REISS & COMPANY LIMITED vs. HENRY NUERTEY KORBOE & THREE OTHERS
  • IN THE SUPERIOR COURT OF JUDICATURE
    IN THE COURT OF APPEAL (CIVIL DIVISION)
    ACCRA - A.D 2017
REISS & COMPANY LIMITED - (Plaintiff/Respondent)
HENRY NUERTEY KORBOE AND THREE OTHERS - (Defendants/Appellants)

DATE:  16TH MARCH, 2017
SUIT NO:  H1/1/2017
JUDGES:  GYAESAYOR JA (PRESIDING), ADUAMA OSEI JA, LOVELACE-JOHNSON JA
LAWYERS:  ADELE ACOLATSE FOR PLAINTIFF/RESPONDENT
THEOPHILUS DONKOR FOR DEFENDANTS/APPELLANTS
JUDGMENT

ADUAMA OSEI JA:

In this judgment, the Plaintiff/Respondent is referred to as “the Plaintiff”, and the Defendants/Appellants are referred to as “the Defendants”.

 

By its writ of summons issued in the Fast Track Division of the High Court, Accra, on the 15th of December, 2008, the Plaintiff sought against the Defendants jointly and severally a claim for the sum of GH¢920,000.00, “being the cost of the Plaintiff’s agrochemicals the 1st Defendant fraudulently and in breach of fiduciary duty and trust to the Plaintiff sold as the Sales Manager of the Plaintiff company on credit to the 2nd and 3rd Defendants and other customers but which said sum the 1st Defendant failed to account for or pay back to the Plaintiff company despite repeated demands”.

 

By the said writ, the Plaintiff also sought against the Defendants declarations that it was entitled to trace the above-stated sum of GH¢920,000.00 to certain specified assets of the 1st Defendant, and to an account from the Defendants from 2006 to date, in respect of all agrochemicals and agricultural tools bearing the labels and name of the Plaintiff and packaged in the same way as Plaintiff’s goods, which the 1st Defendant in breach of his fiduciary duty or in breach of trust to the Plaintiff imported for the 2nd and 3rd Defendants from the Plaintiff’s suppliers, Excel Crop Care in India, and were sold by the 1st, 2nd and 3rd Defendants.

 

 

Again, the Plaintiffs sought against the Defendants orders for the judicial sale of the specified properties of the 1st Defendant to satisfy any judgment it would obtain against the Defendants, to account for all agrochemicals and agricultural tools the 1st Defendant fraudulently sold through 2nd and 3rd Defendant companies but proceeds of which the Defendants failed to pay to the Plaintiff, and for payment to the Plaintiff by the Defendants of all amounts found due after the accounts had been taken. General damages were also sought for breach of fiduciary duty, and interest was sought on the sum that would be awarded as general damages, on the sum that would be found due under the account, and on the above-stated sum of GH¢920,000.00.

 

 

To justify the above-stated claims, the Plaintiff alleged in its statement of claim that the 1st Defendant had been its employee since the year 2000, and that at all material times until the 5th of July, 2007, the 1st Defendant had been its salesman in charge of its Agrochemical Division. The Plaintiff contended that as its salesman, the 1st Defendant held a fiduciary and other duty relationships with it that obliged him, in all his dealings with the Plaintiff, to act in good faith, honestly, and in the best interest of the Plaintiff. The 1st Defendant was not to place himself in a conflict of interest position in his dealings with the Plaintiff.

 

In respect of the 2nd and 3rd Defendants, the Plaintiff alleged that they were limited liability companies incorporated by the 1st and 4th Defendants to carry on, among other businesses, the business of importing and distributing agricultural inputs and general goods. The Plaintiff alleged further that the 1st and 4th Defendants were the Directors and alter egos of the 2nd and 3rd Defendant companies and that the 1st and 4th Defendants had at all material times held themselves out to be personally liable for the acts and debts of the 2nd and 3rd Defendant companies.

 

The Plaintiff alleged acts and conduct on the part of the 1st and 4th Defendants in relation to the 2nd and 3rd Defendant companies that had given rise to the debt of GH¢920,000.00 and contended that the 1st, 2nd and 3rd Defendants were the main debtors and that the debt had come about as a result of fraudulent dealings involving the Defendants in respect of the Plaintiff’s agrochemicals.

 

The Plaintiff contended that from the facts alleged, it was entitled to trace the sum of GH¢920,000.00, being the amount owed, to the assets of the Defendants and further that the Defendants were liable to account to it for the goods they imported and sold in direct competition with the Plaintiff company.

 

In their statement of defence, the Defendants stated that even though the 1st Defendant had done some work with and for the Plaintiff, the 1st Defendant had never been employed by the Plaintiff as a salesman or otherwise. The Defendants denied the existence of the duty relationships alleged by the Plaintiff in its statement of claim and contended that even though the 1st Defendant had always acted faithfully and honestly in his dealings with the Plaintiff, he owed the Plaintiff no special duty to so act.

 

The Defendants admitted that the 1st and 4th Defendants were directors of the 2nd and 3rd Defendants. They however denied that the 1st and 4th Defendants were the alter egos of the 2nd and 3rd Defendants or that the 1st and 4th Defendants had ever held themselves out as liable for the acts and debts of the 2nd and 3rd Defendants. The Defendants did not admit the debt of GH¢920,000.00 alleged by the Plaintiff and they also rejected the Plaintiff’s contention that the said sum was traceable to their assets or that they were liable to account to the Plaintiff. The Defendants also denied the fraudulent dealings alleged by the Plaintiff against them.

