Cur. adv. vult.
KOCH J.—Wiieywardene v. Petris.
September 2, 1935. Koch J.—
I agree with my brother that the principles set put in the two Indiancases, Balkishen Das v. W. F. Legge 1 and Narasingerji Jyanagerji v. Panu-ganti Parthasaradhi Rayanam Gam', do not apply. Our system ofmortgage is peculiar to the Roman-Dutch law and so intrinsicallydifferent from the Indian law of mortgage, which bears a strong affinityto the law of mortgage as it obtains in England. The essence of aRoman-Dutch law mortgage or hypothec is that the ownership of theres mortgaged remains with the mortgagor and that the mortgagee isonly given a jus in re in respect of the property mortgaged, which he canfollow up by means of the actio quasi serviana also called hypothecaria forobtaining satisfaction of his debt against the mortgagor and those inpossession of the property, whether claiming under the mortgagor orthrough an independent source of title—Voet, lib. XX. tit. 4, s. 1 et seq. and
S.C. No. 291—D. C. Colombo No. 50,490 (S. C. Minutes of July 18, 1935).
The case of Ana Lana Saminathan Chetty v. Vander Poorten3 whichappellant’s Counsel relies on can be easily distinguished. The essence ofthis judgment lay in the fact that the two deeds Nos. 471 and 472 takentogether and read as one did not pass absolute title to the grantee butreserved such beneficial interests in the grantors as to impose duties andobligations on the grantee in the nature of trusts. The covenantscontained in these deeds clearly warranted such a conclusion.
Can it be said that the terms and conditions of the agreement of Novem-ber 12, 1931, arrived at between the parties and duly recorded in themortgage action No. 40,945, taken in conjunction with the recitals andcovenants appearing in the deed No. 132 reserved such a beneficialinterest in the appellant? I have weighed every word in these docu-ments in the light of the position of the parties at the time they wereentered into, and I agree with my brother that such of the terms as havebeen relied upon by the appellant to establish such an interest in himcan without strain be explained away. The justification for theirintroduction lay in the necessity for formulating a method whereby theconsideration for repurchase by the appellant could reasonably be fixedby a process of calculation.
I am also of opinion that in the circumstances there should have beena tender of this consideration or what in law amounted to tender. Therewas not even an attempt to satisfy this requirement so as to invest theappellant with a cause of action.
I agree with my brother that the appeal must be dismissed with costs.Soertsz A. J.—
The plaintiff brought this action on September 29, 1933, alleging thathe had mortgaged the premises called and known as Nagansola estatewith the defendants, that they had sued him on the bond in caseNo. 40,945—D. C. Colombo, and had obtained judgment, but thatwithout proceeding to execution, they had on November 12, 1931, enteredinto an agreement with him by which he undertook to execute a validtransfer of the mortgaged premises to them for a sum which represented1 I. L. R. 22 Allahabad 149.* J. L. R. 47 Madras 729.
3 34 N. L. R. 287.
SOERTSZ AJ.—Wijeywardene v. Peiris.
the debt he owed them for principal and interest due on the bond and forcosts of the action. The defendants, on their part agreed to execute at theplaintiffs cost and expense a valid conveyance in his favour on his payingto them on of before a certain date—that date was to be subject to twoextensions in certain contingencies—a price to be ascertained in a certainway. The terms of the agreement were entered of record in the mortgageaction. They are set forth in exhibit A filed with the answer in this case.In compliance with this agreement the plaintiff by the deed of November30, 1931, conveyed the land to the defendants and put them in possession.This deed was not put in evidence in the lower Court, but by consent ofCounsel it was admitted on appeal. It shows that the terms of agreementappearing in exhibit A were embodied in it. The plaintiff paid nointerest whatever in terms of the agreement but, as already stated,brought this action on September 29, 1933, the eve of the expiry of theoriginal period for making payment and obtaining a reconveyance. Healleged that the defendants “ had neglected to look after the estate in aproper and careful and husbandlike manner and to maintain the saidestate in a reasonable manner ”. He estimated “ the sum of Rs. 45,000as the reasonable value of the deterioration caused to the said estate bythe defendants ” and claimed that he was entitled to have the said sumof Rs. 45,000 deducted out of the sum of Rs. 95,123.25, which appears tobe the amount for which judgment had been entered in the mortgagebond case and he said that he “ is ready and willing to pay the defendantsthe svun of Rs. 50,123.25 (to wit, the sum of Rs. 95,123.25 less the saidsum of Rs. 45,000) and the said sum of Rs. 11,414.80 being interest up tothe said September 30, 1933, and is prepared to take a conveyance of thesaid estate from the defendant at his cost ”. He also averred that hebelieved that the expenditure incurred by the defendants in the upkeepof the land was in excess of what was actually required and that he hadduly objected to the accounts of the defendants. He, therefore, prayedfor a declaration that he was entitled to have the sum of Rs. 45,000deducted from the Rs. 95,123.25, and that the defendants are liable toexecute a transfer of the estate to him on his paying them Rs. 50,123.25and Rs. 11,414.80 by way of interest.
