NAGUR PITCHI v. USOOF

001-NLR-NLR-V-20-NAGUR-PITCHI-v.-USOOF.pdf


the
NEW LAW REPORTS OF CEYLONVOLUME XX.[Full Bench.]
Present : Wood Benton C.J. and Ennis and De Sampayo JJ.NAGUB PITCHI v. TJSOOF.
1917*
201—D, C. Puttalam, 2,763.
Ordinance No. 7 of 1840, 8. 2—Informal agreement—Action to recovermoney advanced.
A' party whoadvancesmoney onaninformal agreement(void
by virtue of theprovisionsof section 2ofOrdinance No. 7 of1840)
is entitled to a refund only if the other party refuses or is incapableof completing the transaction.
T
A HR plaintiff advanced a sum of Bs. 945 to the defendant on averbal agreement for the lease to him by the defendant of twoparcels of land. He did not afterwards wish to take a lease, thoughthe defendant was willing to execute one. He brought this actionto recover the sum advanced. The learned District Judge foundthat there was an agreement that if the plaintiff failed to take thelease the deposit should be forfeited, and dismissed plaintiff's action.
The plaintiff appealed.
St. V. Jayewardene (with him Arulanandan), for the plaintiff,appellant.—The defendant has admitted the receipt of the money.We are entitled to get back the money, as the agreement to lease isnot notarially executed. Such an agreement is of no force or availin law, as provided by Ordinance No. 7 of 1840. The EvidenceOrdinance and the case law ace in favour of our view. Counsel cited(1836) Morgan's Digest 82 ; (1859) 3 Lorenz 175 ; (1873) Grenier,vol 11., part II., p. 34 ; 2 C. L. B. 191 ; 3 N. L. B. 105 ; S. 0. M.,May 30, 1898, C. B. Kandy, 6,147 ; 4 A. C. B. 74 ; S. C. M., May 3,
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1917
Nargur P ichi«. Uaoof
Bawa, K.G. (with him M. W. H. de Silva), for the respondent.—The cases cited do not apply to the facts of this case. In this casethere is an agreement to forfeit the money advanced if the plaintiffdoes not complete the contract. This is a separate agreement, andis not affected by section 2 of Ordinance No. 7 of 1840.
If the plaintiff be allowed to prove the agreement, even for acollateral purpose, the defendant also should be allowed to provewhat the actual agreement was (see 12 M. I. A. 1ST).
The plaintiff cannot recover, as he was the party who made default.See Halsbury’s Laws of England, vol. XXV., p. 402; Thomas v.Brown, 1 Q. B. D. 714; Voet 18, 1, 25; 2 Nathan 715; 1 S, 0. B.60 ; 22—D. C. Kegalla, 4,420, S. C. M„ August 7, 1917.
A. St. V. Jayewardene, in reply.
Cur. adv. vult.
August 23, 1917. Ennis J.—
The plaintiff-appellant sued for the recovery of Rs. 945 paid on averbal agreement to the defendant for the lease of certain lands fora term of years. The learned Judge found that the defendant wasready and willing to execute the lease, and that there was an agree-ment that if the plaintiff failed to take the lease the deposit should^bo forfeited. He gave judgment in defendant's favour, holding'that in law the defendant was entitled to retain the amount asforfeit. The plaintiff appeals; and a series of cases have beencited in support of his contention that he is entitled to recover themoney paid. Mr. Bawa, for the respondent, urged that these casesall differ from the present case, in that in this case there was adefinite agreement for forfeiture, and that such an agreement isseparate, and not affected by the provisions of section 2 of OrdinanceNo. 7 of 1840. It seems to me that the test as to whether or notthe agreement to forfeit is a separate agreement can be found inthe terms of section 92 of the Evidence Ordinance. Had theagreement to lease been reduced to writing and notarially executed,as required by section 2 of Ordinance No. 7 of 1840, no evidence ofa separate agreement to forfeit the advance would be admissiblein evidence, except the document; and if the document did notcontain this provision, it could not be proved as a separate verbalagreement. Consequently, I am of opinion that the agreement toforfeit, as an agreement separate from the agreement to lease,cannot be proved in the present case, and that, as a term of theagreement to lease, it is of no effect in law by virtue of theprovisions of section 2 of Ordinance No. 7 of 1840.