 

Fourteen issues were set down for determination by the trial Court at the close of pleadings, but among them, the holdings that appear to have generated this appeal are in respect of the issues:

 

i. whether or not the 1st Defendant owed the Plaintiff a fiduciary duty to act faithfully and honestly and in good faith and whether the 1st Defendant so acted;

ii. whether or not the 1st and 4th Defendants are the alter egos of the 2nd and 3rd Defendant companies and therefore personally liable for the transactions, the subject matter of this suit;

iii. whether or not the veil of incorporation be pierced to make the 1st and 4thDefendants liable for the debts of the 2nd and 3rd Defendant companies of GH¢920,000.00;

iv. whether or not the 1st Defendant and/or the 2nd and 3rd Defendants defrauded the Plaintiff to the tune of GH¢920,000.00;

v. whether or not the Plaintiff is entitled to trace the sum of GH¢920,000.00 to the assets of the 1st Defendant listed in the statement of claim; and

vi. whether or not the Defendants are liable to account for agrochemicals and tools with the labelling and packaging of the Plaintiff company which the Defendants in breach of trust and of fiduciary duty imported from the Plaintiff’s suppliers, Excel Crop Care of India which they sold in direct competition with the Plaintiff.

 

The decisions of the trial Court touching on the above-stated issues were that the 1st Defendant owed the Plaintiff a fiduciary duty to protect its interest, that the 1st Defendant breached that duty, that the 1st and 4th Defendants were the alter egos of the 2nd and 3rd Defendant companies, and that it was necessary for the veil of incorporation on the 2nd and 3rd Defendant companies to be lifted to make it possible for the 1st and 4th Defendants to be held liable for the debts of the 2nd and 3rd Defendants. The trial Court also held that the sum of GHȼ920,000.00, being the amount of the debt claimed by the Plaintiff, was traceable to the assets listed on the inventory alleged to belong to the 1st Defendant and/or 4th Defendant, and, again that the Defendants were liable to account to the Plaintiff in respect of the proceeds of sale of the Plaintiff’s agrochemicals.

 

Being dissatisfied, among others, with the above decisions of the trial Court, the Defendants are in this appeal praying this Court to reverse the judgment of the trial Court, dated 21st February, 2014, on the grounds that:

(a) the Plaintiff obtained the said judgment by perpetrating a fraud on the trial High Court;

(b) the said judgment is vitiated by fraud which the Plaintiff perpetrated on the trial High Court;

(c) the trial High Court Judge erred in law when he refused to adjourn the delivery of his judgment to abide the determination of the application for committal for contempt brought by the 1st Defendant/Appellant against the Plaintiff/Respondent and two others for their attempt to perpetrate a fraud on the said High Court to obtain judgment in favour of the Plaintiff;

(d) the judgment is vitiated by bias on the part of the trial High Court Judge;

(e) the trial High Court Judge erred in holding that the 1st Defendant is liable for breach of a fiduciary duty owed to the Plaintiff for importing and trading in the same goods as the Plaintiff;

(f) the trial High Court Judge erred in holding that the 1st and 4th Defendants are the alter egos of the 2nd and 3rd Defendants in the absence of proof of such fact;

(g) the learned trial High Court Judge erred in lifting the veil of Incorporation and thus making the 1st and 4th Defendants personally liable for the 2nd and 3rd Defendants when no grounds were established for the lifting of the veil of incorporation of the 2nd and 3rd Defendants;

(h) the trial High Court Judge erred in law when he ordered the Defendants to account after the judgment to the Plaintiff for agrochemicals and agricultural tools imported and sold by the 2nd Defendant prior to the institution of the suit;

(i) the judgment is against the weight of the evidence adduced at the trial High Court; and

(j) further grounds to be filed upon receipt of the record.

 

The judgment appealed against is at page 584 to page 595 of Volume Two of the Record of Appeal, and the Notice of Appeal is at page 602 to page 604 of the same Volume of the Record.

 

As may be noted above, the Defendants filed 9 substantive grounds of objection to the judgment of the trial Court. In the submissions filed in support of the grounds, however, Counsel argued 4 grounds, which he identified as grounds one, two, three and five. For some inexplicable reason, though the grounds as contained in the Notice of Appeal were identified by lower case letters from (a) to (i), in his filed submissions, Counsel decided to identify them numerally. After relating the grounds filed to the submissions made in respect of those grounds, it seems to this Court that Counsel has argued grounds (a), (b), (c) and (e) and abandoned grounds (d), (f), (g), (h), (i) and (j).

 

Grounds (a) and (b) were argued together and the contention they make when read together is that the judgment appealed against is vitiated by fraud because the Plaintiff obtained same by perpetrating a fraud on the trial Court. In supporting these combined grounds, Counsel for the Defendants observed that, as a general principle of law, to set aside a judgment on ground of fraud, the party seeking to set it aside ought to institute a fresh suit. In the fresh suit, the fraud ought to be pleaded, particularised and proved beyond all reasonable doubt. Counsel submitted that when, however, there is clear evidence of fraud on the face of the record, the court can rely on the record to do justice in the matter.

 

In the view of Counsel, in the instant case, the record shows clear evidence of fraud on the part of the Plaintiff. The evidence shows that there was collusion between the Plaintiff and the accountant appointed by the Court to go into accounts between the parties. Counsel observed that the court appointed accountant gave false testimony in the case and contended that the false testimony misled the trial Court to rely on Exhibit CE1 to the detriment of the Defendants. Counsel also observed that the Plaintiff tendered false VAT invoices for the purpose of proving its case against the Defendants and argued that the Plaintiff’s conduct in so doing provided another instance of the fraud perpetrated by the Plaintiff.

