IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL COURT)
KUMASI - A.D 2014
ALHASSAN MUSAH TIMBERS LIMITED - (Plaintiff)
FRANKO TIMBERS LIMITED - (Defendant)
DATE: 4TH FEBRUARY, 2014
SUIT NO: RPC/89/12
JUDGES: ANGELINA MENSAH-HOMIAH (MRS.) JUSTICE OF THE HIGH COURT
NANA ADWOA KOOMSON FOR THE PLAINTIFF
SOLOMON OPPONG TWUMASI FOR THE DEFENDANT
The Plaintiff Company by its writ of summons and statement of claim filed on 24/02/12 sought five reliefs. These are:
a. A declaration that the defendant company’s actions in terminating the agreement that existed between itself and the Forestry Department constituted a fundamental breach of the working agreement that existed between the parties.
b. Recovery of GH¢ 61, 853.61 being monies paid to the defendant company as advanced payments in anticipation of the defendant company’s share of the profits from the working agreement between the parties.
c. GH¢ 70, 800.00 special damages;
d. Interest on the said amount at the current bank rate from June 28, 2008 to date of final payment; and
e. General damages for financial loss and loss of profits occasioned by the defendant company’s breach of the working agreement between the parties herein.
An order that the defendant permits the plaintiff to operate in its concession in the Dampia Range Forest Reserve to defray defendant’s indebtedness to plaintiff.
Both parties are limited liability companies and work in the wood or timber industry. By the averments in the Plaintiff’s statement of claim, the Plaintiff entered into a working agreement with the Defendant Company on 09/07/2007 for a period of five years.The Plaintiff was to hire out its equipment to the Defendant and was to operate in the Tinti-Bepo Concession belonging to the Defendant. The parties were to share the total volume of all species of logs hauled to the Plaintiff Company’s yard equally. The Defendant’s 50% share was to be offered for sale at the existing ex-factory (Kumasi) prices and that the Plaintiff was to be given the right of first option to purchase. In anticipation of these proceeds, two directors of the Defendant Company, namely, Mr. Francis Osei Kyeremateng and Mr. C.O. Kyeremateng collected monies totaling GH¢61,853.61 from the Plaintiff. Without notice to the Plaintiff, the Defendant terminated its Forest Reserve Concession at Tinti-Bepo with the Forestry Department. The Plaintiff was notified by the Forestry Department after the termination, and they have also refused to approve of a new stock survey in the said concession. The Plaintiff gave particulars of special damages in paragraph 11 of its statement of claim.
By its further amended statement of defence filed on 11/07/2013, the Defendant admitted that Mr. C.O. Kyeremateng and Francis Kyeremateng took various sums of money from the Plaintiff based on an earlier agreement between the parties. It was the Defendant’s case that notwithstanding the letter written to the Forestry Service, the Plaintiff continued to operate in the Defendant’s concession without properly accounting for the proceeds there from. Besides, the Defendant fraudulently applied to the Forestry Service Division for a stock survey. The Defendant explained that following the death of one of its only two directors, it informed the Forestry Department of the compelling need to suspend its operations until the appointment of another director without which the operations of the company were illegal and that action did not amount to a termination of the contract with the Forestry Department. With the appointment of a new Director, the Defendant averred that it is now in the position to do lawful operations. The Defendant counterclaimed as follows:
a. An amount of seven million five hundred and fifty four thousand nine hundred and seventeen Ghana Cedis five pesewas (GH¢7,554,917.5) being the Defendant’s half share of an amount of fifteen million one hundred and nine thousand eight hundred and thirty five Ghana Cedis (GH¢15,109,835) earned by the Plaintiff from its operations in the Defendant’s concession based on the mutual agreement between the parties.
b. Interest on the sum mentioned in relief (a) supra at the prevailing bank rate calculated from 25th August 2008 till the date of final payment.
c. Cost inclusive of solicitor fees
d. General Damages for breach of contract
e. Any other order this court honourable may deem fit.
These are the issues agreed to be tried:
1. Whether or not the two Directors of the Defendant Company collected monies totaling GH¢61,853.61 from the Plaintiff Company as its share of the proceeds from the working agreement between the parties?
