Court dismisses action against administrator for selling estate property to another administrator without court sanction.

[*352] 1976 December. 23

(PIKIS, AG.P.D.C, & CONSTANTINIDES, D.J. )

IN THE DISTRICT COURT OF LARNACA

Zohrab Karaoghlanian,

Plaintiff,

and

Costakis Christofides, as

Administrator of the Estate of

Bedros Karaoghlanian,

Defendant.

(Action No. 112/76).

Administration of Estates - Personal representatives - Contract disposing immovable property - Executed by three, out of four, administrators who have not signed in a representative capacity - And had a personal interest in the transaction - Contract executed in breach of trust because it purported to sell property of the estate to one of the administrators without the sanction of the Court - Present administrator, successor of said 4 personal representatives, not liable for the obligations undertaken in the contract - Sections 3 and 15 of the Trustee Law, Cap. 193 and section 33 of the Administration of Estates Law, Cap. 189.

St. McBride, for the Plaintiff.

G. Nicolaides, for the Defendant.

JUDGMENT

The judgment of the Court was delivered by:-

PIKIS, AG.P.D.C. Bedros Karaoghlanian died [*353] on 20th May 1966, possessed of 4,800 one pound shares in the family company of Bedros Karaoghlanian & Sons Limited and other property including a rather big plot of land situate in a fairly good area of the town, plot 360,sheet/

plan XL-64,2,II suitable for division into building sites. He left seven heirs, that is his wife, Arusiak, four sons namely

Zohrab, Vartkes, Gregor and Hagop and two daughters, Enayid and Esnid. It seems that while alive the old man had the dominant voice in the company and overshadowed other members of the family. The company had several branches and was engaged in diverse activities such as running an ice factory, maintaining engineering works, an agricultural section and a fishing trawler. Tension was building up among the heirs of the deceased during his life but there was no explosion until after his death when Zohrab Karaoghlanian, the plaintiff in the present action, petitioned the dissolution of the company on grounds of negligent and fraudulent management and for the reason that the company was generally managed in a manner oppressive to minority shareholders and/or to the petitioner. Following this petition there were numerous appearances before the Court as we may gather from an examination of the file of the petition (1/67 - exhibit 1 ). At some stage of the proceedings a settlement was reached between the petitioner and other interested parties, to whom we shall refer in some more detail later on, as a result of which the petition was withdrawn and dismissed. It is this

agreement, a photostatic copy of which was produced by the consent of both [*354] parties - exhibit 3, and alleged failure on the part of the

administrator of the estate of the deceased to implement it that has given rise to the present action. We might mention that the present action is not the first occasion when the plaintiff complained of failure on the part of the administrator of the estate of Bedros Karaoghlanian, deceased, to fulfil obligations under the agreement of 4th January 1968. On 19th October 1 972, the plaintiff applied to the Court by summons for an order directing the administrator to comply with the terms of the aforesaid agreement. The application was dismissed by the Court for procedural reasons inasmuch as the Court could not be moved to take congizance of the allegations of the plaintiff by a summons application and that the matter should be initiated either by action or by originating summons, the appropriate procedure for starting and defining litigable issues before the Court (see exhibit 4 and 5). We understand that this decision of the Full District Court of Larnaca was upheld on appeal. Apparently after dismissal of the appeal the present action was instituted and the plaintiff prays for an order of the Court ordering the administrator of the estate of his deceased father to transfer the land allegedly agreed to be transferred to him by virtue of exhibit 3 and damages in the alternative.

The defendant contests the validity of plaintiff's claim on a number of grounds, Firstly, it is contended that exhibit 3 was never signed by the administrators of the [*355] estate, his predecessors in title; secondly, it is alleged that the predecessors of the defendant had no power or authority to execute the agreement and further it is alleged that the obligations undertaken therein, if any, could not be undertaken on behalf of the estate as the administrators had a personal interest in the transaction. At the time of execution of the relevant agreement (exh.3) the administrators of the estate of the deceased were the plaintiff, his mother Arousiak Karaoghlanian and his brothers Vartkes and Gregor. Subsequently they were replaced by the present administrator for reasons not made clear to the Court but not so very hard to guess. Possibly disputes among the administrators and their conflicting interests led eventually to the appointment of the present defendant as administrator of the estate of the deceased.

The Agreement of 4th January 1968

The agreement is preceded by a recital of the title of the petition and the addition thereto of "In the matter of the estate of Bedros Karaoghlanian, deceased, late of Larnaca".

The parties to the Agreement

The agreement is between Zohrab Karaoghlanian and what are referred to as the other parties. The other parties are not described in the body of the agreement but their signatures appear at

the end thereof and the signatures are those of Vartkes Karaoghlanian, signing [*356] "for the company and myself” Gregor

Karaoghlanian and oddly enough by the petitioner himself though in what capacity it does not say. Down below, in fact below the signature of witnesses, there is the following statetement:-

"We agree to the above contents as concerns the five building sites only"

and following thereto there is the signature of Arousiak Karaoghlanian and Hagop Karaoghlanian. The other two heirs of the deceased do not feature in any way in this not happily drafted agreement.

