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Rannchod v Lallu [1995] FJHC 139; Hbc0488.91s (30 August 1995)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 488 OF 1991

BETWEEN:

PARVATI MANILAL LALLU RANCHOD
(f/n Pranjivan)
Plaintiff

AND:

SUNDARLAL LALLU
(f/n Lallu Ranchod)
Defendant

V.K. Narayan with S. Maharaj for the Plaintiff
V. Kapadia for the Defendant

JUDGMENT

By this action the Plaintiff seeks to set aside a Deed of dissolution of partnership executed by the Parties on 18 June 1991.

The plaintiff is the defendant's sister-in-law being the widow of the Defendant's deceased elder brother Manilal Lallu Ranchod (the deceased). For some years the deceased and the Defendant had carried on a business together as equal partners. The business of the partnership comprised a cinema theatre known as "The Liberty Theatre" and a shop known as "Ranchod's Supermarket". Both properties are situated at Beach Street Levuka.

The deceased died in October 1980. He was survived by his wife, the Plaintiff, who was appointed sole Executrix and Trustee of his Will and by two daughters and a son Indravan. Under the Will the Plaintiff took a life interest in the Estate while Indravan was entitled to the remainder absolutely.

The deceased and his brother and their families used to live behind the supermarket and following her husband's death the Plaintiff continued to live there with her brother-in-law and his family, generally helping out with the running of the household and also helping in the supermarket.

She told me that she had very little education and knew nothing of the partnership accounts. Instead she made herself useful at the till, by weighing out dry goods, by stacking the shelves or by performing one or other of the myriad small manual tasks which are involved in the running of a retail business.

In due course the children grew up. The daughters were "married off" and left. In 1987 Indravan moved to Suva. Gradually relations between the Plaintiff and the Defendant began to deteriorate. The Defendant says that this was because of the Plaintiff's behaviour which he says was immoral. The Plaintiff denies that and says that the trouble began when she and Indravan began to want to see the business accounts. By now the cinema had closed down, a victim of the video. In December 1989 matters came to a head when the Defendant assaulted the Plaintiff and after his conviction in the Magistrates' Court in January 1990 the Plaintiff moved out of the family accommodation behind the supermarket, setting up residence at the theatre property where she established a small grocery business which she ran from her sitting room. From then on the partnership was effectively dead and the Defendant began actively to plan for its formal dissolution.

In order to fully appreciate the context in which the next events took place it is important to know that the parties are both members of Fiji's Gujerati community. This is a distinct community within Fiji's Indian population with its own language and customs. I was told that when family disputes arise within the Gujerati community it is quite common for prominent members of the community, usually at least distantly related, to be called in the to help to find a solution. That is exactly what happened in the present case.

A meeting was called at the Peninsula Hotel in Suva on 18 April 1991. It was attended by the Plaintiff and the Defendant who travelled separately from Levuka to Suva. Also present at the meeting were-

(a) Dalpat Rathod, a well known businessman whose first cousin's sister is the Plaintiff and whose brother-in-law's brother is the Defendant and who called the meeting at the Defendant's request.

(b) Vallabh Ranchod, a supermarket owner in Beach Street Levuka who described himself as being an uncle to both parties.

(c) Laxmidas Ranchod the Plaintiff's brother-in-law who was not called to give evidence.

(d) Bhagwan Das Gokal who was not called.

(e) Indravadan, the Plaintiff's son.

As a result of the meeting a handwritten document setting the terms of the dissolution of the partnership was drawn up and signed by the parties and the others present at the meeting. It is written in Gujerati and was produced together with an agreed English translation as Defence Exhibit No.2. (the agreement). The English translation of the agreement is as follows:-

"Date 18/4/91

WE the undersigned SUNDARLAL LALLUBHAI RANCHOD and PARVATI BEN MANILAL LALLUBHAI hereby are willingly separated from our partnership business and all assets and liabilities of the partnership are being divided amongst us as set out hereunder.

Sundarlal Lallubhai Ranchod shall receive the property of Ranchod's Supermarket and shall also take partnership liabilities amounting to $76,000.00 as per the list attached hereto.

The division of liabilities between the parties has been done based on accounts presented by Sundarlal. Any other liabilities revealed after this date shall be the responsibility of Sundarlal.

The legal documents putting into effect the above understanding shall be prepared by Messrs Sherani & Co. When legal documents are prepared both partners shall willingly execute the said documents and transfer documents relating to the properties shall also be executed by the partners without any reluctance.

The above mentioned settlement has been agreed by the partners willingly and voluntarily after taking advice and in a cordial atmosphere. This settlement has been entered into by the partners so that they can in the future help each and live peacefully with each other and not harass each other again.

