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Andrew Rozario Vs. Mahomed Ibrahim Sarang - Court Judgment

LegalCrystal Citation
Decided On
Case NumberO.C.J. Suit No. 1050 of 1924
Reported inAIR1924Bom460; (1924)26BOMLR695; 83Ind.Cas.34
AppellantAndrew Rozario
RespondentMahomed Ibrahim Sarang
insolvent---adjudication--debt due to insolvent before adjudication--decree obtained by insolvent on the debt in concealment of his adjudication--decree a nullity. a decree obtained by an insolvent, in concealment of his adjudication, to recover an outstanding of a date prior to the date of adjudication, is a nullity.;a decree obtained by an insolvent, in concealment of his adjudication, to recover an outstanding of a date prior to the date of adjudication, is a nullity. - - 2. clearly as the insolvent's interest in the debt, if any, due by the present plaintiff had become vested in the official assignee, he had no legal right to bring the suit. if he sues in respect of an after-acquired chose in action he can obtain a decree and if the decree is satisfied before the trustee intervenes.....norman macleod, kt., c.j.1. the plaintiff has filed this suit to set aside a decree obtained by the defendant against him in suit no. 3367 of 1923 for rs. 1900 with interest and costs, on october 22, 1923. the defendant was adjudicated an insolvent on his own petition on november 30, 1922. before the official assignee he filed a statement showing liabilities rs. 13,000 and outstanding debts rs. 2000 doubtful he described himself as a ship repairer and supplier of coolies and said he had no hooks of account or loose papers as he did not keep any. he did not file his schedule and nothing further was done in the matter of the petition.2. clearly as the insolvent's interest in the debt, if any, due by the present plaintiff had become vested in the official assignee, he had no legal right to.....

Norman Macleod, Kt., C.J.

1. The plaintiff has filed this suit to set aside a decree obtained by the defendant against him in Suit No. 3367 of 1923 for Rs. 1900 with interest and costs, on October 22, 1923. The defendant was adjudicated an insolvent on his own petition on November 30, 1922. Before the Official Assignee he filed a statement showing liabilities Rs. 13,000 and outstanding debts Rs. 2000 doubtful He described himself as a ship repairer and supplier of coolies and said he had no hooks of account or loose papers as he did not keep any. He did not file his schedule and nothing further was done in the matter of the petition.

2. Clearly as the insolvent's interest in the debt, if any, due by the present plaintiff had become vested in the Official Assignee, he had no legal right to bring the suit. If this had been discovered before the decree was passed, the Official Assignee would have been given an opportunity of deciding whether he should be brought on the record as plaintiff, and if he had refused the suit would have been dismissed.

3. Within a short time after the decree was passed the plaintiff' discovered that the defendant who had been suing him was an insolvent, so he instructed his solicitors to write that the decree passed in the suit was null and void.

4. On November 21, the Official Assignee, having become aware of the decree having been passed, wrote to the plaintiff demanding payment of the decretal amount. The plaintiff's solicitors replied that the decree was null and void. Although the Official Assignee took no steps to get the decree executed the plaintiff' filed this suit on March 26, 1924. He claims that he is entitled to have the decree in Suit No. 3367 of 1923 set aside on the ground that it was obtained by the fraud of the defendant.

5. It seems strange that the researches of counsel could find no direct authority on the point, or any discussion in the text books on the legal status of a decree obtained by the original owner of a chose of action who had in fact no right to sue at the time by reason of the chose in action having become vested in another.

6. The case of Ex parti Carter (1876) 2 Ch. D. 806, relied upon by Mr. Jinnah, does not help me when the facts are considered. An undischarged bankrupt sued to recover commission he had earned while the bankruptcy proceedings were pending and obtained a decree. The trustee thereupon intervened, but negotiations for a settlement whereby the trustee was to be paid 100 out of the decretal amount having broken down, the bankrupt issued a debtor's summons against the defendant. The Registrar made an order in the bankrupt's favour, but this was reversed on appeal. The Court held that though the plaintiff could bring the action and might even levy execution, he was not entitled to the beneficial interest in the decree since his after-acquired property was vested in the trustee. Consequently the debtor's summons, which apparently was not a step in execution, was not competent.

