JOHNSON VRS. WESTERN FRESH BOTTLING CO LTD (GJ0278/2020) [2024] GHAHC 112 (1 July 2024)

IN THE SUPERIOR COURT OF JUDICATURE, IN THE HIGH COURT OF JUSTICE (GENERAL JURISDICTION) ACCRA HELD ON MONDAY THE 1ST DAY OF JULY, 2024 BEFORE HIS LORDSHIP JUSTICE PATRICK BAAYEH (J), FLORINDO FEDELE JOHNSON UNNUMBERED HOUSE - PLAINTIFF SUIT NO. GJ0278/2020 NINGO PRAMPRAM ACCRA VRS: WESTERN FRESH BOTTLING CO LTD. UNNUMBERED HOUSE NINGO PRAMPRAM ACCRA TEMA, ACCRA JUDGMENT - DEFENDANT The Plaintiff instituted the instant suit originally against two Defendants, Western Fresh Bottling Company Ltd and Mr. Alfred Essienne on 20th November, 2019, claiming the under-listed reliefs as endorsed on the amended writ of summons. i. An order compelling the Defendants to pay the sum of Twenty- Five Thousand Dollars ($25,000) being the amount paid as consideration in exchange of 20,000 ordinary shares of the Defendant company. ii. An order directed at the Defendants to pay the Plaintiff an amount of One Hundred And Nine Thousand, Three Hundred and Fifty Eight cedis (GH¢109,358. 00). being loans the Plaintiff gave to the Defendant company. 1 | P a g e iii. An order directed at the Defendant to pay the Plaintiff an amount of Seventy-one Thousand, Nine Hundred Dollars ($71,900) or its cedi equivalent being loans given to the Defendant. iv. Interest on the aforementioned sums of monies from 1st January, 2020 up to and inclusive of the day of final payment. v. In the alternative an order for the valuation and sale of Defendant company’s water bottling factory which is currently shut down, situate at Prampram to enable the Plaintiff recover all the unprofitable investment made in the company. vi. Cost. vii. Any other order(s) deemed fit by this Honourable court. The case was subsequently discontinued against the 2nd Defendant (Mr. Alfred Essienne) on 11th November, 2021 when it was realized that the 2nd Defendant had passed on to eternity before the issue of the writ of summons. The Defendant entered appearance and also filed its Defence denying Plaintiff’s claims. The Plaintiff also filed a reply to the Defendant’s Defence. At the close of pleadings, the issues adopted for trial were; a. Whether or not the Defendant is indebted to the Plaintiff in the sum of $25,000 being consideration in exchange of 20,000 ordinary shares of the Defendant company. b. Whether or not the Defendant company is indebted to the Plaintiff in the sum of GH¢109,358 and $71,900 or its cedi equivalent being loans given to the Defendant company. 2 | P a g e The case of the Plaintiff as deduced from her pleadings is that she is an American pensioner and resides partly in the United States of America and partly in Ghana. The Defendant is a limited liability company incorporated under the laws of Ghana and deals with the production and sale of bottled drinking water. It is Plaintiff’s case that sometime in June, 2015 she was approached by Defendant through its managing director (now deceased) Mr. Alfred Essienne to help raise capital for operations for the Defendant company. In furtherance of this, the managing director of the Defendant agreed to transfer 20,000 out of his shares in Defendant company to the Plaintiff in consideration for $25,000 and a share transfer agreement was executed to that effect. Plaintiff avers that she subsequently granted loans on different occasions anytime the Defendant needed same which was in both cedis and dollars all totaling One Hundred and Nine Thousand, Three Hundred and Fifty-eight cedis (GH¢109,358.00) and Seventy-One Thousand, Nine hundred dollars ($71,900) respectively. Plaintiff avers that in spite of all these monies paid to the Defendant’s late managing director she never received a share certificate to accord her the status of a shareholder. She was also never notified of any shareholders meeting of the company or payment of any dividends. It is the Plaintiff’s case that upon her visit to Ghana and the Defendant’s principal place of business, she noticed that a lot of the Defendant’s assets were being disposed of. She immediately demanded the refund of all her investment and the late managing director promised to refund same to her but this was never fulfilled before the managing director died and she continued to make demands on the Defendant for payment but this has proved futile. On her part the Defendant company pleaded that it has neither taken a loan facility from the Plaintiff nor has it authorized any of its directors to seek or receive any loan on its behalf. It is Defendant’s case that any purported advancement of money to any director was done in the director’s personal capacity and not on behalf of the Defendant company. 