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Company Law - Companies Act 1963
(Act 179) -
Estoppels
- Fraud
- Breach of duty -
Whether plaintiff has capacity
as the managing director the 2nddefendant
to sign and issued a Guarantee
Bond on behalf of the plaintiff
company - Whether the
plaintiff company in a settlment
out of court against the
plaintiff, the 2nd
defendant did not obtain the
approval and authority - Whether
this action breached her duty of
being honest and faithful to the
plaintiff company - Whether
plaintiff’s claim should be
based on fraud and nothing else.
HEADNOTES
“The plaintiff is a limited
liability public company
registered and operating in
Ghana as an insurer. The 1st defendant
is a non-banking financial
services provider. The 2nd defendant
was at all material times the
managing director of the
plaintiff company whilst the 3rd defendant
is a limited liability company
registered and engaged in the
construction industry in Ghana.
The 4th and 5th defendants
were at all material times the
managing director and the
director respectively of the 3rd defendant.
The 4th defendant was
also a shareholder of the 3rddefendant.
The case of the plaintiff is
that in her capacity as the
managing director the 2nddefendant
signed and issued a Guarantee
Bond (known as the Second Bond)
on behalf of the plaintiff
company and in favour of the
other defendants herein, in
particular the 1stdefendant
for a sum of Nineteen Million
Three Hundred and Three
Thousand, Eight Hundred Ghana
Cedis, Eight Pesewas
(GH¢19,303,800.08) contrary to
previous resolution of the Board
of Directors of plaintiff
company to discontinue the
issuance of guarantee bonds. The
plaintiff further claimed that
the 2nd defendant
also engaged in and settled out
of court a suit no. BFS/300/13
brought against the plaintiff
company (which was the 4th defendant
in that suit) and the other
defendants in the instant suit,
by the 1st defendant
herein (as plaintiff in that
suit) to enforce the payment of
this second Guarantee Bond when
the plaintiff herein failed or
defaulted to honour the said
Bond upon maturity. According to
the plaintiff company in
settling out of court the said
suit (No. BFS/300/13) against
the plaintiff, the 2nd defendant
did not obtain the approval and
authority and in so doing
breached her duty of being
honest and faithful to the
plaintiff company. The plaintiff
claimed that in so doing or
acting the 2nd defendant
was in fraudulent collusion with
the other defendants herein who
had been sued with the
plaintiff. It was on the basis
of these claims that on the 26th day
of January 2015 the plaintiff
issued the writ of summons
against the defendants seeking
the following reliefs
HELD :-
We think that enough has been
said to demonstrate that the
lower courts, with all due
respect, were in clear error
when they ignored the plea of
fraud and treated the action as
an ordinary suit in the manner
they did. We think that this
caution, no matter when and the
circumstances under which it was
raised should have been
carefully considered. The
Supreme Court as the highest
Court of the land is enjoined to
give directives, directions and
orders to courts lower than it
to foster judicial harmony. We
think the Court of Appeal ought
not to have disregarded this
well considered opinion of His
Lordship. We think that such
practice would not advance
substantial justice and judicial
harmony. If the Court of Appeal
had considered the issue of
fraud it would certainly have
set aside the judgment of the
learned High Court Judge. For
the reasons canvassed above we
allow the appeal and set aside
the judgments of both the High
Court and the Court of Appeal
and order a trial on the merits
based on the pleadings as they
stood at the High Court.
