[1929] EACA 2

## PRIVY COUNCIL APPEAL No. 110 or 1929.

Before VISCOUNT DUNEDIN, LORD TOMLIN and LORD RUSSELL OF KILLOWEN.

THE OFFICIAL ASSIGNEE of the Estate of MAHOMED BIN SALIM EL JASERI and ANOTHER (Appellants)

(Original Defendants)

## COWASJI DINSHAW & BROS, a firm, and OTHERS (Respondents) (Original Plaintiffs).

- Transfer of Property Decree, 1917, sections 107 and 117 as amended by the Transfer of Property Decree, 1925, and the Registration of Documents Decree (Cap. 86 of the Revised Laws of Zanzibar)-validity of a written lease for a period of one year which has not been registered. Rights of the mortgagor and mortgagee under the mortgage. - $Held:$ —That a written lease for a period of one year is valid although<br>it is not registered. Further held that a lease granted by the mortgagor is not binding upon the mortgagees in the absence of their consent.

The Judgment of the Supreme Court in Civil Case No. 66 of 1928 was delivered by DoorLy, J. (Zanzibar), in favour of the defendants. The plaintiffs appealed to the Court of Appeal for Eastern Africa.

## Bhaya for appellants.

Hasan for respondents.

SHERIDAN, Ag. C. J. (Kenya). This appeal relates to two. The first is whether an agricultural lease for a period of points. one year is invalid by reason of the fact that it was not registered. This point was dealt with at very great length by the learned Judge who reviewed the legislation in Zanzibar on the subject from the date of the application of the Transfer of Property Act, In these circumstances I find it unnecessary to discuss 1882. In my opinion the provisions of section 6 $(f)$ the point at length. of the Registration of Documents Decree, 1919, must be taken to apply to both agricultural and non-agricultural leases. The section provides inter alia that "It shall not be necessary to register any of the following documents ... (f) A lease of property for a year or less." Mr. Bhaya contended that this provision related only to agricultural leases but I do not find his contention a sound one. His argument that the Registration of Documents Decrees were Statutes on a general subject and the Transfer of Property Decrees Statutes on a particular subject does not appeal to me. The former decres are, in my opinion, just as much statutes on a particular subject namely registration of documents as are the latter-the particular subject in the

latter case being the transfer of property. When in 1925 the Transfer of Property Amendment Decree was passed repealing section 117 of the Transfer of Property Decree, 1917, I assume the legislature had in mind that the Registration of Documents Decree, 1919, had already exempted inclusively agricultural leases of a period of a year or less from the necessity of registration. Just as after the passing of the Transfer of Property Decree, 1917, the law exempting from registration leases of a year or less was to be found in the Registration of Documents Amendment Decree, 1915, section 2 (f), as from the passing of the Registration of Documents Decree, 1919, the law on the point was to be found in section 6 $(f)$ of that decree. In short I am in agreement with the conclusion of the learned Judge that the lease in issue in the case did not require registration for its The second point for consideration is whether the lease validity. is binding on the first and second plaintiffs (appellants) in the absence of their consent. There are two mortgages in the case, but it will suffice to refer to one of them in considering the $point.$ The question is what are the rights of the mortgagor and mortgagee under the mortgage. The mortgage appears to me to be of that kind referred to in section 98 of the Transfer of Property Decree as an anomalous mortgage. The deed provides that "the mortgagor as beneficial owner doth hereby grant and convey unto the mortgagees the shambas more particularly described in the schedule". This amounts to an absolute transfer of the property to the mortgagees. The learned Judge found that there had been an absolute transfer of the property to the mortgagees, but eventually he further found that in as much as there was no proviso that the mortgagee was to re-transfer the property to the mortgagor upon payment of the mortgage money the mortgage deed did not contain the essentials of what is referred to in section 58 (2) of the Transfer of Property Decree as an English mortgage. In consequence of this finding he held that the mortgagor was entitled to lease the property without the consent of the mortgagee. What has puzzled me in the case is why because the mortgage may fail exactly to fulfil the essentials of an English mortgage the mortgagor should be free to dispense with the permission of the mortgagee to whom the property has been transferred absolutely. Irrespective of whether the mortgage be looked on as an English mortgage or not I am of the opinion that the first finding of the learned Judge that the lease made without the concurrence of the mortgagees is not binding on the mortgagees is the correct view. I would therefore allow the appeal with costs in this Court and the Court below on the ground that the lease as against the mortgagees is not binding on them in the absence of their consent. The effect of this decision will be that judgment will be entered for the plaintiffs (appellants) in the terms of paragraphs $(a)$ and $(b)$ of their plaint.

