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Company law - Private Limited
Liability Company. - Micro
Finance Company - Official
Liquidation - Bodies Corporate
(Official Liquidation) Act, 1963
(Act 180 - Whether or not the
High Court judge exceeded her
jurisdiction - Whether or not
judge wrongly exercised her
discretionary powers by
ordering the release of
properties attached by the
Registrar in execution -
HEADNOTES
The facts giving rise to this
application are as follows; DKM
Diamond Micro Finance Ltd,
hereafter referred to as “the
Company”, was incorporated under
the Companies Act, 1963 (Act
179) as a private Limited
Liability Company. It had its
registered office at Sunyani in
the Brong Ahafo Region and
operated mainly in that Region
and the three regions of
Northern Ghana. It was licensed
by the Bank of Ghana on 25th
October, 2013 to operate as a
Micro Finance Company. As part
of its activities it took
deposits from the general public
and in turn contracted to pay
rather astronomical monthly
rates of interests to the
depositors. By May of 2015 the
Company ran into difficulties as
it started defaulting in the
timely payment of the extra
ordinary monthly rates of
interest it had promised its
numerous customers. Initially
the Bank of Ghana intervened to
ensure that the Company paid its
depositors but that did not
yield the needed results.
Consequently some of them
resorted to the law courts so
different suits claiming various
sums against the Company were
filed in a number of courts The
applicants herein are two of
such depositors who filed suits
No. in the High Court,
Commercial Division, Sunyani
against the company Judgment was
entered in favour of Applicants
The Applicants went into
execution and attached a Yutong
BusHowever, before the
properties could be sold, the
Company was put into official
liquidation upon a request by
the Bank of Ghana to the
Register of Companies. In order
that they could continue with
their court case, Applicants
applied to the court for leave
pursuant to Section 17 of the
Bodies Corporate (Official
Liquidation) Act, 1963 (Act
180). The application was
granted. After that Applicants
brought a motion to substitute
the official liquidator, who is
the Interested Party herein, for
the Company and that too was
granted the High Court gave its
ruling on 12th July,
2016. It dismissed both motions
by Applicants and made an order
releasing the attached
properties to the Interested
Party.
HELD
We have considered all the
circumstances of this case and
in our considered opinion, since
DKM Diamond Micro Finance Ltd
was put under liquidation,
equity alone would demand that
all assets of the company ought
to come to the possession of the
liquidator so that all
depositors across board will be
paid part of their deposits.
For all of the above reasons we
find ourselves unable to grant
the prayer of the Applicant and
we therefore refuse the
application.
STATUTES REFERRED TO IN JUDGMENT
Companies Act, 1963 (Act 179)
Bodies Corporate (Official
Liquidation) Act, 1963 (Act 180)
1992 Constitution
Banking Act, 2004 (Act 673)
Non-Bank Financial Institution
Act, 2008 (Act 774)
High Court (Civil Procedure)
Rules, 2004 (C.I,47).
.
CASES REFERRED TO IN JUDGMENT
BOOKS REFERRED TO IN JUDGMENT
DELIVERING THE LEADING JUDGMENT
PWAMANG, JSC.
COUNSEL
BAARIMA AGYEKUM HENNEH FOR THE
APPLICANTS,
GEORGE BEKAI FOR THE INTERESTED
PARTY.
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RULING
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PWAMANG, JSC.
The facts giving rise to this
application are as follows; DKM
Diamond Micro Finance Ltd,
hereafter referred to as “the
Company”, was incorporated under
the Companies Act, 1963 (Act
179) as a private Limited
Liability Company on 1st
August, 2013. It had its
registered office at Sunyani in
the Brong Ahafo Region and
operated mainly in that Region
and the three regions of
Northern Ghana. It was licensed
by the Bank of Ghana on 25th
October, 2013 to operate as a
Micro Finance Company. As part
of its activities it took
deposits from the general public
and in turn contracted to pay
rather astronomical monthly
rates of interests to the
depositors. By May of 2015 the
Company ran into difficulties as
it started defaulting in the
timely payment of the extra
ordinary monthly rates of
interest it had promised its
numerous customers.