STATUTES REFERRED TO IN JUDGMENT
Companies Act 1963 (Act 179) Section
203
High Court (Civil Procedure Rules ) LN
140A of 1954 Order 25 rule 4
High Court( Civil Procedure Rules) CI
47 of 2004 Order 11 rule 18
CASES REFERRED TO IN JUDGMENT
OKWEI MENSAH (Decd) (acting by)
ADUMUAH OKWEI V LARYEA (Decd)
(acting by) ASHIETEYE LARYEA &
ANOTHER [2011] 1 SCGLR 317
HENDERSON V HENDERSON [1843] 3 Hare
100,
FOLI & ORS V AGYA ATTA & ORS
(consolidated) [1976] 1 GLR 194
CA
SASU V AMUA-SEKYI & ORS [2003/04] 2
SCGLR 746
REPUBLIC V HIGH COURT (COMMERCIAL
DIVISION) ACCRA; EX PARTE THE
TRUST BANK LTD (AMPONSAH PHOTO
LAB LTD. & THREE OTHERS (
INTERESTED PARTIES [2009] SCGLR
164
EMERIS V WOODWARD [1889]46 Ch D 185
GHANA MUSLIMS REPRESENTATIIVE COUNCIL
V SALIFU [1975] 2 GLR 246 CA,
OKOFO ESTATES LTD. V MODERN SIGNS LTD.
& ORS [1996/97] SCGLR 224
JONAH V KULENDI & KULENDI [2013/14] 1
GLR 272
GBENARTEY & GLIE V NETAS PROPERTIES &
INVESTMENTS & ORS [2015/16]1
SCGLR 605
THE REPUBLIC OF PERU V PERUVIAN GUANO
[1887] 1 Ch 465
HUBBUCK & SONS LTD. V WILKINSON
HEYWOOD & CLARK [1899] 1 QB 86.
DZOTEPE V HAHORMENE III [1987/88]2 GLR
681
Duchess of Kingston’s Case [1776] 20
st Tr 355 at 357
REPUBLIC V HIGH COURT, COMMERCIAL
DIVISION, EX PARTE IVORY FINANCE
COMPANY LIMITED, dated 19/05/16,
Suit No.JS/20/2016
BOOKS REFERRED TO IN JUDGMENT
Kerr on Fraud and mistake 7th
Edition
DELIVERING THE LEADING JUDGMENT
ANIN YEBOAH, JSC:-
COUNSEL.
KWAME ADORBOR LED BY KIZITO
BEYUO FOR THE PLAINTIFF/
APPELLANT/ APPELLANT.
RICHARD AMOFA LED BY EMMANUEL
AMMISAH FOR THE DEFENDANTS/
RESPONDENTS/ RESPONDENTS
ANIN YEBOAH, JSC:-
On 26/1/2015, the
Plaintiff/Appellant/Appellant
herein (who for sake of brevity
shall be referred to as the
Plaintiff) commenced these
proceedings at the Commercial
Division of the High Court,
Accra, against the five
defendants (who shall be
referred to in this judgment as
the defendants) for several
reliefs endorsed on the writ of
summons thus:
(a)
a declaration that the 2nd
Defendant acted in breach of
Section 203 of the Companies Act
1963 (Act 179) in issuing the
First and Second Guarantee
bonds;
(b)
a declaration that the 2nd
Defendant acted in breach of
Section 203 of the Companies Act
1963 (Act 179) in negotiating
and signing the Terms of
Settlement;
(c)
a declaration that the consent
judgment entered against the
Plaintiff on 27th
November 2014 was procured by
fraud perpetrated by the
defendants herein;
(d)
an order to set aside the
consent judgment entered against
the plaintiff on 27th
November 2014;
(e)
damages against the 2nd
Defendant for breach of Section
203 of the Companies Act 1963
(Act 179);
(f)
damages against the Defendant.
It should be noted that the case
before us did not proceed to
trial or even application for
directions stage but was
truncated at the High Court when
on the 17th of April
2015, the court granted an
application to dismiss the suit
summarily on the grounds that
“the endorsement on the writ of
summons and the statement of
claim does not only fail to
disclose a reasonable cause of
action against the 1st,
3rd, 4th
and 5th defendants
but was frivolous, vexatious and
an abuse of the process of the
court”.