 

Underground (c), the contention made by the Defendants is that the trial Court erred in its refusal to adjourn the judgment delivered on 21st February, 2014, to abide the outcome of the Defendants’ contempt application. In arguing the said ground, Counsel for the Defendants referred to the proceedings in the contempt application contained in Volume 3 of the Appeal Record and contended that the proceedings established that there had been collusion between the Plaintiff and the court-appointed accountant with the aim of misleading the trial Court to enter judgment for the Plaintiff against the Defendants. Counsel argued that the contempt application was aimed at exposing to the trial Court the fact that the Plaintiff’s case was based on fraud, and the trial Court not having adjourned delivery of the judgment to abide the outcome of the contempt application, it deprived itself of the opportunity of taking account of the Plaintiff’s fraud in its judgment to the prejudice of the Defendants.

 

 

 

Counsel made the further point that in another matter before the Criminal Division of the High Court arising out of the same or similar facts as in the contempt application, but in which the 1st Defendant was the accused person, the criminal court had acquitted and discharged the 1st Defendant on the ground that the rules of natural justice had been breached to the detriment of the 1st Defendant. Counsel observed that in acquitting the 1st Defendant, the criminal court had expressed disgust about the manner in which the court appointed accountant prepared his report, Exhibit CE1, and he argued that if the criminal court had been so disgusted with the manner in which Exhibit CE1 was prepared, then the trial Court would have been even more disgusted if it had allowed the contempt application to be heard before it delivered its judgment.

 

The contention made underground (e) is that the trial High Court Judge erred in holding that the 1st Defendant is liable for breach of a fiduciary duty owed to the Plaintiff for importing and trading in the same goods as the Plaintiff. In arguing the said ground, Counsel for the Defendants made references to the record and contended that the Plaintiff and its management team had always known that the 1st Defendant was buying and reselling agrochemicals to its customers, and also that since the year 2000, the 1st Defendant had been importing agrochemical products into Ghana for sale. Counsel observed that the Plaintiff never raised any challenge to the 1st Defendant’s line of business as an importer of agrochemical products and he contended that, in the circumstance, there was no basis for the trial Court’s determination that the 1st Defendant stood in a fiduciary relationship to the Plaintiff.

 

Responding to grounds (a) and (b) of the appeal, Counsel for the Plaintiff denied that the Plaintiff obtained the judgment by fraud or that the judgment is vitiated by fraud. She submitted that the judgment was delivered after the trial Court had regularly gone through the process of hearing evidence from all parties and their witnesses, as well as the court-appointed accountant. All witnesses, including the court-appointed accountant, were subjected to cross-examination by Counsel in the case, and all exhibits tendered were duly considered by the trial Court. There was nothing irregular about any of the stages in the proceedings.

 

Counsel contended that all the facts on which the Plaintiff based its case were proved by oral and documentary evidence, and she referred to various parts of the record to support her contention. She rejected the claim by the Defendant that the accounts taken by the court-appointed accountant were done on the blind side of the Defendants. She stated that the Defendant’s lawyer was duly furnished with copies of all documents submitted for the work of the court-appointed accountant.

 

Regarding the contempt proceedings, Counsel for the Plaintiff noted that the one filed against Caradoc Mills Lamptey alleging fraud and the one against the Plaintiff and its Managing Director and Caradoc Mills Lamptey were either withdrawn as being incompetent or dismissed by the Fast Track Court differently constituted.

 

Counsel for the Plaintiff considered the judgment in the criminal proceedings, which her colleague for the Defendants referred to, as perverse and considered that it did not, in any event, vitiate the proceedings in the Fast Track Division and did not render the process of going into accounts in the civil suit fraudulent either.

 

Counsel was of the view that the contempt applications filed by the Defendants constituted a completely different matter and did not vitiate the jurisdiction of the trial Court in this matter. Counsel referred to the contempt application filed on 11th February, 2014, and noted that that application and its annexures are not part of the pleadings and proceedings in the present case. They cannot therefore form a basis for overturning the judgment lawfully obtained by the Plaintiff in the present case.

 

In the view of Counsel for the Plaintiff, if the Defendants have any grievance against the trial Court on ground of fraud, the course open to them is to institute a fresh action to impeach the judgment. It is not open to them to raise fraud in this appeal, when the facts are not apparent on the face of the appeal record.

 

Regarding the VAT invoices, Counsel for the Plaintiff contented that there was nothing fraudulent about them or their tendering and she rejected the Defendants’ contention to that effect. Counsel drew attention to various parts of the proceedings which she considered as establishing the genuineness of the invoices.

 

In response to Ground (c) of the appeal, where the Defendants contend that the trial Court erred in law when it refused to adjourn delivery of its judgment to abide the determination of the 1st Defendant’s application for committal of the 1st Plaintiff and two others for contempt, Counsel explained that the Defendants’ lawyer had on the 21st of February, 2014, made an oral application to arrest the judgment that was to be delivered on that day on the ground that he had filed a motion for committal for perjury, which was not on the Court’s docket and which had also not been served on the Plaintiff. Counsel noted that there was no motion for stay of proceedings or to arrest judgment pending and submitted that an application for committal for perjury did not operate to stay proceedings or delay delivery of judgment.

 

Counsel also noted that the contempt application was dismissed by the High Court on 16th February, 2015, and also stated that the facts on which the Defendants’ applications for contempt and perjury were based are not part of the proceedings in the Court.

 

Counsel also noted that the committal proceedings for perjury before the Criminal Court were dismissed by the Criminal Court as being incompetent. Counsel also pointed out that the matters contained in the criminal matter are not part of the appeal record herein.

 

In responding to Ground (e) of the appeal, Counsel for the Plaintiff denied the submissions of Counsel for the Defendants that to the knowledge of the Managing Director of the Plaintiff, the 1st Defendant had been doing business with the Plaintiff’s customers, and also that the 1st Defendant had been importing agrochemical products into Ghana for sale.

