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JUDGMENT
ANSAH, JSC:
This is an appeal against the
judgment of the Court of Appeal
dated the 1st day of
March, 2007, dismissing the
appeal by the appellant,
hereafter called the plaintiff
against the decision of the High
Court dated 25th
October, 2004.
The plaintiff, was a Director on
the Board of Directors of the 2nd
Defendant between 1974 and 2001.
The 1st
defendant/appellant/respondent,
hereinafter referred to as the 1st
defendant, is a company
incorporated under the laws of
Japan and a Shareholder of the 2nd
Defendant/appellant/respondent
company, hereafter called the
second defendant, registered
under the laws of Ghana.
The plaintiff claims he was
appointed by the 1st
Defendant to serve as its
representative or Director on
the Board of the 2nd
Defendant in 1974 after
previously serving on the same
Board as a nominee of the
Government of Ghana between 1965
and 1972. Prior to the
appointment, the plaintiff
averred that he reached an oral
agreement with a representative
of the 1st Defendant,
that he would be earning the
same as he (the representative
was earning) and this oral
agreement was confirmed by
Exhibit C purported to be a
letter of appointment copied to
the 2nd Defendant and
the Government of Ghana, as a
shareholder. It was signed by
the Executive Managing Director
of the 1st Defendant.
Thereafter, the plaintiff served
in that capacity on the Board of
Directors of the 2nd
Defendant Company till 2001 when
he was relieved of his position
by the 2nd Defendant
upon the recommendation of the 1st
Defendant.
In reaction the plaintiff sued
the 1st and 2nd
Defendants jointly and severally
claiming the following:
1.
Damages for breach of an oral
contract made in or about
June/July 1974, appointing the
plaintiff Director to serve on
the Board of Ghana Sanyo Company
Limited and witnessed in writing
by letter dated October 4th
1974, under and by virtue of
which the plaintiff has worked
and rendered services to the 1st
and 2nd defendant
companies as Director, from
which the defendants have failed
and refused to pay the plaintiff
reasonable Director’s fees and
lump sum remuneration as agreed.
Alternatively;
2.
Adequate remuneration and
compensation for services
rendered to the defendants from
1974 to 2001 as Director on the
Board of the 2nd
Defendant company
3.
Interest on the said amount at
the prevailing bank rate.
The defendants denied reaching
any oral agreement with the
plaintiff and contended that
Exhibit C was a mere ‘circular’.
I shall presently set out the
contents of Exhibit C in full
for its full effect and weight
to be made manifest in this
opinion.
The trial court found that the
plaintiff’s action could not
succeed in contract “due to the
hazy and unclear terms of the
oral agreement”, but granted the
alternative relief and,
considering the claim in
Quantum Meruit, awarded a
tidy sum of ¢350,000,000.00 to
the plaintiff.
On appeal to the Court of
Appeal, the court set aside the
award of the trial court for the
alternative claim in quantum
meruit because the court
held it was unlawful and in
clear contravention of section
194 of the Companies Code 1963,
Act 179, (quoted below), and
amounted to usurping the
functions of members of the 2nd
Defendant Company conferred by
the same provision of the Code.
The present appeal is from the
judgment of the Court of Appeal
dated 1st March 2007.
The grounds of appeal relied
upon and argued before us are
that:
1.
The judgment of the Court of
Appeal is against the weight of
the evidence before the court.
2.
The decision of the Court of
Appeal, that quantum meruit does
not apply in the case of the
appellant, when the court of
appeal had itself agreed with
the finding of the court below
that the appellant was not
appointed in the legally proper
manner, but had rendered service
as director to the respondents
who also received benefit from
that service, is per incuriam.
3.
The Court of Appeal having
itself set down the issue
‘Whether quantum meruit applies
to this case’, failed to
consider, the remedy of quantum
meruit, its nature, its purpose
and its effect, on the unanimous
evidence, that in pursuance of
whatever agreement there was,
hazy or void, the plaintiff
rendered invaluable service to
the defendants.