The defendants, in their answer, stated that they were at all timesready and willing to execute a conveyance of the premises to the plaintiffon his performing his obligations under the agreement, but that theplaintiff had failed and neglected to do so. They averred that the plaintdisclosed no cause of action.
The trial Judge dealt with the case in a manner that was not altogethersatisfactory. But in the end he dismissed the plaintiff’s case.
The questions that have been raised in appeal are whether the deed ofNovember 30, 1931, constituted a mortgage within the principle enun-ciated by the Privy Council in the Indian cases, Balkishen Das v. W. F.hegge ‘ and Narasingerji Jyanagerji v. Panuganti Parthasaradhi Raya-nam Gam ’, or whether it was a transaction which was governed by the
> I. L. R. 22 Allahabad 149.* /. L. R. 41 Madras 729.
182SOERTSZ AJ.—Wijeywardene v. Peiris.
principle in the Privy Council case from Ceylon. Saminathan Chetty v.Vander Poorten or whether it was a sale with a contract of repurchase.
In my opinion, the Indian cases do not apply. Those decisions are thelogical result of a form of mortgage well known to the laws of India butradically different from the Ceylon law of mortgage. As pointed out bythe learned and noble Lords in the earlier of the two cases : —“ Mortgagesby conditional sale under various names are a common form of mortgagein India and have come before this Board in several reported cases. Ithas been stated that this form of mortgage was introduced in order toenable Muhammedans contrary to the precepts of their religion to lendmoney at interest and obtain security for principal and interest. If so,one would expect to find that the transaction would as far as possible bemade to assume the appearance of a sale ”. In view of this the PrivyCouncil held that the nature of the transaction as to whether it was a saleor a mortgage should be decided “ on a consideration of the contents ofthe documents themselves with such extrinsic evidence of surroundingcircumstances as may be required to show in what manner the languageof the document is related to existing facts ”. The Board then went onto point out that in the particular case before them there were clearindications that the transaction contemplated by the parties was amortgage by conditional sale, and not a sale. For instance, there was aprovision that if the Bankers—the ostensible vendees—object to receivethe money and relinquish the property, the vendor may deposit the amountin the treasury “ by virtue of this agreement ” “ and obtain possessionover the Ilaka ”. Now by Bengal Regulation No. 1 of 1798 “ a regulationto prevent fraud and injustice ” in the case of conditional sales such asthese, provisions were made empowering the borrower to deposit themoney in the Dewaney Adawlut of the city or Zillah in which the landwas situated, and as emphasized in the Privy Council judgment, thesimilar provision introduced into the document under consideration atonce suggests a reference to Regulation No. 1 of 1798 as being applicableto the case and this affords a clear clue to the intention of the parties.Again the Privy Council refers to the fact that “ by Regulation No. 17 of1806 the mortgagor under deeds of this description was empowered toredeem the land at any time within one year after the commencement ofproceedings to foreclose the mortgage or render the sale conclusive providedthat payment or tender be proved or deposit be made within the timeabove specified in the manner specified in the previous regulation ”.(I.e., Regulation No. 1 of 1798)…. The effect of the Regulation
of 1806 was therefore to introduce into those parts of India to which theregulation applies the English Doctrine of an equity of redemption asapplicable to the class of deeds referred lo in it ”.
The other Indian case relied on, Narasingerji Jyanagerji v. PanugantiParthasaradhi Rayanam Garu (supra) was also decided on the basis that a *mortgage by way of a conditional sale is well known in India. In thatcase Lord Blanesburgh held that although the appearance of a sale is“laboriously maintained”, in reality the transaction .was a mortgage forthe very cogent reasons adduced by him. For example, (a) “ The sum.
i 34 N. L. R. 287.
