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Company law - Directors -
Appointment - Appointment of
directors to be governed by
section 272(2) of Act 179 in
absence of provision in
Regulations of company - Court
ordering defendant, one of
members of company, to appoint
plaintiff as director - Whether
order valid - Companies Code
1963 (Act 179) s 272.
Company law - Shareholder -
Dividends - Shareholders
entitled to dividends only when
declared.
The plaintiff claimed against
the 1st defendant company and
the 2nd defendant, a director
and shareholder, jointly and
severally for damages for fraud
and for declarations that as a
director and member of the
company he was entitled to
dividends, profits etc from the
company, alternatively for an
order that he be appointed a
director. The plaintiff claimed
that prior to the incorporation
of the company he had come to an
agreement with the promoters
that he would be appointed a
director with 25 per cent
shareholding as consideration
for his pre-incorporation
services rendered to the
company. He complained that the
2nd defendant “fraudulently”
omitted to include him as a
director and shareholder when
registering the company. The
trial judge dismissed the claim
against the lst
defendant-company and, in an
exercise he termed “lifting the
veil”, awarded ¢3 million cedis
damages against the 2nd
defendant and ordered him to
appoint the plaintiff as a
director. He also ordered that
the register of the company be
rectified to include the
plaintiff as a member and
declared him to be entitled to
all rights of a member and
dividends from the date of
incorporation of the company. On
appeal,
Held
- (1) In the absence of any
provisions in the Regulations of
the company the appointment of
directors of the company would
be regulated under section
272(2) of Act 179 that enabled
the company to fill any vacancy
in the number of directors or
increase the number of directors
at any time by ordinary
resolution. The 2nd defendant
was only one of the members of
the company. The order that the
plaintiff be appointed a
director was made without
reference to the Regulations of
the company which were not
tendered in evidence. The court
was therefore not in a position
to decide whether the 2nd
defendant alone had the legal
competence to appoint a
director. The implications of
the order were therefore very
grave as the 2nd defendant was
ordered to do what he had no
legal capacity to do.
(2) Regarding the order that
the plaintiff was entitled to
all benefits of a member from
date of incorporation, what a
shareholder was entitled to were
dividends, when declared.
Cases referred to:
Akufo-Addo v Cathline,
dated 27/1/92, SC.
Oelkers v Ellis
[1914] 2 KB 139.
Lynn v Bamber
[1930] 2 KB 72.
E D Kom
(with him Charles Hayibor
and Mrs Sylvia Cudjoe)
for the appellant.
Afari Yeboah
for the respondents.
KPEGAH JA.
This is an appeal against the
judgment of his Honour Antwi,
sitting at the circuit court,
Sekondi.
According to the plaintiff he
and one R S Oduro, PW1,
conceived an idea to form a
stevedoring company. This was
when they were both working with
Atlantic Port Services, another
stevedoring company. Those who
were to join them in the
promotion of the company were Dr
De-graft Dickson, Mr F N Arthur
and a Madam Dade, the wife of
the 2nd defendant and Mr Brenya.
The said Madam Dade could not
attend the preliminary meeting
called for the purpose because
she was sick and had to be
represented by the 2nd
defendant, her husband.
The plaintiff said he objected
to the 2nd defendant being a
member of the proposed company
but he was persuaded by Mr Oduro
to accept him as the secretary
of the proposed company. To
this, he agreed. Being the only
promoter with any stevedoring
qualification, the plaintiff
said he was authorised to enter
into certain pre-incorporation
contracts and acquire certain
equipment needed for a
stevedoring company. He employed
and paid labourers. He also
applied for and obtained a
stevedoring license for the
company at a cost of ¢15,000.
The 2nd defendant was entrusted
with the registration of the
company with the
Registrar-General’s Department
under the Companies Code. When
he asked to sign the relevant
documents before registration,
the plaintiff said, he was
informed by the 2nd defendant
that the documents were with Mr
Oduro, PW1, who had then gone to
UK to procure forklifts for the
company. That was the end of the
matter, as he became
marginalised. He later heard
there was a suit pending in
court between Oduro and Arthur
on the one hand and the 2nd
defendant on the other, in
respect of the company. The
matter was settled; Oduro and
Arthur were paid off by the 2nd
defendant and his wife, who
became the only
director-shareholders of the
company. The company so
incorporated was Speedline
Stevedoring Company Ltd, the lst
defendant.
