CARTHELIS v. RANASINGHE

050-SLLR-SLLR-2002-V-2-CARTHELIS-v.-RANASINGHE.pdf


CA
Carthelis v. Ranasinghe
359
CARTHELIS
v.RANASINGHE
COURT OF APPEALWEERASURIYA, J. ANDDISSANAYAKE, J.
CA NO. 393/96 (F)
DC COLOMBO NO. 6233/ZLSEPTEMBER 15. 2000OCTOBER 30, 2000NOVEMBER 30, 2000
Trusts Ordinance – Constructive Trust S. 83 – Attendant circumstances -Beneficial interests – Tests to be applied – Notaries Ordinance S. 20 (c),S. 31 (10) – Duties of a Notary.
The plaintiff-respondent instituted action seeking a declaration of title to the landin question and the ejectment of the defendant-appellant. The defendant-appellantsought the dismissal of the action, and in recovention sought an order to set asidethe Deed of Transfer or in the alternative a declaration that the property is heldin trust by the plaintiff-respondent. The District Court held with the plaintiff-respondent. On appeal it was contended that the tial Judge failed to considerthe applicability of s. 83 Trust Ordinance.
Held:
(1) Applying the tests laid down in decided cases and considering the attendantcircumstances it would be clear that the defendant-appellant did not intendto part with the beneficial interest in the property.
Per Dissanayake, J.
‘It is of significance to observe that the Notary failed to give a plausibleexplanation regarding the substantial amount of space left between the scheduleof the deed and the place where the defendant-appellant and the witnesseshave signed. This gives credence to the version of the defendant-appellantthat their signatures were obtained on blank sheets of paper and later convertedto a Deed of Transfer.*
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Per Dissanayake, J.
'There is a duty cast on the Notary under S. 20 (c) Notaries Ordinanceto state whether the consideration or part of it passed before him or not. Thefact that this provision has been blatantly disregarded by the Notary who isalso an Attorney-at-Law, is another factor that is indicative of the fact thatthe deed was not attested in the manner as testified to by him, the plaintff-respondent and her witness.'
(ii) The trial Judge has failed to indulge in a proper evaluation of the evidence,she has also failed to consider the evidence, on the question of a constructivetrust in terms of s. 83.
APPEAL from the judgment of the District Court of Colombo.
Cases referred to :
Eliya Lebbe v. Majeed – 48 NLR 357.
Thisa Nona and 3 Others v. Premadasa – 1997 1 SRI LR 169.
Premawathie v. Gnanawathie Perera – 1994 2 SRI LR 171.
Sunil F. A. Cooray with Malaka Herath and S. A. D. S. Suraweera for the defendant-
appellant.
Wijayadasa Ftajapakse with KapHa Uyanagamage and Rasika Dissanayake for the
plaintiff-respondent.
Cur. adv. vult.
June 15, 2001
DISSANAYAKE, J.
The plaintiff-respondent by her plaint dated 01. 12. 1989 and amendedsubsequently, filed this action seeking a declaration of title, to the landdescribed in the schedule to the plaint, ejectment of the defendant-appellant therefrom and damages at Rs. 5,000 per month from01. 12. 1989 until the plaintiff-respondent is placed in possession ofthe said land.
CA
Carthelis v, Ranasinghe (Dissanayake, J.)
361
The defendant-appellant by his answer daed 29. 08. 1990 whilstpraying for dismissal of the plaintiff-respondent’s action, made a claimin reconvention seeking (a) an order setting aside the deed bearingNo. 882 dated 01. 08. 1986 (b) or in the alternative a declarationthat the property in suit is held in trust by the plaintiff-respondent untilretransfer of the same on repayment of the loan.
The case proceeded to trial on 17 issues and after the conclusionof the trial, the learned District Judge by her judgment dated 26.
1996 entered judgment for the plaintiff-respondent as prayed forin the plaint.
It is from the aforesaid judgment that this appeal has been lodged.
Learned Counsel for the defendant-appellant contended that thelearned District Judge has misdirected herself in entering judgmentfor the plaintiff-respondent, on the following grounds :
that the learned District Judge has not embarked on a properevaluation of the evidence; and
that the learned District Judge failed to consider the applicabilityof provisions of section 83 of the Trusts Ordinance.