4.
The Court of Appeal failed to
deal with the real issue between
the parties, namely; ‘whether
the plaintiff was entitled to
claim the value of the service
rendered to the defendants.’
5.
The Court of Appeal erroneously
proceeded to consider the
plaintiff’s alternative relief
not under quantum meruit but
under the Companies’ Code,
particularly section 194 and
thereby misdirecting itself in
arriving at the erroneous
conclusion that quantum meruit
could not succeed.
6.
The Court of Appeal erred in
proceeding as if quantum meruit
was in conflict with the
Companies Code and therefore
failed to appreciate that
quantum meruit comes in where
there is no contract or the
contractual provisions as to
remuneration are inapplicable.
7.
The Court of Appeal, having
taken cognizance of the
defendants’ evidence which was
placed before the court below,
that the directorship of the
plaintiff was not a matter for
dispute, erred in failing to
consider what ought to happen to
the invaluable services rendered
by the plaintiff to the
defendants, and thereby caused
injustice in setting aside the
judgment of the Court below.
The appellant filed the
following additional Grounds of
Appeal;
1.
The judgment of the Court of
Appeal is not supported by the
evidence before the court below.
2.
The Court of Appeal misdirected
itself when it said, “... The
plaintiff claims that on his
appointment to the 2nd
Defendant Board in 1974, he
served the 2nd
Defendant till year 2001...”
thereby, changing the plaintiffs
cause of action from one of
breach of contract appointing
him a director to one of a
director appointed under the
Companies Code, and ignoring the
evidence led before the court
below.
3.
The Court of Appeal seriously
misdirected itself in thinking
or assuming that because a man
worked as a director, he was or
must be or must have been a
director, covered absolutely by
the Companies Code and therefore
the Companies Code applied to
him, thereby loosing sight of
the plaintiff’s cause of action
founded on breach of a contract
which the trial judge found to
be hazy.
4.
The Court of Appeal misdirected
itself in finding that the
plaintiff was made a director
against the overwhelming
evidence to the contrary, found
by the trial judge, and as a
result, wrongly used the
Companies Code to strangle and
displace the common law and the
remedy of quantum meruit.
The reliefs sought from this
court were to set aside the
judgment of the Court of Appeal,
and to re-instate the judgment
of the trial High Court.
It is discernible from the
original and additional grounds
of appeal that they encompassed
the same grounds as they related
to
(1) the weight of evidence,
(2) the position of the
plaintiff appellant as a
director of the company and
(3) the monetary payment made to
the appellant on quantum meruit
basis.
The grounds of appeal will be
considered together in so far as
it is convenient so to do.
It was necessary to state at
this stage that certain facts
were not in dispute, evidence
having been sufficiently led in
support thereof. They were that:
1 The plaintiff appellant
rendered services to the
defendant/respondent
company.
2 He rendered the service as a
Director of the 2nd
defendant/respondent
company.
3 That there were years that the
Board of Directors of the 2nd
Defendant/respondent company, of
which the plaintiff/appellant
was a member, decided not to pay
directors remuneration due to
financial constraints in the
company.
Throughout the total gamut of
the record of proceedings, the
fulcrum around which all issues
revolved, is whether the unpaid
plaintiff/appellant’s
remuneration for service
rendered as a director of the
respondent company was
maintainable and if so, whether
it was to be determined in
Quantum Meruit or in accordance
with Section 194 of the
Companies Act, 1963, Act 179?
Needless to say the High Court
resolved the issue in favour of
the plaintiff, but the first
appellate Court took a
diametrically opposing view to
that. The dominant issue is
could the Court of Appeal have
been right in so saying?
