SOMAWATHIE DE SOYZA ALIAS KUMARASINGHE v. JAYASENA FERANANDO

002-SLLR-SLLR-2005-V-1-SOMAWATHIE-DE-SOYZA-ALIAS-KUMARASINGHE-v.-JAYASENA-FERANANDO.pdf


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Sri Lanka Law Reports
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SOMAWATHIDE ZOYSA ALIAS KUMARASINGHEV.V.
JAYASENA FERNANDO
SUPREME COURTS. N. SILVA, C.J.,
DE SILVA, J.
AND WEERASOORIYA, J.
S.C. APPEAL NO. 19/2000
A. 673/1988
C. MT. LAVINIA 650/2L
2ND JUNE AND 4TH AUGUST, 2003
Declaratory Action – Defence of constructive trust – Plaintiff's claims to be abona fide purchaser without notice of trust – Burden of proof – Trust Ordinance,sections 65, 66 and 84 – Lack of evidence of trust – Plaintiff's right todeclaration of title.
SCSomawathi De Zoysa alias Kumarasirighe11
V. Jayasena Fernando (Weerasooriya,J.)
The plaintiff-respondent (“the plaintiff") instituted action against the defendantappellant (“the defendant”) for a declaration of title to a land consisting ofseparate portions, namely the northern and the southern portions. The plaintiffhad purchased the northern portion of the land on 01.12.1979 from the formerhusband of the defendant. The defendant had left the husband on 23.02.1979.
The defendant claimed that prior to her separation from her husband thedefendant had sold a land for Rs. 5000/- and two days later namely, on24.10.1978, her former husband had purchased the aforesaid northern portionof the land for Rs. 5000/- paid by her. Hence the said land which the plaintiffpurchased was held in trust for her (in terms of section 84 of the TrustOrdinance). Under section 65 (1) of the Ordinance she had a right to follow thesaid land into the hands of the plaintiff who had purchased it from the trustee.She did not file an action for that purpose. However, in terms of section 66 (1)of the Ordinance, the plaintiff was not liable to suit if he was a bona-fidepurchaser without notice of the trust.
The District Judge held with the defendant and dismissed the plaintiff’saction. On appeal, the Court of Appeal held that the burden of proof undersection 66 (.1) as to whether the plaintiff purchased the land bona'fide withoutnotice of the trust was on the beneficiary and not on the transferee (the plaintiff).Nevertheless the court set aside the judgment of the District Judge given infavour of the defendant.
Held:.
(1) The burden of proof under section 66(1) is on the transferee. TheCourt of Appeal erred in holding that the burden was on the beneficiary.
. (2) However, the findings of the Court of Appeal that on a consideration ofthe entire evidence the conduct of the defendant was not that of aperson who had provided purchase money to her former husband topurchase the Northern portion of the land in dispute and that theplaintiff had no notice of the alleged trust at the time of the impugnedpurchase were correct.
The appeal of the defendant – appellant should be dismissed.
On the question of the burden of-proof under section 66(1) of the TrustOrdinance –
2-CM 5256
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Held:
Per Weerasuriya, J.
‘The provisions of a statute must be construed with due regard to the object tobe achieved and the mischief to be prevented. Where two views are possiblean.interpretation which would advance the remedy and suppress the mischiefto be prevented is to be preferred”
APPEAL from the judgment of the Court of AppealRohan Sahabandu for defendant-appellantAmarasiri Panditharatne for plaintiff-respondent
Cur. Adv. vult.
June 15,2004WEERASURIYA, J.
The defendant-respondent-appellant (“the defendant”) was granted specialleave to appeal on the matters set out in paragraph 9 (i), (j) and (k) of thepetition. They read as follows :
(9)(i) that the interpretation placed by the Court of Appeal on Sections
65 and 66 of the Trust Ordinance was erroneous in that itrequired the defendant to plead and prove the negative.
(9) (j) that the decision of the Court of Appeal to interfere with thefindings of the trial judge was entirely due to the erroneousview taken by the Court of Appeal on the burden of proof andthe Court Appeal made no reference to Section 98 of theTrust Ordinance.
(9) (k) that the findings on facts by the Court of Appeal cannot besupported on an examination of the entirety of the evidence.
Facts in briefThe plaintiff-appellant-respondent (“the plaintiff”) instituted action againstthe defendant for a declaration of title to the land described in the sched-ule to the plaint which constituted two separate portions of land being thenorthern portion and the southern portion, purchased upon two deeds (P2and P3) and the ejectment of the defendant. The plaintiff purchased the
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Somawathi De Zoysa alias Kumarasinghe
V. Jayasena Fernando (Weerasooriya, J.)
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northern portion of the land from the (former) husband of the defendant andthe southern portion from T. Dias. The defendant claimed that before sheseparated from her (former) husband she sold a property belonging to herfor Rs. 5000/- and her (former) husband purchased the northern portion ofthe land, two days later namely, on 24/10/1978 for Rs. 5000/- with hermoney. The defendant therefore plebded in her answer that her (former)husband held the subject matter of this action in trust for her and sought adeclaration to that effect.
