Cancellation of transfer of property made with undue influence

‘The transfer of property without the free will of the donor may be cancelled as a result of undue influence’

A person with poor health is usually cared for by a close relative. This does not give the relative the right to acquire his property after the person loses their mental capacity. Such an act is considered unconscionable, since it is based on the relationship of dependence and domination of the will of the ill person. Acquisition of property with the use of a power of attorney, whether transfer of immovable property, withdrawal of money or receipt of valuables, may be cancelled even after the death of that person. A donation that takes place under such circumstances can be cancelled due to undue influence, since the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other, article 14 of Contract Law, Cap.149.

The law of equity, as case law states, aims at preventing someone from keeping the benefits of his unlawful act and the donation, in order to be valid, must be a spontaneous act of the donor who must be capable and with free will, without undue influence.

Recognition by relatives and the fact that an ill person would leave property to someone who cared for them as a sign of gratitude is not an excuse for not considering that act as concluded under undue influence, as the supreme court pointed out in its judgment dated June 16, 2021. The court stated that if the relatives’ opinion remains the same, their opinion and intention may be shown in the context of the administration of his estate, and upheld the judgment of the court of first instance that ordered the cancellation of the donation. The deceased was not married and had no children and the heirs of his estate were the children of his siblings. His sister’s daughter cared for him for many years, as she did for her parents who lived essentially in the same house as her uncle.

After the uncle’s death, an administrator of his estate was appointed who filed an action claiming the cancellation of the donation of his property and its return to the estate.

While her uncle was alive, the niece obtained two powers of attorney with his fingerprint, which were certified. She used them to transfer all his immovable property to her name by donation and to withdraw his money from his bank accounts. The main difference between the parties, as identified by the court of first instance, focused on the legality of the powers of attorney and its finding was that the uncle at that time was not of sound mind due to old age and bad health and therefore, acted without his free will.

The court held that the powers of attorney were the product of undue influence exercised by the niece upon the uncle and consequently it issued orders for the cancellation of the donations.

The supreme court in its judgment added that admittedly, the niece was the one who offered continuous service, assistance and help to the deceased up to his death. However, it does not overlook that the doctrine of undue influence was introduced by the courts of equity to deal with those cases where, while the will of the affected person is externalised, there is such a relationship between the affected person and the beneficiary or such circumstances, that it is fair and just, as a matter of public policy and honest conduct, to call the beneficiary of the contract to prove that the person affected actually acted voluntarily. The court confirmed that the action of the niece was unconscionable and dismissed her appeal.

George Coucounis is a lawyer in Larnaca and the founder of George Coucounis Llc, [email protected]