7. Mr. Jinnah argued that if the bankrupt could sue for an after-acquired chose in action which was vested in the trustee, he could also sue for a chose in action to which he was entitled at the date of the bankruptcy, but there is this difference between the bankrupt's estate, which vests in the trustee on bankruptcy, and after-acquired property, which also vests on acquisition, that the bankrupt can deal with the latter until the trustee intervenes. If he sues in respect of an after-acquired chose in action he can obtain a decree and if the decree is satisfied before the trustee intervenes the judgment debtor obtains a good discharge. The question then remains between the trustee and the bankrupt if the after-acquisition is discovered. In other words persons who deal with an undischarged bankrupt in good faith for value with regard to after-acquired property are protected: Cohen v. Mitchell (1890) 25 Q.B.D. 262. It is otherwise with regard to property which actually vests in the trustee at the date of the adjudication order. Whether or not the defendant knew thathe had no right to sue for the money he said he had advanced to the plaintiff seems to be immaterial. Ho must be taken to have known that his outstandings passed to the Official Assignee and that he had wrongfully concealed the diary the entries in which he relied on to prove his case. He is, therefore, liable to have proceedings taken against him under the provisions of the Insolvency Act. The Official Assignee after the threats contained in the correspondence ending on November 29, 1923, made no attempt to get his name placed on the record so that he could execute the decree. I cannot say whether such an attempt would be successful but it is quite clear that unless the adjudication order is annulled the insolvent cannot execute his decree.

8. Now a suit will lie to set aside a decree obtained by fraud.

9. The text books confine themselves to stating that simple proposition, but it is far too wide. I should be inclined to say that many decrees are obtained by the fraud of the successful party, which cannot be set aside by filing another suit, and when the authorities are examined the difficulty of laying down any principle to establish a distinction between frauds which, it-proved, will enable the unsuccessful party to set aside a decree and those which will not support such a suit is apparent. It has been said that the fraud must be a fraud on the Court, but that is not a very helpful definition as every party who swears falsely to support his case commits a fraud on the Court, and yet I doubt very much if the unsuccessful opponent would be allowed to go to trial in another suit on the issue whether the defendant had spoken the truth in the previous suit.

10. In Flower v. Lloyd (1877) 6 Ch. D. 297 the plaintiffs had commenced an action to restrain the defendants from infringing their patent and obtained a judgment, which was reversed by the Court of Appeal, on the ground that the defendants' process was no infringement of the plaintiffs' patent. The plaintiffs then applied to have the appeal re-heard with fresh evidence on the ground that when an expert sent down by the Court whose evidence was the only material evidence before the Court as to the defendants' process, examined the defendants' works, the defendants has fraudulently concealed from him parts of the process. The question then arose whether final judgment having been passed by the Court of Appeal dismissing the action the plaintiff was entitled by motion to apply for leave for a re-hearing of the appeal on the ground of subsequent discovery of facts which showed or tended to show that the order of the Court of Appeal was obtained by a fraud practised on the Court below. Jessel M.R. held that the motion should be rejected as not being within the jurisdiction of the Court of Appeal and there was another remedy. The Court of Chancery had jurisdiction to give relief in such a case and the Master of the Rolls quoted Lord Redesdale 5th Edition, pp. 112, 113. (p. 299): 'If a decree has been obtained by fraud, it may be impeached by original bill without the leave of the Court'; but there were very few such cases, in most leave had to bo obtained. The fraud used in obtaining the decree being the principal point in issue, and necessary to be established by proof before the propriety of the decree could be investigated. There was another totally different class of cases where matter was subsequently discovered which showed that the decree was wrong, although there had been no fraud in obtaining it. That was called a supplementary bill in the nature of a bill of review which brought the new matter forward and enabled the Court to do justice and get rid of the original decree. That always required leave. James L.J. said (p. 301):--

