CEYLON THEATRES LTD., and CINEMAS LTD. and others, Respondents

078-NLR-NLR-V-70-CEYLON-THEATRES-LTD.-and-CINEMAS-LTD.-and-others-Respondents.pdf


Ceylon Theatres Ltd. v. Cinemas Ltd.
337
[Privy Council]
1968 Present: Viscount Dilhorne, Lord Guest, Lord Devlin, Lord
Wilberforce, and Lord Pearson
CEYLON THEATRES LTD., Appellant, and CINEMAS LTD. and
others, Respondents
Privy Council Appeal No. 3 of 1967
S. C. 573161—D. C. Colombo, 8603/P
Partition action—Interlocutory decree—Order for sale of land—Reservation therein ofencumbrances—Validity—Meaning of the terms “ the land ” and “ the title ”—Partition Act (Cap. 69), ss. 2, 4, 5, 16 (2), 18, 25, 26, 46, 47, 48, 50, 51, 54.
In proceedings under the Partition Act (Cap. 69) the Court has power, whenordering a Bale of land held in co-ownership, to direct that such sale is to besubject to a life interest subsisting in an undivided part or parts of the landsold. It cannot be contended that such sale must be made so as to pass a titlefree from the life interest.
Almost the whole of the corpus in the present partition action was occupiedby a building and no physical partition of the property was practicable. Plain-tiff, 1st defendant and 3rd defendant were entitled respectively to undivided11/18, 5/18 and 2/18 shares, of which 3/18, 2/18 and 1/18 shares, totalling 1/3share, were subject to the life interest in favour of the 2nd defendant. Thelife interest of the 2nd defendant arose by way of usufruct and was confined toan interest in the income of the property. It was subject to forfeiture onremarriage.
Held, that an interlocutory decree for the sale of the property, subject to thelife interest in favour of the 2nd defendant in respect of 1 /3 share of the soil and1 /3 share of the buildings, was in conformity with the provisions of the PartitionAct, more especially of sections 25, 26, 46, 47 and 48. In such a case it cannotbe contended that a sale under the Partition Ordinance must be free from allencumbrances.
A PPEAL from a judgment of the Supreme Court reported in(1965) 67 N. L. R. 97.
E. F. N. Oraliaen, Q.O., with M. P. Solomon, for the 1st defendant,appellant.
S. Nadesan, Q.C., with N. Chinitvasagam, Mark Fernando and L. B.Rajapakse, for the plaintiff-respondent.
lxx—15
1*—H 18223—2,130 (4/08)
Cur. adv. vult.
338
LORD WILBERFORCE—Ceylon Theatres Ltd. v. Cinemas Ltd.
January 23, 1968. [Delivered by Lord Wilberforce]—
This appeal from the Supreme Court of Ceylon raises the questionwhether, in proceedings under the Partition Act (No. 16 of 1951) thecourt has power, when ordering a sale of land held in co-ownership, todirect that such sale is to be subject to a life interest subsisting in anundivided part or parts of the land sold (as was held by the DistrictJudge) or whether (as was held by the Supreme Court) such sale must bemade so as to pass a title free from the life interest.
The property in question consists of land and buildings at Panchika-watte Road in the Municipality of Colombo. It is not necessary furtherto particularise it beyond stating that almost the whole of the land isoccupied by a building called the Tower Hall Theatre. The relevance oftnis is that no physical partition of the property is practicable. Thecommon interests in the property arose under the Will of one G. A. DonHendrick Appuhamy (or Seneviratne) dated 7th April 1929 and inconsequence of certain subsequent devolutions.
For the purpose of this appeal it is sufficient to set out the findings ofthe District Judge, which, on this matter, are not challenged. He held theparties to be entitled as follows :
i
" Plaintiff (1st Respondent) to an undivided 11/18 share of which3/18 share is subject to the life interest in favour of the 2nd Defendant(2nd Respondent).
The 1st Defendant (Appellant) to an undivided 5/18 share of which2/18 share is subject to the life interest in favour of the 2nd Defendant(2nd Respondent).
The 3rd Defendant (3rd Respondent) to an undivided 2/18 shareof which 1/18 share is subject to life interest in favour of the 2ndDefendant (2nd Respondent).
All the buildings will belong to the parties in the same propor-tion as their soil rights above mentioned, and the 2nd Defendant(2nd Respondent) also will be entitled to the life interest in respectof 1 /3 share of soil and 1 /3 share of the buildings.”
It may be material to add that the life interest of the 2nd defendant(2nd respondent) was under the terms of the Will subject to forfeiture onremarriage.
