ALGAMA

VS.

LANKANAYAKE

SUPREME COURT
SURASENA, J.
AMARASEKARA, J.
SAMAYAWARDHENA, J.
SC/APPEAL/57/2019
SC/HCCA/LA/237 /2018
NWP/HCCA/KURU/80/2015/F
DC WARIYAPOLA 09/SPL
APRIL 27, 2021

Partition Law, No. 21 of 1977, section 48(1)-Trusts Ordinance, No. 9 of 1917, section 83-Finality of partition decree-Constructive trust

A constructive trust is not wiped out upon the entering of a partition decree notwithstanding that section 48(1) of the Partition Law invests a partition decree with finality free from all encumbrances whatsoever.

The position is the same even if the beneficiary of a constructive trust who was a party to the partition action failed to put the constructive trust in issue in the partition action.

Cases referred to :

1. Babunona v. Cornelis Appu (1910) 14 NLR 45

2. Galgamuwa v. Weerasekera (1919) 21 NLR 108

3. Sultan v. Sivanadian (1911) 15 NLR 135

4. Weeraman v. De Silva (1920) 22 NLR 107

5. Marikar v. Marikar (1920) 22 NLR 137

6. Punchimahatmaya v. Medagama (1949) 51 NLR 276

7. Herat v. Amunugama (1955) 56 NLR 529

APPEAL from the Judgment of the High Court of Civil Appeal of Kurunagala.

W. Dayaratne, P.C., with Ranjika Jayawardene for the Defendant-Respondent-Appellant.

Sapumal Bandara with Geethika Mannaperuma for the Plaintiff-Appellant-Respondent.

cur. adv. vult.

June 10, 2021

SAMAYAWARDHENA, J.

By way of Deed of Transfer No. 10950, the Plaintiff-Appellant-Respondent (Plaintiff) transferred some of her undivided rights to the land described in the schedule to the Deed to her brother, the Defendant-Respondent? Appellant (Defendant). The Plaintiff states that although this Deed is ex facie an outright transfer, it was in fact security for a loan obtained by her from the Defendant and there was an oral agreement between them that the Defendant brother would retransfer the property once she repaid the loan with interest. The Plaintiff's position is that she never intended to pass the beneficial interest in the property to the Defendant, thereby resulting in a constructive trust being created in her favour.

Section 83 of the Trusts Ordinance, No. 9 of 1917, as amended, reads as follows:

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.

The Defendant had also acquired undivided rights to this property by other Deeds. He filed a partition action to partition the larger land making the Plaintiff also a Defendant. The partition case was concluded without contest. The Plaintiff did not raise her claim to the constructive trust in the partition action.

The Plaintiff states that the Defendant continuously postponed the retransfer of the property and she was ultimately compelled to file this case as a last resort to vindicate her rights.

The Defendant denies this version of events of the Plaintiff. The Defendant states that the transaction was an outright transfer of the property and he is not holding the property in trust for the Plaintiff.

After trial, the District Court held against the Plaintiff on the basis that the partition decree wiped out the constructive trust, if any.

On appeal, the High Court of Civil Appeal reversed the Judgment and directed the District Court to enter Judgment for the Plaintiff.

The Defendant is now before this Court against the Judgment of the High Court.

The Defendant raised several questions of law but this Court granted leave to appeal on two questions, which in essence is whether the High Court erred in law when it decided that a constructive trust is not extinguished by a decree for partition notwithstanding that the Plaintiff, being aware of the partition action, did not claim such a right in the partition action.

In the Partition Ordinance, No. 10 of 18