Constructive Trust – Section 83, Trusts Ordinance – Resulting Trust – Attendant Circumstances – Oral promise to reconvey – Payment of consideration – Burden of proof – Section 101, Evidence Ordinance – Prevention of Frauds Ordinance – Appellate interference – Retrial – Civil Appellate High Court – Jurisdiction and error apparent on the face of the record.
Malagodage Thilakeratne vs Malagodage Iranganie,
SC
Appeal No. 169/15 - WP/HCCA/COL/63/2009(F) - DC Colombo Case No. 7371/SPL
Constructive
Trust – Section 83, Trusts Ordinance – Resulting Trust – Attendant
Circumstances – Oral promise to reconvey – Payment of consideration – Burden of
proof – Section 101, Evidence Ordinance – Prevention of Frauds Ordinance –
Appellate interference – Retrial – Civil Appellate High Court – Jurisdiction
and error apparent on the face of the record.
The
Plaintiff transferred a land by Deed No. 1527 of 02.05.1990 to her brother, the
1st Defendant, allegedly on his request to enable him to obtain a loan from the
Ceylon Electricity Board Employees’ Provident Fund, on the understanding that
the property would be reconveyed to her once the loan was repaid. The Plaintiff
contended that no consideration passed and that the Defendant held the property
on a constructive trust in her favour. The Defendant denied this and maintained
that he had purchased the land for Rs. 40,000/-, paid by cheque issued in the
Plaintiff’s name by the CEB.
The
District Court dismissed the Plaintiff’s action. On appeal, the Civil Appellate
High Court ordered a retrial holding that the trial judge had not heard any
witness and that payment was not proved. The Defendant appealed to the Supreme
Court.
Held
(by majority, S. Thurairaja PC, J. and Kumudini Wickremasinghe, J.; A.H.M.D.
Nawaz, J. dissenting):
The
Civil Appellate High Court erred in holding that the learned District Judge did
not hear evidence; this was an error apparent on the face of the record. A
retrial could not have been ordered on that ground.
The
burden of proving that the Defendant encashed the cheque lay on the Plaintiff
under Section 101 of the Evidence Ordinance, as she asserted it in her plaint.
The Civil Appellate High Court misdirected itself in placing the burden on the
Defendant.
Although
an oral promise to reconvey can constitute an attendant circumstance under
Section 83 of the Trusts Ordinance, there must be sufficient evidence that the
transferor did not intend to part with the beneficial interest.
The
Plaintiff failed to establish that the transfer was gratuitous or that a
constructive trust arose; the totality of the circumstances did not displace
the presumption of an absolute transfer.
All
questions of law were answered in the affirmative; the judgment of the Civil
Appellate High Court was set aside and that of the District Court affirmed.
Per
Thurairaja PC, J.:
An
oral promise to reconvey, though unenforceable under the Prevention of Frauds
Ordinance, may be admitted to establish attendant circumstances under Section
83 of the Trusts Ordinance. However, mere proof of such a promise, without
other corroborative circumstances, is insufficient to establish a constructive
trust.
Appeal
allowed. No order as to costs.
(Nawaz,
J., dissenting):
Held
that a resulting/constructive trust arose under Section 83 as the transaction
was gratuitous and the Plaintiff never intended to transfer the beneficial
interest to the Defendant. The Civil Appellate High Court correctly found in
favour of the Plaintiff.
Judgment - DECIDED ON: 28th February 2025 - THURAIRAJA, PC, J.
1. The instant case relates to an action
instituted on or about 22nd August 2005 by the Plaintiff-Appellant-Respondent
(hereinafter referred to as ‘Plaintiff’ or ‘Respondent’) before the District
Court of Colombo against her brother, the 1st Defendant- Respondent-Petitioner-Appellant
(hereinafter referred to as ‘1st Defendant’ or ‘Appellant’), seeking a inter
alia a declaration that the 1st Defendant is holding the property described in
the scheduled to the Plaint on constructing trust in favour of the Plaintiff
and for a direction to the Appellant to reconvey the said property to the
Plaintiff.
BACKGROUND OF THE CASE
2. The Plaintiff had transferred the property in question to the 1st Defendant by Deed of Transfer No. 1527 dated 02nd May 1990 attested by Nalini Peiris, Notary Public, and contended that the said transfer done upon the 1st Defendant’s request to temporarily transfer the said property to his name, in order to enable his application for a loan from the Employees Provident Fund of the Ceylon Electricity Board. The Plaintiff further contended that the 1st Defendant obtained a loan from the Employees Provident Fund providing the property in question as security thereof. The Plaintiff’s position is that she did not receive any consideration for the transfer of this property and argued, therefore, that the transfer formed a contrastive trust.
3. When the Plaintiff wanted the property
re-transferred, the 1st Defendant had delayed the same urging that he is unable
to do so until the loan obtained from the 2nd Defendant is repaid in full.
4. Following full payment of the loan, the
Plaintiff alleges that the 1st Defendant still refused to retransfer the
property in accordance with their initial understanding, demanding Rs.
500,000/- from the Plaintiff for such retransfer.
5. The 1st Defendant took up the position
that he mortgaged the said property to the 2nd Defendant in order to the
purchase the said property for the purpose of building a house, and he
contended that all monies from the said loan were paid to the Plaintiff as
consideration for the transfer.
6. He vehemently denies ever agreeing to
retransfer the property or demanding Rs. 500,000/- in breach of such an
agreement to reconvey. According to the 1st Defendant, he had found that the
said property cannot be developed after purchasing the same and had intended to
sell it. He states that in or around 2005 the Plaintiff’s son, his nephew,
indicated an interest to purchase the property in suit back from the 1st
Defendant for Rs. 500,000/-. According to him, for this reason he had given the
Deed of Transfer to the Plaintiff.
7. The District Court of Colombo by its
judgment dated 24th April 2009 dismissed the case of the Plaintiff holding in
favour of the 1st Defendant. The Plaintiff thereafter preferred an appeal
against the said judgment to the Civil Appellate High Court of the Western
Province holden in Colombo. The Civil Appellate High Court delivered its
judgment on 17th January 2014 ordering a retrial.
8. Aggrieved by the said decision the 1st
Defendant-Respondent-Appellant Petitioned to the Supreme Court praying, inter
alia, for this Court to set aside the aforementioned judgment of the Civil
Appellate High Court and affirm the judgment of the District Court of Colombo.
QUESTIONS OF LAW
9. On 01st October 2015 this Court granted
leave on the following questions of law submitted by the Appellant:
i. Have Their Lordships misdirected
themselves in holding that “…the Learned District Judge who finally delivered
the judgement but he has not got an opportunity even to hear the evidence of
the single witness who has testified at the trial”?
ii. Have their Lordships thus erred in holding
that the case must be re-tried in the District Court of Colombo?
iii. Have Their Lordships misdirected themselves
in holding “As such we find that the defendant-respondent has not proved by
evidence that the said payment has been duly paid to the appellant
[Plaintiff-Appellant-Respondent of the instant case]”?
iv. Have Their Lordships thus erred in holding
that “… the plaintiff’s transaction with her brother in respect of Deed No.
1527 has been duly completed has not proved.”?
ANALYSIS
First and Second Questions of Law
10. I see it convenient to dispense with the first and second questions of law at the very outset as they relate to matters observable on the face of the record.
11. The position of the 1st
Defendant-Respondent-Appellant was that the learned Judges of the Civil
Appellate High Court had misdirected themselves in concluding that the learned
District Judge who delivered the judgment did not have the benefit of hearing the
evidence of a single witness at the trial. This finding of the Civil Appellate
High Court is based on an erroneous submission to this effect made by the
Plaintiff- Appellant-Respondent in their written submissions before the Civil
Appellate High Court.1
12. As the 1st Defendant contends, it is an
error apparent on the face of the record. The learned District Court Judge who
gave the judgment has, in fact, the 1st Defendants evidence in its entirety.
Moreover, all parties have agreed to adopt the testimonies given before the
learned Judge’s predecessor on 26th January 2009.2
13. Moreover, it is not uncommon for original
court judges to give judgments based on evidence led before their predecessors,
especially in long draw disputes relating to land such as this. As such, even
where a district judge has not had an opportunity to hear any witnesses and
bases a judgment on the evidence heard before their predecessors, that, on its
own, cannot be considered a reason to set aside such judgment, except under
special circumstances.
14. Accordingly, the first question of law is
answered in the affirmative.
16. The judgment of the Civil Appellate High
Court indicates that the Court has taken into account the submission of the
Plaintiff-Appellant-Respondent that the demeanor of witnesses in the instant
case is extremely important to be considered as case depended largely on the
factual evidence given by the parties in open court. The Court has also taken
into consideration the contention of the Plaintiff-Appellant- Respondent that
none of the witness testified before the District Judge who gave the judgment,
which is factually inaccurate as already observed.
17. As apparent from the judgment of the Civil
Appellate High Court, this appear to be the basis of ordering a retrial as no
other reasons are set out therein. As such, the learned Judges have ordered a
retrial based on a manifestly erroneous finding.
18. Therefore, the second question of law, too,
is answered in the affirmative.