2. Whether or not the Defendant Company terminated the contract between itself and the Forestry Department in its Tinti-Bepo Forest Reserve Concession?
3. Whether or not the Department of Forestry has refused to approve of a new stock survey as a result of the termination of the Defendant’s contract with the Forestry Department
4. Whether the Department of Forestry has confirmed that survey of the Tinti-Bepo area is impossible for timber harvesting operations?
5. Whether or not as a result of the Defendant’s termination of the contract with the Forestry Department the Plaintiff has lost a total sum of GH¢ 70,800.00being cost of hiring equipment?
Representatives of the two companies gave evidence to support their respective cases. In respect of the issue on collection of monies by two directors of the Defendant Company, the Plaintiff’s representative who described herself as the Managing Director tendered numerous receipts evidencing monies advanced to Mr. Francis Kyeremateng in anticipation of his 50% share of the proceeds from the Plaintiff’s operations in the Defendant’s concession.
She also tendered exhibit ‘H’, which is a signed document by the parties where the Defendant acknowledged its indebtedness to the Plaintiff. PW1, who was the Defendant Company’s bush manager at the material time and who played an active role in the performance of the contract, confirmed in his evidence that the Defendant had indeed been the recipient of the monies claimed by the Plaintiff.
Counsel for the Plaintiff submitted that exhibits B, C and D series are official receipts of the Defendant Company issued in favour of the Plaintiff, and acknowledging thereon that the said payments were advance payments under the agreement between the parties and which had been signed and dated.
Further, counsel argued that the Plaintiff’s evidence on monies advanced to the Defendant has been confirmed by PW1. To that extent, she invited the court to admit these receipts and on the balance of probabilities, reject the evidence of the Defendant’s representative which is not credible.
The Defendant denied ever receiving the various sums of money captured in the exhibits referred to above. In cross-examination however, the Defendant’s representative admitted receiving an amount of GH¢3,000.00 from the Plaintiff. For the Defendant, counsel argued that the Defendant Company cannot be liable for the financial advances made by the Plaintiff to Francis Kyeremateng. In advancing this argument, counsel relied on three cases: i) Salomon v Salomon (1897) AC 22 HL, and ii) Morkor v
Kuma (East Coast Fisheries case) (1998-99) SCGLR 620 and Quartson v Quartson (2012) 2 SCGLR 1077. He adopted the legal position that a company has a separate legal existence from the personalities involved, be they directors or shareholders. He again submitted that it was the Plaintiff’s duty to show on the preponderance of probabilities, that the monies advanced to Francis Kyeremateng and Caesar Owusu Cheremateng, were paid qua the company or to the directors as individuals. He cited instances in cross-examination where PW1 admitted that the monies so advanced to Francis Kyeremateng were used to settle personal family problems and for his private use, but were never used to advance the course of FRANCO TIMBERS LIMITED, and it will be unjust to burden it with repayment.
I find it necessary to delve into the authorities cited and relied on by Counsel for the Defendant. In Salomon v Salomon, Mr. Salomon formed a company to take over his boot manufacturing business. The Company was called Salomon & Co Ltd. The Company had seven members, namely, Mr. and Mrs. Salomon and their five children. The company allotted shares to Mr. Salomon and he was also a debenture holder. The company faced difficulties and had to be wound up a year later. The value of the company’s assets as realized was 6000 pounds; but the company owed 7,733 pounds to unsecured creditors and 10,000 pounds to Mr. Salomon whose debt was secured as a debenture holder. It became apparent that Mr. Salomon’s debt, which was secured as a debenture holder, took priority over the unsecured debts.
The creditors sought to impugn Mr. Salomon’s right to receive payment, which will swallow all the monies realized from the company’s assets. Among the arguments advanced by these creditors was that although incorporated, the company was a mere sham; it never had an independent existence and was in fact Mr. Salomon under different names. He acted as an agent for the company, which had to indemnify him against the liabilities incurred in the course of the agency.
The case travelled to the House of Lords and Lord Halsbury noted at page 31:
“either the Company was a legal entity or not. If it was, the business belonged to it and not Mr. Salomon. If it was not, there was no person and nothing to be agent at all.”