GUTHRIE-SMITH, J. (Uganda).—This is an appeal from a judgment of MR. JUSTICE DOORLY as to the validity of a lease for a year granted by the mortgagor the first defendant to the second Against the title of the second defendant is set up defendant. a subsequent lease granted by the first defendant with the concurrence of plaintiffs one and two as mortgagees in favour of When the summons was issued the second plaintiff three. defendant was in possession by forcible entry according to the plaintiffs, but there is no evidence as to this. The plaintiffs then made an application for a receiver pendente lite. On the hearing of the application the learned Judge held that the mortgages were "English mortgages" (a term which I will explain presently), and that therefore the lease to the second defendant was void and he appointed a receiver. The defendants thinking that that ruling was final delivered written statements in agreement therewith, but afterwards at the trial the learned Judge receded from his former position and held that the lease was valid and that defendants must succeed. This outline shows that both parties were misled and that it would not be fair to hold the defendants bound by the admission in their written statements. For the purpose of this appeal nothing turns on this point.

The mortgages in the case are both in the same form which is a most peculiar one. It is to a large extent taken from Key. and Elphinstone with variation. Instead of the usual proviso for reconveyance on payment the clause reads "provided always that if the mortgagor shall on the 17th day of April, 1928, pay to the mortgagee the sum of $\hat{R}$ 30,000 with interest as aforesaid the said properties shall be deemed to be discharged from this mortgage". Counsel stated that it was not usual in Zanzibar to bother about reconveyances, but that if a reconveyance was wanted it would be enforced under section 60 of the Transfer of Property Decree, 1917. We can group the reasons for the appeal under two heads. First that the lease to second defendant was void merely for want of registration, and second that the first defendant had no power to lease without the concurrence of the mortgagees.

Taking first the points involved in the question whether the mortgagor had power to grant a lease without the concurrence of the mortgagees. The law relating to mortgages in Zanzibar is the Indian Applied Transfer of Property Act. 1882, section 58, et seq. That act was first applied by the Order-in-Council, 1897, and was in 1917 enacted as a decree by order of the Sultan countersigned by the British Resident. Under the Order-in-Council, 1924 (Zanzibar Legislation, 1925), this decree cuts out at one stroke all application of English law concerning mortgages since English law only applies subject to the Decrees of the Sultan. Taking therefore the decree itself and disregarding English law one turns to the leading Indian work on the interpretation of the act.

namely Gour on the Transfer of Property Act, and at once discovers that for the elucidation of the act in India it is necessary to refer to statute law and to countless decisions of the High Courts all over India decided before the Act came into force in India which have obviously no application to Zanzibar. Even decisions after the Act came into force although they may be useful guides to the meaning of the language are not binding on the Courts here and may often be misleading owing to the differences between the general laws of the two countries. For instance Gour tells us, paragraph 1688, Vol. II, that "in India a mortgagor is entitled to exercise the ordinary right of ownership and to receive the rents and profits without having to account for them ". And in paragraph 1397 that " An English mortgage being subject to stringent restriction both racial and territorial is seldom heard of outside the limits prescribed in section 69. Such a mortgage executed in the mofussil would be treated as a mortgage by conditional sale ". These statements are no doubt correct as regards India but to make them applicable in Zanzibar one would have to derive them from the wording of the Act as affecting the interest of the parties as expressed in the deed, and it would be most improper to derive them from Indian cases decided before the Act came into force in India.

The different forms of mortgage are defined in section 58 as (1) Simple which gives only a right to have the property sold, (2) Conditional which gives only a right to foreclosure, (3) Usufructuary which only entitles the creditor to repayment out of the rents and profits and, (4) An English mortgage which must have three elements: $-(a)$ covenant to repay. (b) an absolute conveyance, $(c)$ a covenant to re-transfer on payment. Section 98 reads "In the case of a mortgage not being a simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, or an English mortgage, or a combination of the first and third or the second and third of such forms, the rights and liabilities of the parties shall be determined by their contract as evidenced in the mortgage deed and so far as such contract does not extend, by local usage. Section 69 denies the exercise of a power of sale in an English mortgage without the intervention of the Court when any of the parties are Asiatics. The learned Judge at the trial held that the deed was not an English mortgage as defined in section 58. He went on to say that if it had been English there would have been no power to the mortgagor to lease, since the Conveyancing Act, 1881, section 18, does not apply, but since question of its being English there $was$ was no there nothing $\quad\text{to}\quad$ $prevent$ $\quad\text{the}\quad$ ${\rm mortgagor}$ $\quad\textbf{in}\quad$ $\mathbf{possession}$ from In my opinion that finding does not conclude granting a lease. Under section 98 what has to be looked at is the. the matter. nature of the parties' interests in the land and to see if the mortgagor is liable to be ousted from possession. If he is so liable then we can apply the principle of $Keech v.$ Hall, in 1 Sm. L. C., and say that in as much as he can confer no greater right