Initially the Bank of Ghana
intervened to ensure that the
Company paid its depositors but
that did not yield the needed
results. Consequently some of
them resorted to the law courts
so different suits claiming
various sums against the Company
were filed in a number of
courts. The applicants herein
are two of such depositors who
filed suit No. RPC 17/2016 in
the High Court, Commercial
Division, Sunyani against the
company and two sister companies
namely; DKM Group of Companies
Ltd and DKM Transport Company
Ltd, claiming for refund of
their deposits in the sum of
GH˘198,056.00 with interest at
54.465% per month. Judgment was
entered in favour of Applicants
herein on 18/01/2016 to recover
a total sum of GH˘599,313.00
being principal, interest and
costs. The Applicants went into
execution and attached a Yutong
Bus with Registration No. GT
4553-15 and LPG Gas Filling
Station situate at Nandom in the
Upper West Region.
However, before the properties
could be sold, the Company was
put into official liquidation
upon a request by the Bank of
Ghana to the Register of
Companies. In order that they
could continue with their court
case, Applicants applied to the
court for leave pursuant to
Section 17 of the Bodies
Corporate (Official Liquidation)
Act, 1963 (Act 180). The
application was granted. After
that Applicants brought a motion
to substitute the official
liquidator, who is the
Interested Party herein, for the
Company and that too was
granted.
In order to have the attached
properties auctioned for
Applicants to be paid their
judgment debt of GHC599,313.00,
they filed two motions; one in
respect of the Yutong Bus
praying for the reserved price
to be reviewed, and the second
praying for the fixing of a
reserved price for the LPG Gas
Filling Station. These
applications were brought on
notice to the Interested Party
and she filed affidavits in
opposition to both motions. In
those affidavits she prayed the
court to stay the proceedings in
the case and to release the
properties attached to her in
order that she would add them to
other assets of the Company to
be sold for all depositors of
the Company to be paid.
After hearing both parties who
were represented by lawyers, the
High Court gave its ruling on 12th
July, 2016. It dismissed both
motions by Applicants and made
an order releasing the attached
properties to the Interested
Party. The court further
directed that the claims of the
Applicants as well as all other
claims before it should be
forwarded to the Interested
Party in order that they will be
paid like all other
depositors/creditors of the
Company.
Applicants are aggrieved by the
orders made by the court and
have filed this application
praying for an order of
certiorari to quash the decision
of the court on the following
grounds:
(a)
The High Court judge exceeded
her jurisdiction when she suo
motu ordered the release of
properties attached by the
Registrar in execution of a
judgment debt when no person had
interpleaded in respect of the
said properties nor had any
application for such
purpose/order been filed before
her.
(b)
The judge exceeded her
jurisdiction when she suo
motu released attached
properties of DKM Transport
Company Ltd to a different and
separate company being DKM
Diamond Micro Finance Ltd,
thereby occasioning a
miscarriage of justice.
(c)
The judge wrongly exercised her
discretionary powers when in
delivering a ruling on a motion
on notice for reserved price,
she entered into the arena of
conflict and granted reliefs not
prayed for and this occasioned a
miscarriage of justice.
(d)
The judge wrongly assumed
jurisdiction when she suo
motu unconditionally
released properties from
attachment when the judgment
debt had not been paid to the
judgment-creditor.
The Applicants filed an
affidavit in support with
exhibits and their lawyer filed
a statement of case. The
Interested party has opposed the
application and filed affidavit
in opposition and statement of
case. We have closely studied
these processes. The Interested
Party stated that her affidavit
in opposition in the High Court
proceedings contained a prayer
for the release of the
properties and the judge saw
merit in her submissions made in
court so the release of the
properties was not done suo
motu. She also contends that
the High Court, Sunyani erred in
law in granting leave to the
Applicants to proceed with their
case after the commencement of
the winding up as it is only
secured creditors who may be
granted such leave.
