TRUST - A presentation
786 GALLELAW BLOGGER
TRUST
- October 29, 2016
TRUST – synopsis of a
presentation made to the District Judges on 24.8.2002 by A W A Salam at the auditorium
of the Office of Judicial Service Commission.
TRUST
786
It is well-known that in a
developing society the proper application of the law of trust based on legal
principles and equitable consideration can play a vital role in the economic
development and proper dispensation of justice.
The law of trust as is
applied today in our country is a combination of equitable considerations mixed
with legal principles. It may not be sensible to go into the historical
background in which the law of trust came
to be introduced into our legal system because of the time restrain.
As you all know the very
first legislation enacted in field of Trust
Law is the Trust Ordinance of
No.9 of 1917 which came into operation on 16th April 1918 and has been amended
from time to time. The amendments made to the Trust Ordnance todate are 4 in
number. They are as follows.
1. Act No.4 of 1918
2. Act No.1 of 1934
3. Act No.7 of 1968 and
4. Act No.30 of 1971
As the last amendment to the
Trust Ordinance has been made in the year 1971 the unofficial version of the
legislative enactment (The Brown book 1981 unofficial copy) carries a
consolidated version of the Trust Ordinance and therefore there is no need to
look up for the amendment separately.
The preamble to the Ordinance
reads that it is an ORDINACE TO DEFINE AND AMEND THE LAW RELATING TO TRUST.
The preamble is abundantly
suggestive of the fact that the law of trust as was applicable in England was
applied by the English judges long prior to the introduction of the Trust
ordinance. That is why we find judgments touching upon the principles relating
law of trust even in cases decided prior to 16 April 1918 namely prior to the
introduction of the Ordinance.
Turning to the
classification of Trust let us straight away look at the type of Trusts the
modern law has recognized. They are
1. Statutory trusts
2. Charitable trusts
3. Express trusts, and
4. Implied trusts (known as
constructive trust or resulting trust)
There eleven chapters in the
Trust Ordinance and Chapter – IX – deals with Constructive Trusts – This
chapter contains fourteen Sections -
that is from section 82 to 98
As far as the Preliminary
chapter is concerned, section 2 plays an
important role with regard to the reception of English law in relation to
matters. for which no specific provisions are made, in the Trust Ordinance. So
the fundamental principle we have to bear in mind, is that, it
is the English law, as mentioned
in section 2 of the Trust ordinance, which is applicable as casus omisus in
relation to matters governed by law of trust.
Section 2 of the Trust
Ordinance reads thus:
“All matters with reference
to any trust, or with reference to any obligation in the nature of a trust
arising or resulting by the implication or construction of law, for which no
specific provision is made in this or any other enactment, shall be determined
by the principles of equity for the time being in force in the High Court of
Justice in England.”
Even prior to the enactment
of the Trust Ordinance we have applied the Roman Dutch law of trust to a
certain extent. An example of this would be the application of the law of fidei
commission. The difference between trust and fidei commission is this.
According to the law of trust, the ownership is nominally vested in
the trustee but the beneficial enjoyment is vested in the beneficiary. However
under fidei commission, property is given to a person (fiduciary) and on his
death or on the happening of a condition property passes to another person
(fide commissary) and may likewise devolve on successive fide
commissaries.
The question as to the
applicability of English law of trust as contemplated in section 2 was raised
in Ibrahim Saibo vs. The Oriental Bank Corporation (3 N.L.R. 148). It was a
case where the price for the purchase of certain land was paid by one Abbas but
the name of the plaintiff Ibrahim Saibo was fraudulently entered in the
conveyance as the purchaser having paid the consideration. This was done so as
to conceal the true ownership from Abase’s creditors; The purchase was intended
to be for the benefit of Abbas. There
was a secret understanding between Abbas and Ibrahim Saibo that Ibrahim
Saibo should convey the land to the
Abbas after Abbas should compound with his creditors.
The land was seized by The
Oriental Bank Corporation in satisfaction of a decree entered against Abbas.
Ibrahim Saibo sued the Oriental Bank Corporation for a declaration that he is
the owner. The court held, that, the plaintiff was not entitled to a
declaration of title to the land, nor to have them released from seizure under
a writ sued out by defendants as creditors of Abbas. The rationale behind the decision was that
Ibrahim Saibo was a party to the fraud with Abbas to defraud the creditors and
therefore not entitled to equitable relief.
The other instance where
English law has been applied reflects in the judgment of Muttalibu Vs Hameed 52
NLR 97. In that case the father provided the consideration to purchase a land
in his son’s name. The father relied on section 84 of the Trust Ordinance which
provides that “where property is transferred to one person for a consideration
paid or provided by another person, and it appears that such other person did
not intend to pay or provide such consideration for the benefit of the
transferee, the transferee must hold the
property for the benefit of the person paying or providing the consideration”.
The son argued that the
English equitable doctrine of advancement modified the rule in section 84. What
is docrine of advancement. That is where the purchase money was paid by a
person in loco parentis (the father being in this position) and the transfer was
made into the name of one for whom he was bound to provide (the son in this
instance) a gift was presumed. It was
held in this case by Dias SPJ that it is a well settled principle of Equity,
which is recognized by section 2 of the Trusts Ordinance, that where a father
or person in loco parentis purchases property in the name of his child or wife
there is a strong initial presumption that such transfer was intended for the
advancement of such child or wife, and the provisions of section 84 of the Trusts
Ordinance do not apply to such transaction. The onus in such cases is,
therefore, on the party seeking to establish the trust to prove that fact. The
son, therefore, did not hold the land in trust for his father A. Fernando v.
Fernando (1918) 20 N. L. R. 244 and Ammal v.kangany (1910) 13 N. L. R. 65
approved and applied.
Dias SPJ said “that the doctrine of
advancement is part of our law and placed beyond all question by section 2”
that “forms an exception to section 84”.
In Ceylon Export Ltd Vs
Abeysundera 38 NLR 117 it was held that
" All matters with reference to any trust, or with reference to any
obligation in the nature of a trust arising or resulting by the implication or construction
of law, for which no specific provision is made in this or any other Ordinance
shall be determined by the principles of equity for the time being in force in
the High Court of Justice in England."
Ladies and gentlemen as you
know well the law of trust is a vast subject and it is practically impossible
to discuss the four main categories of trust. They are
They are
1. Statutory trusts
2. Charitable trusts
3. Express trusts, and
4. Implied trusts (known as
constructive trust or resulting trust)
In our day to day work the
type of litigation we generally come across arises from what is commonly known
as “constructive trust”. Constructive trust would mean that it is not expressed
but the existence of the it is construed by law depending on the circumstances.
As I told you earlier constructive trust is also termed by some jurists as
implied trust.