This settlement has been reached in the presence of the following persons named hereunder:

1. Vallabh Bhai Ranchod

2. Lachmidas Ranchod Raghlawala

3. Dalpat Brijbhukan Rathod

4. Indrawadan Manilal Lallubhai

5. Bhagwan Gokal

(signed)

After the agreement had been drawn up and signed Dalpat Rathod took it to Sherani and Company, Solicitors, as had been agreed in paragraph 5. Sherani's then prepared a legal document embodying the Agreement with one or two variations, the most significant of which was a reduction in the Plaintiff's share of the partnership liabilities from $76,000 to $64,000 and a corresponding increase in the Defendant's share from $76,000 to $86,000 such variation being agreed without any consultation with the Plaintiff. In the event this document (the first Deed - Defence Exhibit No.1) was never signed. The Plaintiff was unhappy with it.

Some weeks later, on about 17 June 1991, another meeting was held at the offices of Sherani and Co. Most of those who were present sit at the Peninsula Hotel were again there with exception of Dalpat Rathod who was in Lautoka and who had, he told me, asked one Kikoo Kapadia, a Chartered Accountant related to the Plaintiff through his wife, to take his place.

According to Kapadia the Plaintiff had approached him after the first Deed fell through and told him that she did not want to a share of the partnership debt: what she wanted was cash. The Plaintiff denied that she had ever approached Mr. Kapadia although it is clear that she did have some discussions with him. Kapadia's suggestion that she approached him was not consistent with what I was told by the Dalpat Rathod whose evidence was that he had asked Kapadia to assist the Plaintiff. The Defendant told me that he had come to Suva about a week before the June meeting to discuss replacing the first Deed with an agreement to give the Plaintiff cash. The Plaintiff told me that the Defendant had summoned her to the meeting at Sherani's. Although she accepted that she wanted cash rather than partnership liabilities her understanding of what she was to get was the Theatre property plus cash. Without the Theatre property, she pointed out, she would have done nowhere to live from which to run her business and no income.

From what I was told it is clear that in fact two meetings were held at Sherani's in June 1991. The first was on the day before a second deal was signed and the second was on the day of signature. The second deed itself is dated 18 June 1991 and is Exhibit 3 (the second Deed). Under the Deed the partnership assets, including the Theatre property and the liabilities, and the Plaintiff would be paid $50,000 cash.

The Plaintiff told me that a few days after she had signed the second Deed and after she had returned to Levuka and was again living at the Theatre two men came and told her that that they had bought the Theatre. They had asked her when she was planning to leave. She told them that this was the first time she realised that she had not in fact received the Theatre as well as the cash. She then returned to Suva and after taking legal advice from Maharaj and Associates had lodged Caveat No.304825 over the Theatre property to prevent its sale. She had then commenced the present proceedings.

By her statement of claim filed on 18 February 1992 the Plaintiff claimed, inter alia, an audited accounted of the partnership since 1980, a declaration that the second Deed was signed by her as a result of duress or undue influence brought to bear upon her by the Defendant and an injunction restraining the Defendant from dealing in the Theatre property. After a number of interlocutory applications including one resulting in an Order for discovery of partnership accounts from 1980 to 1991 made by Byrne J in 1993 the matter came on for trial on 18^th October 1994 after it was agreed by Counsel that the first two issues set out in the minutes of the pre-trial conference held on 14 June 1994 and filed in Court would be tried first, it being accepted that their resolution would in all likelihood be determinative of all remaining issues between the Parties. The two issues are:-

"(i) Whether the transfer Deed (the second Deed) and other documents referred to in paragraphs 12 and 13 of the Statement of Claim and paragraph 11 were executed by the Plaintiff (of her own free will) or was it done as a result of inducement, duress, undue influence by the Defendant either directly or indirectly; and

(ii) Was the Plaintiff given an opportunity to seek independent legal advice, before she executed the documents referred to in (i) above (the Defendant's Solicitors do not agree that this could be a separate issue from (i))".

On 10^th May 1995 after all the evidence had been heard, both Counsel filed carefully prepared and comprehensive written submissions for which I am grateful.

The central question is whether the Plaintiff signed the second Deed and the other associated documents referred to in the First Issue (above) as a result of undue influence being brought to bear upon her. If she did then it is open to the Court to avoid the contract entered into. On reconsideration of the evidence which I saw and heard during the five days of the trial I find the following matters to be especially relevant.