20. In this regard the 1st Defendant-Respondent-Petitioner-Appellant invited this Court’s attention to the fact that Deed No. 1527 dated 02nd May 1990 attested by Nalini Peiris, Notary Public (marked ‘පැ 1’), by which the transfer in question was made, contains no conditions whatsoever indicating the formation of a trust. In addition, the Appellant further pointed out that the Plaintiff-Appellant-Respondent has expressly admitted the receipt of Rupees 40,000/- in consideration for the transfer as observable on page 1 of the said Deed. With regard to consideration the attestation of the Notary states that “… withinmentioned consideration will be paid to the Vendor by the Ceylon Electricity Board Provident Fund Society”, indicating that no consideration was paid before the Notary.
21. It was the Appellant’s contention that, what
the Plaintiff has admitted to have received as consideration on page 1 is that
which was to be paid by the Ceylon Electricity Board Provident Fund Society as
referred to in the attestation. In light of this, the Appellant contended that
there is an outright transfer of the property for consideration of Rupees
40,000/-, the receipt of which the Plaintiff has admitted in the Deed.
22. In this setting, the Appellant sought to
argue by virtue of Section 92 of the Evidence Ordinance, while acknowledging
the provisos thereto, that the Plaintiff was estopped from contending anything
contrary to the contents of the Deed marked ‘පැ 1’.
23. What is alleged here by the Plaintiff is an
oral promise to reconvey the property once the 1st Defendant’s purpose is
fulfilled. Such a promise, however well established, most certainly cannot
contradict, vary, add to or subtract from a notarial document such as ‘පැ 1’—for that
requires compliance with Section 2 of the Prevention of Frauds Ordinance. In
this sense, this promise on its own is of little to no utility, as it would not
amount to an enforceable pactum de retrovendendo.
24. In spite of this general infirmity associated with informal promises to reconvey, a party may lead evidence of such a promise for the purpose of establishing a trust governed either by Section 5(3) or Chapter IX of the Trust Ordinance.4 If not, as has been previously observed by this Court, said provisions of the Trust Ordinance effectively becomes nugatory.5
25. As Dr. Abdul Majeed notes, in Equity and the
Law of Trusts, it “…is always available to a party to a suit to lead parol
evidence to establish the true nature of the transaction as an exception to the
rules contained in sections 92/93 of the Evidence Ordinance, if the land is
transferred as security for a loan or the transfer in fact creates a trust as
per section 83 of the Trust Ordinance, such an exception would be an instance
permitted by law to lead parol evidence to establish the true nature of the transaction.”6
26. Section 83 of the Trust Ordinance provides
that,
“Where the owner of property transfers or
bequeaths it, and it cannot reasonably be inferred consistently with the
attendant circumstances that he intended to dispose of the beneficial interest
therein, the transferee or legatee must hold such property for the benefit of
the owner or his legal representative.”
27. Basnayake
CJ commented describing the words
‘attendant circumstances’ in
Muttammah
v. Thiyagaraja as follows:
4
See the analysis of A.H.M.D. Nawaz J in Vairamuttu Palagapodi v. Gnanamuttu
Kanmani C.A. Case No. 201/1998(F), CA Minutes of 30th May 2016, pp. 12-15
5
Muttammah v. Thiyagarajah 62 NLR 559; Bernedette Valangenberg v. Hapuarachchige
Anthony [1990] 1
Sri
LR 190
6
Dr. U.L. Abdul Majeed, Equity and the Law of Trusts (Revised 2nd edn 2022) p.
231
attendant
which expression in this context may be understood as ‘accompanying’ or
‘connected with’. Whether a circumstance is attendant or not would depend on
the facts of each case.”7
28. The jurisprudence of this Court has
recognized various circumstances that can be considered as ‘attendant
circumstances’ for the purpose of establishing a constructive trust by virtue
of Chapter IX of the Trust Ordinance. Such circumstances include:
I. Whether the transferor continued in
possession after the conveyance;
II. If the transferor paid the whole cost of
the conveyance;
III. If the consideration expressed on the deed
is utterly inadequate to what would be a fair purchase price for the property
conveyed [Ehiya Lebbe v. Majeed (48 NLR 357, 359)];
IV. The relationship between parties
[Valliyammai Achi v. Abdul Majeed (45 NLR 169, 191)].8
29. An oral promise to reconvey, too, as H.N.G.
Fernando J noted in Muttammah v. Thiyagarajah,9 is undoubtedly an ‘attendant
circumstance’ in cases of this nature, since such a promise supports the
proposition that there was no intention on the part of the transferor to part
with beneficial interest in the property.
8
See Liyana Athukoralalage Indrawathie v. Galolu Kankanamalage Dharmasena SC
Appeal No. 190/2016, SC Minutes of 02 October 2023, p. 9
9 62 NLR 559
30. His Lordship held therein,
“The plaintiff sought to prove the oral
promise to reconvey not in order to enforce that promise but only to establish
an ‘attendant circumstances’ from which it could be inferred that the
beneficial interest did not pass. Although that promise was of no force or
avail in law by reason of Section 2 of the Prevention of Frauds Ordinance, it
is nevertheless a fact from which an inference of the nature contemplated in
Section 83 of the Trusts Ordinance properly arises. The Prevention of Frauds
Ordinance does not prohibit the proof of such an act. If the arguments of
counsel for the appellant based on the Prevention of Frauds Ordinance and on
Section 92 of the Evidence Ordinance are to be accepted, then it will be found
that not only Section 83, but also many of the other provisions in chapter IX
of the Trusts Ordinance will be nugatory. If for example ‘attendant
circumstances’ in Section 83 means only matters contained in an instrument of
transfer of property, it is difficult to see how a conveyance of property can
be held in Trust unless indeed its terms are such as to create an express
Trust.”10
31. As can be clearly seen, while the Deed of
Transfer itself is an important matter which should be considered as one of the
attendant circumstances, it is open to a plaintiff to lead parol evidence with
regard to other attendant circumstances from which it could be inferred whether
a transferor intended to dispose of beneficial interest or not.
Is
there sufficient proof of an oral promise to reconvey?
32. As I have already noted, there is no
documentary proof of an agreement to reconvey. However, the evidence of the
Plaintiff as well as the two witnesses called by the
10
ibid, p. 571
Plaintiff
have given evidence to the effect that the land was transferred to the 1st
Defendant to facilitate a loan and that the 1st Defendant agreed to reconvey
the land to the Plaintiff once that purpose is fulfilled. They have also given
evidence as to the extremely close relationship which existed between the
Plaintiff and the 1st Defendant at the time of this transfer.
33. Hettiarachchige Vasantha Sanjeewa, the son
of the Plaintiff, is the first witness called by the Plaintiff. He is also a
witness to Deed of Transfer No. 1527, and has given evidence with regard to the
circumstances under which the said transfer was done. He categorically states
that his mother had no intention to sell the land. He further states that it
was transferred by his mother to the 1st Defendant in order to obtain a loan
and that his uncle, the 1st Defendant, agreed to reconvey the land prior to the
Deed of Transfer being executed. Even after strenuous cross-examination this
position remain consistent. Moreover, he states that there was an arrangement
to recovery at a subsequent time and that it was obstructed due the 1st
Defendant requesting Rs. 500,000/- for the same.
34. Thereafter, Hettiarachchige Chandrani
Nishanthi, one of the daughters of the Plaintiff, has corroborated this
position in her testimony. She states that she heard the discussions between
her mother and uncle which related to the transfer in question and that her
mother agreed to transfer the property to facilitate the 1st Defendant’s
attempt to obtain a loan. She has further given evidence with regard to the
subsequent arrangement to recovery being frustrated by the 1st Defendant
requesting Rs. 500,000/- in corroboration of the testimony given by the earlier
witness. The evidence given by the Plaintiff, too, is consistent to this
effect.
35. However, the 1st Defendant vehemently denies
this, claiming that he intended to buy a land for the purpose of building a
house and ended up purchasing the property in
suit,
as suggested by his bother-in-law, the husband of the Plaintiff. He further
states that he subsequently found the land to be one that cannot be developed
and expressed his intention to sell the same, at which point the Plaintiff’s
son approached him to buy the land for Rs. 500,000/-. He states that a deed of
transfer was prepared for this purpose by his nephew and that he even fixed a
date to sign the said deed. However, he states that he refused to sign this
deed when he realized that his nephew had not brought the money as they
previously agreed.
36. The evidence of the
Plaintiff-Appellant-Respondent with regard to the agreement to reconvey is
probable, consistent and has been corroborated by two witnesses. There is no
more than a bare denial by the 1st Defendant-Respondent-Petitioner-Appellant in
this regard. As such, I am of the view that the Plaintiff-Appellant-Respondent
has proved the existence of an agreement to reconvey on a balance of
probability.
37. However, evidence of such an agreement per
se is not sufficient to establish a constructive trust.11 There must be other
attendant circumstances which indicates the establishment of a constructive
trust.
Is
there sufficient evidence indicating that the payment has been paid to the
Plaintiff?
38. Throughout the trial, parties have placed
much emphasis on the question as to whether or not any consideration has moved
from the 1st Defendant to the Plaintiff. Indeed, the third question of law
before this Court relates entirely to this.
