The Supreme Court has recently delivered a divided verdict in a long-standing land dispute involving allegations of a constructive trust and the burden of proving payment.
Was the Land Transfer a Real Sale? – Judges Divided
Background
The Supreme Court has recently delivered a divided verdict in a long-standing land dispute involving allegations of a constructive trust and the burden of proving payment. The case centered around whether a transfer of property from a sister to her brother was a genuine sale or merely a nominal conveyance intended to help the brother secure a loan. The majority of the Court ruled in favor of the brother (the 1st defendant), while a dissenting judge issued a detailed opinion supporting the sister’s (the plaintiff’s) claim.
The case involved a dispute between a sister (the Plaintiff) and her brother (the 1st Defendant) over the ownership of a property that had originally been registered in the sister’s name.
According to the sister, she had not sold the property. Her version was that she agreed to transfer the land temporarily into her brother’s name so that he could obtain a loan from his employer, the Ceylon Electricity Board (CEB). She claimed that this was done on the oral promise that he would retransfer the property back to her after securing the loan. She insisted that no payment was made to her and she never intended to pass the beneficial ownership to her brother.
The brother, on the other hand, maintained that the transfer was a genuine sale. He claimed he had obtained a loan from the CEB specifically to buy the land from his sister and that the proceeds of the loan were paid to her by way of a cheque issued through the CEB. He further stated that a voucher bearing her name was signed when the cheque was handed over.
The central question before the courts became whether this payment had actually been made to the sister, and whether the brother had truly acquired full ownership—or whether, as the sister claimed, a constructive trust arose because the property was never meant to be beneficially his.
Majority Rules
“He Who Asserts Must Prove”
- Plaintiff Failed to Prove Constructive Trust
In siding with the brother, the majority of the Court held that the Plaintiff, having alleged that no payment was made and that the land was never meant to be permanently transferred, bore the burden of proving this assertion. The Court found that the Plaintiff had not provided sufficient material or documentary evidence to establish that the transfer was subject to a resulting trust.
Justice S. Thurairaja PC, delivering the majority judgment, emphasized that the burden of proof lies on the party asserting a fact, particularly when that fact is central to their claim. In this case, the Plaintiff had alleged that her brother had encashed a cheque issued in her name by the CEB, but had never handed over the funds to her. The majority found that no sufficient evidence had been led by the Plaintiff to substantiate this critical claim. “Since the Plaintiff has asserted in her Plaint that the 1st Defendant encashed the cheque, the burden of proving the same is on the Plaintiff,” Justice Thurairaja noted, adding that no witness from the People’s Bank was summoned to confirm this version.
While the Plaintiff had led evidence of an oral agreement to reconvey the land, which was corroborated by her two children, the Court held that such an agreement, on its own, was insufficient to establish a constructive trust. The law requires not just a promise to reconvey but also “attendant circumstances” proving that the beneficial interest was never meant to pass to the transferee. The Court found that such circumstances were lacking in the Plaintiff’s case.
In contrast, the 1st Defendant’s version—that he used a CEB loan to pay for the land—was supported by documentary evidence. A CEB officer, testifying as the 2nd Defendant, confirmed from office records that a cheque had been issued in the Plaintiff’s name and that a voucher bearing her signature acknowledged its receipt. Though the officer had no personal knowledge of the transaction, the Court noted that the Plaintiff never denied the signature nor offered alternative evidence to dispute receipt.
The Plaintiff also failed to disprove other elements of a bona fide transfer. The 1st Defendant had produced documents showing that he had sought approval to develop the land but later abandoned the idea due to environmental restrictions. This, the Court held, was consistent with his claim of genuine ownership.
Another critical factor in the majority’s reasoning was that the Deed of Transfer was in the Plaintiff’s possession, which the 1st Defendant explained was handed over to a nephew for the purpose of reselling the land. The Court found no inconsistency or fabrication in that explanation.
“…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. 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.
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…” – Justice S. Thurairaja PC
What are attendant circumstances under Sec. 83 of the Trust Ordinance:
“…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:
- Whether the transferor continued in possession after the conveyance;
- If the transferor paid the whole cost of the conveyance;
- 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)];
- The relationship between parties [Valliyammai Achi v. Abdul Majeed (45 NLR 169, 191)
An oral promise to reconvey, too, as H.N.G. Fernando J noted in Muttammah v. Thiyagarajah, 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……..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…” – Justice Thurairaja PC
Dissenting Judgment
“He Who Affirms Must Prove It, Not the One Who Denies It”
- Plaintiff cannot be called upon to prove a negative
While the majority of the Court upheld the validity of the transaction in favour of the brother, Justice Nawaz, in his dissenting opinion, underscored: when a party negatively asserts that no payment was made, the burden does not shift to them to prove the non-occurrence. Rather, the responsibility to prove the positive assertion—that payment was in fact made—rests entirely on the party claiming to have made such payment.
