that Arunachalam carried on businessin Ceylon and other places under the firm of R. M. A. R. A. R., andin April, 1898, the Jaffna branch of the business was managed byhis agent, the said Supramaniam, and the deeds Nos. 319 and 320were executed between the first defendant and Arunachalam; thatArunachalam died inestate in January, .1901, leaving an estate'inCeylon worth more than Rs. 1,000, and leaving as his only heirshis son, the plaintiff, and a grandson; and* (paragraph 18) that inOctober, 1898,. Arunachalam appointed the plaintiff his generalattorney in respect of his property and business, and the plaintiff as6uch attorney procured the execution of the deed No. 911 by Supra-maniam without consideration. They then claimed that either theaction should be dismissed, or that the.plantiff should render accountsof the income and expenditure in the working of the estates.
„ The third defendant filed an answer saying that he is rightfullyin possession under a power of attorney from the first defendant.
Deed No. 319 dated April 28, 1898* recites that Todd is the ownerof the estates, subject to a first mortgage to J. McClaren, a secondmortgage to B. Messar, and a third mortgage to R. M. A. R. A. R.Supramaniam Chetty; and that the said R. M. A. R. A. R.Supramaniam Chetty, residing at Vannarponnai in Jaffna, has agreedto buy the estates from Todd for Rs. 125,500 burdened with the said'mortgages, and that he should retain Rs. 93,930.97 and Rs. 13,000to pay off the first two mortgages (which he undertook to pay),and the balance of Rs. 18,569.03 to pay off his own third mortgage,and in consideration of the premises Todd thereby sold and trans-ferred the said estates to the said R. M. A. R. A. R. SupramaniamChetty, to hold to him and his for ever
Deed No. 320, dated the same day, is an agreement betweenR. M. A. R. A. R. Supramaniam Chetty and Todd, whereby Suppra-maniam Chetty binds himself to sell and transfer to Todd the estateswhich he had bought from him, provided that Todd shouldwithin six months from the date thereof pay to Suppramaniaxn28-
c 864 )
Oefi 19,1910 Es. 125,500, and Suppramaniam also agreed to pay to ToddHimmms9K2,000 in ten monthly instalments; and it concludes:It is
J‘ further distinctly understood between the parties to this agreementSomaaun- that in case the aforesaid sum of Rs. 125,500 is not paid by^ the said, J. P. Todd to the said R. M. A. R. A- R. SuppramaniamChetty within the term of six months from this date, that is to say,on or before October 1, 1898, this deed and the agreement hereincontained to be of no force or avail in law, and the parties shall,thence forward be free from any liability under this agreement.*'
Then by deed No. 911, dated May 1, 1900, Supramaniam Chetty,reciting that he is the owner of the estates, and that he had beencarrying on the business of a firm at Vannarponnai in Jaffna, and isnow about to leave Jaffna to go to his native place in India, and thatit is necessary that he should sell and transfer the said estates, andthat he had aranged with R. M. A. R, A. R. Somasunderam Chetty(the plaintiff in this action) to sell mid transfer them to him, sellsand transfers them .to the plaintiff in consideration of Re. 120,000paid to him by the plaintiff.
At the trial issues were settled, including issues as to whether thedeeds 319 and 320 operated as a mortgage or as an out-and-out salewith a promise to re-convey on the terms and within the time statedin No. 320; whether the claim for re-conveyance is barred by pre-scription; whether there was such an agreement as alleged inparagraph 18 of the answer of the first two defendants; if so, whetherthe defendants can rely on it, as it is not notarially executed;was Supramaniam the agent of Arunachalam in April, 1898; andwas deed No. 319 made, according to the custom prevailing cmiongNattu Cotta Chetties, in the name of the firm, with the name of theattorney Supramaniam affixed; and did the estates thereby vest inArunachalam; and what was the value of the estates in 1898? Thefirst defendant admitted the execution of the deeds 319, – 320 .and911, and that he had not paid Rs. 125,500 according to the agree-ment made in No. 320, and the defendants admitted that the.agreement alleged in paragraph 13 of the answer was non-notarial,and was oral, and was prior to the execution of deeds 319 and 320.No oral evidence was taken. It is not recorded that any was tendered,or that the Judge refused to admit it; but in his judgment hediscusses the question whether Todd could lead evidence to provethe agreement pleaded in paragraph 13 of his answer, and decidesthat he could not, such evidence being not admissible under section92 of the Evidence Ordinance. He also found that deeds 319 and911 vested the title to the lands in the plaintiff; and that deeds 319and 320 did not operate as a mortgage; and he gave judgment forthe plaintiff. This is an appeal by the first two defendants.
