Court allows plaintiff's claim for damages and estoppel but dismisses counterclaim regarding fraudulent transfers.

[*12] 1975 February. 28

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

IN THE DISTRICT COURT OF LARNACA Elias Adamou,

Plaintiff,

and

Georghios Char. Kitchiou and Another,

Defendants.

(Action No. 2/73).

Fraudulent Transfers Avoidance Law, Cap. 62 - Object of - To make property, otherwise not so available,available in execution for the satisfaction of a judgment debt - It presupposes the existence of a judgment debt.

Contract - Sale of land - Oral agreement for sale of land - Death of vendor before transfer - Deceased not failing to carry out her obligations under the agreement but she put it beyond her reach to implement the agreement by transferring property to her husband - Her estate liable for breach of contract.

Damages - Breach of contract - Measure of damages - Principles applicable - Section 73(1) of the Contract Law, Cap. 149 - Defendant’s fraud in the equitable sense - Whether it affects date as at which damages are to be assessed - Breach of contract for sale of land - Quantum of damages.

Contract - Representation - Sale of land - Oral agreement - Vendor transferring land to her husband - Vendor and husband inducing buyer to believe that it was within contemplation of vendor to transfer the property to him - Whether conduct of husband amounts to a representation of fact binding him in contract to the buyer.

Contract - Specific Performance - Sale of land - Oral agreement - Property no longer registered in name of vendor

- Provisions of the Sale of Land (Specific Performance) Law, Cap. 232 not complied with - Specific performance not possible - Rule that damages are assessed as at the date of trial where specific performance is refused - Only applicable where it is refused in the exercise of the Court’s discretion - And not where it is beyond the reach of the Court to order specific performance.[*13]

Estoppel - Equitable estoppel - Principle of - Contract of sale of land - Ho transfer - Buyer moving into occupation of land with consent and agreement of owner and has remained in occupation since - Following representations of owner and her husband buyer altering his position substantially to his detriment by building a house on the property - Owner estopped from denying to buyer a right to be on the property.

C. Varda, (Mrs.), for the Plaintiff.

A. Poetis, for the Defendants.

JUDGMENT

The following judgment was delivered by:-

PIKIS. AG. P.D.C.: In 1956, the plaintiff [*14] purchased from Apostolou Georghiou, late of Ormidhia, one donum of land for the purpose of building a house for the accommodation of his family. Following this oral agreement, the plaintiff built, in the same year, a house consisting of two rooms, a lavatory and a kitchen, for the accommodation of his family. The area where the house was built is shown on a plan prepared by the local inquiry clerk who carried out a local inquiry for the purpose of defining the boundaries of the disputed parcels of land.

In 1957, Apostolou Georghiou and her husband, administrator of her estate, built a house themselves on property belonging to them on land adjacent to the property purchased by the plaintiff; thus the two families became neighbours and good neigbourly relations prevailed among them.

In 1958, the parties to the 1956 oral agreement thought fit to make a written record of their agreement and thus exhibit 1 was signed by Apostolou Georghiou, evidencing that she had sold a building site to the plaintiff of an extent of one donum, worth £60. Reference is made in the document to the circumstances making it impossible at the time for Apostolou Georghiou to transfer the property in the name of the plaintiff because of the resignation of the village mukhtar. The deceased had undertaken to convey the property to the plaintiff as soon as a mukhtar was appointed. In the meantime another house was built in the adjacent area to accommodate members[*15] of the expanding family of the deceased.

It is an admitted fact that at the period of the EOKA struggle no mukhtar was serving at the village of Ormidhia.

Apostolou Georghiou died in 1969, without having transferred the property to the plaintiff. Her husband, who is sued as 1st defendant in his capacity as administrator of the estate of his deceased wife and personally as 2nd defendant, refused to transfer the property to the plaintiff; hence the present action.

A series of events took place during the intervening period that complicates the picture and compounds the difficulties in resolving the disputes between the parties.

