Strong v, Marikar.
1933
Present:
145
Dalton A . C J . and Drieberg J.
STRONG
v.
MARIKAR.
209—D. C. (Inty.)
Puttalam, 4,441.
Caveat—Creditorfilescaveat to prevent alienation of property by debtor in
fraud of creditors—Object of caveat—Registerable interest in land—
Registration of Documents Ordinance, No. 23 of 1927, ss. 30, 32, and 33.
Section 32 of the Registration of Documents Ordinance does not
entitle a creditor, who has not obtained judgment against his debtor,
to enter a caveat to prevent the alienation of property by his debtor in
fraud of creditors.
The object of the section is to give the caveator notice of a deed in
order that he might have it rectified or cancelled under sub-section (5)
if he can show that it is void or voidable or fraudulent as against him or
that it is in derogation of his lawful rights.
It does not alter the substantive law regarding the grounds on which
he can have the deed cancelled.
Held further, the caveator is not bound to show that he has a registerable interest in the land, the registration of deeds affecting which he
seeks to prevent.
T N this action the appellant sued the respondent f o r the r e c o v e r y of a
A sum of Rs. 10,662.91 and, before the decision o f the action, registered
u n d e r section 32 o f the Registration o f D o c u m e n t s Ordinance, N o . 23 of
1927, a caveat affecting five lands o f the respondent. H e filed an
affidavit alleging that the respondent w a s about t o m o r t g a g e t h e m and
that if h e did so, the appellant w o u l d b e d e p r i v e d o f the means of r e c o v e r ­
ing the amount d u e to h i m . T h e respondent m o v e d under section 33 of the
Ordinance that the registration of t h e caveat b e cancelled. T h e learned
District Judge held that the filing o f the caveat w a s w r o n g f u l and a l l o w e d
the application.
H. V. Perera, for appellant.—Under section 25 o f Ordinance N o . 14
of 1891, o n l y a party to an instrument o r deed can l o d g e a caveat
(Annamaly Chetty v. Thornhill ),
b u t u n d e r section 32 (1) o f Ordi­
nance N o . 23 of 1927, any person is entitled to enter one. T h e change
in the w o r d i n g is significant. Section 32 (1) has b e e n deliberately
m a d e w i d e r in terms, as the party aggrieved has been g i v e n a r e m e d y
b y section 33 and a claim for damages b y section 34. A s the l a w n o w
stands any person can l o d g e a caveat, but if h e d o e s so unlawfully o r
i m p r o p e r l y he w i l l b e liable in damages.
1
N. Nadarajah, for respondent.—The position taken u p b y the appellant
is not correct. It w a s not intended to w i d e n the provisions of Ordi­
nance N o . 14 of 1891. In the statement o f objects and reasons b y the
Hon. the Attorney-General in the Government
Gazette of A p r i l 8, 1927,
it is clearly stated that the a m e n d m e n t of section 25 o f Ordinance N o . 14
of 1891 w a s necessary in v i e w o f the fact that the section w a s being
abused b y simple m o n e y creditors. T h e submission m a d e for the appel­
lant is that the mischief sought to b e averted has been rendered lawful.
35/13
- - 1 2 9
K
L
R
m
146
DALTON A.CJ.—Strong v. Marikar.
T h e class of persons w h o can c o m e under section 3 2 is no larger than
under the clause 2 5 of Ordinance N o . 2 5 of 1 8 9 1 , but a close examination
of sub-section ( 5 ) of section 3 2 shows what persons are entitled to lodge
caveats. T h e appellant does not c o m e within the class of persons. He
is only at the best a simple creditor without a decree of Court for his claim.
His claim is being disputed. A s such h e cannot say that the deed is
fraudulent as against him or in derogation of his lawful rights. Under
the Roman-Dutch law a simple creditor without discussing the available
property of his debtor cannot say that he has been defrauded. This can
o n l y be done after a decree. (4 N. L. R. 81.) It is submitted that a
simple m o n e y creditor cannot enter a caveat, and the law is the same
n o w as under section 2 5 of Ordinance N o . 1 4 of 1 8 9 1 as far as simple
creditors are concerned.