The contents of the Agreement

The plaintiff agreed, subject to compliance by the other parties, with the obligations undertaken in this agreement to transfer all his shares in Bedros Karaoghlanian & Sons Limited to his remaining shareholders and his hereditary rights in the estate to the remaining heirs of the deceased excepting in both, cases Hagop Karaoghlanian.

We have already indicated who are the heirs of the deceased. The shareholders of Hagop Karaoghlanian & Sons Limited were Arousiak Karaoghlanian, Gregor Karaoghlanian, Hagop Karaoghlanian, Vartkes Karaoghlanian and the plaintiff himself. In consideration thereof the other parties undertook -

(a) to pay to the petitioner a sum of £8,250 by three instalments; and

(b) to transfer five building sites from the contemplated division of plot 360 into building sites, [*357] mapped in a plan attached to the agreement.

Incidentally the other parties undertook to take all steps reasonably required to procure the division of the land into building sites. Following this agreement the plaintiff received an amount of £3,250 from his brothers Vartkes and Gregor as he testified, to whom he transferred his shares in the company. Thus it appears that the plaintiff acted in this respect in defiance, if that has any significance, to the provisions of the aforesaid agreement. An important term of this contract shedding light to the intentions of the parties, as embodied in this agreement, is to be found in clause 5 that provides, inter alia, that the "other parties" shall indemnify the plaintiff jointly and severally in respect of income tax liability and estate duty.

The Construction of an Agreement - Powers of Personal Representatives

The construction of a document is a matter of law for the Judge and once parties to a contract have reduced their agreement in writing subject to limited exceptions the intention of the parties is to be gathered exclusively from the contents of the agreement and in this way certainty in commercial transactions and other spheres of human activity is guaranteed. (See, inter alia, Navy, Army and Air Force Institutes v. .Stelios Papadopoulos (1966) 2 C.L.R. 204 - Halfdan Grieg v. Sterling Coal Corporation

(1973) 2 All E.R., 545). Nor will the Court [*358] imply a term in an agreement unless the reading of such a term in the context of the agreement is absolutely necessary in order to give business efficacy to the transaction. (See George William Portsmouth v. Cyprus Inland Telecommunications Authority (l967) 1 C.L.R.

87 - Trollope & Colls V. New Hospital Board (1973) 2 All E.R.

260 (H.L.).) In fact no term will be implied unless the agreement without the introduction of such a term would be so unbusiness

like that sensible people could not be supposed to have entered into it. (Brown and Davis Limited v. Galbraith (1972) 3

All E.R. 31 (C.A.).) Also the behaviour of the parties after the execution of an agreement and their doings are irrelevant unless they disclose a new agreement and generally they are of no assistance to the Court in construing a contract. The only instance when the behaviour of the parties after the execution of an aagreement is of some relevance is where a term of the agreement is ambiguous and such conduct throws light on what they intended by the adoption of the ambiguous term. (See Wickman Limited v. L. Schuler A.G. (1972) 2 All E.R. 1173.) The first question and indeed the most important question in these proceedings is whether the administrators of the deceased at the time of the execution of the relevant agreement were parties to this agreement.

Numerically only three of the four administrators signed as parties to this agreement for on no fair construction of this document can one conclude that Arousiak Karaoghlanian was a party to this contract. [*359]

In our judgment this, in itself, is fatal to the action of the plaintiff for the following reasons :-

In Snell’s Principles of Equity, 27th edition, at p. 228, edited by Megarry & Baker, the following statement appears as to the powers of the trustees of a private trust to bind the trust:-

"In the case of a private trust, no majority of trustees can bind a minority, and the Court will, in general, observe this rule when asked to interfere"

(See also p. 249). The authority cited in support of this proposition is of notable antiquity. (See Luke v. South Kensington Hotel Company (1879) 11 Ch.D.) In Williams On

Executors & Administrators, l4th edition, volume I at p. 423 et seq. the matter is presented ata somewhat different perspective but in relation to the sale of real

estate the concurrence of all administrators is required by virtue of the provisions of the Land Transfer Act 1897, a law that incorporates the relevant principle of equity on the subject. Therefore though co-administrators are regarded in law as an individual person and in certain cases the act of one binds the others this is not the case in relation to dispositions involving land.

In Cyprus the matter is regulated by statute, namely by the provisions of section 15 of the Trustee Law, Cap. 193.

In this section of the law it is provided that [*360] a personal representative or two or more trustees acting together,

and be it noted personal representatives are included in the definition of a trustee in accordance with the provisions of section 3 of the same law, have power to do a number of things including the compromise of claims and the apportionment of trust property provided they act together unless the trust instrument or any law expressly authorizes one of them to carry out any of the acts specified therein. Moreover on a consideration of the powers of personal representatives and in particular the provisions of section 33 of the Administration of Estates Act, Cap. 189, it appears that failing agreement among the heirs only the Court can sanction the sale of immovable property for the purpose of facilitating distribution among the beneficiaries.