According to the plaintiff
before the company was
incorporated, there was an
agreement between him and the
other promoters that he, the
plaintiff, would be a
director-shareholder with 25 per
cent shareholding; that the
shares were to be paid for, not
in cash, but by his
pre-incorporation services
rendered to the company. But,
says the plaintiff, the 2nd
defendant fraudulently failed to
include his name as a
director-shareholder as agreed
when he was registering the
company. A suit was filed
against him by Arthur and Oduro,
the 2nd defendant and his wife.
Thereafter they fraudulently
passed a resolution to the
effect that they were the only
director-shareholders of the
company.
The plaintiff therefore took out
a writ in the circuit court
claiming against the defendants
jointly and severally for:
“(a) ¢5,000 damages for fraud;
(b) a declaration that he is a
director of the lst defendant
company; in the alternative, an
order for specific performance
that he be made a director;
(c) a declaration that he is a
member of the said company and
entitled to dividends, profits
etc from the company’s
operations.”
The learned trial judge
dismissed the claim against the
lst defendant company. And, in
an exercise he termed lifting
the veil “in order to fix who is
responsible for the loss
incurred by the plaintiff” as a
result of the conduct of the 2nd
defendant who is an officer of
the company, the trial judge
awarded ¢3 million damages
against the 2nd defendant. He
then proceeded to order the 2nd
defendant, one of the
shareholders, to appoint the
plaintiff as a director of the
lst defendant company. The court
also ordered that the register
of the company be rectified to
include plaintiff’s name as a
member. The learned trial judge
declared the plaintiff to be
entitled to dividends from the
date of incorporation of the
company.
I would, before delving into the
details of the matter only like
to subject the orders made by
the court to some scrutiny. I
will therefore quote the
relevant portion in detail:
“I hold that the plaintiff is
entitled to a specific
performance of the said
agreement to make him a director
and so order the 2nd defendant
to carry it out.
I further order that the
register of the company be
rectified to include the name of
the plaintiff in accordance with
section 35 of Companies Code.
Following from this order the
plaintiff is also entitled to
all rights of a member from date
of incorporation, (October
1976), and all benefits to him
as such a member.”
The implication of the first
part of the order is that the
2nd defendant, one of the
members of the company, must
make the plaintiff a director or
to appoint him to that position.
This was made without reference
to the Regulations of the
company which normally contain
the mode for the appointment of
a director of a company. Indeed
the Regulations were not
tendered in evidence. One
therefore is not in a position
to decide whether the 2nd
defendant only has the legal
competence to appoint a
director.
The implications of the order
are therefore very grave as the
2nd defendant finds himself
being ordered to do what he has
no legal capacity to do. I am
not prepared to speculate what
the Regulations of the company
say on the issue. I do not want
to expose myself to any
criticism of violation of rule
8(6) of LI 218 which states:
“Notwithstanding the foregoing
provisions the court in deciding
the appeal shall not be confined
to the grounds set forth by the
appellant. Provided that the
court shall not rest its
decision on any ground not set
forth by the appellant unless
the respondent has sufficient
opportunity of contesting the
case on that ground.”
If forced to decide the case
here I will only recall what I
said in the leading judgment in
the Supreme Court case of
Akufo-Addo v Cathline dated
27/1/92. I will quote same:
“I must concede the fact that
there is no ground filed in the
Court of Appeal which could be
said to be a complaint against
the trial court’s decision to
decree title to the Kaneshie
House in the plaintiff when
there had been no claim for such
a relief. No such ground was
specifically formulated and
argued in that court. The
plaintiff’s criticism is the way
the issue was raised suo motu
thereby denying her any
opportunity to contest the
appeal on that ground. The
rationale behind the
provisions in rule 8(6) of LI
218, in my view, is that a
person who has been brought to
an appellate forum to maintain
or defend a verdict or decision
which he has got in his favour
must not only understand (per
the grounds stated in the notice
of appeal) on what ground or
grounds the judgment is being
impugned, but must also have
sufficient opportunity to
controvert those grounds or any
one on which his verdict is
likely to be set aside.