The plaintiff-respondent's case was that N.P. Bertie Perera, whowas known to her had come to her house with the defendant-appellantand introduced him to her husband as one who wanted to sell hishouse and property situated at Kotte and that the defendant-appellanthad offered to sell it for a consideration of Rs. 260,000. The plaintiff-respondent agreed and subsequently the defendant-appellant hadobtained a sum of Rs. 75,000 as an advance payment and thereafteron two occasions had obtained Rs. 50,000 and Rs. 75,000 and finallyon 01. 08. 1986, the day on which the impugned deed was signedshe obtained the balance payment of Rs. 60,000.
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The plaintiff-respondent sought to assert that the deed No. 882dated 01. 08. 1986 (P1) attested by S. W. Premaratna, Notary Public,was a duly executed deed of transfer. She testified that the defendant-appellant continued to occupy the premises with her leave and licenseup to 30th October, 1989.
The plaintiff-respondent's position was that the defendant-appellant 40was in wrongful possession of the said premises since 30. 10. 1989,after termination of the license causing her damages in a sum ofRs. 5,000 per month. She sought ejectment of the defendant-appellantfrom the said premises.
The defendant-appellant's case was that since a marriage wasaranged for his 4th son he was in need of some money. He cameto know Major Ranasinghe, the plaintiff-respondent's husband throughBertie Perera, who agreed to give Rs. 60,000 as a loan, to him.
The defendant-appellant, his wife and Bertie Perera went to theresidence of the plaintiff-respondent on 24. 12. 1985 and obtained soa sum of Rs. 60,000 as a loan. He sought to assert that MajorRanasinghe obtained his signature on 3 blank sheets of paper purportingit to be a document signed as security for the loan taken.
The defendant-appellant elaborating the placing of his signature onthe 3 blank sheets of paper stated that he was given the 3rd pageof deed bearing No. 882 dated 01. 08. 1986 (P1) to be signed. Thesaid 3rd page of the said deed was in blank and was folded whengiven to him for signature. Except the numbers 1 and 2 he did notobserve any other letters there. The words witnesses or N.P. werenot found in the said 3rd page of 'PT at the time he placed his 60signature. His position was that his wife and Bertie Perera too signedthe said blank sheets of paper thereafter.
CA
Carthelis v. Ranaslnghe (Dissanayake, J.)
363
The defendant-appellant testified that he had never seen S. W.Premaratne, the notary public before, until he saw him in Court whenhe (Premaratne) gave evidence. Although he admitted to signing 3sheets of paper in blank on 24. 12. 1985, he denied having signeddeed No. 882 (P1) on 01. 08. 1986 as a deed of transfer.
The defendant-appellant's position was that for the loan he obtainedfrom Major Ranasinghe he paid interest at the rate of Rs. 3,000 per
month to him but he was never issued with any receipts for the saidpayments.
The defendant-appellant denied that he received letter dated30. 10. 1984 (P4).
His position was that he never received a sum of Rs. 260,000either from the plaintiff-respondent or from her husband.
Therefore, the crucial issues that arise for decision in this caseare :
Whether the defendant-appellant signed deed No. 882 dated01. 08. 1986 (P1), as a deed of transfer or he signed P1 as a resultof a fraud that was perpetrated on him by the plaintiff-respondent'shusband who is said to have obtained his signatures on 3 blanksheets of paper which was purported to be a document given assecurity for the loan, or in the alternative.
Whether, under the circumstances of this case a constructivetrust had been created in favour of the defendant-appellant.
It is of significance to observe that the Notary S. W. Premaratnefailed to give a plausible explanation regarding the substantial amount
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of space left between the schedule of the deed and the place wherethe defendant-appellant and the witnesses have signed at page (3)of deed P1. This gives credence to the version of the defendant- 90appellant that their signatures were obtained on blank sheets of paperand later converted to a deed of transfer.
The Notary's failure to mention the fact of payment of Rs. 60,000before him and his failure to mention anything at all regarding theconsideration in the attestation clause is another factor that belies hisevidence that he attested the deed in the presence of the defendant-appellant and the witnesses.
There is a duty cast on the Notary under section 20 (c) of theNotaries Ordinance to state whether the consideration or part of itpassed before him or not. The fact that this provision has been iooblatantly disregarded by the Notary who is also an Attorney-at-Lawis another factor that is indicative of the fact that deed P1 was notattested in the manner as testified to by him, the plaintiff-respondentand her witness.
