006-NLR-NLR-V-43-THE-PUBLIC-TRUSTEE-v.-WALLES.pdf
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The Public Trustee v. Walles.-
1941
Present: Scertsz and Keuneman J.J.
THE PUBLIC TRUSTEE v. WXLLES.
119—D.C. (Jnty.) Colombo, 1,489.
Trustee—Application to remove trustee from office—Burden of proof—Breachof duty—Application for relief by trustee—Trusts Ordinance (Cap. 72),ss. 15 and 31.
Where an application is made for the removal of a trustee under section76 of the Trusts Ordinance, the burden is on the petitioner to prove thatthe trustee committed a breach of the duty to deal with the trust propertyas carefully as a man of ordinary prudence would deal with such propertyif it were his own.
A trustee, who has acted honestly but not reasonably is not entitled torelief under section 31 of the Trusts Ordinance.
.Where a trustee was found guilty of negligence the District Court isjustified in withholding costs from him.'
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KEUNEMAN J.—The Public Trustee v. Walles^^PPEAL from a judgment of the District Judge of Colombo.
V. Perera K.C. (with him J. E. M. Obeyesekere and M. M. I.Kariapper), for first respondent, appellant.
C. Suntheralingam (with him S. P. Wijewickreme), for petitioner,respondent.
Cur. adv. vult.
September 11, 1941. Keuneman J.—
The appellant is the Public Trustee who had been duly appointed bythe Court as trustee of the trust estate left under the will of the lateVincent William Perera (P 2 of 1899). The petitioner made applicationunder section 76 of the Trusts Ordinance, inter alia, for the removal of theappellant from the office of trustee, and for an accounting. The maincharge with which we are concerned in this appeal is that the appellantfailed to exercise reasonable diligence in collecting the rent due underlease P 8 of March 10, 1932, from the lessee G. A. Caldera. This was alease of Kendalande estate of about 40 acres. There were some othercharges. In respect of Kendalande estate, the learned District Judgeheld that there was gross negligence and supineness on the part of theappellant in not taking active steps to collect Caldera’s rent as it fell due,and that this had resulted in the loss of Rs. 1,312.54 to the estate. Theappellant was ordered to make good that amount to the estate. On theother issues the District Judge held in favour of the appellant, in oneinstance (which will be mentioned later) the District Judge held thatthere was a technical breach of the terms of the trust instrument, but theappellant was exonerated from liability in the circumstances of the case.
Further, the District Judge refused to remove the appellant from theoffice of trustee, and ordered each group of the parties to bear its owncosts.—
The appellant now appeals against the order requiring him to bring inRs. 1,312.54, and the order relating to costs.
As regards Kendalande estate, the appellant, together with the benefi-ciaries under the will, leased to G. A. Caldera, Proctor, this estate for theperiod of ten years. As the will P 2 forbade a lease for more than twoyears, the consent and approval of the Court was obtained. Theconsideration for the lease was payable as follows : —
Rs. 480 in advance.
Rs. 480 on or before February 10, 1933.
Rs. 960 on or before February 10, 1934.
Rs. 960 on or before February 10, 1935.
Rs. 960 on or before February 10, 1936.
Rs. 960 on or before February .10, 1937.
The lease was on the basis of Rs. 480 a year, but the whole of the leasemoney was payable on or before February 10, 1937.
Further the lessee, Caldera, undertook to carry out certain specifiedimprovements to the bungalow on the leased premises, without hayingany claim to compensation.
It was also agreed that if 'the rent was in arrears for thirty days, it waslawful,for the lessors at any time thereafter to enter into possession of thepremises.
44KEUNEMAN J.—The Public Trustee v. Walles.
It will be noted that the first payment of Rs, 480 was made in advance.
A second payment of Rs. 480 was due on or before February 10, 1933.Caldera failed to pay this amount. As far as can be ascertained from thedocuments, the appellant made no attempt to recover this amount tillJune 26, 1933, when Caldera was requested by letter to send the amountwithout delay. Nothing further appears to have happened till aboutDecember, 1933, when, according to the office minute of December 18,1933, the attention of the Public Trustee was called to the state of affairs.
It runs as follows : —
-»
“ The lease money due from Mr. G. A. Caldera not received yetWhen Mr. Caldera last time he saw you stated that he was losing onthe lease and finds it difficult to pay one year’s money at once, he waspermitted to pay even by monthly instalments. Invite his attentionplease. ”
To this the reply of the Public Trustee was “ Yes ”.
