Q.
Ahmad has been taken care of by his long time agent Salim in all the transaction of his estate holdings. During his younger days, Ahmad had a tough life. He did not go to school and farmed in his Kampung inherited land all his life. During the golden years of Palm Oil, Ahmad made fortunes and relied on his estate agent friend Salim in investments on properties.
In his old age, he was unsure of his children who were Zakaria and Farah, to take over his estate plantations. As illiterate himself, he listened to Salim for making land transactions as he trusted Salim and listened to him all his life. Before he grasped his last breath, he transferred a plot of land 200 hectares to Salim as a gift. Salim in order not to make it a big fuss, kept it a secret.
A few months after Ahmad has passed on, his son Zakaria found out the land transfer to Salim. He engaged a lawyer to sue Salim to get back the land.
Comment on the position of Salim, in the legal tussle to get back the land by Zakaria.
A.
A leading case is Johnson v Buttress 1936 (Australian Contract Law)
This is a case of undue influence of Salim towards Ahmad. It is construed that Salim had dominant influence over Ahmad as he made most of the transactions for Ahmad. There is enough suspicion that he could in fact, induced Ahmad to transfer the 200 hectares of land without Ahmad realizing it.
In layman term, Ahmad could have signed on a "blank cheque"!
There are 3 elements under s.16 of CA50.
- The relations between the parties to each other must be such that one is in a position to dominate the will of the other.
- The issue whether the contract has been induced by undue influence.
- The burden of proving that the contract was not induced by undue influence lies upon the person who was in a position to dominate the will of the other.
If there is element of undue influence on the land transaction between Ahmad and Salim, the contract for the transfer is not under free consent (s.14) and thus, voidable. The treatment of such voidable contract is referred to provision s.20, Contracts Act 1950.
20. When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the court may seem just.
Therefore, Zakaria may sue for undue influence in order to get back the land. Further matter were found to support the element of undue influence, as Ahmad was illiterate so heavily relied upon Salim for all the communications. Furthermore, Salim kept it silent for the land transaction, and he did not engage a third party lawyer to advice Ahmad on the land transaction to himself.
If he stated his conflict of interest and engaged a third party lawyer to transact the land, it would be able to distance himself from Ahmad, and made it appear as independent decision by Ahmad. Thus, being able prove to the court that he indeed did not influence Ahmad on the land transfer and it was actually without his notice that it was transferred to him as gift.
To conclude, Salim could likely lose the case with Zakaria and the land be awarded back to Zakaria and Farah, as the contract was voidable under undue influence.
Ref:
S.16 & S.20 Contracts Act, 1950.
Lee & Detta 2013 Commercial Law. 2nd Edi, Oxford Fajar; page 74.