1904, 0. R. Batticaloa, 9,159; 11 N. L. R. 272; 12 N. L. R. 87,18 N. L. R. 292, 449 ; 19 N. L. R. 193 ; Carson v. Roberts, 31 Beaven613 ; 32 L. J. Ch. 105 ; L. T. J., July 2, 1910, p. 223 ; Ramanathan(1863-68) 83 ; Asirwatham’s Reports 22.
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Ii has been argued that the principle enunciated in Shah MukkuvLaU and others v. Baboo Sree Kishen Singh and others 1 would apply,md that the plaintiff should not be allowed to prove an agreement,sven lor a collateral purpose, without it being open to the defendantto prove the terms of it. Counsel for the plaintiff has, however,oow taken up the position that he does not seek to prove the agree-ment at $11, that it is sufficient for him to show that money waspaid under an agreement which cannot be proved, and that he isentitled to recover. Against this it was urged that in any eventthe plaintiff could not recover, as he was the party making default,the defendant being ready and willing to execute the lease. There areconflicting English cases on the point. In Carson v. Roberts2it was held that where there is no contract which can be enforcedthe purchaser is entitled to a return of his deposit, and in that casethe purchaser himself was the party who refused to complete thecontract. In Thomas v. Brown 3 it was held that where upon averbal contract for the sale of land the purchaser pays the depositand the vendor is always ready and willing to complete, an actioncannot be brought to recover back the money.
With regard to the Ceylon oases, in Cassim Pulle v. P. Migueland another4 it was held that money paid by a purchaser at anauction, of which the conditions of sale were not notarially executed,could be recovered. In Perera v. Silva,5 where a vendor was suedfor the return of the purchase money, such a return was allowed.In Wambeck v. Le Mesurier,5 where the defendant had been placedin possession of land on an invalid lease, it was held that if herefused to accept a lease he must quit the land. In Girigorisv. Tillekeratne7 the defendant refused to give a valid lease tocomplete his contract, and plaintiff was allowed to recover hisdeposit.
Other Ceylon cases were cited, and it will be sufficient to give thereference: Ramanathan (1863-68) 83; Morgan’s Digest 83; 3 Grenier,vol. II;, -part II., p. 34; C. R. Kandy, 6,147, S. C. M., May 30,1898; Asirwatkam’s Reports 22; 62—C. R. Batticaloa, 9,159, S. C. M..May 3, 1904; 11 N. L. R. 272; 19 N. L. R. 193.
The Ceylon cases do not go to the extent of saying that in everycase where money has been paid on an invalid agreement it can berecovered, and they cannot be said to be directly in conflict withthe decision in Thomas v. Brown.5 The more recent English casesseem to show that where the vendor or lessor is ready and willingto.complete the contract, the deposit paid cannot be recovered.
Lord Halsbury’s Laws of England (vol. XXV., p. 402), commentingon . the English cases, says : “ Where a deposit has been paid under
112 Moore 2nd. App. 157.* (1859) 3 Lorenz 175.
* (1862) 31 Beav. 613.5 (1908) 4 A. C. B. 74.
» (1876) 1 Q. B. D. 714.8 (1898) 3 N. L. R. 105.
’ (1893) 2 O. L. B. 191.
1917.
Etnas J.
Nagur Pitch*v. Ueoaf
a verbal contract for the sale of land, a vendor who resists thepurchaser’s action on the contract by the plea of the Statute oiFrauds is liable to return the deposit as money had and receivedto the use of the purchaser; but it seems that if the purchaser setsup the Statute in order to escape from his contract, he cannot recoverthe deposit.”
