Wickremaratne v. Thavendrarajah
COURT OF APPEALATUKORALE, J. AND RODRIGO, J.
C. A (S. C ) 71/75 (F)-D. C. MOUNT.LAVINIA 2501/ZL -16.
NOVEMBER 16.17 AND 18. 1981.
Evidence Ordinance sections 91. 92-Indenture of lease of a business executedbetween the plaintiff and defendant-Action filed for ejectment by plaintiff on basisof such lease-Defence taken that document was a sham and the true transaction aletting of premises and not of business-Does section 92 of the Evidence Ordnance
htii out oral evidence in regard to true nature of transaction ?
The plaintiff filed this action on the basis of an indenture of lease (P4) in terms ofwhich he claimed to have leased to the respondent the business of Modern D aperyStores carried on at Wellawatta for a period of three years. The cause of action herelied on for the ejectment of the defendant was that he had sublet and/or assignedand/or parted with possession of the said premises where the business was carriedon and had also failed to pay the rents that tell due for three consecutive nonthsending 31 st March, 1971. He prayed, inter alia, for a cancellation of the sad leaseP4 and for ejectment of the respondent from the business and the premises and forthe return of certain movables claimed to have been handed over with the business.
The respondent in his answer while admitting the bare execution of P4 deniedthat what was leased to him was the business of Modern Drapery Stores andpleaded that it was the premises in question which were let to him by the olamtiffand that the execution of the indenture of lease P4 was a subter-'uge or acamouflage in order to recover rent in excess of the authorised rent for thepremises At the trial, the learned District Judge held in favour of the defendant thatit was a lease of the premises in question and not of the business. The plaintiff'saction was dismissed.
In appeal it was argued on behalf of the appellant that section 92 of the EvidenceOrdinance prohibited the reception of oral’evidence to show that the document P4was not in reality a lease of the business at all but only a colourable device or a shamfor letting out premises which were rent controlled at a rentel in excess of theauthorized rent and was thus a cover to circumvent the rent laws It was submittedthat to permit oral evidence to be led on this question would be to permit suchevidence to contradict the express terms of P4 and to thereby contravene section92. Learned Counsel for the respondent submitted that section 92 cannot stand inthe way of leading oral evidence for the purpose of showing that the transactionevidenced by P4 was not the real agreement between the parties but only a sham inorder to circumvent the rent laws.
Sri Lanka Law Reports
[1982J 1 S.L.R
Section 92 of the Evidence Ordinance cannot exclude oral evidence where it is forthe purpose of showing that the document does not embody the real agreementbetween the parties thereto and that there was in fact no agreement as set outtherein ; but that it was only a sham to conceal the real agreement which was to letcertain premises at a rental in excess of the authorised rent
Cases referred to
Fernando v. Cooray. (1957) 59 N.L.R. 169.
Penderlan v. Penderlan. (1948) 50 N.L.R. 513.
Tyagaraja v. Vedathanni, (1931) A I.R. (P.C.) 70.
APPEAL from the District Court. Mount Lavinia.
H. LV Jayewardene. O.C.. with L. V. R. Fernando. V. Siriwardena. and RonaldPerera, lor the plaintiff-appellant.
C. Ranganathan. Q.C.. with P. Karalasingham, Siva Rajaratnam and A. H. M. Reeza,for the defendant-respondent.
Cur. adv. vult.
January 19. 1982.
In his plaint the appellant averred that by Indenture of LeaseNo. 849 dated 26.6.1969 (which was annexed to the plaintmarked A and also produced in evidence as P4) he leased out tothe respondent the business called and known as Modem DraperyStores carried on by him at premises No. 5, W. A. Silva Mawatha,Wellawatta, at a monthly rental of Rs. 275/— for a period of 3 yearscommencing from 1.1.1969. For a first cause of action he pleadedthat in contravention of the express terms of the said lease therespondent had sub-let and/or assigned and/or parted with thepossession of the said premises to one Mohideen and had furtherfailed to pay the rents that fell due for the 3 consecutive monthsending on 31.3.1971. He thus prayed for a cancellation of thelease P4, for the ejectment of the respondent from the businessand the premises and also for the return of the movables valued atRs. 3,625/- which were handed over to the respondent togetherwith the business and referred to in the second schedule to theplaint. For a second cause of action he pleaded that on 13.6.1969the respondent took over from him the articles set out in the thirdschedule to the plaint undertaking to return the same to him at theexpiry of the lease of the business of Modern Drapery Stores andclaimed their return or their value, namely Rs. 6,596/-.
