057-SLLR-SLLR-2003-V-3-TILAKARATNE-v.-JAYATILAKA-AND-OTHERS.pdf
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Tilakaratne v Jayatilaka and others (Somawansa, J.)
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TILAKARATNEv
JAYATILAKA AND OTHERSCOURT OF APPEALDISSANAYAKE, J.
SOMAWANSA, J.'
CA 300/89(F)
D.C. KEGALLE 2285/LFEBRUARY 13, 200fFEBRUARY 19, 2002
Trusts Ordinance – Sections 5, 5(1) and 5(3) – Attendant Circumstances -Oral Agreement to sell land – Prevention of Frauds Ordinance – Section 2 -Applicability – Fraud
The plaintiffs-respondents instituted action seeking an order to direct thedefendant-appellant to accept a certain sum and execute a deed in favour ofthem as agreed upon by the parties. It was their position that the defendant-appellant was holding the property on trust. The defendant-appellant contend-ed that he never entered into any agreement to sell the property, and furthercontended that in any event that even if there is an Agreement to sell, it is voidin view of section 2 of Frauds Ordinance. The District Court held with the plain-tiff-respondent.
Held
There existed an oral agreement to sell the property. Though the plain-tiffs-respondents were able and willing to pay the consideration thedefendant-respondent in violation of the agreement refused to executethe Deed.
On an examination of the evidence no trust would be established orinferred.
The agreement could only tantamount to an Agreement to sell. TheAgreement is not in conformity with the provisions of S.5(1) TrustOrdinance, therefore does not create a trust.
The oral agreement and the attendant circumstances did not give rise toa trust there is no evidence of a fraud in the circumstances section 2 ofthe Frauds Ordinance would apply.
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APPEAL from the District Court of Kegalle.
Cases referred to:
Saverimuttu v Thangavelautham – 55 NLR 529 at 532
Lakshmanan Chettiarv Muttiah Chettiar- 50 NLR 337 at 344
Swami Sivagnananda v The Bishop of Kandy – 55 NLR 130
Don v Don – 31 NLR 73
A.K. Premadasa, P.C., with C.E. de Silva for defendant-appellant
C.B. Walgampaya, with S.A.I.S. Suraweera and W.A.N.Jayantha for plain-tiff-respondent.
Cur. adv. vult
May 22, 2002SOMAWANSA, J.
The plaintiffs-respondents instituted action No.2285/L in theDistrict Court of Kegalle seeking an order from Court to direct thedefendant-appellant to accept a sum of Rs. 40,000/- and executea deed in favour of the plaintiffs-respondents as agreed upon by theparties and further claimed damages for non execution of the deed.The plaintiffs-respondents’ pleaded case was that the defendant-appellant who is the owner of the property in suit agreed to trans-fer the same to the plaintiffs-respondents for a consideration of Rs.40,000/- and in view of the agreement to sell, the defendant-appel-lant handed over possession of the land and the house standingthereon which is the property in suit to the plaintiffs-respondentsand the plaintiffs-respondents came into occupation of the same.Further it is averred by the plaintiffs-respondents that in view of thisagreement with the defendant-appellant they made arrangementsto obtain a loan from the State Mortgage Bank in a sum of Rs.40,000/- and having prepared the necessary deed to transfer theproperty in suit, requested the defendant-appellant to sign thedeed. However the defendant-appellant refused to sign and as aresult of his failure to transfer the property has caused damages in
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a sum of Rs. 25,000/-. Therefore, the plaintiffs-respondents claim-ed that in -the circumstances the defendant-appellant was holdingthe said property in trust on behalf of the plaintiffs-respondents.
The defendant-appellant’s position is that he never enteredinto any agreement with the plaintiffs-respondents to sell this prop-erty to the plaintiffs-respondents and in any event if any agreementto sell did exist it became null and void in view of section 2 of thePrevention of Frauds Ordinance which required that such agree-ment to be reduced to writing and notarially executed. Further, onor about September 1979 the plaintiffs-respondents forcibly andunlawfully entered the property and is in possession of the samethereby causing damage to the defendant-appellant in a sum of Rs.
' 40,000/-. In the circumstances, the defendant-appellant is seekingfor a dismissal of the action, ejectment of the plaintiffs-respondents,a declaration that the defendant-appellant is the owner of the landand damages for wrongful occupation. The plaintiffs-respondentsfiled a replication praying for a dismissal of the defendant-appel-lant’s claim in re-convention.
At the commencement of the trial parties admitted that thedefendant-appellant is the owner of the property in suit. The plain-tiffs-respondents raised 04 issues while the defendant-appellantraised 04 issues. The learned District Judge by his judgment dated
held in favour of the plaintiffs-respondents and it is fromthis judgment that the defendant-appellant has preferred thisappeal.
Considering the question of any agreement to sell, thoughthe defendant-appellant denied any agreement to sell, the three let-ters written by the defendant-appellant to the State Mortgage andInvestment Bank marked, P2, P8 and P12 clearly establish the factthat there was an agreement to sell the property in suit to the plain-tiffs-respondents by the defendant-appellant. This is further estab-lished by the fact that the plaintiffs-respondents were given pos-session of the property in suit. The mother of the defendant-appel-lant admitted in her evidence that the possession of the propertywas given to the plaintiffs-respondents in view of the intended sale.
It may also be noted that she admitted the signatures on P2,P8 and P12 as that of the defendant-appellant. She also admitted
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that the defendant-appellant wanted money to go abroad and assuch intended selling the property to the plaintiffs-respondents.However she admitted that it was she who objected to the sale andprevented the signing of the deed.