On 8th July, 1960, the deceased had transferred gratuitously to her husband the property sold to the plaintiff. There is nothing to suggest that this transfer ever came to the knowledge of the plaintiff and in accordance with my findings this fact was concealed from the plaintiff whereas the deceased and her husband continued behaving to the plaintiff in a way assuring him that there was no obstacle in the way of transferring the property to him, in an effort to disabuse any impression he might form that the deceased had changed her mind.

It is the evidence of the plaintiff, which I accept as correct, that on many occasions subsequent to the year 1960, when a mukhtar had been appointed at [*16] Ormidhia, both the deceased and her husband had repeatedly assured the plaintiff of their intention to honour the agreement but technical obstacles were suggested as impeding them from effecting the conveyance.

The plaintiff, in an ill-drafted statement of claim, that leaves much to be desired in the way of clarity and coherence, seeks to set aside the transfer of the property from defendant 2 and have it retransferred to the name of the 1st defendant, on the ground that it had been fraudulently made. Further, the Court is prayed to decree specific performance and order the registration of the property in the name of the plaintiff. Lastly, damages are claimed upto £3,000.

A joint defence is put forward on behalf of the defendants wherein defendant 2 denies that he is in any way guilty of fraudulent conduct. It is admitted in paragraph 2 of the defence that the property had been sold to the plaintiff, allegedly for £15, and it is further admitted in paragraph 3 that the plaintiff has been in possession of the property. It is alleged that the agreement between plaintiff and defendant contained a stipulation that in the event of breach, damages should not exceed £60, an allegation that remained unsubstantiated. I was invited to construe the reference made in exhibit 1 to the value of the property as a stipulation limiting damages to £60. I could give the document such construction only by thwarting the wording of an otherwise clear provision.[*17]

In a counterclaim the defendants apply for the cancellation of the agreement between the plaintiff and the deceased and ask for an order of injunction to restrain the defendant from trespassing into their property. The defendants never purported to explain why the plaintiff should he viewed as a trespasser when it is admitted that he purchased the property and moved into occupation in consequence of the terms of this agreement.

Four witnesses testified for the plaintiff, including the plaintiff himself. The first witness is an L.R.O. official who produced a plan (exh. 1) whereon the land in dispute is shown and gave an outline of the circumstances leading to the present registration of the property in the name of defendant 2.

According to the testimony of the plaintiff, following the inauguration of the Republic in 1960, he invited the deceased to proceed and transfer the land in his name, but at her request agreed to have the transfer postponed pending the creation of a road in the area that would apparently make feasible the division of the land into small plots. This road had not been constructed until after the death of Apostolou. Approximately in the year 1972, or early in 1973, the plaintiff made a last request to defendant 2 to transfer the property in his name, to which the defendant resorted to with a blunt refusal, telling the plaintiff, in a derisory manner, that he might seek to trace the deceased and have her transfer the property in his name.[*18] Georghios Hassabis, an architect by practical experience, practising in the area of Xylotymbou, testified that in 1963, or 1964, he prepared plans on instructions from the plaintiff and submitted them to the authorities for securing a building permit. Mr. Hassabis prepared the application and the plans. Defendant 2 signed the application at the request of Mr. Hassabis (see exhibit 5). However, there is nothing to suggest that plaintiff learned, at that stage, that the property was registered in the name of defendant 2. What is strange is the contention voiced by the defendant in the course of the cross-examination of the plaintiff, to the effect that he was personally unaware of the existence of a contract between his wife and the defendant.

Both Mr. Hassabis as well as the last witness for the plaintiff, Mr. Christos Zacharias, a building contractor, gave evidence About the value of the property occupied by the plaintiff in an effort to establish the damage to which the plaintiff is entitled to.