Justice Nawaz held that since the Defendant was the one asserting that payment had been made, it was his legal burden to prove that fact, especially given the Plaintiff’s clear and consistent denial. He invoked the foundational rule of evidence, rooted in both Roman law and Section 101 of the Evidence Ordinance, that “he who affirms must prove,” not the one who denies.
“A negative does not admit of direct and simple proof,” Justice Nawaz observed, quoting the legal maxim “ei incumbit probatio, qui dicit, non qui negat” — the burden of proof lies on the one who asserts, not the one who denies.
In contrast, the 1st Defendant had claimed that the Plaintiff was paid by cheque via the CEB loan issued in her name. However, crucially, no copy of the cheque or payment voucher was shown to the Plaintiff during cross-examination. The CEB officer who testified confirmed that a voucher existed with a signature bearing the Plaintiff’s name, but admitted that he had no personal knowledge of the transaction and could not say who actually received or encashed the cheque.
Justice Nawaz emphasized that no bank official was called from the People’s Bank (the paying bank) to confirm that the Plaintiff’s account received the funds or that she personally cashed the cheque. The omission to call such a witness, or even confront the Plaintiff with the key documents, created a “serious evidentiary void.” “If this evidence was withheld from Court, the corollary follows—that the presumption under Section 114(f) of the Evidence Ordinance must be drawn against the 1st Defendant,” he held.
“…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.
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.( Writ petition (civil) No 1478/2008)…” Justice A.H.M.D. Nawaz
Justice Nawaz noted that not only did the 1st Defendant fail to establish payment, but he also failed to cross-examine the Plaintiff on critical points such as the alleged visit to the CEB or the handing over of the cheque—raising suspicion about the credibility of his narrative. Justice Nawaz further observed that the Defendant’s story introduced new facts only during his own testimony, such as an alleged visit to the CEB with his sister, which were never put to the Plaintiff or her witnesses. This, he said, amounted to a serious lapse in cross-examination that weakened the credibility of the Defendant’s account.
“…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. 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 of the 1st Defendant’s belated assertions…”- Justice Nawaz
Ultimately, Justice Nawaz concluded that a resulting trust arose based on the common intention that the Plaintiff would retain the beneficial interest in the property, and that the 1st Defendant held the legal title merely for the purpose of facilitating a loan. “It is inequitable for the 1st Defendant to appropriate and convert the property as his own,” he held.
‘Presumed Resulting Trust’ under Section 83:
Burden on Transferee to Rebut
In this case, Justice A.H.M.D. Nawaz, delivering the dissenting judgment also emphasized how the principles of presumed resulting trust, as contemplated under Section 83 of the Sri Lankan Trusts Ordinance, applied to the facts at hand. Relying on the interpretation provided in Underhill and Hayton: Law of Trusts and Trustees, he pointed out that when a property is transferred without evidence of a genuine sale or intent to gift, and where the transferor did not receive consideration, the law presumes that the transferee holds the property in trust for the transferor.
“…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….” – Justice A.H.M.D. Nawaz
A Lesson for Cross-Examining Counsel:
Unchallenged Testimony Counts as Proved Evidence
In his dissenting judgment, Justice A.H.M.D. Nawaz emphasized that uncontradicted evidence led by a party can attain the status of “proved” within the meaning of Section 3 of the Evidence Ordinance. Citing the principle affirmed by H.N.G. Fernando C.J. in Edrick de Silva v. Chandradasa de Silva and later followed in Cinemas Ltd v. Sounderarajan, Nawaz J. noted that “matters before the court” are not limited to oral or documentary evidence alone. Instead, even unchallenged testimony, if not impugned in cross-examination, constitutes part of the evidentiary fabric of the case. This approach is reinforced by the foundational rule in Browne v. Dunn, requiring parties to challenge opposing testimony at the appropriate stage, or risk having it treated as accepted.
“…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….”- Justice A.H.M.D. Nawaz
Case No: SC Appeal No. 169/15 [Decided on 28.02.2025]
Before: S. THURAIRAJA, PC, J. , A.H.M.D. NAWAZ, J. AND KUMUDINI WICKREMASINGHE, J
