010-NLR-NLR-V-33-SUMANGALA-THERO-v.-CALEDONIAN-TEA-AND-RUBBER-ESTATES-CO.,-LTD.pdf
Sumangala Thero v. Caledonian Tea rf Rubber Estates Go., Ltd.
49
1931Present: Lyall Grant and Drteberg JJ.SUMANGALA THERO «. CALEDONLAN TEA ANDRUBBER ESTATES CO., LTD.
12—(Inty.) D. C. Kandy, 36,064.
Registration—Deed of lease—Agreementto renew lease—Notice—Trusts
Ordinance, No. 9 of 1917, s. 93.
Where a person acquires property with respect to which there isan existing lease, which has been registered, and where the deed oflease contained a provision for the renewal of the lease for a furtherterm,—
Held, that the registration df the deed constituted sufficient notice tothe purchaser of the agreement for renewal.
T
HIS was an action for declaration of title to a half-share of landcalled Nitulmulahena.
One Dingiri Banda, by lease D1 of 1894, leased, for 30 years, the landin dispute in this case (inter alia) to one Dickinson, whose rightsultimately devolved by various assignments on the defendant company.
By D.l Dingiri Banda undertook to grant, at the expiration of the term,a renewal of the lease for the same term or to sell the leased lands to thelessee on the expiration of the lease, or on the lessor's minor son TikiriBanda attaining majority.
The lease D1 was duly registered.
The defendant company in 1919 purported to purchase the entiretyof .the land in dispute from one M. W. Loku Banda, on the footing thatTikiri Banda, already referred to, was the only heir of the original lessor,Dingiri Banda.
The plaintiff, alleging that Dingiri Banda had another son besidesTikiri Banda and claiming title through him, purported to purchase aone-half share of the land in 1927.
The plaintiff then instituted this action for declaration of title to ahalf share of the land against the defendant company. The defendantcompany filed answer denying the existence of any son of Dingiri Bandaother than Tikiri Banda and denying the plaintiff's title to any share of theland, and prayed for the dismissal of the plaintiff’s action. It furtherprayed, in reconvention, that in the event of the plaintiff being declaredentitled to any share of the land in dispute, the plaintiff be ordered toexecute a lease of such share in favour of the defendant company in terms ofthe covenant for renewal, contained in Dl, granted by plaintiff's predeces-sor in title. At the trial the defendant company conceded the plaintiff'stitle to half share of the land, and the District Judge allowed the defendantcompany's prayer in reconvention and ordered the plaintiff to execute alease of his half share in favour of the defendant company in terms of Dl.The plaintiff appealed.
H. V. Per era, for the plaintiff, appellant.—The option contained inDl is vague, and it is not clear who is to exercise the option.
50 LYALL GHAUT J.—Sumangala Then v. Caledonian Tea £ Rubber Estates Co.
The agreement for renewal or sale is not enforceable by the defendantcompany against the plaintiff. The defendant company cannot, claimthe benefit of section 93 of the Trusts Ordinance, 1917, as, though Dlwas registered, the entry in the register does not amount to notice of thecovenant for renewal or conveyance at the termination of the lease.
[Drieberg J. referred to Suwaris Silva v. Omerihamy1.]
The entry in the register in the case referred to specifically mentioned'the agreement to sell and therefore there was full notice of the agreement.In the present case, no mention is made in the register of any covenantfor renewal or conveyance. When the company purported to purchasethe entirety of the land in 1919, it must be taken to have exercised its.option under Dl once and for all, and it cannot now ask for a lease of theremaining half share which it finds it has not purchased. An optioncannot be exercised piecemeal.
Further, if the defendant was asking in reconvention for specificperformance, it should have specifically alleged and proved notice.There has been no allegation and no evidence of notice.
The lease Dl would have expired in 1924 and it is now too late to askfor a renewal of the lease after the lapse of so many years.
The District Judge’s judgment is wrong and the defendant’s prayer inrecon mention should have been dismissed.