With the above factual background in mind, having seen and heard the witnesses, I shall proceed to make my findings. I find as a fact that the plaintiff and the deceased entered into an oral agreement in the year 1956, whereby the latter sold to the former one donum of land so that the plaintiff might build a house thereon. The land sold is situate where a house was shortly afterwards built by the plaintiff wherein he

has since, been living with his family. The absence of a [*19] mukhtar prevented the parties from having the property conveyed in

the name of the plaintiff, whereas in 1958 they deemed it appropriate to have some written record of the transaction and in consequence exhibit 1 was signed. In the meantime, in the year 1957, the defendants had themselves built a house nearby and nobody, including the 2nd defendant, ever questioned the right of the - plaintiff to occupy the premises until very recently when defendant 2, in the hope of gaining advantage to himself, chose to endeavour to oust the plaintiff from the property. The inevitable inference from the evidence is that defendant 2 was well aware from the very beginning that the plaintiff had entered the property following the oral agreement above referred to, with the consent and concurrence of the then owner of the property, his deceased wife.

In 1960 defendant 2 and his deceased wife, for reasons best known to themselves, chose to have the property transferred in the name of the 2nd defendant by way of gift. This fact did not come to the knowledge of the plaintiff. On the contrary, both the deceased and her husband had repeatedly assured him that it was within their contemplation to have the property transferred in his name and both acted in concert to disabuse him of any suspicion he might form because of the non-transfer of the property in his name. The 2nd defendant continued representing to the plaintiff that the property would be transferred in his name after the death of his wife. It seems that the 2nd defendant was wavering whether to [*20] honour the agreement with the plaintiff. As much is evidenced by the testimony of Mr. Hassabis, telling the Court that in the year 1972 or 1973 he had been instructed by the 2nd defendant to draw up plans for the division of the land into separate parcels in a way designed to have the property in dispute transferred in the name of the plaintiff. Subsequently the 2nd defendant changed his mind and withdrew the title deeds from Mr. Hassabis.

In the light of my findings, I shall proceed to examine plaintiff's claim in the following sequence: -

1. Fraudulent transfer.

2. Liability of the estate of the deceased for breach of contract.

3. Damages for breach of contract.

4. Personal liability of the 2nd Defendant.

5. Specific Performance.

6. Quantum of damages.

7. The counterclaim.

1. Fraudulent Transfer

Mrs. Varda, for the plaintiff, invited the Court to set aside the transfer in the name of the 2nd defendant, on the strength of the provisions of the Fraudulent Transfers Avoidance Law, Cap. 62. Evidently counsel is labouring under a misconception. The object of the provisions of Cap. 62 is to make property, otherwise not so available, available in execution for the satisfaction of a judgmentdebt. It presupposes the existence of a judgment-debt. It is, in the final analysis, a mode of execution. Any [*21] doubt on the subject should be removed on a consideration of the procedure laid down in s. 4, Cap. 62, for the avoidance of a fraudulent transfer that can only be achieved by application after judgment in the cause of the action where judgment was given. Unlike s. 172 of the English Law of Property Act, 1925, a transfer made with a view to defrauding creditors is not voidable, and as such liable to be set aside in an action by the defrauded creditor but only vulnerable at the instance of a judgmentcreditor to facilitate the satisfaction of the judgmentdebt (see s. 172, The Law of Property Act, 1925 - see also Lloyds Bank Limited v. Marcan, (1973) 3 All E.R. 754).

2. Action for Breach of Contract against the Estate of the Deceased.

The deceased is clearly guilty of a breach of contract. Not only she failed to carry out her obligations under the agreement with the plaintiff but as from the year 1960 she put it beyond her reach to implement the agreement by transferring the property to her husband. This fact she concealed from the plaintiff at a time she continued assuring him that it was her firm intention to honour her agreement with him. Her continued assurances as well as those of her husband were acts designed to allay any suspicion that the plaintiff might form about the intentions of the deceased. Her husband, in his capacity as administrator of her estate, continued making similar false representations to the plaintiff, in an effort to perpetuate the belief of the plaintiff that the property [*22] vested, in the deceased, until the belief was shattered by the refusal of the defendant to transfer the property to the plaintiff.

3. Damages Recoverable for Breach of Contract

Section 73(1), of the Contract Law, Cap. 149, provides:-

"When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

"Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach".