CAWickremaratne v. Thavendrarajah (Atukor$(e, J.)23
— ■•-_ ;■? ty •••- '•'*■» —
The respond^,^if[>‘h!s‘ah^ier admitted the bare execution of theIndenture of Lease';P4' but denied that the business of ModemDrapery Stores' was leased out to him. He pleaded that P4 was asubterfuge- dr a camouflage for the purpose of recovering rent inexcess of the'Authorised rent for the premises in question which heaverred were let to him' by the appellant furnished at a monthlyrental of Rs. 275/- from September 1966. He also claimed inreconvention a suhri’of Rs. 11,42i.30 cts. being excess rentrecovered from him by the appellant for the period September1966 to February' 1972 in respect of the premises. He furtherstated that the appellant had recovered from him a sum ofRs. 3,000/- as an advance dr deposit from him ; the appellant wasentitled to'recover as an advance or deposit only,'a sum ofRs. 305.85 cts. (being 3 months’ rent) and the appellant has thu*recovered a sum of Rs. 2,694.15 cts. in excess of the authorisedadvance or deposit .which sum too he claimed in reconvention fromthe appellant.'
At the trial in 'the idwer court several, issues were framed, themain of which arising for determination by the learned DistrictJudge being issue No. 1 raised on behalf of the appellant andissues Nos. 10 and 11 raised on the respondent's behalf. They areas follows
'-Did the plaintiff by the said lease bond let to the• defendant-the business known as Modern Drapery Stores'carried cn in'premises No. 5. W. A. Silva Mawatha,'Colombo 6, at a monthly rental of Rs. 275/- ?
(10) Did the plaihtiff let to the defendant the furnishedpremises bearing'No. 5, W. A. Silva Mawatha at a rentalof Rs. 275/- per month ?
( VV) If isrsue 10 is answered in the affirmative.-
can the plaintiff have and maintain this action ?
what is the authorised rent of the premises'?'' ‘
what amount has the plaintiff recovered in excess ofthe authorised rent ?
Sri Lanka Law Reports
11982} 1 S.L.R.
The appellant gave evidence and called two witnesses. Therespondent gave no evidence nor did he call any witnesses. Thelearned District Judge in his judgment observed that the appellant'sown evidence was that he did not at any time carry on the business,of Modern Drapery Stores and held, on the first issue, that therewas no lease of this business but only of the premises in question.He took the view that it was irresistible to conclude that' bond P4of 26 6.1969 constituted only a rental of the premises and in thewords in paragraph 2 of the answer the ‘lease marked A was asubterfuge or camouflage' for the purpose of recovering excessrent for the premises bearing assessment No. 5, W. A. SilvaMawatha On the basis of this finding he answered the first issueagainst the appellant and issue No. 10 in the respondent's favour.Consequently issue No. 11 (a) was also answered in the negative.On issue No. 11 (6) he accepted the evidence of the appellant asto what was the authorised rent and on that footing he held onissue No. 11 (c) that the appellant had recovered a sum of.Rs. 6,046.62 cts. as excess rent in respect of the premises for theperiod July 1969 to 31.7.1974. He thus dismissed the appellant'saction and entered judgment for the respondent in the said sum ofRs. 6.046.62 cts. with costs. The appellant has now appealedfrom this judgment.