I would follow this principle.
In the present case it is the plaintiff who sets up the OrdinanceNo. 7 of 1840 to escape the completion of his agreement, and hecannot recover his deposit. Had he been willing to carry out theagreement and the defendant had refused, the position would havebeen reversed, and he could have recovered.
I would dismiss the appeal.
De Sampayo J.—
The question for decision is whether the plaintiff, who advanceda sum of Bs. 945 to the defendant on a verbal agreement for thelease to him by the defendant of two parcels of land, but who,according to the finding of the District Judge* did not afterwardswish to take a lease, though the defendant' was willing to executeone, can recover the deposit from the defendant.
If the English law on this point were followed, the questionshould be answered in the negative. Where a deposit is made onan informal agreement, within section 4 of the Statute of Frauds,the right to recover it depends on the further question, whether theperson who has made the deposit is himself the party in defaultor not. That is to say, if he is desirous of completing the transac-tion, but the other party refuses or is unable to carry out his partof it, the deposit is recoverable; but not in the converse case. Ofcourse, no interest or damages will in any case be allowed, sincesuch relief can only arise from a valid contract. See Vilde v. Fort,'1Oo8bell v. Archer,2 Sweet v. Lee,3 Wright v. Colls,* Thomas v.Brown.6 The reason for thi3 inquiry as to who was in default isthat where the party receiving the money fails to give to the partypaying it the property or right for which the money has been paid,the latter is entitled to a refund, on the general principle that moneypaid on a consideration which fails may be recovered back as moneyhad and received; whereas if the party receiving the moneyis willing to carry out the agreement, but the other party is not,there cannot be said to be a failure of consideration, and consequentlyno right of action can arise. Mr. Jayewardene, for the defendant,howeven^, relies on Carson v. Roberts,6 and strenuously contends
1 (1812) 4 Taunt. 334.* (1849) 8 C. B. 150.
(1835)|2 A. dk E. 500.‘ (1876) L. R. 1 Q. B. D. 714.
(1841) 3M.&G. 452.* (1862) 31 Beam. 613 :}32 L. J. Oh.105.
( s )that Lord Bomilley *s judgment in that ease is the more authori-tative view of the English law, and that it decides that the partywho had deposited money on an agreement invalid under theStatute of Frauds may recover the deposit in any event, withoutreference to any question as to who was in default. It is not quiteclear that Lord Bomilley expressed such a view. The two reportsin which the case is reported differ in very important particulars,and all that can safely be said on the above point is that LordBomilley thought that an inquiry by Court as to who was in defaultwas inconvenient and unsatisfactory. But the decision, I think,turned on a particular fact in that case. It is true that the vendeethere did not wish to complete the purchase, but it also appearsthat subsequently certain prior mortgagees had the property soldagainst the vendor, and the real point in the decision appears to bethat as, under the circumstances, the deposit could no longer beapplied for the purpose for which it was intended, the vendee wasentitled to recover it back. That is how I find Leake on Contract(3rd ed.} p. 87) has understood the case, for it is cited as authority forthe proposition that “ if the contract is mutually abandoned, or isincapable of completion, the purchaser is presumptively entitledto a return of the deposit.” That case, therefore, does not, in myopinion, alter the ruling to which I have referred, or affect thereasoning on which it is based.
1917.
Db Sampayo J.
