1919 JTR(SC) 80
1920 AIR(PC) 65 ; 1919 47 LawReportsInd.App. 1 ; 1920 11 LW 455 ; 1920 43 ILR(Mad) 546 ; 1920 MWN 317
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD SHAW OF DUNFERMLINE, LORD PHILLIMORE, SIR JOHN EDGE, MR. AMEER ALI, AND SIR LAWRENCE JENKINS.
POOSATHURAI - Appellant
Versus
KANNAPPA CHETTIAR - Respondents
On Appeal From The High Court at Madras.
Decided On : Nov. 18. 1919.
Undue influence requires proof that a party in a dominating position used that position to obtain an unfair advantage. The burden of proof shifts to the dominant party only if the transaction is shown to be unconscionable or for undervalue.
Act
Referred
:CONTRACT ACT
: S.16
(A) Indian Contract Act - Sections 14 and 16 - Undue Influence - Consent is free if not caused by undue influence - Undue influence occurs when a party in a position to dominate the will of another uses that position to obtain an unfair advantage - Mere influence, even where one party relies on another for advice, is insufficient to render influence "undue"; it must be established that the dominating position was used to obtain an unfair advantage causing injury.
(B) Burden of Proof - Where a person in a position to dominate the will of another enters into a contract and the transaction appears unconscionable, the burden of proving that the contract was not induced by undue influence lies upon the person in the position to dominate.
(C) Unconscionability - To shift the burden of proof, it must be established as a matter of fact that the bargain was unconscionable in itself or constituted an unfair advantage, such as a sale for undervalue.
Facts of the case:
A suit was brought for the cancellation of a deed of sale on the grounds of fraud and undue influence. It was alleged that the grantor was induced to enter the transaction by the representations and influence of relatives in a fiduciary relationship. The trial court set aside the deed, but the High Court reversed the decision, finding no evidence of unfair benefit or detriment.
Findings of Court:
The court found that the sale was not proven to be for undervalue or unconscionable. The property was burdened with substantial mortgages, and the consideration paid was not established to be unfair. No evidence of conspiracy between the vendee and the relatives was provided.
Issues: Whether the deed of sale should be cancelled on the ground of undue influence and whether the transaction was unconscionable.
Ratio Decidendi: The court held that for influence to be "undue," the dominating party must use their position to obtain an unfair advantage. The burden of proof shifts to the dominant party only if the transaction is unconscionable. In the absence of proof that the sale was for undervalue or otherwise unfair, the claim of undue influence fails.
Result: Appeal dismissed with costs.
(B) Burden of Proof - Where a person in a position to dominate the will of another enters into a contract and the transaction appears unconscionable, the burden of proving that the contract was not induced by undue influence lies upon the person in the position to dominate.
(C) Unconscionability - To shift the burden of proof, it must be established as a matter of fact that the bargain was unconscionable in itself or constituted an unfair advantage, such as a sale for undervalue.
Facts of the case:
A suit was brought for the cancellation of a deed of sale on the grounds of fraud and undue influence. It was alleged that the grantor was induced to enter the transaction by the representations and influence of relatives in a fiduciary relationship. The trial court set aside the deed, but the High Court reversed the decision, finding no evidence of unfair benefit or detriment.
Findings of Court:
The court found that the sale was not proven to be for undervalue or unconscionable. The property was burdened with substantial mortgages, and the consideration paid was not established to be unfair. No evidence of conspiracy between the vendee and the relatives was provided.
Issues: Whether the deed of sale should be cancelled on the ground of undue influence and whether the transaction was unconscionable.
Ratio Decidendi: The court held that for influence to be "undue," the dominating party must use their position to obtain an unfair advantage. The burden of proof shifts to the dominant party only if the transaction is unconscionable. In the absence of proof that the sale was for undervalue or otherwise unfair, the claim of undue influence fails.
Result: Appeal dismissed with costs.
Solicitors for appellant:Chapman-Walker & Shephard. Solicitor for respondents: Douglas Grant.
Judgement
Appeal from a judgment and decree of the High Court (July 30, 1912) reversing a decree of the Subordinate Judge of Madura.
The appellant sued defendants now represented by respond ents, for cancellation of a deed of sale dated March 17, 1906, executed by him in favour of the respondent Kannappa Chettiar (the third defendant) on the ground of fraud and undue influence. The undue influence alleged by the plaint was that of the first and second defendants, maternal uncles of the appellant the plaint also alleged misrepresentation by the first three defendants and want of consideration.
The Subordinate Judge, after a consideration of the evidence, said that he had no doubt that the transaction was unconscionable and unfair, and that the plaintiff was induced to enter into it by the representations and influence of the first defendant, who stood in a fiduciary relation to the plaintiff; and that the first defendant influenced the plaintiff partly to benefit himself at the plaintiffs expense, also undue pressure which the third defendant was able to exercise upon him. He also found that
23 Law. Rep. 47 Ind. App. 1 ( 1919- 1920)
Poosathurai V. Kannappa C hettiar 124
certain debts, stated as being part of the consideration, did not exist. In the result the Subordinate Judge made a decree setting aside the deed conditionally upon the appellant paying to the first respondent the sum of Rs. 6,725 and interest.