Section 73 of the Contract Law reproduces in substance the rules of the Common Law governing the measure of damages in the event of breach and echoes the principle approved in Hadley v. Baxendale, (1854), 9 Exch. 341, a decision of respectable antiquity, that has stood the test of time for over a century. The principles adopted, subject to certain refinements and ramifications that have been introduced by subsequent decisions, form the basic rules that still regulate the [*23] award of damages in a case of breach of contract. In accordance with this decision damage is recoverable if -

(a) it flows naturally from the breach; or

(b) if it is of a type that could reasonably be said to have been within the contemplation of the parties as likely to result if either party defaulted. In the opinion of Lord Reid, who reviewed in a recent decision the principles that determine as award of damages in a breach of contract action, in Koufos v. C. Czarnikow Ltd., (1967) 3 W.L.R. 1491 (H.L.) -

"The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would have realized that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation".

An authoritative statement of the Law on the subject was made in The Heron II, (1967) 3 All E.R. 686, (H.L.), where it was emphasised that the defendant will be liable for damage reasonably foreseeable as likely to occur, even in the most unusual case unless the risk is so small that a reasonable man would, in the totality of the [*24] circumstances, feel justified in neglecting it. In a more recent decision, Brightman J. made a detailed analysis of items of damage that may be recovered in an action for breach of contract -

(a) legal costs of approving and executing a contract;

(b) costs of performing an act required to be done by the contract, notwithstanding that the act is performed in anticipation of the execution of the contract; and

(c) damage for any other loss which ought to be regarded as within the contemplation of the parties.

(See Lloyd v. Stanbury (1971) 2 All E.R. 267).

Damages are assessed as at the date of breach of contract. A breach of contract occurs when a party to the contract demonstrates by his actions, or by the unequivocal expression of an intention, not to fulfil the conditions of the contract. In the instant case the deceased committed a breach of her contract with the plaintiff in the year 1960, when she transferred the property to her husband. The breach was never brought to the notice of the plaintiff; on the contrary, both the deceased and her husband, by their conduct, did much to induce the plaintiff to believe that it was still within the contemplation of the deceased to transfer the property to the plaintiff. Is it right then, in the light of the conduct of the [*25] deceased and her husband, to assess damages on the basis of the prices ruling in 1960? Such a course would appear to offend against common notions of justice and common sense; it would be giving the defendants the fruits of their wrongful conduct. In equity it is axiomatic that a wrongdoer should not be allowed to reap the benefits of his wrong. A long line of cases lays down that where a party is guilty of fraud, in the equitable sense, his fraudulent conduct has the effect of putting in abeyance the crystallization of the innocent party’s rights until the truth is revealed and the innocent party has an opportunity to defend his rights. Fraud in equity has a meaning wider than actual fraud, as defined by s. 36 of the Civil Wrongs Law, Cap. 148, and

embraces conduct which falls below the standards demanded by equity (see Nicolas Pyrgas v. Theodora Charalambous Stavrinidou (1969) 1

C.L.R. 332). As Lord Denning, M.R., observed in Archer v. Moss, (1971) 1 All E.R. 747, at p. 750, fraud in the equitable sense denotes conduct by the defendant or his agent such that it would be against conscious for him to avail himself of the lapse of time. This was said in the context of the application of the Statute of Limitation but it seems to me that the application of this principle is not limited to cases falling under the Statute of Limitations but has a wider application and can be invoked in every case where a party endeavours to take advantage of a situation relying on his own fraud. The case of Archer v. Moss (supra) was followed by Thesiger J., in King v. Victor Parsons & Company. (1972) 2 All E.R., p. 625.[*26]

In my judgment the damage of the plaintiff must be assessed as at the year 1972, the year in which the

administrator of the deceased told the plaintiff unequivocally of his refusal to transfer the property to the plaintiff.

Personal Liability of the 2nd Defendant.

I have already decided that it is not feasible in these proceedings to order the setting aside of the transfer of the property in the name of the 2nd defendant under the provisions of Cap. 62. The case against him has been pleaded on the assumption that such remedy is possible. Nowhere is it alleged that the 2nd defendant is in any way contractually bound to the plaintiff or in any way answerable in damages for fraudulent conduct. In consequence the case against him personally must be dismissed.