The decree then continued :
“ It is further ordered and decreed that the said land and premisesbe sold by Public Auction in conformity with Partition Act No. 16of 1951 subject to the life interest in favour of the 2nd Defendant in
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respect of 1 /3 share of the soil and 1 /3 share of the buildings, andthe proceeds thereof be entitled [sic] to the parties according to theirproportionate shares.”
Although the 2nd defendant, who as stated was entitled to the life interestin 1/3 of the land and buildings, was duly made a party to the partitionproceedings, she took no part in the present appeal which was arguedbetween the appellant (1st defendant) on the one side and the respondent(plaintiff) on the other. No objection was raised on either side to thisprocedure.
The present law in Ceylon as to partition of immovable property iscontained in the Partition Act (No. 16) of 1951. It is upon theconstruction of that Act that the issues in this appeal must be decided.It may be convenient to preface examination of the relevant sections withsome observations of a general character as to the nature of the rights andinterests involved in the case.
First, rights of co-ownership, under the Roman Dutch Law, are regardedas qucLsi-can/itractual. One of the obligations so imposed, or treated asaccepted, by the co-owners is the obligation to allow a division of theproperty—in communione nemo compellitur invitus detineri. Bothby the common law, and under the successive pieces of ligislation whichhave been passed in Ceylon concerning partition, partition may be effectedby agreement or by decree of a competent court. Partition, when effectedby judicial decree, appears, according to the prevailing opinion, to be inthe nature of an alienation by purchase, the alienees deriving their titlefrom the decree of the court. The position under the Partition Ordinance(Cap. 56) of 1863, the legislation which preceded the Act of 1951, hasbeen described as follows :—
“ When common ownership becomes burdensome the PartitionOrdinance enables it to be determined at the instance of a co-ownerby the conversion of undivided shares into shares in severalty bypartition, or when that is not possible by the sale of the land. Uponthe issue of a certificate of sale to the purchaser under decree forsale, the title declared to be in the co-owners is definitely passed tothe purchaser and the lands cease to be held in common by theoriginal owners. ” Fernando v. Cadiravelu 1 per Garvin J.
Thus, the conception underlying judicial proceedings for partition orsale is that of dissolving the bond of common ownership by alienationof the co-owners’ shares.
It must be obvious that cases will arise where there are encumbrancesaffecting either the common property as a whole or individual shares andthat their existence may give rise to difficulty in cases of sale. Some
1 25 N. L. R. 492, 497.
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LORD W1LBERFORCE—Ceylon Theatres Ltd. v. Cinemas Ltd.
recognition of this difficulty and an attempt to deal with it is to be foundin the Partition Ordinance (Cap. 56) of 1863. Express provision was theremade for sale, under order of the court, subject to cc any mortgage orother charges or encumbrances ” on the property and there were otherprovisions dealing with the case where there was a mortgage over anundivided share. These provisions were evidently incomplete, and in theinterval between 1863 and 1951 a number of cases came before the courtswhere the property was subject to fideicommissa or trusts. These arereferred to in the judgment of Tambiah J. in the Supreme Court wherehe expresses the opinion that such complex questions were nevercontemplated by the framers of the Ordinance. The Act of 1951 dealssomewhat more fully with the position of encumbrances and the ultimatequestion for decision must be how far it has altered, or extended, thepre-existing law.
Secondly, as to the life interest of the 2nd respondent (2nd defendant).In this case the interest arises by way of usufruct and is confined to aninterest in the income of the property. It is subject to forfeiture onremarriage. There is no doubt that it constitutes an encumbrance withinthe meaning of the Partition Act, 1951. But it is necessary to bear inmind that the Act applies generally to life interests and usufructs of anycharacter, whether affecting the whole or a part only, and whetherconferring a mere interest in income or a closer interest in the land itself.Any interpretation of the Act must take account of the varied characterof these rights.
With these preliminary observations the relevant statuory provisionscontained in the Partition Act 1951 may now be considered. The Actcommences with a general statement of the nature and purpose of partitionproceedings (section 2). These may be brought where land belongs incommon to two or more owners, and may be instituted by any one ormore of them for the partition or sale of the land. This follows andadopts the common law conception that partition (or sale) is a rightattaching to co-ownership and that the purpose of partition proceedingsis to give effect to that right.
