KARUNAWATHIE v. ROBO SINGHO

033-SLLR-SLLR-1983-2-KARUNAWATHIE-v.-ROBO-SINGHO.pdf


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Karunawathie v. Robo Singho
407
KARUNAWATHIE
v.
ROBO SINGHO
COURT OF APPEALATUKORALE. J. P/CA ANDMOONEMALLE. J.
S. C. 832/75D. C. GALLE 7766/129. 30 JUNE 1983.
Property — Trust to re-transfer land — Section 83 of Trusts Ordinance — Oralagreement to re-transfer — Section 2 of Frauds Ordinance—Section 92 of theEvidence Ordinance.
Held –
The oral agreement by the defendant appellant to reconvey the lands to theplaintiff-respondent on payment of Rs. 3000/- does not give rise to a trust.Further facts, clearly indicative of a trust must be proved before a trust can arise.The facts that adequate consideration did not pass, that plaintiff-respondentremained in possession after execution of the conveyance and that an oralpromise was made to re-transfer are insufficient.
Further this oral agreement relied on by the plaintiff-respondent amounts to acontract for the transfer of immovable property which is invalid and cannot beenforced as it contravenes section 2 of the Prevention of Frauds Ordinance.Though parol evidence of this oral agreement was admitted at the trial withoutobjections it would still be prohibited by section 92 of the Evidence Ordinance.
Cases referred to :
Saverimuttu v. Thangavelainathan 55 NLR 486
Perera v. Fernando 17 NLR 486
Valliamma Atchchi v. Abdul Majeed 48 NLR 289
Adicappa Chetty v. Caruppan Chetty 22 NLR 169APPEAL from judgment of the District Court of Galle.
W. Jayewardene. Q.C. with N. R. M. Daluwatte and Lakshman Perera fordefendant-appellant.
N. Devendra for substituted plaintiff-respondent.
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August 4, 1983.
MOONEMALLE, J.
The Plaintiff-Respondent instituted this action against theDefendant-Appellant for a declaration that Deed of transfer No.3443 dated 20th October 1957 (P3) was executed in trust forthe Plaintiff-Respondent, and that the Defendant-Appellant beordered to retransfer to him the six allotments of land describedin the schedule to the amended plaint.
The Defendant-Appellant in her amended answer prayed thatshe be declared entitled to these lands free of any trust, and forejectment of the plaintiff-respondent, and for damages andcosts.
After trial, the learned District Judge entered Judgment for theplaintiff-respondent holding that the deed P3 was executed intrust for the plaintiff-respondent, but that he was not entitled to areconveyance of the lands mentioned in the deed P3 until hepaid the full sum of Rs. 3000/- to the defendent appellant. Hedismissed the defendant-appellant's claim to a declaration of titleto these lands, for ejectment and damages. The Plaintiff-Respondent was entitled to costs.
This appeal by the Defendant-appellant is from this judgment.The Plaintiff-Respondent is now dead. The Plaintiff-Respondentand the Defendant-Appellant were brother and sister. ThePlaintiff-Respondent was a bachelor, while the Defendant-Appellant was married to one D. H. Senanayake. a policeconstable.
The Plaintiff-Respondent had been in financial difficulties andwas sued in D.C. Galle in M. B. Case No. 1162. and Judgmenthad been entered against him. The decree in that case dated11 th January 1957 is P2.
This decree was for the recovery of Rs. 2032/- and interest at5% and costs. The Plaintiff-Respondent had decided to sell thelands which are the subject-matter of this action in orderto obtain the money to satisfy the decree P2. Sometime in
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Karunawathie v. Robo Singho (Moonemalle. J.)
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September 1957 the Defendant-Appellant had come to thePlaintiff-Respondent's house and learnt that he was going to sellthe ancestral lands including the ancestral house. She-had askedhim not to sell the lands to outsiders and had told him that shewould give him the money he needed. The Defendant-Appellanthad paid the Plaintiff-Respondent the sum of Rs. 3000/- and hehad transferred the lands to her by deed P3. The Plaintiff-Respondent’s position was that the Rs. 3000/- paid to him wasan advance given to him to liquidate his debt and that the landswere transferred to the Defendant-Appellant to be held by her intrust for him. and that she had agreed to retransfer the lands tohim on his repaying to her the Rs. 3000/-.
According to the Defendant-Appellant, after the execution ofP3. she had allowed her father to look after these lands as shewas living away frpm the village with her husband who wasstationed in far off places. She said that her father used to sendto her, her share of coconuts and paddy from these lands. It wasadmitted by the Plaintiff-Respondent that the Defendant-Appellant and her husband were not living in the village after theexecution of P3 till they returned to the village in 1969-70.