Therefore even if we were to assume that three of the administrators of the property purported to enter into a contract on behalf of the estate of the deceased their acts do not bind the estate because (a) the contract was not executed by all the administrators, and

(b) the authority of the Court was a prerequisite to a valid disposition of the nature envisaged by the agreement (exhibit 3).

In our judgment as a matter of proper construction of exhibit 3 the administrators of the estate of the deceased are not parties to this agreement. Firstly, they did not sign in a representative capacity and though aware [*361] of the necessity to state the capacity in which they signed this agreement, evident from the capacity in which Vartkes Karaoghlanian executed the agreement, none of them purported to sign in his capacity as an administrator. The other parties had an

interest both in the estate of the deceased as well as in Bedros Karaoghlanina & Sons Limited and their participation

in this agreement can be explained on that score. Moreover, the stipulation embodied in clause 5 involving an undertaking on the part of the "other parties" indemnifying jointly and severally the plaintiff against certain liabilities does tend to exclude the presence of any intention on their part to contract in a representative capacity. For we cannot ascribe to a person having a personal interest in a transaction an intention to contract in a representative capacity in the absence of the most explicit terms signifying such intention.

Further, nothing surrounding the circumstances of this transaction compels us, in the light of the principles earlier expounded, to imply a term that the other parties contracted in a representative capacity and certainly a Court dispensing justice in accordance with the principles of equity would never imply a term in an agreement entailing breach on the part of a trustee of a fiduciary relationship. The mere fact that the implication from reading into the contract such a term would be to ascribe an intention to one of the administrators to contract in a dual capacity as vendor and purchaser concerning the property of [*362] the deceased, trust property, is sufficient to bar any such implication. This would be equivalent to accepting in the absence of a specific clause that at least one of the administrators acted in a totally unacceptable way and is guilty of a breach of trust. In fairness to the plaintiff It does not appear that he ever intended to sign this agreement in a representative capacity judging from his statements in his affidavit of 19th October 1972 (exhibit 4Β) and in particular his reference to the "other parties" as the remaining heirs of the deceased and not the administrators of the estate of the deceased. In consequence the allegation that the predecessors in title of the defendant entered into the agreement embodied in exhibit 3 fails as a matter of proper construction of the contract in question.

Power of a Personal Representative to sell Property of the Estate to himself

Even if we were to ignore all the above we would still refuse to hold the present administrator of the estate of the deceased to this contract for the reason that the Court would not uphold a contract of a personal representative affording on the face of it evidence that it had been executed in breach of trust. (See Halsbury’s Laws of England, 3rd edition, volume 16, paragraph 699.) A personal representative for the time being is bound by contracts entered into

by his predecessors; but this obligation does not extend to contracts [*363] impeachable on grounds of breach of trust.

(See, inter alia, Halsbury’s Laws of England, 3rd edition, volume l6, paragraph 694). A personal representative cannot, without the sanction of the Court, sell to one of themselves directly or indirectly, a proposition justified on a consideration of the confidential position that a personal representative holds and his high duty to show absolute fidelity in the discharge of his duties, (See Halsbury’s Laws of England, 3rd editions volume 16, paragraph 701.) Therefore for all the above reasons even if the personal representatives of the deceased purported to enter into the agreement embodied in exhibit 3 we would still refuse to hold the defendant liable for the obligations undertaken therein and would dismiss the action. Of course we are not, in these proceedings, making any pronouncement as to the implications of this agreement between the parties and the purported adjustment of their rights as shareholders of the family company and as heirs of the deceased, evidenced by exh. 3.

In accordance with a long standing practice approved on several occasions by the Supreme Court the trial Court must adjudicate, despite the result, on all factual issues in dispute so that the Supreme Court may, if it reverses the judgment on appeal, proceed and give final judgment without having to remit the case back for consideration. Therefore we must examine whether this is a proper case to make an estimate of the damage to which [*364] the plaintiff would be entitled if successful in these proceedings, The only evidence we have on the subject comes from an estate agent, witness Costa HadjiAntoni, who testified on the value of building sites in the vicinity of the subject property in September 1968 and by making a comparison he came to certain conclusions as to the value of the immovable property in question at the time. Though it would be easy to make our deliberations as to the value of such land in the light of the testimony of the aforesaid witness this task can be performed just as easily by the Supreme Court as the evidence of this witness has not been contradicted by any other witness and the Supreme Court would be in a position to draw proper conclusions therefrom. We cannot, however, make an estimate of the damage to which the plaintiff would be entitled and shall refrain from so doing as we cannot, on the material before us, estimate the damage to which the plaintiff would be entitled to if successful, considering that according to his own testimony he himself has so far failed to comply with some of his obligations under the agreement, such as transferring his shares in Bedros Karaoghlanian & Sons Limited to the persona envisaged by thus agreement.

In the result, the action is dismissed, with costs on the scale of claims exceeding £5,000, to be assessed by the Registrar and approved by the Court.

Application dismissed with costs.