Wendt, for defendant, respondent.—The option in Dl though awk-wardly worded is clear in its intention. An option is always to beexercised by the tenant (Doe d. Webb v. Dixon2).
Section 98 of the Trusts Ordinance applies in this case. The mereregistration of Dl ought to have put the plaintiff on the inquiry andamounts to notice of all the covenants in Dl, though they are notspecifically mentioned in the register. The plaintiff’s conduct amountsto wilful abstention from inquiry or gross negligence. The case in 11Ceylon Law Recorder is in point.
When the plaintiff purchased, the defendant company was in possessionof the whole land. This fact must be taken to be notice to the plaintiffof the actual interest the defendant company had (Daniels v. Davison3).
In the circumstances, there has been no undue delay in the exercise ofthe company’s option. The company has asked for the renewal as soonas it discovered that it had not purchased the entirety of the land. InMoss v. Baston1 specific performance of a renewal of a lease wasallowed 4 years after the expiry of the original term of 3 years. Noauthority has been cited to show that the option cannot be exercised,as it has been in this case.
April 30, 1931. Lyall Grant J.—
The plaintiff-appellant sued the defendant-respondent for a declarationof title to an undivided half share of a land called Nitulmulahena.The defendant-respondent pleaded in his answer that the plaintiff wasnot entitled to a half share or to any share and in reconvention claimedthat if the plaintiff were declared entitled to the premises, he should begranted a renewal of the lease from the plaintiff in terms of a certain lease
bond of September 29, 1894.
111 Cey. Law See. SO.9
• {1807) 9 Bast. IS.<
16 Vesey 249.
{1866) L. if. 1 Equity 474.
IjTALL GRANT J.—Sumangala Thero 9. Caledonian Tea 6 Rubber Estates Co. 51
After trial the learned District Judge held that the plaintiff-appellantwas entitled to a half share of the land and .that the defendant was entitledto a renewal of the lease. From this finding the plaiutiff appeals.
The lease in question was granted by one Dingiri Banda in 1894 andwas for a period of 30 years. The lease was originally granted to a Mr.Dickinson* but was assigned by him to a Mr. Boss* and by Mr. Boss tothe defendant company in 1896. The lease itself and these two assign-ments were duly registered. The indenture of lease contained thefolio vying clause:—
“ And it is hereby further agreed by and between the parties hereto(that, after the expiration of the said term of 30 years, the said lessordoth hereby further agree to secure a renewal of this lease on the sameconditions as these presents by obtaining the consent and concurrenceof the said minor or effect an absolute sale of the said lands either at theexpiration of these presents or as soon as the said minor attains the ageof majority for a price not exceeding Bs. 100."
The reference to the “ said minor ” is accounted for by the fact thatthe lessor purports to transfer not only land which was his own property,but also two other lands which belonged to his minor son Tikiri Banda.
The defendant company asserted that on the death of Dingiri Banda,all his property including the lands leased devolved upon his two children,Tikiri Banda and Dingiri Amma Kumarihamy, as his sole heirs.
On October 21, 1919, the company bought all the lands leased fromone Loku Banda. In its defence to the present action the companyallege! that this Loku Banda was the sole representative of DingiriAmma Kumarihamy and Tikiri Banda. The company asserted thatTikiri Banda died intestate and issueless many years ago leaving an estatebelow Bs. 1,000 in value and leaving him surviving as his sole heir hissister, the said Dingiri Amma Kumarihamy; that Dingiri Amma Kumari-hamy died some years ago leaving as her sole heir her son Kalugaha-kumbura Walauwa Heena Banda, who by deed No. 1,519 dated April 23,1919, sold and conveyed the land to Batnayake MudiyanseralahamillageWalauwa Loku Banda, and that the said Loku Banda sold and conveyedto the defendant company as above set forth.