1
H. V. Perera, in reply.—The case of Fernando v. Fernando only lays
d o w n that a person claiming damages cannot bring a Paulian action
without a decree. That does not apply to a creditor w h o claims a debt
which is due. He can institute a Paulian action, and as such he can
rightly say that his rights are being interfered with w h e n a debtor transfers
his property; h e can therefore lodge a caveat.
July 13, 1933.
DALTON A.C.J.—
I agree that this appeal must be dismissed. I have had the oppor­
tunity of reading the j u d g m e n t of m y brother Drieberg, and I concur
in the conclusion to w h i c h he has come. I should like to add, however,
that the idea of a creditor being allowed to enter a caveat to stop his
debtor dealing w i t h his i m m o v a b l e property, until his ordinary contract
debt is paid, is not strange to me, o r in fact u n k n o w n in Roman-Dutch
law. During the course of the argument before us, the remarks of
A . St. V . Jayewardene J. in Fernando v. Fernando w e r e brought to our
notice, and they d o g i v e r o o m for the suggestion that in C e y l o n a creditor
whose claim is certain and ascertained, although he has not obtained a
judgment, is in a m o r e favourable position, so far as a Paulian action is
concerned, than one w h o has a claim for unliquidated damages only.
T h e origin in the Netherlands of the practice o f advertisement in the case
of sales of land is referred to b y Wessels J. in Houtpoort Syndicate v.
Jacobs . In British Guiana even at the present day, simple contract
creditors are e m p o w e r e d to enter a caveat against the transfer or mortgage
of any i m m o v a b l e property belonging to the debtor. This right of oppo­
sition has been the subject of many local decisions there, but does not
extend to any claim for uncertain or unascertained damages. The
V e n d u e Regulations for Demerara and Essequebo, as enacted b y the
Assembly of T e n on O c t o b e r 6, 1784, are referred to b y Burge, Colonial
Laws, 1st ed., p. 582. B y subsequent regulation the requirements in
respect of sales b y the vendue master w e r e extended to all alienations of
i m m o v a b l e property, and they are n o w governed there b y Rules of
Court under the provisions of the local Deeds Registry Ordinance, 1919.
There the conditions under w h i c h a creditor can enter an opposition o r
caveat before a c o n v e y a n c e or mortgage is executed are set out. T h e y
1
1
' 26 N. T.. ft. 292.
2
South Africa. (1904) T. S. 105.
D R I E B E R G J.—Strong
v. Marikar.
147
in fact p l a y an important part in the system of c o n v e y a n c i n g w h i c h
survives in its present f o r m to a great extent f r o m D u t c h days. W i t h
regard to Ceylon, h o w e v e r , although the provisions o f our Registration
of D o c u m e n t s Ordinance ( N o . 23 o f 1927) m a d e considerable changes in
respect of the l a w applicable to instruments affecting land, and the use
o f the w o r d s " in derogation o f his lawful rights " in section 32 (5) raises
considerable difficulties, M r . P e r e r a has not satisfied m e that the Ordinance
has made any change in the l a w of the land, as it stood b e f o r e the Ordi­
nance w a s passed, in respect o f the enlargement o f the right of creditors
in C e y l o n to obtain the rectification or cancellation of deeds alleged to
h a v e been e x e c u t e d to their prejudice.
T h e appeal' must therefore b e dismissed with cpsts.