The conveyance made by No. 319 is a conveyance to Supra-maniam, not to Arunachalam; We are aware that, it is -a customamongst chetties that an agent, when signing promissory notes or
( 365 )
bills or other commercial documents connected with the business Oct 19,1910of his principal, prefixes to his own name tire initials of tile finn hotckinsohwhose agent he is; those initials show to~ those who are aware of the C. J.custom that he is an agent, and if they know the name of the firm Somaatm-which the initials represent,* they also know who is the principal.
But this is a case of a formal deed of transfer to Supramaniam,
“ residing at Vannarponnai in Jaffna ”; and although it may beshown, and the prefixed initials go far to show, that he was an agent,and was buying with his principal’s money, and would have to holdthe land for and account for it to his principal, it is impossible to saythat the transfer was to his principal. Similarly, the deed 911, bywhich he transferred the land to the plaintiff, vested the land in theplaintiff, although as between him and Arunachalam or his heirs itmay be that the plaintiff holds the land as agent or trustee.
The appellants contend that they have the right to adduceevidence in proof of the agreement alleged in paragraph' 18 of theiranswer, that is, to prove a verbal agreement made before the deeds319 and 320, so as to show that the agreement set out in those deedswas not the real agreement, but that the real agreement was thatSupramaniam should hold the lands as mortgagee only; and theycontend that, as some evidence that that was the real agreement,they are entitled to prove that .the value of the lands at the date ofthe execution of those deeds was more than the purchase moneystated in the deeds.
The parties to those deeds were residents in Ceylon, and theyand their legal advisers must have been well aware of the ordinaryform of mortgage here, which does not take the form of a conveyanceto the mortgagee. They were dealing with properties of considerablevalue, and we may be sure that they carefully considered the termsof their bargain and informed their legal advisers of it, and that thelatter drew up the deeds in accordance with their instructions. Theterms of the bargain, as expressed in the deeds, are quite short andsimple, and are set out in the clearest language; and it is not allegedthat there has been any fraud or any clerical error or mistake offact or of law; or that the consideration stated in the deed of transferwas not paid. You can show by parol evidence, unless someenactment forbids it, that a transferee took the transfer subject toan agreement to re-transfer in certain events, or to hold as a trustee;or you can show that the deed was obtained by fraud or mistake, orwith the object of defrauding some one. But where the parties haveformally expressed in writing the terms on which the transferee isto re-transfer, and no fraud or mistake or illegality is alleged, it iscontrary to sense and also to the express enactment of section 92of the Evidence Ordinance to allow evidence of an oral agreementmade before the formal agreement, not to explain the latter, or toshow tiiat there was any mistake in itr hut to contradict it. Theappellants’ counsel in tiie Court below tried to evade this difficulty.
