ANTOINE ROSSEK (PLAINTIFF)
(1) DIAB NASR
(2) EMIL NASSAR (DEFENDANTS)
(1971) All N.L.R. 562
Division: High Court of Lagos
Date of Judgment: 25th October, 1971
Case Number: SUIT NO. LD/241/1968
Before: Lambo, J.
Application for rectification of Register of Deeds.
(1) By reason of the fact that an attorney is presumed to have been appointed by the principal for the confidence reposed in him, the attorney must act in the fullest good faith towards his principal. He must have no interest at variance with his duty, and, if he has, no transaction between principal and agent can be upheld unless full disclosure was made to the principal before the transaction. It follows that without such full disclosure, no transaction by which, for example, the agent, whether remunerated or not, purports to buy the principal's property or to sell his own property to the principal, will be supported. For where any such purchase or sale takes place the agent ceases to act as agent and becomes a principal.
(2) There is a broad principle of Equity developed to ensure that trustees, agents or persons standing in such legal relationship shall not retain a profit made in the course of or by means of their office. The principle extends to all fiduciaries.
(3) Applying the above observations to the facts of this case mutatis mutandis it would be seen that as an attorney of the plaintiff the 1st defendant (Diab Nasr) had committed a breach of his fiduciary duty to the plaintiff by acquiring plaintiff's interest in the property in question through a fictitious assignment thereof to the 2nd defendant, his nephew, a man said to be of feeble or no means.
(4) Looking broadly at all the circumstances of this case, particularly the purported assignment by the 1st defendant of plaintiff's interest in the property at 194 Broad Street, to his nephew (the 2nd defendant) at such a gross undervalue, one could not help coming to the conclusion that the 1st defendant was actuated by fraudulent intent from the beginning to the end of the transaction.
Judgment entered for the Plaintiff: Rectification of register ordered.
Cases referred to:
Saunders (formerly Gallie) v. Anglia Building Society, (1970) London Times, 10th November.
Whitcomb v. Minchin, 56 E.R. 830.
Tufton v. Sperni, (1952) W.N. 437.
Gregory v. Gregory, 35 E.R. 530.
Davies v. Cooper, 41 E.R. 377.
In Re Gallard, (1897) 2 Q.B. 8.
Diab Nasr v. Berini Bank Ltd., (1968) 1 All N.L.R. 274.
Phipps v. Boardman, (1965) 2 W.L.R. 839.
APPLICATION for Rectification of Register of Deeds.
SUIT NO. LD/241/1968.
G.O.K. Ajayi for the Plaintiff.
A. Ajose-Adeogun for Defendants.
Lambo, J.:-By his writ of summons the plaintiff "seeks an order for rectification of the Register of Deeds in respect of the leasehold property situated and known as 194, Broad Street, Lagos, on the ground that the 1st defendant acted in fraud of the plaintiff his principal under the Power of Attorney dated 29th November, 1961, by assigning the plaintiff's interest in the said property to the 2nd defendant under a most colourable sale at such a low consideration as to be fraudulent. The plaintiff also seeks an order revoking the said Power of Attorney and forbidding further dealings thereunder."
Of the five witnesses who testified in support of the plaintiff's claim, Mr Benjamin Epega, an Estates Surveyor and Valuer, told the court that the property is situated in a first class commercial zone of Lagos Island with two frontages and a close proximity to the Standard Bank and the John Holt Headquarters, as well as the U.T.C. and Gottschalck Limited.
The property in question which was sub-let to one Edward Bouari for a period of five years at an annual rent of £2,500, as per Exhibit A dated the 5th July, 1963, was, in fact, leased from the sole surviving Executor and Administrator of the Estate of one P.H. Williams for a period of 75 years at an annual rent of £600 per annum. The co-lessees-the plaintiff and the 1st defendant-made a down payment of £3,000, representing five years' rent in advance.
In his evidence, Mr Epega said that the capital value of the leasehold interest in the property in 1963 when it was sublet to Edward Bouari for £2,500 was worth £30,000. He was also of the view that the rent of £2,500 per annum reflected the prevailing rental value for the premises at the time. He told the court that within a year before the sublease to Edward Bouari, the rent of £2,500 per annum would still be reasonable. In his opinion, the purported sale by the 1st defendant to his nephew, the 2nd defendant, of plaintiff's unexpired term of 74 years for £2,500 is very unreasonable. He was of the view that £15,000 would be a fair amount.