I agree...that in the case of a decree (or judgment as we call it now) being obtained by fraud there always was power, and there still is power, in the Courts of Law in this country to give adequate relief. But that must be done by a proceeding putting in issue that fraud, and that fraud only. You cannot go to your adversary and say, 'You obtained the judgment by fraud, and I will have a rehearing of the whole case' until that fraud is established. The thing must be tried as a distinct and positive issue; 'you' the defendants or 'you' the plaintiff 'obtained that judgment or decree in your favour by fraud; you bribed the witnesses, you bribed my solicitor, you bribed my counsel, you committed some fraud or other of that kind, and I ask to have the judgment set aside on the ground of fraud.' That would be tried like anything else by evidence properly taken directed to that issue, and wholly free from and unembarrassed by any of the matters originally tried.

11. The plaintiff then filed another action to set aside the decree on the ground of fraud alleged to have been committed by the defendant in connection with the expert's inspection: Flower v. Lloyd. (1878) 10 Ch. D. 327. The Vice-Chancellor considered the fraud established and the defendant appealed. Baggallay L.J. held that the charges of fraud had not been made out James L.J., while agreeing with this finding, added (p 333):-

But we must not forget that there is a very grave general question of far more importance than the question between the parties to these suits. Assuming all the alleged falsehood and fraud to have been substantiated, is such a suit as the present sustainable? That question world require very grave consideration indeed before it is answered in the affirmative. Where is litigation to end if a judgment obtained in an action fought out adversely between two litigants sui juris and at arm's length could be set aside by a frash action on the ground that perjury had been committed in the first action, or that false answers had been riven to interrogatories, or a misleading produc-tion of documents, or of a machine, or of a process had been given? There are hundreds of actions tried every year in which the evidence is irreconcilably con-flicting, and must be on one fade or other wilfully and corruptly perjured. The Court ought to pause long before it establishes a precedent which would or might make in numberless cases judgments supposed to be final only the commencement of a new series of actions.

12. Thesiger L.J. concurred with these remarks. Baggallay L.J. desired to reserve for himself an opportunity of fully considering the question how, having regard to general principles and authority, it would be proper to deal with cases, if and when any should arise, in which it should be clearly proved that a judgment had been obtained by the fraud of one of the parties, which judgment but for such fraud would have been in favour of the other party. He would much regret to feel himself compelled to hold that the Court had no power to deprive the successful but fraudulent party of the advantage to be derived from what he had so obtained by fraud.

13. In Baker v. Wadsworth (1898) 67 L.J.Q.B. 301 the plaintiff having failed in an action to recover possession of certain cottages and land brought another action to set aside the previous judgment on the ground that the defendant obtained a verdict in her favour fraudulently by falsely and fraudulently committing perjury. In default of delivery of defence, the plaintiff moved for judgment. Wright and Darling JJ. refused the application upon the ground that there was no authority that the mere proof that a judgment had been obtained by perjury was sufficient to induce the Court to set aside the judgment. A few months later the case of Cole v. Langford [1898] 2 Q B, 36 came for hearing on a similar application before another Divisional Bench when the previous judgment was set aside on the ground That the jurisdiction had been exercised in several cases since Flower v. Lloyd notably the case of Priestman v. Thomas (1884) 9 P.D. 210. With all due respect that case was hardly in point. In an action for probate two wills were propounded. A compromise was effected and judgment was given for the earlier will. Subsequently it was discovered that the earlier will was a forgery and in an action in the Chancery Division judgment was given setting aside the compromise. Then a suit was filed in the Probate Division for revocation of the probate of the earlier will and it was held that the defendant was estopped from denying the forgery. The procedure adopted seems somewhat cumbrous, but clearly a grant of probate in a suit is not like a judgment inter paries in an ordinary action and it would be impossible to rule out the jurisdiction of the Court in another proceeding to consider an issue whether the will which was propounded was a forgery. The Court might have referred with greater force to Abouloff v. Oppenheimer (1882) 10 Q.B.D. 295. The plaintiff had filed a suit against defendants in the District Court of Tiflis in the empire of Russia and obtained judgment in his favour whereby it was decreed that the defendants should return to the plaintiff certain goods and in default that the plaintiff should recover their value. An appeal to the High Court of Tiflis against this judgment was dismissed with costs. The plaintiff then filed an action in the Queen's Bench Division to recover the value of the goods so decreed in default of possession of the goods having been given. The defendants pleaded as a distinct defence that the judgments were obtained by the gross fraud of the plaintiff in fraudulently representing to the Courts at Tiflis that the goods in question were not in the possession of the plaintiff at the time the said suit was commenced, and during the whole time the suit was defended. The plaintiff demurred to this defence but the demurrer was overruled, and judgment was entered for the defendants. The plaintiff appealed. The argument of his counsel was that assuming there was the fraud alleged, the facts of the case could not be tried over again in England: the defendants wished to show that the judgments of the Russian Courts were wrong on the merits and Flower v. Lloyd was relied upon. On the other side it was contended that the demurrer admitted that the Russian Courts had erred through the fraud of the plaintiff, and it would be unreasonable to allow her to succeed in an action brought in an English Court. Lord Coleridge C.J. said (p. 299):--