It appears from this that Caldera had alleged that he was losing on thelease, and that the Public Trustee had allowed him the concession ofpaying the amount due by monthly instalments, but that Caldera had noteven availed himself of that concession.
After the attention of Caldera had been invited on several occasions, hewrote a letter (not produced) on January 20, 1934, by which apparentlyhe paid the sum of Rs. 250. It is important to remember that Calderanever again paid any amount to the Public Trustee, until after action hadbeen instituted against him. To judge from subsequent letters written ,by the Public Trustee, Caldera had also promised to make a furtherremittance, and had also applied for a reduction of the rent. By I. R. 42of January 30, 1934, the Public Trustee declined to consider the questionof reduction of rent, unless consent was obtained direct from the heirs.It was not till March 9, 1934 (letter I. R. 43) that the Public Trusteereminded Caldera of his promise to send a further remittance. On April12, 1934 (I. R. 43), Caldera asked for a further two weeks, time. On thisthe Public Trustee endorsed the following minute:— “await till 26thinstant and B. O. if no payment received by then Attention wasinvited on May 3.
In June, 1934, we find a query by the Public Trustee, as regards theamount due from the lessee up to May 31, 1934. To this the somewhatastonishing reply is received from the office that Rs. 390 is due, and aletter was written by the Public Trustee on June 20, 1934, requestingCaldera to remit this amount. It has to be remembered that on February10,1934, under the lease a further sum of Rs. 960 had become due fromCaldera, and that the amount due then was Rs. 1,920, less the sums ofRs. 480 and 250 paid by Caldera, viz., a^net sum of Rs. 1,190. It certainlyappears that the Public Trustee regarded the arrangement with Calderaas including the supersession of the agreement under the lease to pay thelease money on fixed dates and in fixed amounts, and the establishmentof a new arrangement to pay the rent in monthly instalments of Rs. 40.Such an alteration had neither the approval of the Qgjirt, nor the consentof the beneficiaries.
KEUNEMAN J.—.The Public Trustee v. Walles.
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On June 22. 1934, Caldera wrote a letter (I. R. 178) to the PublicTrustee, regretting that he was unable to send a remittance owing toexpenses connected with his wife’s serious and prolonged illness but askedfor three weeks to make a substantial payment. He again asked for areduction of rent, on the ground that he was losing on the lease, or in thealternative for a surrender of the lease. He added that fees were due tohim in a testamentary case, and requested, if possible, that the amountdue to him should be transferred to the lease account.
On July 16, 1934, Caldera saw the Public Trustee, and was apparentlyasked to furnish a statement showing the income and expenditure inrespect of the land. Caldera promised to send a communication in thecourse of the week, but though his attention -was invited on severaloccasions and he was telephoned to many times, nothing happened tillMarch, 1935 (vide minute I. R. 50). Eventually, Caldera saw the PublicTrustee on March 9, 1935, but only to say that he would send the requiredstatement early in that week (vide minute I. R. 51). There is a suggestionin the case that the statement was eventually sent, but when it was sentis not clear, nor do we know the details of the statement.
On June 26, 1935, the Public Trustee summoned a meeting of thebeneficiaries for July 8, 1935 (P 9). About six of the beneficiariesattended, and agreed to the Public Trustee getting a surrender of the leasefrom Caldera as from August 1, 1935, or any other convenient date shortlyafterwards, Caldera paying rents right up to the date of surrender (vide
R. 14). The Public Trustee informed the remaining beneficiaries of themeeting in question, and requested them to say whether they agreed tothe proposal (vide P 10). Eventually this proposal could not be carriedout and on September 20, 1935, the Acting Public Trustee sent a peremp-tory letter to Caldera, claiming the sum of Rs. 2,150 as lease money on'the basis of the lease, aiid demanding a substantial payment immediately,,failing which legal steps would be taken (I.R. 53). No reply was receivedthough Caldera-s attention was repeatedly called to this matter, and onNovember 11, 1935, the Public Trustee entrusted the matter to hisProctor (I. R. 56).
Action D. C. Colombo, No. 5,264 was eventually brought on June 25,1936, but I do not find any evidence of undue delay in the institution ofthe action ; or in the subsequent proceedings or in execution of the decree.