DRIEBERG
J.—
T h e appellant sued the respondent for the r e c o v e r y of a sum of
Rs. 10,662.91 and, before the decision of the action, registered o n A u g u s t
3, 1932, under section 32 o f the Registration of D o c u m e n t s Ordinance,
N o . 23 of 1927, a caveat affecting five lands of the respondent. T h e
appellant says these lands are i n the present state of the market w o r t h
Rs. 100,000 and that the respondent's liabilities, including the d e b t to
the appellant, amount to Rs. 91,653.29, of w h i c h R s . 57,000 is secured
b y mortgage. H e alleged that the respondent w a s preparing further to
e n c u m b e r his p r o p e r t y and that if he e x e c u t e d the deeds and registered
them, he w o u l d b e c o m p l e t e l y d e p r i v e d of any means of r e c o v e r i n g the
amount due to h i m ; that it w a s absolutely necessary that h e should
prevent the registration of any d o c u m e n t s b y the respondent in o r d e r
that in the event of e x e c u t i o n h e w o u l d b e able to i m p u g n the same as
being in fraud of his claim. H e g a v e this explanation in an affidavit
filed b y him w h e n the respondent m o v e d to h a v e the registration o f the
caveat cancelled. T h e respondent does not challenge this statement
of his liabilities, but h e says that the lands affected b y the caveat are
w o r t h Rs. 100,000. O n O c t o b e r 15 the respondent
moved
under
section 33 of the Ordinance that the registration of the caveat b e can­
celled. T h e learned District J u d g e held that the filing of the caveat w a s
wrongful and not necessary, that the appellant had n o right to d o so,
and he ordered that it b e cancelled. T h e appeal is f r o m this order.
T h e j u d g m e n t p r o c e e d e d o n the g r o u n d that t h o u g h the provision
for the registration o f caveats under section 32 o f O r d i n a n c e N o . 23 o f
1927 w a s in certain respects different f r o m that under section 25 of
Ordinance N o . 14 of 1891, the caveator had still to s h o w that he had a
registerable interest in the land, the registration of deeds affecting w h i c h
h e sought to prevent. It is clear that the appellant w o u l d not h a v e
b e e n entitled to register a caveat under the O r d i n a n c e of 1891, but it is
contended it is otherwise u n d e r the present Ordinance..
U n d e r Ordinance N o . 14 of 1891, section 25, it w a s c o m p e t e n t f o r any
party to lodge w i t h the Registrar a caveat to prevent the registration o f
any d e e d or other instrument affecting a particular land w h i c h m i g h t
thereafter b e tendered for registration w i t h i n a fixed period not e x c e e d i n g
six months. If a d e e d w a s tendered for registration v ^ t h m that p e r i o d
the caveator had thirty d a y s within w h i c h to bring his action in w h i c h
148
case the registration was suspended until the decision of the action.
It is clear that under this provision the only persons to w h o m this relief
w o u l d be necessary w e r e those w h o w o u l d be affected b y the registration
of a deed and w h o w o u l d lose in competition with it. In 191 D. C.
Negombo, 16,048,' Bertram C.J. held that b y the w o r d "party" w a s
meant " party to some deed or instrument", and that the object of the
section was to allow a person w h o claimed a registerable interest in the
land under s o m e document to prevent another registration being made
to his prejudice. It w a s pointed out there and also in Croos v. Ramanathan Chetty' that this provision w a s not intended to supplement the
process w h i c h the law allowed of sequestration before judgment, provided
b y section 653 of the Civil P r o c e d u r e Code.
Ordinance No. 23 of 1927, w h i c h repealed section 25 of Ordinance No. 14
of 1891, does not use the w o r d " p a r t y " but enacts that " a n y p e r s o n "
m a y register a caveat. It provides what the caveator has to p r o v e
w h e n h e impeaches a deed submitted for registration while the caveat
is in force, and what order the Court m a y make regarding it. It also
makes provision, w h i c h Ordinance N o . 14 of 1891 did not, for the party
affected b y the caveat, though he has submitted no deed for registration,
to. apply that the registration of the caveat be cancelled. It brings
within its scope cases to w h i c h the old provision does not apply; this
follows from the use of the w o r d s '-any p e r s o n " instead of the w o r d
" party ", and it provides for the relief of persons w h o may be prejudiced,
not b y the registration of a deed and the consequent loss of their claims
to priority as in the case of the old provision, but b y the execution of a
deed and the acquisition of rights under it. It will b e seen that whereas
under Ordinance N o . 14 of 1891, registration was suspended until the
caveator established his claim, under section 32 of Ordinance N o . 23 of 1927
the object of the caveat is to give the caveator notice of a deed in order that
he might have it rectified or cancelled under section 32 (5) if he can s h o w
that it is void or voidable or fraudulent against him or that it is in
derogation of his lawful rights.