It has been argued that the defence is bad mainly on the ground that upon these pleadings it must be taken that these allegations of fraud were brought before the courts at Tiflis; that the defendants did state to those courts that the goods were not in their possession but in the plaintiff's; that the courts had jurisdiction to examine this defence, and did examine it, and came to a conclusion against the defendants: and therefore that, whether this conclusion was right or wrong on the matters of fact, the question of the plaintiff's alleged fraud cannot now be tried or litigated in the courts of this country.

14. His Lordship then considered the authorities which laid down the principle that where a judgment has been obtained in the Courts of a foreign country by the fraud of a party he cannot prevent the question of fraud from being litigated in the Courts in England if he sought to enforce the judgment so obtained, and continued (p 301):

This principle has been laid down in the broadest terms by De Grey, C.J., in the answer to the two questions of the House of Lords in the Duchess of Kingston's case (1776) 2 S. L.C. 731. [that it had always been held in the Courts in England that it was an answer to an action upon a judgment, that that judgment had been obtained by the fraud of the party seeking to enforce it.] In that case one of the questions put to the judges was whether a sentence of the spiritual court against a marriage in a suit for jactitation of marriage was conclusive evidence, so as to stop the counsel for the Crown from proving the marriage in an indictment for bigamy; and speaking of this sentence De Grey, C.J., says (p. 738): 'Like all other acts of the highest judicial authority, it is impeachable from without; although it is not permitted to show that the Court was mistaken, it may be shown that they wore misled.

15. Now in the case of a disputed issue of fact where the Court has to decide between the evidence of the plaintiff and the evidence of the defendant one of which must be false where is the line to be drawn between the Court being misled and the Court being mistaken. The learned Chief Justice further said at p. 303: -

Where a fraud has been successfully perpetrated for the purpose of obtaining the judgment of a Court, it seems to me fallacious to say, that because the foreign court believes what at the moment it has no means of Knowing to be false, the court is mistaken and not misled; it is plain that if it had been proved before the foreign court that fraud had been perpetrated with the view of obtaining its decision, the judgment would have been different from what it was.

16. Now the issue in the case must have been whether the goods were still in possession of the plaintiffs or had been delivered to the defendant, and the Russian Courts must have decided on the evidence that goods had been delivered to the defendant. It is obvious that if they had known that the plaintiff's evidence was false they would have decided the other way. It must follow, therefore, from the above dictum that whenever a plaintiff or defendant obtains a decree by perjury the Court has been misled and not mistaken, and the judgment so obtained can be impeached on the ground of fraud.

