NAYAK COMPANY LIMITED VRS NANA YAA KONADU (GJ/1195/2022) [2023] GHAHC 581 (15 December 2023)

IN THE HIGH COURT OF JUSTICE GHANA (GENERAL JURISDICTION COURT 4) HELD IN ACCRA ON FRIDAY THE 15TH DAY OF DECEMBER, 2023 BEFORE HER LADYSHIP OLIVIA OBENG OWUSU, (MRS.) J. SUIT NO: GJ/1195/2022 1. NAYAK COMPANY LTD NAYAK PLAZA, KWAME NKRUMAH AVENUE ADABRAKA, ACCRA 2. ALHAJI ABDUL RASHID : PLAINTIFFS/APPLICANTS H/NO. 233 AIRPORT WEST RESIDENTIAL AREA ACCRA VRS NANA YAA KONADU UNNUMBERED HOUSE NEAR A&C SHOPPING MALL, EAST LEGON, ACCRA : DEFENDANT/RESPONDENT ======================================================= ======================================================= R U L I N G On 5th September 2022 the Plaintiffs took out a Writ of Summons against the Defendant for the following reliefs: 1 | P a g e a) The sum of One Million, Two Hundred and Fifty Thousand United States Dollars (US$ 1,250,000.00) being the total proceeds from the sale of Nayak Limited property at Sekondi which the Defendant has kept or held. b) Interest on the sum in a) from 14th November, 2008 to the date of final payment. c) Cost.” The Statement of Claim states the following relevant facts: The 1st Plaintiff is a company registered under the laws of the Republic of Ghana. The 2nd Plaintiff is the chairman, Managing Director and 50% shareholder of the 1st Plaintiff -Company (hereafter referred to as the 1st Plaintiff). The 1st plaintiff had property in Sekondi and the 2nd Plaintiff and the Defendant decided to sell it. The property could only be sold with the consent of both the 2nd Plaintiff and the Defendant as they are the only shareholders and directors of the 1st Plaintiff. The 2nd Plaintiff therefore gave his consent. The 2nd Plaintiff and the Defendant agreed that since the 2nd Plaintiff was leaving the jurisdiction, the Defendant should take charge of the sale for and on behalf on the 1st Plaintiff. By an agreement dated 14th November 2008 the 1st Plaintiff sold the said property to New Sea Fish Limited for the sum of One Million, Two Hundred and Fifty Thousand United States Dollars (US$1,250,000.00). The said sum was collected from the purchaser by the Defendant on behalf of the 1st Plaintiff. The Statement of Claim alleges further that the 2nd Plaintiff and the Defendant were husband and wife and were divorced on 23rd September 2009. The relationship they had therefore made it difficult for the 2nd Plaintiff to use means other than persistent verbal demands to recover the total proceeds for the 1st Plaintiff. The Plaintiffs aver that at the time the Defendant received the One Million, Two Hundred and Fifty Thousand United States Dollars (US$ 1,250,000.00) from New Sea Fish Limited she knew that she was receiving same for and on behalf of the 1st Plaintiff and not in her personal capacity. They maintain therefore that she was enjoined to pay same to the 1st Plaintiff. They complain that the Defendant has made several promises to pay the said sum to the 1st Plaintiff and has failed or refused to do so in spite of repeated demands. 2 | P a g e They claim that the failure or refusal of the Defendant to pay the said sum of money to the 1st Plaintiff has caused serious financial hardship to it. That the 1st Plaintiff has lost the use and benefit of as well as income which would accrue from the said sum of money. The Plaintiff's action is resisted by the Defendant whose Defence is that the said property was not sold for cash. She denies receiving money from the sale of any property. Further to this denial, the defendant avers that the 1st Plaintiff had no equitable interest in the property as she solely financed the acquisition of the said property to the knowledge of the 2nd Plaintiff. She goes on to say that as one of only two directors and a 50% shareholder of 1st Plaintiff she has not mandated anyone to issue a Writ for and on behalf of the 1st Plaintiff and therefore the instant Writ is legally incompetent. She maintains that there is no cause of action against her and prays the Court to strike out the instant action. It is also her case that the instant action is statute barred. By way of reply, the Plaintiffs joined issue with the Defendant. At the hearing of the Application for Directions, the Court, pursuant to Order 33, Rule 3 of the High Court (Civil Procedure) Rules, 2004 (C. I. 