One case that has perplexed me to a degree is the recent decision of the English Court of Appeal, that of Spiro v. Lintern (1973) 3 All E.R. 319,

deciding robustly, if I may say so with respect, that where A encourages B to believe that A is under some binding obligation to

him, which would be to A's advantage to deny, A is under a legal duty to B to disclose the non existence of the obligation and any failure to make such disclosure amounts to a representation by conduct. Such a duty was found to exist where the owner of a house encouraged the purchaser to believe that he had given his consent through his wife for the sale of the house to the[*27] purchaser whereas, in point of fact, such consent had not been given. It was held that it would be inequitable, in the light of his conduct, to allow the owner to deny the existence of such consent.

In the instant case the conduct of the 2nd defendant, unconscionable though it is, did not amount to a representation of fact binding him in contract to the plaintiff; all that his conduct helped to achieve was to mislead the plaintiff in believing that his wife was still the owner of the property and that she was willing to honour her obligations under the contract. He assisted in a way the deceased in breaking her contract with the plaintiff but no action is raised against him for interference with the contractual relations between the plaintiff and the deceased, an action that might expose him to liability in damages. In consequence the action against the 2nd defendant personally fails.

Specific Performance.

Counsel for the plaintiff, relying on the authority of Hadji Yanni v. Attorney-General (1970) 1 J.S.C., p. 82, invited the Court to decree specific performance of the sale agreement in question. Firstly, it is no longer possible to order specific performance of the agreement as the property is no longer registered in the name of the deceased. Secondly, a long line of decided cases has laid down that no contract for the sale of land can be specifically enforced unless the provisions of the

Sale Of Land (Specific Performance) Law, Cap. 232, have been complied [*28] with, (see Iordanou v. Aniftos, 24 C.L.R. 97 - Avgousti v. Papadamou and Another (1968) 1 C.L.R.

66 - Xenopoullos v. Makridi (1969) 1 C.L.R., p. 488). The case of Hadji Yanni (supra), cited by Mrs. Varda, is no authority for any proposition to the contrary. The provisions of s. 76 of the Contract Law, Cap. 149, are inapplicable to cases of sale of land.

Before leaving the subject of specific performance, reference may be made to recent decisions of the English High Court, namely Wroth v. Tyler (1973) 1 All E.R. 897, and Grant v. Dwakins (1973) 3 All E.R. 897, deciding that where specific performance is refused, in the exercise of the Court’s discretion, damages may be assessed, unlike the general rule of the Contract Law, as at the date of the trial. The present case is distinguishable from the above decisions for the reason that the rule above approved can only be invoked in a case where the plaintiff is entitled to a decree of specific performance and the remedy is refused to him in the exercise of the Court’s discretion. It is inapplicable to cases where it is beyond the reach of the Court to order specific performance.

Quantum of Damages.

Reference has already been made to the principles governing an award of damages for breach of contract. The pertinent question is what damage was within the contemplation of the parties at the time of the formation of the contract. There is enough evidence before me and so I find that it was within the contemplation of the parties, [*29] at the time of the agreement, that the property purchased and into which the plaintiff moved with the consent and approval of the deceased, would be used for the purpose of building a house thereon. Thus it may be reasonably inferred that it was within the contemplation of the parties, at the time when the parties entered into the agreement, that the deceased would, in the event of breach, be answerable in damages not only for the value of the land but for the value of any buildings erected on the land. This finding apart the plaintiff would still be entitled to recover, by way of damages, the value of the buildings on the principle of unjust enrichment. Without going into the various theories that have been propounded from time to time as to the juridical basis of the principle, the practical effect of the doctrine of unjust enrichment is that a party will not be allowed to unjustly enrich himself at the expense of an innocent party in circumstances where so to do, would be unjust and unconscionable (see Chitty on Contracts, 23rd edition, General Principles, paragraphs 1666-1671 inclusive - see also the case of United Australia Limited, (1941), A.C.1, at pages

27 and 29).