SOERTSZ AJ.—Wijeywardene v. Peiris.
paid had no relation to the value of the one hundred and ninety-sixvillages comprised in the deed of assurance In the present case, thesum paid—even if the case is to be considered on the principles applicablein India—cannot be said to have no relation to the value of the land.That is clear from the fact that at the time of the agreement, the partiescontemplated the probability of the expenditure necessary for the upkeepof the land exceeding the income, and also from the fact that when theplaintiff in his plaint said he was willing to pay some Rs. 60,000 for theretransfer, the defendants were willing to accept that offer, (b) Therewas a clause that if any portion of the land is taken up by the Governmentunder the Land Acquisition Ordinance, any compensation awarded wasto go to the ostensible purchaser and to the vendor in certain proportions.For these and other reasons the transaction in which the parties wereengaged was held to be a loan and not a sale. ^ It is really not necessaryto labour this matter any further for a mortgage by conditional sale isutterly alien to the law of Ceylon. Very recently there have been a fewtimid attempts to dally with this kind of Indian mortgage by alludingto something called a ‘ Moratuwa mortgage ’. There was allusion to it inthe course of the argument in this case too. I think we should take thisoccasion to repudiate the endeavour to body forth “ the forms of thingsunknown and to give to airy nothings a local habitation and a name ”.The law of Ceylon is the Roman-Dutch law according to which “ the mort-gagor remains the owner of the property. If the debt is not paid at thestipulated time, an action is brought for an order of Court condemning themortgagor to pay the sum due with interest and costs, and declaring theproperty executable ". (Morice’s English and Roman-Dutch Law, p. 57.)The usual Indian mortgage is the mortgage known to the English law bywhich the property is conveyed to the creditor or mortgagee subject to anagreement to reconvey if the debt is paid. The Ceylon mortgage is theRoman-Dutch law mortgage and only created a jus in re. The law ofCeylon is also familiar with what is known in Roman-Dutch law as aPactum de retrovendendo which is described by Voet, hk. XVIII., tit. 3,s. 7(Berwick’s Trans.) as follows:“ Nearly allied to the pactum
commissorium is the pactum de retrovendendo agreement for repurchasethe effect of which when annexed to a purchase is that the vendor maywithin or after a time fixed, or at any time redeem or take back the thingsold, on restoring the same price he actually received for it unless it hasbeen expressly agreed otherwise …. It is the duty of a personwho demands a resale from a refractory purchaser to make judicial con-signation and deposit of the price offered and refused ”. In this state ofthe law in Ceylon, I find it hard to persuade myself that the defendants in■this case who held a mortgage over this land and who, after an anxious careeras mortgagees, sued on the bond and obtained judgment were content,without proceeding to execution of their decree, to relapse into the con-dition of mortgagees from which they had just emerged. I cannot bringmyself to hold that these parties who are in no way affected by suchxeligious scruples as hamper -a large proportion of the Indian population,and who are fully conversant, with mortgages as well as with sales withthese pacts attached, should have resorted to this form of sale in order to
SOERTSZ AJ.—Wijeywaraene v. Peiris.
effect a mortgage. I therefore, hold that the Privy Council rulings inthe two Indian cases referred to have no application here.
Next, there arises the question whether this case is governed by thePrivy Council ruling in Saminathan Chetty v. Vander Poorten (supra).At the very outset, it must be remarked that that was a case “ in the natureof an action for breach of trust and redemption In their plaint theplaintiffs expressed “ their willingness to redeem upon the footing thatthe amount due to the respondent was the aggregate total of the sumadvanced, money expended, interest at 9 per cent, per annum to the dateof the plaint, and the sum of Rs. 25,000 for reasonable compensation andprofit for the respondent’s services, such aggregate total amounting,apart from expenditure, , to Rs. 274,090” …. The plaintiffspleaded that by reason of “ deed No. 472 and of the facts alleged in theplaint, the respondent held the estate in trust for the plaintiffs and thedefendants other than the respondent …. that the respondentwas fraudulently and in breach of the trust attempting to effect a fictitioussale to a nominee of his own at a price less than the market price ”.