The relationship between the Plaintiff and Defendant

It is not disputed that the Plaintiff is a woman of little education whose duties and responsibilities in the running of the business were essentially those of a shop assistant. After her husband's death the Defendant effectively managed the business single handed. So, for example, the Plaintiff was not one of the signatories to the partnership cheques. It is also clear that the Defendant saw himself as the head of the extended family. So for example, when the Defendant disapproved of the Plaintiff receiving personal telephone calls he put a stop to them. He told me "I put my foot down". When the relationship deteriorated further the Defendant assaulted the Plaintiff, which assault led to proceedings in the Magistrate's Court. After the assault and after the Plaintiff had left the supermarket and gone to live at the Theatre property the Defendant agreed to pay the Plaintiff $80 per week presumably as her share of partnership profits. The Plaintiff told me, and this was not disputed, that the payments were irregular. The Plaintiff also told that she had received a number of telephone calls including one on 16 April 1991 two days before the meeting at the Peninsula Hotel, threatening that she would be killed and that her home, the Theatre property, would be burnt down unless she signed papers dissolving the partnership. She told me that she had reported these telephone calls to the Police and that on one occasion she had recognised the caller as her brother-in-law, the Defendant. The Plaintiff's claim received some corroboration from Constable Delai of the Levuka Police Station who told me that he had interviewed the Plaintiff after she had complained to the Police that she had been receiving telephone calls from an unknown person threatening to burn down the Theatre property if she did not sign some documents connected with a property deal. Constable Delai told me that when he had interviewed the Plaintiff she had been a "nervous wreck". The Police had put her residence under surveillance but had been unable to trace the maker of the telephone calls. The constable produced as Exhibit 2 an extract from Levuka Police Station complaints register dated 16 April 1991 recording that the Plaintiff, whom he knew well, had telephoned complaining that she had been threatened. The Defendant denied ever threatening the Plaintiff but it was never suggested that anyone else might have had a reason to threaten her and I can think of no circumstances in which the Plaintiff would simply make up such an allegation. In his evidence in chief the Defendant admitted that he had assaulted her because her response to his prohibition had been "cheeky". While I found some aspects of the Plaintiff's evidence confused and hard to understand I have no difficulty in accepting the truth of what she told me both about the assault and about the threatening telephone calls.

Partnership Finances

The purpose of the various meetings held at the Peninsula Hotel and at the offices of Sherani and Co was fairly to divide the partnership assets and liabilities. At the commencement of the Court hearing a bundle of agreed documents was handed up as Exhibit 1. Pages 101 to 139 purport to be balance sheets and trading profit and loss accounts for the years 1980 to 1989 prepared by B Parshotam and Co, accountants. As is made clear on the face of these documents the accounts were not audited and were prepared from information supplied by the Defendant. The maker of the accounts was not called. Although the accounts are dated variously as 1985, 1986, 1987 and 1992 it is not disputed that they were not prepared until after the Order for production already referred to. The Plaintiff called a Chartered Accountant Mr. Pande who gave it as his opinion that the accounts were not professionally prepared. He described them as unsatisfactory, pointing out numerous mysteries and inconsistencies. On the basis of what he was shown he told me that he could not pronounce on their authenticity. In his opinion the accounts as presented were no reliable guide to the financial health of the partnership at all.

According to Dalpat Rathod even these accounts were not available when the meetings were held at the Peninsula and at the offices of Sherani and Co. The Defendant agreed that the only accounts which were available in 1991 were those for the year 1987. The properties had not been professionally valued prior to the meetings. The Defendant and Rathod valued the properties "while sitting down together". Rathod had last visited Levuka two years before the valuations were made. There were no details of loans or overdrafts obtained from the bank. All accounts as were available at the Peninsula Hotel were provided by the Defendant. The Plaintiff provided nothing. In the year prior to the division of the assets the Plaintiff had had no contact at all with the Supermarket business. Neither Ranchod nor Kikoo Kapadia nor anyone else had ever taken any steps at all to verify the accuracy of the information provided by the Defendant. Rathod told me "we all trusted the Defendant". Kapadia was provided with figures by Rathod which showed the Plaintiff having assets of $45,000 while the Defendant's assets were put at $39,000. Why this was Kapadia did not know. What "Renuka's jewellery" valued at $9,250 was or how it was connected with the partnership, he did not know. How the Income Tax liability set out in Part III of the Schedule to Exhibit D1 had been calculated he did not know. Although when he had initially spoken to the Plaintiff he had told her that he could not advise her since he did not have enough details of the contemplated transaction, after Rathod had sent him the information (which Rathod had obtained from the Defendant) Kapadia had advised the Plaintiff to take the cash. Kapadia agreed that the figures provided by the Defendant might not have been correct but he had never asked the Defendant to provide audited accounts.

