APPUSINGHO, Appellant, and LEELAWATHIE and others, Respondents

101-NLR-NLR-V-60-APPUSINGHO-Appellant-and-LEELAWATHIE-and-others-Respondents.pdf


^BASNAY^KE, C.J.—Apjmsingho v. Leelawathie
409
1958Present: Basnagake, C.J., and Pulle, J.APPUSINGHO, Appellant, <md LEELAWATHIE and others,Respondents8.0.688—.D.G.Tangalle,LI393.
Registration of Documents Ordinance—Prior registration—Section 7(2)—Fraud or
collusion.
The expression “ fraud ” in section 7 (2) of the Registration of DocumentsOrdinance is used in the sense of actual fraud and not equitable fraud. Merenotice of a prior unregistered instrument is not of itself sufficient evidence offraud for the purpose of the section.
The collusion contemplated in section 7 (2) of the Registration of DocumentsOrdinance must be between persons other than the transferor who combine toobtain the subsequent instrument. ■
A sold a land to B on 17th May, 1952. On 3rd November, 1952, A sold thesame land to C. B’s deed was not registered, whereas C’s deed was dulyregistered. The question for decision was whether the priority of C was de-feated by fraud or collusion in obtaining the subsequent deed. The evidenceshowed nothing more than that a Proctor’s clerk to whom C had entrusted thetask of obtaining the transfer from A knew of the previous sale of the land toB and that he had searched the relevant register and discovered that the deedin favour of the plaintiff was not registered.
Held, that the evidence did not establish fraud or collusion within themeaning of those expressions in section 7 (2) of the Registration of DocumentsOrdinance.
A
i APPEAL from a judgment of the District Court, Tangalle.
H. V. Perera, Q.O., with N. E. Weerasooria, Q.G., and W. D. Gwnaselcera,
for Plaintiff-Appellant.
E. A. G. de Silva, for 1st Defendant-Respondent.Cecil de S. Wijeratne, for 3rd Defendant-Respondent.Cur. adv. mdt.
November 13,1958. Basnayake, C.J.—The only question that arises for decision on this appeal is whether thepriority of the person claiming under deed No. 3,848 of 3rd November1958 attested by K. G. D. de Silva, Notary Public, is defeated by fraudor collusion in obtaining it.
The learned District Judge has found that the evidence does notestablish fraud or collusion in obtaining deed No. 3,848. This appeal isfrom that decision.
LX2—J. U. R 2475—1,593 (6/59)
410
BASNAYAKE, C.J .—Appusingho v. Leelawathie'
"J-. !a:—
, Briefly the material facts are as follows: Hettitantrige ChandrasiriWimalasuriya the 2nd defendant (hereinafter referred to as Chandrasiri)in the present action wan the owner of the land described in the secondSchedule to the plaint. 'By deed No. 90 of 17th May 1952 attested byN. M. A. W. Wickremasuriya, Notary Public, (P2), Chandrasiri sold theland to the appellant reserving to himself the right to get a retransfer ofthe land within a period offive years on the payment of the considerationof Rs. 5,000 with interest at.the rate of 15% per annum. On 15th July1952 by deed No. 95 of that date (P3) the appellant purchased for a sumof Rs. 5,000 the right to obtain a retransfer of the land reserved in favourof Chandrasiri. On 3rd November 1952 Chandrasiri executed deedNo. 3,848 (P9; 1D7) of that date conveying the same land to the 1stdefendant, also reserving the right to obtain a retransfer of the landwithin six months.
It was conceded both here and below that the 1st defendant’s deed wasduly registered and that the appellant’s deeds were not; but learnedcounsel argued that the priority of the 1st defendant was defeated byfraud or collusion in obtaining the subsequent deed.
The fraud or collusion in obtaining deed No. 3,848 the appellant con-tends is fraud or collusion of the 3rd defendant, who lent his good officesto the 1st defendant in connexion with the transaction. The plaintiffjoined him as a party to this action. The learned District Judge heldthat he had been wrongly joined. Chandrasiri was not called as awitness by either theplaintiffiorthe 1st defendant; The learned DistrictJudge has held that the 3rd defendant was aware of the deeds P2 andP3 in favour of the appellant and that they were not duly registered and 'that he must have come to know of the existence of P2 and P3 fromChandrasiri. The 3rd defendant denied that Chandrasiri informed himof the existence Of the deeds. The learned Judge has also found that itwas the 3rd defendant who gave the notary the particulars necessary forwriting the deeds, that it was the 3rd defendant who searched the landregisters for prior encumbrances, and that in the course of his search hecould not have failed to discover that deeds P2 and P3 were not dulyregistered. On these findings the questions that arise for considerationare5—<
whether there lefraud or collusion on the part of the 3rd defendant,
and
if so, whether fraud or collusion on his part is fraud or collusion in
obtaining the deed within the contemplation of sub-section (2)of section 7 of the Registration of Documents Ordinance(hereinafter referred to as the Ordinance).