In order to understand the
concept relating to constructive trust it is necessary that we advert ourselves
to the provisions of the evidence ordinance as contained in chapter VII.
Chapter VII of the evidence ordinance contains nine sections 91 to 99. Chapter
VII of the evidence ordinance is given the subtitle as of the exclusion of oral
evidence by documentary evidence. Let me for purpose of clarity refer to the
marginal note to these sections.
91. Evidence of terms of
contracts , grants or other disposition of property reduced the to form of a
document
92. Exclusion of oral agreement
93. Exclusion of evidence to
explain or amend ambiguous document.
As we know section 91 of the
evidence ordinance reads as follows
91. When the terms of a
contract, or of a grant, or of any other disposition of property have been
reduced by or by consent of the parties to the form of a document, and in all
cases in which any matter is required by law to be reduced to the form of a
document, no evidence shall be given in proof of the terms of such contract,
Grant, or other disposition of property, or of such matter, except the document
itself, or secondary evidence of its contents in cases in which secondary
evidence is admissible under the provisions herein before contained.
Now look at section 92 of
the Evidence Ordinance
92. When the terms of any
such contract, grant, or other disposition of property, or any matter required
by law to be reduced to the form of a document, have been proved according to
the last section, no evidence of any oral agreement or statement shall be admitted,
for the purpose of contradicting, varying, adding to, or subtracting from its
terms.
Proviso (1) . Any fact may
be proved which would invalidate any document, or which would entitle any
person to any decree or order relating thereto, such as fraud, intimidation,
illegality, want of due execution, want of capacity in any, contracting party,
the fact that it is wrongly dated, want or failure of consideration, or mistake
in fact of law.
Proviso (2) . The existence
of any separate oral agreement as to any matter on which a document is silent,
and which is not inconsistent with its terms, may be proved. In considering
whether or not this proviso applies, the court shall have regard to the degree
of formality of the document.
Proviso (3) . The existence of
any separate oral agreement constituting a condition precedent to the attaching
of any obligation under any such contract, grant, or disposition of property
may be proved. Proviso (4) . The existence of any
distinct subsequent oral agreement to rescind or modify any such contract,
grant, or disposition of property may be proved, except in cases in which such
contract, grant,. Or disposition of property is by law required to be in
writing, or has been registered according to the law in force for the time
being as to the registration of documents. Proviso
(5) . Any usage or custom by
which incidents, not expressly mentioned in any contract, are usually annexed
to contracts of that description, may be proved. Provided that the annexing of
such incident would not be repugnant to, or inconsistent with, the express
terms of the contract. Proviso
(6) . Any fact may be proved which shows in what manner the language of
a document is related to existing facts.
In the manner section 92 is
couched it is trite law that a constructive trust can be proved in respect of a
deed or document which is silent about a trust. Now let us examine this
situation.
The trust Ord. chapter IX
lays down the circumstances and the guidelines as to when a constructive trust
can be said to have been created. In
terms of section 82 An obligation in the nature of a trust referred to in the
ordinance as a " constructive trust" is created in the cases set out
in that chapter.
Constructive trust created
by purchasing a property in another’s name
When a person obtains a
title to a property for the consideration paid by another person, he is aware
that the person who furnished the consideration becomes a true owner of the
property. There are instances where conveyances are executed in another’s name
with an understanding that the property to be conveyed to the true owner. In
such a situation the true owner can
bring an action on the ground of constructive or implied trust. In such
instances the parties are entitled to lead parole evidence up to a particular
extent without violating the provisions of Evidence Ordinance and Prevention of
Frauds Ordinance.
In Gould vs. Innasitamby 9
NLR 177 was a case where the plaintiff, being desirous of buying a particular
land did
so
in the name of his servant Innasitamby, the defendant to the action. The plaintiff
furnished the purchase money, and the defendant promised both before and after
the purchase to convey the land to the plaintiff when called upon. Instead of
doing so he, claimed the lands as his own property. The plaintiff then sued for
the delivery of the bills of sale, plans and documents for a declaration that
the defendant held the bills of sale in Trust for the plaintiff as his agent.
He further sought to transfer the title in his name. The defendant plead that
the plaintiff was debarred in law to maintain the action. In Terms of Section 2
of the Prevention of Frauds Ordinance as the law does not permit to have any
valid transaction relating to immovable property unless such conditions of
transaction are embodied in on a notarial instrument & signed by the
parties to transaction or their lawfully authorized agent. District court
dismissed the action. But supreme court set aside the judgment and directed to
enter judgment in favour of the plaintiff by holding that notwithstanding the
absence of any notarial instrument the plaintiff was entitled to obtain the relief. Middleton J said that the statute
of frauds not be allowed to be used to perpetrate and cover fraud.
In Sangaraoukka vs. Kandiah
(19 NLR 344) “A” agreed to buy a land from B and paid the purchase money, but,
fearing some litigation, obtained a conveyance in the name of C without C’s
knowledge. A informed C subsequently of the execution of the deed in C’s
favour, and C accepted it, and agreed to transfer the land to A whenever called
upon. Justice Show held that C held the land in trust for A, and that A could
maintain an action for a conveyance for the land from C, or if C had parted
with the land to recover its value.
In Muniyandi Natchie Vs. Jatanb (1988 (2) CALR
56) The plaintiffs desired to own property that was sold through the Estate
Fragmentation Board. They were both persons whose applications for citizenship
in Sri Lanka were being finalized by the Registering Authorities of the State.
Thus they were non-citizens at the time of the sale. Under the Finance Act
No.11 of 1963 they were required to pay 100% tax if they purchased the property
as non-citizens. In order to overcome this they paid the purchase price for the
land and had the deed written in the name of the defendant who was their sister
and a citizen of Sri Lanka. After they became citizens they filed this action
for a declaration that the defendant holds his property in trust and for the
transfer of the title to the plaintiffs. Defendant’s claim that she had bought
the property out of her money, was totally rejected by the trial judge, who
found that the plaintiffs had provided the consideration for the purchase.
However, counsel for the defendant contended that section 98 of
the Trust Ordinance read with section 4(1) of the same ordinance would prevent
the creation of such a trust in so far as the transfer of property was in
evasion of section 51 (1) of the finance act. Section 4 (1) states that, a
trusts may be created for any lawful purpose. The purpose of a trust is lawful unless it is (a) forbidden by law, or
(b) is of such a nature that if permitted, it would defeat the provisions of
any law or (c) is fraudulently or (d) involves or implies injury to persons or
property of another or (e) the court regard it as immoral or opposed to public
policy.