on third parties than he himself possesses as against the mortgagee he cannot grant a valid lease other than a tenancy on sufferance. In the deed before us there is an absolute conveyance and a right to foreclosure or sale, and I can see nothing in the law to prevent the mortgagee from going into possession when he pleases. Hence the lease of the second defendant gives him no rights except as against the mortgagor.

The remaining point is that the lease is void for want of To determine this we have to look at two lines of registration. legislation. First, as to transfer of property we have the Indian Act applied by Order-in-Council, 1897, and enacted as a decree in 1917 which was amended in 1925. Second, we have registration provided for under old decrees which were all abolished and replaced by a copy of the Indian Registration Act under a decree of 1908 amended from time to time and consolidated in 1919. Section 107 of the Transfer of Property Act or decree (they are identical) reads as follows: "" A lease of immovable property from year to year or reserving a yearly rent can be made only by registered instrument. All other leases may be made either by a registered instrument or by oral agreement accompanied by delivery of possession." Then followed a clause enabling the Government to exempt any kind of lease not within clause 1 from This power was never exercised. registration. Section 117 enacted that the above section inter alia should not apply to agricultural leases except by notification in the Gazette which was never made. By the 1925 Transfer of Property Amendment Decree this section 117 was repealed. The other line begins with the Registration of Documents Decree, 1908, which made registration compulsory of all documents affecting land (that is shortly summarized). The 1915 amendment exempted leases for a year or less from registration. This section was re-enacted by the 1919 Consolidating Decree. The arguments of counsel on the effect of the above decrees, and whether decrees in the one line repealed inconsistent sections in the other line, were of great complexity and ingenuity and the judgment was even more so. To my mind there is no inconsistency at all. One has merely to remember, that decrees on transfer and decrees on registration must be treated as in pari materia. You cannot argue that one line is general and the other specific. Sense can only be given to the two lines by reading them as supplementary. Hence the law is and has been ever since 1915 that leases for a year or less do not require registration. In my opinion the judgment appealed from is correct on this latter point but wrong on the other point. The plaintiffs are entitled to succeed in the appeal and have judgment entered in their favour in terms of $(a)$ and $(b)$ in the plaint with costs in both Courts.

STEPHENS, J. (Kenya).—This is an appeal by the original plaintiffs against the judgment of MR. JUSTICE DOORLY, Acting Chief Justice of Zanzibar, on the following amongst other grounds :-

- (1) That the learned Judge erred in holding that an agricultural lease for a period of one year, which is in writing but is not registered, is by itself a valid lease. - (2) That the learned Judge erred in holding that the plaintiff's mortgages are not English mortgages as they do not contain an express covenant for re-conveying the property to the mortgagor. - (3) That the learned Judge erred in allowing both the defendants separate sets of costs as their interests were identical.

The hearing of this appeal occupied four days, and was in my opinion unnecessarily prolonged three days too many.

Now the first point we have to deal with is whether an agricultural lease for a period of one year which is in writing but is not registered, is by itself a valid lease.

Now a long time unnecessarily was spent in discussing the provisions of the Indian Transfer of Property Act, 1882, which was applied to Zanzibar by Article 11 (b) of the Zanzibar Orderin-Council, 1897, for that Act ceased to be the law of Zanziber on the coming into force of the Transfer of Property Decree (No. 9 of 1917). Chapter V, section 107, of that decree enacts as follows: -

" A lease of immovable property from year to year or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument.

All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Provided that the British Resident may with the previous sanction of the Secretary of State, from time to time, by notification in the local Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year. or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession."

The proviso may be disregarded because it is admitted by counsel on both sides that the British Resident has issued no notification under the proviso. Section 117 of the Decree, also contained in Chapter V of the Decree, enacts as follows: -

" None of the provisions of this Chapter apply to leases for agricultural purposes, except in so far as the British Resident, with the previous sanction of the Secretary of State, may by notification published in the Gazette declare all or any such provisions to be so applicable in the case of all or any of such leases, together with, or subject to, those. of the local law, if any, for the time being in force."