Section 4 requires the plaintiff to specify in his plaint particulars of anyright, share or interest in the land and the names of all persons claimingto be entitled thereto and section 5 requires that such persons are to bemade parties to the action. Section 5 (a) (i) describes these persons asthose who are entitled or claim to be entitled :
" to any right, share or interest to, of, or in the land to which theaction relates, whether vested or contingent, and whether by way ofmortgage, lease, usufruct, servitude, trust, fideicommissum, lifeinterest, or otherwise. ”
The comprehensive nature of this list is noticeable : it includes rightsand interests (i) which can without difficulty be given a value in money—e.g., mortgages, (ii) which could be given a value in money by an
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appropriate procedure of valuation, e.g., usufructs, trusts, fideicommissa,or life interest, though this would be a matter of some difficulty in thecase of fideicommissary interests, or other interests subject to acontingency or (as in the present case) subject to defeasance, (iii) whichcould hardly be the subject of compensation at all, e.g., certain servitudesessential for the dominant land, where the compensation would, in effect,be equivalent to its value (see for a description of the variety of servitudesrecognised in Roman Dutch Law Lee, An Introduction to Roman DutchLaw 5th Ed. pp. 164 ff.).
It will be seen that the Act returns to this list in a later importantsection (section 48).
The Act continues with a number of procedural provisions, of whichit is only necessary to mention section 18 which deals with the report tobe made by the commissioned surveyor. This must state the nature andvalue “ of the land surveyed ” and the details of the computation of suchvalue : it must also refer to the parties to the action present at the surveyand the name of any person not a party who has preferred any claimand the nature of such claim. Thus, although no explicit reference ismade to any encumbrances on the land, it would seem that the surveyor,whose commission is accompanied by a copy of the plaint (section 16 (2) ),is assumed to be aware of their existence and nature. Sections 25 and 26are of cardinal importance. Section 25 relates to the trial of the partitionaction. It requires the court to examine the title of each party, to tryany issue of law and fact in regard to the right share or interest of eachparty to, of, or in the land, and to consider and decide which of theorders mentioned in section 26 should be made. The word “ title ” inthis context evidently includes a title which may be subject to anencumbrance : it is, as Garvin J. said in the passage quoted above “ thetitle declared to be in the co-owners ”. Section 26 requires the court, atthe conclusion of the trial, to pronounce an interlocutory decree inaccordance with the findings. It states (subsection (2) ) that theinterlocutory decree may include one or more of the following orders,namely :
“ (a) order for a partition of the land ;
order for a sale of the land in whole or in lots ”
or orders . . . whether for partition or sale relating to specified portionsor shares of the land.
The form of the interlocutory decree in practice is well illustrated bythe decree made in the present case, the relevant portion of which hasbeen set out above.
Much of the rival arguments submitted in the appeal has been focussedupon these sections and in particular upon the use of the words
1 «• H 13223 (4/88)
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'* the land ”. On the one side (for the respondents) it is said that the onlyreference here is to ‘f the land ” which must mean the actual physicalproperty the subject of the suit, so that all that may be partitioned orsold, under the order of the court, is this property. No power is conferred,and none consequently exists, to sell the land subject to any encumbrance :so the inference must be that the land is to be sold free from allencumbrances.
On the other side (for the appellants) it is said that, recognition havingbeen given by the Act to the possibility that encumbrances may exist,these must be assumed to continue unless provision is expressly made fortheir discharge and satisfaction. Neither does section 26 provide for theirdischarge nor elsewhere in the Act (except in section 50, to be referredto later) is any provision made for their satisfaction. On the contrary,such subsequent references as there are to encumbrances assume that(with certain carefully specified exceptions) they continue to affect theland. On this argument “ the land ” means simply “ the land the subjectof the action ” such as it is, with all its burdens and advantages.
Their Lordships, at this stage of the argument, would be disposed toprefer the latter of these two views. The absence from section 26 of anysuch words as “ free from encumbrances ”, if the intention was that theyshould be discharged, appears to them more significant than an omissionto add “ subject to encumbrances ”, if the intention was to preserve them.The reason for this is that, as has been stated, the basic object of thepartition action is to sever the co-ownership, as between the co-owners,so that if the rights of other persons are to be affected, the Act might beexpected so to state. To compel persons other than co-owners havingencumbrances on the land or on shares in it, including owners ofservitudes, owners of usufructs or life interests, or fideicommissaries, toaccept some assessed compensation for their rights, though no doubt apossible result of legislation, amounts to a substantial interference withtheir rights. This should not be imposed upon them in the absence ofclearly expressed provisions including adequate methods of assessing thevalue of their rights. Silence as to these rights appears to indicate thatthey are not to be affected. But the argument is not conclusive atthis stage and the rest of the Act has to be considered for otherindications.