The relevant provisions of
the finance act do not impose a prohibition on the transfer of lands to the
class of persons to whom the plaintiff belonged. Section 58 (1) read with
section 59 of the Finance Act impose a tax and empower the Commissioner of
Inland Revenue and recover any underpaid tax from anyone from whom it has
become due. If the plaintiffs are found to be noncitizens at the time of the
re-transfer of the land then the obligation casts on such transferees to pay
the 100% tax could not be evaded. The breach of a revenue law has not been
within the contemplation of section 4 (1) of the Trust Ordinance. It is the
prohibition by law or the immortality or objectionable nature in regard to
public policy that has been considered in assessing this matter – Palkitrner J
held that a constructive trust exists under section 84 of the Trust Ordinance
in favour of the plaintiffs.
The same question came up
recently for determination in the Supreme Court in SC Appeal 82/2009 - SC (HC)
CALA 35/2009 before a bench presided over by Dr Shirani A Bandaranayaka
J (as her ladyship was then).
The facts were identical in
some way to the facts in Muniyandi’s case. The appellant Saroja Nisansala had
been in Dubai where she had been working in several houses on an hourly basis
and had stayed at the plaintiff John Laurances’s house. In lieu of rent she had
helped to clean the garden of Laurance for two hours. Nisansala submitted that,
during that period Laurance had a close intimacy with her. When she returned to
Sri Lanka, Laurance purchased a house. It was gifted to her. Nisansala
submitted that the Laurance had purchased the said land for her benefit.
The position of Laurance was
that he purchased it in the name of Nisansala to avoid the 100% on the deed as
he is foreigner and that he intended to form a company and then have it
transferred in the name of the company. Significantly, Nisansala had given a
letter P2 undertaking to transfer it to the company to be formed or to a
nominee of Laurance. It is on the basis of this document P2 Laurance claimed
that Nisansala was holding the property in trust for him. It was strenuously
submitted that the case of Muniyandi has been wrongly decided.
The questions that came up
for determination were as follows…
1. Could the
plaintiff-respondent(Lawrence) in the
circumstances of the case, plead a constructive trust?
2. Is the trust alleged by
the plaintiff-respondent (Lawrence) contrary to the provisions in sections 4(1)
and 98 of the Trusts Ordinance?
Considering the basis on which Muniyandi’s
case was decided and the other authorities the supreme court affirmed the
decision of the Provincial Civil appellate court and endorsed the view that the
circumstances are no bar to claim a constructive trust.
Constructive trusts created
on the ground of frauds
when a person holds a
property with a purpose of defrauding the beneficiary of it, the beneficiary is
entitled to bring in action for a declaration that the property is subject to a
constructive trust in his favour and to
recover the same. It is necessary to prove that there should have been a
fraud at the very inception of the transaction, it is sufficient if it
arises subsequently. This principle was followed in Ohlmus vs Ohlmus (9
NLR 183).
In Andiris Punchihamy 24 NLR
203 A transferred his property to B without consideration, and with the objects
of defrauding his creditors. Ennis J said that it was open to the heirs of A to sue B for the same.
In Hall Vs. Pelmadulla Valley Tea and Rubber Company Limited (28 NLR
422) by a notarial contract, the added defendant after reciting that he had
agreed to sell 1,000 acres of land to the defendant company, bound himself to
give effect to that agreement and to deduce a good and valid title. In pursuance of the agreement the company was
placed in position of certain blocks of lands which forms the subject matter of
the present action. The plaintiff, with
notice of the said agreement, purchased the land has sought to eject the
company therefrom. The Court held that
the contract was an existing enforceable contract within the meaning of Section
93 of the Trust Ordinance and that the plaintiff was bound to hold the property
for the benefit of the company to the extent necessary to give effect to the
contract. The proviso to Section 93 of
the Trust Ordinance does not prevent the application of the Section to
contracts affecting immovable property, which are not required by law to be
registered. section 93
In Thidoris Perera vs. Eliza
Nona 50 NLR 176 by an agreement duly registered, first and second defendants
agreed to sell to the plaintiff within three months of the final decree in a
partition action then pending the divided lot that would be allotted to them in
the final decree. They however sold this lot to the third defendant. In an
action by the plaintiff for specific performance of the agreement, it was held
that the agreement was an existing contract within the meaning of section 93 of
the Trust Ordinance and that specific performance could be enforced.
In De Silva vs. Senaratne 50
NLR 313 first to seven defendants areed to transfer to the plaintiff the lot
allotted to them by the final decree in a partition action. The agreement was
registered. It was further stipulated that if the defendants failed to effect
the transfer within the one month of the decree they were to pay to the
plaintiff a certain sum of money. The defendants failed to convey the land to
the plaintiff but in breach of the agreement conveyed it to the 8th defendant.
The defendants claimed the right to pay the stipulated sum of money in lieu of
performance of the agreement. It was held that the defendant had no right of
election. And held further, that in the absence of the evidence that the
plaintiff had waived his right to specific performance, the contract was an
existing contract and that the 8th defendant having notice of the agreement was
in terms of section 93 of the Trust Ordinance under obligation to convey the
land to the plaintiff.
In Mohamed vs. Abdul Gafoor
(57 NLR 228) plaintiff was a minor and lived with his elder sister. Each of
them was entitled to a half share of the business of a Tea Factory. Defendant,
who was the husband of the sister, of his own accord undertook to manage the
business on behalf of the plaintiff and conducted the entire business. Fernando
J. held that.
1. Under section 90, read with section
82 of the Trusts ordinance the defendant was a constructive trustee as an agent
who stood in fiduciary relation to the plaintiff and, accordingly, held the
half share of the business for the benefit of the plaintiff.
2. Inasmuch as a person in the position
of an agent is generally treated by English law as an express trustee, the
provisions of section 111(5)of the Trusts Ordinance precluded the defendant
from pleading the benefit of the Prescription Ordinance.
In Fernando vs. Thamel (47
NLR 297) by notarial deed the plaintiff conveyed a land to the defendants. On
the same day the defendant gave the plaintiffs an informal document by which he
undertook to give a re-transfer of the land within a period of three years on
payment of a certain sum. There were circumstances tending to show that the
transfer of the land was to be in trust and establishing fraud on the part of
the defendant. It was proved that no money was paid by the defendant on the day
of transfer, that he merely undertook to free the property from a mortgage
which it was subjected to, that the plaintiffs were reluctant to grant the
transfer and only did so on an agreement to retransfer and that there was gross
disparity between the price and the value of the property. Court held that the
informal document was admissible to prove that the defendant held the property
in trust for the plaintiff. It was further held that informal document was not
admissible under proviso (3) to section 92 of the Evidence Ordinance.