In this opinion, I shall
consider first the issue
relating to the position of the
directorship of the plaintiff in
the company. There was ample
evidence that he acted as a
Director of the defendant
company for quite a long period
of time and as stated above, in
that capacity, he rendered
services to and for the benefit
of the company. But in spite of
this the question is, was he
duly appointed by the company
into that position? This was
largely a matter of law the
answer lying squarely in the
provisions of the Companies
Code, 1963, Act 179.
Section 181 thereof provided on
appointment of directors that:
“(1) No person shall
be appointed a director of a
company unless he shall
prior to such appointment, have
consented in writing to be
appointed.
(2) The first
directors of a company shall be
named in the company’s
Regulations.
(4) The Regulations
of a company may provide for the
appointment of a director or
directors of by any class of
shareholders, debenture holders,
creditors, employees or any
other person.
(5) Notwithstanding
any provision in the company’s
Regulations, any casual vacancy
in the number of directors may
be filled by,
a) the
continuing directors or director
notwithstanding that their
number may have been reduced
below that fixed as the
necessary quorum of directors;
or
(b) by
ordinary resolution of the
company in general meeting:
Provided that,
……….(a) in exercising their
power to fill such vacancy the
directors shall observe the
rules laid down in sections 203
and 204 of this Code and shall
not appoint any person to be a
director unless they have taken
reasonable steps to satisfy
themselves that he is a person
of integrity and suitable to be
a director of the company.
(b) if the casual vacancy so
filled is one which, under the
terms of the Company’s
Regulations, should be filled by
an appointment by any class of
shareholders, debenture holders,
creditors, employees, or other
persons, the director appointed
by the continuing directors or
by an ordinary resolution of the
company in general meeting, as
the case may be, shall cease to
hold office so soon as any other
director is duly appointed in
accordance with the
Regulations.”
Apart from these legal
provisions, the plaintiff relied
on Exhibit C, made by Mr. E
Kamuro, the Managing Director of
the company, to prove that he
was a director of the company.
Portions of Exhibit C read:
“Dear Sirs,
We have pleasure to inform you
that the management of Sanyo
Electric Trading co. Ltd has
appointed Mr. D.S. Quarcoopome
as one of the Sanyo Directors on
the board of Ghana Sanyo
Electrical Mfg. Cop. Ltd. With
effect from 1st
October, 1974 in lieu of Mr. S
Miyamoto the directorship of
Japan Sanyo shall then consist
of:
Mr. K Kamuro (Being acted by
general manager),
Mr. D. S. Quarcoopome (newly
appointed),
Mr. Y Shikatani (General
Manager).”
By Exhibit C, the plaintiff was
appointed a director of Sanyo
Electric Trading Company, the
first defendant respondent
herein.
Construing the exhibit, the
trial High Court judge said it
was ‘hazy and unclear’, an
observation which the Court of
Appeal affirmed in its judgment.
It must also be borne in mind
there was no evidence the
plaintiff signified his consent
in writing before he was
appointed a director of the
company. Neither was it shown
that the appointment of the
plaintiff as a director of the
company was covered by the
company’s Regulations as
required by section 272 of the
Code. The Regulations of the
company did not contain the name
of the plaintiff as one of the
first directors: See paragraph 4
of Exhibit B, the Regulations of
the company.
But, there was also the evidence
of the DW 2 to consider; he said
under cross-examination:
“Q Now you agree that
exhibits D –D8 and 6-6J are all
minutes of the company which
shows (sic) that the Defendant
was in Board of Directors of
Sanyo Ghana Limited?
Ans. Yes I do not think Mr
Quarcoopome’s Managing
Directorship is in dispute.
Nobody is saying that Mr
Quarcoopome was not a Director
in Ghana Sanyo, so I feel a
little disturbed about this.”
Next to that, there were the
pleadings and evidence of the
defendants to consider; they
pleaded that there was no oral
contract to make the plaintiff a
director, (see paragraph 9 of
statement of defence), a point
they continued to harp on in
their evidence in court. The
representative of the plaintiff
herself admitted there was no
ordinary resolution passed to
appoint the plaintiff a director
of the company.