39. The Plaint of the Plaintiff before the
District Court of Colombo in paragraph 5 avers that “…පැමිණිලිකාරිය වෙත විදුලිබල මණ්ඩලය විසින් නිකුත් කර ඇති වෙක් පත 1 ෙන විත්තිකරු විසින් මුදල් කර ගන්නා ලදී [the cheque
issued to the Plaintiff by the Electricity
11
Vairamuttu Palagapodi v. Gnanamuttu Kanmani C.A. Case No. 201/1998(F), CA
Minutes of 30th
May
2016, pp. 15-17
Board
was encashed by the 1st Defendant]”. In her testimony, she states that she
never received any money and that she did not even see a cheque. As the learned
President's Counsel for the 1st Defendant-Respondent-Petitioner-Appellant
contended, this is a somewhat contradictory position.
40. The Plaintiff further states in her evidence
that she had never had a current account, that she had never dealt with cheques
and that she does not go to the bank except with one her children.
41. The first and second witnesses, son and
daughter of the Plaintiff, who gave evidence clearly states that the Plaintiff
is not someone who is capable of interacting with banks on her own as she is
illiterate and can do little more than signing her name. Both witnesses also
state that their mother did not receive cheque and that she could not have
encashed one without their assistance.
42. Denying the position of the Plaintiff, the
1st Defendant states that he himself took the Plaintiff to the Electricity
Board in order to collect the cheque and that he got to know the Electricity
Board that she had collected the cheque which was in her name.
43. The 2nd Defendant, Palitha Kithsiri
Samarawickrama, secretary/accountant of Ceylon Electricity Board EPF, giving
evidence confirms, having referred to the records, that a cheque had been
issued in the Plaintiff name and that it has been encashed. He further confirms
that a voucher is available on his record bearing the signature of the
Plaintiff acknowledging the receipt of the cheque from his office.
44. However, the 2nd Defendant is unable to give
any evidence as to who has encashed it. Furthermore, it is also clear that he
has no personal knowledge of this particular transaction in suit as he was not
employed at secretary/accountant at the time. It is clear that the evidence of
the 2nd Defendant is only relevant insofar as to establish that
the
cheque has been issued in the Plaintiff’s name and the Plaintiff has signed and
collected it from the 2nd Defendant’s office. From this alone, we cannot come
to a conclusion that the Plaintiff would have encashed the cheque, given the
nature of the agreement the Plaintiff claims to have had with the 1st
Defendant—which was for the property to be transferred to his name so that he
may obtain a loan for its purchase and raise money through his sister.
45. However, no party has adduced any evidence
as to who in fact encashed the cheque, and the cheque has not been listed as
evidence. As the learned President’s Counsel for the 1st
Defendant-Respondent-Appellant rightfully submitted, the Plaintiff in paragraph
5 of her Plaint before the District Court has asserted that the 1st Defendant
encashed the cheque; and by virtue of Section 101 of the Evidence Ordinance, he
who asserts must prove. As such, the burden of proving that 1st Defendant
encashed the cheque is clearly in the Plaintiff.
46. Learned Judges of the Civil Appellate High
Court, however, have come to a conclusion that the Defendant has had failed to
prove by evidence that the payment has been duly paid to the Plaintiff. In
coming to this conclusion, the learned Judges have placed the burden of proof
on the Defendant, which is clearly bad in law.
47. For the foregoing reasons, the third
question of law is answered in the affirmative.
Final
Question of Law
48. Although the first three questions of law
are answered in the affirmative, before I answer the final question of law, I
wish to consider other attendant circumstances of the transfer for the sake of
completion.
49. Plaintiff-Appellant-Respondent also
contended that, although a survey was done and a plan was prepared, boundaries
of the land were not marked and that possession of
the
land in suit has never been passed to the 1st Defendant. This is corroborated
by the evidence of the first and second witnesses. The two witnesses as well as
the Plaintiff also state that the 1st Defendant has not taken any steps to
develop the land which he claims to have bought for the purpose of building a
house.
50. The 1st Defendant, in his testimony before
the District Court, states that he bought the land intending to build a house
and every intention of developing the property. He has produced a document
marked ‘වි 4’ to establish
that he sought approval from the Kotikawatte Mulleriyawa Pradeshiya Sabha to
develop the land. He states, he was informed that 25 ft from the boundary of
the Kolonnawa Canal (වකාවළාන්නාෙ ඇළ), which is
adjacent to the land in suit, must be set aside for the purpose of
conservation. He states that once 25 ft are set aside there was no room to
build a house and therefore, he had given up on developing the land and built a
house on a different land. He further claims to have erected a fence there and
planted several trees, which the other witnesses deny.
51. The document marked ‘වි 4’ gives an
indication of an intention on the part of the 1st Defendant to develop the land
in suit. In addition, as the 1st Defendant himself has admitted in his
testimony, the Deed of Transfer marked ‘පැ 1’ was in possession of the
Plaintiff-Appellant-Respondent at the time of filing action before the District
Court. However, the 1st Defendant states that he handed over the Deed of
Transfer marked ‘පැ 1’ to his
nephew in order to prepare a new deed of transfer after his nephew showed
interest to buy the land for Rs. 500,000/-.
52. The final question of law before this Court
is as follows:
“Have Their Lordships thus erred in
holding that “… the plaintiff’s transaction with her brother in respect of Deed
No. 1527 has been duly completed has not proved.”?12
53. This question of law is clearly related to
the third question of law. As previously discussed, since the Plaintiff has
asserted in her Plaint that the 1st Defendant enchashed the cheque, the burden
of proving the same is on the Plaintiff. However, no evidence has been adduced
to this effect.
54. The 1st Defendant-Respondent-Respondent in
his Written Submissions asserted that the Plaintiff has made no attempt to call
a witness from the People’s Bank to prove her assertion, despite having all
opportunity to do so.13 The Counsel also invited the Court to consider the
presumption set out in Section 114(f) of the Evidence Ordinance in this regard.
55. Considering the aforementioned, I am of the
opinion that learned Judges of the Civil Appellate High Court have erred in
holding that the transaction between the Plaintiff and her brother had not been
duly proven.
56. Accordingly, I answer the final question of
law in the affirmative.
Conclusion
57. All questions of law are answered in the
affirmative. The judgment of the Civil Appellate High Court is accordingly set
aside.
12
Emphasis added
13
Written Submission of the 1st Defendant-Respondent-Appellant dated 16th
November 2015, p. 13
58. Moreover, despite the finding that the
Plaintiff has furnished evidence to tilt the balance of probability towards the
existence of an oral promise to reconvey, I am of the view that the totality of
the attendant circumstances does not lead to a sufficiently strong inference
that the Plaintiff did not intend to dispose of the beneficial interest over
the property in suit so as to displace a duly executed notarial instrument.
59. As such, I affirm the findings of the
learned District Court of Colombo in judgment dated 24th April 2009, subject to
the variation.
60. I make no orders as to costs.
Appeal
Allowed.
JUDGE
OF THE SUPREME COURT
KUMUDINI
WICKREMASINGHE, J.
1. I had the privilege of reading the draft
judgment of His Lordship S. Thurairaja, PC, J as well as the draft judgment of
His Lordship Nawaz, J. I agree with the opinion of Justice
S. Thurairaja, PC.
JUDGE
OF THE SUPREME COURT
A.H.M.D.
NAWAZ, J.
1. Oftentimes an appeal before this Court
raises the quotidian issue of what English law terms a gratuitous transfer
resulting trust. This typically arises whenever there is a sale of property
absolute on the face of it but it is argued in the context of the transfer and
attendant circumstances that the vendor never intended to convey the beneficial
interest in the property to the purchaser. In such cases, recourse is made to
Section 83 of the Trusts Ordinance and I would have thought that the
interpretations placed on Section 83 of the Trusts Ordinance and allied legal
provisions have been so well settled, and for such a long time, that any
contrary construction becomes almost unimaginable. However, the simplistic
dismissal of such long-established principles in the judgment of my brother,
Justice Thurairaja, compels me to write this dissent. I will therefore proceed
to set out my own reasons as to why a constructive trust or resulting trust
arises based on the facts inherent in this case.
2. Let me unscramble the bare minimum of the
facts. The Plaintiff-Appellant-Respondent (the Plaintiff) seeks to recover her
property, which she had transferred to her brother— the 1st
Defendant-Respondent-Appellant (the 1st Defendant). Her claim is based on a
constructive trust under Section 83 of the Trusts Ordinance, wherein the
declaration sought in the plaint states that, although the title to the land
was transferred by the Plaintiff sister through a notarial deed of transfer,
the deed was executed in the name of the 1st Defendant brother solely as
security for a loan to be granted by the Ceylon Electricity Board (CEB). The
Plaintiff asserts that her brother never provided consideration for the
transfer in his name and, therefore, the “transferee” (the 1st Defendant
brother) holds the legal title subject to a constructive trust in favor of the
Plaintiff sister.
3. The case of the 1st Defendant brother is
that soon after the transfer of the land to him by the sister, he mortgaged the
property to the 2nd Defendant (the CEB) for the purpose of obtaining a loan but
the proceeds of the loan were all paid to the Plaintiff sister as consideration
for the transfer. The assertion is that the consideration was paid to the
sister by a cheque issued in her favor by the CEB.