In EhiyaLebbe vs.Majeed (48
NLR 357) plaintiff on P1 of 1943 conveyed a certain land to the defendant. On
the same day by P2 a non notarial document , the defendant agreed to re-convey
the land to the plaintiff on payment of the sum of 250/= within two years. The defendant refused to
retransfer on tender of the money within the time. The Commissioner found on
the facts that when plaintiff executed P1 it was never in the contemplation of
either party that the defendant was to hold the property as absolute owner but
only till plaintiff’s debt to the defendant 250/= was repaid. Dias J. held that in the
circumstances the defendant was a trustee for the plaintiff in terms of section
83 of the Trusts Ordinance. It was held further that, to shut out the
non-notarial document P2 would be to enable the defendant to effectuate a fraud
and that section 5(3) of the Trusts Ordinance would apply. Section 5(3) provides that the rules provided
in Section 5(1) and 5(2) of the trust Ord.
Nadararaja Vs Kanapathy 49
NLR 121 by deed P1, notarially attested, plaintiff’s mother since dead and the
co-plaintiffs transferred certain lands to the first defendant. These lands
were subjected to mortgage decrees in favour of the second and third
defendants. The consideration for the transfer was the amount due on the
decrees. There was an oral agreement between the parties that the first
defendant was to re-transfer the lands on payment to him within a reasonable
time of the amount due on the mortgage decrees which he had undertaken to
settle and that he should hold the land in trust till then. It was held that,
the agreement was enforceable at law although it was not notarially attested.
To hold otherwise would allow the statute of Frauds to be used as a protection
or vehicle for frauds. ValliyammaiAtchi
vs. Abdul Majeed 48 NLR 289 followed.
In VelupillaiSanmugam vs.
KathiraveluThambiayah 1987(1) CALR 33 the defendants sold the property in
question, 1964 by deed P1, to two persons, subject to an agreement to reconvey
if a sum of 5,000/=was paid by the defendants to transferees within two years.
The defendants remained in possession. In 1970 by deed P2 the transferees under
deed P1 sold the property to the plaintiffs. When the plaintiff brought an
action to evict the defendants from possession, the defendants argued that they
had duly paid the sum of 5,000/= within the stipulated time, and that since the
transferees under deed P1 failed to reconvey the property as agreed they held
the property subject to a constructive trust under the section 93 of the Trusts
Ordinance. They also argued that the transfer under P2 was effected to defeat
their interest in the land and that the plaintiff too should hold the property
on trust. The District Court rejected the contention of the defendants that the
agreed sum of money was duly paid to the transferees under deed P1 ad upheld
the plaintiff’s right to possession of the property. On appeal to the Court of
Appeal; Goonawardena J. held that,
1.the defendant’s objection
must fail on the ground that the condition for reconveyance, namely payment of
5,000/= was not fulfilled by them.
2. even had the money been
duly paid by the defendants, the plaintiffs cannot be said to have bought the
property with notice of a constructive trust in their favour. In the instant
case if prior to the execution of P2 in 1970 the plaintiff searched the
registration of the transfer P1, it would have led him to the document P1
itself and upon its terms he would have observed that the period of two years
stipulated therein had long passed without a re-conveyance having been obtained
and it would not in my view be reasonable or possible to say that he should have
had notice of any existing contract affecting the property to which the
privilege of section 93 have been attracted… Therefore even if the contract to
reconvey was existing at the time of execution of P2 and was capable of being
specifically enforced to my mind the plaintiff must be deemed to have had no
notice of it inasmuch as an examination of the registration entries leading up
to P1 would not have revealed it; and even if there had been actual knowledge
of any such existing contract which the plaintiff had gathered aliunde, to my
mind such knowledge would be irrelevant and of no value for the purpose of
attracting the privileges granted by section 93.
3. Loco Parentis
When a person purchases a
property or invests money in the name of another, the property or investment is
deemed to be held on trust for the purchaser or the person who invests. But
where the purchaser is the father, or is a person standing in loco parentis to
the person in whose name the property is purchased, then the transaction does
not amount to a trust, but is presumed to be a gift to the child.
This principle has been
followed by the English law without any variation. For example Gray vs. Gray
1677(2) Swan 594, Bennett vs Bennett 1879(1) Ch.D.474 and Commissioner of Stamps
vs. Byrnes 1911 A.C386
The principle is the same
under the Roman Dutch law. In Rangahamy vs. Bastian Vedara;a 2 NLR 3 60 when
the first plaintiff was a small child her father, the defendant, many years ago
bought a piece of land in her name, for which he had paid the consideration.
The daughter's position was that he thought he was going to die, and he wanted
to provide for his daughter in case he should die. He had no intention of
parting with the land during his lifetime. Withers J. cited Voet and held that the defendant became the
owner of the land, because he had no mandate from his daughter nominate the as
the purchaser. (Voet 18.1.8)
In Perera versus David
Appuhamy 6 NLR 236 at the request of A the father of B and C , Minors, D
conveyed the land B and C and delivered
the deed to A. he leased the land to E for a number of years. B arriving at
majority, sold its share of the land to F. In the action brought by F against E
for the ejectment, Moncreiff J. held that as A, the father of B, had no authority
from B or the court to buy the land, the deed in his favour conveyed no title
to him but operated as a conveyance to A himself, and that therefore A’s lease
to E was good.
Similar question arose in
Affefudeen vs. Periyathamby 12 NLR 313. It was a case where a person paid his
own money for the land and got his daughter's name inserted in the deed as
purchaser, the daughter became the owner of the property, where the transaction
was in effect a donation not a sale. This principle has been recognized in South
Africa too. i.e Elliot’s trustee versus Elliott 1845 3 menz 86.
This presumption is
rebuttable and only evidence of the intention of the parties at the time of or
contemporaneous with transaction is
admissible. But subsequent acts or expression on the part of the parent will
Not converted it into a trust.
Bertram CJ in Fernando
versus Fernando 20 NLR 244 concluded that when property is bought in the name
of one person with money of another, there is a presumption of a resulting
trust in favour of the person who provides the money. This presumption does not
arise where property is bought by father or another person in loco parentis in
the name of the child in such a case strong presumption arises that it was
intended to be a gift to the child such a presumption (of gift) does not
necessarily arise in the case of a mother, but only when she has placed
herself in loco parentis within a special legal sense, that is when
she had assumed an obligation to provide the child very little evidence is wanted to establish
that the mother stands in loco parentis. The presumption of gift in favour of
the child can be displaced by the evidence of the intention of the parties. In
order that the person who is put to election (of his rights under a Will)
should be concluded by it, two things are necessary.
1.a full knowledge of the
inconsistent rights and of the necessity of electing between them;
2 an intention to elect
manifested either expressly or by acts which imply choice and acquiescence
where property was bought by
a mother in the name of her son, it was held in the circumstances of this case,
that the son held it in trust for the mother and that, even if it was in the
nature of the gift to the Son, he had elected under the mother's will to treat
it as the mother's property.