. . . . They prayed (1) “ that the Court do declare that the sum ofRs. 274;090 to be a reasonable sum to be paid to the first defendant inrespect of the said loan and compensation and profit, or in the alternativethat the Court do declare what sum is reasonable. (2) That the firstdefendant be ordered to render an account of the monies expended byhim on the management, control, and working of the said property andthat the plaintiffs be allowed to contest or surcharge the same. (3) Thatthe Court do order the first defendant, on receipt of the said sum and theamount of the monies so expended when the account is taken, to reconveyto the plaintiffs and the second, third, fourth, sixth, and seventhdefendants or their assigns respectively the said property ”.
It is obvious that that was a totally different action from the present.In dealing with that action the learned and noble Lords of the PrivyCouncil said that the first question is as to the construction and effect ofthe deeds Nos. 471 and 472 in the light of the “ circumstances leading upto and surrounding their execution They examined the deeds and thecircumstances and held that the deeds “ did not operate to vest in therespondent an absolute title ”. They held that the transaction effectedby the deeds was-the creation of a security for money advanced. Therewas no absolute title in the respondent. He held the legal title, but therewas a beneficial interest outstanding in the syndicate. Our TrustsOrdinance, No. 9 of 1917, enacts in section 82—“ An obligation in thenature of a trust (herein referred to as constructive trust) is created inthe following cases ”. Section 83—“ where the owner of a propertytransfers or bequeaths it and it cannot be reasonably inferred with theattendant circumstances that he intended to dispose of the beneficialinterest therein, the transferee or legatee must hold such property forthe benefit of the owner or his legal representatives ”. Section 84—“ whereproperty is transferred to one person for a consideration paid or providedby another person and it appears that such other person did not intendto pay or provide such consideration for the benefit of the transferee, the
SOERTSZ AJ.—Wijeywardene v. Peiris.
transferee must hold the property for the benefit of the person paying orproviding the consideration ”… Section 95—“ in any case notcoming within the scope of any of the preceding sections where there is notrust, but the persons having possession of property has not the wholebeneficial interest, therein, he must hold the property for the benefit ofthe person having such interest, or the residue thereof (as the case maybe), to the extent necessary to satisfy their just demands
The noble and learned Lords point out in their judgment that “ it mustnot be overlooked that the syndicate had expended about Rs. 200,000 onthe property before they got into conflict with the Crown, and that theyhad provided Rs. 64,000 towards the total sum which had to be depositedunder the decree made in the Crown’s favour. They could therefore havehad no interest in entering into an arrangement by which in effect thewhole property passed absolutely to the respondent and their expenditurewas wholly lost ”. They also refer to the facts that the respondentcannot sell below a certain price without the consent of the syndicate;if he does sell, he has to deal with the proceeds in a certain manner; thedistribution of the proceeds of sale includes payment to himself of suchsums as shall be due and payable to him for the monies advanced to theCrown for the purchase from the Crown; the ultimate balance of theproceeds of sale is to be distributed pro rata according to their interestsamong the syndicate and their successors in title. In these circumstancestheir Lordships held, without hesitation, that an absolute interest in theland did not vest in the respondent. The matters relied upon for thisfinding are just those matters which find a place in the sections of theTrusts Ordinance I have referred to. It could not be reasonably inferred,consistently with the attendant circumstances, that the syndicateintended to dispose of the whole beneficial interest in the land, for theyhad already spent two lakhs of rupees on it. They could not haveintended to pay or provide Rs. 64,000 out of the consideration paid to theCrown for the benefit of the respondent, and therefore the respondent“ must hold the property for the benefit of the persons having the ..
.. beneficial interest or the residue thereof, to the extent necessary
to satisfy their just demands
There are no circumstances in the present case to show that the bene-ficial interest in this land or any residue thereof is outstanding in theplaintiff. Counsel for the appellant, however, relies on certain terms inthe minute of settlement of the mortgage suit drawn up on November 12,1931, and later embodied in the deed of sale. He invites attention to theclause which provides for the present defendants taking possession of theland and maintaining it to the best of their ability, and in their discretionexpending such monies as they may consider necessary having regard tothe income derived therefrom and to the financial and market conditionsobtaining at the time. He argues that this indicates that there was somebeneficial interest remaining in the present plaintiff. I am unable toagree. The provision referred to is a stipulation which a prospectivepurchaser may quite naturally make. The next four clauses also reliedupon are, in my opinion, introduced in order to provide a method of
SOERTSZ AJ.—Wiieywardene v. Peiris.
ascertaining the price the plaintiff had to pay in order to obtain a re-transfer and also in order to enable him, if the occasion arose, to raise thenecessary funds. Particular stress was laid on clause (b)(3) in the
agreement on the part of the plaintiffs in that case, who are the presentdefendants, which says that the present plaintiff shall be liable for “ anyexcess of expenditure over income in connection with the maintenanceand the upkeep of the premises and the keeping of the accounts hereinafterreferred to, the defendant (i.e., the present plaintiff) being allowed creditin the event of such payment for any excess of income over expenditure ”.