In the light of the above reasoning I am inclined to take theview that there existed an oral agreement to sell the property in suitto the plaintiffs-respondents and that though the plaintiffs-respon-dents were able and willing to pay the consideration the defendant-appellant in violation of the agreement was refusing to execute thedeed.
The next question that has to be decided is whether the saidagreement, with the attendant circumstances would give rise to atrust in favour of the plaintiffs-respondents. On an examination ofthe evidence, I am inclined to take the view that no such trust couldbe established or inferred. The agreement at the most wouldamount to an agreement to sell the property in suit. Certainly, noevidence that the defendant-appellant had any intention to create atrust and there is no evidence that any consideration passed on thesaid agreement or that the defendant-appellant benefitted from theagreement. Only person who derived any benefit from the agree-ment was the plaintiffs-respondents who entered into occupation ofthe premises in suit. The fact that the plaintiffs-respondents raiseda loan from the State Mortgage Bank to purchase the property insuit will not be sufficient to establish a trust as the money from theloan never passed on to the defendant-appellant.
At this point, it would be pertinent to refer to section 5 of theTrusts Ordinance. The relevant sub-sections of section 5 readsthus:
“5. (1) Subject to the provisions of section 107, no trust inrelation to immovable property is valid unless declared by thelast will of the author of the trust or of the trustee, or by a non-testamentary instrument in writing signed by the author of thetrust or the trustee, and notarially executed.
These rules do not apply where they would operate so asto effectuate a fraud”.
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It is apparent that in the instant case the agreement is onlyan oral agreement neither reduced to writing nor is it notarially exe-cuted. Hence it appears that this agreement is not in conformitywith the provisions laid down in section 5 (1) of the Trusts•Ordinance and therefore does not create a valid trust. On the otherhand, as there is no evidence of any fraud on the part of the defen-dant-appellant provisions contained in section 5 (3) of the TrustsOrdinance also will not apply to the instant case. It was statedby the Privy Council in Saverimuttu v Thangavelautham <1> at 100532-
“that a breach of such an agreement (an oral agreement tosell land to another for a consideration) is undoubtedly dis-honest but the dishonest conduct resulting from the breachdoes not amount to fraud within the meaning of the proposi-tion that the Statute of Frauds may not be used as an instru-ment of fraud. If the contrary view were taken the Ordinancewould be totally ineffective”.
In Lakshmanan Chettiar v Muttiah Chettiar (2> at 344 it wasobserved by Howard, C.J. –
“A finding as to fraud cannot be based on suspicion and con-jecture for fraud like any other charge of offence, whethermade in civil or criminal proceedings, must be establishedbeyond reasonable doubt”.
In Swami Sivagnananda v The Bishop of Kandy it was
held –
“When a prospective purchaser of certain premises is per-mitted, pending the purchase to occupy the premises on pay-ment of a stipulated sum of money his occupation is at best,that of a licencee and not that of a contractual tenant entitled 120to claim the protection of the Rent Restriction Act. If the con-templated sale does not take place, the duration of thelicencee expires and the licencee becomes a trespasserliable to be ejected”.
As stated earlier on an examination of the evidence led in theinstant case it appears to me that this is a case where the defen-dant-appellant has gone back on his oral agreement to sell the
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property in suit. There is no evidence that he intended or in fact per-petrated a fraud. There is no evidence that the defendant-appellantenriched himself at the expense of the plaintiffs-respondents. In the 130circumstances, I am inclined to take the view that section 2 of thePrevention of Frauds Ordinance would also apply to the instantcase. In Don v Don <4) it was observed by Drieberg, J.
“The principle that equity does not allow the statute of fraudto be used as an instrument of fraud does not apply to caseswhere the fraud alleged is merely a refusal, to sign a writtenagreement after an informal promise is given, that such awritten agreement will be signed. Oral evidence of such aninformal promise is inadmissible.
The principle that the statute should not be used as an instru- uoment of fraud does not extend to cases where the absenceof writing is due merely to non performance of an informalcontract to execute a formal agreement to reconvey land, forit is not fraud for a party under those circumstances to say “Ihave agreed but I will not sign an agreement”.
Fry in his book on Specific Performance 6th Edition at 575says –
“The law is clearly established that an allegation that it waspart of the parol contract that the contract should be reducedto writing does not withdraw the case from the operation of isothe statute, and that after a parol contract a refusal to sign awritten one is no fraud of which the court can take cog-nizance.”
In the light of the above reasoning, I am inclined to take theview that the learned District Judge has erred in his finding that theoral agreement and the attendant circumstances gave rise to trustin favour of the plaintiffs-respondents and his judgment is liable tobe set aside.
It is also necessary at this point to consider the defendant-appellant’s claim in re-convention for damages on the basis of 160wrongful occupation by the plaintiffs-respondents. It is admitted bythe defendant-appellant that the plaintiffs-respondents entered intooccupation in September 1979. However he alleged that the plain-
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tiffs-respondents entered into occupation unlawfully and by force.
But it is strange that up to date the defendant-appellant has donenothing about it. There is no evidence that he even made a com-plaint to the police or some other authority. The mother of thedefendant-appellant admitted in her evidence that the possessionof the property was given to the plaintiffs-respondents in view of theintended sale. In the circumstances it is apparent that the defen- 170dant-appellant cannot succeed in his claim for damages.
For the foregoing reasons, I set aside the judgment of thelearned District Judge dated 16.11.1989 and dismiss the action ofthe plaintiffs-respondents. The claim of the defendant-appellant inre-convention for damages is disallowed. Subject to this variationthe appeal is allowed with costs.
DISSANAYAKE, J. – I agree.
The Appeal allowed.