BDEEN v. FAROOK

002-SLLR-1984-V1-NILABDEEN-v.-FAROOK.pdf


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Sri Lanka Law Reports
[1984) 1 S.L.R.
NILABDEEN
v.
FAROOK
COURT OF APPEAL
L. H. DE ALWIS, J. AND MOONEMALLE. J.
«.A. 367/80(F|
D C. COLOMBO 1665/S.
DECEMBER 5 AND 6. 1983.
•
Res Judtcata-Order as to possession made in criminal proceedmgs-Whetherbinding on a civil court in subsequent proceedings for declaration of title.
Sale of Goods Ordinance, Sections 2.18 and 19-Contract of safe-Whether 'Sale'or 'Agreement to Sell'-Remedies available for breach of agreement to sell.
The plaintiff agreed 'to give' his lorry to the defendant for a sum of Rs. 57,500/- Ofthis amount the defendant paid Rs, 17,500/- on the date of the agreement andreceived possession of the lorry. The balance was to be settled by 'financing" thelorry. In proceedings m the Magistrate's Court in connection with this transactionthe lorry was ordered to be handed over to the defendant and the Supreme Courtaffirmed the defendant's right to possession on the groSr^d that the lorry had beensold to him. The plaintiff ijjen sought to vindicate title to the lorry or in thealternative the payment of the balance Rs. 40,000/- with interest.
CA
Nilabdeen v. Farook (L. H. de Alwis, J.)
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Held *
An order reg#ding possession made in criminal proceedings«does not operateas res |udicaia in respect of the question of title arising in ^subsequent civil action.
(2| The terms of the contract and all the circumstances point to the contract beingan agreement to sell and not a sale. Property in the lorry remained with the plaintiffand he was entitled ft both remedies sought by him.
Cases referred to
Nilabdeen v. Silva 78 NLR 454
Perera v. Ratnadasa S.C. 66/80. S.C Minutes of 8.4.1981.
Holhngton v. Hawthorn & Co. Ltd., 119431 2 AER 35.
Goody v. Adhams Press Ltd. {1966) 3 AER 369.
Jayasuriya v. Warnakulasuriya 61 NLR 189.
Silva v. Kanapathipiliai 14 CLW 41.
Viking Tours Ltd. v. The Finance Company Ltd. & another (1981) 1 SLR 116.APPEAL from a judgement of the District Court of Colombo.
S. M Mahenthiran for plaintiff-appellant.
Nimai Senanayake. S.A. with Miss S. M. Senaratne and K. Gunaratne fo^defendant-respondent.
January 20. 1984.
L. H. DE ALWIS, J.
This appeal comes up for re-hearing as a result of Ranasinghe, j.,who heard the argument with me on an earlier occasion beingelevated to the Supreme Court, before judgment was delivered. Mr.Ranganathan Q.C. who appealed for the appellant has also sincedied and Mr. Mahenthiran now appears for the appellant.
The Plaintiff-appellant instituted this action against thfDefendant-respondent for, inter alia, a declaration that he is theowner of motor lorry 24 Sri 6388 ; for an order for the delivery ofpossession of the said lorry to him ; for damages in a surn ofRs. 48,000/- together with continuing damages at Rs. 2,000/- amonth until the lorry is returned to him, or, in the alternative to theabove reliefs, for judgment in a sum of Rs. 40,000/- together withinterest at 30% per annum from 1 st July 1974 till payment in full.
The plaintiff was the owner of the said lorry and averred that on
he entered into an agreement with the defendant to sellthe lorry to him for the price of Rs. 57,500/-. On that day thedefendant paid him a sum of Rs. 17,500/- and the plaintiffdelivered possession 6f the lorry to4iim. According to the plaintiff,the sale was to be completed only after the payment of the balancesum of Rs. 40,000/-, obtained from a Finance Company.