17. Brett L.J. said (p. 306):-

I will assume that in the suit in the Russian courts the plaintiff's fraud was alleged by the defendants, and that they gave evidence in support of the charge; I will assume even that the defendants gave the very same evidence which they propose to adduce in this action; nevertheless the defendants will not be debarred at the trial of this action from making the same charge of fraud and from adducing the same evidence in support of it; and if the High Court of Justice is satisfied that the allegations of the defendants are true, and that the fraud was committed, the defendants will be entitled to succeed in the present action. It has been contended that the same issue ought not to be tried in an English court which was tried in the Russian courts, but I agree that the question whether the Russian courts were deceived, never could be an issue in the action tried before them... The issue in the Russian courts would be whether the defendants were wrongfully detaining the goods of the plaintiff. The question of fact whether the plaintiff had the goods in her possession at the moment when the action was commenced, would he a circumstance very material to be considered in order to determine that issue: but in the present action, upon this paragraph of the defence the only issue is whether the judgment of the Russian courts was obtained by the fraud of the plaintiff successfully perpetrated on those courts.. I wish to say, however, that I am strongly of opinion that in the present action no question can be raised whether the judgment of the Russian courts was erroneous...With one exception, none of the authorities cited before us in the least militate against our decision they all seem to show that the fraud of a party to a suit is an extrinsic and collateral act which will vitiate the judgment. That exception is to be found in the doubts expressed by James, L.J., with the assent of Thesiger, L.J., in Flower v. LIoyd. (1878) 10 Ch. 327.

18. I do not think it can be said that James and Thesiger L. JJ. expressed an opinion that the fraud of a party to a suit would not vitiate a judgment so obtained by him by means of that fraud. 'I'hey said that an allegation by an unsuccessful party that his opponent had succeeded by his inducing the Court to believe a false story was not sufficient to support an action to set aside the judgment fin the ground of fraud. I cannot myself wee the distinction between the question 'Is the plaintiff telling me the truth' which the Judge has to decide, and the question 'Is the plaintiff deceiving me by telling me a false story.' Where there is a direct conflict of evidence the Judge must know that one of the parties is deceiving him. And if the judgments in Alouloff v Oppenheimer were carried to their logical conclusion, the fears expressed by James L.J. in Flower v. Lloyd would certainly materialise.

19. In Vadala v. Lawes (1890) 25 Q.B.D. 310 the plaintiff also sued on the judgment of a foreign Court at Palermo in a suit filed to recover the amount due on certain bills of exchange. The defendant raised the defence than the judgments of the Italian Courts had been obtained by fraud The defendant had appointed one Reynolds by a power of attorney to act as his representative in Sicily. The bills sued on were signed by Reynolds on behalf of the defendant. The fraud alleged was that the plaintiff had entered into speculative transactions in stocks and shares also in produce with Reynolds. That the bills originally deposited in Court were forged bills but the plaintiff procured Reynolds to sign other bills which were substituted for the forged bills. That the plaintiff concealed these facts from the Courts and induced the Courts to believe that the bills were discounted in the ordinary course of business with the authority of the defendant. In reply the plaintiff pleaded that these allegations ware made by the defendant in the Italian Courts and were there gone into and adjudged against the defendants. The plaintiff obtained a verdict, the fraud with regard to the substitution of the bills being held not proved, and the defendant not being allowed to cross-examine the plaintiff with a view to allowing that the transactions were gambling transactions and not genuine mercantile dealings A new trial was ordered by the Divisional Courts on the ground that it was open to the defendant to prove that the Italian Courts were misled. In appeal against this order the decision in Abouloff v. Oppenheimer was followed. Lindley L.J. said (1890) 25 Q.B.D. 310. the question was whether the defence that plaintiff fraudulently represented the bills as commercial bills when he knew they were not could be gone into at all. There were two rules relating to such matters, the joint operation of which gave rise to the difficulty. First, a party to an action can impeach the judgment in it for fraud. Second, when an action is brought on a foreign judgment, the merits which had been tried in the foreign Court could not be gone into. His Lordship proceeded (p. 316):-

But you have to combine those two rules and apply them in the case where you cannot go into the alleged fraud without going into the merits. Which rule is to prevail '! ...I cannot read the judgments (in Ahouloff v. Oppenhdmer) without seeing that they amount to this: that if the fraud upon the foreign Court consists in the fact that the plaintiff has induced that Court by fraud to come to a wrong conclusion, you can reopen the whole case even although you will have in this Court to go into the very facts which were investigated, and which were in issue in the foreign Court...

