A contract induced by undue influence

Transfer of property made without free consent of the owner is voidable

The unstable health of a person may lead another person from the close family and friends to take advantage of their relationship with them, in order to unfairly obtain their property. This may be achieved by exercising undue influence on the vulnerable person. The most frequent means used is to obtain a power of attorney, with the use of which the property is acquired. The victim may claim the voidance and cancellation of the transfer of the property, as it occurred without their free consent.

The provisions of articles 16 and 20 of the Contract Law, Cap.149, are relevant here, according to which a contract is said to be induced by undue influence when the relations between parties are such that one of them is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over them.

A person is deemed to be in a position to dominate the will of another: (a) when they hold a real and apparent authority over them, or stand in a fiduciary relation to the other; or (b) when they make a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress. When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the influenced party.

The Supreme Court in its judgment issued in C.A.388/2014, dated April 3, examined the appellant’s complaints against the decision of the court of first instance to issue a judgment ordering the setting aside of the transfer of the property of a deceased person. In particular, the court ordered the re-registration of it into the name of the administrator of the vulnerable person, who in the meantime passed away. The appellant secured a power of attorney from the deceased, whom he was close to, a month after his health had deteriorated and he was in hospital after a cardiac stroke. Soon after he passed away, his relatives found out his immovable property was transferred to the appellant without the deceased receiving any money. Under the circumstances, it was impossible for the the deceased to have spent the sum stated to have been given as payment for the property.

The administrator of the estate of the deceased had filed a lawsuit before the District Court claiming the voidance of the transfer and re-registration of the property in his name, as the transfer was achieved due to the exercise of undue influence upon the deceased and the appellant took advantage of the relationship of trust between them and the affected mental capacity of the deceased due to age and illness. The District Court accepted that the deceased under the circumstances was fully dependent on the appellant who was dominating his will and used the power of attorney to transfer the property to him without his free consent.

The Supreme Court decided that the first instance court evaluated and weighed the testimonies of two doctors/witnesses having in mind the principles which surround the process, their expertise and the scientific criteria that supported the testimonies, allowing the District Court to shape an independent judgement. In relation to a complaint about the alleged lack of particulars for mental distress in the pleading of the statement of claim, the Supreme Court held that the complaint was unjustified since the relevant details were duly stated.

Moreover, the Supreme Court held that the decision of the court of first instance to void the transfer with a final outcome to be cancelled was correct. The Supreme Court rejected the appeal and validated the judgment of the Court of first instance.

George Coucounis is a lawyer practicing in Larnaca and the founder of GEORGE COUCOUNIS LLC, Advocates & Legal Consultants, www.coucounis.law, [email protected]