According to section 31 (10) of the Notaries Ordinance, unlesseither the executant or the 2 witnesses are known to the Notary hecannot attest a deed. But, according to the testimony of the defendant-appellant he only saw the Notary for the 1st time in Court when hecame to give evidence in this case. Bertie Perera was emphatic thathe did not know the Notary before. If the defendant-appellant has not 110seen the Notary before, it is not likely that his wife, the other witness,would have known the Notary. However, Notary Premaratna's positionwas that he had known the defendant-appellant for a period of about7 months before the deed was attested.
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Carthelis v. Ranasinghe (Dissanayake, J.)
365
The following discrepancies and infirmities were also observed inthe evidence led on behalf of the plaintiff-respondent :
Bertie Perera stated that the defendant-appellant, his wife,
and he went to Panagoda Army Quarters of Major Ranasingheto discuss the said transaction for the first time with theplaintiff-respondent.120
But, the testimony of the palintiff-respondent was thatdefendant-appellant, his wife and son came to SanchiarachchiGardens, Colombo 12, when they first came to discuss thetransaction.
Bertie Perera's testimony was that only Rs. 60,000 orRs. 70,000 was paid as the 1st instalment to the defendant-appellant. Whereas, the plaintiff-respondent was emphaticthat Rs. 75,000 was paid as the 1st instalment. Bertie Pereraalso asserted that a sum of Rs. 75,000 was paid beforethe Notary Public, thereby contradicting the testimony of the 130plaintiff-respondent who stated that a sum of Rs. 60,000was paid on the day when the deed was executed.
Witness Bertie Perera in the course of his evidence admittedthat he was a broker. However, he changed his evidencesubsequently and stated that he did not work as a broker.
He even denied the fact that he said so in evidence.
Before I proceed to examine the question whether in view of thepeculiar circumstances of this case, a constructive trust had beencreated in favour of the defendant-appellant, it is necessary toexamine the definition of a constructive trust as found in section 83 140of the Trusts Ordinance.
Section 83 reads thus :
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"Where the owner of property transfers or bequeaths it, andit cannot be reasonably be inferrred consistently with the attendantcircumstances, that he intended to dispose of the beneficial interesttherein. The transferee or legatee must hold such property forthe owners or his legal representative."
In dealing with the question of a trust the attendant circumstancesare considered very material. In the case of Eliya Lebbe v. MajeecP>at 339 Dias, J. stated thus :
“There are certain tests for ascertaining into which category acase falls. Thus, if the transferor continued to remain in possessionafter the conveyance, or if the transferor paid the whole cost ofthe conveyance or if the consideration expressed on the deed isutterly inadequate to what would be the fair purchase money forthe property conveyed – all these are circumstances which wouldshow whether the transaction was a genuine sale for valuableconsideration or something else."
In the case of Thisa Nona and 3 Others v. PremadasaP it wasobserved, that the following circumstances which transpired in thatcase were relevant on the question whether the transaction was aloan transaction or an outright transfer (1) the fact that a non-notarialdocument was admitted to have been signed by the transferee,
the payment of the stamp duty and the Notary's charges by thetransferor, (3) the fact that the transfer deed came into existencein the course of a series of transactions, and (4) the continuedpossession of the premises in suit by the transferor just the way shedid before the transfer deed was executed.
It was further held in the said case that the attendant circumstancesshow that the transferor did not intend to dispose of the beneficialinterest in the property transferred. Law, therefore, declares under suchcircumstances that the transferee would hold such property, for thebenefit of the transferor.
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Carthelis v. Ranasinghe (Dissanayake, J.)
367
I shall now discuss whether the tests laid down above could beapplied to ascertain the true nature of the present transaction.
The continued possession by the defendant-appellant of thepremises in suit, after the execution of deed No. 882 (P1)on 01. 08. 1986 upto the date of filing of action.
The explanation given by the plaintiff-respondent thatsince the defendant-appellant's wife expired after deed (P1) 180was executed and he wanted some time to leave, is untenableas the plaintiff-respondent allowed him to be in possessionfor a period of over 3 years and 2 months until she filedthis action to eject him.
The consideration of Rs. 60,000 mentioned in deed P1 isclearly inadequate as fair purchase money for 17. 30 perchesof land together with an old house at Kotte in 1985.