 

Counsel for the Plaintiff contended that from the evidence on record, it was when the 1st Defendant absconded that the Managing Director of the Plaintiff company found in his drawers documents showing that he was importing and selling in direct competition with the Plaintiff.

 

In the view of Counsel for the Plaintiff, there was enough evidence before the trial Court to justify its determination that the 1st Defendant stood in fiduciary relationship with the

Plaintiff and also to justify the lifting of the veil of incorporation on the 2nd and 3rd Defendant companies.

 

Reading the submissions of Counsel for the parties on the grounds of objection pursued in this appeal on behalf of the Defendants has raised two questions in my mind: Is the judgment in the present case one that lends itself to impeachment on ground of fraud without the necessity of instituting a fresh action? On the evidence in this case, can the 1st Defendant properly be regarded as a fiduciary of the Plaintiff?

 

It is trite learning that a judgment obtained by fraud cannot stand and will be set aside if it is so proved. In his submissions filed in this appeal, Counsel for the Defendants has made the point that, ordinarily, a person seeking to impeach a judgment on ground of fraud will need to institute a fresh action in which the alleged fraud is pleaded, particularised, and proved beyond all reasonable doubt. He states however that there are situations where, even without a fresh action being instituted, the glaring evidence of fraud which appears on the face of the record regarding the manner in which the judgment was obtained will move the court to set it aside.

 

I agree with Counsel for the Defendants that there are situations where, though the rules of pleadings regarding the setting aside of judgments on ground of fraud have not been strictly complied with, the courts have acted to set aside judgments found to have been fraudulently obtained. This position has been confirmed by Brobbey JSC in Apeah and Another Vs. Asamoah [2003-2004] SCGLR 226, cited by Counsel the Defendants, where at page 243 of the Report, he has underscored that even though fraud should under normal circumstances be pleaded, the court cannot ignore clear evidence of fraud which appears on the face of the record. The court will act on such evidence and do justice in the matter.

 

Regarding fiduciaries, it is noted that in Black’s Law Dictionary, 8th Edition, 2004, a “fiduciary” is described as “a person who is required to act for the benefit of another person on all matters within the scope of their relationship”. To elaborate, extreme loyalty is expected of a fiduciary in his dealings with the person to whom he relates as a fiduciary. There must be no conflict of duty between the fiduciary and his principal. Indeed, it is said that the fiduciary must not place himself in a situation where his personal interest and his fiduciary duty conflict; he must also not place himself in a situation where his fiduciary duty conflicts with another fiduciary duty; and, again, he must not profit from his fiduciary position without his principal’s express knowledge and fully informed consent.

 

We can say from Keech Vs. Sanford [1726] EWHC Ch. J76, that when we talk of a fiduciary not profiting from his fiduciary position, we include any benefit or profit which although unrelated to the fiduciary position, came about as a result of an opportunity that came his way as a result of the fiduciary position. It does not matter that the principal would not have been able to make the profit. What matters is whether the fiduciary made the profit by virtue of his role as a fiduciary for the principal. In such an event, the fiduciary must report the profit to the principal.

 

We can say therefore that where a principal is able to establish that there is a fiduciary duty and that that duty has been breached, the court will find that any benefit gained by the fiduciary ought to be returned to the principal. This will be on the principle that it will be unconscionable to allow the fiduciary to retain the benefit by enjoying his strict common law legal rights.

 

As was held in the Australian case of Farah Construction Vs. Say-Dee Pty Limited [2007] HCA 22, to forestall an order for the return of the benefit, the fiduciary will have to show that there was full disclosure of the conflict of interest or profit and that the principal fully accepted and freely consented to the fiduciary’s course of action.

 

The return of the benefit may be secured by a tracing order or by an order for account or both. Where, for example, a senior employee has taken advantage of his position by operating his own company on the side and has made some profits over a period of time, an account of profits will be an appropriate remedy.

 

Dart Industries Inc. Vs. Décor Corp Pty. Ltd. (“Lettuce Crisper Case”) [1993] HCA 54, was an Australian industrial property case and in it, the principle was underscored that a person who wrongly uses another person's industrial property – patent, copyright, trade mark – is accountable for any profits which he makes which are attributable to his use of the property which was not his. It was acknowledged that if one man makes profits by the use or sale of something, and that whole thing came into existence by reason of his wrongful use of another man's property in a patent, design or copyright, the infringer is obliged to account for all the profits which he thus made.

 

Among relationships that are assumed to give rise to fiduciary duties are those between a trustee and a beneficiary, a lawyer and his client, a guardian and his ward, company board of directors and the company, and a senior employee and the company that has employed him. It is interesting to note in this respect that in Black’s Law Dictionary referred to above, the meaning of “fiduciary” is illustrated with the sentence, “A corporate officer is a fiduciary of the corporation”.

 

Generally, the employer – employee relationship does not give rise to fiduciary duties. There are however circumstances in which the fiduciary duties owed by the directors of a company may extend to other officials of the company. This position is acknowledged by Gower who in his Principles of Modern Company Law, at page 473 of the Second Edition, makes the point that “any officials of the company who are authorised to act on its behalf and in particular, …. those acting in a managerial capacity”, may owe fiduciary duties to the company. There is also the case of Canadian Aero Service Limited Vs. O’Malley [1974] SCR 692, a leading civil case decided by the Supreme Court of Canada, in which senior employees were considered likely to be found to owe fiduciary duties towards their employers.

 

In the O’Malley case, O’Malley and Zarzycki were senior officers of Canadian Aero Service Limited ("Canaero"), which was a company engaged mainly in topographical mapping and geophysical exploration. Together with Wells, O’Malley and Zarzycki were directors of Canaero. In 1961, Litton Industries acquired Canaero’s parent company and in February,1965, Wells resigned as director. O’Malley and Zarzycki also resigned from their positions in August, 1966.

