CAVaidhianathan and Another v. Idroos Mohideen and Others55
VADMANATHAN AND ANOTHERV,(DROSS MOHIDEEN AND OTHERSCOURT OF APPEALDHEERARATNE J., ANDWUETUNGA J.
CA NO. 586/77 (F)
Trusts — Sale of land — Agreement to retransfer — Existing contract — Specificperformance — Trusts Ordinance s. 93 and 3(K) — Prescription.
The 2nd defendant transferred the premises in suit to the 1 st defendant by DeedNo. 1389 dated 18.1.47 (P2/2D2). On the same day by Deed No. 1390attested by the same Notary (and duly registered) the 1 st defendant agreed toretransfer the said premises to the 2nd defendant at the end of 15 years from18.1.47 on repayment of the consideration of Rs. 3000/-. On 7.4.57 howeverthe 1st defendant transferred the said premises to the plaintiffs by Deed No.1464 attested by the same Notary. On 18.4.63 the 1st defendant purported totransfer the same property to the 2nd defendant by Deed No. 4177. The 3rddefendant claimed to be tenant of the premises first under 1 st defendant butlater he had attorned to the 2nd defendant. On the death pending action of the3rd defendant the 3A and 3B defendants were substituted in her room. Theyclaimed to be tenants under the 2nd defendant The plaintiffs claimed the landby purchase and prescription. The 2nd defendant claimed on the basis of trustand also re-purchase.
As the plaintiff had purported to acquire the premises from the 1 st defendantwith notice of an existing contract between the 1st defendant and 2nddefendant of which specific performance could be enforced the plaintiff held theproperty in trust to retransfer the property to the 2nd defendant s. 93 of theTrusts Ordinance.
The agreeement to retransfer (Deed No. 1390 — P.3) was an existing contractbetween the 1st and 2nd defendants in that the vinculum juris still remained,unloosened at the time of action. The bond remained intact until the contractwas performed or mutually cancelled or set aside by a competent court.
This "existing contract" between the 1 st and 2nd defendants was a contract ofwhich specific performance could be enforced. The plaintiffs bought with noticeof this existing contract. A person is said to have notice of a fact either when heactually knows the fact, or when, but for wilful abstention or gross
negligence he would have known it — section 3(K) of the Trusts Ordinance. Forthe purposes of s. 93 of the Trusts Ordinance due registration is notice. TheDeed P3 was duly registered and the plaintiffs would have got to know of P3 ifthey had caused a search to be mqfle in the Land Registry before they bought.Hence they had notice. As the plaintiffs held the property in trust the plea ofprescription fails. They must re-trgnsfer the property to the 2nd defendant.Failing that the Registrar of the Court should execute the deed of re-transfer.
Cases referred to
Thidoris Perara v. Etrza Nona SO NLR 176
Silva v. Salo Nona 32 NLR.81.86
APPEAL from judgment of the District Judge of Colombo.
N.R.M. Daluwatte P.C. with A Chinniah for plaintiff — appellants.
F.C. Perara for defendant — respondents.
Cur. adv. vutt.
March 30.1988WUETUNGA. J.
The plaintiffs-appellants filed this action seeking a declarationthat they were entitled to the land and premises in suit and forejectment of the defendants and damages.
The plaintiffs calimed that the 1 st defendant who was entitledto the said land and premises by right of purchase an4.byprescription had transferred the same to them by deed No. 1464dated 7.4.57 (PI > and that the plaintiffs and their predecessorsin title had been in prescriptive possession of the same. Theystated that the defendants who had no manner of right or titlehave been in wrongful possession of the same since May, 1966,to the plaintiffs' loss and damage at Rs. 35/- p.m.
The. 1st defendant did not claim any right or title to thepremises in suit and denied that he was in possession thereof.He sought to be discharged from the proceedings.
The 2nd defendant while admitting the bare execution of deedNo. 1464 dated 7.4.57 (PI), set out the circumstances in which
the execution of that deed took place. She stated that as ownerof the premises in suit she sold and transferred the same to the1st defendant by deed No. 1389 dated 18.1.47 (P2/2D2K Onthe same day. by deed No. T390(P3> attested by the sameNotary and duly registered, the 1st defendant agreed toretransfer the said land and premises to the 2nd defendant at theend of 15 years from 18.1.47. With notice of the saidagreement, the plaintiffs have purported to acquire the same bydeed 'No. 1464 dated 7.4.57 (P1). The 1st defendant hadthereafter retransferred the premises in suit by deed N6r4177dated !18.4.63 (2D1) to the 2nd defendant. She claimed that theplaintiffs held, the said land and premises'under a constructivetrust for her benefit and sought a declaration to that effect. In herclaim in reconvention, she further prayed for a decree requiringthe plaintiffs to transfer the premises in-suit to her.
The 3rd defendant's position was that he vyas in occupation ofthe premises for over 15 years and was originally a tenant underthe 1 st defendant. Subsequently, in or about August. 1962 heattorned to the 2nd defendant as her tenant and continued tooccupy the said premises bona fide and as her lawful tenant. Heprayed that the plaintiffs' action be dismissed. The 3A and 3Bdefendants, who were substituted in place of the deceased 3rd
defendant agreed to abide by the answer of the 3rd defendant.
It was-admitted that the 2nd defendant was the original owner€1the premises in suit, that the said premises were transferred by(the 2nd defendant to the 1 st defendant on deed No. 1389 dated18.1.47; that on the same day. agreement No. 1390 was enteredinto between the 1st and 2nd defendants, that the 1st defendantexecuted deed No. 1464 dated.7.4,57 in favour of the plaintiffsand .that the 1st defendant executed deed of transfer No. 4177dated V8.4.63 in favour of the 2nd defendant.