The main question arising for our adjudication in this appeal is aquestion of law namely, whether, as contended before us bylearned counsel for the appellant, the provisions of s. 92 of theEvidence Ordinance (Chap. 14, Vol. 1. (C.L.E.) ) prohibit thereception of oral evidence to show that the purported lease of thebusiness of Modem Drapery Stores upon document P4 is in realitynot a lease of the business at ail but was only a colourable device ora sham or a blind for letting out rent-controlled premises at a rentalin excess of the authorised rent and was thus a cover forcircumventing the rent restriction laws. Learned counsel for theappellant submitted that under s. 92 of the Evidence Ordinancewhere the terms of a contract have been reduced to the form of adocument no oral evidence can. as between the parties thereto, beadmitted to, inter alia, contradict or vary the terms therein. Insupport of his submission he relied on the decision in the DivisionalBench case of Fernando v. Cooray (1). He maintained P4 was on itsface clearly and plainly a letting of a business and not of the
Wickremaratne v. Thavendrarajah (Atukorale. J.)
premises. To permit oral evidence to be led to show that the lettingwas not of the business but of the premises would, he urged,be tantamount to admitting oral evidence to contradict the expressterms of P4 and would be a contravention of the provisions ofs. 92. Learned counsel for the respondent, on the other hand,maintained that s. 92 does not stand in the way of leading oralevidence for the purpose of showing that the transaction evidencedby P4 was not the agreement between the parties but was only asham or fictitious agreement signed by the parties with a view tosurmounting and circumventing the rent laws. P4 is a cloakintended to conceal their true agreement, namely, the letting andhiring out of premises at a rent in excess of the authorised rent. Hesubmitted that where a party to a document seeks to establish thatthere was no such agreement as set out in the document and thatthe document is a sham not intended to be acted upon s. 92 of theEvidence Ordinance will have no application and such oral evidenceyvas therfore admissible. He relied on the decision in Penderlan v.Penderlan (2) and submitted that the decision cited by learnsdcounsel for the appellant has no application to the question foradjudication by us.
A perusal of P4 indicates clearly and unmistakably (and this factwas not disputed before us) that it purports to be a lease of ihebusiness of Modern Drapery Stores and not of the premises inwhich the business is carried on. There appears to be no ambiguityin the terms contained in P4. Its terms are explicit. Admittedly it hasbeen signed by both parties. It would therefore raise a strongpresumption that it embodies the real agreement between theparties. But the appellant during the course of his evidence statedthat he never carried on the business of Modern Drapery Storesalthough it is so mentioned in P4. On this evidence the learnedDistrict Judge, having concluded that this business 'as a goingconcern' was not leased out to the respondent and that it was thesole concern of the respondent himself, has reached the findingthat P4 was a subterfuge or a camouflage to hide the letting of thepremises at excess rent. At the hearing before us. however it alsotranspired that the appellant in his complaint to the Police (P8) on21.9.1971 (shortly before the institution of the present action) hadstated that on 26.6.1969 he gave the premises in question to therespondent on a monthly rental of Rs. 275/- on an agreement for 3years. The agreement referred to in P8is no doubt a reference to
Sri Lanka Law Reports
11982] 1 SLR.
P4. This item of evidence also, lends support to the respondent'scase that th'e're was no agreement to lease out the business asStated iH’P4. There is therefore, in my view ^sufficient oral evidenceby way ofiadmissions by the appellant himself to prove that therew'a's no agreement between the parties as evidenced by documentP4 and that P4 was only a ruse to conceal their true transactionwhich was one of letting and hiring of the premises at a rental ofRs. 275/- per month-a rental which according to the finding of thelearned District Judge and conceded by learned counsel for theappellant was much’in excess of the authorised rent. Althoygfythelearned District Judge was in error when he stated that 'tbp bondP4 of 26.6.1969 constituted only a rental of the premises , yet forthe reasons set out above he was correct in holding that P4 was asubterfuge or a camouflage for recovering excess rent. It wouldtherefore necessarily follow that the agreement embodied in P4was a fictitious one never intended to be acted on by the partiesth’Sriiselves. The question that arises for consideration is whether ina'Situation like this parol evidence of the appellant which shows thatthef'e^asih fact' no agreement between the parties as set out inthe document-P4 is excluded by s. 92 of the Evidence Ordinance.There is no dispute that if this parol evidence is not so excludedthen it becomes relevant and admissible.