20. The weakness of the argument on which this decision was based was evidently apparent to the learned Lord Justice when he says at p. 318:-

The counsel for the plaintiff have pointed out, and I think unanswerably, that that is really frittering away, if you look at it from one point of view, the general rule on which they are relying, that you cannot re-try the merits. To a technical objection it is a good technical answer to say: The substance is the same--that you do re-try the merits (as I understand the judgment to mean) for the purpose of satisfying an English jury that the foreign Court has been imposed upon; and if you cannot prove that the imposition was made without re-trying the merits, you are at liberty to re-try thom.

21. It is obvious, therefore, that the second rule referred to in this judgment is practically abrogated. It is sufficient for the defendant to allege that the judgment against him was obtained on perjured evidence for him to be allowed to have the case retried in an English Court on the merits It is possible, however, that the decision in Abouloff v. Oppenheimer might not be held applicable to a suit to set aside a judgment obtained in an English Court, on the ground that the successful party had committed perjury.

22. It is to be noted that in the first action of Flower v. Lloyd (1877) 6 Ch. D. 297 James L J, in giving instances of fraud which would vitiate a decree, refrained from adding as one 'you gave false evidence' Further, if, as laid down by De Girey C. J in The Duchess of Kingston's case, the fraud which will vitiate a judgment must be an extrinsic and collateral act, it is difficult to see how perjury can be such an act, and no attempt was made in Abouloff v. Oppenheimer to explain the difficulty. Apparently it was taken for granted that perjury was an extrinsic and collateral act.

23. A review, therefore, of the authorities on the subject does not afford much assistance in deciding the question in the present case whether the insolvent obtained his decree by fraud. It is unfortunate that the present plaintiff did not present an application for review, which would undoubtedly have been granted. The suit would have been re-heard and as soon as the insolvency of the plaintiff had been proved, it would have been obvious that the plaintiff could not proceed. I doubt, however, whether the Court would have dismissed the suit without giving the Official Assignee the opportunity of being substituted as a party. Granted that the assignor of a chose of action is not entitled to sue, he is not an improper party in a suit by the assignee, and is often added so as to prevent any question being raised as to the validity of assignment. If the assignor sues, concealing the assignment from the Court, that in a sense is a fraud on the Court and in the case of an insolvent a fraud also on the creditors, but it is not a fraud which touches the merits of this case, as was suggested in the course of the arguments, as the moneys were said to have been advanced long before the adjudication order. I should have little hesitation in setting aside the decree if there had been a voluntary assignment of the debt. The assignor's title would then be absolutely bad. The difficulty arises from the fact that here there was a statutory assignment which was not absolute, but for one reason or another might come to an end, so that his property would be restored to the assignor. If I set aside the decree it would still be open to the Official Assignee to tile a suit to recover the money within the period of limitation, though another Judge might decide it in a different way, but considering that the insolvent had a contingent interest in the claim, that the case was heard fully and carefully on its merits, would the fact that the insolvent concealed his insolvency from the Court justify me in setting aside the decree on the ground of fraud, which does not go to the roots of the case. The insolvent cannot execute the decree unless the adjudication order is annulled nor can the Official Assignee, unless he can succeed in an application to have his name placed on the record as decree-holder. There is, however, this consideration in favour of the plaintiff. The Court was undoubtedly misled by the insolvent plaintiff. If the insolvency had been discovered before the decree was passed, the suit must have stopped, unless the Official Assignee had intervened. He may not have done so, and then the defendant, now plaintiff, would have escaped. I do not think he should be deprived of that chance owing to the conduct of the insolvent, while it is still open to the Official Assignee to sue him for the debt.

24. I decree the plaintiff's claim with costs.

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