 

With the acquisition by Litton Industries, the authority of O’Malley and Zarzycki and the scope of their independent action at Canaero became limited, and Wells was aware that O’Malley and Zarzycki were discontented by reason of this development. O’Malley and Zarzycki were also concerned about a possible loss of position if Canaero should fail to get contracts.

 

Before the three resigned, at the suggestion of Wells, O’Malley, Zarzycki and Wells decided to form a business venture in the same fields as Canaero, which was incorporated as Terra Surveys Limited in September 1966. In that month, Terra won a contract to perform a topographical survey and related mapping for the Government of Guyana and the agreement was executed in November 1966. The proposal upon which the contract was granted was based on preparatory work that had been performed by O'Malley and Zarzycki for Canaero prior to their resignations.

 

Canaero filed a claim against the three, together with Terra Surveys Limited, on the basis that the defendants had improperly taken the fruits of a corporate opportunity in which Canaero had a prior and continuing interest.

 

Among the issues that arose for determination in the action were the relationship of O’Malley and Zarzycki to Canaero, the duty or duties, if any, owed by them to Canaero, and whether there had been any breach of duty by reason of the conduct of O’Malley and Zarzycki in acting through Terra to secure the contract for the Guyana project.

 

The Supreme Court of Canada held that anyone in a supervisory or controlling role of a company has a fiduciary duty towards the company, which includes the duties of "loyalty, good faith and avoidance of a conflict of duty and self-interest". The court considered that O’Malley and Zarzycki were not mere employees but senior officers whose duty to their employer was similar to that owed to a corporate employer by its directors. In the view of the Canadian Supreme Court, even though O’Malley and Zarzycki were subject to the supervision of the officers of the controlling company, their positions as officers of a subsidiary charged them with initiatives and with responsibilities far removed from the obedient role of servants. O’Malley and Zarzycki therefore stood in a fiduciary relationship to Canaero and they were precluded from obtaining for themselves, either secretly or without the approval of the company, any property or business advantage belonging to the company. The approval of the company, if any was given, had to be one properly manifested upon full disclosure of the facts. The court determined that O’Malley and Zarzycki had breached their fiduciary duty, and held that Canaero was entitled to compel them, as defaulting fiduciaries, to answer for their default according to their gain.

 

Having reviewed the position regarding impeachment of judgments on ground of fraud and who a fiduciary is and the implications of being a fiduciary, I now go back to the two questions I posed earlier on: Is the judgment in the present case one that lends itself to impeachment on ground of fraud without the necessity of instituting a fresh action? On the evidence in this case, can the 1st Defendant properly be regarded as a fiduciary of the Plaintiff?

 

Counsel for the Defendants concedes that as a general rule, where it is intended to impeach a judgment on ground of fraud, a fresh suit ought to be filed. He has however submitted that there may be situations where the evidence of fraud that has come to the attention of the court regarding the circumstances in which the judgment was obtained is so glaring that the court will be ready to set the judgment aside without insisting on a fresh action being instituted. Counsel for the Defendants has contended that the present case provides an example of such situations.

 

The judgment of a court gives what is intended to be the final decision by the court as to the rights and obligations of the parties in the case. The processes that are gone through before judgments are delivered and the almost hallowed status accorded judgments, make the court tardy to throw out a judgment on grounds that may turn out to be flimsy. This perspective aids my understanding of the requirement that a person seeking to have a judgment set aside on a serious ground such as fraud, ought to institute a fresh action to impeach the judgment. A fresh action calls for pleadings and by the pleadings, the matters in issue regarding the alleged fraud are clearly defined to prepare the parties as to the evidence to be led. So that when the court decides to set the judgment aside, it will not be based on flimsy grounds, but on solid and certain grounds.

 

But as we have noted above, there are exceptional situations where, to serve its overriding purpose of dispensing substantial justice, the court will on glaring evidence of fraud set aside a judgment without insisting on a fresh action. In Amuzu Vs. Oklikah [1998-99] SCGLR 141, there was clear evidence of fraud on the record and the Supreme Court held that even though fraud had not been pleaded, the evidence of fraud could not be ignored. Also in Apea and Another Vs. Asamoah (supra), the Supreme Court decided that the rules of pleadings could be dispensed with and the evidence of fraud allowed to take its course, where it was clear from the evidence on record that the judgment in issue had been obtained on the basis of a lease which had been fraudulently procured.

 

In my view, since the Defendants herein are presenting the present case as an exception to the general rule, the onus is on them to demonstrate that, indeed, this case can be considered among the exceptions to that rule. In this direction, Counsel for the Defendants has in his filed submissions, noted that the trial Court had made an order for the Registrar to appoint an accountant to go into accounts between the parties. All documents and questions meant for the accounts were, under that order, to be filed by each party and served on the other by the 6th of April, 2009. Counsel has remonstrated however that the Plaintiff never filed any document or question as ordered by the trial Court, as a result of which the Defendants were left uncertain as to what exactly to file in response to the Plaintiff’s claims. In consequence, none of the parties filed any document for the court-appointed accountant to rely upon.

 

Counsel has also noted from the record that while the Plaintiff failed to file any documents as ordered by the trial Court, it had invited the court-appointed accountant to its offices and given him some documents, which had been used by the accountant to prepare a report, Exhibit CE1, against the Defendants without anything being cross-checked with the Defendants.