Mr Bouari, who was the 3rd plaintiff's witness, stated that he was put in possession of the premises by the 1st defendant before July 1963, although the deed of sublease (Exhibit A) is dated the 5th July. In fact he said he was already living in the premises having been put in possession thereof as far back as January 1963 following a verbal agreement he reached about rent with the 1st defendant.
The plaintiff who described himself as a general merchant and hotelier is a brother-in-law of the 1st defendant, who is married to his sister. They had both taken a lease of the property in question for a period of 75 years at a rent of £600 per annum: vide Exhibit B dated the 13th October, 1959.
At the time of the transaction, the plaintiff owed the defendant £4,300. He later asked for a further loan of £1,500 soon after the transaction described in the deed, Exhibit B. As the total indebtedness then stood at £5,800, the 1st defendant quite naturally asked the plaintiff for a security. The plaintiff in reply undertook to mortgage to the 1st defendant his half shares in the property in question and in another one known as 196, Broad Street. At the 1st defendant's request, the plaintiff's undertaking as regards the proposed mortgage was reduced into writing as evidenced by Exhibit C.
"I the undersigned Antoine Rossek hereby declare that as I am partner with Mr Diab Nasr on properties situated at No's 194 and 196 Broad Street, Lagos, that I am willing to mortgage my share of those properties to Mr Diab Nasr, that we have an outstanding account and plus a cheque to K.L.M. to be paid by Mr Diab, later we should verify the account and settle the whole account before end of November 1961.
Sgd. A. Rossek."
Soon after receiving Exhibit C, the 1st defendant approached the plaintiff and requested that the latter should execute, in his favour, a Power of Attorney to enable him to mortgage or lease plaintiff's interest in their joint properties to raise money if and when the need arose. The plaintiff agreed and two days later, the 1st defendant telephoned the plaintiff to say that the Power of Attorney which would enable him "to lease or mortgage my half share interests" was ready for execution. I said he could send it to me. In the evening of the same day, someone came to me at the Ambassador Hotel with the Power of Attorney saying that he was from the 1st defendant. I took the document from the man and, without reading it, signed it in the belief that it was, as Mr Nasr said, for the purpose of mortgaging or leasing my interest in the said property." The plaintiff then identified Exhibit D, dated the 29th November, 1961, as the said Power of Attorney, and said:-
"The contents of Exhibit D show that I authorised him to sell my interests in the properties. If I had read the contents I would not have signed it as we did not at any time discuss the sale of my half share interests."
By this evidence, the plaintiff was in effect repudiating the Power of Attorney and setting up the plea of non est factum in regard thereto. In my view, upholding the submission of learned Counsel for the defendants, this plea is not available to the plaintiff in view of the recent decision of the House of Lords in the case of Saunders (formerly Gallie) v. Anglia Building Society reported in the London Times of 10th November, 1970. But notwithstanding this, a person holding a Power of Attorney stands in a fiduciary relationship to the donor of the power. In one word, the relationship of principal and agent is created. Alcock on Power of Attorney at p. 135 summarises the position succinctly as follows:-
"By reason of the fact that an attorney is presumed to have been appointed by the principal for the confidence reposed in him, the attorney must act in the fullest good faith towards his principal. He must have no interest at variance with his duty, and, if he has, no transaction between principal and agent can be upheld unless full disclosure was made to the principal before the transaction. It follows that, without such full disclosure, no transaction by which, for example, the agent, whether remunerated or not, purports to buy the principal's property or to sell his own property to the principal, will be supported. For where any such purchase or sale takes place the agent ceases to act as agent and becomes a principal."