These are the facts as they arise on the documents. The Public Trusteewho officiated as trustee during the material period was not called to giveany explanation of his conduct.
There was considerable discussion in appeal as to the incidence of theburden of proof in this case. Counsel for the petitioner argued that, inview of the fact that the Court had been consulted with regard to theterms of the lease, and had given approval to those terms, there was aninjunction of Court imposed on the appellant to collect the rents due onthe specified dates, and that the resulting position was similar to that ofa trustee who had been directed under the terms of the trust to call intrust moneys^ on a given date. I think it is not possible to put the caseso high, nor in fact do the issues suggest that such a view was entertained.Counsel for the petitioner in the lower Court quite rightly undertook the43/7
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KEUNEMAN J.—The Public Trustee v. Walles.
burden of proving that “ the Public Trustee failed to exercise reasonablediligence in the collection of the rents In my opinion the petitionerhad to prove that the Public Trustee failed to exercise the care requiredunder section 15 of Chapter 72, viz., committed a breach of the duty “ todeal with' the trust property as carefully as a man of ordinary prudencewould deal with such property if it were his ov/n
Can we say there was such a breach of duty ? The evidence in the caseestablishes that from February, 1933, to September, 1935, the action ofthe Public Trustee was dilatory in the extreme. "No real pressure wasused on Caldera to make him pay the rent. The concession was given toCaldera of paying by monthly instalments and the terms of the lease werenot enforced and even when Caldera failed to take advantage of theconcession, no real effort was made to secure payment. Caldera waspermitted to make one excuse after another, and each time he made anexcuse and asked for a short time to pay, it took several months beforethe Public Trustee satisfied himself that the excuse was not valid, andby then, not only had the period of time asked for been exceeded by alarge margin, but in fact nothing was done by Caldera. The maincontention of Caldera, viz., that he was losing on the lease, was obviouslya mere excuse, as his failure to provide the figures for a considerableperiod shows. It is very important to remember that since the inceptionof the lease Caldera only made one payment, viz., Rs. 250 on January 20,1934. No threat of legal proceedings was made until September, 1935.On the evidence before me it appears that prior to September, 1935, theappellant was satisfied with mere inactivity, or at most contented himselfwith writing some letters, which it must have been obvious had no effectin securing payment. During that time a period of nearly two and ahalf years had elapsed, since the first failure of Caldera to pay.
Counsel for the appellant argued that the lease was very profitable tothe estate, and that even if no payment was received, there was at thetime every prospect of the eventual recovery of the lease money, -and thatthe appellant was acting wisely in letting the lease run on, and not addingto Caldera’s embarrassment by filing action, which may have had theeffect of ruining Caldera’s professional income.
It is not possible to accept this argument for two reasons. First, thePublic Trustee who functioned during this period has not been called,and there is no evidence that the idea suggested by Counsel ever influencedhis mind. Next, though it is true that the Public Trustee at the timeCaldera’s offer was first received considered that it was a good proposition,and though it may be regarded as a good proposition, if the rents werepaid in accordance with the lease, I think it ceased to be a goodproposition, when there was a persistent failure to pay the lease money.
The beneficiaries were entitled to regular payments under the terms of. the trust, and it was impossible to make the payments, if the rent waswithheld, and this was particularly hard on the beneficiaries, who wereerftitled to payment during their life time alone. The further suggestionof Counsel that so good a rent could not have been obtained outsidecannot be supported on the evidence. It is true that at a later stage onlya lesser rent was obtained, but by this time the estate had been consider-ably neglected and the lease was for a shorter period. The claim of
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KEUNEMAN J.—Tke Public Trustee v. Walles.
Caldera that he was entitled to compensation for improvements cannotbe seriously entertained, and was not persisted in at the subsequenttrial.
In my opinion the conduct of the appellant fell very far short of theconduct which may be expected of a prudent man dealing with thisproperty as his own. The District Judge has held that the loss was dueto the gross negligence and supineness of the appellant, and I cannot saythat that finding, is not justified on the evidence.