3 | P a g e At the trial Plaintiff gave evidence by herself and did not call any witness. On behalf of the Defendant company, two witnesses gave evidence. These are Lucy Nana Essuman (DW1) and Martha Adwoa Edusei Essienne (DW2). Before I proceed to evaluate the evidence adduced by the parties in support of their respective statements of facts pleaded, I shall refer to the law and consider the burden of proof on the parties as prescribed by law in order to determine the issues one way or the other within the context of the evidence adduced. The general propositions of the law has been captured in the principle “ he who asserts must proof”. This proposition of the law was propounded in the case of MAJOLAGBE VRS LARBI (1959) GLR 190 and which was restated by the Court of Appeal speaking through Kpegah JA (as he then was) in the case of ZABRAMA VRS SEBGEDZIE (1992) 2 GLR 22 @ PAGE 226 where he said; “ A person who makes an averment or assertion which is denied by his opponent has a burden to establish that his assertion or averment is true. And he does not discharge this burden unless he leads admissible and credible evidence from which the fact or facts, be assets can properly and safely be inferred. The nature of each averment or assertion determines the degree and nature of the burden”. In the case of ABABIO VRS AKWASI III (1994-1995) GBR 774, the Supreme Court reiterated the law as stated in the case of ZABRAMA VRS SEGBEDZIE (Supra) and held that; “ A party whose pleadings raise an issue essential to the success of the case assumed the burden of proving such issue. The burden only shifts where the Plaintiff has adduced evidence to establish his claim. See also the case of IN RE WA NAA; ISSAH BUKARI (SUBSTITUTED BY MAHAMA BUKARI & ORS VRS MAHAMA BAYONG & ORS (2013-2014) SC GLR 1590. 4 | P a g e In ADWUBENG VRS DOMFEH (1996-1997) SCGLR 600, the Supreme Court stated that (in holding 3 of the head notes); “ Section 11 (4) and section 12 of the evidence Act, 1975 (NRCD 323) clearly provided the standard of proof in all civil cases, without exception was proof by preponderance of probabilities” Also, it is provided by Section 10(1) and Section 11(1) and (4) of NRCD 323 that, the party who bears the burden of proof must produce sufficient evidence of fact to proof his or her case. Failure to produce sufficient evidence means that his claim is bound to fail. In the case of ACKAH VRS PERGA TRANSPORT LTD & ORS (2010) SCGLR 736, the Supreme Court per Sophia Akuffo JSC (as she then was) said; “ It is a basic principle of law on evidence that a party who bears the burden of proof is to produce the required evidence of the facts in issue that has the quality of credibility short of which his claim may fail. The method of producing evidence is varied and it includes the testimonies of the party and material witnesses, admissible hearsay, documentary evidence and things (often described as real evidence) without which the party might not succeed to establish the requisite degree of credibility concerning facts in the mind of the court or tribunal of fact such as a jury. It is trite law that matters that are capable of proof must be proved by producing sufficient evidence, so that on all the evidence a reasonable mind could conclude that the existence of a fact is more probable than its non-existence. This is the requirement of the law on evidence under Section (10)1 and (2), and Section 121(1) and 4 of the Evidence Act (1975) NRCD 323”. I will first deal with issue one (1) I.e. whether or not the Defendant company is indebted to the Plaintiff in the sum of $25,000 being consideration in exchange of 20, 000 ordinary shares of the Defendant company. 5 | P a g e The Plaintiff testified that he entered into an agreement with the late Managing director of the Defendant company Alfred Essienne whereby he allocated or transferred 20,000 ordinary shares to her in exchange of the sum of $25,000 in June, 2015 and further granted loans to the Defendant through the managing director to the sum of GH¢109,258.00 cedis and $71,900. Plaintiff tendered in evidence EXH A dated 20th June 2015. Exhibit H A is headed “Share Transfer Agreement between Alfred Essienne and Florindo Fidele Johnson”. For the avoidance of doubt, I wish to reproduce EXH A in its entirety. It states; “ This share transfer is made on the 20th day of June 2015 between Alfred Essienne (Transferor) of P. O BOX SK 54, Sakumono, Tema of one part and Florindo Fedele Johnson (Transferee) of 173300, North Bend Road, Cincinnati, Ohio 45224 United States of America, of the second part. “Whereas 1. The Transferor is a shareholder of 80,000 ordinary shares in the Capital of Western fresh Bottling Company Ltd (company) a company incorporated under the laws of Ghana. 