At page 51, Lord Macnaghten stated:
‘The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are manager, and the same hands receive the profits, the company is not in law the agents of the subscribers or a trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act.”
This principle of a company’s separate legal existence was applied in Ghanaian cases such as Appenteng & others v Bank of West Africa & others ( 1961) GLR 199 and Owusu v R N Thorne ltd & another ( 1966) GLR 90. In these cases, the courts upheld the principle that a limited company has legal existence apart from the directors and members, and, it is in a few exceptional cases that the veil of incorporation is lifted.
More recently, the supremecourt in Morkor v Kuma, referred to supra, agreed with the appellant that her multifaceted status in the company could not, by itself, render the company her alter ego. At page 632, Sophia Akuffo JSC noted:
“ … A company, is thus a legal entity with a capacity separate, independent and distinct from the persons constituting it or employed by it. From the time the House of Lords clarified this cardinal principle more than a century ago in the celebrated case of Salomon v Salomon & Co ( 1897) AC 22, it has, subject to certain exceptions, remained the same in all common law countries and is the foundation on which our Companies Code (Act), 1963 is grounded.”
Her Ladyship continued:
“The corporate barrier between a company and the persons who constitute or run it may be breached only under certain circumstances. These circumstances may be generally characterized as those situations where, in the light of the evidence, the dictates of justice, public policy or the companies Code itself so requires… Therefore, whether or not a circumstance is one in which the lifting of the veil of incorporation is merited is dependent on the peculiar factors driving each particular case.”
It flows from her Ladyship’s arguments at pages 634 -635 of the report that, the courts will lift the veil in situations of improper business conduct, securing an immediate personal benefit from a corporate transaction , a scheme to avoid contractual obligations, fraud and the like.
Then, in Quartson v Quartson (2012) SCGLR 1077 at 1080, the court reiterated that a company had separate legal existence from its shareholders and directors and unless certain exceptions could be shown, its veil of incorporation would not be lifted. The court refused the petitioner’s relief for an order for the payment of directors’ fees and dividends on the ground that such an action should be brought against the company itself. It is to be noted that this was a matrimonial cause where property was to be shared upon dissolution of marriage.
According to the facts and evidence of the case before me, the parties had a binding agreement in respect of the Plaintiff’s operations in the Defendant’s concession. There is evidence that an agent of the Defendant Company, PW1, signed for and received various sums of money on behalf of the Defendant Company, details of which are contained in exhibits B, C and D series. These documents are official receipts and the Plaintiff was entitled to assume that the monies so received, pursuant to the agreement between the parties, would be used in the best interest of the Defendant Company. If a director of the Defendant Company, in whose hands these monies fell, opted to misapply the same, how does that affect the Plaintiff Company? It is the Plaintiff Company which had a working agreement with Franko Timbers Limited. The agreement was not between Francis Kyeremateng and Alhassan Musah Company Ltd as can be gleaned from exhibit ‘A’. Is it not intriguing that the Defendant’s representative who testified also collected an amount of GH¢3,000.00 in the name of the Defendant Company but used the same to purchase an air ticket to the USA? Does it lie in his mouth to say that the money so received, evidence of which is contained in exhibit ‘E’, was used for the benefit of the Defendant Company? Obviously not! In my view, all monies, evidenced by exhibits B, C and D series were given to Francis Kyeremateng, acting for and on behalf of the Defendant Company. I do not find any compelling reason to lift the veil of incorporation and to hold his estate personally liable for the amounts so received. May his soul rest in peace whilst the Defendant company figures out a solution to its indebtedness to the Plaintiff company.
Apart from this lame argument of the separate legal existence of an incorporated company, the Defendant failed to introduce any credible evidence to discredit the contents of exhibits B, C and D series. In evaluating these documents, I notice that some of the receipts bear dates which predate the contract contained in exhibit ‘A’. The said contract was executed on 09/07/2007 and its duration was five years. The Plaintiff’s representative sought to explain during cross-examination that the parties had an earlier oral agreement and subsequent to exhibit ‘A’, they agreed that an account be prepared to incorporate the defendant’s indebtedness under the oral agreement. In effect, the Plaintiff’s representative testified that the debit balance in the 2006 transactions (exhibit ‘H’) was carried over to the accounts of 2008, 2009, 2010 (hereinafter referred to as the 2nd accounts) and some of the receipts in the exhibits tendered pertain to this 1st account.