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The defendant however failed and neglected to ppy the balancesum of money to the plaintiff within a reasonable time. In or aboutAugust 1974 the lorry met with a serious accident while in thecustody of the defendant who fraudulently attempted to make aclaim in the plaintiff’s name from the Insurance Corporation of SriLanka but was prevented from doing so by the plaintiff. In or aboutNovember or December 1974 the defendant dishonestly andfraudulently committed criminal conversion of the lorry by using itas his own in breach of the conditions of the agreement to sell. On
the plaintiff took the lorry into his custody on the pretext ofhiring it and produced it at the Colombo Frauds Bureau and made acomplaint of criminal misappropriation of it against the defendant.The Police produced the lorry in the Magistrate's Court of Colomboand the learned Magistrate made order on 2.12.75 under section102 of the Administration of Justice Law No. 44 of 1973 (A.J.L.)
■then in force, handing over the lorry to the defendant. The plaintiffmade an application to.the Supreme Court to revise the order of theMagistrate but the Supreme Court dismissed the application on
and affirmed the order of the Magistrate. The plaintiffthereafter filed the present action in the District Court of Colombofor relief.
The defendant's case is that on 31.5.74 the plaintiff sold anddelivered the said lorry to him on his payment of Rs. 17,500/- andrepresented to him that he would arrange for finance for thejJayment of the balance sum of Rs. 40,000/- through a FinanceCompany. The plaintiff however was unable to make thearrangements for finance and to transfer the vehicle to thedefendant because he did not have the certificate of registration inrespect of the vehicle. The certificate in fact was in the custody of aMagistrate's Court in connection with some alleged offence. Thedefendant claims that on the agreement entered into in May 1974,property in the lorry passed to him and he was entitled to possessand use it as his own. He prayed that the plaintiff's action be
dismissed. The defendant denied that there was any obligation onhis part to pay the balance sum of Rs. 40,000/- within a reasonabletime from 31-.5.74 and the plaintiff's failure to produce thecertificate of registration and arrange for finance for the lorryprevented him from paying the balance sum due on the lorry. The
Nilabdeen v. Farook (L H. de Alwis. J.)
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CA
defendant further pleaded that the appellant took wrongful custodyof the lorry on fe. 10.75, causing him loss and damage and claimedin reconvention a sum of Rs. 94,250/- as at 17‘. 12.76, that is from5.10.75, together with interest at 30% per annum from 5.10.75upto the date of the plaint and legal interest on the aggregate sumthereon till payment in full, and further damages at Rs. 6,500/- permonth from 17.12.76. until possession of the vehicle is restored tohim, in good and serviceable condition, failing which he prayed forfurther damages in a sum of Rs. 115,000/-, being the value of thelorry.
The 17th of December 1976 is the date on which a settlementwas arrived at in Court by the parties, on an application made by theplaintiff for an interim injunction against the defendant, the terms ofwhich were that the defendant was to have possession of the lorryon his depositing Rs. 2,000/- per month from 17.1.77. In theevent of his default, the plaintiff was entitled to possess the saidvehicle on depositing Rs. 2,000/- to the credit of the case. Thedefendant defaulted and possession of the lorry was handed overto the plaintiff on the aforesaid terms. The order was made* dn9.1.78 directing the defendant to hand over possession of thevehicle to the plaintiff.
The case went to trial on several issues and the learned DistrictJudge on 30.7.80 dismissed the plaintiff’s action and gavejudgment for the defendant in a sum of Rs. 94,250/- together withlegal interest an^ costs and further damages at Rs. 6,500/- pdfmonth until the lorry is handed over to the defendant in goodcondition. In the alternative, the plaintiff was directed to pay a symof Rs. 115,000/-, less depreciation of 10% per annum from1.1.78. On the same day that the Judge delivered his judgment, hemade another Order that in the event of appeal, the lorry should bekept at Rowlands Garage, or any other reputed garage, and untilsuch arrangements are made, the lorry should be kept in thecustody of the District Court. This order was varied by the SupremeCourt in revision, on 14.8.80, and custody of the lorry was orderedto be delivered to th^ defendant on his furnishing security in Rs.25,000/- in cash or*by Bank guarantee, or Joy deed, for a sum ofRs. 50.000/-.
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[1984] 1 SLR.
The contract entered into between the plaintiff and the defendanton 31.5.74 Ts .embodied in two documents. P1 Signed by theplaintiff, and P2 signed by the defendant. The translation of thedocuments reads as follows :
•
P1- 'I, N. M. Nilabdeen, residing at No. 158, LayardsBroadway, Colombo 14, hereby agree to give the lorry No. 24 Sri6388 to M. S. M. Farook for a sum of Rs. 57,000/- and receivea sum of Rs. 17,500/-. I agree to get the balance Rs. 40,000/-later after the lorry is financed. The financed amount and balanceI agree to take later and on this day I hand over the lorry- Sgd. N.H. Nil&bdeen*.