Although the plaintiff-respondent took up the position thatthe consideration was Rs. 260,000 but the consideration ofRs. 60,000 was inserted in deed P1 in order to reduce the 190stamp duty, this position was not supported by NotaryPremaratne.
The plaintiff-respondent failed to produce the receiptsallegedly taken from the defandant-appellant for payment ofthe earlier instalments. The explanation adduced by her thatafter the execution of deed P1 the receipts were destroyedby her husband is unacceptable.
If the consideration that was paid by the plaintiff-respondentwas Rs. 260,000 the question may arise as to why, this factwas not averred in the replication dated 07. 11. 1990. It 200was only averred later in the amended replication dated21. 08. 1991. There was no plausible explanation for thedelay.
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The plaintiff-respondent who valued the land, the subject-matter of the action at Rs. 100,000 in paragraph 10 of theplaint, later amended it to Rs. 260,000 after filing of theamended replication.
These circumstances go to show that the position thatRs. 260,000 being paid as consideration has been an afterthought on the part of the plaintiff-respondent.
Even if one were to assume that the consideration forthe transaction was Rs. 260,000, in view of the admissionof the plaintiff-respondent, under cross-examination that thevalue of a perch of land in Kotte in 1985 was Rs. 50,000(vide proceedings at page 385 of the brief), the total valueof 17.30 perches of land at Rs. 50,000 per perch wouldbe over Rs. 800,000.
Therefore, even a consideration of Rs. 260,000 is clearlyinadequate, as fair purchase money for 17.30 perches ofland at Kotte in 1985.
The failure of the plaintiff-respondent to cause an examinationof the title of the property by making a search at the landregistry, by her Notary.
When one invests money on land, especially for thepurpose of building a house, one has to be mindful of thetitle to the property. Therefore, examining the title by doinga search at the Land Registry is necessary for the vendeeto be satisfied – that the vedor has good title to sell andadditionally that the said title is acceptable to a lendinginstitution.
Even though the plaintiff-respondent asserted that sheintended to purchase this land for building a house, it appears
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Carthelis v. Ranasinghe (Dissanayake, J.)
369
that she has not done an examination of the title by gettinga search being done at the Land Registry.
The failure of the pfaintiff-respondent to produce the tiltledeed bearing No. 538 dated 29. 10. 1984 (D1) and otherold deeds which were produced by the defendant-appellantto wit : deed No. 2130 dated 31. 12. 1957 (D2) and deedbearing No. 1130 dated 04. 07. 1971 (D3). If it was a pureand simple transfer, one would expect the title deeds and 240all other old deeds to be in the hands of the transfereehaving obtained them from the trasferor, for the purposeof preparing the deed of transfer.
Applying the aforementioned tests and considering the attendantcircumstances it would be clear that the defendant-appellant did notintend to part with the beneficial interest in the property.
In such circumstances in terms of section 83 of the TrustsOrdinance plaintiff-respondent would hold such property for the benefitof the 1st defendant-appellant (vide case of Premawathie v. GnanawathiePerera.(3)250
Upon consideration of the totality of the evidence of this case, itwould appear that the signatures of the defendant-appellant had beenobtained on 3 blank sheets of paper, purporting it to be a documentas security for the loan of Rs. 60,000 obtained by him, to be held,until the repayment of the said loan. This document has been laterconverted as a deed of transfer of the property in suit.
Thus, the learned District Judge has failed to indulge in a properevaluation of the evidence. She has also failed to consider theevidence, on the question of a constructive trust in terms of section83 of the Trusts Ordinance.260
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The learned District Judge was in error when she entered judgmentfor the plaintiff-respondent.
Since the relief prayed for by the defendant-appellant in the answeris in the alternative and as I have already come to a finding on thequestion of a constructive trust, relief in terms of prayer (B) of theprayer to the answer of the defendant-appellant is not necessary.
Therefore, I set aside the judgment dated 26. 07. 1996 and thedecree and direct judgment be entered dismissing the action of theplaintiff-respondent. I
I further direct that judgment be entered in favour of the defendant-appellant in terms of prayer (C), and (D) of the answer of thedefendant-appellant.
The appeal is allowed with costs.
WEERASURIYA, J. – I agree.
Appeal allowed.
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