The Applicants subsequently
filed a supplementary affidavit
in which they brought to our
attention two different
decisions of the High Court
Justices in Bolgatanga and Wa
both in respect of the DKM Micro
Finance liquidation. The High
Court, Bolgatanga decided as a
matter of law that the order by
the Registrar of Companies for
the winding up of the Company is
invalid as same was not done
under the applicable enactment.
The Judge at the High Court, Wa
agreed with him and further
questioned the procedure adopted
by the Bank of Ghana in
petitioning to the Registrar of
Companies to wind up the
Company. In response the
interested party has maintained
that the order for the winding
up was validly made.
Before considering the merits of
the present application we deem
it proper to deal with the
points of law that have been
raised before us. The Interested
Party filed an application in
the High Court, Bolgatanga for a
review of its decision that the
order for winding up of the
Company is invalid and has
exhibited same in the
proceedings before us. The
ground for that application is
purely on a matter of law so we
shall have recourse to our
powers in Article 129(4) of
the 1992 Constitution and
determine the question of the
validity of the winding up of
the Company that has been raised
in that application for review
before the High Court,
Bolgatanga. Article 129(4) of
the 1992 Constitution provides
as follows;
“ For the purposes of
hearing and determining a matter
within its jurisdiction and the
amendment, execution or the
enforcement of a judgement or
order made on any matter, and
for the purposes of any other
authority, expressly or by
necessary implication given to
the Supreme Court by this
Constitution or any other law,
the Supreme Court shall have all
the powers, authority and
Jurisdiction vested in any court
established by this Constitution
or any other law.”
From the processes filed before
us, the Interested Party has
started dealing with the
numerous depositors/creditors of
the company who have suffered
hardship as a result of the
activities of the Directors of
the Company and are therefore
anxious of their fate. In the
circumstances it is in the
public interest to speedily
resolve the issue of the
legality of the actions of the
official liquidator.
The reason given by the High
Court, Bolgatanga for holding
that the order for the winding
up of the Company is invalid was
that the Bank of Ghana was wrong
in relying on section 68(1) of
the Banking Act, 2004 (Act 673)
to request the Registrar of
Companies to wind up the Company
because, according to him, micro
finance companies are regulated
by the Non-Bank Financial
Institution Act, 2008 (Act 774)
and not the Banking Act. The
relevant provisions with regard
to the coverage of those
enactments are as follows;
Section 1 of the Non-Bank
Financial Institution Act, 2008
(Act 774) provides;
“This Act applies to non-bank
institutions and non-bank
financial services as set out in
the First Schedule to this Act,
but does not apply to
(a) operators of micro finance
services with risk assets which
are not more than the amounts
prescribed by the Bank of Ghana
and whose sources of funds do
not include deposits from the
public; and
(b) any other institution or
person as the Bank may specify
by Notice published in the
Gazette.”
The services set out in the
First Schedule are as follows;
: Non Bank Financial Services
1.
Operations
2.
Money lending operations
3.
Money Transfer services
4.
Mortgage Finance operations
5.
Non-deposit-taking micro finance
services
6.
Credit Union operations
7.
Any other services or operations
as the Bank of Ghana may from to
time by notice designate as
such.
There is no dispute that DKM was
a Micro Finance Company that
took deposits from the public so
clearly it is not covered under
Act 774. All the activities
mentioned in the first schedule
of Act 774 do not involve the
taking of deposits but DKM
Diamond Micro Finance Ltd was
licensed to take deposits.
On the other hand Section 47(6)
of Act 774 lists non-bank
financial institutions that are
to be regulated under the
Banking Act as follows;
“THIRD SCHEDULE
(Section 47 (6))
Institutions Previously
Regulated under Financial
Institutions (NonBanking) Law,
1993 (P.N.D.C.L. 328)
immediately before the coming
into force of this Act and to be
migrated to other regulatory
regimes.
