|
_______________________________________________________________________________
REASONS FOR JUDGEMENT
ACQUAH, J.S.C:
On 8th May 2001, we unanimously
granted the applicant's prayer
for certiorari and consequently
quashed the proceedings and
orders of the Accra High Court
(Benin J.A) dated 12th May 2000
and 19th January 2001. We
reserved our reasons which we
now proceed to deliver.
Towards the latter part of the
1980's John K. Dolphyne took out
a writ of summons at the Sekondi
Circuit Court against Speedline
Stevedoring Co. Ltd. and S. E.
Brenya seeking damages for
fraud, and a declaration that he
is a member and Director of
Speedline Stevedoring Co. Ltd.
In the accompanying Statement of
Claim, Dolphyne averred that
sometime in October 1976, he and
three other named persons agreed
to established the Speedline
Stevedoring Company Ltd (herein
after referred to as the
Company). They invited Mrs.
Brenya to attend a company
meeting but she designated her
husband, Mr. Brenya to attend
instead. At that meeting, Mr.
Brenya was appointed company
secretary. The four Founders
were appointed the company's
Directors/Shareholders. He
averred further that he paid
¢15,000 for the company's
licence. The registration of the
company was entrusted to Mr.
Brenya. It was averred that Mr.
Brenya failed to carry out these
instructions and rather
fraudulently registered the
company without the inclusion of
Mr. Dolphyne's name as
shareholder. Besides he
fraudulently put down the names
of only himself and his wife as
the directors of the company. He
Dolphyne, was appointed to
oversee the company's operation
in Takoradi. It turned out that
when he discovered the fraud
committed by Mr. Brenya, two of
the company's founders namely
Messrs Oduro and Arthur made a
report to the Registrar General
who set up the one man Ntrakwah
committee. This committee
confirmed Mr. Brenya's fraud.
Hence the Circuit Court writ and
the reliefs sought.
The Circuit Court gave him
judgement. There was an appeal
to the Court of Appeal, and
finally to the Supreme Court,
which on 29th January 1997 set
aside the reliefs for a director
and membership of the company on
grounds that a Circuit Court had
no jurisdiction to deal in
company matters. The Supreme
Court however confirmed the
damages of ¢3,000,000.00 for
fraud.
Thereafter Dolphyne adding the
company as 2nd Plaintiff in Misc
No. 768/97 issued a writ at at
the Accra High Court against Mr.
Brenya as 1st Defendant and Mrs.
Brenya as 2nd Defendant.
Speedline Stevedoring Co which
was 2nd plaintiff in this suit
was removed and made a 3rd
defendant. The reliefs claimed
by Mr. Dolphyne were:
i. A declaration that the
plaintiff is the
Director/Shareholder of
Speedline Stevedoring Co, a
company plaintiff paid ¢15,000
for its licence.
ii. A declaration that the
resolution of the Board of
Directors of the said company
purporting to dissociate
plaintiff from directly or
indirectly connection with the
same is null and void.
iii. Perpetual injunction
restraining the defendant his
servants, agents, privies
grantees and assigns form
interfering with the affairs of
Speedline Stevedoring Co. Ltd
until the determination of the
suit herein, and for an order of
receiver and manager of the said
company.
In the following year, that was
1998, Mrs. Brenya and the
company in suit No CS 180/98
filed at the Accra High Court,
against Mr. Dolphyne and Mr.
Brenya claimed several reliefs
including:—
Brenya claimed several reliefs
including:—
"i. Declaration that by the
copy of the Regulations of the
Company duly registered at the
office of the Registrar General,
1st plaintiff has never been and
is not a director or shareholder
of the company and has no
capacity to be recognised or
hold himself as such.
ii. Declaration that 1st
plaintiff was not a party in the
Accra High Court suit No. 662/79
taken by the two former
directors/shareholders and could
not use the settlement as res
judicata or estoppel against the
defendants or rely on the
settlement reached by the
parties to the said suit to the
detriment of defendants.
iii. Declaration that the 1st
plaintiff was not part of the
complaint made by the two former
directors/shareholders Messrs,
Oduro and F. N. Arthur to the
office of the Registrar-General
and could not use the report as
res judicata or estoppel by
judgement against the defendants
herein."
These two High Court suits were
consolidated, the proceedings
judgements and orders of which
are the subject matter of the
certiorari application which we
granted on 29th May 2000.
Now the facts grounding Mr.