Nagur Pitch*v. VsooJ
The more important question is whether the principle of the Eng-lish decisions should be adopted here. I was doubtful on thispoint, but on consideration I cannot see why it should not. Thereis no essential difference between the English Statute and ourOrdinance which may deprive us of the benefit of the Englishauthorities. It is true that section 4 of the Statute of Fraudsonly provides that no action shall be brought on a contract whichis not in writing as thereby required, and therefore other rightsarising out of a contract, which is not void, though unenforceablemay be established and secured by action. Section 2 of our Ordi-nance of Frauds and Perjuries, on the other hand, declared thecontract to* be of no force or avail in law. At the same time, thatsection of our Ordinance requires notarial writing only for the pur-poses therein mentioned; it does not declare a non-notarial contractto be void for other purposes, and much less illegal. Therefore,I think the two Statutes, so far as the point under considerationis concerned, are brought in essence into line with each other; asit may be said here, as it has been said in England, that the contractexists as a fact, which the Court can take cognizance of for otherpurposes than those stated, and that the only effect of the Statuteis to render the kind of evidence required indispensable when itis sought to enforce the contract. (Maddison v. Alder son,1) Thatbeing so there does not appear to be any difficulty in concluding
1 (IMS) L.'B. 8 A. C. 475.
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1917
Da Sahpa o J.
Nagtsr PUchi9. Uaoof
that with us also a party who advances money on an informalagreement is entitled to a refund only if the other party refuses,.or is incapable of completing, the transaction, and the considerationfor the advance therefore fails.
It is necessary, however, to take account of certain local decisionson the subject. I was certainly much impressed at the argumentwith the number of them, and with the long period of time whichthey covered. But when the cases are closely examined, it will befound that they are neither individually strong, nor collectivelysuch as to form a curaua curia* None of them contains any discus-sion of principles or exposition of the law. The first case is D. C.Walligama, 1.571.1 The report gives a mere note of the case,*without any statement of facts; but from the remark that thepurchaser was not entitled to recover the land, but only the moneyadvanced, and also the expenses incurred in improving the land,it may be gathered that it was the vendor, defendant, who wasin default. In Cassim Pulle v. Miguel 2 there is no judgment, theAppellate Court merely affirming the judgment of the lower Court,but it is clear from the statement of facts that there, too, the defen-dant was. in default, and also had no title to the property. It isinteresting to note incidentally that counsel in that case cited Englishauthorities and relied on English legal principles. The case which ismostly cited in subsequent cases is C. It. Panwila, 3,713.3 Therethe defendantdeniedthetransaction,andit seemsnecessarily
to followthathe wastheparty in default.Moreover,the Court
practically did no more than to follow the case in Morgan's Digest.In Oirigoris v. Tillekeratne ,4 Withers J. said that as he wassitting alone he followed C. B. Panwila, 3,713 (stipra), but heobviouslydidso in spiteof his ownviewof the law. Similar
remarks apply to the judgment of Browne J. in the unreportedcase C.B.Kandy,6,147,5 and tothejudgmentsof Wood
Benton J. in Perera v. Silva6 and Martelis v. Jayewardene.7This being the state of local authority, I think the way is clearfor us to adopt the principle of the English decisions, and to holdthat the plaintiff in this case, on the findings of fact of the -DistrictJudge, is not entitled to a refund of the Bs. 945 which he advancedto the defendant. In view of this opinion, it becomes unnecessaryto consider the effect of the defendant’s plea, which has apparentlybeen established to the satisfaction of the District Judge, that theplaintiff agreed that if he failed to pay the balance sum in respectof one year’s' lease money and complete, transaction the depositshould be forfeited to the defendant.
would dismiss the appeal, with costs.
111888) Morg. Dig, 82*
1 {1859) 3 Lor. 175*
3{1878) Oren. vol. II, pt* II, p. 34*
A1893) 2 C* L* R* 191.
B S* C. Min*, May 30, 1898*• {1908) 4 A* O* R. 74*
{1908) 11 N* L. R* 272*
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Vood Benton C.J.—
I have had the advantage of reading the judgments of mylrothere "Rnnin and De Sampayo, and although, in view of themportance of the point involved in the appeal, I should have.esired to say something on the subject myself, I agree so entirely■rith them that I do not think it would be right to allow the case totand over for that purpose till my return from circuit.
Appeal dismissed.
1917.
Na^ur Pitch*v. XJaoaJ