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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