Evidence on the question of damage stems mostly from the testimony of Mr. Hassabis, an architect by practice, with some experience in the value of properties in the area where the property is situate and Mr. Zacharia, a building contractor, who testified as to the value of the buildings. As a matter of correct valuation it is a more precise measure to value land and premises standing thereon as one holding. In the absence of such evidence assistance may be[*30] derived from the valuation of the separate elements of a property such as the value of land and premises on it. The evidence of Mr. Hassabis is mostly helpful as determining the value of the land though he did purport to give some indication of the valuation of the property as a whole. According to the evidence of Mr. Zacharia, the value of the premises alone at the material time was in the region of £3,000.

Having sifted the evidence before as well as I could, on the question of damage, I find that the plaintiff is entitled to £3,000 damages against the estate of the deceased.

The Counterclaim.

The defendant, in his counterclaim, seeks a number of remedies which boil down to the following:-

(a) An injunction to restrain the plaintiff from trespassing on his property; and

(b) a declaration that the property does not belong to the plaintiff but is the property of the defendant.

The contentions raised in support of the second remedy are a necessary part of the answer of the defendant to the plaintiff’s claim and in as much as the success or dismissal of the claim, will seal the fate of the allegations made by the defendant in this respect, the defendant cannot make the self same allegations the subject of a separate action. [*31]

The claim of the plaintiff for an injunction both in his capacity as an administrator of the estate of his deceased wife and personally must be dismissed as he is estopped personally and as an administrator by his conduct and that of his wife from alleging that the plaintiff is a trespasser or has no right to be on the property. The findings of the Court disclose that the plaintiff entered the property with the consent and approval of his deceased wife and subsequently remained thereon purporting to exercise a right that was duly recognized both by the defendant and his wife.

Equitable Estoppel.

I shall not elaborate in any great detail on the principles of equitable estoppel. The essence of the doctrine is that a person who makes, by word or conduct, a representation to another, on the basis of which the latter acts and adjusts his position accordingly, cannot later resile from his representation with immunity and the representee may set up such a representation as a defence in answer to a claim of the representor made contrary to his representation.

In Hadji Yanni v. Attorney-General

(1970) 1 J.S.C. 80, at p. 98,reference is made with approval to the following passage as defining the boundaries of estoppel:-

"...Where by his words or conduct one party to a transaction makes to the other a promise or assurance which is intended to affect the legal relations between them and the other party acts upon It, altering his position to his detriment, [*32] the party making the promise or assurance will not be permitted to act inconsistently with it”.

In Ajayi v. R.T. Briscoe (Nig.) Ltd., (1969)

1 W.L.R. 365 the Privy Council enumerated the prerequisites for the application of the doctrine of promissory estoppel in the following way:-

"(1) that the other party has altered his position.”

"(2) that the promisor can resile from his promise on giving reasonable promise, which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position.”

"(3) the promise only becomes final and irrevocable if the promisee cannot resume his

position”.

In Woodhouse Ltd. v. Nigerian Produce Limited, (1972) 2 All E.R. 271, Lord Hailsham L.C., expressed the view that before a representation can give rise to an estoppel it must be clear and unequivocal and a representee who misconstrues an equivocal representation does so at his peril (p. 280).

Reverting to the facts of the case, it is clear from my findings that the plaintiff moved into occupation of the property with the consent and agreement of the then owner and has remained in occupation since with the consent and approval of the deceased and her husband (2nd defendant). In the meantime , following the representations of the[*33] deceased and her husband he altered his position substantially to his detriment by building a house on property that he had purchased. In these circumstances the defendant is estopped from denying the plaintiff a right to be on the property. The estoppel will operate until the parties are properly restored to their position by the payment of compensation, as adjudged in these proceedings. Therefore, the counterclaim is dismissed. There will be no order as to costs re the counterclaim.

Before concluding, I may mention that difficult issues had to be resolved in these proceedings and the Court did not receive from counsel the assistance that should be expected in the circumstances.

In the result, judgment is given for the plaintiff against the 1st defendant, for £3,000, with costs to be assessed by the Registrar. The action is dismissed against the 2nd defendant, with no order as to costs. The counterclaim is dismissed with no order as to costs.

Judgment against defendant 1 for £3,000.- with costs.

Counterclaim dismissed.