A question similar to the one-.in the instant case arose forconsideration by their Lordships: oMhe Privy Council in Tyagaraja v.Vedajibanni (3). There it .was contended by the appellants thatunder s. 91 and s. 92 of the Indian Evidence Act (1,872). theprovisions of .which are. the same as the, corresppnding section inour Ordin^y^e.'^ial evidence wa?establish that it
had, beemMre^d that the provisions.. jpr ..the respondent'smaintenan2»^ritatfigi4jp.a docjjqfieint vy^.pqf to be.apted.uponas the do.cum'ePt y/as'only intended to create, evideqqe ,qf,;theundivided e.tatusrof'tWe'ifamily.^p! holding that the sections do notrenders qjal evidenee 'inaqmj^^iblO-Sjr Jg^n Wallis in the courseof his,-judgment-observed as follows f , **ur,
'When' a contract has been reduced to the form of a document,s. 91 etfdfUdes oral evidence of the terms of the document byrequiring'those terms to be proved by the document itself unless'otherwise expressly provide^/in^the Act,..arid s. 92 excludes oralevidencjitfWbtmj(f|j|jCtli^,t,yarYing. adding to or
Wickremaratne v. Thavendrarajah (Atukorale. J.)
subtracting from such termss. 92 only excludes oral
evidence to vary the terms of the written contract, and has noreference to the question whether the parties had agreed tocontract on the terms set forth in the document. The objectionmust therefore be based on s. 91 which only excludes oralevidence as to the terms of a written contract. Clearly under thatsection a defendant sued, as in the present case, upon a writtencontract purporting to be signed by him could not be precluded indisproof of such agreement from giving oral evidence that'hissignature was a forgery. In their Lordships' opinion oral evidence
in disproof of the agreement . . ■.that as in the
present case, the document was never intended to operate as anagreement but was brought into existence solely for the purposeof creating evidence of some other matter stands exactly on thesame footing as.evidence that the defendant's signature wasforged."' ’ ’ ‘ .
Their Lordships in that case were of the opinion that there wasnothing in either s. 91 or s. 92 to exclude oral evidence to showthat there was no agreement between the parties and therefore nocontract. With great respect, this appears to be the correct legalposition under pur sections of the Evidence Ordinance, s, 91precludes the admission of oral evidence to prove The terms of acontract of grant or of any other disposition of property which havebeen reduced to the form of a document, s. 92 enacts that whenthe terms are proved by the document no evidence of any oralagreement or statement shall be admitted.as between the partiesthereto or their representatives in interest to contradict or varythem. It is thus clear that the oral evidence referred to in the twosections is to be excluded only upon the proof of a contract, grantor other disposition of property. Evidence which is, intended toshow that there was in fact no contract, grant or other dispositionof property would not. in my view, offend against the provisions,ofeither section, l am therefore of the opinion that neither,?. 92.flors. 91 can have any application unless there has been in ,the firstinstance a contract or a grant or any other disposition of propertybetvveen the parties.
In Penderlan v. Penderlan (supra) the plaintiff who .was'the ownerof a land and a fibre mill executed a deed in respect thereof infavour of her brother, the 1st defendant. It was a transfer in thenature of a conveyance for a consideration of Rs. 5.000/- .No
Sri Lanka Law Reports
 1 SLR.
consideration passed and there was no change of possessioneither. It was a transfer to enable the 1st defendant (who haoconceived the idea of applying for the post of Vidane Aratchy) toclothe himself with the necessary property qualification. There wasa promise by the 1 st defendant to retransfer the property within amonth. He failed to do so and put the plaintiff off from time to timepromising to retransfer. He then effected a retransfer excluding thefibre mill which he sold to the 3rd defendant. At the trial the plaintiffled oral evidence to prove the true nature of the transaction enteredbetween herself and the 1st defendant. It was held by Basnayake.