4. So, the quintessential question is whether
consideration was paid for the transfer. Whilst the sister’s case was one of
non-payment of consideration along with other attendant circumstances, the
brother asserted payment. The learned District Judge of Colombo by his judgment
dated 24 April 2009 dismissed the case of the Plaintiff sister holding inter
alia that the Plaintiff had failed to establish her contention of non- payment,
whilst the appeal preferred by the Plaintiff sister was allowed by the Civil Appellate
High Court of the Western Province.
5. The Civil Appellate High Court Judges
ruled in favor of a constructive trust, holding that the 1st Defendant had
failed to provide evidence that the payment in question had been duly made to
the Plaintiff. Consequently, the 1st Defendant has appealed this judgment to
this Court. However, the Civil Appellate Judges also issued an inconsistent
order remanding the case for a re-trial—an exercise in futility, as I will
demonstrate.
6. When conflicting claims regarding payment
or non-payment of consideration arise between the parties, the provisions of
the Evidence Ordinance, 1895, determine the allocation of the burden of proof.
In this context, Sections 101, 102 and 103, along with other relevant
provisions of the Evidence Ordinance, become applicable. Accordingly, the key
issue that arises is how the burden of proof should be distributed between the
sister and brother in this particular case.
7. Indisputably, Section 83 of the Trusts
Ordinance is engaged and it is convenient to posit the provision with the
relevant illustration at this stage.
Where
the owner of property transfers or bequeaths it, and it cannot reasonably be
inferred consistently with the attendant circumstances that he intended to
dispose of the beneficial interest therein, the transferee or legatee must hold
property for the benefit of the owner or his legal representative.
Illustration
(a) A conveys land to B without consideration
and declares no trust of any part.
It
cannot, consistently with the circumstances under which the transfer is made,
reasonably be inferred that A intended to transfer the beneficial interest in
the land. B holds the land for the benefit of A.
8. Section 83 is found in Chapter IX of the
Trusts Ordinance and the first provision in this chapter (Section 82) states,
"An
obligation in the nature of trust (hereinafter referred to as a 'constructive
trust') is created in the following cases.”
9. Sections 82 and 97 make clear that
Sections 83 to 96 each raise a trust, though the sections themselves do not
specifically mention the word trust, but refer to “….hold...for the
benefit.....". However, it has never been doubted that these sections give
rise to trusts - Fernando v Coomaraswamy.1 A comparison between the Indian
1
(1940) 41 N.L.R. 466
Trusts
Act, 1882 and Sri Lankan Trusts Ordinance No. 9 of 1917 reveals that Section 82
of our legislation is pari materia with Section 81 of the Indian Trusts Act,
1882. However, while our Chapter IX is expressly titled 'Constructive Trusts’,
the corresponding chapter in the Indian legislation does not bear the same
caption. En passant, I must remark that Section 81 of the Indian Trusts Act is
no longer in force in India, having been repealed by Section 7 of the Benami
Transactions (Prohibition) Act, 1988.2
10. The omission of any reference to
"constructive trusts" in the Indian Trusts Act is intentional and
understandable. Both the Indian legislation and the Sri Lanka Trusts Ordinance
recognize the concepts of resulting and constructive trusts as understood in
English law. However, the Trusts Ordinance, somewhat infelicitously, refers
only to "Constructive Trusts" in Chapter IX, whereas the Indian
Trusts Act omits explicit mention of either resulting or constructive trusts in
its corresponding Chapter IX. Due to this discrepancy, the distinguished jurist
L.J.M. Cooray, in his treatise, suggested that the phrase “obligations in the
nature of trusts” might have been a more appropriate heading for Chapter IX
than “constructive trusts.”3
11. The reason is discernible. Both Sections 83
and 84 of the Trusts Ordinance embody the English law concept of resulting
trusts rather than constructive trusts. It cannot be gainsaid that the Trusts
Ordinance is an almost verbatim reproduction of the Indian Trusts Act of 1882,
but the amendments suggested by L.J.M.Cooray have gone a- begging.
2
See Mukherjee Indian Trusts Act, 1882, Sixth Edition (2021) at p 1032.
3
See The Reception in Ceylon of the English Trust -An Analysis of the Case Law
and Statutory Principles Relating to Trusts and Trustees in Ceylon in the light
of the Relevant Foreign Cases and Authorities (1971) at p124.
Resulting
Trusts in Sections 83 and 84
12. Lord Upjohn explained resulting trusts in
Vandervell v IRC4
Where
A transfers, or directs a trustee for him to transfer, the legal estate in
property to B otherwise than for valuable consideration it is a question of the
intention of A in making the transfer whether B was to take beneficially or on
trust and, if the latter, on what trusts. If, as a matter of construction of
the document transferring the legal estate, it is possible to discern A's
intentions, that is an end of the matter, and no extraneous evidence is
admissible to correct and qualify his intentions so ascertained. But if, as in
this case … the document is silent, then there is said to arise a resulting
trust in favour of A. But this is only a presumption and is easily rebutted.
All relevant facts and circumstances can be considered in order to ascertain
A's intentions with a view to rebutting this presumption.
13. David Hayton, in editing the 13th edition of
Sir Underhill's Law of Trusts and Trustees and relying on Re Vandervell's
Trusts (No. 2)5 described the trust that arose in that case as an ‘automatic
resulting trust’ to distinguish it from the ‘presumed resulting trust’
contemplated in Sections 83 and 84 of the Sri Lankan Trusts Ordinance. In the
instant appeal, we are not concerned with an automatic resulting trust as
encountered in Re Vandervell's Trusts (No. 2), but rather with a presumed
resulting trust as provided for in Section 83 of the Trusts Ordinance.
4
(1967) 2 AC 291; (1967) 1 All ER 1 (House of Lords).
5
(1974) Ch 269; (1974) All ER 205
14. According to the 20th Edition of this
leading textbook on Trusts which now carries the title Underhill and Hayton:
Law of Trusts and Trustees,6 resulting trusts of property may be imposed in the
following circumstances:
(a) when property is transferred to a trustee,
on trusts which do not wholly dispose of the beneficial interest.
(b) when property is gratuitously transferred
to another or purchased in the name of another, and there is no evidence that
the transferor or purchaser declared a valid express trust in his own favour,
or that he intended to make a gift or loan or to abandon the property, in which
case a presumption is made that the transferor or purchaser did not intend the
transferee to acquire beneficial enjoyment of the property for himself, failure
to rebut such presumption by the transferee leading to the imposition of a
resulting trust; or
(c) when money is lent on the basis that it
will not become part of the borrower's general assets, but must be applied for
a specified purpose, a resulting trust arising in the lender's favour from the
moment of receipt that is defeasible by the exercise of a power vested in the
borrower to use the money for the purpose
Presumed
Resulting Trusts in Sections 83 and 84
15. Paragraph (b) above outlines the principles
reflected in Sections 83 and 84 of the Sri Lankan Trusts Ordinance. Regarding
the requirements of Section 83, where a resulting trust arises, Underhill and
Hayton provide the following interpretation:
When
real or personal property is conveyed to a purchaser jointly with others, or to
one or more persons other than the purchaser, and he does not provide the
6
20th Edition (2022) at Articles 25 and 26 edited by Paul Matthews, Charles
Mitchell, Jonathan Harris and Sinead Agnew.
purchase
money as lender, and he receives no consideration from the grantees, and there
is no evidence to show that he intended them to take beneficially, the law
presumes that he did not, and a failure by them to rebut this presumption leads
to a resulting trust.7
16. The crucial question then is whether
evidence in this case shows that the transferor did or did not intend to
transfer the beneficial interest in the property, real or personal.
Undoubtedly, non-payment of consideration for the transfer will point to the
intention of the transferor but evidence that the transferor did not intend to
make a gift of the property to the transferee will also strengthen the
presumption that the transferor did intend to keep the beneficial interest in
himself or herself.
Rebuttal
of Presumed Intention by the Transferee
17. The presumed intention of a resulting trust
that arises on evidence has to be rebutted by the transferee in order to claim
an absolute transfer. Otherwise, a presumption of trust would continue to
prevail in favor of the transferor. Sections 83 and 84 do not lay down the
relevant principles with specific reference to the presumption but leave it to
the Court to decide whether or not, in the attendant circumstances of the case
the transferee has received the beneficial interest.
18. Thus, there is a duty to inquire into the
attendant circumstances to ascertain the parties' intention. However, judges
have not hesitated to rely on the presumption to determine the nature and
extent of the evidential burden placed on the parties. I will address the
burden of proof, but only after first examining the evidence. As previously
noted, Sections 102 and 103 of the Evidence Ordinance are instrumental in
7
(20th Edition, 2022) Division Three> Trusts Imposed by Law> Chapter
8>Resulting Trusts>Article 26.1
determining
the allocation of the burden of proof between the parties. Upon a synoptic
consideration of all the facts in the case, it will become evident that even
the presumption expressed in Section 114 of the Evidence Ordinance could be
invoked to ascertain the parties' intention. By "parties' intention,"
I refer to the common intention shared between the sister and brother in this
case. If their common intention was that the transfer served solely to
facilitate a loan for the brother, a resulting trust would arise. However, if
their common intention was a genuine sale, the sister would have intended to
transfer not only the legal title but also the beneficial interest.