The signing of the second Deed and other documents on 18 June 1991

The signing took place at the offices of Sherani & Co. At no time were the figures supplied checked by Mr. Nagini. No legal advice of any kind at all was given by Mr. Nagin to the Plaintiff. Instructions to draft the second Deed were given by Rathod to Nagin. Kapadia had no part in its preparation. No copy of the documents which were signed were given to the Plaintiff. Mr. Nagin told me "whether someone was hoodwinking the other Party did not concern me". No advice was given to the Parties concerning their duties to each other as partners. The consequences of the agreement to the Plaintiff's position as Trustee and Executrix of the deceased's estate was not explained to her. Mr. Nagin told me that he took the view that the Parties had come to him and said that this was the agreement that had been reached: his duty was simply to put the agreement which had already had been reached into legal form. Although the whole meeting at Sherani's was conducted in Gujerati the Deed, according to itself (Exhibit 3) was read over and explained to the Plaintiff in Hindustani, a quite different language from Gujerati, while the Defendant for some unexplained reason had the pleasure of hearing the document read over and explained to him in English. Whether the Plaintiff took any active part in the meeting beyond being there was not at all clear. Mr. Nagin told me that she appeared to be perfectly normal and he recalled her speaking but other evidence including that of Kapadia suggests that if she spoke at all then it was only to ask whether she should sign. Although both Rathod and Kapadia had intervened on the Plaintiff's behalf, Rathod by obtaining a reduction from $76,000 to $64,000 already referred to, and Kapadia by obtaining a Deed of Indemnity from the Defendant neither was specifically instructed by her. Rathod had been approached by the defendant and Rathod had appointed Kapadia in his place when his business commitments prevented him from being present at further discussions. At no time during the discussions had the Plaintiff ever received any independent legal advice.

In Allcard v. Skinner [1887] UKLawRpCh 151; (1887) 36 Ch. D. 145, 190 Cotton L.J. explained that the equitable doctrine of undue influence extends to all cases "where influence is acquired and abused, where confidence is reposed and betrayed" and in particular where the relations between the Plaintiff and the Defendant have at, or shortly before the exercise of the contract been such as to raise a presumption that the Defendant had influence over the donor. In such a case "no benefit can be retained from the transaction unless it has been positively established that the duty of fiduciary care had been entirely fulfilled".

In the present case it is clear to me that the relationship between the Plaintiff and the Defendant was one in which the Defendant, in the rather antique language of the older authorities, exercised "dominion" over the Plaintiff. (See Huqueunin v. Baseley (1807) 14 Ves 273) or in other words was one in which there was, as between the Parties a marked and distinct "inequality of bargaining power" (See Lloyds Bank v. Bundy [1974] EWCA Civ 8; [1975] QB 326. I am also satisfied that the Plaintiff has proved that the Defendant and the "arbitrators" recruited by him to secure the dissolution of the partnership between them exercised over her mind "such a degree of general domination or control that (her) independence of decision was substantially undermined". (See Smith v. Kay [1859] EngR 38; (1859) 7 HLC 750; Bank of Montreal v. Stuart [1910] UKLawRpAC 53; [1911] AC 120).

Having found that on the facts much more than a mere presumption of undue influence has been established the existence or otherwise of independent legal advice is not directly relevant as available rebuttal. It is however relevant to the question of whether the second Deed amounted to an unconscionable bargain since "where a purchase is made from a poor and ignorant man at a considerable undervalue, the vendor having no independent advice a Court or equity will set aside the transaction.... The circumstances of poverty and ignorance of the vendor and absence of independent advice throw upon the purchaser, when the transaction is impeached the onus are proving that the purchase was.....fair, just and reasonable". (See Fry v. Lane [1888] UKLawRpCh 178; (1888) 40 Ch. D 312, 322).

In the present case the Plaintiff was, as I find, both poor and ignorant. Her income was what she could make from a grocery business run out of her sitting room plus $80 per week paid irregularly by the Defendant. Her ignorance of the financial status of the partnership was almost, if not entirely complete. She was given no independent legal advice at all and such advice as she was given by Kapadia was dependant on information supplied by Rathod who in turn had obtained it from the Defendant. The Defendant's attempts to establish that the division of the partnership assets was fair, just and reasonable were based on the virtually worthless accounts prepared for him after the litigation had already commenced and based upon information supplied by him. Whereas I accept that the Defendant's witnesses were, on the whole, motivated by a genuine desire to help the Parties resolve their problems the Defendant himself did not impress me as a witness upon whose word I could rely.

I was not satisfied that the second Deed was a fair just and reasonable division of the partnership assets. I was not satisfied that the Plaintiff had freely and fairly entered into it. My answers to the two questions posed are therefore in the negative.

M.D. SCOTT
JUDGE

Suva 30 August 1995

HBC0488.91S