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GHANA BAR REPORT 1994 -95 VOL 1

 

Shahin v Cofie and others [1994 – 95]  1 G B R 398 - 411 S C

SUPREME COURT

ABBAN, AMUA SEKYI, BAMFORD-ADDO, HAYFRON-BENJAMIN, KPEGAH JJSC

17 JANUARY 1995

 

 

Land law and Conveyancing –  Lease  –  Unconscionability –  Matters to be considered – Conveyancing Decree 1973 (NRCD 175) s 18.

Land law and Conveyancing – Lease – Habendum – Lessor proposing to grant a 50-year lease –Habendum stating that lessor covenanted to hold property unto the lessee “during the said term hereby granted” – No term granted elsewhere in lease – Term determinable by mode of payment of rent – Tenancy from year to year resulted.

In 1972, the plaintiff proposed to lease her land to the 1st defendant for 50 years with 25 years option at ¢100 per annum. The plaintiff covenanted in the lease “to hold the premises unto the lessee from the date of executing the agreement…yielding and paying therefore yearly during the said term hereby granted the rent of 100 cedis per annum the rent in respect of the first ten years amounting to ¢1,000 having been paid on or before the execution of these presents (the receipt whereof the Lessor doth hereby acknowledges).” The 1st defendant assigned his interest to the second defendant, who in turn assigned it to the 3rd defendant who also assigned it to the 4th defendant. The plaintiff instituted an action in the High Court for an order setting aside or modifying the head-lease of 1972 on the ground that it was unconscionable. Alternatively the plaintiff claimed a declaration that on a proper construction of the demise in the head-lease was for a term of 10 years only.

The trial judge found that the lease was for 50 years with an option to renew for a further 25 years. On the issue whether the lease was unconscionable, it was held that the plaintiff was estopped by acquiescence from setting the lease aside but ordered an upward revision of the rent with effect from 1 January 1991 because he considered the rent of 100 cedis per annum too low. The Court of Appeal, by a majority, held that the agreement was unconscionable and that the plaintiff’s acquiescence did not debar relief. The court therefore set aside the lease without further order, implying that the plaintiff was to re-take her land with the dwelling house erected thereon at the expense of the 1st defendant. The 3rd defendant appealed.

Held: (1) The Conveyancing Decree 1973 (NRCD 175) s 18 retained the power of the courts to grant equitable relief by setting aside or modifying on equitable terms an agreement for the transfer of land that was unconscionable. The court would take into account the relative bargaining positions of the parties, the value of the agreement to the parties, the commercial setting, the purpose and effect of the agreement. An unconscionable bargain or agreement was one that an independent observer would regard as unreasonable or that which no man with regard for his own interests would make and no fair-minded person would accept. Such agreement was voidable at the instance of the grantor. However it was a complete defence to such an action that the plaintiff had ratified the agreement. On the facts, the lease could not be said to be an unconscionable bargain; if it was, the plaintiff had by her conduct ratified it having waited thirteen years before seeking redress. The judgment of the Court of Appeal would be set aside. Allcard v Skinner (1887) 36 Ch D 145 CA referred to.

(2) The issue of unconscionability ought to be determined by reference to the circumstances prevailing at the time the agreement was entered into, not at any later date, otherwise, few agreements would escape censure. Except by mutual agreement, the fall in the value of money could not affect the contractual obligations of the parities under the agreement. North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1978] 3 All ER 1170 referred to.

(3) By any standards, the lease was incompetently drawn, for although the habendum referred “to the said term hereby granted” no such term had been specified. Besides the lessor’s covenants referred to “the said term of years hereby granted” being 50 years although no such term of years had been granted elsewhere in the lease. A tenancy from year to year resulted, determinable at the end of any year upon a year’s notice.

Cases referred to:

Allcard v Skinner (1887) 36 Ch D 145 CA.

North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1978] 3 All ER 1170.

Wontumi for the 3rd defendant-appellant.

E A  Mingle for the respondent.

APPEAL to the Supreme Court against the judgment of the Court of Appeal.