One then has to examine the conduct of the 1st defendant in purported exercise of his powers under the Power of Attorney. One half share of the property in question with an unexpired term of 74 years which was said to be worth £15,000, was wholly assigned by the 1st defendant under the said Power of Attorney to his nephew (the 2nd defendant) for £2,500. With regard to the 2nd defendant, there is evidence, which is unchallenged, that when his father died some years ago, it was the 1st defendant, his uncle, who assumed parental responsibilities for his upbringing; they lived under the same roof and the 1st defendant "virtually treated him as his son." In addition, the 2nd defendant is employed by the 1st defendant at a salary of between £70 and £80 per annum. The plaintiff, on this point, said:-
"I am sure the 2nd defendant had no money of his own to pay £2,500";
i.e. for the purported assignment to him, by the 1st defendant, of the plaintiff's property in question. The plaintiff described the assignment as ridiculous, apparently because of the grossly inadequate price of £2,500 said to have been paid for it by the 2nd defendant. It should be noted that in less than four months after the 1st defendant had purported to assign plaintiff's interest in the property in question to his nephew (the 2nd defendant), there was yet another Power of Attorney by the same nephew, Exhibit F, whereby he appointed his uncle (the 1st defendant) to sell plaintiff's interests which had earlier been assigned to him by Deed, Exhibit E. Paragraph 1 of the said Power of Attorney (Exhibit F) reads as follows:-
"(1) To sell, either by way of public auction or private contract, the leasehold premises and building thereon (hereinafter referred to as the premises) lying and situate at No. 194, Broad Street, Lagos, in the Federal Territory of Nigeria, the indenture of lease whereof is registered under Land Certificate No. LO 1704 at the Lands Registry Office, Lagos, at any price which my said Attorney may think fit."
The effect of defendants' fraudulent design on the plaintiff is, that the 1st defendant succeeded in vesting in himself, for a grossly inadequate consideration of £2,500, the entire half share interest of the plaintiff in the property in question which is described as situated in a first class commercial zone of Lagos Island and stated by a Chartered Valuer and Surveyor to be worth £15,000. I am in agreement with plaintiff that no money passed between the 1st and 2nd defendants in respect of the purported assignment described in the Deed, Exhibit E.
In paragraph 15 of the amended statement of claim it is averred as follows:-
"The plaintiff will contend that the 1st defendant acted in fraud of the Power of Attorney obtained from the plaintiff with the sole intention of giving himself sole beneficial interest in the property, 194, Broad Street, Lagos, and that he merely used the 2nd defendant as a nominal owner and conduit pipe in his plot to acquire beneficial ownership to the plaintiff's share of the leasehold interest in the said property."
I am of the view that this averment has been proved to the hilt and that the whole conduct of the 1st defendant in respect of the transaction is fraudulent. The effect of my holding that the validity of the Power of Attorney, Exhibit D, cannot be challenged on a plea of non est factum, is that the 1st defendant stands in the position of a Trustee to the plaintiff in respect of his interest in the property in question. In Whitcomb v. Minchin, (1956) E.R. 830, the following report of the case appears:-
"In this case, the Vice-Chancellor, Sir John Leach, held that as a trustee for the sale of an estate could not purchase the estate himself so the agent of the trustee employed for the purpose of sale could not purchase it."
From what looks like a conspiratorial arrangement between the 1st and 2nd defendants, the former has succeeded in purchasing plaintiff's property by devious arrangements with his impecunious nephew, the 2nd defendant. In addition to 1st defendant's unscrupulous and reprehensible behaviour in purchasing property which came into his possession by virtue of his appointment as Attorney, and without making any disclosure of the fact to the plaintiff, he had purported to sell plaintiff's interest in the property to his nephew at a gross under-value. He had sold for £2,500 property which was stated to be worth £15,000 and had used, for this purpose, his nephew (the 2nd defendant) as a mere vehicle for carrying out his schemes. In Tufton v. Sperni, (1952) W.N. p. 439, Jenkins, L.J., said that:
"It must be shown that the transaction in question did in fact arise within some special relationship between the parties and that the relationship was a fiduciary one. Moreover, it must be shown not merely that there was a fiduciary relationship of some sort but that the fiduciary relationship was of such a character as to warrant the interference of the court."
In Gregory v. Gregory, 35 E.R. 530, the Master of the Rolls (Sir William Grant) in an action to set aside a purchase by a trustee "for himself and his children", said:-
"There are two questions in this case, first, whether the plaintiff had originally a ground for setting aside this conveyance? and, secondly, whether the lapse of time which has taken place is not a sufficient bar? Now, I think that if this Bill had been recently filed, the plaintiff would have had a right to have had the sale set aside. James Gregory, the purchaser, was the acting trustee from the year 1778 to the year 1793, and must therefore have acquired a complete knowledge of the situation and value of the estates. It is true the bargain is made for the benefit of himself and his children. But the whole transaction was managed by him only. He chooses that the form of transfer shall be to himself and his children. In principle it must be the same, whether the estates were purchased by him for himself and his children or for himself alone; and the danger must be as great to permit a trustee to purchase in the name of himself and his children as in his own name. It is clear that he was not discharged at the time of his purchase from his situation as trustee.... It is however pretty clearly made up that there was inadequacy of price in this case. If, therefore, the purchase had been recent, I am of opinion that it ought to have been set aside."