The material sub-sections of that section read—
“ (1) An instrument executed or made on or after the first day OfJanuary, eighteen hundred mid sixty-four, whether before or after thecommencement of this Ordinance shall, unless it is duly registeredunder this Chapter, or, if the land has come within the operation ofthe Land Registration Ordinance, 1877, in the books mentioned £q
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BASNAYAKE, C.J.—Appuaingho v. Leelawathie
section 26 of that Ordinance, be void as against all parties claiming anadverse interest thereto on valuable consideration hy virtue of anysubsequent instrument which is duly registered under this Chapter, or,if the land has come within the operation of theLand RegistrationOrdinance, 1877, in the books mentioned in section 26 of,thatOrdinance*
“ (2) But fraud or collusion in obtaining such subsequent instru-ment, or in securing the prior registration thereof shall defeat the
priority of the person claiming thereunder.”
( '
To answer these questions it is necessary to construe the above quotedprovisions and ascertain the meaning of the words “ fraud or collusion inobtaining such subsequent instrument or in securing the prior regis-tration thereof”. In the absence of anything in the context to thecontrary the words of a statute must be given their ordinary meaning.For the purpose of ascertaining the ordinary gleaning it is permissible toconsult authoritative dictionaries. The Shorter Oxford Dictionarydefines “ fraud ” as—,
“1. The quality of being deceitful. 'Now rare; 2; Criminaldeception; the using of false representations to obtain an unjustadvantage or to injure the right or interests of another (M. E.); 3. Allact or instance of deception, a dishonest trick (M. E.j; 4. A fraudulent,contrivance; in mod. colloq. use, a spurious or deceptive thing.”
The word “ collusion " is defined in the same Dictionary as—
“ Secret agreement or understanding ,for purposes of trickery orfraud; underhand scheming or working with another; deceit, fraud,trickery.”>,…
According to Sweet’s Law Dictionary—
“ Fraud is used in many senses, but the point common to all ofthem is pecuniary advantage gained by unfair means. Actual fraudis where one person causes pecuniary injury to another by intentionallymisrepresenting or concealing a material fact which from their mutualposition he was bound to explain or disclose. This kind of fraud is alsosometimes called ‘personal’ or.‘moral’ as opposed to ‘legal’ or‘ constructive ’ fraud.”
In the same dictionary “ collusion ” is defined , thus :
“ Collusion is where two persdns, apparently in a hostile position, orhaving conflicting interests, by arrangement do some act in order toinjure a third person or deceive a Court.”
*' 1 ,'
Tomlins’ Law Dictionary defines “ fraud ” thus: .
' “ Deceit in grants and conveyances of labels, and bargains and salesOf goods eto. to the damage of another person; which may be either bysuppression of the truth, or suggestion of falsehood. ”
4rl2
, BASNAYAKE, C.J.—Appu&ingho v. Leelawathie
and “ collusion ” as follows :—1
“ Is a deceitful agreement or contract Between two or more persons,for one to bring an action against the other, to some evil purpose, asto defraud a third person of his right. This collusion is either apparent,when it shows itself on the face of the act; or, which is more common,it is secret, when done in the dark, or covered over with a show of"honesty.”
Byrne’s Law Dictionary defines “ fraud ” thus:
“ Fraud is used in many senses, but the point common to all of themis that pecuniary advantage is gained by unfair means. Actual fraudis where one person causes pecuniary injury to another by intentionallymisrepresenting or concealing a material fact which from their mutualposition he was bound to explain or disclose. This kind of fraud isalso sometimes called ‘ personal ’ or ‘ moral ’ as opposed to ‘ legal ’ or* constructive ’ fraud.”
It is not necessary to burden this judgment with Wharton’s definition offraud; but his definition of collusion should, I think, be reproduced. Hedefines it as—
“ An agreement or compact between two or more persons to dosome act in order to prejudice a third person, or for some improperpurpose.”
In this connexion it would be useful to refer to Story’s discussion ofthe topic of “ fraud ” in his Equity Jurisprudence. He says (s. 186Equity Jurisprudence)—*
“ It is not easy to give a definition of fraud in the extensive signi- “fication in which that term is used in courts of equity; and it has beensaid that these courts have, very wisely, never laid down, as a generalproposition, what shall constitute fraud, or any general rule, beyondwhich they will not go upon the ground of fraud, lest other means ofavoiding the equity of the courts should be found out.”
Story quotes Labeo’s definition of fraud as—
“ Any cunning, deception, or artifice, nsed to circumvent, cheat, ordeceive another—Dolum Mcdum esse orrmem calliditatem, fallaciam,machinationem ad eircumveniendum, fallendum, deoipiendum, alterum,adhibitam.”