The facts appear not to be
controverted and for the sake of
consistency I shall proceed to
adopt the facts as set down by
the Court of Appeal thus:
“The plaintiff is a limited liability
public company registered and
operating in Ghana as an
insurer. The 1st
defendant is a non-banking
financial services provider. The
2nd defendant was at
all material times the managing
director of the plaintiff
company whilst the 3rd
defendant is a limited liability
company registered and engaged
in the construction industry in
Ghana. The 4th and 5th
defendants were at all material
times the managing director and
the director respectively of the
3rd defendant. The 4th
defendant was also a shareholder
of the 3rd defendant.
The case of the plaintiff is
that in her capacity as the
managing director the 2nd
defendant signed and issued a
Guarantee Bond (known as the
Second Bond) on behalf of the
plaintiff company and in favour
of the other defendants herein,
in particular the 1stdefendant
for a sum of Nineteen Million
Three Hundred and Three
Thousand, Eight Hundred Ghana
Cedis, Eight Pesewas
(GH¢19,303,800.08) contrary to
previous resolution of the Board
of Directors of plaintiff
company to discontinue the
issuance of guarantee bonds. The
plaintiff further claimed that
the 2nd defendant
also engaged in and settled out
of court a suit no. BFS/300/13
brought against the plaintiff
company (which was the 4th
defendant in that suit) and the
other defendants in the instant
suit, by the 1st
defendant herein (as plaintiff
in that suit) to enforce the
payment of this second
Guarantee Bond when the
plaintiff herein failed or
defaulted to honour the said
Bond upon maturity.
According to the plaintiff company in
settling out of court the said
suit (No. BFS/300/13) against
the plaintiff, the 2nd
defendant did not obtain the
approval and authority and in so
doing breached her duty of being
honest and faithful to the
plaintiff company. The plaintiff
claimed that in so doing or
acting the 2nd
defendant was in fraudulent
collusion with the other
defendants herein who had been
sued with the plaintiff. It was
on the basis of these claims
that on the 26th day
of January 2015 the plaintiff
issued the writ of summons
against the defendants seeking
the following reliefs:”
The Court of Appeal after hearing the
appeal dismissed the appeal and
affirmed the judgment of the
trial High Court. It proceeded
to dismiss the entire case on
the merits regardless of the
fact that the case did not go
for full trial. This is a
subject of a couple of
legitimate complaints as
captured in the grounds of
appeal which will be discussed
later in this delivery. After
the dismissal of the appeal by
the Court of Appeal on the
15/12/2016, the plaintiff lodged
this appeal that very day and on
1/02/2017 successfully sought
leave and amended the Notice of
Appeal with the following
grounds of appeal to seek the
reversal of the judgment:
(i)
The decision by their Lordships
upholding the ruling of the High
Court Judge is not supportable.
(ii)
Their Lordships in the Court of
Appeal erred in raising anew and
determining the issue of
estoppels without giving the
appellant a hearing on the
issue.
(iii)
The decision of the Court of
Appeal on the novel issue of
estoppels was made without
giving the Appellant a hearing,
and in breach of the rule of
natural justice.
(iv)
The Court of Appeal erred in
determining factual and other
matters not raised or determined
in the Court below.
(v)
The Court of Appeal erred in
determining factual and other
matters not decided in the Court
below without giving the
appellant a hearing on those
issues, thus violating the audi
alteram rule.
(vi)
The Court of Appeal erred in
raising and determining the
issue of estoppels in disregard
of the rule of mutuality.
(vii)
The authority of the Managing
Director to issue the bond in
issue was not relevant to the
matter on appeal in the Court of
Appeal.
(viii)
The Court of Appeal erred in not
complying with the directive of
the Supreme Court in Suit No.
J5/20/2016 entitled Republic v
High Court, Commercial Division,
Ex parte Ivory Finance Company
Limited, that the action ought
to be heard on the merits.