Dolphyne 1997 suit, were the
very facts on which he launched
his Circuit Court case which
resulted in his being awarded
¢3,000,000.00 damages for fraud.
As the trial High Court observed
in his judgement of 12th May
2001.
" The material facts relied upon
by the parties were not
significantly different from
those in the earlier suit ... It
appears that Mr. Dolphyne was
prepared to rest his case on the
various court judgements put in
evidence in the action he took
against Mr. Brenya. His attorney
made this clear in
cross-examination.''
Thereafter the High Court began
by referring to the Supreme
Court's judgement which accepted
the finding of fraud committed
by Mr. Brenya against Dolphyne,
and held that this fraud
" relates to the formation, and
more particularly the
registration of the company's
shareholders and directors. So
the decision of the Circuit
Court was that Mr. Dolphyne was
entitled to be registered as
director and shareholder but was
fraudulently left out by Mr.
Brenya who was entrusted with
that responsibility."
The trial High Court then took
the view that in the
circumstances all that was left
for him to do was to examine the
findings of the Circuit Court,
especially as the proceedings
and judgement of that court were
all that the plaintiff relied on
before him. Accordingly he
said:—
" Let me now turn to the
relevant findings of fact made
by the Circuit Court. I will
quote some of these findings in
order to save time. I shall
refer to other findings as and
when it becomes necessary."
Thereafter the Court pronounced
its decisions on the two
consolidated suits as follows:—
" In suit No. 768/97, relief 1
is allowed to this extend that
Dolphyne is declared to own 25%
shares in the company; he is
also declared to be a director
of the company along with Mrs.
Brenya. Reliefs 2 and 3 of the
said suit are dismissed. A final
decision on relief 4 will be put
off for the moment... The
counter claim by the company in
the said suit is disallowed...
So too is the counter claim by
Mr. and Mrs. Brenya in the said
suit also dismissed. The entire
claim by Mrs. Brenya in CS
180/98 is without merit and is
dismissed, except for what I
have adjudged to be her
entitlements in the company."
He then adjourned the case for
six weeks for parties to sit
down
" and talk about the future of
the company before any final
orders may be made. They should
take into account the overall
interest of the company, and in
the process a buy out may be
considered if that will help
them if they cannot co-operate
to let the company operate
successfully. They may also
discuss the question of
accounts, always bearing in mind
the overriding interest of the
company, so parties should
approach this exercise with an
open mind if they truly have the
interest of the company at
heart."
On the next sitting of the court
which was the 19th January 2001,
the court made the following
orders:—
" It is ordered that Mr. Antonio
Casto Barcom and Mr. J.K.
Dolphyne should take over the
management of the company from
the Receivers and Managers. The
receivers and managers will,
however, continue to sign the
company's cheques and notify the
two named persons up to the end
of January 2001. With effect
from 1.2.2001 these two persons
Dolphyne and Antonio will be
signatories to the company's
cheques. This order is to be
drawn up by the Registrar, and
signed by the judge himself and
copies sent to all the
appropriate agencies including
the banks with which the company
does business... The Receivers
and Managers are to meet with
Messrs Antonio and Dolphyne next
Tuesday, the 23rd day of January
and introduce them to the
relevant agencies and persons in
and around Accra-Tema. A similar
exercise is to be embarked upon
in Takoradi on Friday, 26th
January 2001."
After this, the judge went on to
make an order for the payment of
¢20 million to each of the
lawyers of the parties as
settlement of their legal fees.
He ordered:—
" ... the receivers and managers
are to issue a cheque of ¢20
million to each of the three
lawyers, namely Dr. Seth Twum,
Dr. Ekow Daniel's and Mr.
Marful-Sam as part of their
fees. The rest of their fees if
any is to be settled by the
parties themselves."
What happens if the lawyer's
fees were less than ¢20 million,
one may ask? These orders are
certainly far beyond the scope
of the reliefs sought by the
parties. The judge completely
reorganised the affairs and
administration of the company
regardless of what is set down
in the company's regulations
registered with the Registrar of
Companies. Not surprisingly
therefore the applicants sought
certiorari to quash the
judgement and these orders as
perverse and made without
jurisdiction.
To begin with, the judgement and
orders in question, as the trial
judge expressly stated, were
founded on the findings made in
the Circuit Court case which
ended up at the Supreme Court.