1. Savings and Loans
Companies, Finance Houses, and
deposit-taking micro finance
institutions, to be regulated
under the Banking Act 2004 (Act
673) as amended.”
The provision talks of deposit
taking micro finance
institutions of which DKM
Diamond Micro Finance Ltd is
one, as those to be regulated
under the Banking Act. We
therefore hold that the Bank of
Ghana was right in coming under
the Banking Act to request the
winding up of the Company.
The other aspect of the legal
issue has to do with the
lawfulness of the procedure
whereby the Bank of Ghana wrote
a letter to the Registrar of
Companies for the official
winding up of the Company.
Section 3 of Act 180 provides
for either a creditor or a
member of a company to petition
the Registrar of Companies to
order the official winding up of
a company if she is satisfied
that the company is incapable of
paying its debts. In the case of
DKM Diamond Micro Finance Ltd,
the Bank of Ghana relied on
Section 68 (1) of the Banking
Act to request for the official
winding up. That section
provides as follows;
“Where the Bank of Ghana
(a)
has revoked the banking license
of a bank, and
(b)
is of the opinion that the bank
is not likely to pay its
depositors and creditors in
full, it may, notwithstanding
the provisions of the Bodies
Corporate (Official
Liquidations) Act, 1963 (Act
180) or any other law, appoint a
liquidator to wind up the
affairs of the affected bank.”
The actual process adopted by
the Bank of Ghana is referred to
by the Interested Party in the
Order for the official winding
up which is Exhibit “OL1”. She
stated in the order as follows;
“That pursuant to the inability
of the Company to fulfill its
obligations to the depositors
and creditors, the Bank of Ghana
pursuant to its letter reference
OFISD/52/2016 dated 1st
March 2016 petitioned the
Registrar of Companies in
accordance with Section 68(1) of
the Banking Act 2004 (Act 673)
requested the Registrar of
Companies to wind up the affairs
of the company pursuant to the
provisions under the Bodies
Corporate (Official Liquidation)
Act, 1963 (Act 180).”
We have not had the benefit of
reading the letter written by
the Bank of Ghana but from what
we have quoted above the Bank of
Ghana did not leave the matter
of winding up of the Company to
the discretion of the Registrar
of Companies. The Bank requested
her to wind up the affairs of
the Company as Section 68(1)
empowers it to do. In our
understanding, the substance and
effect of the letter from Bank
of Ghana was to appoint the
Registrar of Companies as the
official liquidator to wind up
the affairs of the Company. The
intention of the legislature in
Section 68(1) of Act 673 is
quite clear so the fact that the
Registrar of Companies
misconstrued that appointment as
a petition and purported to
exercise her powers under
Section 3 (2) and (4) of Act 180
does not affect the validity of
her appointment under Section.
Act 180 gives power to the
Registrar of Companies and the
Court to order the official
winding up of insolvent
companies in general but in
Section 68(1) of Act 673, the
legislature has conferred that
power on the Bank of Ghana in
the case of licensed banks. In
those instances it is the Bank
of Ghana that determines the
status of insolvency of the bank
and not the Registrar of
Companies or the Court. On the
basis of the aid to
interpretation stated in the
Latin maxim generalia
specialibus non derogant
(general provisions do not
derogate from special ones), we
hold that the Registrar of
Companies was validly appointed
the official liquidator by the
Bank of Ghana to wind up the
affairs of DKM Diamond Micro
Finance Ltd pursuant to Section
68(1) of Act 673. As the
appointment directed, she is to
wind up the Company in
accordance with the provisions
of Act 180 so the steps she has
so far taken in line with the
provisions of Act 180 are valid.
At this stage we shall deal with
the point raised by the
Interested Party challenging the
lawfulness of the grant of leave
by the court to applicants to
proceed with their case after
the winding up had commenced.