It must be said that it is not
only a matter of justice and
judicial obligation, but indeed
an appreciation of rules which
have the force of statute, that
the Court of Appeal has the duty
to do that which the court below
ought to have done. This
responsibility cannot be
properly and meaningfully
discharged without the Court of
Appeal taking a global view of
the case as whole.
Therefore in applying the
proviso to rule 8(6) of LI 218
care must be taken that we do
not, in the process, give an
interpretation which will
inhibit or stultify the rule
that an appeal before the Court
of Appeal “shall be by way of
rehearing”. The proviso cannot
in my view be said to imply an
absolute prohibition. In certain
special or exceptional
circumstances, the proviso will
not apply.
So it can be said that the Court
of Appeal should not decide in
favour of an appellant on a
ground not put forward by him
unless the court is satisfied
beyond doubt, first that it has
before it all the facts or
matters bearing on the
contention being taken by it
suo motu, secondly that the
point is such that no
satisfactory or meaningful
explanation or legal contention
can be advanced by the party
against whom the point is being
taken even if an opportunity is
given him to present an
explanation or legal argument;
for example, void matters as in
this case”.
I will therefore approach the
issue as if the appointment of a
director is not regulated by the
company’s Regulations. I will
therefore bring the matter under
section 272(2) of Act 179 which
provides that in the absence of
a provision in the Regulations
as to the mode of appointment of
a director, the company may,
“at any time by ordinary
resolution fill any vacancy in
the number of directors and may
at any time by ordinary
resolutions increase the number
of directors so however that the
total number of directors shall
not exceed the maximum, if any,
prescribed by the Regulations.”
The evidence is clear that the
2nd defendant is only one of the
members of the company. The
question again arises whether he
alone can act under this section
to appoint the plaintiff as
director in the company, unless
he has, prior to such
appointment consented in
writing, to be so appointed.
The trial judge, after holding
that there is no evidence to
satisfy the requirements of the
law and consequently refusing to
grant the last relief for a
declaration that he is a
director of company, turned
round to grant what he called an
order of specific performance
against one of the shareholders,
the 2nd defendant, that the
plaintiff be made a director.
This order is predicated upon
“an agreement to make plaintiff
a director.” The finding of the
court below was a follows:
“The evidence of plaintiff and
PW1 is that there was a meeting
where it was decided that he was
to be made a director.”
This, however, is what PW1, the
plaintiff’s own witness said in
unequivocal language:
“I am not aware that myself or
anybody ever gave plaintiff the
assurance that he was to be a
director of Speedline
Stevedoring Company.”
This piece of evidence from PW1
should seriously undermine the
views of the trial court as
quoted above.
There was no attempt by the
plaintiff to question the
evidence of PW1 and I have no
reason to doubt him. I say so
because after the incorporation
of the company, the plaintiff
was employed as a General
Manger. He was so employed from
2 October 1977 till 1982 when he
resigned.
I will now consider the main
arguments in this appeal. Mr Kom
for the appellant can be
summarised as follows:
(a) that the trial judge erred
in giving judgment to the
plaintiff since there was no
contract between the plaintiff
and the 2nd defendant.
(b) the plaintiff was estopped
by laches and acquiescence;
(c) that if the plaintiff was
not to pay for the shares he
claimed to have been allotted
with cash but rather services,
the case should have been dealt
with under section 42 of the
Companies Code 1963 (Act 179).
Mr Afari-Yeboah, learned counsel
for the plaintiff can also be
summarised as follows:
(a) the defendant did not plead
the Statute of Limitation and
cannot now take advantage of
same.
(b) that on the evidence there
was a valid agreement to make
the plaintiff a
director-shareholder of the
proposed company.
(c) the fact that the plaintiff
worked for the company for
several years and retired before
making his claim did not amount
to acquiescence on his part.
(d) the finding of fraud
against the 2nd defendant is
valid in view of the evidence on
record.
The crux of the plaintiff’s case
is that there had been an
agreement between him and the
other promoters of the company
that he be made a
director-shareholder of the
company to be formed. As a
result of this agreement, he
rendered certain services to the
company and his shares were to
be paid for, not with cash, but
his services.
The learned trial judge in his
judgment made a very important
finding against the plaintiff’s
claim of directorship of
Speedline Stevedoring Company
Limited; this is what he said in
his judgment:
“To be made a director you need
to fill a form to accept
appointment as a director. No
evidence was led by plaintiff to
the effect and so the claim
should fail.”