(ix)
The Court of Appeal omitted to
decide on the ground of appeal
against the trial judge striking
out 3rd, 4th
and 5th defendants’ suomotu.
We have recited all the grounds of
appeal to show the extent of the
complaints raised against the
judgment of their Lordships at
the Court of Appeal which is now
before us.
Before we proceed to discuss the
grounds of appeal, we have
decided to point out a serious
procedural issue which appears
to have eluded the two lower
courts.
This action in our respectful opinion
was commenced to set aside a
consent judgment obtained before
a court of competent
jurisdiction on grounds of
fraud. The basic common law
procedure which has been a
settled practice is that the
plaintiff’s claim should be
based on fraud and nothing else.
In the proceedings before us,
the plaintiff in the statement
of claim raised issues relating
to Section 203 of the Companies
Act 1963 (Act 179) and its
apparent breach by the managing
director. In the statement of
claim the plaintiff pleaded
breach of duty and supplied
copious particulars based on
allegations of second
defendant’s recklessness also
based on Section 203 of Act 179
of 1963. No complaint has been
raised by the defendants against
the procedural flaw and the
lower courts never raised it. We
think that it would advance
substantial justice to determine
this appeal without raising this
issue on second appeal. This
court has in the recent case of
OKWEI MENSAH (Decd) (acting
by) ADUMUAH OKWEI V LARYEA
(Decd) (acting by) ASHIETEYE
LARYEA & ANOTHER [2011] 1 SCGLR
317 made it clear that when
a court is called upon to set
aside a judgment on grounds of
fraud, the case should be
limited to only the allegation
of fraud and it should not
re-open the matter as if it is a
fresh trial of issues raised in
the earlier case. As pointed
out, we prefer to deal with the
issue of fraud and nothing else
since fraud was adequately
pleaded with clear particulars
in the statement of claim. In
our view this was not a
fundamental error to deny us the
opportunity to proceed with this
appeal on the merits.
Ground one of the of grounds of appeal
raises the issues of the
propriety of the manner in which
the two lower courts formed the
opinion that as a consent
judgment has been given by the
High Court, another High Court (
a court of coordinate
jurisdiction) was bereft of any
jurisdiction to set it aside. We
think that explains why the
Court of Appeal in affirming the
judgment of the trial High Court
exhaustively dealt with estoppel
per rem judicata and proceeded
to cite several cases on the
subject; notably HENDERSON V
HENDERSON [1843] 3 Hare 100,
FOLI & ORS V AGYA ATTA & ORS
(consolidated) [1976] 1 GLR 194
CA and SASU V AMUA-SEKYI & ORS
[2003/04] 2 SCGLR 746 and
other cases to form the view
that the plaintiff was estopped
from re-litigating the matter.
It is a basic common law principle
that a consent judgment obtained
before a Court of competent
jurisdiction could be set aside
on grounds of fraud, mistake or
on any other vitiating factor,
regardless of its finality. In
the case of REPUBLIC V HIGH
COURT (COMMERCIAL DIVISION)
ACCRA; EX PARTE THE TRUST BANK
LTD (AMPONSAH PHOTO LAB LTD. &
THREE OTHERS ( INTERESTED
PARTIES [2009] SCGLR 164
this very court relying on
EMERIS V WOODWARD [1889]46 Ch D
185 held in holding 1 thus:
“Notwithstanding that a consent
judgment had been given and
completed, a trial High Court
had ample jurisdiction to set it
aside upon any grounds which
would entitle it to set aside an
agreement entered between the
parties on the grounds of
mistake. And given that an
appeal would not ordinarily lie
against a consent judgment,
bringing a fresh action to
challenge the validity of a
consent judgment was a standard
and accepted procedure.Thus a
fresh action to establish fraud,
mistake, or other vitiating
factor seemed a reasonable
procedure for achieving justice
in the circumstances. And it was
not for the Supreme Court to
determine whether the
circumstances had been
established which would justify
the setting aside of any aspect
of the consent order; that would
be an issue determinable by a
High Court of co-ordinate
jurisdiction” (emphasis is
ours).