After the death of the father in 1960, the Defendant-Appellantstated that she had asked the Plaintiff-Respondent to look afterthe lands. According to her, the Plaintiff-Respondent used tocome and see her and bring her share of the income from theselands. Even after the execution of P3. the Plaintiff-Respondenthad borrowed money on certain occasions from the Defendant-Appellant and her husband. By Letter of 20th August 1963 (P4),the Defendant-Appellant’s husband had written to the Plaintiff-Respondent that the Plaintiff-Respondent had received from himup to that date a sum of Rs. 4600/- inclusive of the Rs. 3000/-that passed on the deed. The Plaintiff-Respondent stated that byJune 1969 he had paid the Defendant-Appellant the lastinstalment of Rs. 475/- due by him and had asked her toreconvey the lands to him. but she had failed to do so.
However, according to the Defendant-Appellant she returnedto the village in August 1 969 after her husband retired. She had
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met the Plaintiff-Respondent and wanted back the possession ofher lands which he was looking after for her. The Plaintiff-Respondent had refused to do so and had disputed theDefendant-Appellant's rights to these lands.
The main question for decision in this case is whether thetransaction relating to Deed P3 is a pure contract for thepurchase and sale of the six allotments of land mentioned in P3or whether it gives rise to a trust in favour of the Plaintiff-Respondent. whereby the Defendant-Appellant is required toretransfer the said lands to him on his paying her the sum ofRs. 3000/-.
Learned Counsel for the Plaintiff-Respondent contended that atrust in terms of Section 83 of the Trust Ordinance arose in thecircumstances of the present case. Section 83 of the TrustsOrdinance reads as follows; "Where the owner of propertytransfers or bequeaths it, and cannot reasonably be inferredconsistently with the attendant circumstances that he intended todispose of the beneficial interest therein, the transferee orlegatee must hold such property for the benefit of the owner orhis legal representative. "
Learned Queen's Counsel appearing for the Defendant-Appellant submitted that a trust does not arise in this Case, andthat the word 'Trust' is used only as a label which the Plaintiff-Respondent attaches to this transaction. He submitted that if theword 'Trust' is left out, then what remains is the oral agreementto retransfer the lands, which is a non-notarial document, andtherefore oral evidence cannot be led to prove that oralagreement, as it contravenes Section 2 of the Prevention ofFrauds Ordinance.
Such an oral agreement is unenforceable in law. However, inthe present case, the Plaintiff-Respondent sought to prove theoral promise not in order to have it enforced, but only to use it asan attendant circumstance in order to prove the trust. It is‘forthis reason that the oral evidence of this oral promise wasadmitted in evidence. The learned trial Judge had cometo a finding that the Defendant-Appellant had given the
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Plaintiff-Respondent the undertaking to reconvey the lands tohim on his paying her the sum of Rs. 3000/-. The learned TrialJudge accepted the evidence of the Valuer's valuation of theselands as being Rs. 13.168/- at the time of the execution of P3.which is about four times the amount of the consideration thatpassed on this deed.
It is common ground that the Plaintiff-Respondent remained inpossession of these lands even after the execution of P3.
Thus, the attendant circumstances on which the PlaintiffRespondent relies on to establish a Trust in terms of Section 83of the Trust Ordinance are,
That adequate consideration did not pass on Deed P3.
That the Plaintiff-Respondent remained in possession ofthe lands after execution of P3 and therefore did not intend topart with the beneficial interest in the property.
That the Defendant-Appellant made an oral promise at thetime of the execution of P3 to retransfer the lands to the Plaintiff-Respondent on the payment of Rs. 3000/-.
Deed P3. on the face of it purports to be an unqualifiedtransfer of immovable property for consideration; whatever labelis given to this transaction, it is necessary to scrutinize theevidence carefully and ascertain its true nature.
There is no doubt that the consideration of Rs. 3000/- thatpassed on P3 is considerably less than the real value of thelands, which is Rs. 13.168/-. In this connection, it is importantto note that the relationship of the Plaintiff-Respondent and thatof the Defendant-Appellant was not that of debtor and creditor, butthat of brother and sister. Evidently, the two of them had beenfriendly at the time because otherwise. P3 would not havebeen executed in favour of the Defendant-Appellant. TheDefendant-Appellant had stated in her evidence that she hadasked the Plaintiff-Respondent not to sell the lands
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to outsiders, and that if the lands were sold to outsiders therewould be no purpose in their living in the village. It is also of notethat the Plaintiff-Respondent was a bachelor who lived in theancestral house with the father and the mother.
