A trust, express or constructive, is not extinguished by a decree for partition and attaches to the divided portion allotted to the trustee

Algama Appuhamylage Don Wasantha Lankanayake v. Algama Appuhamylage Don Ananda Algama - SC Appeal No. 57/2019 – delivered on 10 June 2021 by Mahinda Samayawardhena J., with P. Padman Surasena J. and E.A.G.R. Amarasekara J. agreeing.

🏛️ Case Overview

Nature of the Case:

A dispute between a sister (Plaintiff) and her brother (Defendant) over land transferred under a deed. The central issue was whether the transfer created a constructive trust in favour of the Plaintiff or was an absolute sale, and whether such a constructive trust could survive a partition decree entered in a subsequent action.

Procedural History:

District Court (Wariyapola): Dismissed the Plaintiff’s claim — held that the partition decree extinguished the constructive trust.

High Court of Civil Appeal (Kurunegala): Reversed the District Court — held that constructive trust survived and directed judgment for Plaintiff.

Supreme Court: Defendant appealed — arguing that the High Court erred in law.

⚖️ Facts in Brief

The Plaintiff transferred undivided rights in land to her brother under Deed No. 10950, claiming it was only as security for a loan, not a genuine sale.

She alleged an oral agreement that the Defendant would retransfer the property once she repaid the loan — invoking Section 83 of the Trusts Ordinance (No. 9 of 1917) which recognizes constructive trusts.

The Defendant denied any such trust and later filed a partition case over the same land. The Plaintiff, though a party to that case, did not assert her trust rights.

The District Court held the partition decree wiped out any possible constructive trust.

The High Court disagreed, ruling that the trust survived the partition decree.

🧩 Key Questions of Law (Leave Granted)

Did the High Court err in holding that a constructive trust is not extinguished by a decree for partition, despite the Plaintiff being aware of the partition action?

Did the High Court err in failing to recognize that the Plaintiff’s silence in the partition case barred her from later claiming a constructive trust?

📜 Supreme Court’s Analysis

1. Effect of Partition Decrees on Constructive Trusts

Earlier under Section 9 of the Partition Ordinance (No. 10 of 1863), the law was unclear whether a partition decree wiped out constructive trusts.

Conflicting precedents existed:

Against survival: Babunona v. Cornelis Appu (1910) 14 NLR 45; Galgamuwa v. Weerasekera (1919) 21 NLR 108.

For survival: Sultan v. Sivanadian (1911) 15 NLR 135; Weeraman v. De Silva (1920) 22 NLR 107.

Full Bench decision in Marikar v. Marikar (1920) 22 NLR 137 settled the matter:

“A trust, express or constructive, is not extinguished by a decree for partition and attaches to the divided portion allotted to the trustee.”

The Court emphasized that Section 9 was not intended to extinguish equitable interests; hence, the beneficiary’s rights survive.

2. Legislative Evolution

Partition Act, No. 16 of 1951, and later Partition Law, No. 21 of 1977, both expressly preserve constructive trusts:

Section 48(1) defines “encumbrance” as excluding constructive or charitable trusts.

Therefore, constructive trusts survive even after partition decrees.

3. District Court’s Error

The District Judge wrongly held that a beneficiary can rely on Section 48(1) only if the partition decree was obtained without his knowledge.

The Supreme Court clarified:

Even if the beneficiary was aware and silent, the trust survives; his later action is against the trustee, not the decree.

The principle in Marikar v. Marikar (supra) still applies.

4. Rejection of the Defendant’s Argument

The Defendant’s counsel argued that the decree could only be challenged under Section 48(4) of the Partition Law.

The Court held this is misconceived, as the beneficiary is not challenging the decree, but enforcing the trust against the trustee personally.

🧠 Key Legal Principles

Principle Authority / Provision

Constructive trust arises when transferor never intended to pass beneficial ownership Section 83, Trusts Ordinance

Constructive trust survives a partition decree Marikar v. Marikar (1920) 22 NLR 137; Section 48(1), Partition Law No. 21 of 1977

Beneficiary’s silence in partition case doesn’t extinguish trust Herat v. Amunugama (1955) 56 NLR 529

Beneficiary sues trustee, not challenges decree Current case reasoning

District Court’s interpretation contrary to legislative intent Supreme Court’s holding

🏁 Held

Both questions of law answered in the negative.

Constructive trust not extinguished by partition decree, even if Plaintiff was a party to the partition case.

Appeal dismissed with costs.

READ JUDGMENT CLICK

High Court judgment affirmed.

📚 Judges

Mahinda Samayawardhena, J. – Main judgment

P. Padman Surasena, J. – Agreed

E.A.G.R. Amarasekara, J. – Agreed

🎨 Suggested Cartoon Concept

Title: “Trust Survives the Divide”

Visual Composition:

Two siblings standing on opposite sides of a partition wall labeled “Partition Decree”.

The brother holds a title deed, smiling smugly.

The sister stands calmly, her hand resting on a glowing scroll titled ‘Section 83 – Constructive Trust’, which extends beneath the wall — symbolizing survival through division.

Behind them, the judge (Samayawardhena J.) declares, “Even walls of partition cannot erase trust!”

Caption below:

“A partition may divide the land — but not the trust that equity guards.”

(Inspired by the thoughts of AWAS for GALLELAWBLOGGER)