This view must have been based
on section 181 (1) of Act 179
which stipulates that no person
shall be appointed a director of
a company unless he has, prior
to such appointment, consented,
in writing, to be so appointed.
The trial court held that there
was no evidence to satisfy this
requirement and refused the
plaintiff’s claim for a
declaration that he is a
director of the company. He
however turned round to grant
what he called an order of
specific performance against the
2nd defendant that the plaintiff
be made a director . This order
was granted in an exercise he
called lifting the veil and was
based on a finding of “an
agreement to make plaintiff a
director”. The finding of the
court was as follows:
“The evidence of plaintiff and
PW2 is that there was a meeting
where it was decided that he was
to be made a director.”
This is the finding upon which
the whole judgment and the
finding of fraud against the 2nd
defendant is based. However what
the plaintiff’s own witness,
(PW1), said in unequivocal
language was as follows:
“I am not aware that myself or
anybody ever gave plaintiff the
assurance that he was to be a
director of Speedline
Stevedoring Company.”
This piece of evidence seriously
undercuts the finding of fact by
the trial judge as quoted above.
PW1 did not support the claim of
the plaintiff as found by the
learned trial judge.
It is difficult to disbelieve
the story of PW1 in view of the
plaintiff’s own conduct.
From his own evidence the
plaintiff appears to be fully
aware of the procedure and the
requirements of incorporating a
company under the laws.
The plaintiff was employed as a
General Manager after the
incorporation of the company. He
was so employed from the lst day
of October 1977 till 1982 when
he resigned and collected all
his entitlements. According to
the plaintiff himself, in 1980
he became aware that 2nd
defendant and his wife litigated
with Oduro and Arthur in the
courts over the directorship and
membership of the company. The
case was settled and the 2nd
defendant and his wife paid off
Oduro and Arthur to take over
the company. The plaintiff, in
his unexplained state of stupor,
continued to work dutifully for
the company as its General
Manager without raising a finger
or making any murmur. Also, as
the General Manager with
Speedline Stevedoring Company
from 1977 to 1982, it is not
improbable that the plaintiff
can claim with any hope of
appearing credible, that he did
not know who the directors and
shareholders of the company
were. When the Registrar-General
was conducting an investigation
into the shareholding and
operations of the company as a
result of dispute between Oduro
and Arthur on one hand and the
2nd defendant on the other hand,
the plaintiff stood by. It was
this dispute which finally ended
up in court.
Even if these circumstances
cannot in law be cited as
acquiescence, they at least
point to the extreme
improbability of the plaintiff’s
assertions.
Also on the important issue as
to who paid the ¢15,000 for the
stevedoring licence, the court’s
finding is that “in 1976 the
plaintiff paid ¢15,000 for the
licence” is not supported by the
evidence. His own witness, PW1,
denied it was plaintiff who paid
and said he rather paid the
¢15,000.
On the facts alone I think I can
safely allow this appeal without
relying on legal technicalities
which I think are also readily
available to the 2nd defendant.
I only want to remark that after
awarding three million cedis as
damage to the plaintiff the
court laced it with an order
that he is entitled “to all
rights of a member from the date
of incorporation, October 1976,
and all benefits as such a
member”. Every student of
company law knows that what a
shareholder is entitled to is
dividends which are declared
after profit.
After awarding the colossal sum
of ¢3 million cedis, the learned
trial judge further ordered
finally, that the plaintiff be
paid dividends from 1976 to date
of judgment.
I think there are justifiable
legal reasons for interfering
with the awards also.
I find the judgment of the court
below most unsatisfactory and
will allow the appeal and set
same aside with costs.
ADJABENG JA.
I agree.
AMPIAH JSC.
I have read the judgment of my
brothers in this appeal.
Unfortunately, I am not able to
agree with them on all their
conclusions.
In his action before the court,
the plaintiff claimed against
the defendants jointly and
severally for:
“(a) Cash the sum of five
million cedis (¢5,000,000) as
damages for fraud;
(b) A declaration that he was a
director of the lst
defendant-company and, or, in
the alternative a declaration of
specific performance of an
agreement that he be made a
director of the lst
defendant-company.”