• This again is only a direction as to the method of calculating the priceto be paid. The words “ in the event of such payment ” must not beoverlooked. I therefore find that the case of Saminathan Chetty v. VanderPoorten (supra) does not apply.
These two questions thus disposed of, I hold that the transactionbetween the parties to the deed of November 30, 1931, a sale by theplaintiff to the defendant of the land in question with a contract for itsreconveyance on the terms embodied in the deed by the defendants to theplaintiff. That that is what the parties intended is clearly shown by thepleadings of the plaintiff and the issues suggested by his Counsel. Thiscase then falls within the ruling in Jeremias Fernando et al. v. Perera et al.In that case A sold certain lands to B for a sum which represented the debtwhich A owed to B. By a separate deed of the same date it was agreedthat on repayment of the purchase price with interest thereon at the rateof 18 per cent, or 15 per cent, if the interest be paid annually, within aperiod of three years, B should retransfer to A. A was to remain inpossession during the three years. A remained in possession for threeyears and then handed over possession to B’s assign, the defendant. Adied nine months later and her children (the plaintiffs) asked the defendantsto retransfer the land. Lyall Grant J. held that the tender of the pricewas a condition precedent to the performance of the promise and thattime was of the essence of the contract and dismissed the action.
In the present case it is admitted, says the trial Judge, “ that theplaintiff neither tendered nor paid the amount set out in paragraph (e) ofthe answer ”, nor did he tender the amount which he alleged was due.AJ1 he said was that “ he is ready and willing to pay the defendants thesum of Rs. 50,123.25 (to wit, the sum of Rs. 95,123, less the said sumof Rs. 45,000), and the sum of Rs. 11,414.80, being interest up to Sept-ember 30, 1933, and is prepared to take a conveyance of the said estatefrom the defendant at his cost ”. That is not a sufficient tender. On thefacts,.it is clear that even his assertion that he was ready and willing topay the amount he said was due, is a piece of acting, a mere mouthing ofa‘ formula. For, when the defendants expressed their willingness toaccept the amount offered although the period of payment had elapsed,and to give the plaintiff a reconveyance, he stood unmasked. But hisresourcefulness did not fail him. He sought to amend his plaint and tointroduce an additional claim which he could pretend would probablyreduce the amount payable by him still further. I think the trial Judge’s
1 28 N. J.. I!. IS-?.
MACDONELL CJ.—Police Sergeant v. Raman Kangany.
observation that the plaintiff was ‘ playing for time ’ is justified. Everymove of his appears to be with a view to ensure protracted litigation.His hope seems to be that the market will improve and make it possiblefor him to get back the land or to obtain a higher value for it. If hishopes are realized, the gain will be his. If they turn out vain, the Josswill fall on the defendants. A case pur^ and simple of “ Heads I win,tails you lose ”. There is nothing on the record to show that thisamendment was accepted by the Court. It was an amendment effectedafter the date for obtaining the reconveyance had passed and should nothave been entertained.
Moreover, in my opinion, the plaintiff was not entitled to make anydeductions from the amount stipulated for in the agreement. In thecircumstances alleged by him, the proper course was for him to pay ortender the amount due on the agreement under protest, and after he hadobtained the reconveyance to sue the defendants to recover any sumthat he alleged was due to him as a result of the depreciation in the valueof the land. I do not understand how he can claim damages in respectof a land that was not yet his. The cases of Babahamy v. Alexander1 andAppuhamy v. Silva * are two other cases that show that tender is a neces-sary preliminary to an action of this kind and that in a case such as thistime is of the essence of the contract, and the tender has to be made on orbefore the date fixed.
therefore, hold that the plaintiff’s action fails and dismiss the appealwith costs.
Appeal dismissed.