In Muthalibu vs. Hameed 52
NLR 97 A, an Indian Muslim domiciled in
Ceylon for 50 years, provided the consideration to 4 vendors B, C , D
and E who thereupon transferred by deed property to F , was the son of
A. A and F having fallen out, A sued F for a declaration that F held the property in trust for A or for a
declaration that the four properties or the consideration for the four
transfers were gift to F by A was entitled to revoke the gifts.
It was sought to be argued,
in view of the decisions of the privy Council inGopeekristGosain vs.
GungapersaudGosain (1954 6 Moore’s Indian appeals 53 and MoulvieSayyudUzhur Ali
vs. MussumatBeebeeUltaf Fatima 1869 (13) Moor’s Indian Appeals 232, that the
usage in India known as Benami transactions applied to this case and that
therefore F held the lands or the consideration as a trustee for his father A.
Dias J. held that there was no proof that the usage in India known as Benami
transactions applied to this case and that, therefore, F held the lands or the
consideration as a trustee for his father A. Dias J. held that there was no
proof that the usage in India known as Benami transactions had been introduced
into Ccylon. The Mohammedan law which prevails in Ceylon is so much, and no
more of it, as has received the sanction of custom or usage in Ceylon, Abdul
Rahiman vs. Ussan Umma 19 NLR 175 followed.
It was further decided that
is a well settled principle of equity, which is recognized by section 2 of the
Trusts Ordinance, that where a father or person in loco parentis purchases
property in the nae of his child or wife there is a strong initial presumption
that such transfer was intended for the advancement of such child or wife, and
the provisions of section 84 of lthe Trusts Ordinance do not apply to such
transaction. The onus in such cases is, therefore, on the party seeking to
establish the trust to prove that fact, therefore, did not hold the lands or
the consideration in trust for his father A. Fernando vs. Fernando 20N:LR 244
and Ammal vs. Kangany 13 NLR 65 approved and applied. The transactions could
not be regarded as donations either of the lands or of the consideration given
by A. Affefudeen vs. Periatamby 12 NLR 313 dissented from.
In Perera vs. Perera 57
NLR 265Gratiaen J. said that if a person
transfers property to another to whom he stands in loco parentis there is a
presumption of advancement, so that a resulting trust under section 84 of the
Trusts Ordinance does not arise in favour of the transferor. But, under section
83 of the Trusts Ordinance the presumption of advancement may be rebutted by
proof that the transferor did not intend to dispose of the beneficial interest
in the property unconditionally to the transferee. Plaintiffs had deposited a
total sum of 5,000/= in favour of their younger sister, the defendant, in the
Post Office, Savings Bank. Although the account in the post office, savings
bank was in the name of the defendant, the bank pass book was retained by the
eldest brother (the 1st plaintiff). The attendant circumstances showed that the
beneficial interest in the money was intended to be “given as dowry” to the
defendant only if and when she would be “given in marriage” to a bridegroom
approved by the family. Defendant, however, soon after she attained her
majority, eloped with and married a man of her own selection without the
approval of her parents or her brothers. Gratiaen J. held that when the defendant
contracted a marriage without the approval of her family, she became
disentitled to receive the sum of 5,000/=. The money, therefore, belonged to
the plaintiffs.
4. Admissibility of parole evidence
with reference to section 2 of the Prevention of Frauds Ordinance and sections
91 and 92 of the Evidence Ordinance.
Section 2 of the Prevention
of Frauds Ordinance No.7 of 1840 stipulates the necessary requirements to be
complied with, in respect of any sale, purchase, transfer, assignment or mortgage
of land or other immovable properties. If any person who enters into such a
contract fails to adhere such provisions, such transaction cannot be enforced
in law. Section 2 of the Ordinance reads thus:
“No sale, purchase,
transfer, assignment, or mortgage of land or other immovable property, and no
promise, bargain, contract or agreement for effecting any such object, or for
establishing any security, interest or encumbrances affecting land or other
immovable property (other than a lease at will, or for any period not exceeding
one month), nor any contract or agreement for the future sale or purchase of
any land or other immovable property, and no notice, given under provisions of
the Thesawalamai Pre-emption Ordinance, of an intention or proposal to sell any
undivided share or interest in land held in joint or common ownership, shall be
of force or avail in law unless the same shall be in writing and signed by the
party making the same, or by some person lawfully authorized by him or her in
the presence of a licensed notary public and two or more witnesses present at
the same time, and unless the execution of such writing, deed or instrument be
duly attested by such notary and witnesses.”
In addition to that section
91 of the Evidence Ordinance requires that with the terms of a contract, or of
a grant, or of any other disposition of property has been reduced through a
form of document no evidence shall be given in proof of the terms of such
contract. It reads thus:
“When the terms of a
contract, or of a grant or of any other disposition of property have been
reduced by or by consent of the parties to the form of a document, and in all
cases in which any matter is required by law to be reduced to the form of a
document, no evidence shall be given in proof of the terms of such contract,
grant, or other disposition of property or of such matter, except the document
itself, or secondary evidence of its contents in cases in which secondary
evidence is admissible under the provisions herein before contained.”
Section 92 of the Evidence
Ordinance further makes provisions for exclusion of evidence of oral agreement
for the purpose of contradicting, varying, adding to, or subtracting from its
terms. Section 92 reads to say:
“When the terms of any such
contract, grant, or other disposition of property or any matter required by law
to be reduced to the form of a document, have been proved according to the last
section, no evidence of any oral agreement or statement shall be admitted as
between the parties to any such instrument, or their representatives in
interest, for the purpose of contradicting, varying, adding to or subtracting
from its terms.
Proviso (1) Any fact may be
proved which would invalidate any document, or which would entitle any person
to any decree or order relating thereto, such as fraud, intimidation,
illegality, want of due execution, want of capacity in any contracting party,
the fact that it is wrongly dated, want or failure of consideration, or is take in fact or law.
Proviso (2) The existence of
any separate oral agreement as to any matter on which a document is silent, and
which is not inconsistent with its terms, may be proved. In considering whether
or not this proviso applies, the Court shall have regard to the degree of
formality of the document.
Proviso (3) the existence of
any separate oral agreement constituting a condition precedent to the attaching
of any obligation under any such contract, grant, or disposition of property
may be proved.
Proviso (4) The existence of
any distinct subsequent oral agreement to rescind or modify any such contract,
grant, or disposition of property may be proved, except in cases in which such
contract, grant or disposition of property is by law required to be in writing,
or has been registered according to the law in force for the time being as to
the registration of documents.
Proviso(5) Any usage or
custom, by which incidents, not expressly mentioned in any contract are usually
annexed to contracts of that description may be proved.
Provided that the annexing of such incident would not be repugnant to, or
inconsistent with the express terms of the contract.