2. The Transferor is desirous of transferring the 20,000 ordinary shares out of the total of 80,000 ordinary shares held by him in capital of the company to the Transferee for valuable consideration. “ Now therefore in consideration of the sum of One Hundred and Fifty-Two Thousand, Four Hundred and Twenty-Four Ghana cedis. (GH¢152,424) paid by the transferee to the transferor receipt whereof the transferor hereby acknowledges, Transferor hereby transfers and the transferee hereby takes the said 20,000 shares held by the transferor in capital of the company together with all the rights and obligations held in connection thereof forever” 6 | P a g e Exhibit A is signed by Alfred Essienne as the transferor and witnessed by Wisdom Ali Adiabo of Cantonments, Accra. The Plaintiff also signed as the transferee and witnessed by Latrisha Archic, a notary public of the State of Ohio. It would be seen that in Exhibit A the only mention of Western Fresh Company Limited is in connection with the fact that Alfred Essienne represented that he owned 80,000 ordinary shares of the company and was desirous of transferring 20,000 out of his 80,000 ordinary shares to the Plaintiff in exchange for the sum of GH¢ 152,424.00. It is not clear whether the GH¢152,424.00 was equivalent to $25,000. It is the case of the Defendant company that it never authorized Alfred Essienne who was the Managing Director to enter into any such share transfer deals with the Plaintiff. Now Exhibit 1 is the registered documents of the Defendant company and the Directors of the Company are Alfred Essienne, George Owusu Koranteng, Martha Adwoa Essienne, Lucy Nana Ama Esuman and Abdulai Mumuni Bawumia. Martha Adwoa Essienne doubled as the company’s secretary. The shareholding structure of the Defendant are; 1. Alfred Essienne – 5,000 shares 2. George Owusu Koranteng – 2,500 3. Lucy Nana Esuman- 1,500 shares 4. Martha Adwoa Essienne- 1000 shares Thus, the total issued shares of the Defendant company is 10,000 shares and Alfred Essienne had 5,000 shares. Mathematically therefore it was impossible for Alfred Essienne who owned 5,000 shares to transfer 20,000 shares to the Plaintiff. Clearly Alfred Essienne had no capacity to have transferred 20,000 shares to the Plaintiff when the total issued shares of the company is 10,000 ordinary shares. Therefore, the principle of Nemo potest plus juris ad alium transferee quam ipse habet (i.e. No one can transfer a greater right to another than he himself has), 7 | P a g e It is the Plaintiff who has the burden to proof or establish that Alfred Essienne had the capacity to transfer 20,0000 ordinary shares to her, but the Plaintiff failed to introduce any such evidence to show that Alfred Essienne indeed owned 80,000 ordinary shares and as such could transfer 20,000 to her. No one gives what he does not have (Nemo dat quod non habet). The transaction between the Plaintiff and Alfred Essienne was clearly invalid, void and unenforceable because the transferor lacked capacity to transfer 20,000 ordinary shares out of his 5,000 ordinary shares to the Plaintiff. The Twenty Thousand Shares is even more than the total issued shares of the company. Can the Defendant be held liable for the action of Alfred Essienne being the then Managing Director? Exhibit 1 as reproduced above shows that the agreement was one between Alfred Essienne and the Plaintiff for which the Defendant company had no knowledge. Indeed, Lucy Nana Esuman and DW2, Martha Adwoa Essienne both testified that this matter was never discussed at any of their Board of Directors meetings neither did any Board members have any knowledge of the purported. Share transfer between Alfred Essienne and the Plaintiff. Thus, the Board of Directors of the Defendant company never authorized any such transaction. The Plaintiff therefore entered into the share transfer contract or agreement with Alfred Essienne in his personal capacity and not with