Court allows lease contract signed by agent, validating extrinsic evidence of agency capacity.

[*1219] 1972 November 2

(PIKIS, AG. P. D. C.)

IN THE DISTRICT COURT OF FAMAGUSTA

Spyroulla Loizidou,

Plaintiff,

and

Zacharias Georgiou,

Defendant.

(Action No. 3450/71).

Contract - Lease of land - For a term exceeding one year - It may he validly executed by a duly authorised agent on behalf of his principal - Capacity of the agent need not he explicitly stated on the contract - It may be established by extrinsic evidence - Section 77(1) of the Contract Law, Cap, 149.

Evidence - Extrinsic evidence - Contract – Extrinsic evidence admissible to show capacity in which signatories of a contract have signed the contract - So long as such evidence does not contradict any terms of the contract as such.

Evidence - Relating to deceased persons - Should be thoroughly Sifted and subjected to careful scrutiny.

Observations regarding the desirability for amendment of section 77(l) of the Contract Law, Cap. 149.

A. Poetis, for the Plaintiff.

N. Antoniou, for the Defendant.

JUDGMENT

The following judgment was delivered by:-

PIKIS, AG. P.D.C.: The plaintiff is the owner [*1220] of two plots of agricultural land situate at Prastio village described in paragraph 1 of the Statement of Claim. It is an admitted fact that as from 1st August, 1964 the defendant became a tenant of these properties and remained in occupation until the end of the agricultural season of 1971. The present action concerns the liability of the defendant and if liable the extent of his obligations to pay rent for the occupation of these lands.

It is the case of the plaintiff that the defendant is liable to pay rent at the rate of £37 per year for each year of occupation minus a total sum of £95 paid by the defendant towards his indebtedness. It is common ground that the defendant first went into occupation of the lands in virtue of the provisions of a written contract of lease, exhibit 1, which provided for a five-year tenancy of the land to the defendant at an annual rental of £37 payable in arrears, plus interest at the rate of 9% on any sum due in the event of failure to pay the rental on the appointed day.

It is the case of the defendant that the tenancy created by this agreement is illegal and void in that it was executed in contravention of the provisions of section 77(1) (b) of Cap. 149. (Contract Law). His complaint is that the contract is illegal insofar as the same was not signed by the plaintiff, one of the parties to the contract or by an agent signing on her behalf. It is the submission of the plaintiff that the contract is valid maintaining that it was signed by the husband of the plaintiff signing on her behalf as her agent. [*1221]

Section 77(1) of Cap. 149 provides:-

Contracts relating to lease of immovable property for any term exceeding one year shall not be valid and enforceable unless:-

(a) Expressed in writing, and

(b) Signed at the end thereof, in the presence of at least two witnesses themselves competent to contract, who have subscribed their names as witnesses, by each party to he charged therewith or by a person, who is himself competent to contract and who has been duly authorised to sign on behalf of such party.

Prior to the enactment of section 2 of Law 6/59 only the signature of each party to he charged therewith could save from voidness a contract of lease of land for a period exceeding one year as the law prior to its amendment made no provision for the execution of such contracts by a party to be charged therewith through a competent .and duly

authorised agent signing on his behalf. In the case of Stavrou v, Periklis Stylianou & Another, 23 C. L. R. page 217 the Supreme Court in interpreting section

77(1)(b) of Cap. 149 - then section 77 of Cap. 192 in the previous edition of the Statutes of Cyprus - decided that the provisions of the law as it then stood made it mandatory that a contract for the lease of land for a period exceeding one year could only be validly executed if signed by each party to be [*1222] charged therewith. They derived support for this proposition from the decision of Tyndall C.J. in Hyde v. Johnson 1836 5 L.J. C.P.

291 where he said:-

"The legislature has, in many statutes, given equal efficiency to written instruments when signed by the parties and when signed by their agents; hut in all those cases express words have been employed for that purpose".

It was their Honours’ considered opinion that Cyprus legislature should he credited with knowledge of this practice and they cited as example section 6(2) of the Limitation of actions Law which reads:

"Every acknowledgement as in sub-section 1 hereof provided shall he in writing signed by the person making the acknowledgement or his authorised agent".