( 366 )
0c& 19, 1910 bj asserting that the alleged prior oral agreement was in the natureHotghxhso* °* a secret trust; The answer to that' is that there was no trustC. J. alleged, secret or otherwise, hut only an ordinary commonplaceSomaaun- agreement for a mortgage, which, if it reaUy existed, would havederam Chetty been carried out by a mortgage in the ordinary way.
v. Todd Reference has been made to cases decided in the Courts of Englandand India (where the ordinary form of .mortgage is by convey-ance to the mortgagee, with a proviso for redemption) in whichthere was a simple transfer, but the Courts allowed parol evidenceto prove that the intention of the parties was that the transfershould be entitled to redeem the properly on certain terms. Thoseare cases in which the parol evidence is not to contradict the formalconveyance, but to add to it another term which is not inconsistentwith it; and many of them are cases in which the plaintiff provesthat he was induced to execute the conveyance by the fraud of thedefendant. But here the evidence is to be given in order to contra-dict the written agreement; if the agreement which the appellants■seek to prove were proved, it would simply wipe out the formalagreement.
I think that the appeal should be dismissed with costs.
Wood Renton J.—
In this action, the plaintiff-respondent claims a declaration oftitle to a group of coconut estates more particularly described inthe plaint, the ejectment of the defendants-appellants therefrom,and damages against them .as trespassers. The first defendant-appellant is the husband of the second; the third defendant wasjoined as a trespasser along with the first and second; he does notappeal, and the real dispute in the action is between the plaintiff-respondent and the first defendant-appellant. The material factsare these: The first defendant-appellant, who was the owner ofthe estate in suit, having become heavily involved in debt, and inorder to pay off certain mortgages with which the estate was encum-bered, sold the properties to Supramaniam Chetty by deed No. 319of April 28, 1898; Supramaniam Chetty in turn transferred the landsto the plaintiff-respondent by deed No. 911 of May 1, 1900. The.defendants-appellants do not, and cannot, deny that this deedex facie creates a valid paper title in favour of the plaintiff-respondent. But the first defendant-appellant alleges that thetransfer of April 28, 1898, to Supramaniam Chetty was not an absoluteconveyance, but was intended to be only a usufructuary mortgage,and that, anterior to its execution, there was an oral agreement tothe effect that Arunachalam Chetty, Supramaniam's principal, orSupramaniam himself, should possess the lands until he had re-imbursed himself, with interest, the amount of the advances, madefor the discharge of the encumbrances on the property* and that
( 367 )
thereafter he should, re-oonvey the lands* to the first deffendant- Oct, 19,1910appellant. It should be mentioned here that, fay an agreement of WoODoven date with the deed of transfer to Supramaniam Chetty, the BbnsokJ.latter covenanted to re-convey the lands to the first defendant- Somaaun-appellant, provided that he, within six months of the date of the ^eram^^fagreement, paid the sum of Bs. 125,500 .to the vendee, and that indefault thereof .the agreement should no longer be of force or availin law. The first defendant-appellant admittedly did not takeadvantage of the. option given to him by this instrument. Whenthe case came on for trial sixteen issues were agreed upon by counselon both sides. The scope of these, however, Was reduced bysubsequent admissions; and we are at present concerned only withthe seventh and sixteenth, raising respectively the questions whetherthe defendants-appellants are entitled to rely on the alleged .oralagreement above referred to, what was the value of the estate in1898, and what was the income derived therefrom from April 28in that year.
The learned District Judge has held, in effect, that the appellantsare precluded by the terms of section 92 of the Evidence Ordinancefrom setting up an oral agreement contradictory of the terms, onwhich, under the instrument of April 28, 1898, it was stipulatedthat a re-conveyance of the estate might be demanded. The DistrictJudge has not dealt specifically with the issue as to the value of theestate, which seems to have been framed for the purpose of enablingthe appellants to lead oral evidence tending to negative the ideathat the deed of April 28, 1898, could have been meant by the partiesto operate otherwise than as a mortgage.