47), set down issue (v) contained in the Application For Directions for determination by legal argument. The issue states thus: “Whether or not this action is legally incompetent” In compliance with the order of the Court Counsel filed their respective submissions. Counsel for the Defendant rests his argument on the following legal points: He submits that the 2nd Plaintiff has no capacity to act for and on behalf of the 1st Plaintiff. That Section 148 of the Companies Act 2019 (Act 992) is clear on the specific mandate needed by officers of the company including the Managing Director to act. According to Counsel the authority to commence a suit must be done with approval from the directors of a company and 3 | P a g e the said approval must be evidenced by a board resolution or minutes of the board meeting. In this case, he submits, no resolution has been passed by the Board of Directors authorizing the 2nd Plaintiff to institute the instant action. He also raises the point that the Board of Directors of the 1st Plaintiff has not appointed the 2nd Plaintiff as the Managing Director of the 1st Plaintiff to clothe him with any power to act for and on behalf of the 1st Plaintiff. He contends that the 2nd Plaintiff was not competent to issue the Writ for and on behalf of the 1st Plaintiff. Basing his argument on Section 1(4) of the Power of Attorney Act 1998 (Act 549) Counsel submits that it enjoins the 1st Plaintiff which is a body corporate to execute a Power of Attorney appointing the 2nd Plaintiff as its lawful Attorney to institute the action. He contends that no such power has been granted by the Board of Directors of the 1st Plaintiff to the 2nd Plaintiff. The 2nd Plaintiff therefore had no authority to institute the instant action. Counsel’s further argument is that the 1st Plaintiff has not consented to join the 2nd Plaintiff to commence this suit. In his view the 2nd Plaintiff has no cause of action. He urges the court to strike out the Writ for want of capacity. He buttresses his argument with Sections 146 (b), 148, 184(c), 191(1) of the Companies Act 2019 Act 992 and Order 4 Rule 5(3) of The High Court (Civil Procedure) Rules, 2004 (C. I. 47). In answer to these submissions, Learned Counsel for the Plaintiff submits that since the Defendant was the one against whom legal action was to be taken she was disabled from taking part in the decision to commence the action. According to him the exceptions to the rule in the celebrated case of FOSS V HARBOTTLE (1843) HARE 461 allow a minority shareholder to bring a claim on behalf of the company. It is his contention that on the peculiar facts of this case the 2nd Plaintiff is the only other member and director of the company and therefore in substance his actions are those of the members in general meeting and the board of directors. He argues that if the only thing the Defendant is complaining about is that the instant action is 4 | P a g e without members or board authorization it can easily be remedied by the 2nd Plaintiff merely passing an ordinary resolution. To him the points raised by the Defendant’s Counsel are unmeritorious, vexatious and constitute a gross abuse of the processes of the Court. In his view this action is legally competent. He backs this view by placing reliance on Sections144 190, 191,192, 199, 200,205 and 218 of Act 992. For authority he also relies on the following cases: 1. P. S INVESTMENT LIMITED V CENTRAL REGIONAL DEVELOPMENT CORPORATION, UNILEVER GHANA LTD, THE ATTORNEY-GENERAL, DIVESTITURE IMPLEMENTATION COMMITTEE AND OTHERS [2012] SCGLR 2. APPENTENG V BANK OF WEST AFRICA (1972 ) I GLR 153 3. PINAMANG V ABROKWA [1992] 2 GLR 384. 4. LUGUTERAH V NORTHERN ENGINEERING COMPANY LTD & ORS [1978] GLR I have considered the rival arguments put forward by Learned Counsel for the parties. The capacity of the Plaintiffs to maintain this action has been questioned before this Court but they assert their legal competence to maintain it. What is the position of the law in these circumstances? Want of capacity is a point of law which if raised goes to the root of the action. See the case of FOSUA & ADU POKU V DUFIE (DECEASED) & ADU-POKU MENSAH [2009] SCGLR 310. Once the plaintiffs’ capacity was placed in issue it was incumbent on them to satisfy the Court that they have the requisite legal