Historically, it was this decision that brought to the surface the limitations of the provisions of section 77 as it then stood and prompted the amendment of the law so that a duly authorised agent may. validly execute, on behalf of his principal, a contract, for the lease of land exceeding one year thus widening the ambit of the provisions of the law. The pertinent question in this case is whether exhibit 1, unobjectionable in every respect, was in point of fact signed by plaintiff's agent signing on her behalf. The matter is not altogether free from complication because whereas the plaintiff is described in the body of the contract as the [*1223] landlord, the contract was not signed by her, but by her husband, who did not, however, state the capacity in which he was signing. It is the plaintiff’s contention and in fact as

much is admitted by the defendant that her husband was her agent and had her authority to sign on her behalf. The first question is whether extrinsic

evidence is admissible to show the capacity in which the signatories of a contract sign the contract. It has long been settled that extrinsic evidence is admissible in such circumstances and the rule is best stated in the words of Parke, B. in Higgins v. Senior (184l) 8 M. & W. 834, at p. 844.

"There is no doubt, that where such an agreement is made, it is competent to show that one or both of the contracting parties were agents for other persons, and acted as such agents in malting the contract, so as to give the benefit of the contract on the one hand, and to charge with liability on the other, the unnamed principals; and this whether the agreement be or not be required to be in writing by the Statute of Frauds: And this evidence in no way contradicts the agreement".

A more recent illustration of the principle is found in the case of Basma v. Weeks (1950) A. C.

441. In that case by a written agreement, R, S and T agreed to sell to A two houses. The vendors knew that A was acting as P's agent, but the agreement did not refer to P or to the fact that A was purchasing as P's agent. Later P sued R, S and [*1224] T for specific performance of the agreement. The defendants pleaded the Statute of Frauds. It was held that evidence could he admitted to show that P was A's principal. The circumstances under which extrinsic evidence is admissible in order to explain the terms of a contract came up for consideration before the House of Lords in the recent decision of Prenn v. Simmons (1971) 3 All E.E. 257 where it was decided that the Court is entitled to receive extrinsic evidence surrounding the execution of a contract concerning the factual background known to the parties at or before the date of the contract including evidence of the genesis and objectively the aim of the transaction. In the same case it was decided that evidence of negotiations is inadmissible on the ground that it can be of no help to the parties since it does not record the consensus of the parties.

It emerges from the above that extrinsic evidence is admissible to explain the capacity in which a contracting party appends his signature to a contract so long as such evidence does not contradict any term of the contract as such. Further, It is permissible for the Court to examine the contents of a document as a whole and. find out whether the party signing thereto does so in. a representative capacity acting on behalf of some other person. (See Fairlie v. Fenton (1870) L.R. 3 exch. 169).

It is evident from the contents of the contract that the plaintiff’s husband was not at the time signing as the landlord of the lands and this is plain on a consideration of the fact that the plaintiff is described as [*1225] the owner, whereas the contract Is signed by her husband. Extrinsic evidence, is admissible to show the capacity in which plaintiff’s husband executed the contract and in fact such evidence has been admitted and establishes, to my satisfaction, that he was both the agent of his wife and signed exhibit 1 to the knowledge of the defendant in that representative capacity. What section 77(1)(b) of Cap. 149 lays down, and this is important for my decision in this case, is that the contract must be signed either by a party to be charged therewith or a duly authorised agent, It is not part of the mandatory provisions of this section of the law that the capacity of the agent must be explicitly stated on the contract and so long as such representative capacity is established the provisions of the statute are satisfied and 1 hold that exhibit 1 in no way offends the provisions of section 77(1)(b) of Cap. 149. Before I go to the evidence it is perhaps convenient to refer to the contention of the defendant that the lease of the property to the defendant for the period of 1968 to 1971 is illegal in that the tenancy agreed upon was for a period exceeding one year and that such tenancy was not evidenced in writing and in general accompanied by the formalities prescribed by section 77(l) (b) of Cap.

149. I may say straight away that if I find this contention proved, such tenancy would be patently illegal as offending the provisions of the said law, and no valid contract could come to life conferring rights or imposing obligations to anyone of the contracting parties.

(See cases of Kanaris v. Tosoun

(1970) 1 J.S.C. p.17. [*1226]

Josiphakis & Others v. Ghani

(1967) 7-8 J.S.C. p.956.

Fielding Plat Ltd. v. Nadjar (1969)

2 All E.R. p. 152.

Shaw v. Groom (1970) 1 All E. R. p. 702)

I will now proceed to examine the evidence which mostly concerns conflicting allegations of the parties regarding stuns of money paid by the defendant to the plaintiff.

