The lawyer-client relationship is based on trust

Every lawyer must have as a primary concern the interest of the client, who often seeks advice in view of investment, activity or property development. They should be honest, sincere and fair to the client, and above all respect and protect their property, as well as be accountable to them for the way it is managed.

Especially when the client is a foreigner, the lawyer must exercise the utmost diligence and must not attempt to exploit the client for their own benefit either personally or through their company.

A lawyer should ensure the relationship of confidentiality and trust and should not become a partner in a client’s activity, nor participate in joint development of a client’s property for personal gain. Essentially, they must not seek to exploit a client either because of ignorance, necessity or because they are a foreigner.

First instance decision

There was a case of a lawyer taking advantage of a foreign client and selling her various properties at an exorbitant price through a company he had a stake in. Furthermore, the company undertook to carry out building works without being a registered licensed contractor.

He took advantage of the lawyer-client relationship of trust and falsely advised her that she would have to acquire some real estate in order to secure permanent residence in Cyprus, which he himself sold to her through his company.

When the client found out, she filed a lawsuit against the lawyer and the company, demanding the cancellation of all the agreements she entered into and the return of her money, alleging fraud, mental duress, fraudulent representations and illegality.

The District Court criticised the lawyer’s conduct and issued decisions cancelling the various agreements the company entered into with the client and ordered the return of the money she paid, amounting to more than one million euros. The lawyer and the company filed an appeal, claiming that this decision was wrong.

Decision of the Court of Appeal

The Court of Appeal in its unanimous decision issued in C.A.429/2019, dated July 11, approved the first instance decision and the findings regarding the way the lawyer handled his client.

It emphasised that the court of first instance correctly noted that the client based her claims on deceit and fraud, mental duress, real and presumed, as well as breach of trust on the part of the lawyer.

As long as the transaction was unduly onerous, the person who was in a position to dominate the other bears the burden of proof.

It also notes that the special relationships that trigger the Presumption of Mental Duress are of two kinds. Those which as a matter of law create the presumption and the others whose existence should be documented by the complainant. In the first case, the complainant must simply prove the existence of a historically established relationship, e.g. lawyer and client, from which the presumption of mental pressure with all its consequences arises.

The Presumption of Law in the present case is raised and activated. The appellant was the lawyer of his client-respondent and in a trust relationship with her. Therefore, any agreement is considered to have been reached as a result of mental duress, the client’s consent was secured by mental pressure, it was not free and therefore the agreements should be cancelled and the amounts paid should be returned to her.

The court of first instance had decided not to refund the client the amount for the construction work, considering that as illegal as the company was in undertaking the construction project, it was even more illegal for the client to entrust it. It considered that the case should be differentiated.

It is a well-known principle that money paid on the basis of an illegal contract cannot be recovered when the contracting parties are equally liable. In the present case, however, the client, as she rightly suggested in the counter-appeal, proceeded with the assignment of construction work, relying on the relationship of trust with her lawyer, assuming he would not urge her to draw up an agreement which was illegal.

The conclusion of the Court of Appeal was to dismiss the appeal and accept the counter-appeal for the return of the amount she paid for the construction work to the client.

George Coucounis is a lawyer specialising in Immovable Property Law, based in Larnaca. E-mail: coucounis.law@cytanet.com.cy, tel: 24818288