The inference to draw from
consideration of this welter of
evidence was that the plaintiff
was not ‘duly’ appointed a
Director of the defendant
company and the Court of Appeal
decision that he was so
appointed, was against the
weight of evidence.
The position of the plaintiff
that he was a Director of the
defendant company was not to be
inferred from only the fact that
he worked for the company for
such a long time that he could
be called and treated as a
Director under the Companies
Code.
That the plaintiff was appointed
a Director of the company was a
positive fact that was capable
of direct proof, by simply
producing evidence on the
existence of a resolution passed
to that effect, and evidence of
his prior written consent to be
so appointed.
On the evidence there was no
such written consent and the
issue was could this requirement
be dispensed with especially in
the teeth of evidence that he
did in fact serve as a Director
in the company for that long
period of time? The trial court
found for the plaintiff that he
was appointed a director of the
second defendant company. The
learned trial judge based her
reasons for so holding on the
facts that Exhibit C was written
to the Ministry of Trade and
Industry to inform the Directors
of the 2nd defendant
that plaintiff had been
appointed to serve on the Board
of Ghana Sanyo Manufacturing
Company Limited by
the defendant and had sat on the
same board with Mr Funabashie
for four years, that was, from
1970 to 1974 when he Funabashie
recommended him to serve on the
board as a representative of the
first defendant company.
She found further support in
first, Exhibit B, the
Regulations of the company, that
the Directors were appointed by
ordinary resolution; though the
Regulations did not say the
plaintiff had in fact been
appointed as a Director of the
company. Second, the plaintiff
did not claim end of service
benefits for they were paid only
to salaried workers or Executive
Directors; the plaintiff did not
fall into either category of
persons in the company and thus
did not qualify to be paid any
end of service benefits.
The Court of Appeal upheld the
fact made by the trial judge
that the directorship of the
plaintiff in the second
defendant company was not in
doubt, referring to the evidence
of the representative of the
defendants quoted above, and
also the fact that the plaintiff
rendered services to the company
and evidently affirmed the trial
court that the plaintiff was a
Director of the defendant
company.
Section 179 of Act 179 is
relevant for our consideration
whether or not the plaintiff was
appointed a director of the
company. The section read:
“179 (1) For the purpose of this
Code the expression ‘director’
means those persons, by whatever
name called, who are appointed
to direct and administer the
business of the company.
(2) Any person not being a duly
appointed director of a company,
(a) who shall hold himself
out or knowingly allow himself
to be held out as a director of
that company or
(b) on whose directions or
instructions the duly appointed
directors are accustomed to act,
Shall be subject to the same
duties and liabilities as if he
were a duly appointed director
of the company.
Provided that nothing in this
subsection contained shall be
deemed to derogate from the
duties or liabilities of the
duly appointed directors,
including the duty not to act on
the directions or instructions
of any other person.
(3) If any person, not
being a duly appointed director
of a company, shall hold himself
out or knowingly allow such
person to hold himself out, as a
director of the company, such
person or the company, as the
case may be, shall be liable to
a fine not exceeding one hundred
pounds.”
Thus, a person who had not been
duly appointed a director of a
company, (which was to say, in
accordance with the legal
provisions quoted above), but
nevertheless acted or held
himself out, or allowed himself
to be held out as such director,
committed an offence punishable
by a fine prescribed by law. Can
such a person be entitled to any
remuneration for work done or
services rendered by him? Such
persons are commonly referred to
as de facto directors. In
Commodore v Fruit Supply
Ghana Ltd [1977] GLR,
241, CA, the facts were that a
non-shareholder of a company who
had not been appointed a
director of the company had
functioned together with the
Managing Director of a company,
and had had his name allowed to
be printed on the company’s
letter head as director, and
transacted business on behalf of
the company; it was held that
even though the non-shareholder
had not been appointed a
director of the company, the
trial judge ought to have held
that on the facts, he had been
held out as a director of the
company and the company thereby
estopped from denying that he
was a director of the company.