the Defendant company or as the company’s representative. Counsel for the Plaintiff has referred to the principle in Turquand’s case i.e. BRITISH BANK VRS TURQUAND 1856 EL BL327 where the principle was laid down that an outsider or third party contracting with a company in good faith is entitled to assume that the internal requirements and procedures have been complied with and the company as a result will consequently be bound by the contract even if the internal requirements and procedures have not been complied with and also cited the case of BARCLAYS BANK (DCO)LTD VRS PRESEVERANCE TRANSPORT SERVICES LTD (1961) GLR 665, where Apaloo J (as he then was)said; “ In my judgment, the Plaintiff bank was entitled to assume that such a meeting was in fact held. In his second edition of the principles of company 8 | P a g e Law, Professor Gower dealing with the rule of Turquand’s case observed at P. 143 as follows. “The rule was manifestly based on business convenience, for business could not be carried on if everybody who had dealings with a company had to meticulously examine its internal machinery in order to ensure that the officials with whom he dealt with had actual authority” This seems to me good sense and I respectfully agree with it.” Counsel then argued that based on this principle the Defendant company is liable for the actions of Alfred Essienne because in all his dealings with the Plaintiff, he represented the Defendant company. With due respect to the counsel for Plaintiff the Barclays Bank case (supra) is distinguishable from the present case in that, in that case the officials of the company actually presented a purported resolution signed by the Chairman of the Board of Directors and the Secretary to convince the bank that the Defendant had authority to borrow the sum of money beyond its issued committal. This is not the case in the instant case. Plaintiff dealt with Alfred Essienne without the involvement of any other person neither did Mr. Essienne produce any resolution of the company authority to him to transfer his shares or indeed borrow any money on behalf of the company. Both DW1 and DW2 told the court that the Board of Directors used to meet very often sometimes every two weeks or at most every month but no issue of raising capital from outside was ever discussed or agreed on. I hold that at no point in time did Alfred Essienne act on behalf of the company (Defendants). Alfred Essienne acknowledged receipt on the sum GH¢152,424.00 in his personal capacity and not on behalf of the Defendant company and the Defendant’s witness told the court the said amount was never received by the Defendant company either from Plaintiff or Alfred Essienne. Indeed, this is corroborated from Exhibit A paragraph 3 which states; “ Now therefore in consideration of the sum of GH¢152,424.00 paid by the transferee to the transferor receipt where of the transferor hereby 9 | P a g e acknowledges the transferor transfer and the transferee hereby takes the said 20,000 shares held by the transferor in capital of the company together with all the right and obligations held in connection forever”. Nowhere in the above paragraph did it state that Alfred Essienne (Transferor) was acting for and on behalf of the company. In fact, Alfred Essienne never even referred to himself in Exhibit A as the Managing Director of the Defendant company. I hold therefore that the Plaintiff entered into the share transfer contract with Alfred Essienne in his personal capacity and not with the Defendant company or as the Defendant’s representative. To have acted for and on behalf of the Defendant company the share transfer agreement (Exhibit A) would have indicated that an agreement has been executed between Western Fresh Bottling Company Ltd represented by its managing Director and the Plaintiff and not Plaintiff and Alfred Essienne. Under cross examine the following dialogue ensued between Plaintiff and counsel for Defendant. Q: I am suggesting to you that there was no shareholder representation giving approval to the Defendant company to take any share. A: As stated, my lord, I gave Alfred, the MD twenty-five thousand dollars, to which I never got my certificate . Q: Did you ask Alfred after you had advanced $25, 000 for the transfer of 20, ordinary shares, why you never got the certificate? 