The learned District Judge, after trial, held that under theagreement P3 the 1st defendant was not entitled to transfereepremises in suit to any person until 1962 and gny suchpurported transferee would be bound by the terms andconditions of P3 and would hold the said property in trust for the2nd defendant. He-further held that the plaintiffs did not get valid
title under PI and that the 2nd defendant became entitled to thesame under 201. He was of the view that the plaintiffs hadneither valid paper title nor prescriptive title and that the 2nddefendant was entitled to have a^feed of conveyance in respectof the said property .executed by the plaintiffs in her favour,failing which the Registrar of the Court was authorised toexecute such deed. He held with , the 2nd defendant anddismissed the plaintiffs' action .with costs.. The present appeal isfrom that order.
Learned President's Counsel for the appellant submitted thatas the agreement P3 contemplated a retransfer of the property insuit at the end of. 15 years without claiming any money by way of-consideration and as the attestation Of 201 shows that the fullconsideration of Rs. 3,000/- had been paid in the presence ofthe Notary, it had no relevance to the original agreement P3which apparently had got abandoned..But 2D1 makes specificreference to 2D2 on which the 2nd defendant transferred theproperty in suit to the 1 st defendant and the attestation of 2D2. refers to the agreement P3: All three instruments have .beenattested by .the same Notary. One cannot lose sight of the factthat the property in question was being retransferred after 15years, when land values had appreciated considerably and the2nd defendant was paying only the original consideration on P2.viz. Rs. 3.000/-. This, in my view, indicates that the retransfer isreferable to the agreement P3'
It was further submitted on behajf of the appellant that thelearned trial judge was in error when he held that the plaintiffs'held this property in trust for the 2nd defendant.
Under Section 93 of the Trusts Ordinance. "Where a personacquires property with notice that another person has enteredinto an existing contract affecting that property, of which specificperformance could be enforced…the former must hold theproperty for the benefit of the latter to the extent necessary togivl effect to the.Contract.■
Provided that in the case of a contract affecting immovableproperty, such contract shall'have been duly registered beforesuch acquisition."
, The term 'existing contract' in Section 93 of the TrustsOrdinance came up.for consideration in Thidoris Perera v. ElizaNona.(1) where it was held that the term was used in the sense of.a contract in which the vinculuqp juris still remains unloosened atthe time of action. Wessels: Law. of. Contract in South Africa wasquoted there that "until the contract has been, performed ormutually cancelled or set aside by a competent court, the bondwhich unites the contracting parties remains intact."
Thus, in the instant case, there was an existing contractbetween the 1st and 2nd defendants, under and by virtue ofagreement No. 1390 dated 18.1.47. (P3), requiring, the 1stdefendant to retransfer the said land and premises to the 2nddefendant.
This was a contract in relation to which specific performancecould be enforced. Being a contract affecting immovableproperty, it should have been duly registered. The learned trialjudge has examined the question of registration and wassatisfied that P3. had been duly registered. ’ *
It was also necessary that the transferee, i.e. the plaintiffs inthis case, should have had notice of the existing contract: Noticeis defined in Section 3.(K> of the Trusts Ordinance. "A person is'said to have 'notice' of a fact either when he actually knows thatfact, or when, but for wilful abstention from inquiry or grossnegligence, he would have known it…… .;On the facts of
Ihe present case, but for wilful abstention from inquiry, theplaintiffs would have known that such a contract existed. The.learned trial judge adverts to this aspect of the matter when hestates that if the plaintiffs had caused a search to be made at theLand Registry, they, would have become aware of the correctposition. Que registration of a contract affecting land has beenheld, for the purposes of section 93 of the Trusts Ordinance, to,be notice. — Silva, v, Salo Nona (2)
All the elements essential for a trust to arise under Sectiqn#93were therefore present in the instant case. Hence, the learnedtrial judge was right when he came to the conclusion that theplaintiffs held the property in question, in trust for the 2nddefendant.
Learned counsel.for the appellant further submitted that thetrial judge was in error when he came to the conclusion that the1st defendant had duly retransferred the premises in suit, to the2nd defendant on 2D1 and consequently the plaintiffs have notitle to the same. Ttiereis merit in this submission, although itdoes not affect the result of the case. Rl. on which the plaintiffsrely for title had been duly registered and did give them legaltitle, subject to P3, the agreement to retransfer, which had beenpreviously registered. At the time the 1st. defendant executed2D1 in favour of the 2nd defendant, purporting to retransfer theproperty, he vyas not competent to do so as the legal title wasalready with the plaintiffs. But. that is not to deny the right of the2nd defendant to follow the property under the .agreement P3.The resulting position is that she. failed to get legal title under2D1 and it is precisely for this reason that it became necessary for.the 2nd defendant to pray for a decree requiring the plaintiffs totransfer the premises in suit to her, under a valid deed of.conveyance.
The learned. District Judge has rightly concluded that theplaintiffs, in whose favour the property was transferred by the 1 st ■defendant on 7.4.57 by P1„ did not have prescriptive title to thesame.
Thus, the relief granted to the 2nd defendant to. have a deed ofconveyance executed by the plaintiffs in her favour, failing whichthe Registrar of the Court was to execute such a deed, ^warranted by law, as the.legal title which was with the plaintiffswou Id thereby be transferred to the 2 nd defend a nt.
For the above reasons. I affirm the judgment of the court below'dismissing the plaintiffs' action.with costs arid allowing the 2nd .-defendant's.claim in reconvention,
The appeal is dismissed with costs.
DHCER ARATNE.JI agree