Thus, applying the material
holding in Commodore v Fruit
Supply (supra) to the facts
of this appeal, it was
reasonable to say even if the
plaintiff was not duly appointed
a director of the company, he
ought to have been considered a
de facto director of the
respondent company. The issue in
this appeal was could such a
director be held entitled to any
remuneration?
The answer is provided in
section 194 of Act 179 which
provided that:
“(1) subject as hereafter
provided in this section, the
fees and other remuneration
payable to the directors in
whatsoever capacity, shall be
determined from time to time by
ordinary resolution of the
company, and not by any
provision in the Regulations or
in any agreement, which
provision shall be null and
void.
(2). The fees payable to
the directors as such shall be
determined from time to time by
ordinary resolution of the
company and not in any other way
(emphasis supplied).
(Regulation 66 of the
regulations of the company
(Ghana Sanyo Electrical
Manufacturing Corporation
Limited, Exhibit B, was couched
in similar terms).
Section 185 (7) of Act 179 is
also relevant in connection
herewith as it provided that:
“Nothing in this section shall
be taken as depriving any
director who has a service
agreement with the company of
any right to compensation to
which he is lawfully entitled
under such agreement on the
termination of his directorship
or of any right to damages if
his removal from his
directorship constitutes a
breach of such service agreement.”
The trial judge held that the
plaintiff was not entitled to
claim 1 endorsed on his writ of
summons but rather on quantum
meruit, by which was meant
“[Latin “as much as he has
deserved”] 1 The reasonable
value of services; damages
awarded in an amount considered
reasonable to compensate a
person who has rendered services
in a quasi-contractual
relationship. 2. A claim of
right for the reasonable value
of services rendered….Quantum
meruit is still used today as an
equitable remedy to provide
restitution for unjust
enrichment, often pleaded as an
alternative claim in a breach of
contract case so that the
plaintiff can recover even if
the contract is unenforceable”
see Black’s Law Dictionary
Eighth Edition p 1276 referred
to in the judgment of the trial
court.
It was significant to observe
the lower courts were ad idem
the plaintiff was entitled to
some payment for services
rendered to the company on the
basis of quantum meruit.
In Hammond v
Ainooson [1974]1GLR 176, an
action for a sum of money for
services rendered for work
rendered for the benefit of the
defendant, Abban J (as he then
was), said at page 183 that:
“In any case, even if I had
found that there had been no
concluded and enforceable
agreement between the parties as
to the amount of allowance the
plaintiff was to receive for her
services during the time the
boat was under repairs, or for
the other services during the
time the boat was under repairs,
or for the other consideration
supplied by her, I would still
have held that the plaintiff
could recover on quantum meruit
basis for the value of the
benefit she conferred on the
defendant and the defendant
accepted. The principle is that
where a person rendered services
in pursuance of a transaction,
supposed by him to be a
contract, but which in truth is
without legal validity, he can
recover for the value of his
services In quantum meruit….The
implied obligation to pay
reasonable remuneration is a
obligation imposed by law and
not an inference of fact arising
from the performance and
acceptance of the services: see
Craven-Ellis v Canons, Ltd
[1936] 2 K.B 403, CA. Greer
L.J., delivering his judgment in
that case said at page 410:
“This would certainly be
strictly logical if the
inference of a promise to pay on
a quantum meruit basis were an
inference of fact based on the
acceptance of the services or of
the goods delivered under what
was supposed to be an existing
contract; but in my judgment the
inference was not one of fact,
but is an inference which a rule
of law imposes on the parties
where work has been done or
goods have been delivered under
what purports to be a binding
contract but was not so in
fact.”
I fully endorse and approve of
the dictum by Abban J (as he
then was), in Ainooson‘s case
(supra) and allow myself to be
persuaded by Craiven-Ellis
just as the Court of Appeal was.