Those cases for w h i c h provision w a s made in section 25 of Ordinance
No. 14 of 1891, namely, w h e r e merely suspension of registration is needed
for the protection of those having a registerable interest in a land, are
excluded from section 32 of Ordinance N o . 23 of 1927 for the reason that no
caveat is needed for their protection. Provision is made for such cases
b y the n e w system of priority notices under section 30. W h e r e a person,
called for the purposes of that section a " t r a n s f e r e e " , has acquired or
proposes to acquire from another person, called the " transferor", any
interest in land, h e can register a priority notice of his intention to register
the instrument in his favour. W h e r e the instrument is not yet executed
the consent of the transferee is needed for the registration of the priority
notice; if executed, his consent is not necessary. T h e notice remains
in force for a period of six w e e k s , w h i c h can b e extended b y consent.
If the deed to the transferee b y the transferor is registered w h i l e the
priority notice is in force, it is d e e m e d to have been registered on the day
' (1925) 29 N. I.. R. 241. (191 D. C. Negamba.
= (1924) 5 C. L. Recorder 164.
16043).
DRIEBERG J.—Strong v. Marikar.
o n w h i c h the priority notice w a s registered.
this kind in the Ordinance o f 1891.
149
T h e r e w a s n o provision o f
T h e learned District Judge w a s w r o n g in holding that a caveator under
section 32 should have a registerable interest, in t h e land. This section
does not state w h o m a y register a caveat but this c a n b e gathered f r o m the
provisions o f sub-section (5) regarding the proof to b e g i v e n b y a caveator
w h o impeaches a d e e d tendered for registration and the o r d e r w h i c h the
Court can m a k e regarding it. T h e caveator must p r o v e that the deed
w a s at the time of registration v o i d or v o i d a b l e b y h i m or fraudulent
against him or in derogation o f his lawful rights, and if h e succeeds in
proving this the Court m a y o r d e r the d e e d to b e rectified o r cancelled
and m a y order the necessary correction in the register. I w o u l d here
d r a w attention to the w o r d s " that the instrument presented for regis­
tration is o r w a s at the time of registration v o i d or v o i d a b l e
".
W h e t h e r b y this is meant the time of registration o f the caveat o r the
time of the registration of the impeached deed is not clear. It is not
h o w e v e r necessary to consider this, but w h a t is clear is that there is n o
provision as in the Ordinance of 1891, that the registration should b e
suspended, and from the provision that o n a decision adverse to the
impeached deed the necessary correction should b e m a d e in the register
it w o u l d appear that a deed presented after the registration of the caveat
w o u l d b e registered. Its presence o n the register implies that it has been
registered, for registration is effected b y entering a d e e d o n the register.
T h e appellant in this case to b e entitled to register a caveat should b e
able to p r o v e that deeds tendered thereafter b y the respondent for regis­
tration w o u l d be, as regards himself, void o r v o i d a b l e o r fraudulent o r in
derogation of his lawful rights. T h e respondent, o n the appellant's
statement, is not presently insolvent; any transfer w o u l d not affect him,
but o n l y such as w o u l d have the effect of rendering the respondent
insolvent to the prejudice of the appellant, and here again a distinction
w o u l d have to b e d r a w n b e t w e e n voluntary c o n v e y a n c e s and those f o r
valuable consideration, for in the case of the latter a fraudulent intention
on the part of the alienee as w e l l w o u l d h a v e to b e p r o v e d . This w o u l d
mean that the Court w o u l d have to e x a m i n e each d e e d tendered and
allow or cancel it according to whether o r not the appellant w o u l d b e
prejudiced b y it. Section 32 m e r e l y provides a p r o c e d u r e w h i c h enables
a person to have notice o f a deed w h i c h h e has the right to have cancelled.