capacity. It is true that the 2nd plaintiff and defendant are the only directors of the company but the company exists apart from the directors. It is well-settled 5 | P a g e that a limited company has existence apart from the directors and members and can sue and be sued in its own name. There is a dearth of authority on the matter. See section 14(2) of Act 992. Reference may also be made to the cases of QUARTSON V QUARTSON [2012] 2 SCGLR 1077 and MOKOR V KUMA (EAST COAST FISHERIES CASE) [1998-99] SCGLR 620. In MORKOR V KUMA (EAST COAST FISHERIES CASE) [1998-99] SCGLR 620 SOPHIA AKUFFO JSC had this to say: “Save as otherwise restricted by its regulations, a company after its registration has all the powers of a natural person of full capacity to pursue its authorized business. In this capacity a company is a corporate being which within the bounds of the Companies Act, 1963 (Act179) and the Regulations of the Company may do everything that a natural person might do. In its own name it can sue and be sued and it can owe and be owed legal liabilities. A company is thus a legal entity with a capacity separate, independent and distinct from the persons constituting it or employed by it. Again in BURLAND V EARLE [1902] AC 83 Lord Davel stated @ page 93 that ..“It is clear law that in order to redress a wrong done to the company or to recover moneys or damages alleged to be due to the company the action should prima facie be brought by the company itself”. The business of a legal persona like a company can only be carried on by human agents. Section 144(3) Of Act 992 vests the power to commence legal action for a wrong committed against the company to be taken by the board of directors in the name of the company. By Section 200 (2) and (4) of Act 992 provides: “2) Proceedings may be instituted by the company on the authority of the board of directors or of a receiver and manager or liquidator of the company, or of an ordinary resolution of the company 6 | P a g e which has been agreed to by the members of the company to attend and vote at a general meeting or has been passed at a general meeting. (4) After investigation of the affairs of the company proceedings may pursuant to section 234 be instituted in the name of the company by the registrar..” Thus in the case of GOLDEN GATES SERVICES LTD V GHANA PORTS AND HARBOURS AUTHORITY AND OTHERS SUIT NUMBER MISC 4/09 unreported decision of Amadu Tanko J (as he then was) dated 17 March 2009 it was held that the power to institute legal action in the name of the company must be exercised by a resolution of the board of directors. If a suit is therefore brought in the company’s name by a director without authority of the board regardless of whether the director who filed the case in Court is also a party to the suit as applicant or plaintiff the Court can properly entertain an objection and strike out the suit. In the instant case the pleadings do not disclose any resolution of the board approving this action. The action on the pleadings was instituted at the instance and on the authority of only the 2nd plaintiff. It is therefore clear that at the time the plaintiffs took this action they were not clothed with the authority of the board of directors to institute the action. I am mindful of the fact Act 992 has made inroads to the rule in the case of FOSS V HARBOTTLE (1843) 2 HARE 461 and that the law permits members as a minority or individually to take legal action in the name and on behalf of the company to enforce the rights of the company. The legal position was lucidly explained by the Supreme Court in the case of P. S INVESTMENT LIMITED V CENTRAL REGIONAL DEVELOPMENT CORPORATION, UNILEVER GHANA LTD, THE ATTORNEY -GENERAL, DIVESTITURE IMPLEMENTATION COMMITTEE AND OTHERS [2012] SCGLR 611. In that case of it was held that the case fell within the exceptions created to the rule in FOSS V HARBOTTLE. That the rule in FOSS V HARBOTTLE will not apply where there is an irregularity in the passing of a resolution which requires a specific majority; or where the wrong complained of is an act ultra vires the company; or where fraud has been committed on the 7 | P a g e minority or where the wrong infringes the personal right of members. Per the rule FOSS V HARBOTTLE the action must be in the name of the company authorized