021-NLR-NLR-V-52-VALLIAPPA-CHETTIAR-Appellant-and-J.-VANDER-POORTEN-et-al.-Respondents.pdf
[In the Privy Council]
1950 Present : Lord Porter, Lord Oaksey,, Lord Radcliffe,Sir John Beaumont and Sir Lionel LeachVALLIAPPA CHETTIAR, Appellant, and J. YANKEE POORTEN
et al., Respondents
Privy Council Appeal No. 51 of 1948. S. G. 34—D.C.
(Inty.) Colombo, 20,662.
Mortgage—Enlargement of mortgagee’s rights—Covenant that mortgagee may possessas “ absolute owner ” with full power to put mortgaged property to such useas he shall think fit—Validity—Interest—Hate to be fixed by trial Court—Power of Appellate Court to alter it.
A covenant in' a mortgage bond providing that the mortgagee could remainin possession of the mortgaged land and that the mortgagor should accepton the debit side all monies properly expended by the mortgagee in the manage-ment and control of the property is valid although ultimately the land derivedno benefit from the expenditure to improve it. In such a case it cannot be
* (1909) 12 N. L. It. 313.2 {1910) 13 RT. L. R. 65.
3 {1909) 12 AT. L. R. 313.
pleaded that the mortgagee could not burden the property with experimentalexpenditure thereby imposing an increased burden on the mortgagor whowishes to redeem.
Where a trial Court is authorised to award interest on monies due at suchrate as the Court shall deem reasonable, an appellate Court will not alter therate of interest allowed by the trial Judge, unless he exercised bis discretionon a wrong principle.
A PPEAL from a decree of tlae Supreme Court.
S. Rewcastle, K.C. with Ralph Rarikh, for the appellant.
Li. M. D. de Silva, K.C., with 2?. K. Handoo, for the respondents.
-Cur. adv. vult.
June 12, 1950. [Delivered by Lord Porter]—
This is an appeal from a decree of the Supreme Court of Ceylon, datedthe 22nd August, 1946, which varied a judgment and order of the DistrictCourt of Colombo, dated the 10th March, 1944. This decree purported togive effect to the directions contained in an Order in Council, dated tjhe15th December, 1932, and drawn up in accordance with the judgment ofdhe Judicial Committee of the Privy Council dated the 23rd November,1932, in previous proceedings between the predeeessors-in-title of theparties to the present appeal.
The relevant facts giving rise to the original dispute between theparties, which led to these directions, are set out in the judgment of theHoard, delivered by Lord Tomlin : —
“ In the year 1923 ” he says “ an action as to title to an estate inCeylon, consisting of about 14,(XX) acres of forest land, was in progressbetween the Crown and certain persons who and whose successors intitle will be hereafter referred to collectively as a Syndicate. Theappellant is the representative of a person, now deceased, who wasa member of the Syndicate in two capacities, one original, and the•other derivative.
“ The Syndicate had expended sums to the amount of Bs. 200,000in acquiring the estate from those whom they believed to be the•owners of it. After they had done so the Crown asserted title to itand the action in question resulted.
‘ ‘ On the 2Sth March, 1923, a decree was made in the action betweenthe Crown and the Syndicate whereby it was declared that the estatewas the property of the Crown, but whereby also the Crown submittedto sell the estate to the Syndicate provided that a sum of Es. 275,000was deposited with the Settlement Officer witiiin twelve months fromthe date of the decree.
’■ The Syndicate towards the end of the period allowed under thedecree of the 28th March, 1923, for making "the deposit, had succeededin raising no more than Es. 64,000 towards such deposit and therespondent, who was approached to assist the Syndicate providedat the last moment the balance, viz., B^. 211,000. By means of theEs. 64,000 already raised and the money provided by the respondentthe deposit was in fact made just before the time for making it expired.
“A sum of Es. 5,160 was immediately repaid to the respondent,so that the sum actually provided by him was Us. 205,840.
“ No definite agreement appears to have been made between theSyndicate and the respondent at the time when the money was pro*-vided but the respondent then instructed his Proctor to see that he was-properly protected.