It does not alter the substantive l a w regarding the grounds o n w h i c h h e
can h a v e the deed cancelled. In this case the appellant seeks to p r o c u r e
the cancellation of deeds w h i c h w o u l d b e , as regards himself, fraudulent
alienations to defeat his rights as a creditor. I w i l l briefly state w h a t
the rights of a creditor in his position are.
If h e can satisfy the Court that the debtor w a s fraudulently alienating
his property he could, subject to the other conditions of section 653 o f
the Civil P r o c e d u r e Code, at o n c e institute an action for the r e c o v e r y
o f the amount d u e to h i m and get an order for the sequestration o f so
m u c h o f his debtor's p r o p e r t y as is necessary to satisfy his c l a i m until
h e obtains j u d g m e n t and e x e c u t e s it. T h e same r e m e d y is o p e n to h i m
in the course of his action.
150
DRIEBERG J.—Strong v. Marikar.
W h e r e the debtor has committed an act of insolvency the creditor
can have him adjudicated insolvent in w h i c h case conveyances without
valuable consideration, with certain exceptions, made w h i l e h e w a s
insolvent w o u l d b e void against his creditors; Insolvent Estates Ordinance,
section 51. Conveyances, though for valuable consideration, made
between the commission of an act of insolvency and the filing of the
petition, are also under certain circumstances void against creditors;
section 57. W h e r e an alienation has been made in fraud of creditors
this is an act of insolvency w h i c h will support an adjudication.
A creditor w h o has obtained a judgment is amply protected b y the
n e w Ordinance, for, in addition to the provision for registration of seizure,
which w o u l d render private alienations thereafter void as against rights
enforceable under the seizure under the Civil Procedure Code, h e can
n o w under section 31 register a priority notice as soon as writ of execution
is issued and so protect himself in the interval between that and the
seizure and its registration.
Was it then intended b y section 32 to afford to a creditor w h o ' h a s not
obtained a judgment a means of obtaining what can otherwise only b e
obtained in a Paulian action? A Paulian action cannot b e brought
except b y a person w h o holds a judgment " for the cause of action does
not arise until the rest of the property of the debtor, not included in the
impeached deed has been exhausted b y e x e c u t i o n " , Bonser C.J. in
Podisingho Appuhamy v. Loku Singho \ He referred to Voet 42.8.13
w h e r e it is said of the Paulian action that it " should be instituted within
a year from the time the right of action first arises, the year to b e reckoned
not from the time of effecting the alienation in fraud of creditors but of
the sale of the w h o l e estate: as it is then that the right of action first
arises: for, before that, it cannot be ascertained whether the creditors
cannot b e satisfied out of the rest of the property w h i c h has remained in
the patrimony of the insolvent and thus whether or not creditors have
been defrauded b y the alienation ". (De Vos' translation.)
=
The case of Fernando v. Fernando was cited b y Mr. Perera. There
the plaintiff sued the defendant to recover a boat in the possession of the
defendant and for damages. T h e plaintiff had bought the boat from
Manuel Joseph de Silva. The defendant pleaded that he had an agree­
ment with de Silva for the hire of the boat and there was an action
pending in which he sued de Silva for damages for breach of the agreement,
and he claimed the right to retain possession of the boat as security f o r
his claim. He alleged that the transfer b y de Silva to the plaintiff was
a fraudulent alienation; he asked that it be declared void as against
his claim and for that purpose h e m o v e d that de Silva b e made a party
to the action. T h e appeal was from a refusal to m a k e ' d e Silva a party.
