Power to set aside contract induced by undue influence

The unstable health of a person may lead another person from the close family members and friends to take advantage of the trust relationship and dependency that this person has with him/her, in order to unfairly obtain his immovable property. This may be achieved by exercising undue influence, since a family member or friend can dominate the will of this person, whom due to his poor health is vulnerable and unable to decide for the disposal of his property. The most frequent means used is to obtain a power of attorney, with the use of which the property is unfairly acquired. Such disposition and transfer are voidable at the option of the person affected, because it is caused by undue influence upon him, without his free consent and such a person as well as his/her administrator may claim the voidance and cancellation of the transfer of the property that was caused by the exercise of undue influence.

Relevant to the aforesaid subject are the provisions of articles 16 and 20 of the Contract Law, Cap.149, according to which a contract is said to be induced by ‘‘undue influence’’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will and consent of the other and uses that position to obtain an unfair advantage over the other. A person is deemed to be in a position to dominate the will of another: (a) where he holds a real and apparent authority over the other, or where he stands in a fiduciary relation to the other; or (b) where he makes 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 party whose consent was so caused.

The Supreme Court in its judgment issued in C.A.388/2014, dated 03.04.2023, 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 the property into the name of the administrator of the vulnerable person who in the meantime passed away due to health problems. The appellant secured a power of attorney from the deceased with whom they maintained a close relationship a month after his health had been deteriorated and had cardiac stroke remaining at the hospital. Due to health issues experienced by the vulnerable person, soon after he passed away, his close relatives found out that his immovable property was transferred to the appellant without the deceased receiving any money. Under the circumstances, the deceased was impossible within such a short time to have spent the sum stated to have been given as price for the sale of 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 immovable property to his name. Such a transfer was achieved due to the exercise of undue influence upon the deceased person and that the appellant took advantage of the relationship of trust between them and the affected mental capacity of the deceased due to age and illness, thus securing unfair advantage. The District Court accepted that the deceased under the circumstances was fully dependent on the appellant who was dominating the deceased’s will and using the power of attorney transferred the deceased’s property to him without his free consent.

The Supreme Court decided that the first instance Court, evaluated and weighed the testimony of the two doctors/witnesses having in mind (something that was recorded in its decision) the principles which surround the process due to the expertise of the witnesses, having accepted their testimonies and subject to the scientific criteria with which they were supported with, in a manner in which the District Court was allowed to shape an independent judgement on the disputed issues. In relation to the 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 decide upon the voidance of the transfer of the property with a final outcome to be cancelled (thus accepting the administrator’s lawsuit) was correct and was issued by the duly self-guidance of applied jurisprudence and the provision of articles 20 of Cap.149. Given the findings on lack of consent of the deceased in the execution of the power of attorney and the transfer of the property caused by the exercise of undue influence by the appellant, with all the effects. Following the above, the Supreme Court rejected the appeal and validated the judgment of the Court of first instance.