The ancestral house is in land No. 2 in P3. called Bubulewatte.Had the Plaintiff-Respondent sold these lands to an outsider, heand his parents would have had to find accommodationelsewhere. In these circumstances, it is quite natural that thelands were sold to the Defendant-Appellant for Rs. 3000/- inorder to preserve them within the family. I do not think that theDefendant-Appellant wanted to take advantage of the Plaintiff-Respondent's financial position and get the transfer of the landsin her name for a low consideration.
It is common ground that the Defendant-Appellant was livingaway from the village even after the execution of P3. This isquite understandable as her husband who was a policeconstable was in a transferable service. According to theDefendant-Appellant her husband served in distant places suchas Welipenna, Matugama and Amparai. and so it would havebeen well nigh impossible for the Defendant-Appellant to haveremained in physical possession of these lands after theexecution of P3. In these circumstances, her version that duringher absence from the village, her father looked after her landstill his death, and thereafter her brother, the Plaintiff-Respondent,did so is quite plausible. The feelings between the Plaintiff-Respondent and the Defendent-Appellant became strained onlyafter the Defendant-Appellant returned to the village in August1969 after her husband had retired.
When the Defendant-Appellant wanted her lands back, thePlaintiff-Respondent was not willing to return them. Thenon 18.1.70. when the Defendant-Appellant went to takepossession of Land No. 5 in P3. there had been an incidentbetween the Plaintiff-Respondent and the Defendant-Appellant'shusband which resulted in the Plaintiff-Respondent being
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charged in M. C. Galle case No. 64867/B for attempting to stabthe Defendant Appellant's husband. It is clear from thecircumstances under which Rs. 3000/- passed as considerationon P3, and from the circumstances under which the Plaintiff-Respondent remained in possession of the lands after theexecution of P3. that it was never intended that the beneficialinterest in the lands should remain with the Plaintiff-Respondent.
The remaining attendant circumstance the Plaintiff-Respondent relied on is the oral promise to reconvey the Landsin (P3).
The general rule is that a transaction relating to immovableproperty is invalid unless the terms of the transaction areembodied in a notarially attested document. However, this rule isrelaxed in the case of fraud on the ground that the Statute ofFrauds should not be made an instrument of fraud —Saverimuttuv. Thangavelainathan (1).
Learned Counsel for the Plaintiff-Respondent submitted thatfraud need not be present at the inception of the execution of anotarial deed for the transfer of immovable property, and that abreach subsequent to the execution of the deed, of an oralpromise to reconvey the property would amount to a fraud.
Learned Counsel for the Plaintiff-Respondent relied on anobservation of Dr. L. T. M. Cooray in his book on the Reception inCeylon of the English Trust, and also on an English CaseBannister v. Bannister referred to in that book, in support of hissubmission. At the outset, I might state that the question of fraudis totally irrelevant to this appeal, as the question of fraud wasraised for the first time in appeal. There was no issue on fraudraised at the trial, and learned trial Judge was not invited at anystage of the trial to decide on the question, of fraud.
It is settled law that where there is an outright sale ofimmovable property, by a notarial deed, oral evidence could be
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led to prove that the property in the hands of the transferee washeld in trust for the transferor..
Learned Queen's Counsel appearing for the Defendant-Appellant in submitting that no trust arose in this case relied onthe case of Saverimuttu v. Thangavelainathan (1). and contendedthat case was on all fours with the present case. In the reportedcase, the appellant and his wife transferred to one Aiyadorai byDeed. 3. three allotments of land which were the subject-matterof a Mortgage deeree on which at the relevant date, a balanceamount of Rs.‘ 2000/- was payable by the appellant and his wifeto Aiyadorai. It was stated in Deed No. 3 that the considerationfor the transfer was this balance amount due on the mortgagedecree. Satisfaction of the decree was duly certified of record.On the face of the deed, it was an unqualified transfer forconsideration. Immediately after the execution of the deed, onthe same day, Aiyadorai leased the lands to the Appellant and hiswife for a period of six years. The relationship of Aiyadorai andthe appellant had been converted from that of creditor anddebtor to that of lessor and lessee. After the lease expired, a rei-vindicatio action was instituted by Aiyadorai's successors in titleagainst the appellants. The appellants sought to assert byevidence of an informal agreement that the transfer to Aiyadoraiwas subject to a condition that Aiyadorai was to hold the lands intrust for the appellants and reconvey the lands to the appellantson payment to Aiyadorai of a sum of Rs. 2000/-with interest. Itwas held in that case that the informal agreement relied on bythe appellants amounted not to a trust but to a contract for thetransfer of immovable property and was therefore invalid as itcontravened the provjsions of Section 2 of the Prevention ofFrauds Ordinance. Counsel for the appellant in that case arguedthat if B transfers land to A for a consideration by an effectivenotarial document and A as part of the same transaction agreesorally or by a non-notarial agreement to retransfer the land to Bfor the same or another consideration, a Trust in favour of Barises. Their Lordships of the Privy Council did not agree. TheirLordships thought that further facts clearly indicative of a Trustmust be proved before a Trust can be said to arise. "
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Karunawathie v. Robo Smgho (Moonemalle. J.)