Story adds that this definition is, beyond doubt, sufficiently descriptiveof what may be called positive, actual fraud, where there is an intentionto commit a cheat or deceit upon another to his injury, and he goes onto say—
i
“ But it can hardly be said to include the large class of implied orconstructive frauds, which are within the remedial jurisdiction of acourt of equity. Fraud, indeed, in the sense <*8* a court of equity,properly includes all acts, omissions, and concealments which involve
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BASNAYAKE, C.J.—Appusingho v, Leelawathie
a breach of legal or equitable duty, trust, or confidence, justly reposed■ and are injurious to another, or by which an undue and unconscien-tious advantage is taken of another.*',
It is settled law that the expression “ fraud ” is used in section I (2) inthe sense of actual fraud and not equitable fraud. Abeysundera ,v.Geylon Exports Ltd., (Privy Council)1. Having regard to the definitionsof actual fraud cited above “ fraud in obtaining such subsequent in-strument ” may be defined as obtaining the subsequent instrument, byany cunning, deception, artifice, or trick or by any intentional mis-representation or concealment of material facts which from their mutualposition the transferee was bound to explain or disclose to the transferor.The expression “ collusion ” in the context of “ collusion in obtainihgsuch subsequent instrument ” presents some difficulty in construction.Sweet’s definition suggests that collusion can be said to exist only wheretwo persons, apparently in a hostile position, or having conflicting'interests, by arrangement do some act in order to injure a-third person.The words “ in obtaining such subsequent instrument ” exclude the caberof a collusion between transferor and transferee, because the transferorcannot be said to be a party to obtaining the subsequent instrument ; butto granting or giving it. The “ collusion ” must therefore be between ''persons other than the transferor who combine to obtain the subsequentinstrument. The definition in the Oxford Dictionary and Wharton’sLaw Lexicon appears to suit the context better than those of Sweet andTomlins. The expression may therefore be defined as an agreement^,understanding or compact between two or more persons to obtain thesubsequent instrument by practising an artifice, a trick, fraud or deceitor by resorting to some underhand or improper scheme or device. '
It is also settled law that mere notice of a prior unregistered instrumentis not of itself sufficient evidence of fraud for the purposes of the section(ibid). It has also been held by this Court in the case of Siripina v.Tikira a and affirmed in the subsequent case of Asemppa v. Weeratunga 3that the mere purchase of land with the knowledge that the vendor hadpreviously sold to a third person, who had not yet registered hisconveyance, does not amount to fraud.■
Several decisions of this Court were cited by both sides. It is not'necessary to refer to them all. I have referred above to the most’1authoritative of them; According to those decisions actual fraud on the:part of the person obtaining the deed must be proved. If the personobtaining the deed acts through an agent duly authorised for the purposehe must suffer if his agent obtains the deed by fraud.
Before I part with this judgment I wish to refer to two Privy Councildecisions not cited at the argument. In the case of Assets Company Ltd.
1 (1936) 38 N. %: It. 117.* (1878)1 &.C.C. 84.
'*(1911) 14 N.L.B. 417—3 Judges…
2*J. N. B 2476 (6/59).
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BASNAYAKE, C.J.—Appusingho v. Leelauxithie
v. Mere Boihi Lord Lindley in deciding a question of registration ofdocuments under the corresponding New Zealand Act said—
“by fraud in these Acts is meant actual fraud, i.e., dis-
honesty of some sort, not what is called constructive or equitablefraud—an unfortunate expression and one very apt to mislead, butoften used, for want of a better term, to denote transactions havingconsequences in equity similar to those which flow from fraud. Further,it appears to their Lordships that the fraud which must be proved in■- order to invalidate the title of a registered purchaser for value, whetherhe buys from a prior registered owner or from a person claiming undera title certified under the Native Land Acts, must be brought home tothe person, whose registered title is impeached or to his agents. Fraudby persons from whom he claims does not affect him unless knowledgeof it is brought home to him or his agents. The mere fact that hemight have found out fraud if he had been more vigilant, and had made, further inquiries which he omitted to make, does not of itself provefraud on his part. But if it be shewn that his suspicions were aroused,and that he abstained from making inquiries for fear of learning the' truth, the case is very different, and fraud may be properly ascribedto him. A person who presents for registration a document which isforged or has been fraudulently or improperly obtained is not guilty offraud if he honestly believes it to be a genuine document which can beproperly acted upon.”
In the later case of Waimiha Sawmilling Co. Ltd. v. Waione TimberCo. Ltd. * Lord Buckmaster observed at p. 273—
“ It is not, however, necessary or wise to give abstract illustrationsof what may constitute fraud in hypothetical conditions, for each casemust depend upon its own circumstances. The act must be dis-honest, and dishonesty must not be assumed solely by reason ofknowledge of an unregistered interest.”
: The plaintiff’s evidence does not establish anything more than that the3rd defendant a Proctor’s clerk to whom the 1st defendant had entrustedthe task of obtaining the conditional transfer from the 2nd defendantknew of the previous sale of the land to the plaintiff and that he hadsearched the relevant land register and discovered that the deed infayour of the plaintiff was not registered. This evidence does notestablish fraud or collusion within the meaning of those expressions in. section 7 (2) on the part of the 3rd defendant.
The appeal is dismissed with costs.
Pulle, J.—I agree.
Appeal dismissed. i
i (1905) A. C. 170 at 210.
* (1840-1932) N. Z. Privy Council Cases, p. 267.