 

Counsel has observed that having thus prepared his report, the court-appointed accountant had gone to Court to testify falsely that the Defendants did not submit any documents to him and had thereby given the impression to the trial Court that it was only the Plaintiff who submitted its documents and questions to the Court’s Registrar. Counsel has contended that the testimony of the court-appointed accountant was false and wilful and could only point to collusion between him and the Plaintiff. The trial Court was misled by the report of the accountant and false testimonies given by the Plaintiff about some VAT invoices in deciding the case in favour of the Plaintiff and on these facts, the judgment could be set aside on ground of fraud without the necessity of commencing a fresh action.

 

As I read the submissions of Counsel for the Defendants in respect of how Exhibit CE1 was produced, I see him anxious to explain the failure of the Defendants to file any documents and questions as ordered by the trial Court, and I also see him straining every nerve to blame the Plaintiff for that failure. The real point however is that having read the record myself, I do not find the matters Counsel has drawn this Court’s attention to as necessarily pointing to collusion between the Plaintiff and the court-appointed accountant and they do not, without more, provide such evidence as will move a court of justice to set aside a judgment when it has not availed itself of the facilities afforded by the rules of pleadings. Also, the response of Counsel for the Plaintiff, summarised above, to the submissions made on behalf of the Defendants, brings to light other aspects of the matter which should caution this Court against attempting to set the judgment aside on ground of fraud in a proceeding that lacks the benefits that pleadings afford. To my mind, the judgment in the present case is not one that lends itself to impeachment on ground of fraud without the necessity of instituting a fresh action. This means that the grounds advanced in this appeal based on fraud are not sustainable and Grounds (a) and (b) are accordingly dismissed.

 

There is also ground (c) under which the Defendants are contending that the trial Court erred in its refusal to adjourn the judgment on appeal herein to abide the outcome of a contempt application. In arguing the said ground, Counsel for the Defendants observed that the contempt application was aimed at bringing to the notice of the trial Court the fact that the Plaintiff’s case was based on fraud, and the trial Court not having adjourned delivery of the judgment to abide the outcome of the contempt application, it deprived itself of the opportunity of taking account of the Plaintiff’s fraud in its judgment to the prejudice of the Defendants.

 

What preceded delivery of the judgment is recoded on pages numbered 597 and 598 in the volume of the appeal record containing proceedings. I gather from what is recorded that on the 21st of February, 2014, Counsel for the Defendants had told the Court that following what had transpired in another division of the court in a different application, he had decided not to proceed with his application before the trial Court which was for committal for perjury. Counsel had told the Court that in place of the application for committal for perjury, he had on the 11th of February filed a motion for committal for contempt of court, which he considered to be “essentially in the nature of a motion to arrest the judgment of (the) court”. I gather from the reaction of Counsel for the Plaintiff that the Plaintiff had not been served with the motion filed on 11th February, which meant that that motion could not be heard on that day.

 

The trial Court, on its part, is recorded to have indicated that it was not going to deal that day with the motion Counsel for the Defendants had filed, and I discern from observations made by the Court in the last paragraph of the page numbered 597 which ends at the page numbered 598, that the trial Court found something improper about the course Counsel for the 1st and 2nd Defendants was taking. The sense emerges from what is recorded that the trial Court considered Counsel’s application to have been filed, presumably, with an improper motive. The trial Court is recorded to have observed: “ …to say that a witness for perjury is intended to arrest the judgment in my view is not right. If you want to arrest a judgment you file a motion to arrest it”. With this observation, the trial Court had proceeded to read the judgment.

 

Considering what is recorded to have taken place in court on the 21st of February, 2014, I do not think the trial Court was obliged to adjourn delivery of the judgment to abide the outcome of an application whose filing had only been orally communicated to the Court, and whose purpose, from the explanation given by Counsel, could amount to abuse of process. It is clear to me that the trial Court saw that its processes were being abused by the 1st and 2nd Defendants and I will not fault the Court for rejecting the request for an adjournment and proceeding with delivery of the judgment.

 

Further, an appeal may attack a judgment for unsatisfactory evaluation of the evidence or for errors in the application of the law or both. Obviously, when the trial of an action has closed and judgment written, any deficiencies in or defects with the judgment are already captured in the judgment. One will therefore find it hard to accept a contention that a deficiency in the judgment has come about because the reading of the judgment was not adjourned, unless the adjournment was expected to bring about a re-opening of the case and a re-writing of the judgment, which cannot be.

 

The statement by Counsel for the 1st and 2nd Defendants that the application for which he was seeking adjournment of delivery of the judgment was in the nature of a motion to arrest the judgment raises another question which needs to be addressed. Is the procedure of arresting judgments available in our jurisdiction in civil trials?

 

 

In Black’s Law Dictionary, 8th Edition (supra), an arrest of judgment under common law is explained as the technical term describing the act of a trial judge refusing to enter judgment on the verdict because of an error appearing on the face of the record that rendered the judgment invalid.” This could be done when there was a plea in demurrer by which the party pleading stated that though the facts alleged are true, they are insufficient for the plaintiff to state a case for himself and for the defendant to frame a response. By so pleading, the defendant stayed in his proceedings in the action until the decision of the court was given as to whether he was bound to answer to the plaintiff’s insufficient pleading. By this procedure, where there were intrinsic causes appearing on the record, the courts could, at common law, arrest the judgment the plaintiff might want to take.