10 | P a g e A: Yes, my Lord, constantly I asked for the certificate and his famous reply was it is coming. Q: So, you are telling the court that despite not receiving your certificate you still went ahead to give Alfred money? A: Yes, my lord, I was still working at the time so, I took the managing director’s word that he will get the certificate for me. Clearly the intent and purpose of the agreement between Alfred Essienne and the Plaintiff was to transfer personal shares of Alfred Essienne to Plaintiff. It was never intended to issue shares from the Defendant company to the Plaintiff. The Defendant was never a party to the agreement between the Plaintiff and Alfred Essienne. It would therefore offend the principle of privity of contract to enforce liabilities of a contract on a 3rd party who was not and never intended to be a party. It would be stretching legal language beyond its elastic limit to hold that because Alfred Essienne was the Managing Director of the Defendant company, every action of his is the action of the company even where it is palpably clear that this was never the intention. A party can only seek remedies against another party if that party was privy to the agreement. See DUNLOP PNEUMATIC TYRE CO LTD. VRS SELFRIDGE & CO LTD(1915) AC 847. Quite apart from the fact that the Defendant company was not privy to the agreement between Plaintiff and Alfred Essienne, the procedure for transferring shares in a company was not followed. The procedure for transferring shares is provided for under Section 54(1) and Section 98(2) of the Companies Act, 1960 Act 179 (which was in force at the time of this transaction). Section 54(1) of Act 179 provides that “statements made in a share certificate under the common seal of the company shall be prima facie evidence of the 11 | P a g e title to the shares of the person named therein as the registered holder and of the amounts paid and payable thereon”. Section 98(2) of Act 179 also provides; “ Notwithstanding anything contained in the regulations of a company or in any contract, shall not be lawful for the company to register a transfer of shares as debentures unless a proper instrument of transfer duly stamped, if chargeable to stamp duty, has been delivered to the company; provided that nothing herein contained shall prejudice any power of the company to register any person to whom the right to any share or debentures has been transmitted by operation of law” Thus, a company cannot register a transfer a transfer of shares unless a proper instrument of transfer has been delivered to the company. And statements made in a share certificate bearing bear the common seal of the company serve as prima facie evidence of the title of the shares of the person named in the certificate. Until the name of the transferor is entered in the register of the company, the transfer is considered the holder of the shares (See Section 98 of Act 179). In the instant case Exhibit A does not qualify as a share certificate for lack of the procedures stated above. So quite apart from the fact that Alfred Essienne had no capacity to transfer 20,000 shares to Plaintiff, the procedure adopted by the parties was also wrong. There was no attempt of the Plaintiff to deliver Exhibit A to the company for registration and until she mounted this suit, the Defendant company was not aware of the existence of Exhibit A. Since the law (Act 179) provides that a share certificate can only be issued only after a valid which share instrument has been registered with the company, Defendant could not have issued a share certificate in respect of an invalid share instrument. I will now deal with the issue ii; (ii) Whether or not the Defendant is indebted to the Plaintiff in the sum of One hundred and Nine Thousand, Three Hundred and Fifty-Eight Ghana cedis 12 | P a g e (GH¢109,358.00) and Seventy-One Thousand Nine Hundred United State Dollars (USD 71,900) or its cedi equivalent being loans given to the Defendant company. It is the case of the Plaintiff that the sum of GH¢ 109,358 and USD 71,900 was advanced to the Defendant company as loans. The Defendant denies liability on the basis that the loans were not authorized by the Board of Directors of the Defendant company and that any loans Plaintiff gave to Alfred Essienne was a personal transaction of Alfred Essienne and not that of the Defendant company. In support of Plaintiff’s claim to have granted loans to the total sum of GH¢ 109,358 and $71,900 to Defendant company, she tendered in evidence receipts marked Exhibit A1, B series and C. Exhibit A1 is for the