The Act continues with a number of additional sections governing themanner in which partition or sale (as the case may be) is to be carried out.These contain references to <c the land ” but they do not in theirLordships’ opinion carry the argument as to the meaning of these wordsany further. The sections can be operated according to their termswhether “ the land ” which is ordered to be partitioned or soldis the land subject to existing encumbrances, or whether it is the land free
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from encumbrances. They provide little assistance in choosing betweenthese alternatives. The next critical provisions are contained in sections46 and 47. It is convenient to reproduce these in full.
“ 46. Upon the confirmation of the sale of the land or of any lot,the court shall enter in the record a certificate of sale in favour of thepurchaser and the certificate so entered under the hand of the Judgeof the court shall be conclusive evidence of the purchaser’s title tothe land or lot as on the date of the certificate. The court may, onthe application of the purchaser, attach to the certificate a plan ofthe land or lot prepared at the cost of the purchaser andauthenticated by the court.
47.(1) The court shall cause to be prepared by a party named
by the court a schedule of distribution showing the amount whicheach party is entitled to withdraw out of the money deposited incourt.
No money shall be withdrawn from court by any party untilthe schedule of distribution has been approved by the court.
A party entitled to compensation in respect of a plantation ora building or otherwise shall share proportionately with the otherparties in any gain or loss, as the case may be, resulting from the saleof the land at a figure above or below the value determined by thecourt under section 38 ”.
These sections were strongly relied upon by the respondent and indeedthey formed the principal basis for the judgment of Tambiah J. in theSupreme Court. Section 46, it was said, shows that what the purchasertakes is “ the land ” and the effect of the section is that, when he receivesthe certificate of sale, he acquires an indefeasible title free fromencumbrances. Section 47 is the necessary counterpart of this : it providesthe mechanism by which encumbrances, from which the land is liberated,pass and attach to the proceeds of sale. This section, it was claimed (andthe argument logically follows) applies to all encumbrances of whatevernature with the sole exception of the interest of a proprietor of anindagama which is specially preserved by section 54.
In spite of the force which these arguments derive from their acceptanceby the Supreme Court, their Lordships feel obliged to take a contraryview. In their opinion these sections are unable to support the weightplaced upon them. Section 46 they cannot regard as more than aconveyancing section the purpose and effect of which is to establish thecertificate of sale as a new and conclusive root of title without the necessityof any conveyance from the co-owners or any investigation of their title.Reference has already been made to the use of the words “ the title ” insection 25, in an open sense, meaning merely the title such as it is—freefrom, or subject to encumbrances : it means no more in the presentcontext. The words “ the land ” here repeated, carry the matter no
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further than it already stands under section 26. It is noticeable that aprovision in terms very similar to section 46 appears in section 8 of thePartition Ordinance of 1863, a section which in terms provides for a saleto he made “ subject to any mortgage, charge or encumbrance^”. Althoughthese latter words have been dropped, this fact alone is not sufficientreason to ascribe to similar terminology now appearing in section 46 atotally different effect, i.e., to pass the land free from encumbrances.
Section 47, similarly, in their Lordships’ opinion, fails adequately tosupport the respondents’ argument. It provides merely for a schedule ofdistribution to be prepared by a party and approved by the court.If the intention was that encumbrances, of the varied charactermentioned in section 5, were to be compulsorily discharged out of theproceeds of sale, it appears to their Lordships inconceivable that so scantya mechanism should have been provided. On the one hand it can neverhave been intended that the amount to be paid to an encumbrancer shouldmerely be fixed by the party presenting the schedule : on the other handno procedure for valuation—-which, as has been shown, may in some casesbe complicated and controversial—is so much as indicated. The argumentfor the respondent extends, and necessarily must extend, to allencumbrances, whether those affecting the land as a whole, or thoseaffecting undivided shares : and if it is right, it represents a considerabledeparture from the scheme of the former Ordinance, even as this wasinterpreted by the courts : yet this departure is founded entirely oninference. That inference their Lordships cannot draw.
There remain for consideration three sections which apear in the Actunder the heading <f Special Provisions Relating to Decrees ”.Section 48 (1) is significant. It reads :
“ Save as provided in subsection (3) of this section, the interlocutorydecree entered under section 26 and the final decree of partition enteredunder section 36 shall, subject to the decision on any appeal which maybe preferred therefrom, be good and sufficient evidence of the title ofany person as to any right, share or interest awarded therein to himand be final and conclusive for all purposes against all persons whom-soever, whatever right, title or interest they have, or claim to have, toor in the land to which such decrees relate and notwithstanding anyomission or defect of procedure or in the proof of title adduced beforethe court or the fact that all persons concerned are not parties to thepartition action ; and the right, share or interest awarded by any suchdecree shall be free from all encumbrances whatsoever other than thosespecified in that decree.