In the course of the trial,
counsel for the defendants
applied to the court to have the
lst defendant-company struck out
as a party to the action on the
ground that no evidence of fraud
had so far been led against the
lst defendant-company. On
18/5/90 the learned trial judge
acceded to the request and
accordingly struck out the lst
defendant-company as a party to
the action and also all the
claims against it. The plaintiff
appealed against this ruling. On
28/6/90, the trial judge
proceeded to give judgment
against the 2nd defendant only.
The 2nd defendant has appealed
against this decision.
At the hearing of the appeal,
the plaintiff appeared to have
dropped his appeal, he did not
argue it. Having thus failed to
prosecute his appeal against the
striking out of the lst
defendant-company as a party in
the action the plaintiff lost
the opportunity of effectively
pursuing his other claims
against the lst
defendant-company. Although the
judge may have been right in
discontinuing or dismissing the
plaintiff’s claim of fraud
against the lst
defendant-company, in my opinion
the proper parties to the
plaintiff’s claims for a
declaration and specific
performance as contained in his
claims (b) and (c) were the
plaintiff and the lst
defendant-company. Although the
2nd defendant is said to have
been authorised to have the
company registered, he could not
be said to be the company; he
was at best an agent of a
company to be registered. The
company as a legal entity is
quite different from those who
form it. It can only be
responsible for acts done under
its authority. A claim for
declaration or specific
performance could only be made
in a proper case against the
company and not its members
except in special situation for
example where the members
continue to run the company
while its substratum has fallen
or where they continue while the
required number for forming the
company has reduced. Having thus
discharged the lst
defendant-company from its
obligation under the action, the
court could not hold the 2nd
defendant liable for specific
performance or a declaration
such as the ones sought by the
plaintiff. The 2nd defendant has
appealed against the order of
specific performance and
declaration made against him. I
think in the circumstances, he
is entitled to succeed. He
cannot be made to do an act
against a company which is not a
party to the action. The appeal
against the order of specific
performance and the declarations
sought by the plaintiff in his
claims (b) and (c) would
therefore be allowed and the
orders made thereunder set
aside. I would dismiss
plaintiff’s claims (b) and (c).
The same cannot however be said
of the plaintiff’s claim for
fraud against the 2nd defendant.
Fraud is an issue of fact for
the trial judge. On the evidence
the judge found fraud against
the 2nd defendant and gave
judgment for the plaintiff. Such
a finding can only be set aside
if it is either perverse or not
supported by the evidence on
record.
It was the case of the plaintiff
that some time in 1976 he and
one S R Oduro (PW1) decided to
form a stevedoring company. They
invited one Arthur and a Dr
De-Graft Dickson to join them as
shareholders. The name of the
company was to be the Speedline
Stevedoring Company. It was
agreed that each of these
persons including themselves
should hold 25% of the share
capital. Subsequently a licence
for the operation of the company
was obtained from the Ghana
Railways and Harbours Authority.
In the interim, the 2nd
defendant was requested to go on
with the registration processes
at Tema. While so engaged at
Takoradi, the plaintiff
occasionally made enquiries from
PW1 as to the progress in the
registration exercise and his
shareholding. PW1 assured him
that everything was under
control and that the 2nd
defendant was processing the
papers. Believing and accepting
what PW1 had told him, the
plaintiff continued to perform
his duties conscientiously at
Takoradi. On the last occasion
when he had met and asked PW1
about the papers, PW1 had told
him that he (PW1) was proceeding
to Britain and that on his
return he would let the
plaintiff know what the
situation was. PW1 however never
told him anything on his return
to Ghana. He got to know later
that PW1 himself had taken
action against the 2nd defendant
for fraudulently dealing with
the company’s affairs and that
the matter had been settled in
court. After further enquiries
he (the plaintiff) realised that
he had been defrauded by both
PW1 and the 2nd defendant and
had been kept out of the
company. He decided therefore to
resign from the company and
pursue his claims against the
company and 2nd defendant.
Earlier in June 1987, the
plaintiff had taken action
against the 2nd defendant (as
lst defendant) and the company
(as 2nd defendant). His claim
was for:
“(a) The lst defendant to be
restrained from owning up the
2nd defendant-company as his
own.
(b) be restrained until the
final determination of the issue
of the directors.
(c) the plaintiff be restored
to his position as at the
incorporation of the 2nd
defendant-company.