It was common ground :
that the (former) husband of the defendant purchased the northernportion of the subject matter of this action in extent 12.5 perchesfor Rs. 5000/- on 24/10/1978 from T. Dias upon deed No. 9166
(PI)., – .
that the defendant and husband resided on the said land after thepurchase of the same till 23/02/1979.
that the (former) husband of the defendant sold the property to theplaintiff for a sum of Rs. 5000/- on 01/12/1979 upon deed No.9816 (P2).
that the plaintiff purchased an equivalent extent of 12.5 perches ofthe same land which formed the southern portion on 20/11 /1979
. from T. Dias upon deed No. 9781 (P3).
The learned District Judge upheld the defendant’s position and heldthat the property, was subject to a trust in favour of the defendant anddismissed the action. The plaintiff thereafter appealed against the judgmentof the District Court, and the Court of Appeal by its judgment dated 26/05/1999 allowed the appeal and entered judgment for the plaintiff as prayedfor in the plaint.
Section 65 and Section 66 of the Trust Ordinance :(Paragraph 9 (i))There is no controversy that the claim of the defendant that the land indispute was held by her (former) husband in trust for her was based in
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terms of the provisions of Section 84 of the Trust Ordinance, which laysdown that where property is transferred to one person for a considerationpaid or provided by another one, and it appears that such other person didnot intend to pay or provide such consideration for the benefit of thetransferee, the transferee must hold the property for the benefit of theperson paying or providing such consideration.
It is well accepted that a beneficiary under a trust has a personal remedyagainst a trustee for loss caused by a breach of the trust. Section 65 (1) ofthe Trust Ordinance provides an additional remedy to a beneficiary tofollow the trust property into the hands of a third party where trust property• has been disposed of by the trustee. This section enacts that where propertycomes into the hands of a third party inconsistently with the trust, thebeneficiary may institute a suit for a declaration that the property iscomprised in the trust. Though the remedy available to the beneficiary ismerely a declaration, this would effectively prevent the third party (transferee)from exercising his proprietary rights in respect of the property.
It is significant that Section 66 (1) makes provisions for a third party toobtain the property free of the trust on proof of certain circumstances. Thissection lays down that nothing in Section 65 (1) entitles the beneficiary toany right in respect of the property in the hands of a transferee who ingood faith for consideration purchases the property without notice of thetrust either when the purchase money was paid or when the conveyancewas executed.
Having regard to the provisions of Section 65 (1), there is no disputethat the burden of establishing a constructive trust in terms of Section 84of the Trust Ordinance lies with the defendant. The crucial question in thisappeal is on whom does the burden of proof lie in terms of Section 66 (1)of the Trust Ordinance.
The provisions of a statute must be construed with reference to theircontext and with due regard to the object to be achieved and the mischiefto be prevented. Where two views are possible an interpretation whichwould advance the remedy and suppress the mischief it contemplates isto be preferred.
Section 65 (1) of the Trust Ordinance seeks to protect a beneficiaryfrom a breach of the trust, by alienation of the property by making provisions
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V. Jayasena Fernando (Weerasooriya, J.)
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for a beneficiary to follow the property into the hands of a third party. Theprovisions of Section 66 (1) of the Trust Ordinance seek to protect a bonafide purchaser for value who had no notice of the trust. In the light of theprovisions of Section 66 (1), to take the property free of any trust theremust be proof that the transferee was a bona fide purchaser for considerationand that he had no notice of the trust. To place the burden of proof to comewithin these provisions on the beneficiary, would be to frustrate the objectof obtaining a declaration that the property is comprised in the trust interms of Section 65(1) of the Trust Ordinance. Therefore to advance theremedy provided by Section 65 (1) to a beneficiary and to suppress themischief which is sought to be avoided by breach of the trust, the burdenof proof should be placed on the transferee. For the above reasons I holdthat the burden of proof in terms of Section 66(1) of the Trust Ordinance toprove the existence of circumstances bringing the case within its provisionslies on the transferee. The Court of Appeal has taken the mistaken viewthat the burden lies with beneficiary (defendant).
The alleged erroneous finding by the Court of AppealParagraph 9 (j) & (k).These related to two fundamental issues, namely:
Whether the defendant’s (former) husband held the property intrust for the defendant; and
Whether the plaintiff was a bona fide purchaser for considerationwithout notice of the trust.