The plaintiff in her evidence maintained that only the sums referred to in her Statement of Claim were paid by the defendant towards the discharge of his obligations to the plaintiff for the tenancy of the lands in question. It is the evidence of the defendant that by 1968, in fact much earlier in 1965, he had paid off all his obligations under exhibit 1(a) by executing a bond for £100 payable to the deceased-husband of the plaintiff, her agent, exhibit 2 which he paid off on 23rd September, 1965 and (b) by payment in kind viz. by delivering several articles of merchandise to the husband of the plaintiff on various dates in 1965 before the execution of exhibit 2. The plaintiff denied the allegation of the defendant that exhibit 2 was executed in part payment of defendant's obligations under the contract of lease and maintained that exhibit

2 was executed in consideration of rents due by the defendant to the plaintiff for the lease of immovable property to him prior to the year 1964. It transpired in the course of her evidence that immovable property had been leased by the plaintiff to the defendant between the years 1955 to 1958. She was

in no position, however, and did not in point of fact enlighten [*1227] the Court as to the extent of the indebtedness, if any, of the

defendant after the expiration of a previous contract of lease between them. She could only assert and this in a vague manner that defendant was indebted to her to an unspecified extent in respect of obligations incurred under a contract of lease that came to an end in the year 1958. The case for the defendant on the other hand is that he executed exhibit 2 being pressed to do so by the husband of the plaintiff, the latter being anxious to secure as far as possible payment of rents due under exhibit 1 in view of the failure of the defendant to furnish guarantors for the faithful performance of his obligations under exhibit 1.

It is a fact that exhibit 1 contains a guarantor's provision, that is, a printed formula often employed to record the Obligations of a guarantor which has been left unfilled. One cannot, but remark that is is some how strange that the obligations undertaken in exhibit 2 do not coincide with those undertaken in exhibit 1 and more than that it is a little strange that defendant should agree to execute a bond in respect of obligations that had not already accrued. On the other hand,. the allegation of the defendant gains strength from the contents of exhibit 2 and in particular the fact that it is specified therein that the bond was executed in consideration of rents due by the defendant to the plaintiff.

There is no suggestion that the husband, of the plaintiff had ever leased to the defendant immovable property other than property belonging to his wife and even plaintiff herself admits that the obligations undertaken by the defendant to her husband [*1228] evidenced by exhibit 2, record rents due by the defendant to her. It is a little odd if one accepts the version of the plaintiff that the plaintiff should agree to the execution of exhibit 1 whereby she leased the property to the defendant for five years at a time when the defendant was indebted to her for rents that had accrued six years earlier without at the same time taking steps to secure payment of arrears of rents.

This more so, if one considers that shortly after the execution of exhibit 2, a few months later it was deemed necessary to secure a bond evidencing the obligations of the plaintiff and stipulating for their payment in a matter of months. The explanation of the plaintiff is that her husband leased the lands in question to defendant to enable him to pay old rents due to him. Even so the most convenient time to require defendant to acknowledge his old debt and stipulate

for its payment within a specified interval of time would have been. at or before the time exhibit 1 was executed. Further, the

defendant maintained that he made several deliveries in kind to the husband of the plaintiff in part payment of his obligations under exhibit 1. I must observe that defendant fell into a number of contradictions particularly concerning the payment of a sum of £18 to one of the daughters of the deceased, on one occasion contending that such sum had been paid in the year 1965, whereas

later he maintained that it had been paid in the year 1969. The daughter of the plaintiff, P.W. 2, testified that in

the summer of 1969 her father and the defendant had a meeting at their family house and in her presence, her [*1223] father reminded the defendant that his indebtedness to him exceeded £200, a fact that was allegedly acknowledged by the defendant in her presence. It is not, however, her evidence that the parties went into accounts nor did she contend that the defendant acknowledged the extent of his indebtedness to the plaintiff after examining their accounts in any way.