P2- 'I. M. S. M. Farook, residing at 85,-Messenger Street,Colombo, having agreed with M. FT M. Nilabdeen residing at158, Layards Broadway, that the price of lorry No. 24 Sri 6388 isRs. 57,500/-, do pay Rs. 17,500/ today 31.5.74 and receivethe above vehicle from M. H. Nilabdeen today 31.5.74 (Friday).usidertaking to pay the balance sum of Rs. 40,000/- on the dateof financing after setting off the financed amount and pay thebalance money by financing on the financing date-Sgd. M. S. M,Farook.'
Learned Counsel for the appellant contended that the documentsP1 and P2 constituted an agreement to sell the lorry, whereunderthe property in the lorry was to pass to the defendant only when hepaid the balance sum of Rs. 40,000/- of the purchase price afterobtaining finance from a Finance Company. The defendantneflected to pay the balance within a reasonable period of time andon his fraudulent conversion of the lorry in November or December1974 to his own use, in breach of the conditions of the agreement,the plaintiff was entitled to recover the lorry from him and ask for adeclaration that he is the owner of the said lorry and for damages ina sum of Rs. 48,000/-, and continuing damages at Rs. 2,000/- amonth from date thereof until the lorry is restored to him, on hisreturning the sum of Rs. 17,500/- paid to him as an advance bythe defendant. In the alternative, he submitted that the defendantwas liable to pay the glaintiff the balance surf! of Rs. 40,000/- at30% interest from 1.7.74 under the contract.
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Nilabdeen v. Farook (L. H. de Alwis, J.)
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*
Mr. Senanqyake, learned Senior Attorney for the defendantcontended that the contract was an outright safe *and that theproperty in the lorry passed to the defendant on 31.5.74, althoughhe had still to pay a balance of Rs. 40,000/-. He further submittedthat the contracf.had not been rescinded but was subsisting andthe rights of the parties arising out of any alleged breach of thecontract must be considered in accordance with the terms of thecontract and the remedies provided by the Sale of GoodsOrdinance. Since the plaintiff was not in a position to furnish thecertificate of registration of the vehicle to enable the defendant toobtain finance on the vehicle, the defendant's inability to pay thebalance of the purchase price cannot be considered wrongful so asto entitle-the plaintiff to retake possession of the vehicle or to suefor the balance, especially as no specific time had been fixed in thecontract for the payment of the balance. It was also not open to theplaintiff to ignore the contract altogether, and to institute an actioi?to vindicate title to the vehicle and ask for its recovery anddamages.
The plaintiff took the lorry into his custody on 5.10.75*dTidproduced it at the Frauds Bureau on a complaint of criminalmisappropriation against the defendant. The Police took the viewthat it was a civil dispute between the parties in regard to the lorryand produced it before the Magistrate’s Court of Colombo fordisposal in terms of section 102 of the Administration of JusticeLaw No. 44 of 1973 (A. J. L.) which was then in force. TheMagistrate afte» inquiry ordered the lorry to be handed over to tnedefendant and the plaintiff moved the then Supreme Court to revisethe order. The Supreme Court dismissed the application, oi^thebasis that the defendant was the person entitled to possession ofthe vehicle, within the meaning of section 102 of the A. J. L. andheld that the lorry had been sold to the defendant and title to it hadpassed to him under section 18 of the Sale of Goods Ordinance.Nilabdeen v. Silva (1). The first question that arises for considerationnow is whether the decision in that case operates as res judicata inthis action in regard to both possession and title to the lorry. Thepresent Supreme Court dealing with this case, in the unreportedcase of Perera v. Ratnadasa (2) held that it was authority only onthe question of pos$8$sion under section 102 of the A. J. L. as thatwas the main issue involved in the case. SNarvananda J. who wrotethe judgment, was of the view that the observations in that case in
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regard to passing of property in terms of section 18 of the Sale ofGoods Ordindhce ar.e obiter dicta, the correctness of which is opento question. I am'in respectful agreement with Sharvananda J'sview that that case is authority only for the proposition that thedefendant was the person entitled to possession i» terms of section102 of the A. J. L. and not in regard to the passing of title in thelorry.