I must be quick to admit that
though, Ainooson was not
a company law case, the
principle on Quantum meruit was
well stated therein.
The dominant issue was whether
the trial court was justified in
law in awarding the colossal sum
of ¢350, 000,000.00 (three
hundred and fifty million cedis)
to the plaintiff in quantum
meriut. The court sought to
justify the award in the
following terms:
“The essential elements of
recovery under quantum meruit
are 1 valuable services were
rendered or materials furnished,
2 for persons sought to be
charged, 3 which services and,
materials were accepted by
persons sought to be charged,
used and enjoyed by him, and 4
under such circumstances as
reasonably notified person
sought to be charged that the
plaintiff, in performing such
services was expected o be paid
by the person sought to be
charged. Montes v Naismith &
Trevino Const. Co. Text Civ.
App. 459 SW Sd 691, 694.”
The Court of Appeal was of the
view that:
“The law on the issue to be
resolved by this appeal is that
fees or other remuneration
payable to directors are to be
determined by ordinary
resolution of the company and
not by any provision in the
company’s Regulations or in any
agreement.”
Furthermore the court held that
the consequential award to the
plaintiff in quantum meruit
offended the clear provisions of
section 194 of the Companies
Code (quoted above) for it
amounted to usurping the
functions of members of the 2nd
defendant company. There being
no evidence that such a
resolution has ever been passed
by the company, the trial judge
erred in deciding to remunerate
the plaintiff for services
rendered to the second defendant
in his capacity as a director.
It was for this reason that the
Court of Appeal concluded that
the trial judge erred in its
judgment and set it aside.
It must be pointed out that In
granting the alternative claim
as she did, the trial judge was
bound to advert her mind to the
provisions of the Company’s Code
which obviously governed the
issues at stake, especially when
it came to remunerations for the
plaintiff for services rendered
the company and his director’s
fees which she said were not
controverted. The trial judge
asked in her judgment:
“Now having established that the
plaintiff was entitled to be
remunerated for his services
rendered the question is how is
he entitled to?”
She should have adverted her
judicial mind to the provisions
of the Company’s Code that
regulated all relevant issues in
the alternate claim she was
considering; to be very precise,
section 194 (1) and (2) on
remuneration for directors.
It is curious why the learned
trial judge did not make any
reference whatsoever to this
legal provision or cast a glance
to the Company’s Code for
assistance and guidance. Her
judgment was per incuriam, to
say the least. The penalty was
that such a judgment would be
interfered with and set aside on
appeal which the Court of Appeal
did.
An appeal to this court is by
way of rehearing and the court
will examine the record
including the judgment of the
trial court to see how justified
the judgment of the first
appellate court, to wit the
Court of Appeal was. If the
trial court had looked at the
provisions in the Companies Code
its judgment in all probability
would have been different. It
did not and that influenced it
to usurp the functions reserved
for resolution by the company.
In the result, I am of the
opinion that the judgment of the
Court of Appeal was right and
ought to be preferred to that of
the trial court. I affirm the
judgment of the Court of Appeal
that the judgment of the trial
court was clearly in
contravention of Section 194 of
the Companies Code and pro tanto
unlawful, unjustified ought to
be affirmed by this court.
The appeal is dismissed.
J. ANSAH
(JUSTICE OF THE SUPREME COURT)
S. A. B. AKUFFO (MS)
(JUSTICE OF THE SUPREME COURT)
S.A. BROBBEY
(JUSTICE OF THE SUPREME COURT)
S. O. A. ADINYIRA (MRS)
(JUSTICE OF THE SUPREME COURT)
S. K. ASIAMAH
(JUSTICE OF THE SUPREME COURT)
COUNSEL
KOCUVIE TAY FOR THE APPELLANT
VICTOR ADAWUDU FOR THE
RESPONDENT
AMA OPOKU AMPONSAH FOR THE 2ND
RESPONDENT
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