Proviso(6) Any fact may be
proved which shows in what manner the language of a document is related to
existing facts.
In order to create the right
of superficies, (jus superficiarum) it is necessary that there should be a
distinct agreement between the parties to that effect. In exceptional cases
such agreement may be inferred from the fact that the owner permits another to
build on his land. A jus superficiarum involves an interest in the land, and as
such cannot be created except by a notarial writing as required by section 2 of
the Ordinance No.7 of 1840. This principle was followed in AhamadoNatchia vs.
MuhamadoNatchia 9 NLR 331.
In ThambyLebbe vs. Jamaldeen 39 NLR 73 Hearne J. held that
an agreement to give as dowry immovable property to the value of 20,000/= or
the equivalent in cash, which is not notarially attested is enforceable. The
words “ promise, bargain, contract or agreement for effecting any such object”
in section2(b) of the Ordinance of Frauds refer to a means of and a stage in
the formal effectuation of a sale, purchase, transfer, assignment, or mortgage.
It was held further that the cause of action arose on the refusal to carry out
the agreement and that the action was not barred by section 8 of the
Prescription Ordinance.
In ValliyammaiAtchi vs.
Abdul Majeed 48 NLR 289 M who was entitled inter alia to certain immovable
property of the value of over 460,000/- executed an unconditional notarial
transfer of these properties to N for a consideration of 203,256/-. It was
alleged by M that this transfer was in pursuance of a verbal agreement that N
was inter alia to hold the properties in trust for him; to pay out of the
income certain specified debts and interest to himself at 12 percent. On the
said sum of 203,256/=and to reconvey the properties to M on the liquidation of
the said sum of 203,256/- and interest. N died and his widow claimed to hold
the properties free of the trust. In an action by M for a declaration of
trustand consequential relief it was held that oral evidence was admissible to
establish the trust. The Privy Council held further, that the formalities
required to constitute a valid trust relating to land are to be found in section
5 of the Trusts Ordinance and not in section 2 of the Prevention of Frauds
Ordinance; that the act of the widow in seeking to ignore the trust and to
retain the property for the estate was to effectuate a fraud; that, therefore,
under section 5(3) of the Trusts Ordinance even a writing was unnecessary and
sections 91 and 92 of the Evidence Ordinance had no application.
In NoorulHatchika vs. Noor
Hameem 51 NLR 134 Wijewardena CJ. Held that, an agreementto transfer immovable
property in consideration of marriage is governed by section 2 of the
Prevention of Frauds Ordinance and should be embodied in a notarial
agreement.ThambyLebbe vs. Jamaldeen 39 NLR 73 and Lila Umma vs. Majeed 44 NLR
524 overruled.
In Suppiah vs. Situnayake 53
NLR 89 was a case where a notarially attested agreement relating to the
purchase and sale of land provided that the agreement should be null and void
at the expiration of three months from the date of its execution. Basnayake J.
held that it was not open to a party, either under section 92or any other
provision of the Evidence Ordinance to prove a subsequent oral agreement to
keep the written agreement alive beyond the stipulated peiod of three moths.
The written agreement could be revived only by another writing attested by a notary
as required by section 2 of the Prevention of Frauds Ordinance.
In Marikkar vs. Lebbe 52 NLR
193 Dias J. decided that under section 5(3) of the Trusts Ordinance, extrinsic
oral evidence was admissible to establish a trust.
Thangavelauthan vs.
Saverimuttu 54 NLR 28 was a case where a person transferred for consideration a
land to another by a notarial deed, and, thereafter on the same day, the
purchaser executed an independent notarial lease of the land to the vendor for
a certain period. GratiaenJ.held that it was not open to the vendor to prove by
parole evidence that either a trust or something resembling a mortgage or
pledge was created.
The respondent appealed to
the Privy Council against the said judgment and reported as Saverimuttu vs.
Thangavelauthan 55 NLR 529 . Whilst
affirming the Supreme Court decision Privy Council held that although in some
cases the provisions of section 2 of the Prevention of Frauds Ordinance have been relaxed on proof of fraud on the ground
that the “statute of Frauds may not be made an instrument of fraud”, this
proposition has only a limited application, and it is necessary that courts
should approach with caution the facts and the law on which any case is claimed to be an exception to the general
rule that a transaction relating to immovable property is invalid unless the
terms of the transaction have been embodied in a notarially attested document.
A, transferred for adequate
consideration certain immovable property to B by deed No.3. The property in
question had previously been the subject matter of a mortgage decree on which,
at the date of the transfer, a balance amount of 2,000/- was payable by A to B. It was stated in deed
No.3 that the consideration for the transfer was the balance amount due on the
mortgage decree. Satisfaction of the decree was duly certified of record, and,
on the face of it, deed No.3 was an unqualified transfer for consideration.
Immediately after the execution of deed No.3, on the same day, B by deed No.4
leased the property to A for a period of six years. In a rei vindication action
instituted (after the expiry of the lease) against A by B’s successor in title,
A sought to assert by evidence of an informal agreement that the transfer to B
was subjected to a condition that B was to hold the land in trust for A and
reconvey it to A on payment to B of a
sum of 2,000/- with interest. The Privy
Council held, that the informal agreement relied on by A amounted not to a
trust but to a contract for the transfer of immovable property and was
therefore invalid as it contravened the provisions of section 2 of the
Prevention of Frauds Ordinance. ValliyammalAtchi vs. Abdul Majeed 48 NLR 289
distinguished.
In Setuwa vs. Ukku 56 NLR
337 Gratiaen J. held that it is never open to a party who execute a conveyance
which is unambiguously a deed of sale to lead parol evidence to show that in
reality it is a deed of mortgage and not of sale. This rule equally applies
where there is an agreement in the deed itself whereby the vendee undertakes to
retransfer the property for consideration within a specified period and also
where there is a separate agreement to the same effect, whether notarial or
not. “The respondent did not rely on any proviso to section 92 of the Evidence
Ordinance. Nor did he allege a trust of the kind which section 5(3) of the
Trusts Ordinance permits to be established by oral evidence. In the result, the
learned trial judge should not have admitted evidence for the purpose of
contradicting, varying, adding to or subtracting from the terms of two notarial
instruments each of which unambiguously purported to record a transaction
between a vendor and his purchaser (not between a mortgagor and his
mortgagee)”.
As Sansoni J. held in Thomas
vs. Fernando 57 NLR 521 the consideration is an essential term in a contract of
sale. Section 92 of the Evidence Ordinance debars a party to the deed of sale
from adducing parole evidence to prove that the consideration for the deed was
not money and therefore the deed was not a sale but represented an entirely
different transaction.