When
is a resulting trust under Section 83 imposed?
19. In Westdeutsche Landesbank Girozentrale v
Islington BC8 Lord Browne-Wilkinson rejected the notion that the resulting
trust is designed to reverse unjust enrichment and declared that this type of
trust gives effect to the common intention of the parties. The transferor does
not intend to part with the equitable interest and the recipient of the
property is also aware that he is not the intended beneficial owner. The trust
is imposed on the basis of the conscience of the recipient of the property.
20. It is these principles, which have not been
fully grappled with in relation to the facts of the case, that form the basis
of my dissent.
Sections
83 and 84 embody English Law
21. On the applicability of English law to
Sections 83 and 84 of the Trusts Ordinance, Gratiaen J said the following in
the context of a case that arose under Section 84.
Sections
83 and 84 of our Trusts Ordinance have introduced the English law on this
subject... Where a man purchases property in the name of (or transfers
8
(1996) AC 669.
property
to) a stranger, a resulting trust is presumed in favour of the purchaser (or
transferor); on the other hand, if the transfer is in the name of a child or
one to whom the purchaser or transferor then stood in loco parentis, there is
no such resulting trust but a presumption of advancement. The presumption may,
however, be rebutted, but it should not give way to slight circumstances.9
22. The reference to a "stranger" does
not exclude a brother, as is the case with the transferee in the instant
appeal. The reasoning of Gratiaen J applies equally to any transferee,
including the 1st Defendant in this case. English law does not impose a
restriction limiting the transferee to a stranger except in the counter
presumption of advancement under Section 84.
23. To summarize the foregoing, Section 83
explicitly states that a transfer of property by a transferor will be subject
to a constructive trust only if, considering the attendant circumstances, it
cannot reasonably be inferred that the transferor intended to dispose of the
beneficial interest in the property.
24. The question then arises: what are the
attendant circumstances in this case that indicate whether the sister, as the
transferor, did or did not intend to dispose of the beneficial interest in her
land?
25. If it is established on a balance of
probability that the brother (the transferee) did not provide consideration,
this fact will serve as one of the attendant circumstances pointing to the
sister’s true intention at the time she executed the deed of transfer.
Non-payment of consideration for the transfer is only one circumstance and
there may be other circumstances that may throw light on the intention of the
transferor as to whether she did or did not intend to pass the beneficial
interest to the transferee.
9
DA Perera v Scholastica Perera (1935) 57 NLR 265.
26. Before I proceed to examine the evidence to
ascertain the parties’ intention, let me make a fleeting reference to the
bifurcation of proprietary interests into those silos of equity-legal and
equitable interests.
Legal
and Equitable Ownership
27. Historically, the separation of equitable
ownership from legal ownership is at the core of the English concept of trusts
law. When the Charter of Justice 1801 declared the Supreme Court to be a court
of law and equity, the way was paved for the reception of concepts of equity,
including the distinction between legal and equitable proprietary interests.
The influence of equity became more pronounced when courts of original civil
jurisdiction also came to be regarded as courts of law and equity.10 Indian and
Sri Lankan judges have repeatedly said that the distinction between equitable
and legal ownership forms no part of their legal system, because (unlike in
England) there have been no separate courts of law and equity in India or Sri
Lanka.11
10
As Lord Haldane observed in Dodwell v John: under principles which have always
obtained in Ceylon, law and equity have been administered by the same Courts as
aspects of a single system (1918) 20 NLR 206, 211 (PC). See also Gavin v Hadden
(Ceylon) [1871] UKPC 48.
11
As the Privy Council explained in the Indian case of A Krishna v Kumara K Deb
(1869) 4 Bombay LR Oudh Cases 270, trusts law could operate without relying on
the distinction between legal and equitable ownership of property because the
Supreme Court of India was a court of law and equity. For instance, in a series
of cases the Supreme Court of Sri Lanka has recognised that an equitable lease
would prevail over a forfeiture clause in a legal lease. See, for instance,
Perera v Thalif (1904) 8 NLR 118; Perera v Perera (1907)10 NLR 230; and Sanoon
v
Theyvendera-Rajah
(1963) 65 NLR 574.
28. In an absolute transfer of property that is
later declared as a resulting or a constructive trust, the legal interest vests
in the transferee (the trustee), while the equitable or beneficial interest
remains with the transferor (the beneficiary).
29. In the instant case before us, the legal
interest has already vested in the brother (the transferee) but the question is
whether the equitable interest continues to reside in the sister (the
transferor)? If the attendant circumstances lead to the inference that the
sister did not intend to transfer the equitable or beneficial interest to the
brother, that interest remains with her. Consequently, a cause of action
arises, allowing her to demand that the transferee brother reconvey the land,
thereby divesting himself of legal title.
30. Before applying the established facts to the
law, it is essential to identify the pivotal questions that will determine the
outcome of this case: Did the brother provide consideration to the sister? Are
there other attendant circumstances that negate an intention to transfer the
beneficial interest in the property?
31. These questions must be answered in light of
the evidence offered by both the
Plaintiff
and the 1st Defendant. I now turn to an analysis of that evidence.
The
first witness for the Plaintiff
32. The first witness for the Plaintiff was her
son who was quite acquainted with the attendant circumstances surrounding the
transfer of the Plaintiff’s land in favor of the 1st Defendant. The son alluded
to the purpose of the transfer - i.e the 1st Defendant wanted the transfer in
order to obtain a loan from his employers - the Ceylon Electricity Board (CEB).
The CEB wanted a mortgage of a land as a security for the loan, as the evolving
evidence would reveal, and as the 1st Defendant did not have title to a land
that could be furnished as security, he approached his elder sister (the
Plaintiff
in
the case) and she voluntarily transferred the land to the younger brother (the
1st
Defendant).
33. The Plaintiff's son began by explaining the
purpose of the transaction. A key item of evidence that emerges from his
testimony is his emphatic assertion that his uncle, the 1st Defendant, never
provided consideration to his mother, the Plaintiff, for the transfer of the
property. In summary, this issue arises as payment for the land was the core
defence of the 1st Defendant.
34. He further testified that his mother (the
Plaintiff) never intended to sell the land to her brother-the 1st Defendant.
35. The evidence of non-payment for the
transfer, along with the absence of any intention to transfer the land in favor
of the 1st Defendant, remained unchallenged during cross- examination.
Furthermore, the witness testified that the 1st Defendant exhibited a
willingness to re-transfer the land both at the time of transfer and
thereafter—an assertion that also went unchallenged. This further reinforces
the Plaintiff's account of non-payment as more probable than not.
36. Does the absence of cross-examination on the
emphatic assertion of non-payment not establish a prima facie case of
non-payment in terms of Section 102 of the Evidence Ordinance?
37. This raises the question of burden of proof
and its allocation between the sister and the brother. I have already alluded
to the presumption of a resulting trust arising under Section 83 upon evidence
of a gratuitous transfer of property and the necessity on the part of the 1st
Defendant to rebut this presumption (para 17). The question whether the sister
transferred the property without receiving any consideration from the
brother
has to be determined upon evidence led and for this purpose I now turn to the
evidence of the 2nd witness for the Plaintiff namely her daughter.
Second
Witness for the Plaintiff.
38. The second witness for the Plaintiff is her
daughter, who was shown the deed dated 2 May 1990. At the time of its
execution, she was 17 years of age. She claimed to be well acquainted with the
background of the transaction, asserting that the transfer was made to
facilitate a loan for the 1st Defendant, with the understanding that the
property would be reconveyed to her mother once the loan installments had been
repaid to the CEB.
39. Like the first witness, she emphasized that
no consideration was paid for the transfer. She further supported this
assertion by referring to the attestation clause in the deed, which forecasts a
prospective payment to be made by the CEB to her mother. The relevant
attestation clause states as follows:
“I further certify and attest that the
within mentioned consideration will be paid to the vendor by the Ceylon
Electricity Board Provident Fund Society”.
40. The Plaintiff’s evidence also asserts that
the aforesaid promise in the attestation clause
-
referring to a future payment after the execution of the deed - was never
fulfilled. However, at this stage, I must also observe that the 1st Defendant
claimed that the Plaintiff was paid by a cheque issued by the CEB, as
stipulated in the attestation clause. To support this assertion, he summoned a
witness from the CEB to establish proof of payment. In contrast, the Plaintiff
and her witnesses unequivocally stated from the witness box that no such
payment was ever made to her.
41. These conflicting versions must be assessed
for their testimonial credibility, and I will apply evaluative tools commonly
used in the assessment of evidence to determine their reliability.
42. The overall tenor of the
examination-in-chief of the Plaintiff's second witness was that her uncle, the
1st Defendant, repeatedly declared his intention to retransfer the land to her
mother. In furtherance of this, they even visited a lawyer's office to effect
the retransfer. However, the 1st Defendant ultimately thwarted these attempts
by demanding a sum of Rs. 5 lakhs as a condition for executing the retransfer.