sum of $25,000 for payment for shares in Defendant’s company. EXH B series and C add up to a total of GH¢ 48,596 whiles the dollars add up to $71,900. It is true that all the receipts were issued on the official receipts of the Defendant company. Most of the receipts were signed by Alfred Essienne personally except Exhibit B1 for the sum of GH¢5,500.00, Exhibit B3 for the sum of GH¢300.00 and Exhibit B5 for the sum of GH¢600.00 which were signed by someone else. It is not clear, apart from Alfred Essienne who signed these receipts which add up to GH¢6400.00 out of the total of GH¢48,596.00. Even though Plaintiff is claiming the sum of GH¢109,358,00 the evidence on record per the receipts she tendered in evidence amount to a total of GH¢ 48,596.00. The contention of the Defendant company is that these loans were never authorized by the Board of Directors of the company neither did Alfred Essienne inform anybody of any such dealings with the Plaintiff. The Defendant has no record of any request it made to the Plaintiff for loans and the Plaintiff did not also provide any evidence to indicate any formal communication or resolution from the Defendant company. Section 202(5) of The Companies Act (1960) Act 179 provides that; “ unless the companies regulation shall otherwise provide the Directors of a company with shares shall not without the approval of an ordinary 13 | P a g e resolution of the company, exercise the company’s power to borrow money or to charge any of its assets where the monies to be borrowed or secured, together with the amount remaining undischarged of the moneys already borrowed or secured, apart from temporary loans obtained from the company’s bankers in the ordinary course of business, will exceed the stated capital for the time being of the company” The stated capital of the Defendant company is GH¢10,000. The Plaintiff is not a bank and for the company to take loans from an outsider , the company needed to pass ordinary resolution to that effect. There is no evidence that there was any such resolution. Plaintiff was asked under cross examination. Q: So, it will be safe to assume that after advancing monies to Alfred Essienne you never took steps to even investigate the shareholding structure of the company. A: As stated, I am a flyer and I was flying so I did not have the time. It is unbelievable that the Plaintiff would invest so much money in a company and yet take absolutely no interest in investigating the company in which she invested so much monies. I think in all sincerity that Plaintiff was quite reckless in her dealings with Alfred Essienne. This is a Plaintiff who paid $25,000 to Alfred Essienne and he failed to give her any share certificate and yet she goes ahead to advance another $25,000 and other monies to the sum of $71,900 and another GH¢48,596 to Alfred Essienne without asking any questions claiming to be acting on the trust she had in Alfred Essienne. Plaintiff woefully failed to exercise caution or investigate the authenticity of Alfred Essienne. The Exhibits receipts show that the monies were given to Alfred Essienne between 10th March, 2015 to 16th January, 2018 a period of almost 3 years yet Plaintiff claims she was a “flyer” and did not have time to investigate anything about either the Defendant company or Alfred Essienne. 14 | P a g e These loans were obtained without the requisite company resolutions or authorization. There is also no evidence that the money was even applied for the benefit of the Defendant company even though the receipts was issued on company receipts. Plaintiff’s failure to investigate or conduct due diligence before jumping into the relationship with Alfred Essienne was a very costly gamble in which the Plaintiff cannot enforce against the Defendant company. Besides the purported loan facility is invalid as it far exceeds the Defendant company’s stated capital of GH¢10,000 and was procured without a resolution of the company. The loan cannot therefore be enforced against the Defendant company. From the totality of evidence on record therefore Plaintiff has failed to prove her claims by preponderance of probabilities against the Defendant company. Plaintiff suit is therefore dismissed. Cost of GH¢30,000.00 for the Defendants. (SGD) JUSTICE PATRICK BAAYEH (J) (JUSTICE OF THE HIGH COURT) COUNSEL GERTRUDE FAFA ATSRIM FOR THE PLAINTIFF JAMAL DON CHEBE HOLDING THE BRIEF OF RICHMOND KORLEY FOR THE DEFENDANT 15 | P a g e 16 | P a g e