(d) any other relief or
reliefs.”
See exhibit 3. It is not known
what came out of the action.
The 2nd defendant on his part
resisted the claim by the
plaintiff and said that the
plaintiff had never been
involved in the formation of the
company and that he (the
plaintiff) had always worked for
the company as an employee only.
The particulars of fraud alleged
by the plaintiff against the 2nd
defendant are contained in
paragraph 8 of the statement of
claim.
The main issues which arose on
the pleadings for determination
were:
“(a) whether or not it was
agreed that the plaintiff be
made a director-shareholder of
the company;
(b) whether the 2nd defendant
has committed fraud on the
plaintiff;
(c) whether the plaintiff was
estopped by laches and
acquiescence from bringing the
action.”
The learned trial judge found
that there was agreement among
the promoters that on the
incorporation of the company
each of the promoters including
the plaintiff be made directors
and allotted with 25% of the
share capital. Admittedly there
was no written agreement to that
effect but the evidence of PW1
who himself became a victim of
the 2nd defendant’s fraud shows
that none of the promoters who
later became
director/shareholders by the
pre-incorporation agreement had
their agreement put into
writing. The 2nd defendant who
was charged with the process of
registration and who claimed to
be the secretary did not produce
any records of the meetings, not
even the lst meeting, and other
relevant documents he was
required to handle. In fact his
dealings with the company’s
affairs in its formation period
were found to be fraudulent -
see exhibit 1. That the
plaintiff’s name did not appear
in any of the documents tendered
in evidence did not derogate
from the plaintiff’s claim that
the 2nd defendant had defrauded
him. The leaving out of the
plaintiff’s name was part of the
fraud complained of by
plaintiff. The statement by the
PW1 that “he was not aware that
myself or anybody ever gave
plaintiff assurance that he was
to be made a director... “cannot
be considered in isolation. This
cannot displace the overwhelming
evidence of PW1, the other
witness and the plaintiff’s own
evidence which the trial judge
believed. As stated before, no
minutes of the first or
subsequent meetings of the
company were tendered in
evidence. Does that mean that
there was never a meeting of the
company? Since the 2nd defendant
was in charge of the formation
processes of the company and was
also acting as secretary at the
time, there was a burden cast on
him to produce the minutes. The
concealment of these documents
was one of the acts of fraud
perpetrated by the 2nd defendant
on the other members of the
company. According to the 2nd
defendant he only got to know
about the plaintiff in
November-December 1977. One may
ask, so all the time that the
plaintiff was working at the
Takoradi post of the company of
which the 2nd defendant claims
to be the Managing director,
with whom was he dealing? The
2nd defendant cannot feign
ignorance of the presence of the
plaintiff.
Section 13 of the Companies Code
1963 (Act 179) provides:
“13(1) Any contract or other
transaction purporting to be
entered into by a company prior
to its formation or by any
person on behalf of the company
prior to its formation may be
ratified by the company after
its formation; and thereupon the
company shall become bound by
and entitled to the benefit
thereof as if it had been in
existence at the date of such
contract or other transaction
and had been a party thereto.
(2) Prior to ratification by a
company the person or persons
who purported to act in the name
or on behalf of the company
shall, in the absence of express
agreement to the contrary, be
personally bound by the contract
or other transaction and shall
be entitled to the benefit
thereof.”
Since there was no ratification
of the agreement, apparently due
to the 2nd defendant’s
fraudulent dealings with the
company’s affairs, the company
itself could not be impeached
but, sub-section (2) of section
13 of Act 179, would give the
plaintiff the right to any
benefits that have resulted from
the 2nd defendant’s default and,
if it is not possible to claim
from the company, then any
person or persons who have
fraudulently caused the loss of
the benefit must be held liable
to pay compensation to the
plaintiff.
The learned trial judge found
that the 2nd defendant defrauded
the plaintiff. The 2nd
defendant’s secret and
clandestine dealings with the
company’s affairs as evidenced
by the Registrar-General’s
Report (exhibit 1) was
sufficient evidence of fraud on
both the plaintiff and the
company, and, the court so
found. These were findings of
fact supported by the evidence.
I do not think sufficient cause
has been shown for disturbing
them.