J.(as he then was) with Dias. J. agreeing, that the prohibitioncontained in s. 92 of the Evidence Ordinance did not extend to acase where it is sought to prove that the transaction is fictitious andnot what it purports to be. During the course of his judgment heobserved that evidence of the fact that an instrument was neverintended to be acted upon was not excluded by s. 92.
In William Fernando v. Roslyn Cooray (supra) tha plaintiff whowas the owner of two allotments of land sold the same to thedefendant for a certain sum of money. The sale was, according tothe terms of the deed, subject to the condition that the defendantshall reconvey the same to the plaintiff within two years from thedate of sale if the plaintiff shall repay to the defendant the said sumtogether with interest at 15% per annum from the date of sale untilrepayment, as aforesaid. The plaintiff was to remain in possessionof the land. The plaintiff failed to make repayment within the periodas agreed upon. The defendant then entered into possession of theland. The plaintiff filed action for a declaration that the deed wasreally security for the repayment of money and not a transfer andthat he be restored to possession. The defendant pleaded that thedeed was an outright transfer subject to the condition set outtherein and that on the plaintiffs failure to repay the money withinthe stipulated time she became entitled to possession of the land.The question that arose for decision was whether it was open to theplaintiff to lead parol evidence of surrounding circumstances toshow that the transaction was not a sale but a mortgage, it washeld (Basnayake, C.J. dissenting) that s. 92 of the EvidenceOrdinance excluded such parol evidence. I do not think thiscase has any application to the facts of the present case.
Wickrrmaratne r. Thavcndrarnjah lAliikorah', J.)
In that case the parties reached a certain- agreement. There’wasto be an out right sale of the property and upon the happening ofa certain event it was to be followed by a retransfer of the landthat was sold. There was thus a real agreement between the parties.The plaintiff tried to show by oral evidence that the sale with acondition to retransfer within a stipulated time amounted to a mortgageof the property. This evidence would have directly contradicted theterms of the deed as it would have reduced the interest conveyedfrom that of an absolute sale, subject to a condition, to that of amortgage. Such evidence would offened the provisions of s.92. Ona consideration of all the above matters I am therefore of the -viewthat s.92 of the Evidence Ordinance docs not exclude oral evidenceto show that the document P4 did not embody the real agreementbetween the parties thereto and that there was in fact no agreementas set out therein but that it was only a sham to conceal the realagreement which was to let and hire the premises at a rental inexcess of the authorised rent.
Learned counsel for the appellant also contended that he is entitledto an order for the return of the movables described in schedule 2of the plaint and the articles described in schedule 3. In regard tothe movables referred to in schedule' 1 the respondent has by letterPll of 22.2.1974 informed the appellant that she is ready to returnthem on the refund of the sum of Rs. 3000/- deposited with theappellant as security therefor. He has further stated that if any itemof movables is not returned by him the value of such items as setout in schedule 2 could be deducted by the appellant and the balancebe paid to him. In view of this letter I think it is just to order therespondent to deliver to the appellant the movables referred to inschedule 2 of the plaint. We make order accordingly. On the returnof all the said movables the appellant is ordered to refund the securityof Rs. 3000/-. If, however, the respondent fails to return any movablethe appellant will be entitled to deduct its value as given in schedule2 from the security with him.
In regard to the articles referred to in schedule 3 of the plaintit appears to me that they have been handed over to the respondenton a separate agreement – vide P6. They consist of articles used inconnection with the earlier business of Ratna Stores. The appellantis entitled to their return. Accordingly we make order that therespondent should deliver those articles to the appellant. If he fails
119821 / S L R
Sri Lanka Law Reports
to return any article he will pay the appellant the value of sucharticle as given in that schedule. The learned District Judge is directedto stipulate a date, not to exceed one month,(.for the return of themovables^ land articles by the respondent. Subject to the abovevariations-the decree of the lower court is affirmed and the appealis dismissed. In all the circumstances of this appeal there will be noorder for costs.
RODRIGO J. — I agree.
WICKRAMARATNE v. THAVENDRARAJAH