43. The witness also referred to the episode in
which the 1st Defendant handed over a copy of the deed of transfer in his name
to her mother after repeated pleas from her mother to retransfer the land. At
this stage, I would classify this as subsequent conduct under Section 8(2) of
the Evidence Ordinance, influenced by the fact in issue—namely, whether the
sister ever intended to transfer the beneficial interest of the property to the
brother. The subsequent act of handing back a copy of the deed is inconsistent
with the behavior of a person who possessed a beneficial interest in the
property. An individual who claims to hold both the legal title and beneficial
interest in a property would not have relinquished the deed to the sister,
whose assertion of non-transfer of the beneficial interest is corroborated by
the very act of the 1st Defendant brother.
44. This very same evidence is also given by the
Plaintiff in her testimony, albeit with a key distinction. According to the
Plaintiff, the 1st Defendant returned the original deed to her after its
execution. This assertion further reinforces the Plaintiff’s
position that she never intended to transfer the beneficial interest to her
brother. The fundamental question that arises is this: Why would the 1st
Defendant return his own title deed to his sister if he truly held both legal
title and beneficial interest in the property? His conduct is at odds with such
a claim.
45. When confronted with this inconsistency, the
1st Defendant attempted to provide an explanation rather belatedly in his
evidence-in-chief. At this juncture, I must interpose to note that his
evidence— which I will address shortly— is replete with new versions that were
never put to the Plaintiff's witnesses.
46. In his examination-in-chief, the 1st
Defendant explained that the Plaintiff’s first witness—her son—had badgered him
into selling the land to them and that the agreed consideration for the
reconveyance was a sum of Rs. 5 lakhs. However, I must observe that this
appears to be an entirely new case introduced by the 1st Defendant in his
evidence, as this stance was never suggested to the Plaintiff or her witnesses,
least of all to her son, who was allegedly pressuring his uncle.
47. Therefore, the evidence given by the
Plaintiff's witnesses—that he returned the original deed of sale out of a sense
of compunction, seeking to dispel any suspicion that he was attempting to
wrongfully appropriate the property from his sister— remains unchallenged. His
newly introduced claim that he was engaged in discussions regarding a possible
sale must be regarded with the incredulity it warrants.
48. The Privy Council has stated that the real
tests for either accepting or rejecting evidence are how consistent is the
story with itself, how it stands the test of cross- examination, how far it
fits in with the rest of the evidence and the circumstances of the case - Bhoj
Raj vs. Sita Ram.12 In deciding on the credibility of witnesses, it is also
necessary to ascertain whether they agree in their testimony-consistency inter
se. If one examines the cross-examination of the Plaintiff’s witnesses, it
becomes evident that none of the positions later adopted by the 1st Defendant
in his evidence-in-chief were ever put to them. This omission casts serious
doubt on the testimonial credibility
12
A.I.R. 1936 P C 60
of
the 1st Defendant’s belated assertions. Accordingly, I reject this defense,
introduced for the first time during his examination-in-chief.
49. With due respect to my learned brother, he
does not appear to assess the 1st Defendant's belated defense through the
forensic and evaluative tools available to this Court—namely, the inherent
inconsistency, improbability and belatedness that undermine the 1st Defendant’s
case. The belated versions put forward by the 1st Defendant undermine his case
and in Evidence & Advocacy13 Peter Murphy & David Barnard point out
that cross-examination has two purposes: to challenge the evidence in chief
insofar as it conflicts with your instructions; and to elicit facts favorable
to your case which have not emerged, or which were insufficiently emphasized in
chief. The cross examiner in the case was innocent of the two purposes as I
proceed to dissect the evidence.
50. It is axiomatic that the words or conduct of
a transferee carry greater evidential weight when they are explicitly brought
to their attention, yet they fail to protest or challenge them at the time.
Such a failure to repudiate the words or conduct attributed to the transferee
casts a serious doubt over the credibility of any contrary versions they later
put forth.
51. Having thus examined the subsequent conduct
of the 1st Defendant and its impact on his testimonial credibility, I now turn
to the testimony of the Plaintiff.
Plaintiff’s
Testimony
52. Having pleaded and placed a denial of actual
payment of consideration at the forefront of her case, the Plaintiff reiterated
this assertion multiple times during both her examination-in-chief and
cross-examination. At the time of giving evidence, she
13
Fifth Edition (1998) at p 182.
was
residing at her daughter’s house, which is situated adjacent to the land in
question—property over which the 1st Defendant claims absolute title. The
Plaintiff testified that the transfer of land to the 1st Defendant was not
intended to be an outright sale but a temporary arrangement to facilitate his
loan application with his employer, the CEB. She emphasized that the transfer
was made at her brother’s request, without any financial consideration, and
based on his promise to reconvey the land upon settling his liability to the
CEB.
53. Despite the land being part of a larger
parcel, it was never fenced or otherwise demarcated to grant exclusive
possession to the 1st Defendant. This claim was reinforced by the testimony of
her son and daughter, who confirmed that possession was never intended to be
relinquished. The Plaintiff remained unequivocal in her stance that she never
intended to transfer ownership permanently.
54. Next, she spoke of the misgivings she
harbored due to the 1st Defendant’s reluctance to reconvey the land. As a
consequence of these concerns, she went so far as to register a caveat, which
was duly marked in evidence.
55. She also visited the office of a lawyer for
the purpose of having the land reconveyed to her but her brother demanded money
for the retransfer and stymied that attempt. She also stated that the 1st
Defendant did not come into possession of the lot which had been transferred to
him
56. As for the alleged payment of a cheque in
her favor by the CEB, the Plaintiff firmly denied receiving any such cheque.
She stated that she had never engaged in cheque transactions, as she maintained
only a savings account. Moreover, she emphasized that whenever she visited the
bank, she was always accompanied by either her son or daughter. She classified
the story of payment by cheque as a falsehood.
57. As previously highlighted by me, she also
mentioned in her evidence the delivery of the original title deeds by her
brother. I pointed this out as subsequent conduct of the 1st Defendant, which I
further classify as an implicit admission that she never relinquished her
beneficial beneficial interest in the property. His explanation that it was as
a result of an ongoing negotiation to sell the land is unworthy of credit as
this was not suggested to any of the witnesses including the Plaintiff.
Observations
on the evidence of the Plaintiff
58. It must be borne in mind that neither the
Plaintiff nor her daughter was ever challenged on their assertions regarding
the subsequent conduct of the 1st Defendant in delivering the original deed of
sale—a conduct indicative of his recognition of the Plaintiff’s beneficial
interest in the property. The unchallenged evidence remains that he visited the
office of a lawyer to sign a deed intended to reconvey the land to the
Plaintiff. His claim that this visit was necessitated by ongoing negotiations
to sell the land lacks credibility, as this position was never put to the
Plaintiff’s witnesses.
59. The Plaintiff further testified that the 1st
Defendant was never admitted into possession of the land, which measured 10
perches, and her firm deposition to this effect remained unchallenged in
cross-examination. This uncontradicted evidence strongly indicates that the
Plaintiff continued to possess the land, whether constructively or otherwise.
Both the Plaintiff and her daughter consistently testified that they had
planted trees on the land, and this claim, too, was left unchallenged in cross-
examination. Having failed to challenge these two witnesses—who remained
steadfast in their assertions that the 1st Defendant never took possession of
the land despite the sale—the 1st Defendant, in his testimony, belatedly
attempted to claim that he had planted the trees. Significantly, his evidence
in chief contained no assertion of
exclusive
possession of the land. This serves as a strong indication that the beneficial
interest in the property remained with the Plaintiff.
60. Moreover, the oral promise to reconvey the
land was the overriding tenor of the Plaintiff’s evidence, and this crucial
aspect of her testimony was not seriously impugned during cross-examination.
61. All this uncontradicted evidence brings to
mind a long line of cases affirming the distilled wisdom articulated by H.N.G.
Fernando C.J. in Edrick de Silva v Chandradasa de Silva,14 later followed in
cases such as Cinemas Ltd v Sounderarajan.15 His observations underscore that
when a Plaintiff leads evidence that remains uncontradicted by the Defendant in
the case, such evidence becomes an additional "matter before the
Court" as contemplated by the definition in Section 3 of the Evidence
Ordinance. In other words, proof under Section 3 is not confined solely to
oral, documentary, or real evidence. Sir James Fitzjames Stephen, the author of
both the Indian Evidence Act and our own, deliberately employs the term
“matters” in defining proof of a fact under Section 3—thereby encompassing even
uncontradicted evidence.
62. Unchallenged and unimpugned evidence assumes
the character of proved evidence as to the fact spoken to by witnesses, and any
belated attempt to contradict such evidence in one’s own testimony—without
having put forward and made known one’s position earlier—lacks credibility.
This fundamental rule must be borne in mind by all cross-examining counsel, and
the counsel for the 1st Defendant, having disregarded it, failed to establish
proof of the 1st Defendant’s case, if his version were true. This
14
70 N.L.R 169 at 174.
15
(1998) 2 Sri LR 16.
principle,
commonly referred to as the rule in Browne v Dunn, derives its name from the
19th - century case.
63. Denning J. in Miller v. Minister of
Pensions16 stated :-
If
the evidence is such that the tribunal can say: ‘we think it more probable than
not,’ the burden is discharged, but, if the probabilities are equal, it is not.
64. In civil cases the test is not whether one
party’s version is more probable than the other party’s for it may be that
neither version of events is credible-see Rhesa Shipping v. Edmunds17.