The provision of section17 of
Act 180 is clear and
unambiguous. It provides that;
“On the commencement of a
winding up, no action or civil
proceedings against the company,
other than proceedings by a
secured creditor for the
realization of this security,
shall be proceeded with or
commenced save by leave of the
Court and subject to such terms
as the Court may impose.”
What it means in simple language
is that upon commencement of a
winding up only secured
creditors are allowed as of
right to sue or continue with
pending civil proceedings for
the realization of their
security. Any other person who
has a cause of action against a
company being wound up cannot
sue as of right but may do so
only with the prior leave of the
High Court. Similarly an
unsecured creditor who has
pending civil proceedings cannot
continue with them without leave
of the High Court. So the
Applicants in this case who are
not secured creditors were
within their rights to apply for
leave to continue with their
case and the judge acted in
accordance with law in granting
same.
We shall now consider the
application on its merits. The
grounds upon which this court
will exercise its discretion and
quash a decision of a court by a
writ of certiorari are as
follows; (i.) Where the court or
tribunal that gave the decision
acted without jurisdiction or in
excess of jurisdiction. (ii)
Where the court or tribunal
acted in breach of the rules of
natural justice. (iii) Where the
court or tribunal committed a
grievous error of law that goes
to jurisdiction and which error
is apparent on the face of the
record and. (iv) Where the court
or tribunal contravenes the
Wednesbury principles on
reasonableness.
One of the grounds for the
present Application can easily
be answered. Applicant has
contended before us that the
Yutong Bus belongs to DKM
Transport Company Ltd and the
judge exceeded her jurisdiction
when she ordered its release to
the liquidator as property of
DKM Micro Finance Ltd which is a
separate legal entity. There is
no issue of excess of
jurisdiction here. If
Applicants case is that there
was evidence showing the vehicle
is owned by DKM Transport Co.
Ltd, then their remedy is in an
appeal where the evidence will
be assessed. In any case, the
affidavit evidence before us
does not sufficiently prove that
the Yutong Bus belongs to DKM
Transport Co. Ltd. That ground
will be dismissed as
misconceived. For the other
grounds of the application, we
have deduced three issues that
arise for determination and they
are as follows;
i.
whether the order releasing the
properties was made suo motu.
ii.
whether in the absence of an
interpleader the trial judge had
jurisdiction to order the
discharge of the properties from
attachment.
iii.
Whether the failure by the
interested party to file a
formal application praying for
the release of the properties
denied the court jurisdiction to
make such an order.
In the first place, the manner
counsel for Applicant has used
the word suo motu in this
applicant is problematic. The
term “suo motu” is a
Latin legal term which means “on
its own motion”. A similar term
is “sua sponte” another
Latin legal term meaning “on its
own accord”. So to say a court
made an order “suo motu”
as contended by Applicant in
this case implies that the order
releasing the attached
properties to the interested
party was upon the judge’s own
motion. However, on the
processes before us the order
was based on the prayer of the
interested party contained in
paragraphs 16 and 17 of her
affidavits in opposition and
urged on the court by her
counsel during the hearing of
the application. It is
therefore wrong for the
applicants to talk of “suo
motu” in this application.
That leads us to the next issue
which is based on the Applicants
case that since no interpleader
was filed by the Interested
Party the court had no
jurisdiction to order the
release of the properties from
attachment. It is important to
recognise that the ground for
instituting interpleader
proceedings is where a third
party is claiming that property
attached to be sold in
satisfaction of a judgment does
not belong to the judgment
debtor but is property of the
party that files the
interpleader. This is done by
filing a notice of claim under
Order 44 Rule 12 of the High
Court (Civil Procedure) Rules,
2004 (C.I,47). The facts of
this case are different. The
liquidator did not apply for the
discharge of the attachment on a
claim that the property did not
belong to the judgment debtor.