In our respectful opinion their
Lordships at the Court of Appeal
in treating the case as res
judicata were in error by
affirming the judgment of the
learned trial judge, who also
formed a similar view and denied
himself the jurisdiction to go
into the merits of the case.
Another fundamental issue arising from
the first ground of appeal was
the procedure adopted in
terminating the proceedings
without any plenary trial. It
was not in doubt that the High
Court could under its inherent
jurisdiction and under Order 11
rule 18 of CI 47 of 2004 strike
out an action on the grounds
that the pleadings do not
disclose any reasonable cause of
action or that the action is
frivolous, vexatious and abuse
of the process. This
jurisdiction when successfully
invoked could terminate
proceedings or stay proceedings
before the High Court. Indeed
the new rules of court is not
different from the old rules
under Order 25 rule 4 of LN 140A
of 1954 and the basic principles
guiding the High Court in
striking out pleadings on the
above stated grounds are the
same. The cases like GHANA
MUSLIMS REPRESENTATIIVE COUNCIL
V SALIFU [1975] 2 GLR 246 CA,
and OKOFO ESTATES LTD. V
MODERN SIGNS LTD. & ORS
[1996/97] SCGLR 224 and the
current decisions of this court
in JONAH V KULENDI & KULENDI
[2013/14] 1 GLR 272 and
GBENARTEY & GLIE V NETAS
PROPERTIES & INVESTMENTS & ORS
[2015/16]1 SCGLR 605 spell
out the same basic principles.
In the GBENARTEY’S case, supra, this
court said, at page 619 per
AninYeboah JSC thus:
“It therefore follows that the
procedure of terminating
proceedings by summary process
should be applied only in cases
where the action is clearly
unsustainable, plain and obvious
that it is beyond doubt that the
case is unarguable, frivolous
and vexatious, and even
legitimate amendments could not
cure the defect.”(emphasis ours)
In all the cases above referred to,
the courts insisted that the
procedure should be sparingly
exercised with extreme care and
circumspection in plain and
obvious cases. See THE
REPUBLIC OF PERU V PERUVIAN
GUANO [1887] 1 Ch 465 and
HUBBUCK & SONS LTD. V WILKINSON
HEYWOOD & CLARK [1899] 1 QB 86.
In these proceedings, the
plaintiff had expressly pleaded
fraud with sufficient
particulars which the defendants
strongly denied which in our
respectful opinion was treated
lightly by the two lower courts.
Fraud qua fraud is such a
serious vitiating factor that in
judicial proceedings care must
be taken not to suppress it when
legitimately raised in the
course of any proceedings. This
very court in the case of
DZOTEPE V HAHORMENE III
[1987/88]2 GLR 681 made it
clear that fraud is such a
serious matter that when it is
raised before a court of law
should be investigated by
evidence and proceedings set
aside if it is so proved. Taylor
JSC said on page 695 as follows:
“In Kerr on Fraud and mistake 7th
Edition at P 416 it is stated on
the authority of De Grey CJ in
Duchess of Kingston’s Case
[1776] 20 st Tr 355 at 357 that
“Fraud is an intrinsic,
collateral act, which vitiates
the most solemn proceedings of
court of Justice and Lord Coke
is quoted as saying “it avoids
all judicial acts ecclesiastical
and temporal”
(emphasis ours).