In Davies v. Cooper, 41 E.R. 373 at 377, the Lord Chancellor set aside the purchase of a contingent reversionary interest, chiefly on the ground of inadequacy of value, the consideration being an annuity for the life of the vendor, whose life was a bad life and was better known to the purchaser than to the vendor to be such. Giving his judgment, the learned Lord Chancellor said at p. 377:-
"Upon the whole, I find that I have to decide upon a contract for the purchase of a reversionary interest at a very inadequate price, a contract by which a dying man known to be so by those with whom he was but believing himself to be a good life agreed to sell property worth between £1,600 and £1,700 for an annuity upon his own life of £120; that those with whom he was dealing were his nearest connections, and who had in some degree at least, interfered in the management of his affairs; and that the only person who can be considered as acting for him for the sale was totally ignorant of the value of the subject matter of the sale, and, according to his own statement, alone, ignorant of the state of health of the vendor, which made the consideration to be paid for the property sold of no value whatever."
In like manner, in Re Gallard, (1897) 2 Q.B.D. 8 a sale by a trustee of a bankrupt's estate was set aside on the ground that it was at an undervalue.
In the Supreme Court judgment of Diab Nasr v. Berini Bank Ltd., S.C. 313/67 delivered on the 25th October, 1968, the plaintiff (Diab Nasr) who was then a Director and Deputy Chairman of Berini Bank had, in breach of his fiduciary duty while acting in collusion with the Manager of the defendant bank, procured various sums of money totalling £40,710-19s-4d to be paid to a fictitious account opened in the name of one Emile Nasr, his nephew, "who at all material times was resident outside Nigeria." Counsel for the defendant bank (Chief Williams) averred that "the plaintiff (i.e. Diab Nasr) has been unjustly enriched at the expense of the defendants and as the result of the breach by the plaintiff of his fiduciary duty." The plaintiff denied any such breach, but Coker, J.S.C., delivering the judgment of the court observed as follows:-
"We do not accept the argument that the plaintiff had not unjustly enriched himself at the expense of the Bank. There is a broad principle of Equity developed to ensure that trustees, agents or persons standing in such legal relationship shall not retain a profit made in the course of or by means of their office. The principle extends to all fiduciaries: see Phipps v. Boardman, (1965) 2 W.L.R. 839."
Applying the observations of that Court to the facts of this case mutatis mutandis it will be seen that as an Attorney of the plaintiff the 1st defendant (Diab Nasr) has committed a breach of his fiduciary duty to the plaintiff by acquiring plaintiff's interest in the property in question through a fictitious assignment thereof to the 2nd defendant, his nephew, a man said to be of feeble or no means.
In my opinion, looking broadly at all the circumstances of this case, particularly the purported assignment by the 1st defendant of plaintiff's interest in the property at 194, Broad Street, to his nephew (the 2nd defendant) at such a gross undervalue, I cannot help coming to the conclusion that the 1st defendant was actuated by fraudulent intent from the beginning to the end of the transaction.
In the result, there will be judgment for the plaintiff for:-
(1) An order rectifying the Register of Titles No. LO1704 by deleting therefrom the name of the 2nd defendant as proprietor of one half undivided share in the leasehold interest originally owned by the plaintiff and substituting thereof the name of the plaintiff.
(2) An order setting aside the deed of assignment dated the 21st November, 1962 and registered under title No. LO1704.
The plaintiff's claim to set aside the Power of Attorney dated the 29th November, 1961 and registered as No. 45 at p. 45 in volume 1187 is dismissed.
In all the circumstances of this case, I think an order for the defendants to pay 200 guineas costs to the plaintiff will not be an unreasonable one. They will, therefore, pay that amount to the plaintiff as costs.
Judgment entered for the Plaintiff: Rectification of register ordered.