AMUA-SEKYI JSC. In or about 1968, the plaintiff, Anna Cofie, purchased from one Quist a piece or parcel of land measuring 150 feet by 60 feet at Osu, Accra, for the sum of ¢1,000. In or about 1972, she agreed to grant a lease of the land to the 1st defendant, Shahin. She said in her evidence that at the time she had commenced the erection of a building on the land and that the agreement was that Shahin was to complete the building and hold the premises for a period of ten years. For his part, Shahin alleged that the plaintiff had dug only a foundation and that the agreement was that he was to take a 50-year lease with an option to renew for a further 25 years. A document prepared by an Accra solicitor on the instructions of Shahin, appeared to confirm Shahin's version of the facts. Indeed, in paragraph 10(a) of the statement of claim it was averred on behalf of the plaintiff that the lease was for 50 years with an option to new for a further 25 years. There was no dispute that the lease agreement was executed by the plaintiff. The agreed rent was ¢100 per annum.

Upon signing the lease, the plaintiff was paid the sum of ¢1,000 being ten years’ rent. Thus, if the agreement was for 10 years, the plaintiff had not only succeeded in recovering what she paid to Quist, but stood to become the owner of a completed dwelling house at the end of the period. Unfortunately, Shahin had other ideas. Within five years he had assigned his interest to Abboud, the second-named defendant, who in turn assigned the premises to Balian, the third-named defendant. When Balian moved to live in the United States, he decided to assign the premises to Lee, the fourth-named defendant. The plaintiff now alleged that these assignments were contrary to the lease she entered into with Shahin. She accordingly instructed solicitors who took out a writ against the four defendants a fifth person named Appes for an order setting aside or modifying the head-lease of 1972 on the ground that it was unconscionable.

Before the trial was concluded in the High Court the plaintiff applied for and was granted leave to amend the relief endorsed on her writ of summons by adding an alternative claim that upon a proper construction of the head-lease the term granted Shahin was 10 years. In response, counsel for Shahin applied for and was granted leave to amend the defence to plead that the plaintiff was estopped by record and conduct from claiming that the lease was for 10 years, and the hearing proceeded on this footing. On the issue whether Shahin acquired the land as a vacant plot or with a building thereon, Dove J found in favour of Shahin that whatever structures there were on the land were demolished to make way for the building which now stands thereon. On the term of years granted to Shahin, he found that this was 50 years with an option to renew for a further 25 years. On the issue whether the agreement was unconscionable, he held that the plaintiff was estopped by her passive acquiescence from seeking to have it set aside. But he did not stop there. He said that at current rates the rent of ¢100 per annum was on the low side and ordered an upward revision of rent with effect from 1 January 1991. In the Court of Appeal, Essiem and Adjabeng JJA expressed the opinion that the agreement was unconscionable and that the plaintiff’s acquiescence did not disentitle her to relief. Georgina Lutterodt JA was of the view that the agreement was not unconscionable. By order of the Court of


 

Appeal the lease was set aside. No other orders having been made, it meant that the plaintiff was to re-take possession of her land together with the dwelling house was erected wholly at the expense of Shahin. It is from this judgment that Balian now appeals to this court.

The Conveyancing Decree 1973 (NRCD 175) retained the power of the courts to grant equitable relief by setting aside or modifying an agreement transferring land from one person to another on the ground that it is unconscionable. By section 18 the court may set aside or modify an agreement to convey or a conveyance of an interest in land on the ground of unconscionability where, after considering all the circumstances, it is satisfied that the transaction is unconscionable. Among the circumstances the court is required to take into account are the bargaining conduct of the parties, their relative bargaining positions, the value to each party of the agreement reached, and evidence as to the commercial setting, purpose and effect of the agreement An unconscionable bargain or agreement is one which an independent observer would regard as unreasonable; that is, one which no man who had regard to his own interests would make and no fair-minded person would accept. The issue whether an agreement is unconscionable is to be determined by reference to the circumstances prevailing at the time the agreement was entered into, not at any later date. If the law were otherwise, few agreements would escape censure. In the absence of an express agreement between the parties the fall in the value of the unit of currency used in their agreement cannot affect their contractual obligation. Any variation of the contract on this ground must be mutually agreed upon and backed by consideration: see North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1978] 3 All ER 1170.