He was emboldened to rely on the
said findings because of his
view that both Brenya and the
company were parties to the said
suit and are therefore bound by
the findings made therein. Thus
after holding that Mr. Brenya
was a party and therefore bound
by the findings, he said of the
company:
"As for the company it was a
party to the Circuit Court case
and so was fully aware of the
nature of the case made against
Mr. Brenya which directly
affected the structure of the
company's shareholding and
directorship if it chose not to
assist Mr. Brenya. It cannot
claim to be affected by the
decision made".
Now for a judgement to operate
as res judicata, the said
judgement must be valid and
subsisting. In other words, it
must be a final judgement
delivered by a court of
competent jurisdiction.
Otherwise that judgement cannot
operate as res judicata to bind
the parties to it. Thus in
Spencer-Bower and Turner's Res
Judicata (2nd Ed) page 9
paragraph 9, the plea is thus
explained:
" Where a final decision has
been pronounced by a ... a
judicial tribunal of competent
jurisdiction, any party or privy
to such litigation, as against
any other party or privy
thereto, ... is estopped in any
subsequent litigation from
disputing or questioning such
decision on the merits whether
it be used as the foundation of
an action or relied upon as a
bar to any claim " (emphasis
supplied).
In the instant case, although it
is true that Mr. Brenya and the
company were parties to the
Circuit Court judgement, and
that the said Circuit Court
entered judgement for Dolphyne
for ¢3million damages for fraud,
and declared Dolphyne a
shareholder and director of the
said company, yet the Supreme
Court upheld only the ¢3million
damages for fraud and set aside
the declaration that Dolphyne
was a shareholder and director
of the company.
Thus in Dolphyne vrs. Speedline
Stevedoring (1996-97) SC GLR 514
at 519, the Supreme Court
stated:
" Reference to section 32 of Act
372 shows quite clearly that the
Circuit Court does not have
jurisdiction in matters
concerned with the Companies
Code 1963 (Act 179). Indeed by
section 2, schedule 1 thereof
unless the context so requires,
a court means the High Court,
therefore unless an applicant or
party to an action or
application in respect of
matters coming within the ambit
of the Companies Code 1963 can
demonstrate that there is some
other Law or even in the
Companies Code itself which
specifically confers
jurisdiction on the lower court,
there will be no jurisdiction
to entertain the matter. In the
present appeal nothing in the
record demonstrates that there
was jurisdiction in the circuit
court, and that part of the
action should have been
dismissed".
Accordingly the Supreme Court
dismissed claims (b) and (c)
dealing with membership and
shareholdership of the company
and set aside the Circuit
Court's decisions on these
reliefs. All the findings made
by the Circuit Court in
connection with those reliefs
similarly stood quashed. And the
High Court can not therefore
rely on them to enter judgement
that Dolphyne is a shareholder
and director of the company. In
Asiama vrs. Adjabeng (1971)2 GLR
17A CA, holding 1 of the
head-notes reads:
"there can be no estopple per
rem judicatem or by conduct
where the judgement pleaded has
been overruled or where the
subject matter of the dispute is
not covered by the judgement."
Such glaring error committed by
the High Court is sufficient to
vitiate the judgement and orders
of 12th May 2000 and 19th
January 2001.
Now what did the company per se
do to justify Mr. Dolphyne's
action against it? Now the case
of Dolphyne at the Sekondi
Circuit Court and in the High
Court suit Misc 768/97 as set
out earlier, was that in 1976 he
and three others decided to
establish a Stevedoring company.
At a meeting to discuss the
formation of this company, it
was agreed that he and the three
founders were to be made
shareholders and directors, and
Mr. Brenya secretary and
entrusted with the
responsibility of registering of
the company. But Brenya did not
register him as a shareholder
and director. Hence his claim
for damages for fraud against
Brenya, and a declaration that
he is a director/shareholder of
the company.
Clearly then Mr. Dolphyne's
complaint relates to a contract
or a transaction which happened
before the incorporation of
Speedline Stevedoring Co. Ltd.
and therefore governed by the
law on pre-incorporation
contracts.
The common law rules on this are
the same both for public and
private companies. No legal
person, natural or artificial,
can contract before he or it
exists. Therefore, a contract
made by a promoter on behalf of
the company before incorporation
never binds the company, because
the company is not yet formed.
It has no legal existence. Even
if the parties act on the
contract, it will not bind the
company: Re Northumberland
Avenue Hotel Co. (1886) 33 Ch.