Gour in his work "Law of Transfer in British India," Vol. III, 5th Ed., p. 2159, says respecting section 117 of the Transfer of Property Act, 1882:-

" This Chapter for the first time makes a special provision as regards non-agricultural leases, which were before the Act generally governed by the same law. The effect of the sanction is to exclude all agricultural leases from the operation of the Chapter. But horticultural leases are subject to the operation. A lease for agricultural purposes is not the same thing as a lease of agricultural land. It implies a lease in which the lessee cultivates the land for raising an agricultural crop."

Now section 6 $(f)$ of the Registration of Documents Decree. No. 19 of 1918 (Chap. 86 of the Revised Laws of Zanzibar), enacts that: $-$

" It shall not be necessary to register any of the following documents $(f)$ a lease of property for a year or less."

From this latter provision it is perfectly clear to my mind that it is unnecessary to register any kind of lease, whether agricultural or non-agricultural not exceeding one year.

The next point is "Whether these mortgages were English mortgages ". Appellants' counsel contends that the mortgages were English mortgages and subject to the rights and incidents of an English mortgage, but the counsel for the respondents denies this.

The mortgages in the case are both in the same form. The learned judge in the Court below on an application for a receiver pendente lite at first was of opinion they were English mortgages, and that therefore the lease to the second defendant was void, and he appointed a Receiver. Later on the learned Judge held that the lease was valid and that defendants must succeed.

The law governing mortgages in Zanzibar was before 1917 contained in the Indian Transfer of Property Act, 1882, section 58. etc., which was in 1917 enacted as a decree. The different forms of mortgages are defined in section 58 as (1) Simple, which gives the mortgagee a right to have the mortgaged property sold; (2) Conditional, which gives a right to foreclosure; (3) Usufructuary,

which only gives the creditor a right to repayment out of the rents and profits accruing from the property; (4) An English mortgage. Where the mortgagor binds himself to re-pay the mortgage money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgaged money as agreed, the transaction is called an English mortgage.

Section 98 of the Decree enacts that:-

" In the case of a mortgage not being a simple mortgage a mortgage by conditional sale, an usufructuary mortgage or an English mortgage, or a combination of the first and third, or the second and third, of such forms, the rights and liabilities of the parties shall be determined by their contract as evidenced in the mortgage deed, and, so far as such contract does not extend, by local usage ".

Section 69 of the Decree enacts that: -

" A power conferred by the mortgage deed on the mortgagee, or any person on his behalf, to sell or concur in selling, in default of payment of the mortgage-money, the mortgaged property, or any part thereof without the intervention of the Court, is valid in the following cases and in no others, namely—(a) where the mortgage is an English mortgage, and neither the mortgagor nor the mortgagee is a Hindu, Mahommedan or Buddhist or a member of any other race, sect, etc., specified in this behalf by the British Resident with the previous sanction of the Secretary of State, in the Gazette".

In the deed before us there is an absolute conveyance and a right to foreclosure or sale, and there appears nothing to prevent the mortgagee from going into possession whenever he pleases, so that the lease of the second defendant gives him no right except as against the mortgagor.

The appellants are therefore entitled to succeed in the appeal and to have judgment entered in their favour in terms of $(a)$ and (b) of the plaint with costs in this Court and in the Court below.

The respondents appealed to the Privy Council on the following grounds: -

1. That the decision of this Honourable Court on the second point, even if correct, does not conclude the case, and in entering judgment for the plaintiffs (appellants) in terms of paragraphs (a) and (b) of their plaint, this Honourable Court misconceived the effect of its said decision.

That even if the said decision be correct, before judgment $2. \qquad$ could be entered for the plaintiffs (appellants) this Honourable Court or the trial Court had to find as facts, firstly, that prior

to the grant of lease in favour of the third plaintiff the mortgagees (the first two plaintiffs) had given their consent to the mortgagor granting such lease, and secondly, that the mortgagor had received the consideration (viz. $\mathbb{R}$ 10,000 being one year's rent in advance) alleged to have been paid by the third plaintiff to the mortgagor.

That this Honourable Court in construing the two mortgage-deeds ought to have taken into consideration the real intention of the parties as expressed in the said deeds, and on the analogy of Indian law ought to have held that the mortgagor, namely, the original first defendant, was entitled to exercise the ordinary rights of ownership including the right to lease without the consent of the mortgagees (the first two plaintiffs).

That in the alternative this Honourable Court ought to 4. have held that the Conveyancing Act; 1881, being an act of general application, applies to Zanzibar by virtue of Article 24 of the Order-in-Council dated the 8th day of December, 1924.