An unconscionable agreement is voidable at the instance of the grantor. However, like one entered into under undue influence, it is a complete defence to such an action that knowing all the facts the plaintiff ratified the agreement or that with full knowledge of his right to avoid the contract he chose not to do so: see Allcard v Skinner (1887) 36 Ch D 145 CA. Further, where on the facts the court decides to interfere it does so on equitable terms. Thus, if the plaintiff has received a rent advance this must be refunded with interest, and if, acting under the terms of the agreement, the defendant has put up a building on the land at his own expense the plaintiff must pay for it. Three questions arise: first, what was the nature of the agreement between the plaintiff and Shahin? Secondly, was the agreement an unconscionable one? Thirdly, if it was unconscionable, did the plaintiff for any reason lose her right to complain?

In the Court of Appeal, both Adjabeng and Lutterodt JJA made positive statements affirming the finding of Dove J that the lease was for a period of 50 years. Essiem JA did not consider the issue sufficiently important for him to express an opinion. Having found that the agreement was unconscionable, he was content to set it aside and leave it at that. The agreement reads as follows:

“To hold the premises unto the Lessee from the date of executing the Agreement herein yielding and paying therefore yearly during the said term hereby granted the rent of ¢100 (one hundred cedis) per annum the rent in respect of the first ten (10) years amounting to ¢1,000 (one thousand cedis) having been paid on or before the execution of these presents (the receipts whereof the lessor doth hereby acknowledges).”

By any standards, this was a most incompetently drawn up agreement, for although in the habendum reference is made “to the said term hereby granted”; no such term had been previously specified. When one comes to the lessor’s covenants reference is once again made to “the said term of 50 (years) hereby granted” although no such term of years had been granted anywhere in the lease. In the absence of a precise statement of the term of years granted under the lease, it becomes a matter of construction for the courts. The only safe and fair guide one can have in a case like this is the rate at which rent is to be paid. Here, it is an annual rate. The result must be that whatever the intention of one or the other of the contracting parties, what they achieved by the agreement they signed was a lease from year to year. Such a lease may be terminated at the end of any year by giving a year’s notice.

In determining whether the agreement entered into between the plaintiff and Shahin on 28 August 1972 was unconscionable, the trial judge looked mainly at the rent that had been agreed upon. He was in no doubt that the rent of ¢100 per annum fixed in 1972 for this vacant plot of land at Osu in Accra was not unfair. However, he was concerned that since then the value of our currency had fallen to such a low level that viewed from the standpoint of the plaintiff the transaction was no longer a profitable one. The majority in the Court of Appeal also appear to have been influenced by this consideration, as a reference in the leading judgment of Essiem JA to the present day rental value of the building now on the land shows.

Another factor considered by the trial judge, but rejected by him, was the contention that the plaintiff was illiterate and did not understand the terms of the agreement. Even though there was evidence that the plaintiff was married to a white man, there was none that the white man was English. In any case, the laboured manner in which the plaintiff wrote her name on the document suggests that she may well have been illiterate. This should come as no surprise as in this country illiterate women have been known to marry white men. But there was also evidence that when she went to conclude the agreement the plaintiff was accompanied by one Paintsil who signed the document as her witness. One would expect this witness, who by all indications was literate, to read and explain the terms of the agreement to the plaintiff before she appends her signature to it. What is more, there was also evidence from the plaintiff that it was her white gentleman who acquired the land for her.

Again, one would expect that this gentleman would be sufficiently interested in the terms of the transfer to Shahin to examine the document and offer advice to his wife. Thus, even if the plaintiff is illiterate, this fact did not place her in a disadvantageous position when she came to make the agreement. The majority in the Court of Appeal did not rely on the evidence as to illiteracy. It is on record that upon signing the agreement the plaintiff was paid an amount of ¢1,000 being 10 years’ rent. Shahin thus acquired the right to remain in occupation of the premises for ten years. There was further evidence that when the period of 10 years expired, the plaintiff met with Balian and reached an accommodation with him. The terms of their agreement are recorded in a document, exhibit 1, which reads:

“RECEIPT AND WAIVER

Received from Ohannes Ishak Balian of Post Office Box 1694 Accra the Assignee and present holder of my plot of land off Cantonments Road, Christiansborg, Accra the sum of ten thousand cedis (¢10,000) in full satisfaction and final payment of the ground rent in respect of the said plot of land for the twenty year period beginning from 28 August 1982 to 27 August 2002. And I hereby waive any previous breaches of any covenants contained in the Lease dated 28 August, 1972 between myself and Shahin Elias Shahin by Ohannes Ishak Balian and his predecessors in title especially with regard to clause 2(g) of the lease which relates to notices of transfers and assignments.