D. 16.
Section 13 of the Companies
Code,1963 (Act 179) dealing with
pre-incorporation contracts,
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 be entitled to the benefit
thereof as if it had been in
existence at the date of such
contract or other transaction
and has 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."
Thus unless it is established
that the company ratified the
pre-incorporation agreement to
have Dolphyne as director and
shareholder; the company cannot
be sued to enforce the terms of
that agreement. Consequently the
action against the company is
misconceived and misdirected.
Speedline Stevedoring Co. Ltd.,
from the records,is a private
company registered under the
Companies Code, 1963 (Act 179),
and therefore subject to the
provisions of this Code. The
Code regulates, inter alia, how
the membership, directorship and
shareholdings of a private
company can be effected. Section
30 of the Code states that one
becomes a member of a company by
subscribing to its Regulation.
And that in the case of a
company with shares each member
shall hold at least one share.
Then section 30(5) provides:—
"membership of a company with
shares shall continue until a
valid transfer of all the shares
held by the member is registered
by the company, or until all
such shares are transferred by
operation of law to another
person or forfeited for
non-payment of calls under a
provision, in the Regulations,
or until the member dies."
It is indeed interesting to
imagine how in the case of a
private company like the
Speedline Stevedoring Co,
someone who has not subscribed
to the regulations of that
company, has not taken shares,
and has not consented in writing
to be a director, may be imposed
on that company as a shareholder
and director simply because the
one who processed the
registration of that company
refused to register him as a
shareholder and director. And
the situation becomes absurd
when one appreciates that the
complainant had, for the refusal
to register him as such, already
been awarded ¢3million damages.
The alleged fraudulent behaviour
of Mr. Brenya was between
Dolphyne and this Brenya, and
the award of damages ended the
matter. The company was not a
party, neither was Mrs. Brenya,
a party to the fraud. The claim
for a shareholdership and
directorship of the company
based on the fraudulent
behaviour of Mr. Brenya cannot
therefore be justified either at
common law or in the face of
section 13 of Act 179.
Now the High Court having
improperly made Dolphyne a
shareholder, when Dolphyne has
no share in the company,
proceeded illegally to allot 25%
of the shares of Mrs. Brenya to
Dolphyne. Section 95 of the Code
prohibits the transfer of shares
without the consent of the
shareholder. Section 42(1) and
45 dealing with payment of
shares provide:—
" 42(1) Expect on a
capitalisation issue pursuant to
subsection (1) of section 47 of
this code, shares shall not be
issued other wise than for
valuable consideration paid or
payable to the company and
unless otherwise agreed shares
shall be paid for in cash.
45. Shares shall not be deemed
to have been paid for in cash
except to the extent that the
company shall actually have
received cash therefor at the
time of, or subsequently to, the
agreement to issue the shares;
and where shares are issued to a
person who has sold or agreed to
sell property or rendered of
agreed to render services to the
company or to persons nominated
by him the amount of any payment
made for the property or
services shall be deducted from
the amount of any cash payment
made for the shares and only the
balance, if any, shall be
treated as having been paid in
cash for such shares
notwithstanding any exchange of
cheques or other securities for
money."
The orders of the High Court
clearly fell fowl of these and
other provisions of the Code.
We are accordingly satisfied
that once the Sekondi Circuit
Court had no jurisdiction to
deal with matters affecting
companies registered under the
Code, the findings of that
cannot be relied upon to ground
a judgement for Dolphyne.
Furthermore since the matters
complained of took place before
the registration of the company,
the company cannot be held
responsible in the absence of
express ratification of that
transaction. The orders of 19th
January 2001 were in flagrant
violation of the provisions of
the Company's Code. For a High
Court can appoint receivers and
managers to manage the affairs
of a company but the Court
cannot, after revoking their
appointment, purport to appoint
directors and determine which
particular directors should sign
the cheques of the company. The
Code does not give a High Court
such jurisdiction. Hence, our
unanimous decision quashing the
judgement and orders of the High
Court dated 12th May 2000 and
19th January 2001.
G. K. ACQUAH
JUSTICE OF SUPREME
J. A. BAMFORD-ADDO (MRS)
JUSTICE OF SUPREME
W. A. ATUGUBA
JUSTICE OF SUPREME
S. A. B. AKUFFO
JUSTICE OF SUPREME
G. L. LAMPTEY
JUSTICE OF SUPREME
COUNSEL
|