5. That in any event the appellants' (original plaintiffs') present suit cannot succeed.

That this Honourable Court having dismissed the 6. appellants' main contention (viz., on the first point) which took. an unnecessarily long time, ought not to have allowed costs to the appellants.

JUDGMENT was delivered on 24-7-30 by LORD TOMLIN as follows: —

This is an appeal from the Court of Appeal for Eastern Africa, allowing the respondents' appeal from the High Court of Zanzibar. The facts are shortly as follows. One Mohamed Bin Salem el Jaseri owned certain shambas. In August, 1921, he mortgaged them to the respondents, Cowasji Dinshaw and Brothers, and he made a second mortgage in April, 1923, to the respondent Dr. Lawrence D'Albuquerque. Both mortgages were in the same form. On the 2nd March, 1928, Mohamed Bin Salem el Jaseri granted a lease to the appellant, Fazel Mohamed Champsi. The mortgagees did not concur in that lease. Later on, on the 16th March, 1928, he granted a second lease to the respondent, Pedro Domingos D'Sa. It is said that either the second lease was granted with the concurrence of the mortgagees, or, the mortgagees approbated the lease afterwards by joining in the present suit. The mortgagees and Pedro Domingos D'Sa, the second lessee, launched the suit against the mortgagor and the appellant Fazel Mohamed Champsi, the first lessee, asking for a declaration that Fazel Mohamed Champsi's lease was void against the mortgagees and seeking for possession of the property to be delivered to Pedro Domingos D'Sa as the lessee under the second lease. After the suit was launched, Mohamed Bin Salem el Jaseri went bankrupt and his assignee was added in his place, and the assignee and Fazel Mohamed Champsi are the present appellants.

Issues were directed. They were two in number. The first issue was as to the validity of the first lease, having regard to the fact that it was not registered. On that point both Courts have determined that it was valid, notwithstanding the absence of registration, and no question now arises under that head. The second issue was: If the first lease was valid, does the consent of the two mortgagees, even if proved, to the second lease oust the first lessee's rights under the first lease? On that issue the Trial Judge held that the mortgagor remained the owner of the property, and that, that being so, he was in a position to grant the lease. The learned Judge said that the mortgagor in possession continued, even after executing the plaintiffs' mortgage. to be the owner of the property, and that he was entitled to lease the property provided that this act did not come within section 66. of the Transfer of Property Decree.

The respondents, that is, the plaintiffs in the action, appealed to the Court of Appeal, and the Court of Appeal determined that the mortgagor was not free as against the mortgagees to lease the property without their concurrence and that, therefore, as against the first lessee the second lease must prevail.

The appeal to His Majesty in Council is by the assignee of el Jaseri and the first lessee against that decision. There was some debate as to the meaning and effect of the mortgages. It was questioned whether the mortgages were in form English mortgages within the meaning of section 58 of the Transfer of Property Decree of 1917, or whether they were anomalous mortgages as defined in section 98 of the same decree. The learned Judge in the Court below had taken the view that they were not English mortgages but anomalous mortgages. The Court of Appeal took the view that it did not matter whether they were English mortgages or anomalous mortgages because in either case the effect of the mortgages was to transfer the property to the mortgagees and that that being so, whether they were English mortgages or anomalous mortgages, the property being in the mortgagees, the mortgagor was not free to grant a lease which would bind the mortgagees:

Their Lordships are of opinion that, having regard to the terms of the mortgages, which convey the property to the mortgagees, the view which the Court of Appeal took of the matter is correct and that the first lease cannot, therefore, prevail as against the second lease, assuming that the second lease was concurred in by the mortgagees.

The Court of Appeal set aside the judgment of the learned Judge in the Court below and directed that relief should be granted in accordance with the prayer of the plaint, which was that the lease should be declared void and that possession should be delivered to the second lessee. It has been said that that order was wrong in point of form, because the question whether or not the mortgagees had concurred in the second lease had been left open and that the issue on the point of law was determined upon the assumption only that they had concurred and that the suit ought to have been sent back for further hearing.

Their Lordships are of the opinion that the concurrence of the mortgagees in the suit in which they sought to establish the validity of the second lease is in itself an approbation of the second lease and that no issue as to their concurrence is therefore now open.

Some other points upon the pleadings were suggested as matters to be tried before the suit could be finally disposed of but in none of those matters, in their Lordships' judgment, is there anything which, even if established, would afford the present appellants any defence to the suit.

Their Lordships are therefore of opinion that the appeal fails and must be dismissed with costs, and they will humbly advise His Majesty accordingly.