I am clearly of opinion that the decision of the learned DistrictJudge as to the former of the two issues above mentioned was right,and I think that the latter also must be answered adversely to theappellants. It was not contended before us that the present casecan be brought within any of the provisos, , to section 92 of theEvidence Ordinance. The appellants’ counsel confined his argumentto two points:' (1) That there was nothing in section 92 to exclude anapplication of the well-known English cases, in which it has beenheld that in equity a party, whether plaintiff or defendant, couldalways show that an assignment of an estate, which was on the faceof it an absolute conveyance, was intended to be nothing more thana security for debt; (2) that even if the English cases on that pointwere inapplicable in Ceylon in consequence of the peremptory termsof section 92 of the Evidence Ordinance, there was nothing in thatsection or in any of the decisions under the same section in the IndianEvidence Act to prevent him from proving by the circumstancesof the case as a whole, and by the conduct of the parties as distin-guished from mere oral evidence of the alleged anterior agreement,that only the creation of a mortgage was intended. I will dealwitfi these points in turn. It is quite true that the first of
( 868 )
Oct. 19, i9io Mr. Jayewardene’e contentions is supported by a strain of Indian^ authority/ I may refer in this contention to the cases of Bakken v.RbntonJ. Alagappudaywrir,r Baksu Lakshman v. Oovinda Kanje* and HemSomeuun- ^h^m^er Soor v. Rally Chum Das,3 On the other hand, the latestderam Chetty decision of the Privy Council itself, Bakishen Das v. Leggef directlyv. Todd negati,ves the appellants* contention on the point that I am nowdealing with. In that case a deed of. sale /of land for value wasaccompanied by a deed of agreement between the parties for purchaseback by the vendor of the land on payment by him of the moneyto the vendee on a, future date fixed. The deeds were followed bytransfer of the possession to the vendee and his receipt of the profits.The vendor did not exercise his right of re-purchase, but after manyyears gave notice of his intention to redeem, and brought this suitto enforce his right of redemption as upon mortgage upon condi-tional sale. It was held by the Privy Council that oral evidencefor the purpose of ascertaining the intention of the parties to thedeeds was not admissible, being excluded by the enactment in’section 92 of the Indian Evidence Act, and that the case had tobe decided on a consideration of the documents themselves, withonly such extrinsic evidence. of circumstances as might be requiredto show the relation of the written language to existing facts. Indelivering the judgment of tile Privy Council, Lord Davey expressedhimself thus: —
11 Their Lordships do not think that oral evidence of intentionwas admissible for the purpose of construing the deeds or ascer-taining the intention of the parties. By section 92 of the IndianEvidence Act (Act 1 of 1872) no evidence of any oral agreementor statement can be admitted as between the parties to any suchinstrument, or their representatives, in any suit, for the purpose ofcontradicting, varying, or adding to, or subtracting from its terms,subject to the exceptions contained in the several provisos. It wasconceded that this case cannot be brought within any of them. Thecases in the English Court of Chancery, which were referred to by thelearned Judges of the High Court, have not, in the opinion of theirLordships, any application to the law of India as laid down in theActs of the Indian Legislature. The case must, therefore, be decidedon a consideration of the contents of the documents themselves,with such evidence of extrincis circumstances as may be required toshow in what manner the language of the documents is related toexisting facts.”
■When we called his attention to this authority, Mr. Jayewardenecontended that it was at variance with the earlier decision of thePrivy Council itself, in the case of Bhagwan Sahai v. BhagwanDinS There is, however, no analogy between the two cases. In
(1892) 1. L. B. 16 Mad. 80.* (2882) 1. L. B. 9 Cal. $28.
• (1880) I. L.R.4 Bam. $94.4 (1899) L L. R. 22 Att. 149.
6 (1890) I. L. R. 12 L, 387.
( 369 )
Bhagwan Sakai v. Bhagwan Din there was no question before the Oct. 19, 2910Privy Council of the admission of oral evidence in contradiction of Woodthe terms of a solemn written contract. The case turned on the Benton J.construction of two written contracts, and the Privy Council held Somaeun*that a written document purporting to be one of sale, although it deram OheUywas accompanied by a contract reserving to the vendor a right to Vmre-purchase the property sold on repaying the purchase moneywithin a certain time, was not, on that account, to be construed asif it were a mortgage. Sir Barnes Peacock, in delivering the judg-ment of the Privy Council, followed the English Law on the pointas defined in the case of Alderson v. White.1 There is, however,nothing in section 92 of the Evidence Ordinance to conflict with theEnglish Law on that subject. It does not follow that English casesand equitable doctrines should be applied where they are in conflictwith section 92 of the Evidence Ordinance, and. the decision of thePrivy Council in the case of Bakishen Das v. Legge is a clear authorityfor the view that they are inapplicable.