Learned Counsel for the appellant contended that even thedecision in regard to possession in that case, is not binding on thisCourt. An order made under section 102 of the A. J. L. is an ordermade in criminal proceedings and it is settled law that a decision ina Criminal Court is not binding on a Civil Court. Hollington v.Hawthorn & Co., Ltd. (3), Goody v. Adhams Press Ltd. (4). ACriminal Court is not the forum for settling Civil disputes undersection 419 of the old Criminal Procedure Code, whichcorresponds to section 102 of the A. J. L. Jayasooriya v.Wamakutasuriya (5) Silva v. Kanapathipillai (6) Viking Tours Ltd. v.The Finance Co. Ltd. and Another {7). I am therefore of the viewth%t Nilabdeen's case does not operate as res judicata also on thequestion of title to the lorry in the present case.
The next question is whether the contract entered in P1 and P2 isan agreement to sell subject to the condition that the balance bepaid, or a sale. Mr. Senanayake S. A. for the respondent contendedt|g£t the contract was an outright sale and property in the lorry wastransferred to the defendant on 31.5.74 and thatlt was not opento the plaintiff to bring an action to vindicate his title to the vehicleand/or its recovery and damages. If there had been any violation ofthe terms of the contract relief must be sought under the contractand the Sale of Goods Ordinance. Indeed he contended that thisquestion of passing of property in the lorry was irrelevant to thequestion.
The plaintiff's position is that on the violation of the terms of theagreement to sell by the defendant failing to pay the balance sum ofRs. 40,000/-, he continued to remain the owner of the lorry andwas entitled to institute the action on two causes of action, one, fora declaration of title to the lorry, end the other *ip the alternative, onthe breach of the contract, in respect of the failure to pay thebalance sum of Rs. 40,000/-.
CANilabdeen v Farook (L. H. de Alwis, J.)21
Section 2 (1^ of the Sale of Goods Ordinance (Cap 84) defines acontract of Sale of Goods both as a contract, wher&by the sellertransfers or agrees to transfer the property in the goods to thebuyer for a money consideration called the price. A 'seller' isdefined in section 59 (1) as a person who sells or agrees to sellgoods and a 'buyer' as a person who buys or agrees to buy goods.Section 2 (3) provides that where under a contract of sale theproperty in the goods is transferred from the seller to the buyer, thecontract is called a 'sale', but where the transfer of the property inthe goods is to take place at a future time, or subject to somecondition thereafter to be fulfilled, the contract is called an‘agreement to sell'.
Section 18 of V)e Sale of Goods Ordinance provides that
where the^e is a contract for the sale of specific orascertained goods, the property in them is transferred to the buyer*at such time as the parties to the contract intend it to betransferred.
for the purpose of ascertaining the intention of the parties,regard shall be had to the terms of the contract, the conduct of theparties, and the circumstances of the case.
The rules for ascertaining the intention of the parties as to thetime at which the property in the goods is to pass to the buyer areset out in section 19, and are only applicable, unless a differentintention appear^ under the earlier section 18.
In my view, according to the terms of the contract in P1 and P2the intention of the parties was that the property in the lorry w«s topass to the defendant on the payment of the balance sum ofRs. 40,000/- though no specified date was fixed for it. The reasonsfor my conclusion will be given by me when comparing this casewith a similar unreported case of the Supreme Court in No. 66/80,S.C. Minutes of 8.4,81. I am of the view that the present contractis only an agreement to sell the lorry and that since title has notpassed to the defendant, the plaintiff is entitled to seek one of tworemedies, that is, either to institute an action to vindicate his title tothe lorry and for its recovery with damages or. in the alternative tosue upon the breacli of the contract for tfie non payment of thebalance sum of Rs. 40,000/-, both of wlllch he has done in thisaction.