In accordance with the provisions of section 7 of Cap. 9 claims against the estate of a deceased person urnet be corroborated. This question does not arise in the present case as the claim is raised by the plaintiff and not by the estate of her deceased husband. It is, however, generally desirable and intrinsically fair that allegations made against deceased persons should be scrutinized to the utmost possible degree lest a living person be allowed to take advantage of the permanent silence of a person, who would be a witness in the case had he been alive. In the case of Thomas v. The Times Book Co. Ltd. (1966) 2 All E.R. page 24l it was emphasised that evidence relating to dead persons should be thoroughly sifted and subjected to careful scrutiny before the Court relies on such evidence. The judge must in the first place approach such evidence with suspicion. It is in this vein that I approached the allegations of the defendant regarding payments allegedly made to the deceased on account of his wife, not evidenced by any receipt especially when we know that there was at least one receipt evidencing a payment made by the defendant to the deceased. (See exhibit 3). [*1230]

The only witness, who gave evidence on the terms tinder which defendant remained in possession of the land after the expiration of the written contract of lease is the defendant himself, his evidence being that the tenancy was renewed at an annual rental of £37 as before. The defendant made conflicting statements about the agreed duration of this extension contract, at first saying that it was on a yearly basis which later he qualified maintaining it was for a two year period. He was silent regarding the third year. I accept that after the expiration of exhibit 1 the lease was renewed from year to year at a rental of £37 per year, without making any provision for interest in the event of arrears. I accept that the tenancy was renewed from year to year and therefore the provisions of section 77 have not been infringed.

I have very carefully considered all the evidence before me and had occasion to watch the demeanour of the witnesses in the witness box. It is a fact that the defendant fell into a number of contradictions, something that I have not overlooked in assessing his evidence. P.W.2 impressed me well and I accept that on one occasion in 1969 she witnessed a conversation between her father and the defendant in the course of which her father reminded the defendant of his obligations, but I do not accept her evidence as conclusively establishing that the defendant was in point of fact, in the summer of 1969 indebted to the plaintiff for a sum of £200 or more as alleged. It is a fact that in the year 1969 the defendant was indebted to her mother for a sum of money in the region of £100 and in accordance with my findings as I [*1231] shall state them shortly, he was indebted to the plaintiff for a sum in the region of

£100, I accept the evidence of the defendant that exhibit 2 was executed in part payment of his obligations under exhibit 1

and accept his evidence that exhibit 2 was executed so as to ease the anxiety of the deceased, agent of plaintiff, that defendant would meet his obligations under exhibit 1. I cannot, however, on the totality of the evidence before me accept that defendant made any other payments to the plaintiff personally or through any agent of hers other than the sum of £100 paid off on 23rd September, 1965 viz. exhibit 2 and the sums admitted by the plaintiff, that is

(a) £60 paid on 20th September, 1969, (b) £10 after 20th September, 1969 and

(c) £25 on 5th September, 1971.

In the light of my findings at the expiration of ! the tenancy agreement, exhibit 1, the defendant was indebted to the plaintiff for a sum of £48 with interest as follows:-

(a) £11 with interest at 9% as from 1st August, 1967 till payment.

(b) £37 with interest at 9% from 1st August, 1968 till payment.

In the absence of appropriation the provisions of section 6l of Cap. 149 become applicable and payment made by the defendant in the year 1969 must be applied in the discharge of the debts in order of time, that is to say, debts are extinguished in the order of time at which they accrue. Therefore, the payment of £60 made in September, 1969 must be [*1232] applied towards extinguishment of the debt of £48 as above stated and interest due thereon as already specified and then to obligations of the defendant incurred subsequently.

Observations regarding the Amendmant of the Law:

Much has been said in this judgment about the ambit and implications of section 77(1) of Cap. 149. I have always been puzzled why it has been deemed necessary to impose such strict formalities for the validity of a contract of lease of land for a period exceeding one year. Such a contract does not create an estate in land and has non of the attributes of a lease as. known to the English law. In fact, such contracts do not differ from a variety of other contracts for which the legislator lays down no special formalities and which are binding on the formation of the contract. It is significant that contracts for the sale of land, where it may be said that the subject of the contract is admittedly of greater purport than a contract for the lease of land, no formalities are land down and the contract may be orally concluded. In my respectful view, there are no special reasons justifying the presence of the formalities envisaged by section 77(l) - Cap. 149. On the contrary, the presence of these formalities may be said to constitute a hindrance to the formation of valid contracts in an area where the public has. a vital interest that parties be held to their agreements. I would venture to recommend the repeal of this section of the law.

In the result, there will be judgment in favour of the plaintiff as follows:- [*1233]

(a) Interest at 9% on the sum of £11 from 1st August, 1967 to 20th September, 1969.

(b) Interest at 9% on the sum of £37.- from 1.8.1967 to 20.9. 1969.

(c) £64.

In all, if my arithmetic is right, it comes to £70.825 mils for which sum judgment is given for plaintiff with costs on the scale of claims £50-£100.- to be assessed by the Registrar.

Judgment and order for

costs as above.