 

In our jurisdiction, however, by Order 25, rule 1 of L.N. 110A (the old rules), a plea in demurrer was abolished and in its place, by rule 2 of the Order, provision was made for a party to raise any point of law in his pleadings, which point could be disposed of by the court at or after the trial. Application could however be made for that point to be set down for hearing and disposed of at any time before the trial. Under the new rules, CI 47, this procedure is provided for by Order 11, rules 1 and 18. This means that today, the type of defect the demurrer procedure dealt with would normally be objected to before trial or judgment. In consequence, the motion in arrest of judgment has fallen out of use. This would explain why in Tanko Vs. State Farms Corporation and Another [1989-90] 1 GLR 259, Kpegah J, as he then was, described an application in arrest of judgment in a civil case as “medieval and anachronistic”. He considered that the procedure was not available to enable a defendant “prevent a plaintiff who might have proved his case in so far as the burden of proof was on him, from obtaining his judgment”.

 

Now, if the procedure of arresting judgment is not available in a civil trial, why should the trial Court adjourn delivery of its judgment to facilitate the pursuit of an application which, as confessed by Counsel, had the end of circumventing the Court’s rules? Would the Court not be condoning abuse of its own processes? In my view, as a ground in an appeal, ground (c) is frivolous and has no merit, and I dismiss the same.

 

There now remains to be dealt with the question posed by me above as to whether on the evidence in this case, the 1st Defendant can properly be regarded as a fiduciary of the Plaintiff company. Underground (e) of this appeal, the Defendants are contending that the trial Court erred in holding the 1st Defendant liable for breach of a fiduciary duty owed to the Plaintiff for importing and trading in the same goods as the Plaintiff.

 

My review of the record shows that the Defendants denied the Plaintiff’s allegation that the 1st Defendant was its employee and that at all material times until 5th July, 2007, the 1st Defendant was the salesman in charge of its agrochemicals division. The denial was quite radical. In paragraphs 3 and 4 of their amended statement of defence, the1st and 2nd Defendants, while conceding that the 1st Defendant did some business with and for the Plaintiff, stated categorically that the 1st Defendant had never been employed as a salesman in any division of the Plaintiff company.

 

In the face of this radical denial, it baffles me to discover from the record a huge number of documents pointing to the fact that the 1st Defendant had been employed as an agronomist/salesman of the Plaintiff Company and had indeed been the manager of its agrochemical division over a period of time. I find, for example, Exhibit A in which the Plaintiff makes reference to an interview the 1st Defendant attended for the position of agronomist/salesman in the Plaintiff Company. Exhibit A is dated 18th January, 2000, and it offers the appointment to the 1st Defendant on probation effective from 4th January, 2000. By Exhibit A, the 1st Defendant is attached to the agricultural division of the Plaintiff and his duties include promoting the sale country-wide of agricultural pesticides specified by the agricultural division, promoting the sale country-wide of agricultural machinery specified by the agricultural division, and promoting the sale country-wide of irrigation schemes specified by the agricultural division.

 

I find also Exhibit C dated 1st August, 2000, by which the 1st Defendant’s appointment is confirmed with retrospective effect from 1st July, 2000. I find, again, Exhibit D6, which is a personal record of the 1st Defendant with the Plaintiff company dated 6th February, 2002, which states the 1st Defendant’s position at the time as Assistant Manager, Agric Division. There is also Exhibit H2 dated 5th July, 2005, addressed to the Chairman of the PMSU of the Plaintiff company by the 1st Defendant by which the 1st Defendant withdraws his membership of the PMSU for the reason that his position in the Plaintiff company at that time did not permit him to remain a member of the union. There, again, are Exhibits H5, H6, and H7, which are staff loan application forms completed by the 1st Defendant as an employee of the Plaintiff company. They are dated 4th May, 2000, 4th March, 2002, and 2nd February, 2004 respectively, and in Exhibits H6 and H7, the 1st Defendant states his division with the Plaintiff company as the Agric. Division. Again, I find Exhibit AAA, which is a memorandum of understanding on emoluments between the Plaintiff company and two of its employees, one of whom was the 1st Defendant. It is dated 29th March, 2004, and the position of the 1st Defendant at that date is stated as Manager, Agric. Division.

 

 

Just one or two of the exhibits referred to above would be enough to establish that the 1st Defendant was an employee of the Plaintiff company. I have however deliberately referred to so many of them in order to highlight the trouble and cost the 1st Defendant’s lack of candour must have caused the Plaintiff in its efforts to prove that the 1st Defendant was its employee. Considering the mass of documentary evidence which the 1st Defendant must have known was available on the issue of his employment with the Plaintiff, the denial was completely unnecessary, and I think it heavily dented the 1st Defendant’s credibility in the action. The several documents on record referred to above leave me in no doubt that the 1st Defendant was an employee of the Plaintiff company who was first employed as an agronomist/salesman and rose to the position of Manager of the Agric Division.

 

We have noted above that generally, an employer – employee relationship does not give rise to fiduciary duties. There are however authorities, which I find persuasive, which hold that a senior officer of a company may stand in fiduciary relationship to the company that employs him. We have noted Gower in this respect, and we have also noted the Canadian case of Canadian Aero Service Limited Vs. O’Malley (supra). Reviewing the facts of the present case in the light of the decision in the O’Malley case, I am inclined to hold, and I so hold, that the 1st Defendant herein stood in fiduciary relationship to the Plaintiff company, and that the trial Court was right in so holding him.

 

As Manager of the Agric Division of the Plaintiff company, the 1st Defendant had responsibilities which kept him “far removed from the obedient roles” of the non-senior employees of the company. He held a supervisory position in the company, and this would explain the need for him to withdraw from membership of the PMSU, as he did by writing Exhibit H2. The fact that the 1st Defendant may himself have been subject to the supervision of other officers of the company does not detract from his supervisory position.

 

Being a fiduciary, the 1st Defendant’s duty includes those of loyalty, good faith and avoidance of a conflict of duty and self-interest. These duties would mean, as has been noted in respect of O’Malley and Zarzycki in the O’Malley case, that the 1st Defendant cannot obtain for himself secretly any property or business advantage belonging to the Plaintiff company.