The questions before the Court, as stated b y Bertram C.J., w e r e whether
the defendant was a person qualified to bring a Paulian action and
whether at the time of his application the time had arrived w h e n he
could bring it. Mr. Perera referred us to the j u d g m e n t of Jayewardene J.
w h e r e he considered t h e objection to the defendant's application on the
ground of his claim being for unliquidated damages; he thought that
in that particular case a j u d g m e n t was needed for the reason that the
» (1900) 4 N.
L. R. 81.
2
(1924) 30 N. L. R. 292.
DRtEBERG J.—Strong v. Marikar.
151
claim w a s o n e for unliquidated damages and that until a definite d e b t
w a s adjudged to b e due b y a C o u r t there could b e n o relationship o f
creditor and debtor. His j u d g m e n t suggests that in the case o f an
ascertained and definite claim a creditor w h o had not got a j u d g m e n t
could maintain the action. Bertram C.J., h o w e v e r , t o o k the v i e w that in
any case a claim under an action is not a debt until it is reduced to j u d g ­
ment and that
t w o fundamental conditions are essential, namely,
concilium and eventus, that is to say, there must b e the design to defraud
the creditor putting the r e m e d y in suit, and the process of l a w must
h a v e disclosed the fact that that creditor w a s in fact defrauded b y the
insufficiency o f the debtor's assets " ( o n p a g e 295) and that " the action
is o n l y competent to a j u d g m e n t creditor w h o c a n s h o w that b y reason
of the alienation complained o f the j u d g m e n t - d e b t o r has n o assets o n
w h i c h execution can b e levied, or that assets o n w h i c h it has already b e e n
levied are insufficient to satisfy the d e b t . " ( o n p a g e 296). In B o r o n c h i
A p p u v. Siyadoris Appu' it w a s stated b y Pereira J. that it is not o n l y a
j u d g m e n t creditor w h o can bring the action. T h e ease is n o t fully
reported and it is not clear w h a t t h e f o r m of the action w a s and the
alienating d e b t o r w a s not a party to it. T h e action w a s dismissed w i t h
l e a v e to institute a fresh action.
It is difficult to see h o w the decree of a Paulian action can b e obtained
in a proceeding under section 32 (5) of the Ordinance ; w h a t w o u l d
happen if the person affected b y the caveat denies that h e is indebted to
the caveator? Is the caveat to continue in force until the caveator
establishes the fact that he is a creditor ?
Further, if, as in this case,,
the caveator s h o w s the risk to himself o f an alienation b y the d e b t o r b y a
statement of the debtor's other liabilities and of his available assets, if
the Court to enter o n an inquiry regarding the value of the assets if
the parties are not agreed o n the point, and if the d e b t o r denies the
liabilities to others alleged b y the caveator, is the Court t o investigate
and determine the extent of such indebtedness ? If so, the Court w i l l
have to undertake a c o m p l e t e examination o f the financial affairs o f the
person concerned.
T h e relief a l l o w e d to a successful caveator under section 32 (5) does
not suggest that it is o n e intended for an alienation in fraud of creditors.
T h e deed has to be " rectified o r cancelled ". T h e r e can b e n o question
of rectifying such a deed, nor should such a deed b e cancelled ; cancellation
w o u l d revest title in the transferor.
A decree in a Paulian action
declares the transfer void as against a creditor o r creditors only, it does
not revest the transferor with title, (Punchi Banda, v. Perera)
if the claims
of the creditors are thereafter satisfied b y other means, the title o f the
transferee w o u l d remain entirley unaffected b y the decree. If it w a s
intended for such cases I w o u l d e x p e c t section 32 (5) to p r o v i d e for an
order declaring the d e e d v o i d as against the caveator. There are m a n y
cases w h e r e a resort to a caveat is a l l o w a b l e and necessary, but in m y
opinion it w a s not intended nor is it necessary in such a case as this.
T h e order cancelling it under the provisions of section 33 (2) is right
and the appeal is dismissed, with costs.
Appeal
' I19H) 4 C. A. C. 05.
a
dismissed.
(1928) 30 N. L. R. 35;,.