“ On the 29th March. 1924, after the deposit had been made, tbe-Syndicate executed a deed which purported to be an assignment bythe Syndicate to the respondent for Es. 30,000 of the benefit of thedecree of the 28th March, 1923. No sum of Rs. 30,000 was in factpaid or intended to be paid by the respondent to the Syndicate andthe only purpose of this document was to give the respondent a;temporary security for the money he had advanced.'
“ At a later date two deeds were executed, respectively dated the-2nd March, 1925, and numbered in the record 471 and 472.
“ Reed 471 was framed as an out and out conveyance by the-Syndicate to the respondent of the whole estate with the exception cla defined portion of 1,000 acres on the south-eastern side thereof,which had apparently been otherwise disposed of, to hold unto the-respondent, his heirs, executors, administrators and assigns absolutelyand for ever..•
“ Deed No. 472 was of even date with Deed No. 471. Upon it'sconstruction and effect the result of this appeal mainly depends. Urwas made between the respondent of the first part and the personsthen constituting the Syndicate of the second and third parts, thegroup of persons who were of the third part being persons claiming:derivative interest under original members of the Syndicate ”.
The operative part of the deed was in the following terms : —
“ The party of the first part shall hold and stand possessed of thesaid lands as absolute owner and with full power and authority to*manage and control the same to fell and remove and dispose of the-timber therein and to put the said lands to such use as he shall thinkfit- in his absolute discretion and to sell the said lands for the bestavailable price with or without the. timber therein such price to be in 'his absolute discretion provided that if the price is less than Rupees-one hundred (Rs. 100) per acre he shall obtain the approval of theparties of the second part for such sale and to apply all monies realisedby him in respect of the sale of such timber and of the said lands onany portion thereof in ‘payment of such sums as shall be due andpayable to him for monies advanced to the Crown for the said purchasefrom the Crown and moneys expended on the management controland working of the said lands as aforesaid and of such compensationor profits for himself as he shall think reasonable and equitable in hisown discretion and shall pay over the balance pro rata according to theirrespective interests among the said parties of the second and thirdparts or their successors in title and such other person or persons as-sha-ll have a legal claim to or interest in the said lands, provided-
{however that it shall not be obligatory on any purchaser from the-party of the first part to see to the application of the purchase moneyby the said, party of the first part in manner herein provided and.receipt by him shall be a full and complete discharge to such purchaserfor the payment of such purchase money.”
“ Possession was taken by the respondent of the property conveyedby Deed Xo. 471 after the execution thereof and he has since remainedin possession. The respondent after going into possession admittedlyout and sold, a considerable Quantity of timber and alleges that heexpended large sums in cultivating and improving the estate. No.account of receipts or expenditure has ever been rendered by therespondent.
“ On the 30th March, 1925, the Crown executed a conveyance ofthe estate to the Syndicate or the survivors of the original membersthereof ”.
The judgment then referred to the fruitless efforts to sell the estatethat had apparently been made and to communications between certainmembers of the Syndicate and the respondent as to the amount to be paidby the latter for redemption; to the fact that the amount demanded(Bs. 500,000) by the respondent being considered excessive by those-seeking to redeem, the latter instituted an action in the nature of an actionfor breach of trust and redemption against the respondent and the othermembers of the Syndicate who did not join as plaintiffs, and to the factthat “ before the trial of the action the respondent settled with all themembers of the Syndicate except the two plaintiffs whom the appellantrepresents ”.
The judgment of the Board next referred to the pleadings of the partiesin which the then plaintiff had declared himself as willing to redeemupon the footing that the amount due to the respondent was the aggregate•total of the sum advanced, money expended, interest at 9 per centumper annum to date of the plaint and a sum of Es. 25,000 for reasonablecompensation and profit for the respondent’s services, such aggregate totalamounting, apart from expenditure, to Es. 274,090; to the judgment ofthe District Judge, dated the 19th July, 1929, in which it was held thatthe respondent was liable to re-convey the estate if called upon to do soand upon being paid the money due to him, and to re-transfer the shares-of the two plaintiffs whom the then appellant represented; and to thefact that an appeal from the said decision of the District Judge wasallowed by the Supreme Court which, by its judgment and decree, datedthe 10th March, 1930, dismissed the action. *
The judgment proceeded to give reasons for their Lordships^ conclu-sions that 'the transaction effected by the two deeds was “ the creation ofa security for money advanced which in certain events imposed upon therespondent, who was the creditor, duties and obligations in the natureof trusts ”, that “ nothing in Deed No. 472 can preclude the debtors fromat any time redeeming the mortgaged property ”, but “ the fact that therespondent settled with all the debtors except one cannot put that one in-a worse position,'” and that “ the appellant, as representing the personwith whom no settlement was made, is entitled to redeem his shares onpayment of his rateable proportion of the total amount due to therespondent The judgment of the Board then continued as follows: —
“ In ascertaining the amount due their Lordships think that noregard should be had to the provision of Deed No. 472 as to * com-pensation or profits ’. That provision is expressed to operate only inthe event which has not happened of the respondent exercising his.power of sale.'