The High Court on appeal reversed the decision of the Subordinate Judge and dismissed the suit. The learned judges after summarizing the evidence said that there was nothing to suggest that the first defendant obtained any benefit out of the sale, that the plaintiff had failed to show that the first defendant, in concert with the third defendant, had induced the plaintiff to enter into the transactions to his detriment. With regard to the debts referred to, they said that the evidence was not satisfactory, but that the amount was subject to litigation and it was impossible to say that the figure stated in the deed was such as to raise an inference that the first defendant had acted dishonestly in accepting it on behalf of the plaintiff.
1919. Oct. 23, 24, 27. Sir Erle Richards K.C. and Dube for the appellant.
De Gruyther K.C. and Kenworthy Brown (who were not called upon) for the respondents.
Nov. 18. The judgment of their Lordships was delivered by Lord Shaw of Dunfermline. This suit has been brought by the present appellant for the cancellation of a deed of sale executed by him on March 17, 1906. Cancellation was decreed by the Subordinate Judge, and the decision was reversed by decree of the High Court of Judicature at Madras.
The real and only point at issue between the parties is whether the deed in question should be cancelled on the ground of undue influence. In the Court of the Subordinate Judge this point did not clearly appear from the issues which were framed. But an examination of the proceedings and evidence shows that it is to an issue of this kind that the plaintiff was throughout groping. The High Court properly discerned that; and the learned counsel for the appellant properly presented the case from that point of view.
It is not necessary to speculate whether the provisions of the Indian Contract Act differ in any particulars from the doctrines of the English law upon this subject. For no such differences are suggested to have any bearing on the issue between these parties. The issue in the present suit is an issue of fact, and there does not appear to the Board to be any sufficient reason for doubting that the judgment arrived at in the High Court is sound.
The Indian Contract Act by s. 14 provides that " Consent is said to be free if it is not caused by .... undue influence as defined by s. 16." By s. 16, sub-s. 1, " the contract is said to be induced by ‘undue influence where the relations existing 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." Sub-sect. 3 of the same section may also be referred to. It provides that " 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, to be unconscionable, the burden of proving that such con tract was not induced by undue influence shall lie upon the person in the position to dominate the will of the other." It is a mistake (of which there are a good many traces in these proceedings) to treat undue influence as having been established by a proof of the relations of the parties having been such that the one naturally relied upon the other for advice, and the other was in a position to dominate the will of the first in giving it. Up to that point "influence" alone has been made out. Such influence may be used wisely, judiciously and helpfully. But, whether by the law of India or the law of England, more than mere influence must be proved so as to render influence, in the language of the law, "undue." It must be established that the person in a position of domination has
23 Law. Rep. 47 Ind. App. 1 ( 1919- 1920)
Poosathurai V. Kannappa C hettiar 125
used that position to obtain unfair advantage for himself, and so to cause injury to the person relying upon his authority or aid.
Where the relation of influence, as above set forth, has been established, and the second thing is also made clear, namely, that the bargain is with the " influencer," and in itself unconscionable, then the person in a position to use his dominating power has the burden thrown upon him, and it is a heavy burden, of establishing affirmatively that no domination was practised so as to bring about the transaction, but that the grantor of the deed was scrupulously kept separately advised in the independence of a free agent. These general propositions are mentioned because, if laid alongside of the facts of the present case, then it appears that one vital element—perhaps not sufficiently relied on in the Court below, and yet essential to the plaintiffs case— is wanting. It is not proved as a fact in the present case that the bargain of sale come to was unconscionable in itself or constituted an advantage unfair to the plaintiff ; it is, in short, not established as a matter of fact that the sale was for undervalue.
The subject of the sale, to mention only one particular, was not the two villages mentioned in the plaint, but the property in the villages burdened with usufructuary mortgages which did not expire for eighteen years. These mortgages amounted to Rs. 51,000. The crucial inquiry on the point of sufficiency of consideration accordingly was, what, on the date of the sale, was the de praesenti value of the plaintiffs right of property in these villages ? Beyond a loose reference to a lakh of rupees, without any specification as to whether this referred to the present value or to deferred value, or to value of the property, the evidence is entirely-silent. Nothing has been brought in argument before the Board to satisfy their Lordships’ minds that the price of Rs. 6,000, even coupled with the demand for the wiping off of a debt of about Rs. 3,000 incurred for litigation and for the honouring by the plaintiff of a promissory note executed by him for another Rs. 3000, was not a fair consideration for the transaction.
Their Lordships think it unnecessary to enter into the further grounds stated by the learned judges of the High Court for their decision, although they express no disagreement with these grounds in themselves.
The true contradictor in the issue was the party to the transaction, the vendee. But the plaintiff endeavoured to strengthen the case for cancellation by convening also as defendants his two uncles, now, also, his two fathers-in-law.
Their Lordships do not doubt that in the category of cases of undue influence might be covered cases where the party to a transaction exercised that influence in conspiracy with or through the agency of others. But they think it right to say that no proof has been given of any such conspiracy or agency in the present case.
When it is added that the consideration paid was in part actually defrayed to cover expenses incurred by the plaintiff on the occasion of his marriages to the two daughters of his uncles, the first and second defendants, and that these marriages took place, it would require fairly strong evidence to induce any Court to give countenance to the suggestion that his uncles and fathers-in-law had conspired with the third defendant to subject the plaintiff to unconscionable loss. To this element weight is properly attached in the Court below.
Their Lordships humbly advise His Majesty that the appeal stand dismissed with costs.