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In the Judgment delivered by Mr. L. M. D. de Silva in that case,the Privy Council has referred to the case of Perera v. Fernando(2) where it was held that where a person transferred a land toanother by a notarial deed purporting on the face of it to sell theland, it is not open to the transferor to prove by oral evidencethat the transaction was in reality a mortgage and that thetransferee agreed to reconvey the property on payment of themoney advanced. It was further held in that case that theagreement relied on amounted not to a trust but to " a purecontract for the purchase and sale of immovable property. "TheirLordships -were of opinion that Perera v. Fernando (2) set outcorrectly the law of Ceylon.
In the case of Valliamma Achchi v. Abdul Majeed (3) there wasan unconditional transfer by notarial deed of immovable propertyby A to B. In pursuance of a verbal agreement B was to hold theproperty in trust for A. B was to remain in possession of theproperty and to pay out of the income of the property debts of Adue to himself and to others, and thereafter B was to reconveythe property to A.
Their Lordships of the Privy Council stated that they " havebeen referred to the relevant evidence and they are satisfied thatthere was ample evidence, if admissible, to justify the finding thatthe trust was established.
In that case on the facts established by oral evidence it washeld that B held on Trust the land conveyed to him by A thoughthe deed of transfer made no reference to the trust.
Their Lordships observed that" The decision does not in termsor otherwise detract from the force of the view expressed by theBoard in the case Adicappa Chetty v. Caruppan Chetty (4). In thatcase it was sought to establish by oral evidence that a personwho held a land under a notarially attested document held it intrust for another. It was held that parol evidence wasinadmissible. It was further held that the agreement in respect ofwhich parol evidence was led sought to " create something
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much more resembling a mortgage or a pledge than a trust" andwas of no force or avail in law if it contravened section 2 of thePrevention of Frauds Ordinance.
The case of /alliamma Achchie v. Abdul Majeed (3) could bedistinguished from the case of Saverimittu v. Thangavelainathan(1) in that in the former case " Chief among the purposes of thattrust was that the transferee should enter into possession, collectthe income and therewith pay off the debt due to himself anddebts due to certain other persons. It was thereafter that thetransferor was to reconvey the property to the transferee. "
Their Lordships in the course of their Judgment in Saverimuttuv. Thangavelainathan (1) referred to the existence of commonelements with the case of Va/iamma Achchi v. Abdul Majeed, (3)namely, that in each case that there was an alleged agreement bya transferee of land to reconvey to the transferor and thetransferor in each case was indebted to the transferee at the timeof the transfer. But their Lordships were of the view that thoseelements themselves did not establish a trust and that theyestablished only an agreement to convey. Their Lordships alsopointed out that the Judgment in Valliamma Atchchi v. AbdulMajeed (3) did not indicate that these common elements are inall cases sufficient to give rise to a trust.
Thus, it is clear that in the present case in appeal the oralagreement by the Defendant-Appellant to reconvey the lands tothe Plaintiff-Respondent on the payment of Rs. 3000/- does notgive rise to a trust. Further facts, clearly indicative of a trust mustbe proved before a trust can be said to arise. Further, this oralagreement relied on by the Plaintiff-Respondent amounts to acontract for the transfer of immovable property which is invalidand cannot be enforced as it contravenes Section 2 of thePrevention of Frauds Ordinance. Though parol evidence of thisoral agreement was admitted at the trial without objections itwould still be prohibited by Section 92 of the EvidenceOrdinance — William Fernando v. Roselyn Cooray (5).
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I hold that there isn't sufficient evidence to uphold the Plaintiff-Respondent's proposition that a trust has been established. Itherefore allow the appeal and set aside the judgment of thelearned District Judge and enter judgment for the Defendant-Appellant as prayed for by her in her amended answer. She willbe entitled to costs of appeal and costs of the court below.
ATUKORALE, J. — I agree
Appeal allowed.