WEERASOORIYA, J.—Siriutardena v. Charles Singho
1960Present : Weerasooriya, J., and Sinnetamby, J.W. A. M. SIRIWAEDENA, Appellant, and W. A. CHARLES SINGHO
and another, Respondents
S. C. 160—D. C. Chilato, 15125
Paulian action—Fraudulent alienation—Fraud on part of purchaser—Requirement ofproof thereof.
In an action to set aside a deed of transfer of property on the ground that itwas executed in fraud of creditors, it is essential for the plaintiff to allege andprove either absence of consideration on the transfer or fraud on the part ofthe purchaser. A solitary issue whether the deed was executed by the vendorto defraud the plaintiff does not suggest any fraud on the part of the purchaser.
Appeal from a judgment of the District Court, Chilaw.
E. B. WilcramanayaJce, Q.C., with Robert Silva, for the 1st Defendant-Appellant.
Austin Jayasuriya, for the Plaintiff-Respondent.
Cur. adv. vult.
May 12, 1960. Weerasooriya, J.—
In D. C. Chilaw Case No. 14362 the plaintiff-respondent obtained adecree, dated the 16th September, 1955, against his daughter, the seconddefendant-respondent, for the payment of Rs. 3,000/- and costs. Theplaintiff caused to be seized in execution of the decree the second de-fendant’s interests in two lands, which interests, it transpired in thecourse of the inquiry that took place into a claim made to them by thefirst defendant-appellant, had been transferred to him by the seconddefendant on deed No. 2716, dated the 5th July, 1955, marked P3.
The claim of the first defendant having been upheld, the plaintifffiled this action to have deed No. 2716 set aside. The second defendantdid not contest the action. Apparently she was possessed of no otherassets than those dealt with in P3. The first defendant stated in evidencethat at the request of the second defendant, who is his cousin, he advancedto her a sum of Rs. 1,600/- and that when he heard that she was sued in
2*-J. N. R 11285 (8/00)
WEER ASOORIYA, J.—Siritvardena. v. Charles SingTio
O. Chilaw Case No. 14362 he got the transfer P3 in order to “ safe-guard ” the money which he had advanced. P3, on the face of it, isfor a consideration of Its. 5,000/-. According to the attestation in thedeed, out of this consideration, “ a sum of Rs. 1,600/- was paid in advanceon an informal agreement ”, a sum of Rs. 100/- was paid in the presenceof the notary and for the balance a promissory note was granted to thevendor by the vendee.
After trial the learned District Judge entered judgment as prayed forwith costs, holding that the second defendant executed the transfer P3“ deliberately with a view to defrauding the plaintiff”. From thisjudgment the first defendant has appealed.
The main ground of objection taken to the judgment by Mr. Wikra-manayake, who appeared for the first defendant; is that although in anaction of this nature it is necessary to prove fraud on the part of thevendor as well as of the purchaser, the plaintiff had neither alleged' in hisplaint any fraud against the first defendant nor had he raised any issueto that effect.
The only issue relating to fraud is in these terms : “ Was deed No.2716… executed by the second defendant in favour of the first
defendant to defraud the plaintiff 1”. This issue is based on the averment.in the plaint that the deed was executed by the second defendant “ witha view to defraud the plaintiff”. Mr. Jayasuriya, who appeared forthe plaintiff, conceded that the issue did not suggest any fraud on thepart of the first defendant. There is no averment in the plaint, norwas any issue raised, that the consideration on P3 was fictitious or thatany part of it had not actually passed. In Perera v. Menik Etana1, whichis a somewhat similar case, Shaw, J., sitting alone, held that in an actionto set aside a deed on the ground that it was executed in fraud ofcreditors, the plaintiff has to allege and prove either that no considerationon the transfer was paid or actual fraud on the part of the purchaser.In Tobius Fernando v. Don Andris Appuhamy2, which was heard before- a bench of two Judges, the decision seems to go even further in regard tothe need to allege and prove fraud on the part of the purchaser.
Although the learned District Judge has referred to the fact thataccording to the attestation in P3 only Rs. 100/- out of the considerationwas paid in the notary’s presence, it is not clear what inference he soughtto draw from it, for he has not rejected as untrue the evidence of thefirst defendant (which is supported by the attestation in P3) that the sumof Rs. 1,600/- previously advanced by him to the second defendant wasset off against part of the consideration and that for the balance (less theRs. 100/-) he gave a promissory note. The first defendant also statedthat the amount due on this note was subsequently settled by him infull.
There appear to be further difficulties in the way of the plaintiffsucceeding ^in this action, seeing that the decree in D. C. Chilaw CaseNo. 14362 was entered more than two months after the execution of P3.
1 5 C. W. B. 258.
2 (1950) 43 C. It. W. 44.
WEERASOORIYA. J.—Siriwardena v. Chari*# Si*xgho
There is no evidence as to how the cause of action in that case arose,and whether it was based on an existing debt due from the second de-fendant to the plaintiff. In the absence of such evidence, it is not opento the plaintiff to say that he was a creditor of the second defendant whenP3 was executed. The present case has, therefore, to be deoided onthe footing that the only liability of the second- defendant at the timewas in respect of the Rs. 1,600/- advanced by the first defendant, andthat the plaintiff did not become a creditor of the second defendant untilhis claim in the earlier case was reduced into the form of a decree.
The circumstances in which an alienation may be set aside as in fraudof subsequent creditors were considered in Fernando v. Fernandol. Oneof the questions that arose there was whether a plaintiff in a Paulianaction, whose status as a creditor of the defendant is derived from adecree entered in an earlier case but which is subsequent to the transfersought to be set aside, must prove the defendant’s insolvency as at thetime of the trSEfisfer, leaving out of account the amount due on the decree.Keuneman, J., expressed the opinion that it is not necessary that thealienation should cause insolvency to the alienor immediately. Hesaid that the remedy of a Paulian action lies where the alienation wasmade by the debtor fraudulently, knowing “ that, in consequence ofthe alienation (the creditor) would not be able to realize his decree, inother words, that (the debtor) acted so that when the decree came intobeing, there would be no assets or insufficient assets to levy executionon ”, and where, in the result, the claim of the creditor has been defeated.But these dicta must be considered in the light of the findings in thatcase that the transfer was not made in good faith and was withoutvaluable consideration.
As I have already stated, in the present case neither fraud on thepart of the first defendant nor want of consideration was alleged in theplaint or in any issue, and even if, in the absence of an allegation to thateffect, it is permissible to look at the evidence for proof of such matters,I think that they have been far from established. In fact, such evidenceas there is points to the contrary. Even as regards the second defen-dant, it is difficult to understand what the learned District Judge meantwhen he said that she had executed P3 deliberately with a view todefrauding the plaintiff.” If P3 was executed for consideration, and theconsideration passed in the manner stated in the attestation, no fraudon her part would appear to have been established. In any event, inview of the decisions of this Court in Perera v. Menik Etana and Tobitcs.Fernando v. Don Andris Appuhamy (supra) it was essential for the plain-tiff to have alleged, and also to have proved, fraud on the part of the firstdefendant, and this he failed to do.
The judgment and decree appealed from are set aside and the plaintiff’saction is dismissed with costs in both Courts. _
Sinnetamby, J.—-I agree.
1 (1940) 42 N. £. R. 12.
W. A. M. SIRIWARDENA, Appellant, and W. A. CHARLES SINGHO and another , Responde