In Fernando vs. Cooray 59
NLR 169 K.D.de Silva J. (Basnayake C.J. dissenting) held that in the absence of
any allegation of fraud or trust, it is not open to a party, who conveys
immovable property for valuable consideration by a deed which is exfacie a
contract of sale but subject to the reservation that he is entitled to
re-purchase it within a stipulated period on the repayment of the consideration
together with interest thereon, to lead parole evidence of surrounding
circumstances to show that the transaction was not a sale but a mortgage .Such
parole evidence, even if admitted without objection, would offend the
provisions of section 92 of the Evidence Ordinance and cannot be acted upon.,
Muttammah vs. Thiyagarajah
62 NLR 559 was a case where in September 1941 , P, who was entitled to the
entirety of a land, donated to T, his son, an undivided half-share of the
property. In October 1954 , T donated the same half-share back to his father to
enable him, the more easily, to raise a loan of 20,000/- on a mortgage of the
entire land. No reservation was made in T’s favour in the deed of gift of 1954,
but by parole evidence T proved inter-alia that he continued to remain in
possession of his share of the land and that it was expressly understood
between the parties that the share should be reconveyed to T after payment of
the mortgaged debt. The loan of 20,000/- was never raised, and P died in March
1956. In the present action instituted by T against the executrix de son tort
of P’s estate, T claimed that the defendant held the half share in trust for
him. In this Sansoni J. and H.N.G Fernando, J. (Basnayake C.J. dissenting) held
that the plaintiff was entitled under section 83 of the Trusts Ordinance to
lead parole evidence of “attendant circumstances” at or about the time of the
execution of the deed showing that although T transferred his half-share to P in 1954 by what was in from an absolute
conveyance it was the intention f the parties that T should retain the beneficial
interest in the property and that what was conveyed was only the nominal
ownership to P.
In Karunawathie vs.
RoboSingho 1983(2) SLR 407 Moonamalle J. held that the oral agreement by the
defendant to reconvey the lands to the plaintiff on payment of 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 remained in possession after execution of the conveyance
and that an oral promise was made to re-transfer are insufficient. Further this
oral agreement relied on by the plaintiff amounts to a contract for the
transfer of immovable property which is invalid and cannot be enforced as it
contravene section 2 of the Prevention of Frauds Ordinance. Though parole
evidence of this oral agreement was admitted at the trial thout objections it
would still be prohibited by section 92 of the Evidence Ordinance.
In Fernando vs. Fernando
1986 (1) CALR 412 Siva Selliah J. decided that, when there is an allegation of
fraud or iisrepresentation the court is empowered to admit oral evidence for
the purpose of ascertaining the true nature of the deed.
In Gunasekera vs. Uyangodage
1987(1) SLR 242 the plaintiff executed a transfer in the name of 1st defendant
all arrangements for the transaction being made by the 2nddefendant. The
plaintiff sued the defendants for a declaration that they held the property in
trust for her alleging an oral agreement to re-transfer the property to her
within three years on payment of 17,000/-. In the meantime the plaintiff was to
remain in possession service the housing loan while the defendants would assist
her to raise a loan from a third party if the need arose. Although the
consideration of the deed in favour of the first defendant was stated to be
17,000/-only 10,000/-was paid in terms of the agreed arrangement. The
plaintiff’s sued was filed after the lapse of the three years and no tender of
the money had been made within the three years.
Jameel J. held apart from the fact that section 91 and 92 of the
evidence ordinance do not permit the receipt of evidence to to vary the terms
of a notarilly executed deed so as to
superimpose on a simple transfer deed characteristics such as mortgages oh
agreements to retransfer yet even on the facts no trust can be held to have
been established. Time was the essence of the alleged oral agreement and the
constructive trust yet there was no evidence that the money was even tendered
in time.
In BernedetteVanlangenberg
vs. Hapuaratchige Anthony 1990 (1) SLR 190 the plaintiff, Hapuaratchige Anthony
a middle grade hotel employee lived with the defendant BernedetteVanlangenberg
a hairdresser and mother of four children as man and mistress. Both worked in the same hotel. Thereafter the
plaintiff proceeded to Sweden where he learned the language and received an
income of about 9000/-a month. The defendant went over to Sweden for a short
spell and she too found employment receiving about 2000/-a month. The plaintiff
purchased the house property in 1976 for 840,000/-paying the consideration out
of his earnings. On 12.5.77 as he had to go to Sweden again be conveyed the
said house property to the defendant his mistress by deed of transfer in the
attestation to which the consideration of 40,000/-was acknowledged to have been
received earlier. Parties fell out in November, 1979. The plaintiff then sued
the defendant for the return of the house pleading a trust. The defendant
claimed absolute title and that she paid the consideration of 40,000/-on the
deed in her favour. Bandaranayarke J held that section 2 of the frauds is not
meant to govern trusts arising under chapter IX of the Trust Ordinance i.e
constructive for implied trusts. A person has therefore to make out a case
falling within the provision of section 83 to 96 of the Trust Ordinance. The
plaintiff initiated the moves to buy the house whilst still in Sweden; he had
paid the purchase price. The defendant’s resources were insufficient to enable
her to pay the consideration on the transfer to her. She had written to the
plaintiff that he would transfer the house to him if he returns her gold chain
and money amounting to rupees 40,000/-. The trial judge rejected the claim of
the defendant that she paid the consideration after considering the financial
resources of the parties as being highly improbable. The defendants claim was
very probably false and her denial of the existence of a constructive trust
amounts to fraud. In the result, section 2 of the Trust Ordinance and section
92 of the evidence ordinance do not apply and plaintiff can lead parol evidence
of the existence of a construed to trust in his favour on the basis that he
retained the beneficial interest in the property at the time he transferred it
to the defendant. The presumption of advancement in favour of mistress though
available in England is not a part of Sri Lanka law. Section 2 of the Trust
Ordinance cannot be utilised to bring in English law.
· In Dayawathie Vs Gunasekara 1991 1 SLR
115 the plaintiff bought the property in suit in 1955. He started construction
work in 1959 and completed in 1961. The plaintiff, a building contractor needed
finances in 1966 sought the assistance of the second defendant with whom he had
transactions earlier. This culminated in a deed of transfer in favour of the
first defendant, who is the mother of the second defendant and the second
defendant being a witness to the deed. The property was to be retransferred within three years
if 17,000/-was paid. The plaintiff be faulted. In his action to recover the
property, the plaintiff succeeded in the trial court in establishing a
constructive trust. The court of appeal to reverse the judgement on the sole
ground that the agreement was the view and simple agreement to retransfer.
Dheeraratna J held that
· 1. The prevention of frauds ordinance
and section 92 of the evidence ordinance do not bar parole evidence to prove a
constructive trust and that the transferor did not intend to pass the
beneficial interest in the property.