DATED AT ACCRA THIS 26 DAY OF OCTOBER 1981

(Signed) Anna Badu Cofie

Witness to Signature (Signed)

Full Name of Witness: Joseph Amelema Nokoe

Address: P.O. Box 654 Accra

Occupation: Legal Practitioner”

It should be noted that, first, there was a revision upwards of the rent payable under exhibit C from ¢100 per annum to ¢500 per annum; secondly, the plaintiff received from Balian the sum of ¢10,000 being agreed ground rent for a period of 20 years commencing from 20 August 1982 and ending on 27 August 2002; thirdly, the signature of the plaintiff was witness by a lawyer who accompanied her. This lawyer, who testified for the plaintiff at the trial in the High Court, described himself as the grandson of the plaintiff and said that he interpreted and explained the document to the plaintiff in the Nzema language before she appended her signature to it. Thus, in spite of her illiteracy the plaintiff cannot claim not to know the contents of this document, which boldly bears her signature. In my opinion, the agreement of 28 August 1972 was not a lease for 50 years, but a lease from year to year. It was not an unconscionable bargain. If it was, the plaintiff had by her conduct ratified it. What is more, she waited thirteen years before seeking redress.

For these reasons, I would set aside the judgment of the Court of Appeal together with the order as to costs. I would grant the plaintiff the alternative relief that the agreement was for a yearly lease determinable at year’s notice, but with the proviso that having accepted rent for the period up to 27 August 2002, the plaintiff can recover the premises only by giving a year’s notice to expire at the end of that period.

ABBAN JSC. I would like to emphasise that the trial High Court, on the facts of this particular case, was right in making the finding that the lease agreement dated 28 August 1972 was not unconscionable, and consequently section 18 of the Conveyancing Decree 1973 (NRCD 175) could not be invoked in aid of the plaintiff-respondent. I would also go further and say that even if there had been sufficiently strong evidence of unconscionability on the part of the defendant-appellant, the plaintiff-respondent could still not succeed by reason of her unexplained long delay in bringing of the so called “trick”. I must observe that what is contained in section 18 of the Conveyancing Decree 1973 (NRCD 175) seems to be more or less the re-statement of the well-known general equitable principles. By these equitable principles the court is empowered to set aside, for example a transaction and having regard to all the surrounding circumstances such as the value of the subject matter of the transaction it can be said that the transaction was harsh and unconscionable. Being an equitable remedy delay in acting or acquiescence on the part of the victim is a good defence. That is laches and acquiescence run through the whole of equitable doctrine. Thus a plaintiff by his behaviour or conduct such as acquiescence or undue delay may lose his right to impeach unconscionable transaction. The plaintiff-respondent said a “trick” was played on her during the transaction as contained in the lease agreement of 28 August, 1972 (exhibit C); and that she became aware of the “trick” three years after she had executed the said lease agreement. In the course of her evidence under cross-examination she was asked:

“Q     How long after you had signed the document did you realise that there was a trick in it?

A      About three years after I signed the document.”

The lease agreement in dispute, as already indicated, was executed on 28 August 1972; so going by the plaintiff’s own evidence, she became aware of the alleged “trick” round about 1975. Yet she did not see it fit and necessary to take step to set aside the said lease agreement until 20 December 1985 when she filed the present


 

 writ. That is, she showed no concern from 1975 to December 1985 a period of ten years. In other words, she delayed for ten years after she had realised that she had been cheated in the transaction and indeed she never offered any explanation for not acting promptly after 1975. I am of the view that this long and unexplained delay should be sufficient to defeat her claim for relief under section 18 of the Conveyancing Decree 1973 (NRCD 175).

Again in exhibit 1, captioned “Receipt and Waiver”, and dated 26 October 1981 (that is, 6 years after she had realised that she had been cheated) the plaintiff-respondent acknowledged having received from the third defendant-appellant (the assignee of the head-lessee) the sum of ¢10,000 “in full satisfaction of the ground rent in respect of the said plot of land for a twenty-year period beginning from 28 August 1982 to 27 August 2002.” If the plaintiff-respondent’s evidence that it was in 1975 when she became aware that the lease agreement was tainted was true, then the question is, why did she on 26 October, 1981, accept the ¢10,000 from the third defendant-appellant? Furthermore, the plaintiff-respondent in that receipt, exhibit 1, stated as follows:

 “And I hereby waive any previous breaches of any covenants contained in the lease dated 28 August 1972 between myself and Shahin by Ohannes Ishak Balian and his predecessors in title especially with regard to clause 2(g) of the lease.”