Learned District Judge held that the defendant’s (former) husbandpurchased the northern portion of the subject matter upon deed No. 9166on 24/10/1978 (P1), with the money advanced by the defendant. Thisconclusion'rested on the testimony of the defendant and from the inferencedrawn from the following circumstances".
that the defendant sold a property belonging to her on 22/10/1.978for Rs. 5000/- and
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that the defendant’s (former) husband purchased the northernportion of the subject matter just two days later namely, on 24/10/1978 for Rs. 5000/-.
Learned District Judge accepted the testimony of the defendant andrejected the version of the husband that he purchased the land using hismoney and the money given to him by his father and members of hisfamily.
The Court of Appeal whilst conceding that at first glance it would appearthat the defendant provided the money, considered the following materialas well in respect of the conduct of the defendant vis-a-vis the property,which had been overlooked by the learned District Judge.
that the defendant left her husband on 23/02/1979.
that the defendant’s (former) husband sold the property in disputeto the plaintiff on 01/12/1979 namely, nine months after theirseparation.
that during this period the defendant had not called upon her(former) husband to reconvey the property.
that the defendant failed to protect her rights in terms of theRegistration of Documents Ordinance by entering a caveat.
that the defendant did not file action against her (former) husbandfor a declaration that the property is subject to a trust in her favour.
that the defendant in her answer filed in the divorce action filed byher (former) husband did not aver that this property was subject toa trust in her favour.
The Court of Appeal held having considered all the circumstances thatthe conduct of the defendant was not the conduct of a person who hadprovided the consideration for the purchase of the property.
Upon a close examination of all the circumstances I hold that the Courtof Appeal was justified in arriving at the above finding.
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Somawathi De Zoysa Alias Kumarasinghe
V. Javasena Fernando (Weerasooriva, J.)
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Learned District Judge had held that the plaintiff was not a bona fidepurchaser for value and had notice of the trust mainly due to two reasons.
that the plaintiff having made aware of the dissension between thedefendant.and her husband took advantage of it and purchasedthe property for a low price.
that when the plaintiff informed the defendant’s former husbandthat the defendant had got into possession of the property, hemerely told him to file action.
The Court of Appeal had considered the following material on this issue.
that the plaintiff had purchased the southern portion of this landsimilar in extent on 20/11/1979 for Rs. 5000/-.
that the defendant’s (former) husband purchased the northernportion of the land nearly one year earlier for Rs. 5000/- and sold'it to the plaintiff for the same amount.
that there was no material to establish that the plaintiff was awareof a trust in favour of the defendant since the property waspurchased by the plaintiff nine months after their separation.
that the alleged possession of the defendant of the land in disputeat the time of purchase by the plaintiff would have alerted him tothe risk of entering into litigation and consequently there was noneed for him to complain to the defendant’s (former) husband ofthe alleged possession by the defendant.
that there was no need for the plaintiff to complain to thedefendant’s (former) husband, in view of her assertion that shewas in possession at the time of the purchase of the property.
that the admission by the defendant (page 283 of the brief) thatshe left her (former) husband on 23/02/1978 corroborated thetestimony of her husband that she left him on 23/02/1978 andestablished the position of the plaintiff that there was no one inpossession of this land at the time of his purchase.
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It is not possible to come to the conclusion that the defendant had leftthe land on 23/02/1978 by solely relying on the answer appearing at page283 of the brief, in view of the contrary position of the defendant both in herexamination in chief and in re-examination.
Section 3 (j) of the Trust Ordinance has to be considered on the questionof notice of the trust by the plaintiff.
“3 (j) a person is said to have notice of a fact either (i) when he actuallyknows that fact, (ii) or when, but for willful abstention from inquiring orgross negligence, he would have known it, (iii) or when information of thefact is given to or obtained by any person whom the Court may determineof having been his agent for the purpose of receiving or obtaining suchinformation”.,
On the available material it is not possible to hold that the plaintiff hadnotice of the trust by applying the criteria spelt out in Section 3 (j).
The Court of Appeal had proceeded to evaluate the evidence led at thetrial and had drawn certain inferences from the conduct of the defendantvis-a vis the trust property and held that the purchaser had no notice ofany interest of the defendant in respect of the property. In the light of theabove material the contention of the defendant that the Court of Appealhad failed to consider Section 98 of the Trust Ordinance has no merit. Forthe above reasons I hold that the Court of Appeal had correctly held thatthe plaintiff had no notice of the trust at the time of his purchase of theproperty.
For the foregoing reasons, I dismiss this appeal. However, I make noorder as to costs.
S. N. SILVA, C. J. – I agree.
J.A. N. DE SILVA, J. – I agree.
Appeal dismissed