by the directors in their power generally to direct and administer the affairs of the company including the conduct of proceedings by or against the company. The question to answer is whether the 2nd plaintiff falls within the exception which permit him to sue. This not a personal action. The wrong complained of does not infringe directly on the personal right of the 2nd plaintiff. The suit has been brought on behalf of the 1st plaintiff. On the plaintiffs’ own showing the defendant received the amount of Fifty Thousand United States Dollars (US$1,250.000) from New Sea Fish Limited for and on behalf of the 1st plaintiff and has failed or refused to pay back the money in spite of repeated demands. In my opinion the wrong complained of must therefore be vindicated by the 1st plaintiff and not the 2nd plaintiff. It is also pertinent to indicate that the instant action is also not a derivative action. A derivative action is an action brought by a member or director in the name of the company even though the decision is not supported by the majority of the members or directors as the case may be. A derivative action can only be instituted subject to the leave of the court. In this connection I will also refer to Ferdinand D. Adadzi in Modern Principles of Company Law in Ghana revised edition by Ferdinand D. Adadzi @ page 1133. He puts it this way: " “ A derivative action has been introduced under the Companies Act 2019 to permit the individual directors or members without the consent of the majority, to institute an action in the name of company against a wrong doer to assert a right of a company. A derivative action is an action brought by a member or director in the name of the company even though the decision is not supported by the majority of the members or directors as the case may be. A member or director who is unable to secure the majority required to institute an action may resort to a derivative action. This is not personal action as the action is in the name of the company”. 8 | P a g e Section 201 of Act 992 provides that: (1) Subject to subsection (3), the court may on the application of a member or director of accompany grant leave to that member or director to bring. (a) Proceedings in the name and on behalf of the company or subsidiary of the company; or (b) Intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending or discontinuing the proceedings on behalf of the company or a subsidiary of the company as the case may be. I am of the opinion that the provisions in the Act, relied on by learned counsel for the plaintiffs, do not support his contention that the action is legally competent. The 2nd Plaintiff failed to bring himself within the exceptions which permit him to sue. It follows that in law he lacked capacity to bring this action. The plaintiffs in instituting this action did not comply with the procedure governing the type of action they have taken. Where an action is instituted wrongly in the name of the company it would not matter that the company has a cast iron case on the merits the action must fail. See the case of SARKODIE V BOATENG II [1982-83] GLR 88. I hold the view that the action is legally incompetent. Accordingly the Plaintiffs’ Claim is struck out for want capacity. There will be no order as to costs. (SGD.) H/L OLIVIA OBENG OWUSU (MRS.) JUSTICE OF THE HIGH COURT PARTIES: 2ND PLAINTIFF PRESENT REPRESENTING 1ST PLAINTIFF DEFENDANT ABSENT 9 | P a g e COUNSEL: EDWARD ANOKYE FOR PLAINITFFS PRESENT GIFTY ANAFO-POKU H/B FOR AGBESI DZAKPASU FOR DEFENDANT PRESENT REFERENCES CASES 1. SARKODIE V BOATENG II [1982-83] GLR 88. 2. GOLDEN GATES SERVICES LTD V GHANA PORTS AND HARBOURS AUTHORITY AND OTHERS SUIT NUMBER MISC 4/09 UNREPORTED DATED 17 MARCH 2009 3. BURLAND V EARLE LORD DAVEL [1902] AC 83 4. QUARTSON V 2 SCGLR [2012] 2 SCGLR 1077 5. MOKOR V KUMA (EAST COAST FISHERIES CASE) [1998-99] SCGLR 620. 6. P. S INVESTMENT LIMITED V CENTRAL REGIONAL DEVELOPMENT CORPORATION, UNILEVER GHANA LTD, THE ATTORNEY -GENERAL, DIVESTITURE IMPLEMENTATION COMMITTEE AND OTHERS [2012] SCGLR 611. 7. FOSS V HARBOTTLE (1843) 2 HARE 461 8. FOSUA & ADU POKU V DUFIE (DECEASED) & ADU-POKU MENSAH [2009] SCGLR 310. BOOKS 1. Modern Principles of Company Law in Ghana revised edition by Ferdinand D. Adadzi STATUES THE COMPANIES ACT 2019 (ACT 992) 10 | P a g e