In this subsection ‘ encumbrance 5 means any mortgage, lease,usufruct, servitude, fideicommissum, life interest, trust, or any interestwhatsoever howsoever arising except a constructive or charitable trust,a lease at will or for a period not exceeding one month, and the rightsof a proprietor of a nindagama.”
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The drafting of this subsection is not entirely clear. It refers, in the firstplace to the interlocutory decree entered under section 26 : this, inaddition to declaring the rights of the parties, would contain an order forpartition or for sale. The subsection continues with a reference to thefinal decee of partition , and to the right share or interest awarded to anypersons, expressions in each case appropriate to partition and not to sale.The explanation of this appears to be that whereas in the case of partition,there is a decree of the court giving effect to the partition, in the case ofsale this takes place upon the basis of the order contained in theinterlocutry decree. The subsection, therefore, at the least, makes itclear, that, after the interlocutory decree has been made, the land is freedfrom all encumbrances not specified in it and the only question remainswhether it goes on to prescribe, or whether it merly assumes, that, asregards encumbrances specified in the decree, the land remains, on a sale(as it clearly does on a partition), subject to these encumbrances. TheirLordships do not find it necessary to express a final opininon on thesealternatives, since on either view the subsection must be taken to supportthe conclusion that the land is sold subject to encumbrances. To repeatan argument already used in other connections, it is difficult to understandhow this subsection could have been drafted as it is if the intention werethat, on a sale, the land were, ipso facto, to be freed from encumbrancesspecified in the interlocutory decree.
Next there is section 50 which deals with cases where an undivided shareis subject to a mortgage or lease. Subsection (1) deals with the case ofpartition and, in effect, confines the mortgage or lease to the divided shareallotted to the mortgagor or lessor.
Sub-section (2) is as follows :—
,r If in an interlocutory decree for sale any undivided share of theland constituting the subject-matter of the partition action in whichsuch decree is entered is declared to be subject to a mortgage or lease,the rights of the mortgagee or of the purchaser of the mortgaged shareunder a mortgage decree, or of the lessee, shall be limited to themortgagor’s or lessor’s share of the proceeds of the sale of theland.”
In their Lordships’ opinion this provision must be regarded as strongsupport for the argument that encumbrances generally, apart that is tosay from those here dealt with, continue to attach to the land. For if therespondents’ arguments were correct, these mortgages and leases, like allother encumbrances, automatically would be transferred to the proceedsof sale by virtue of sections 26, 46 and 47 and this provision would beentirely otiose. Comparison between this section, with its reference tomortgages and leases, and section 48 (1) with its listed reference toencumbrances generally, strongly points the contrast between thoseencumbrances which remain attached to the land, or to shares in it, and
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those which, exceptionally attach to the proceeds of sale. It may be addedthat the language used in subsection (2) which after mentioning thedeclaration contained in the interlocutory decree of sale, then continuesby stating the consequences to the purchaser of the land, when comparedwith that used in section 48 (1), suggests that the latter subsection isintended to effect (rather than that it assumes) that other encumbrancescontinue to bind the land.
Thirdly there is section 51. This provides for registration of anyinterlocutory decree made under section 26, any final decree of partition,or any certificate of sale under section 46. The fact that an interlocutorydecree, which, under sections 25 and 26, must specify encumbrances, isrequired to be registered, suggests, somewhat strongly, that such specifiedencumbrances continue to bind the land. Moreover, when the sectioncontinues by requiring registration of the certificate of sale, the naturalconclusion to draw from this would be that the certificate of sale wouldconform with and produce the same result as the interlocutory decreeitself—i.e., that under it, encumbrances would be preserved. For if, asthe respondent contends, the certificate of sale was intended to pass anunencumbered title, it would be expected either that an interlocutorydecree providing for sale should not be registered, or that, if registered, itshould be removed when, or before, registration of the certificate of sale.But the section requires the respondent to register each document as aninstrument affecting the land to which it relates.
Finally section 54 contains an express reservation of the rights of aproprietor of a nindagama. The Supreme Court relied upon this asinconsistent with the view that the encumbrances generally should bepreserved. This section however is contained in a section of the Actdealing with Special Cases and is confined to those specifically mentioned.They are not within the general category of rights or interests previouslydealt with. The section therefore affords no guidance as to the intentionof the general portion of the Act.
For these reasons their Lordships are of opinion that the order madeby the learned District Judge was correct. They will humbly adviseHer Majesty that the appeal be allowed, and the order of the DistrictJudge restored. The 1st respondent must pay the appellant’s costs of thisappeal and in the Supreme Court.
Appeal allowed