The plaintiff denied that Dingiri Banda left only the children mentionedby the defendant. He said that by the first marriage there were threechildren, not two (the number is immaterial), but that Dingiri Bandacontracted a second marriage, the issue of which is one Loku Banda,not the Loku Banda previously mentioned, and that this Loku Bandabecame entitled on the death of Dingiri Banda to a half share of hisproperty. It is admitted that, by Kandyan law. that is the share towhich he would become entitled assuming that he was the only child ofthe second marriage.
On July 8, 1927, Loku Banda transferred his share of the lands inquestion to the plaintiff. At least that is. the plaintiff's averment.The defendant company said that it was unaware of this and put .theplaintiff to the procf of this averment. In spite of this, however, thedeed does not seem to be produced and the question of its existence is
52 LYAIiL GRANT J.—-Sumongala Then t>. Caledonian Tea S Rubber Estates Co.
not made mention of in the ease. The defendants appear to haveacquiesced in the position and to have accepted the fact of this transfer.
The issues hi the case were first:—Whether Loku Banda was a son ofDingiri Banda, the lessor to Mr. Dickinson ? After further investigationthis point was conceded by the defendant. On the other hand the plaintiffconceded that he was liable to pay to the defendant company compensa-tion for improvements in the amount actually expended by them in suchimprovements. The second issue was:—What sum the defendantcompany was entitled to by way of compensation ? It was admittedthat Dingiri Banda leased the entirety of the land to Mr. Dickinson for aperiod of 30 years commencing from September 29, .3894. The thirdissue was:—Is the defendant company entitled to a lease or a transferof the lease No. 2,559 of 1894 ? The fourth issue was:—In any circum-stances is the defendant entitled to ask for a lease or a transfer from the*plaintiff ? In his judgment the learned District Judge states that at thetrial the defendant’s counsel admitted the plaintiff’s title to a half shareof land, and the only issues remaining for trial were the two last issues.
The learned District Judge found that there was a definite undertakingby the lessor to renew the lease on the same conditions and he found thatthe company was entitled to a renewal of the lease from the plaintiff.
On the appeal it was argued that, in any view of the clause, it couldhave no effect after the termination of .the lease, or at any rate after solong a period as three years from its- expiry. It was also argued verystrongly that it was impossible to treat the agreement, otherwise than asa whole.
It is admitted that, as regards two of the lands mentioned in the leaseand also as regards the half share claimed in this action, the defendants -had acquired absolute property by purchase and Mr. Perera strenuouslyargued that it was not open to them now to ask for a renewal of the leasein regard to a mere fraction of the land. I do not think that, in thecircumstances of this case,-there is anything to prevent the defendantsfexereising this option, as soon as it is brought to their notice that theabsolute title upon which they thought they held the land as owner wasdefective.
More detailed examination is perhaps required of the renewal clause.
I agree with the view taken by the learned District Judge, that thisclause refers not only to the minor’s lands but also to Dingiri Banda’sown land, the land now in question.
The first part of the clause allows the tenant to claim renewal afterthe expiry of. the lease. .This at once distinguishes the right from a rightexercisable during the currency of the lease, and thje only question fordecision is now how' long this right is to continue. In the circumstancesof the present case it does not seem unreasonable to say that nothing hashappened, either effluxion of time or anything else, to bar the defendantcompany from now exercising the option.
In Daniels v. Dawson (supra) it is laid down that the possession of atenant is notice to the purchaser of the actual interest he may have, eitheras tenant, or farther, by an agreement to purchase the premises.
DRIEBERd J-—Sumangala There v. Caledonian Tea A Rubber Estates Co, 5$
Nothing has been oited to us to show that a different rule obtains isour law. The principle is clear. By the mere fact of the defendant's-possession the purchaser is put upon inquiry. In the present case inquirywould have revealed the option to purchase.
The fact that the option was not disclosed ex faeie of the- register cannothelp the buyer. The existence of the lease was disclosed to him and.if he took the risk of not examining the registered lease he cannot, to mymind, afterwards plead ignorance.
