Acquisition of Property with Undue Influence

Acquisition of property with undue influence

In Cyprus, the principle of undue influence does not allow anyone to keep the benefits of fraudulent actions, as George Coucounis explains.

The ability to contract is the basis for the validity of any transfer or donation of assets, money or property in Cyprus from one person to another. There are people who due to their age or health condition have reduced mental ability to manage their personal affairs, even more to dispose their immovable property. These people need care, love and protection and cannot be the victims of anyone trying to take advantage of their problem.

Under these circumstances, any such person does not have the contractual ability to donate or transfer his property, unless an order is issued by the Court appointing a suitable person to administer their estate.

Even when someone is appointed as an administrator, he acts gratuitously, for the benefit of the mentally weak or ill person and he may dispose the property only after he obtains an order from the Court. The administrator is always accountable to the Registrar of the Court regarding the way he administers the estate, provide the Court with receipts and accounts on a regular basis and he is entitled to a reasonable remuneration, if he claims it. Otherwise, he is considered to act gratuitously and he cannot claim it later.

Elderly people, mainly the ones who have no close relatives or are not taken care of by them, are often victims of people who take advantage of the situation. They act illegally using various methods to acquire the property of the elderly. The most common method is to obtain a power of attorney through which they believe they are free to acquire the property.

Although this is not proper, they make use of the power of attorney and transfer the assets to their name. They must not be happy that they managed to acquire someone else’s property, since they have acted illegally and immorally. Even if the signature of the elderly was certified, any transfer of property made is illegal, since the elderly had no contractual ability and did not understand or comprehend the contents of the authorisation given. His consent is not considered to be free, but it is said to be caused by coercion, undue influence, fraud, misrepresentation or mistake. Therefore, such transfer, if made, can be declared null and void, because it was made with the use of undue influence or fraudulently and the property can be returned to the owner or the administrator of his estate.

The relevant provisions of the law are set out in the Contract Law, Cap. 149, section 14, 16, 19 and 20, where it is stated that 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 of the other and uses that position to obtain an unfair advantage over the other.

In particular, a person is deemed to be in a position to dominate the will of another (a) where he holds a real or 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.

Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.

The Supreme Court of Cyprus had the opportunity to deal with the above issue emphasizing that the application of the principle of undue influence, in accordance with the law of equity, aims at preventing someone from keeping the benefits of his fraudulent or unlawful act. This is not a restriction upon the donor but an obstacle over the consciousness of the recipient of the donation, based on the public interest and the proper behaviour.

When the Court is satisfied that a transfer or a donation was the result of undue influence exercised by the recipient or where the relations between the donor and the doneé at the time of the donation or just before it, are such as to create the presumption that the donor was influenced by the donee, the Court declares the donation null and void

For a transfer or a donation to be declared valid, it must be considered as a spontaneous act of the donor who acted with his free will and with full knowledge of his acts. The most common way for a transfer or a donation to be proven that it was not the result of undue influence, is to prove that it was made after a proper and independent legal advice was taken.