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In the unreported case of the Supreme Court referred to, thefacts are almost identical with those of the present case and bearcomparison. In that case too, the parties had entered into acontract on two documents as in the present case, for the sale of alorry. That case too was a declaratory action, tWe only differenceDeing that it was the buyer who instituted this action for adeclaration that he was the owner of the lorry and for consequentialreliefs. In that case the contract consisted of two documents P1and D2 given by the seller of the lorry and the buyer respectively. InP1 the owner of the lorry stated that he received an advance ofRs. 16,000/- on 1.4.74 from the buyer on the 'promise of selling*him the lorry at a price of Rs. 36,000/- and was agreeable toreceiving the balance Rs. 20,000/- before 21.4.74 by financing thelorry. The buyer in D2 certified that he had taken delivery of the lorrythat day and had paid an advance of Rs. 16,000/- to the seller. Heelso stated that the seller would thereafter not be responsible forany damage caused to the lorry or by the lorry and that he wouldtake action to raise the balance sum of Rs. 20,000/- due to theseller before 21.4.74 from a Finance Company. The balance wasnot paid and about a year later the seller took forcible possession ofthe lorry and the buyer filed an action against him for a declarationthat he was the owner of the lorry on the basis that title to it hadpassed to him on its sale.
Sharvananda, J., with whom His Lordship, the Chief Justice andV^gnasundera, J., agreed, said that the two documents recordedan agreement to sell rather than a sale and that the plaintiff hadfailed to establish that he had become the owner of the vehicle influe^ion. The documents P1 and D2 disclosed a clear intentionthat the property in the lorry was not to pass to the buyer until thepurchase was completed by payment of the balance purchaseprice. In that case no doubt there were two factors which led theCourt to the conclusion that it was an agreement to sell and not asale. They were the phrases 'promise of selling* and that the seller'will not be responsible for any damage caused to the lorry or forany damage caused by the lorry'. Sharvananda J.. was of the viewthat this assurance on the part of the buyer, the plaintiff, wasexplicable only on the basis that title to the lorry continued to be inthe defendant, the selle^ In the present case,*the words 'agree togive' appearing in the document Pi is equivalent to the words'promise of selling' occurring in P1 in the unreported case. The
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Nilabdeen v. Farook (L. H. da Alwis, J.)
23
absence of Ifie additional condition regarding the seller'sresponsibility for any damage caused to the lorry .does'not affect thenature of the present contract, in view of the other circumstancesthat make it out as an agreement to sell.
The defendantItes made certain statements in the course of hisevidence which indicate that property in the lorry had not passed tohim and that he still recognised the plaintiff as the owner of thelorry. The defendant has referred to the plaintiff as the proprietor ofthe lorry when the latter took him to a Finance Company to obtainfinance. He further said that the procedure for obtaining financewas for the plaintiff to transfer the lorry to the Finance Companyand for the latter company then to hire it to him on a hire-purchaseagreement under which he would have to pay the finance obtained,in instalments, and on the final payment being made the lorry wouldbe transferred by the Finance Company to him.
The Motor Traffic Act {Cap. 203) requires the new owner of a
vehicle to have himself registered as the owner, on a transfer of the
motor vehicle to him, by perfecting certain prescribed forms..Tjie
owner has also to obtain a revenue licence and a certificate of
insurance in order to use the vehicle. In this case, and in the
unreported case, the buyer had failed to comply with the provisions
of section 12 and the connected sections of the Motor Traffic Act,
and Sharvananda J., in the unreported case took the view that
omissions of this nature could not be reconciled with the buyer’s
claim of ownership of the lorry.«
•
In the present case too the plaintiff could not in'any event havetransferred the property in the lorry to the defendant, because thecertificate of registration was in the custody of a Magistrate's (&urtin connection with some violation of the law although it was said tohave been misplaced or lost. All these circumstances point to thecontract being an agreement to sell and not a sale. The plaintiff'sfirst cause of action for a declaratory decree and consequentialrelief must succeed.