In fact she based her claim on
the ownership of the judgment
debtor but her case was that on
the commencement of winding up
proceedings the liquidator by
law is to take possession of all
assets of the company under
liquidation. Furthermore the law
makes provision that if those
properties are subject matter of
civil proceedings the liquidator
may apply to the court for
orders to be made in respect of
those properties. Section 6
(2) and 16 (2) and (3) of Act
180 provide as follows;
“6 (2). During the interval
between the presentation of a
petition for an official winding
up and the commencement of the
winding up, the Court may, on
application being made by a
party thereto or the Registrar
stay any proceedings by or
against the company or in
respect of its property;
and accordingly any disposition
of the property of the company,
including things in action and
any transfer of shares shall,
unless the Court otherwise
directs, be void.(emphasis
supplied)
16 (1) Save as may otherwise be
directed by the liquidator, the
property of a company shall,
during winding up proceedings,
remain vested in the company.
(2) Subject to the provisions of
the preceding subsection, the
liquidator shall take into his
custody or under his control all
the property and things in
action to which the company is
or appears to be entitled.”
It seems to us that the above
provisions give authority to the
interested party to apply to the
court for orders in respect of
the Yutong Bus and the LPG
Filing Station and also confer
jurisdiction on the court to
consider the application.
Consequently there is no issue
of want or excess of
jurisdiction on the part of the
court in acceding to the prayer
of the Interested Party and
releasing the properties from
attachment.
The last issue of the
Applicant’s complaint, as we
understand it, is that the
Interested Party did not
formally apply for the release
of the attached properties.
Applicant is obviously referring
to a formal application in terms
of Order 19 Rule 1 (1) and
(4) of The High Court (Civil
Procedure) Rules, 2004, (C.I 47)
which provide as follows;
“1. (1) Every application in
pending proceedings shall be
made by motion.
4. Every application shall be
supported by affidavit deposed
to by the applicant or some
person duly authorised by the
applicant and stating the facts
on which the applicant relies,
unless any of these Rules
provides that an affidavit shall
not be used or unless the
application is grounded entirely
on matters of law or procedure
which shall be stated in the
motion paper.”
It must be noted that the
application made by the
interested party was in the
course of interlocutory
proceedings mounted by the
Applicants. Since the
application was not made in
initiating proceedings for a
substantive relief from the
court, the trial judge had
authority under Order 81 (1) of
C.I 47 to waive non-compliance
with order 19 Rule 1(1) and (4)
of CI 47 and determine it on the
merits it being reasonably
related to the subject matter of
Applicant’s motions. This is
particularly so as the
Interested Party has explained
that when she became aware that
the Applicants were about to
obtain orders for reserve price
which would enable them to sell
the properties and pay
themselves alone she had to
intervene using the fastest
means available in order to
protect the interest of other
depositors. Under the
circumstances, she included her
application in her affidavit in
opposition. We appreciate the
urgency with which the
Interested Party had to act and
do not consider that the failure
to present a formal motion
denied the court jurisdiction to
hear her and grant same. Since
the Applicants were served with
the affidavit in opposition
containing the prayer they
cannot claim to have been denied
opportunity to be heard on it.
We have considered all the
circumstances of this case and
in our considered opinion, since
DKM Diamond Micro Finance Ltd
was put under liquidation,
equity alone would demand that
all assets of the company ought
to come to the possession of the
liquidator so that all
depositors across board will be
paid part of their deposits.
For all of the above reasons we
find ourselves unable to grant
the prayer of the Applicant and
we therefore refuse the
application.
(SGD) G. PWAMANG
JUSTICE OF THE SUPREME COURT
(SGD)
V. J. M. DOTSE
JUSTICE OF THE SUPREME COURT
(SGD) ANIN
YEBOAH
JUSTICE
OF THE SUPREME COURT
(SGD) P. BAFFOE -
BONNIE
JUSTICE OF THE SUPREME
COURT
(SGD)
A, A. BENIN
JUSTICE OF THE SUPREME
COURT
COUNSEL
BAARIMA AGYEKUM HENNEH FOR THE
APPLICANTS,
GEORGE BEKAI FOR THE INTERESTED
PARTY.
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