Incidentally, the above-mentioned receipt (exhibit 1) as found by the trial High Court was explained to the plaintiff-respondent in her native language, Nzema, in the presence of a legal practitioner who, in his evidence, described the plaintiff-respondent as his grandmother.

Why must the plaintiff-respondent continue to adopt or honour the terms of that lease agreement despite the fact that, according to her, it was unconscionable? The conduct of the plaintiff-respondent, to say the least, was inconsistent with that of a person who had been cheated by the appellant. In any case, that conduct could also amount to acquiescence on her part and that should deprive her of any relief under section 18 of NRCD 175. Consequently, the Court of Appeal was wrong in reversing the judgment of the trial High Court. I would therefore restore the judgment of the trial High Court, subject to deleting therefrom that portion which sought to modify the lease agreement of 28 August 1972 by varying the ground rent, which the parties to that document had agreed upon. I also agree that the agreement was a yearly lease; and the plaintiff-respondent having accepted ground rent up to 27 August 2002, she can only recover the premises after August 2002 and not before.

BAMFORD-ADDO JSC: I have had the privilege of reading in advance the opinion of my distinguished Brother Amua-Sekyi JSC and I agree entirely with him. Section 18 of the Conveyancing Decree 1973 (NRCD 175) provides as follows:

“The court shall have power to set aside or modify an agreement to convey or a conveyance of an interest in land on the ground of unconscionability where it is satisfied after considering all the circumstances including the bargaining positions, the value to each party of the agreement reached, and evidence as to the commercial setting, purpose and effect of their agreement, that the transaction in unconscionable.” (Emphasis mine.)

After a careful consideration of all the circumstances of the case I agree with my brothers that some modification in the terms of the agreement is called for. A further factor, which I think justifies this modification is that of “the value to each party of the agreement reached” which is one of the factors to be taken into consideration by a court under section 18 (NRCD 175). The plaintiff was fully aware of the terms and conditions of the agreement when she accepted the first rent payment in 1972 of ¢1,000 being ten years rent in advance at the rate of ¢100 per annum. She also received a revised rent of ¢10,000 in 1982 for a further period of 20 years and it would be unjustified to allow her to take over the property immediately. Considering all the circumstances of this case it is my opinion that the lease be considered as one from year to year and therefore that it should expire in the year 2002 when the plaintiff may choose to determine same, after giving one year’s notice. This variation would benefit both parties, the defendant on one hand would have enjoyed the use of the land at a small rent for 30 years, and the plaintiff would have acquired a whole house built entirely by defendant on her vacant plot while at the same time receiving some rent for the use of her land.

HAYFRON-BENJAMIN JSC. I have had the privilege of reading the very able opinion furnished by my learned and respected brother Amua-Sekyi JSC in this appeal and the equally interesting treatment of the intendment of section 18 of the Conveyancing Decree 1972 (NRCD 175) contributed by my learned and respected brother Abban JSC.

Speaking for myself, I am of the view that these two opinions fully cover the issues raised for determination in this appeal. On the evidence the transaction between the parties created a tenancy from year to year. The fact that annual rent was paid so many years in advance or that it was stipulated that the tenant (respondent) should have possession for 50 years paying yearly so much rent did not detract from the nature of the tenancy thereby created. Indeed from an annual rent of ¢100 the same was ten years later increased to ¢500 per annum. It is obvious that what was contemplated between the parties was a periodic increase in the annual rent. On this basis the rent has been paid until the 27 August 2002. The appellant’s conduct was also inconsistent with her claims for statutory or equitable relief. I therefore agree that the bargain was


 

 not unconscionable. I, however agree that the appellant was bound by her agreement having accepted advance rent up to 27 August 2002. I would also grant the appellant her alternative relief that the agreement constitutes a yearly tenancy determinable by a year’s notice, in this appeal, expiring on the 27 August 2002.

KPEGAH JSC. I have had the privilege of reading the opinions just read by my noble and respected brothers, Amua-Sekyi and Abban JJSC I have nothing useful to add and therefore I agree with the views expressed and conclusions reached by both.

Appeal allowed.

S Kwami Tetteh, Legal Practitioner

 
 

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