One further point was argued regarding the amount ordered to bebrought in. The appellant has failed to show that if active steps weretaken against Caldera at an earlier period, the same' result would haveensued. So far as the evidence goes, Caldera was regarded as a Proctorin good standing at the material time. He has, since these proceedingsstarted, been prosecuted to conviction, but there is no evidence that atthe material time, he was unable to pay the amounts due. To judgefrom his letters, Caldera although subject to temporary financialembarrassment, was not incapable of paying the rents, if continuous andsufficient pressure was applied to him, but it is difficult to resist theconclusion that even these letters were mere excuses made in order toavoid payment.
The District Judge also held that the appellant was not entitled torelief under section 31 of the Trusts Ordinance. This section stales thata trustee who has acted honestly and reasonably may be excused in wholeor in part. There is no question but that the appellant acted honestly,but the District Judge held that he did not act reasonably. I agree withthis finding.
Further, the District Judge held that section 45 of the Trusts Ordinancewas not applicable. Under that section a trustee is empowered to allowtime for payment of a debt, provided he acts in. good faith and withoutnegligence. In this case there has been positive evidence of negligence.
The findings of the District Judge on this aspect of the case are affirmed.
Counsel for appellant addressed another argument to us on anotherfinding of the District Judge which he suggests may have influenced theorder for costs, viz., that there had been a technical breach of trust inthat the appellant failed to make payments' to the beneficiaries in theterms of the will P 2. Under the will the trustee was to recover, receiveand- take rents, income and profits of the estate, and to pay monthlyone-fifth shares thereof to each of the three daughters of the testator,one-fifth to the testator’s wife, and one-fifth was to be held by the trusteeuntil the period of distribution mentioned later, and was to form a reservefund and be applied towards the payment of all taxes and the upkeepand repairs of the real properties, any balance being invested on mortgage.The period of distribution referred to was the distribution set out in thewill, on the deaths of the wife and daughters. It is, I think, clear underthe will that rates and repairs were to be paid out of one-fifth of theincome, and the remaining four-fifth was to be distributed to the bene-ficiaries mentioned. It was however found in practice that rates andrepairs took up considerably more than one-fifth of the income. Thiswas largely due to the increase in rates. The trustee was compelled toallocate considerably more than one-fifth of the income to this purpose.
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KEUNEMAN J.—The Public Trustee v. Walles.
The beneficiaries accordingly received less than the four-fifth specifiedin the will. I think the District Judge was right in holding that theappellant was guilty of a technical breach of trust, in disregarding theexpress terms of the trust, and in acting on his own initiative without thesanction of the Court. The District Judge further held that the actionof the appellant in this matter was inevitable, if the corpus of the trustproperty was to be preserved, and was such as would have been sanctionedby the Court, The appellant had accordingly acted honestly andreasonably and was entitled to be excused under section 31. Not onlydo I think that this finding is right, but I am unable to see that it hasinfluenced the District Judge in arriving at any conclusion relating tocosts adverse to the appellant.
There is one other matter to which it is necessary to refer. The DistrictJudge has used strong language in describing the conduct of the presentholder of the office of Public Trustee in relation to the lease of Kendalandegiven at a later date to Mrs. D. E. Perera. No doubt this offeror wastreated with some leniency, but, on a study of the evidence, I do not thinkthe Public Trustee was influenced by any other motive than that ofgiving consideration to the moral claim of Mrs. D. E. Perera, whoapparently was the real, but not the nominal, previous lessee, and hadin writing some claim to have her offer considered. I do not think it wasan option. I cannot find any justification for the suggestion that thePublic Trustee’s personal interests came into conflict with his duty astrustee, or that the Public Trustee was compelled to give the lease toMrs. Perera in order to avoid the matter going further, when awkwardquestions could be raised with regard to the alleged option. Nor can theinterview given by the Public Trustee be regarded as immoral, althoughit was perhaps a little irregular. As I said, some leniency was shown tothis offeror, but the Public Trustee was careful to see that no loss resultedto the estate. Further no specific charge was made against the PublicTrustee on this point, nor has any issue been framed in this connection.
The only matter that remains for consideration is the order relating tocosts. The District Judge carefully considered the circumstances of thecase, and came to the conclusion that the appropriate order was that eachparty should bear his own costs. It is impossible to interfere with thisexgrcise of discretion, aiid I think myself that the finding in one respectthat the Public Trustee was guilty of negligence justified the withholdingof cos«0from him although he has succeeded on other matters.
The appeal is dismissed'with costs. _
Soertsz J.—I agree.
Appeal dismissed.