 

The 1st Defendant does not deny the Plaintiff’s allegation that he and the 4th Defendant have incorporated the 2nd and 3rd Defendant companies, of which they are both directors, and that the 2nd and 3rd Defendants carry on business as importers and distributors, among other things, of Agric inputs, which business falls within the business the Plaintiff is engaged in. What the 1st Defendant says in his amended statement of defence is that the Plaintiff is aware that he started importing agrochemicals and agro products as a sole proprietor in 2002 and that it was his sole proprietorship that was in 2004 incorporated into the 2nd Defendant company. The knowledge alleged by the 1st Defendant is however denied by the Plaintiff Company, which states in its amended reply that the business the 1st and 4th Defendants are carrying on through the 2nd and 3rd Defendants in direct competition with it, is being carried on without its consent or authority.

 

From my review of the record, I find that, indeed, there were times when the 1st Defendant’s company, Hekona Ghana Limited, bought goods from the Plaintiff. I also find that while these purchases were on a low scale, the Plaintiff did not object because, as the Plaintiff’s witness, Peter Vanderwurff testified, the Plaintiff was not interested in retailing. I find however that when the Plaintiff discovered that Hekona Limited was owing it in substantial sums, it objected to the growing level of Hekona’s trading with it, since it considered it inappropriate for the 1st Defendant, as its employee, to engage in trading with it to such a substantial level.

 

Again, I find that the 1st Defendant’s activities regarding the Plaintiff’s business reached a point where he and his wife, the 4th Defendant, made business trips to the Plaintiff’s suppliers in India without the knowledge or consent of the Plaintiff. And there is evidence of the Plaintiff’s suppliers shipping goods meant for distribution by the Plaintiff, to the 1st Defendant’s company, Hekona Limited. The evidence suggests that the 1st Defendant imported several containers of goods from the Plaintiff’s suppliers in India without the knowledge of the Plaintiff.

 

Apart from evidence of activities and conduct on the part of the 1st Defendant in respect of the Plaintiff’s business which may be considered fraudulent, the evidence on record presents the 1st Defendant as engaging in direct competition with the Plaintiff, using the 2nd and 3rd Defendants as instruments of such competition.

 

Now the position, as the Australian case of Farah Construction Vs. Say-Dee Pty Limited (supra) would support, is that to avoid being ordered to return the gain he has made from obtaining for himself business belonging to his principal, the fiduciary will have to show that there was full disclosure of the conflict of interest or profit and that the principal expressly and fully accepted and freely consented to the dealings the fiduciary undertook. Evidence of this nature is however not found from the record in this suit in respect of the gain the 1st and 4th Defendants used the 2nd and 3rd Defendants to obtain at the expense of the Plaintiff Company.

 

In my view, from the facts and circumstances of the present case, the Plaintiff Company is entitled to compel the 1st Defendant to answer for his default, and among the remedies available to the Plaintiff Company for this purpose is a tracing order or an order for account. Also, in my view, where a fiduciary who is a controlling shareholder and a director in a limited liability company, as is the case herein in respect of the 1st and 4th Defendants and the 2nd and 3rd Defendants, is shown to have used the company to obtain unjust gains, redressing the unjust gains obtained may necessitate lifting the veil of incorporation on the limited liability company.

 

Lifting the veil in this case will, in my view, not be different from what happened in the case of Gilford Motor Company Vs. Horne [1933] Ch.935, where Horne, a former employee of the plaintiff, had covenanted not to solicit the plaintiff’s customers. Horne formed a company to carry on his business, and the company solicited the plaintiff’s business. Even though the company was not itself a party to Horne’s covenant with the plaintiff, an injunction was granted to restrain not only Horne, but the company as well. In the judgment, the company was described as “a device, a stratagem”, and as “a mere cloak or sham.” This amounted to treating the company as Horne’s alter ego.

 

The foregoing are indications that this Court, having reviewed the record and having found the 1st Defendant to be a fiduciary who has in breach of his fiduciary duties obtained unjust gains at the expense of the Plaintiff, is not inclined to disturb the trial Court’s decision that the 1st and 4th Defendants are the alter egos of the 2nd and 3rd Defendant companies and that the veil of incorporation on the 2nd and 3rd Defendant companies ought to be lifted so that the 1st and 4th Defendants may be fixed with the liabilities of the 2nd and 3rd Defendants arising from their activities regarding the sale of the Plaintiff’s agrochemicals. This Court will also not interfere with the tracing order and the order for account made by the trial Court, and the lifting of the veil of incorporation on the 2nd and 3rd Defendants. It follows that ground (e) of this appeal has failed and the same is hereby dismissed.

 

Under grounds (f), (g) and (h), the Defendants intended to question the decision of the trial Court holding the 1st and 4th Defendants as alter egos of the 2nd and 3rd Defendants, and also its orders lifting the veil of incorporation on the 2nd and 3rd Defendants and requiring the Defendants to account to the Plaintiff. Again underground (i), the Defendants intended to challenge the judgment as not flowing from the weight of evidence before the court. As stated earlier on however, grounds (f), (g),(h) and (i) are deemed to have been abandoned and will not be discussed by this Court. The appeal therefore fails in its entirety and the same is hereby dismissed.

 

Cost of Ten Thousand Ghana Cedis (GH¢10,000.00) in favour of the Plaintiff/Respondent.

 

(Sgd)

K.N. Aduama Osei

(Justice of Appeal)

 

(Sgd)

Gyaesayor                        I agree                                               P. K. Gyaesayor

(Justice of Appeal)

 

(Sgd)

Lovelace Johnson           I also Agree            Avril            Lovelace Johnson   

                                                                               (Justice of Appeal)