Ir. support of his argument on the seoond point, the appellants'counsel referred us to certain Indian cases; see, for example, KhahkarAbdul Rahman v. Ali Rafez 2 and Mohamed Ali Hassein v. NagarAlt * in which it has been held that the decision of the PrivyCouncil in Bakishen Das v. Legge does not exclude oral evidence ofthe acts and conduct of parties for the purpose of showing thatan apparent sale was really a 2 mortgage. In Amir Ali’s Laws ofEvidence4th ed.t p. 481, reference is given to cases, bothearlier and later than the decision of the Privy Council in BakishenDas v. Legge, in which the Courts have, for the purpose of judgingthe nature of a transaction,' had recourse to the acts and conduct ofparties and to the circumstances, as, for example, where it wassought to show that an ex facie sale was really a mortgage, to thecircumstance that properly which was worth B$. 250 was apparentlysold for Rs. 35. I have been unable to obtain access here to anyreports of these decisions. They would seem, however, to havequite untouched the question whether, even assuming that evidenceof conduct may be admitted to show that a transaction is not whator: its face it appears to be, it is permissible thereafter to give oralevidence in order to prove what were the terms of the real transaction.
The weight of Indian judicial authority suppoiis the view that suchoral evidence would be inadmissible (see Achntaramaraju v. Subba- -raju 4 and Rahiman v. Elahi Baksh* and other cases cited in AmirAli’s ubi supra nn. (5 and 8). In the words of Amir Ali: —
‘ The true rule would therefore appear to be that any evidence,whether of conduct or otherwise, tendered for the purpose of con-tradicting, varying, adding to, &c., a document is excluded by the.
1 (1MQ 2 DeG.andJ. 105. .8 (1901) I. L. R. 28 Cal. 289.
* (1900) J. L. R. 256.* (1901) 2. L. R. 25 Mad. 7.
( 370 )
Oct. 19,1910 terms of this section, unless it can be shown to be admissible underthe provisos, as on the ground of fraud. If a case comes within theRenton J. provisos, then any evidence of conduct or otherwise may be given.Somaaun-the same principles apply to the admission' of evidence of
deramChetty conduct as indirect evidence of the existence of a contemporaneousv. Todd oraj agreement as to the admission of direct evidence. Neither areadmissible, unless the case can be shown to come within the provisosto the section.'*
The local case of D. C., Kalutara, No. 62,519 (Record, p. 77), is noauthority in favour of the appellants. The proceedings in that casewere instituted by third parties, to whom section 92 of the EvidenceOrdinance does hot apply; and, moreover, as the learned DistrictJudge has pointed out in his excellent judgment, the decision turnedon fraud. Even if it were competent to the appellants, in spite ofthe decision of the Privy Council in Bakishen Das t>. Legge, to adduceevidence as to the value of the estate, for the purpose of showingthat the conveyance of April 28, 1898, was a mortgage and not aconditional sale, their case would be in no way advanced. For thedecision of the Privy Council in Bakhishen Das v. Legge would, inmy opinion, effectually debar them from contradicting the writteninstrument, which gave the first defendant-appellant the option ofprocuring a re-conveyance within six months on payment to hisvendee of Es. 125,500 by oral evidence of the agreement on whichthey relied. It appears to me that we might as well strike section92 out of the Evidence Ordinance altogether as give effect to thecontentions put before U9 by the appellants in the. present ^ase.
I would dismiss the appeal with costs.
SOMASUNDERAM CHETTY v. TODD et al