The 2nd defendant had pleaded
delay and acquiescence against
the plaintiff on his claim based
on fraud. His contention was
that even if there was fraud,
the plaintiff had delayed in
bringing the action and had
acquiesced in the act. The trial
judge found that in the
particular circumstances of the
case, there was neither delay
nor acquiescence to defeat the
plaintiff’s claim. In coming to
this conclusion the judge had
observed that where there was
fraud, time was no bar to an
action. This statement, to my
mind, even though it is not
wholly incorrect, is too wide
and needs qualification.
Section 22(1) of the Limitation
Decree 1972, (NRCD 54) provides:
“22(1) Where, in the case of
any action for which a period of
limitation is fixed by this
Decree:
(a) the action is based on the
fraud of the defendant or his
agent or any person through whom
he claims for his agent, or
(b) the right of action is
concealed by fraud of any such
person or
(c) the action is for relief
from the consequences of
mistake,
the period of limitation shall
not begin to run until the
plaintiff has discovered the
fraud or mistake, as the case
may be or could with reasonable
diligence have discovered it;
Provided that, for the purposes
of this Decree, concealed fraud
by one of concurrent wrongdoers
shall not suspend time for
another or others.”
The 2nd defendant did not rely
on the statute but relied on the
equitable doctrine of laches and
acquiescence. In Lindsay
Petroleum Company v Hurd
[1874] LR 5 PC 221, 239-240,
Lord Selbourne observed:
“The doctrine of laches in
Courts of Equity is not an
arbitrary or a technical
doctrine. Where it would be
practically unjust to give a
remedy, either because the party
has, by his conduct done that
which might fairly be regarded
as equivalent to a waiver of it,
or where by his conduct and
neglect he has, though perhaps
not waiving that remedy, yet put
the other party in a situation
in which it would not be
reasonable to place him if the
remedy were afterwards to be
asserted, in either of these
cases lapse of time and delay
are most material. But in every
case, if an argument, against
relief, which otherwise would be
just, is founded upon mere
delay, that delay, of course,
not amounting to a bar by any
statute of limitations, the
validity of that defence must be
tried upon principles
substantially equitable. Two
circumstances always important
in such cases are, the length of
the delay and the nature of the
acts done during the interval,
which might affect either party
and cause a balance of justice
or injustice in taking the one
course or the other, so far as
relates to the remedy.”
The evidence on record does not
show that the plaintiff had
waived fraudulent acts of the
2nd defendant or acted in a way
as to put the other party (the
2nd defendant) in a situation in
which it would not be reasonable
to place him if the remedy were
afterwards to be asserted. The
evidence rather shows that not
only had the 2nd defendant
concealed the whole affair from
the plaintiff but he had also
together with PW1 on whom the
plaintiff relied, manipulated
the records of the company so as
to keep the plaintiff out of the
company. The company which was
said to have been registered on
29/10/76 with 4 people as
shareholders was on 29/3/77
registered anew with only two
shareholders - see exhibits B
and D. This first company was
registered with No. 1902 while
the 2nd was numbered 5057. The
change was effected by the 2nd
defendant and his wife at a
meeting of which no notice had
been given, of the self-styled
directors namely the 2nd
defendant and his wife. This
conduct, the report (exhibit 1)
showed, was a fraudulent way by
which the 2nd defendant tried to
keep the affairs of the company
concealed from the plaintiff and
the others. To which of the two
companies did the plaintiff
belong? When the plaintiff
became aware of this fraud on
him - PW1 never told him of the
action he had taken in court and
the outcome of the action - he
queried the 2nd defendant and
when he was given no
satisfactory explanation he
resigned from the company as the
General Manager; the 2nd
defendant himself was a paid
employee. Since these fraudulent
acts were concealed from the
plaintiff, I agree with the
learned trial judge that if
there was any delay, the delay
was “pardonable”. The term
‘concealed fraud’ it has been
held, includes not only wrongful
acts which the defendant took
active steps fraudulently to
conceal from the knowledge of
the plaintiff but also any
wilful wrongdoing which is
unknown to the plaintiff at the
time when it is committed - see
Oelkers v Ellis [1914] 2 KB
139; also Lynn v Bamber
[1930] 2 KB 72.
For the above reasons, I would
dismiss the 2nd defendant’s
appeal against the award of
damages for fraud.
Appeal allowed.
S Kwami Tetteh, Legal
Practitioner |