· Extrinsic evidence to prove attendants
circumstances can be properly be received in evidence to prove resulting trust
In Premawathie Vs Gunawathie
1994 2 SLR 171 the plaintiff instituted action for a declaration of title to
the land described in the schedule to the plaint, for the ejectment of the
defendants and for damages. Admittedly the first defendant was the owner of the
land in suit and she by deed No 5755 dated 4thapril 76 transferred it to the
plaintiff for a sum of 6000/-. P1 exfacie
an out and out transfer. Using her claim of title on P1, it was the plaintiff's
case that the defendants acting in concert had wrongfully prevented her from
taking over the possession. The first defendant's position was that she did not
intend to dispose of the beneficial interest in the land to the plaintiff and
relied upon the section 83 of the Trust Ordinance. The trial judge overruled
the position and he held in favour of the plaintiff.
In an appeal to the Supreme
Court GPS Silva CJ held that the undertaking to reconvey the property sold was
by way of a non notarial document which is of no force or avail in law under
section 2 of the Prevention of Frauds Ordinance.
However the attendant
circumstances must be looked into as the plaintiff had been willing to transfer
the property on receipt of 6,000/- within 6 montha but could not do so despite
the tender of 6,000/- within the 6
months as she was in hospital, and the possession of the land had remained with
the 1st defendant and the land itself worth 15,000/- , the attendant
circumstances point to a constructive trust within the meaning of section 83 of
the Trust Ordinance. The “attendant circumstances” show that the 1stdefendant
did not intend to dispose of beneficial interest.
In Thisa Nona vs. Premadasa
1997 (1)SLR 169 Thisa Nona the
1stdefendant transferred an undivided extent of one rood from her undivided 1/3
share out of the land in dispute which was in extet of one acre and twenty
perches to the plaintiff, Premadasa for a sum of 1,500/- by deed marked P16.
She claimed her title by another deed dated same day as P16 (9.1.1975) and
attested by the same notary. This was a transfer by the above said plaintiff to
the first defendant (p15). The first defendant contended that there was a
number of attended circumstances to suggest that the P16 created a trust in
favour of her in terms of the section 83 of the Trust in favour of her in terms
of the section 83 of the Trust Ordinance. The ground set out was as follows.
1. The transaction was a loan
transaction
2. The transfer was a security for the
loan
3. Notarial fees and stamps were paid
by her
4. The plaintiff was refused to accept
1,500/- and property even before the six years mentioned in “1V2”
contemporaneous non-notarial document.
5. The possession was not handed
over.The 1st defendant continued even after the transaction.
It had been contended on
behalaf of the plaintiff that the provisions of the section 83 of the Trusts
Ordinance has no bearing to the fact of this case since:
1. there was no evidence led
to show that consideration paid on the P16
was inadequate.
2. there was evidence that
the plaintiff was in possession of another portion of the same land owned by a
brother of the 1stdefendant.
3. there was no effective
steps taken to pay 1,500/- within six years assuming one and half is admissible
despite section 2 of the Prevention of Fraud Ordinance.
4. even up to date 1,500/-
had not been paid nor deposited in court.
5. P16 is an outright sale
with no conditions attached to it and for valuable consideration.
6. all authorities cited by
the counsel for the 1st defendant smacked of trust being created. Whereas there
was no such parallel in this case since the 1st defendant effectively disposed
both her illegal and beneficial interest to the plaintiff.
Wigneswaran J. after
considering all relevant materials came to the finding that. Fact that document
1V2 was admitted by the plaintiff, the fact that the first defendant paid the
stamp and notary’s charges, the fact that P16 was a document which came into
existence in the courst of a series of transactions between the plaintiff and
the fact that the first defendant continued to possess the premises in suit
just the way she did before P16 was executed all go to show that the
transaction was a loan transaction and not an outright transfer. The amending
circumstances show that the first defendant did not intend to dispose of the
beneficial interest in the property transferred. Law therefore declares under
such circumstances that the plaintiff would hold such property for the benefit
of the first defendant.
In Wijayaratne vs.
Somawathie 2002 (1) SLR 93 proof of due execution would be on a balance of
probability. Non-compliance of the rules in section 31 of the Notaries
Ordinance does not invalidate a deed. Section 33 protects a deed. The absence
of a mark by the executants at most would be non-observance by the notary of
the rules specified in section 31. Udalagama J. observed that “it is my view
that the essential element of due execution is to comply with the provisions of
section 2 of the Prevention of Frauds Ordinance.”
7.Exclusion of prescription.
Section 111(1) of the Trusts
Ordinance No.9 of 1917 makes provisions
to exclude the defence of prescription in respect of actions for trust. It
reads thus:
(a) In the case of any claim by any
beneficiary against a trustee founded upon any fraud or fraudulent breach of
trust to which the trustee was party or privy.
(b) In the case of any claim to recover
trust property, or the proceeds thereof still retained by a trustee, or
previously received by the trustee and coverted to his use; ;and
(c) In the case of any claim in the interests of
any charitable trust, for the recovery of any property comprised in the trust,
or for the assertion of title to such property.
The claim shall not be held
to be barred or prejudiced by any provision of the Prescription Ordinance.
Section 111 of the Trusts
Ordinance was incorporated to recognize the English rule in relation to trust
properties. In English law in Soar vs. Ashwell 1893 (2) Q.B.390 the court has
adopted the principle that prescription cannot defeat the claim of trust
property. This legal maxim has been followed throughout in our courts including
in the following cases.
Lucia Perera vs. Martin
Perera 53 NLR 347.Mohamed vs. Abdul Gaffoor 57 NLR 228.Bahar vs. Burah 55 NLR
01 and Vaidhianathan vs. IdroosMohideen 1988 (2) SLR 55. This subject has been
discussed in detail under the heading of “Prescription” and sub heading “Exclusion against trustees”
in Volume 1.
8.Burden of proof.
In LakshmananChettiar vs.
MuttiahChettiar 50 NLR 337 defendant was the attorney of the plaintiff who was
a money lender resident in India. Plaintiff had two debtors A and S.A gave a
promissory note and a decree was obtained against the estate of S. three days
before leaving the service three of the plaintiff the defendant assigned the
decree to one AlagappaChettiar and he had previously endorsed the note to the
same Chettiar who recovered the money from A. No consideration had been paid by
the chettiar. Plaintiff claimed that defendant was trustee of these monies and
liable to account to the plaintiff. This action was brought more than six years
after the transactions in question. The court held that in the absence of fraud
or fraudulent breach of trust to which the defendant was a party, the action
was prescribed in terms of section 111 of the Trust Ordinance for the reason
that the money was neither retained by the defendant nor converted for his own
use. It was held further that the burden of proving fraud was on the plaintiff.
Fraud must be established beyond reasonable doubt and a finding of fraud cannot
be based on suspicion and conjuncture.
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