‘’It is, however, right that reasonable interest should be allowedon moneys advanced or expended.
“Bearing these considerations in mind, their Lordships think thatthe appeal should be allowed and that the decree below be discharged ’ ’subject to an exception immaterial to the present appeal…
“ Their Lordships do not, however, think that the decree of theDistrict Judge should be restored, but that a decree should be framed,providing for the following matters ….”.
These matters so far as relevant to this appeal were set out in theOrder in Council drawn up to give effect to their Lordships’ decision..It runs as follows : —
“ (4) That the appeal ought to be remitted to the Supreme Courtof the Island of Ceylon in order that a Decree should be framed,providing for the following matters—
“ (a) declaration that upon the true construction of Deeds Nos. 471and 472, and in the events which have happened the appellantis entitled to redeem upon the terms hereinafter appearing:the shares of the deceased person whom he represents in theproperty conveyed by Deed No. 471;
‘ ‘ (6) a direction for the taking of the following enquiry and accounts:“ (i) an enquiry as to the amount of the shares in the propertyin question of the person whom the appellant re-presents;
‘ ‘ (ii) An account of what is due to the respondent for principalmonies advanced to provide the deposit under thedecree of the 28th day of March, 1923, and for monies-properly expended by him in the management andcontrol of the property together with interest at suchrate as the Court shall deem reasonable upon themonies advanced or expended from the respectivedates of such advance or expenditure to the date ofdecree;*
“ (iii) an account of rent and profits (including proceeds of saleof timber and other produce) of the property receivedby the respondent or by any Other person or persons-bv the order or for the use of the respondent or which- without the wilful default of the respondent might-have been so received, with interest at such rate asaforesaid upon such rents and profits from therespective dates of receipt to the date of decree; and.
“ ^iv) an account of the costs payable to the appellant by the-respondent under their Lordships’ report as to paymentof costs hereinafter contained and remaining unpaid;
“ (c) a direction that the amounts certified under account (iii) oughtto be deducted from the amount certified under account (ii)and that upon payment by the appellant to the rest>ondentof the proportionate part of the balance so found correspond-ing with the shares which shall be certified under enquiry (i)-to be the shares in th«j property of the person whom the-appellant represents less any costs payable to the appellantunder account (iv) remaining unpaid, the respondent shallre-convey to the appellant the shares in the property of suchpersons; and
“ (<2) such other directions as the Court may deem necessary or appro-priate for working out the decree; ”
Following the remittal of the appeal to the Supreme Court for theabove-mentioned purpose that Court by an Order directed the DistrictCorut of Colombo to hold the enquiry and to take accounts in accordancewith the directions of the Board.
The enquiry was accordingly held and accounts taken in the DistrictCourt, the present appellant being substituted for the previous represen-tative of the third and fifth plaintiffs, and the present respondents for thedefendant No. 1 since deceased.
After holding the enquiry the District Judge published his award fromwhich an appeal by the present appellant to the Supreme Court wasdismissed subject to a variation in a matter not now material.
From that dismissal the present appeal has been taken to TTis Majestyin Council, but only two matters are now in dispute although those are ofsome considerable importance.
As set out above the Decree embodying the judgment of their Lordships’Board contained directions for amongst other matters an account of whatwas due to the first respondent for principal monies advanced to providethe deposit under the Decree of the 28th March, 1923, and for moniesproperly expended by him in the management and control of the propertytogether with interest at such rate as the Court shall deem reasonable uponthe monies advanced or expended from the respective dates of suchadvance or expenditure to the date of decree, and the two matters now indispute are (1) what monies are included amongst those properly expendedand (2) what rate of interest should be allowed.