The
party bearing the burden will discharge it only if the tribunal of fact is
satisfied that his version of events is more probable than any alternative
version.
65. However, the phrase ‘balance of
probabilities’ is often employed as a convenient phrase to express the basis
upon which civil issues are decided but the test says nothing about how far
above 50 per cent the probability should be that his version of events is
correct.
66. One theory holds that anything over 50 per
cent suffices, no matter what the nature of the allegation (the so-called ’51
per cent test’-see Davies v. Taylor18).
67. The only matter on which the Plaintiff was
cross-examined concerned the payment purportedly made by the CEB to the
Plaintiff. It is worthy of note that the Plaintiff consistently denied
receiving such payment, and even her witnesses testified that their mother had
not been paid. Counsel for the 1st Defendant attempted to cross-examine
16
(1947) 2 All ER 372 at p374 (KBD)
17
(1985) 1 WLR 948 (House of Lords).
18
[1972] 3 WLR 801 (HL) p.810.
the
Plaintiff on the contents of an answer filed by the 2nd Defendant (CEB), who
had by then been discharged from the proceedings. In these circumstances, the
material contained in the answer would amount to hearsay and could not serve as
proof of the alleged payment by the CEB.
68. The renowned dicta of Honorable L.M. De
Silva J, delivered in Subramaniam v the Public Prosecutor19 while sitting in
the Privy Council, established that an out-of-court statement cannot serve as
proof of its contents unless supported by direct evidence or falling within an
exception to the hearsay rule. Merely because the answer filed by the CEB
indicated that a cheque had been drawn in favour of one Iranganie, it does not
prove the truth of the implied assertion sought to be made that the proceeds of
the cheque reached the account of the Plaintiff. Unless a copy of the cheque
and voucher were put to the Plaintiff in cross examination, the Plaintiff’s
evidence that no payment by way of a cheque was made to her has to be accepted
on the foundational principle given in paragraph 61 of this judgement.
69. Even the witness from the CEB who had
nothing to do with the drawing of the cheque or its purported delivery to the
Plaintiff could not say with certainty that the proceeds of the cheque had
reached the Plaintiff. Then who was the recipient of this money? The 1st
Defendant could not have left this issue in a state of uncertainty and doubt.
If he had personal knowledge of the person to whom the proceeds of the cheque
went, it was his bounden duty to bring it to the fore in court.
70. Thus, there is a serious doubt that arises
in the case presented by the 1st Defendant. The only line of cross examination
undertaken of the Plaintiff focused on the alleged payment of consideration for
the transfer which was denied by the Plaintiff, whereas the core of the
Plaintiff's case appears to be focused on a purposeful conveyance that
19
(1956) 1 WLR 965
did
not seek to vest beneficial interest in the 1st Defendant. If at all, the
testimony as spoken to by the Plaintiff and her witnesses is that a conveyance
in the name of the 1st Defendant was effected only for the purpose of
facilitating a loan for him upon his oral promise to retransfer.
71. When the Plaintiff alluded to the oral
promise on the part of the brother to retransfer the land, she was not
seriously challenged on that attendant circumstance that goes to prove that the
1st Defendant did make an oral promise to retransfer the land.
72. Having made these preliminary observations I
would now turn to the evidence for the Defendant and briefly touch upon how he
fared in the witness box.
Evidence
led on behalf of the 1st Defendant.
73. I have already highlighted some items of
evidence proffered by the 1st Defendant and I have said that the testimony of
the 1st Defendant is replete with new material that was not put to the
Plaintiff and her witnesses. For instance, the 1st Defendant speaks of taking
the Plaintiff to the CEB in order to secure the cheque for her. He also stated
that he was not however present at the time when the cheque was allegedly
handed over to her. This visit to the CEB was never put to the Plaintiff or her
witnesses. Thus, serious misgivings arise in regard to the testimonial
trustworthiness of the story of payment allegedly made by the CEB to the
Plaintiff.
74. It is important to observe that the
Plaintiff unequivocally denied receiving any cheque from the CEB when giving
evidence. She maintained that she only had a savings account implying that she
could not have engaged in cheque transactions. She further stated that she did
not hold a current account, suggesting that she lacked the means to receive the
cheque proceeds. Moreover, during cross-examination, it was never
suggested
that her savings account had received the proceeds of the alleged cheque, nor
was a copy of the cheque shown to her.
75. As regards the burden of proof, which I will
address shortly in this judgment, I am of the view that it rests on the 1st
Defendant to establish payment. It is critical to his case to prove that
payment was made, thereby resulting in a valid sale to him. The burden of
proving the payment of consideration, if any, lies with the 1st Defendant, and
the circumstances I have highlighted raise serious doubt as to whether such
payment occurred. The Plaintiff testified that she did not have a current
account, and if a cheque had indeed been credited to her savings account, the
1st Defendant failed to call any officer from either the paying or collecting
bank to confirm that the cheque proceeds were received by the Plaintiff through
her bank account. It is not difficult for the CEB to establish to whom its
money had been dispatched by its bank - the People’s Bank.
76. If the attestation clause of the transfer
deed states that the consideration of the transfer would be paid by the CEB to
the Plaintiff, it is the burden of the vendee to prove that the consideration
was paid to her. The only witness summoned by the 1st Defendant to establish
the payment of a cheque was the secretary / accountant who served in the EPF
department of the CEB. Admittedly, this witness was nowhere there when the CEB
allegedly made this payment to the Plaintiff. The witness was giving evidence
from a file which was maintained in relation to the loan of the 1st Defendant.
77. The witness from the CEB who was summoned by
the 1st Defendant referred to a voucher which had been allegedly signed by one
Iranganie - a name that the Plaintiff bears. However, this voucher was not put
to the Plaintiff when the Plaintiff was giving evidence. Certified copies of
the documents in the files were available to the 1st Defendant but he chose not
to confront the Plaintiff with the actual documents. This omission is grievous
and does not identify with unerring accuracy the identity of the
person
who had allegedly received the payment. This omission to elicit and establish
the true identity of the real payee becomes more pronounced in light of the
fact that the Plaintiff had vehemently rejected all suggestions of payment and
moreover, there was a culpable omission to suggest to her that she went with
the brother to the CEB to receive the proceeds of the loan obtained by the 1st
Defendant.
78. Did Iranganie (the Plaintiff) personally
receive the payment, or was it collected on his behalf by someone else? This is
the brooding question as there is uncontradicted evidence that the Plaintiff
did not go to the CEB to receive the cheque? If Iranganie (the Plaintiff) had
not gone to receive the alleged cheque and there is no evidence that her
account received the funds of CEB, who pocketed the funds of the CEB? This
looms large in the case and the person who asserted the payment was bound to
have established this fact. If this evidence was withheld from Court, the
corollary follows i.e the presumption of fact embodied in Section 114(f) of the
Evidence Ordinance may be drawn against the 1st Defendant.
79. The witness from the CEB could not establish
that the cheque was paid in the account of the Plaintiff. He stated that he
could not state with certainty as to who had been paid.
80. If a cheque had been credited to the account
of the Plaintiff, it would not have been impossible for the CEB to obtain the
details of the person who had encashed the cheque.
81. Thus, there is no proof that the Plaintiff
was handed over a cheque. Though the voucher contained a signature bearing the
name Iranganie, it was never shown to the Plaintiff and the identity of the
recipient of the cheque was never established on a balance of probability.
82. In the teeth of the denials made by the
Plaintiff that she was ever paid by a cheque, it was imperative on the part of
the 1st Defendant to have conclusively established that the proceeds of the
cheque were received by the Plaintiff. The officer from the CEB refreshed his
memory from a file maintained at the CEB and he was not the author or had any
personal knowledge of the recipient of the cheque.
83. If the 1st Defendant claims to have taken
his sister to the CEB to procure the payment for her, it is contrary to human
nature that he was not around at the crucial moment when she allegedly
collected the cheque.
84. The 1st Defendant had personal knowledge of
the path of payment but he failed grievously to establish that it was his
sister who received the payment. The paying bank - the People’s Bank could have
been noticed to supply the deficiency.
85. In the light of this overwhelming evidence
against the 1st Defendant, Section 114 (f) of the Evidence Ordinance should be
invoked against him and it is fatuous to invite this Court to draw this
presumption against the Plaintiff. In light of the items of evidence I have
highlighted and the serious omission on the part of the 1st Defendant to prove
by cogent evidence that his employer CEB paid consideration to the Plaintiff,
my brother could not have used Section 114 (f) of the Evidence Ordinance to
draw adverse inferences against the Plaintiff because it was not the burden of
the Plaintiff to establish the proof of payment and it was indeed the burden of
the 1st Defendant to establish the proof of payment. He sought to do so but
failed to lead material evidence resulting in the consequence of the
presumption being drawn against the 1st Defendant himself.
86. Now that I have demonstrated that on a
balance of probability the case of the Plaintiff outweighs that of the 1st
Defendant and it becomes necessary to rationalize my
reasoning
on the evidence having regard to the provisions dealing with burden of proof
and the law thereon.