The argument would at any rate, I think, be conclusive in a questionbetween the company and Loku Banda. The position of Loku Bandawas that from Dingiri Banda's death he was entitled to a half share ofthe rent from the lease. He however put in no* claim. There is nothingto show that at any time he got any money from the defendant companyas rent, and in particular he made no claim after the defendant companyceased to pay rent in 1919. Clearly he would not be in a position now to-come forward and resist the company's claim, inasmuch as by his ownlaches he let the company believe that they were absolute owners afterthe lease had expired. It remains to be considered whether the caseis different where a third party is concerned. According to his own casecircumstances point to the plaintiff having bought on a speculative title.The company was in possession of the land and had been in possessionfor many years, and no doubt planted it with tea. The defendantsregistered their deed of 1919, which strengthens their position againstany such claim as is now made.
Their lease was also registered, and I think the plaintiff was put uponhis guard, by these facts and by the fact that the company was in posses-sion of the land after the expiry of the lease, to inquire by what title thecompany remained in possession. The result of such inquiry would havebeen to show that the company remained in possession on a deed fromHeen Banda's transferee. That would not bar the claim of the plaintiffto the land, but it would have necessarily warned him of the obligationunder which Dingiri Banda put himself when he granted the lease.
I do not think that the plaintiff can obtain possession of this landexcept by fulfilling the conditions which Dingiri Banda entered into.The existence of the lease was known to him and it is not at all unusualfor a long lease, especially a planting lease, to contain a purchase orrenewal clause. I think it is not too much to ask that the- plaintiff shouldhave made himself acquainted with the terms of the lease. If he haddone so he would have found that the defendant company were entitledto a renewal of the lease. I do not think that anything that has happenedsince can be held to disentitle the company to that renewal.
I accordingly dismiss the appeal with costs.
Drieberg J.—
The appellant appeals from a judgment ordering him to execute infavour of the respondent company a lease for a period of 30 years from.September 28, 1924, of his undivided half share of Nitulmulahena whichhe bought on July 8, 1927, from P. M. Loku Banda, one of the heirs ofDingiri Banda; Dingiri Banda leased this and two other lands onindenture D1 of September 29, 1894, for 30 years to Lawrence Dickinsonr
54 DRIEBEBG J.—Sumangala Thero p. Caledonian Tea <6 Rubber Estates Co.
whose rights under it ultimately passed by D3 of January 1, 1898, to therespondent company. D1 contained a clause by which the lessor under-took to grant at the expiration of the term a renewal of the lease for thesame term or to sell the leased lands to the •lessee for Rs. 100 on theexpiration of the lease or on the lessor’s minor son, Tikiri Banda, attainingmajority.
By D1 Dingiri Banda leased this land, which was his. and also twolands belonging to his minor son, Tikiri Banda. Tikiri Banda diedbefore 1919, but it is not known whether he had then attained majority.The respondent company says that Dingiri Banda died leaving as hissole heirs Dingiri Amma and Tikiri Banda; Tikiri Banda died intestateend without * issue and Dingiri Amma became solely entitled to the land;Dingiri Amma died leaving as heir, Heen Banda, who sold to M. W. LokuBanda on April 23, 1919, and M. W. Loku Banda on October 21, 1919,sold it to the respondent company.
But Dingiri Banda had contracted another marriage by which he hada son named P. M. Loku Banda, not the vendor to the respondentcompany, who on Dingiri Banda’s death succeeded to a half share ofthis land, and the respondent company on their purchase of 1919could only have become entitled to a half share. P. M. Loku Bandaon July^ 8, 1927, sold his half share to the appellant, who brought thisaction to vindicate this share.
The respondent company denied his right to a half share, alleging thatP. M. Loku Banda was not a heir of Dingiri Banda, and they asked in thealternative that, if the appellant' was held to be entitled to a half share,he and P. M. Loku Banda be ordered to execute in their favour a renewalof the lease or to convey to them his half share.