Mr. Senanayake's next submission was that the contract of salestill subsists and the seller's rights flow from it, in the event of abreach. The possession of the lorry was voluntarily delivered, by theplaintiff to the defendant and the ctefendanl’s possession thereforecannot be said to be unlawful, But the*plaintiff alleges that itbecame unlawful when the defendant started to use the lorry as his
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[1984] 1 S.L.R.
own without paying the balance. No specific date v^s fixed for thepayment of tfie.balance sum of Rs. 40,000/- in the contract, but itwas to be paid on* finance being arranged. The plaintiff states thatthe financing was to be arranged by the defendant while thedefendant says that the plaintiff undertook to do.it. But there is onrecord, the evidence of the defendant that he had to make thearrangements for financing the lorry through a Finance Companyand also thst he undertook to pay any difference between theamount obtained from the Finance Company and the balance due,out of his own pocket. He says he could not finance the lorrybecause the plaintiff did not have the certificate of registration,without which no finance company would lend money on the lorry.Counsel for the defendant submits that the defendant's failure topay the balance was not unlawful because of these circumstances.It is true that no time limit was fixed for the payment of the balanceJbut payment must be made Within a reasonable time of thecontract. The defendant had the use of the lorry for at least one anda half years before its seizure by the plaintiff on 5,10.75 and hewould have had ample opportunity to earn sufficient income from itto* p*ay back the full balance, even without the aid of a FinanceCompany, considering that, on his own showing, he was earningabout Rs. 6,500/- per month by hiring the lorry to Messrs. Walker& Greig. Moreover the defendant succeeded in having thecertificate of registration altered to his name by the Registrar ofMotor Vehicles on his producing a certified copy of the SupremeCourt judgment dated 14.9.76 affirming the Magistrate's Order of^12.75 that he was the person entitled to the lorry. Then, at least,on the strength of his certificate of registration, he could haveobtained the necessary finance on his own, to pay the plaintiff thebalance sum of Rs. 40,000/-. which he did not do. In thecircumstances, his failure to repay the balance sum of Rs.40,000/- within a reasonable period of time, amounts to awrongful neglect or refusal to pay. The plaintiff therefore had thealternative remedy under the contract, to sue for the balance pricedue. That is what the plaintiff has done on the alternative cause ofaction pleaded in the amended plaint.
The learned District Judge has erred in taking the view that theplaintiff is not entitled to the balance sun} of Rs. 40,000/-,because he attributed the defendant's failure to obtain finance, tothe omission of. the plaimiff to produce the certificate of registrationof the lorry, and has answered issue 5 in the negative. But whether
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CANilabdeen v. Farook (L H. deAlwis. J.)
or not tHe cer^ficate pf registration was produced, the defendantwas obliged under the agreement to pay the ballnce sum ofRs. 40,000/-. Financing was one of the methods adopted forobtaining the balance money, but it was not the only way in whichthe money couHl have been obtained. In fact the respondentadmitted in evidence that he was prepared to pay the difference ifhe was unable to obtain the full amount of the balance by financingthe lorry and as pointed out earlier, he had subsequently thefinancial capacity to pay the balance even without the aid of aFinance Company. His failure to pay the balance of the purchaseprice within a reasonable period of time is therefore wrongful andissue 5 must be answered in the affirmative. The plaintiff'salternative claim for the balance sum of Rs. 40,000/- with interestat 30% from 1.7.74 till filing of action and thereafter with legalinterest till payment in full is also entitled to succeed.
The defendant has claimed in reconvention a sum ofRs ,94,250/-, as at 17.12.76 together with interest at 30% from5.10.75 upto the date of plaint and further damages atRs. 6,500/-, per month from 17.12.76 until possession of’thelorry is restored to him, on account of the appellant retakingpossesion of the lorry on 5.10.75. The date 17.12.76 is the day onwhich, by settlement in Court, the defendant was allowed to takepossession of the lorry on depositing a sum of Rs. 2,000/-, permonth. But as was pointed out earlier the contract was only anagreement to sell where the property in the lorry, remained with theplaintiff, and the defendant forfeited, by his failure to pay tH6balance, the right to the lawful possession of it. His claim inreconvention must therefore fail.
The judgment of the learned District Judge is set aside andjudgment is entered for the appellant in terms of paragraphs (a), {£>)and (c) of the prayer to the amended plaint. The respondent isentitled to set off the sum of Rs. 17,500/- paid by him on P1 andthe money deposited by him in court, against the damages payableby him.
The appeal is allowed with costs. In view of the decision in themain appeal. Revision Application No. 1018/80 does not arise forconsideration.
MOONAMALLE, J.-l agree.
Appeal allowed with costs.