As to the first question the appellant contended that their Lordships’Board having decided that the property wag held by 'the first respondentas mortgagee, the principles of an English mortgage apply, that inaccordance with those principles the mortgagee could not burden theproperty with experimental expenditure thereby imposing an increasedburden on a mortgagor who wished to redeem and complained that theDistrict Judge had allowed such expenditure in taking the accounts.
Undoubtedly the learned Judge did allow such expenditure and itappears from his judgment that so far from the property profiting bythem, considerable expenditure was incurred with little or no result.
Ji the English rule of law was a rigid one and was applicable to Ceylon•the argument would be a formidable one. But in their Lordships’ opinionneither premise can be accepted. In the first place a mortgagee, like.any other holder of property under a deed, is subject to the terms ofthe deed and his rights may be enlarged or diminished by its terms. Inthe second place a mortgagee in Ceylon is not subject to all the under-lying conceptions of English law, but is without doubt bound strictlylo fulfil the terms of the deed under which he holds."
In the present ease the first respondent’s rights or powers are drawn in"the widest terms. Those terms have already been quoted but specialattention may be called to such expressions as “ absolute owner ”, “ fullpower and authority to manage and control ”, “.. • . and to put the
said lands to such useas he shallthink fit in hisabsolutediscretion ’ ’.
There is power to cuttimber butno obligation toreplantand no sign
throughout the deed that the use is to be confined to cuttting or replacingtimber. Bather it seems intended that in places where the timber has.been cut or in places where no timber exists the use and cultivation•should be wholly within this respondent’s direction.
Moreover the primary object appears to be the realisation of the money■expended by selling the property and that result might well have beenachieved and perhapsonly couldbe achieved byputtingthe land to
some immediate use- rather than by the long term process of replanting.
“ I am inclined to think ” says the learned District Judge “ that the-parties are bound by their convenants and the plaintiffs will have to accepton the debit side allexpenses properly incurredby theoriginal first
•defendant in an attempt to improve the land although ultimately theland itself derived no benefit from such expenditure. It is not suggestedthat the original first defendant acted unwisely or extravagantly in makingexperimental plantations ”.
This, their Lordships think, not only accurately presents the BomanDutch Law of Ceylon, but is consonant with the law of England. InShepherd v. Jones 1 such reasonable expenditure as the nature of theestate warranted was alone permitted. But, it is added, any reasonableexpenditure assented to in terms or by implication apart from the deedsmust be allowed to the respondents.
It appears from the evidence that some at any rate of the respondentswere aware of what was going on, i.e., that the respondent was tryinga number of experimental crops in order to make the best use of theproperty, though there is no direct evidence of assent on the part of theappellant, but in truth the Syndicate as a whole were content to leavethe management in the hands of the respondent. No doubt the result-might be that a larger sum would have to be paid on redemption thanmight have been chargeable if these experiments had not been made, buton the other hand, if they had been successful they would have enhancedthe value of the property and might have been the only method of.effecting a sale, and the parties to the deed took the risk.
1 21. Ch. D. 469.
In their Lordships’ view the expenditure was properly allowed and thedecision of the learned judge rightly approved' in the – Supreme- CourtsThe question of interest can be more- shortly disposed of. The period,in respect of which interest was to be allowed was during the years 1926<-to 1933. Luring that period the interest-on; decrees – was 9-per cent. and.remained at that figure until 1944 when it was reduced to 5 per cent..The Syndicate themselves when framing their plea suggested 9 per cent,as the appropriate amount and indeed added- a sum of Bs.- 25,000 as»-compensation for the 1st respondent’s services^ The Money-lenders Act-then in force would have allowed 15 per-cent, and as the-learned District-Judge says no evidence was 'called to show that" 9 per cent, was*-excessive. The Supreme Court thought it on the high side-but recognised,that the matter was for the judge’s discretion and could see no reasonfor interfering or concluding that he- had. exercised it> on- any wrongprinciple. Their Lordships agree with the Supreme Court in this view.
In their opinion the learned judge and the Supreme Court, came to anright conclusion on both points and they will humbly advise His Majestyto dismiss the appeal. The costs must be paid by the appellant.
Appeal dismissed..