Burden
of Proof
87. A Defendant who claims to have purchased the
Plaintiff’s land with a loan from his employer and produces the relevant
monthly statement from the paying bank at trial could have easily established
that the cheque payment by his employer was credited to the Plaintiff’s
account. Just as the 1st Defendant in this case presented a witness from the
CEB who stated that, based on the monthly statement, he could not confirm to
whom the cheque was paid, the Defendant could have procured the necessary
information regarding the payee by obtaining it from his employer, CEB—the
drawer of the cheque—or by subpoenaing the bank to testify about the
destination of the cheque proceeds.
Proving
a negative
88. Since it was the 1st Defendant asserting the
payment, and the Plaintiff was asserting a negative—namely, non-payment—it is
trite law that the Plaintiff cannot be called upon to prove a negative. Based
on the rule of Roman Law - ‘ei incumbit probatio, qui dicit, non qui negat’ -
the burden of proving a fact rests on party who substantially asserts the
affirmative of the issue and not upon the party who denies it, for a negative
does not admit of direct and simple proof. see the Indian case of Ranutrol Industries
Limited v. Mr. Nauched Singh and Anr.20
89. In the aforesaid case, there was a dispute
between a company and its employee, regarding his dismissal. The learned
counsel appearing for the company stated that
20
Writ petition (civil) No 1478/2008
the
"Labour Court has not addressed the issue that proper enquiry has not been
held”. According to him, in the light of this issue, the onus of proving the
lack of proper enquiry lay upon the workman and that there is nothing in the
impugned award to show that this aspect of the matter has been considered by
the Labour Court.
90. Justice Sudershan Kumar Misra observed that:
"A
reading of the impugned award clearly shows that the workman had made a
categoric statement that his service had been terminated without any enquiry
and in violation of the provisions of the Industrial Disputes Act and that no
notice or notice pay or retrenchment compensation had been given to him. As
stated in the Latin maxim Ei incumbit probatio qui dicit, non qui negat i.e.,
onus of proof lies upon him who affirms, and not upon him who denies the
existence of any fact. It is the management who averred that the requisite
enquiry had, in fact, been held. Therefore, it was for the management to prove
that fact. In this context, the Labour Court has duly noted the fact that
despite a number of opportunities being granted to the management, it has
failed to produce any evidence of a fair and valid inquiry.”
91. Identical views were expressed in other
Indian cases-see New Indian Assurance Company Ltd v. Nusli Neville Wadiya21
where the Supreme Court of India alluded to the pervasive principle behind
Section 101 of the Evidence Ordinance that the burden of proving a fact rests
on the party who substantially asserts the affirmative of the issue and not
upon the party who denies it, for a negative is usually incapable of proof.22
21
(2008) 3 Supreme Court Cases 279: (2008) 1 Supreme Court Cases (Civ) 850:
2007
SCCC OnLine SC 1540
22
Ei qui affirmat non ei qui negat incumbit probatio
92. In such circumstances, where a prima facie
case of non-payment has emerged before the court, the relevant evidence—such as
the identity of the recipient of the cheque and its proceeds—must come from the
proponent of the assertion of payment, namely the 1st Defendant. A culpable
failure to discharge this burden arises if the 1st Defendant withholds such
evidence. In that event, Section 114 enables the court to draw a presumption
that, if produced, the said payment particulars would have been unfavorable to
the 1st Defendant. This is why the failure to prove the recipient’s identity
becomes relevant. As I said before, there is only evidence that a cheque had
been drawn in the name of one Irangainie. There is not a scintilla of
acceptable evidence that the cheque was handed over to the Plaintiff or
credited to her savings account.
93. When the Plaintiff denied receiving payment
and this evidence was corroborated by the son and daughter, the Plaintiff
furnished a prima facie case of non-payment. Then the burden shifted to the 1st
Defendant to adduce evidence of payment as he asserted payment. As the date and
amount paid were within his exclusive knowledge, he must plead and prove the
same in terms of S. 106 of the Evidence Ordinance. The entries in the books
should have been put to the Plaintiff and they have been skillfully hidden from
her.
94. All in all. the prima facie evidence of
non-payment has not been rebutted by the 1st Defendant and it is for this
reason that even the onus set out in the provisions dealing with burden of
proof has not been discharged by him.
95. There is also another aspect that looms
large in this case namely failure to cross examine the Plaintiff on material
particulars as well as a grievous omission to put matters to the Plaintiff,
which the 1st Defendant spoke to only in his examination in chief.
96. To sum up, Professor Peter Murphy, Professor
of Law, South Texas College of Law made a significantly important pronouncement
in his book on the necessity to cross examine a witness and suggest to the
witness the matters that are in favour of the cross-examining party-the 1st
Defendant in this instance.
There
are two direct consequences of a failure to cross examine a witness. One is
purely evidential in that, “failure to cross-examine a witness who has given
relevant evidence for the other side is held technically to an acceptance of
the witness’s evidence in chief.” The other is a tactical one but no less
important for that. “Where a party’s case has not been put to witnesses called
for the other side, who might reasonably have been expected to be able to deal
with it, that party himself will probably be asked in cross examination why he
is giving evidence about matters which were never put in cross examination on
his behalf.”23
97. Even in his other work, viz. "A
Practical Approach to Evidence, having considered the effect of omission to
cross-examine a witness on a material point Peter Murphy states the same as
above.
It
is, therefore, not open to a party to impugn in a closing speech or otherwise,
the unchallenged evidence of a witness called by his opponent or even to seek
to explain to the tribunal of fact the reason for the failure to
cross-examine.24
Accordingly,
it is counsel’s duty, in every case:
“(a) to challenge every part of a
witness’s evidence which runs contrary to his own instructions; (b) to put to
the witness, in terms, any allegation against him which must be made in the
proper conduct of the defence; (c) to put to the witness
23
Peter Murphy on Evidence, 8th Ed., p. 597-598,
24
A Practical Approach to Evidence at page 444,
counsel’s
own case, in so far the witness is apparently able to assist with relevant
matters or would be so able, given the truth of the counsel’s case."
To
proceed with the quotation from Peter Murphy:
"The
second consequence of failure to cross-examine is a tactical one but no less
important for that. Where a party’s case" had not been put to witnesses
called for the other side, who might reasonably have been expected to be able
to deal with it that party himself will probably be asked in cross-examination
why he is giving evidence about matters which were never put in
cross-examination on his behalf. The implication of the question is that the
party is fabricating evidence in the witness-box, because if he has ever
mentioned the matters in question to his legal advisers, then they would have
been put on his behalf at the proper time."25
98. All this goes to prove that the 1st
Defendant grievously failed to prove the payment of consideration.
99. Apart from the above, as I have pointed out,
there are other attendant circumstances that unambiguously point to the fact
that the sister did not have the intention to transfer the beneficial interest
to the brother. The fact that the 1st Defendant did not go into possession of
the property coupled with his subsequent conduct of handing back the original
deed for retransfer remained uncontradicted and as Peter Murphy
25
In this connection see C.A.Case No 20/99 Athambawa Uthumanachi v Mohamed Thamby
Asiya Umma (D.C.Kalmunai No 2079/L) decided on 20.06.2018 ; Also see CA Kananke
Acharige Mithrananda (5th Defendant- Appellant) v Manage Sardajeewa and Others
CA C.A. Case No. 722/1999
(F)
D.C. Tangalle Case No. P/3194 delivered on 06.05.2019.
sounded
the caveat, a number of new versions were taken up by the 1st Defendant only in
his examination in chief.
100. I must pinpoint a stark reality and a sad
consequence the Plaintiff faces if justice is not meted out in her favor. She
never intended to transfer the beneficial ownership of the property to her
brother, and, moreover, no payment was made by him for the property. The
Plaintiff faces the bleak future of losing not only her land but also the money
which should have been paid if it was a genuine sale. I do not think that this
Court exercising good conscience and equity can permit such injustice to be
perpetrated against the Plaintiff. As Lord Browne-Wilkinson stated in
Westdeutsche Landesbank Girozentrale v Islington (supra), a resulting trust is
imposed on the basis of the unconscionable conduct of the recipient of the
property and I feel compelled to observe that the owner of the property-the
Plaintiff believed and had legitimate expectations that her property would be
returned.
101. On the facts of the case a resulting
trust arises on the basis of the common intention of the parties and there is
no doubt that the brother was well aware that the property must be returned to
the sister. In the circumstances, I hold quite compellingly that a declaration
of trust must be made in favour of the Plaintiff and the 1st Defendant must be
ordered to return the property back to the sister, as it is inequitable for the
1st Defendant to appropriate and convert it illegally as his own.
102. I have already pointed out that it is quite
stultifying to remit the case back, as the Civil Appellate High Court Judges
erroneously decided to remand it to the District Court for the taking of
further evidence. The record contains substantial evidence demonstrating the
attendant circumstances, which clearly indicate that the beneficial interest in
the property was not transferred to the brother. Accordingly, I set aside the
order
to remand the case to the District Court but the judgement of the Civil
Appellate High Court declaring a constructive trust in favor of the Plaintiff
is hereby affirmed.
103. The decision of the District Court is set
aside and all questions of law are answered in favour of the Plaintiff. Thus, I
proceed to dismiss the appeal of the 1st Defendant- Respondent-Appellant.
JUDGE
OF THE SUPREME COURT
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