In these proceedings it appears that
no serious attention was given
by the learned judges of the two
lower courts on the crucial
issue of fraud being raised to
set aside the judgment. In the
OKOFO ESTATE’S case which was
summarily terminated by a
motion under the rules of court
as it then stood that is, Order
25 rules 4 of LN 140A of 1954,
Edward Wiredu JSC (as he then
was) said at page 253 as
follows, while admonishing
judges for resorting to the rule
when allegation of fraud is in
issue:
“on the face of the materials
presented before the High Court,
the plaintiff alleged “fraud”
against the defendant
(particulars given). An
allegation of fraud goes to the
root of every transaction. A
judgment obtained by fraud
passes no right under it and so
does a forged document obtained
by fraud pass no right. An
allegation of fraud, if denied,
needs to be investigated and
proved. This can be done only by
taking evidence. A denial of
allegation of fraud raises a
triable issue which a court
cannot determine summarily. In
the instant case the allegation
of fraud ought to have alerted
the High Court that it could not
competently determine the case
before it without going into
the allegations. The summary
way in which the court dismissed
this case erroneously denied the
plaintiff a hearing, a denial
which amounted to a violation of
fundamental rule of natural
justice. It was not within the
competence of the High Court on
the available materials before
it, to have dismissed the
plaintiffs action summarily”
(emphasis ours).
We have quoted ad longum the dictum of
Edward Wiredu JSC (as he then
was) to illustrate how trial
courts should be very
circumspect in striking out
actions summarily when fraud is
in issue.
We think that enough has been said to
demonstrate that the lower
courts, with all due respect,
were in clear error when they
ignored the plea of fraud and
treated the action as an
ordinary suit in the manner they
did.
The above issue of fraud exhaustively
discussed should have been
enough for the allowance of this
appeal without resort to dealing
with the other grounds but there
is a disturbing issue which is
captured in ground (v) of the
Notice of Appeal
which we think the lower courts must
take note of. The Court of
Appeal went on to discuss the
merits as though there was
evidence led on those issues. As
the case was terminated
summarily, the issues which were
adequately discussed were not
based on any evidence. Counsel
for appellant has, indeed,
pointed not on the settled
authorities that pleadings do
not constitute evidence and it
was thus out of place for the
court below to have treated it
so and delved very deep into all
matters not in issue on appeal.
We think counsel’s complaint is
legitimate and well founded.
The last ground which we think is also
worth resolving is ground
(viii). In a certiorari
application brought before this
court in Suit No.JS/20/2016
entitled: REPUBLIC V HIGH
COURT, COMMERCIAL DIVISION, EX
PARTE IVORY FINANCE COMPANY
LIMITED, dated 19/05/16,
this court, per Benin JSC
cautioned thus:
“since the plaintiff had raised fraud
which has not been rebutted by
evidence apparent on the face of
the record, it would seem that
the party alleging the fraud is
entitled to be heard on merits”.
We think that this caution, no matter
when and the circumstances under
which it was raised should have
been carefully considered. The
Supreme Court as the highest
Court of the land is enjoined to
give directives, directions and
orders to courts lower than it
to foster judicial harmony. We
think the Court of Appeal ought
not to have disregarded this
well considered opinion of His
Lordship. We think that such
practice would not advance
substantial justice and judicial
harmony. If the Court of Appeal
had considered the issue of
fraud it would certainly have
set aside the judgment of the
learned High Court Judge.
For the reasons canvassed above we
allow the appeal and set aside
the judgments of both the High
Court and the Court of Appeal
and order a trial on the merits
based on the pleadings as they
stood at the High Court.
ANIN YEBOAH
(JUSTICE OF THE SUPREME COURT)
J. V. M. DOTSE
(JUSTICE OF THE SUPREME COURT)
V. AKOTO-BAMFO
(MRS)
(JUSTICE OF THE SUPREME COURT)
A. A. BENIN
(JUSTICE OF THE SUPREME COURT)
Y. APPAU
(JUSTICE OF THE SUPREME COURT)
COUNSEL
KWAME ADORBOR LED BY KIZITO
BEYUO FOR THE PLAINTIFF/
APPELLANT/ APPELLANT.
RICHARD AMOFA LED BY EMMANUEL
AMMISAH FOR THE DEFENDANTS/
RESPONDENTS/ RESPONDENTS. |