At the trial, the appellant produced the certificate of the secondmarriage of Dingiri Banda and the birth certificate of P. M. Loku Banda,and the respondent company admitted P. M. Loku Banda's title. Thedeed by P. M. Loku Banda to the appellant was not put in evidence butits execution was apparently accepted as P. M. Loku Banda had filed* answer admitting having executed it. The respondent company put inevidence the lease D1 and the assignments D2 and D3 by which rightsunder it passed to the company. The transfer to the company by M. W.Loku Banda was not produced. The respondent company also put inevidence the extract of encumbrances in which appear all the transactionsto which I refer.
I agree with my brother that the agreement for a renewal lease or aconveyance was enforceable by the respondent company against P. M.Loku Banda. Whether it is enforceable against the appellant dependson whether the conditions required by section 93 of the Trusts Ordinanceexist. The respondent company rely solely on the registration of thedeed of lease, Dl, prior to the appellant’s purchase.
It was held in Suwaris Silva v. Omervhamy 1 that “ no form of noticeother than due registration will suffice to admit a contract to theprivileges of section 93 the agreement there sought to be enforcedwas one by which the purchasers at a sale under the Partition Ordinance1 {1930) 11 Cey. Law Rec. 50.
DBIEBERG J.—Sumangala Thera e. Caledonian Tea it Rubber Estates Co. 55
undertook to transfer the property to the plaintiff; they subsequentlysold the laud to another; registration of the agreement had not beenspecially pleaded by the plaintiff and the case was sent back for inquirywhether the agreement was duly registered with a direction that if thiswas so found judgment should be entered for the plaintiff.
I have examined the extract of encumbrances filed in the case and Ifind that the deed in question was registered as an “ agreement to sellthe above on a valid deed of transfer on or before September 80, 1928,subject to the conditions in the deed and in consideration of Bs. 700paid in advance The registration of the deed therefore gave fullnotice of the agreement.
In this case the deed was registered as “ a lease of the above for 30years commencing from the date of the deed, yearly rental Bs. 2. peracre ”. It is not registered as a deed agreeing to grant a new lease or tosell the land to the lessor. It is interesting to note the words in theproviso to section 93, “ provided that in the case of a contract affectingimmovable property such contract shall have been duly registered beforesuch acquisition ”. It is, of course, not possible to register a contractrelating to land, but the deed embodying that contract; was it intendedthat the form of registration of the deed should be such as to give noticeof the contract sought to be enforced?
There is a difference to my mind between the contract to renew thelease and the contract to sell to the lessor.
It is not necessary for the purposes of this appeal to decide whetherthe contract to sell to the lessees is enforceable against the appellant. Ihave much doubt whether it is. It is not easy to see how the registrationof the deed as a lease is a registration of it as an agreement to sell; suchan agreement is separate and distinct from the contract of lease, and isnot a covenant or condition one would expect to find in a lease: underthe Stamps Ordinance it would need stamp duty additional to that paidon the deed as a lease.
As regards the agreement to grant a new lease, I agree that this isenforceable against the appellant. Provision for renewal is a commoncondition in leases and cannot be regarded as a separate or distinctagreement; knowledge of the lease necessarily called for inquiry regard-ing its conditions. While this would be so in any case, there were circum-stances here which pointed strongly to the necessity for examining thedeed of lease. The register shows that in 1903 the respondent companyhas registered this land together with 151 other lots as forming Kaha-watta estate and dealt with it as such in mortgage debentures; thisshould have indicated to a purchaser that the company was not dealingwith it on a tenure which it was likely they intended to terminate withthe existing lease.
Failure to examine the deed of lease under these circumstances canonly be attributed to wilful abstention from inquiry or gross negligence,and under section 3 of the Ordinance this amounts to notice.
I agree that the appeal should be dismissed with costs.
Appeal dismissed-