It is noticeable that the Defendant company, per its director, F.O. Kyeremateng (now deceased), executed exhibit ‘H’. His signature is on exhibit ‘H4’. Exhibit ‘H’ series covers the period, 25/04/06 to 08/05/08. The written agreement between the parties (exhibit ‘A’), was signed on 09/07/2007. The cumulative effect of these evidence is that the parties had some arrangements pertaining to the Defendant’s concession prior to exhibit ‘A’. Indeed, the Defendant acknowledged its indebtedness of Cedis 383,297.75 (now GH¢38,329.77) on exhibit ‘H4’. This unpaid balance was actually carried over to the following accounting period, exhibit J4. The Plaintiff’s representative explained to the satisfaction of this court that F.O. Kyeremateng was seriously ill at the time in question and so he was unable to sign exhibit ‘J4’. The fact of his ailment, which sent him to the other side of the world, cannot be ignored by this court.
At that time, the Defendant company had only two directors: F.O. Kyeremateng and C.O. Cheremateng. The latter was an absentee director as can be gathered from his own evidence. He did not play any role in the running and management of the defendant company. It appears he resurfaced after the death of F.O. Kyeremateng and pretended to show some interest in the affairs of the company. As if that was not enough, C.O. Cheremateng also collected money from the Plaintiff Company in the name of the Defendant Company.
It is true that the Plaintiff did not plead the fact of an earlier oral agreement but testified that the closing balance on that account was transferred to the subsequent accounting periods as indicated in the statement of accounts, based on which relief (b) was endorsed on the writ of summons. It has been held that if a party gives evidence on facts which had not been pleaded and no objection is raised, the trial judge cannot turn a blind eye to that piece of evidence and is entitled to consider the same. Thus, in Asomah v Servodzie (1987- 88) GLR 67, the Supreme court held:
"… Therefore if at the trial evidence being given by a party had no bearing on the facts he had pleaded it was the duty of opposing counsel to object to that evidence and exclude it. If that was not done, and the evidence got on the record, then a court could not shut its eyes to it in considering the case as a whole…” See also Edward Nasser & Co. V McVroom (1996-97) SCGLR 468.
In sum, even though the 2006 transaction between the parties was not specifically pleaded by the Plaintiff, oral and documentary evidence were allowed to go in without objection and I am entitled to take them into consideration in evaluating the evidence as a whole. These receipts were signed for and on behalf of the Defendant’s Director, F.O. Kyeremateng, by PW1. It is on record that PW1 was the “bush manager” of the Defendant Company and was held out as an officer of the said company. In the last moments of F.O. Kyeremateng, PW1 was more or less the face of the Defendant Company. Some of the monies PW1 received on behalf of the Defendant Company were duly taken into account in the exhibit ‘H’ series which F.O. Kyeremateng signed. By so doing, F.O. Kyeremateng approved of the acts of PW1 as acts of the company. PW1 led evidence to confirm the earlier transactions between the parties, especially, the unpaid balance on the 1st account which was carried over to the subsequent accounts.
Consequently, I find that as of 18/06/2008 when exhibit ‘J4’ was executed, the Defendant Company owed the Plaintiff Company an amount of GH¢38,329.77. I further find that a portion of this debt consists of monies taken by the Defendant after the 2007 agreement (exhibit ‘A’) had been executed. Even though exhibit J series was not signed by the parties, PW1 gave credible evidence to the effect that F.O. Kyeremateng sent him to collect several financial advances from the Plaintiff’s representative which were documented.
However, F.O. Kyeremateng passed on before the 2nd accounts could be signed by the parties. PW1 identified the exhibit J series as the 2nd account which was prepared at the request of F.O. Kyeremateng. This more or less confirms the evidence of the Plaintiff’s representative. That notwithstanding, some of the receipts covering these transactions are indeed doubtful.
For instance, exhibit ‘D 20’ is dated 31st September, 2008. This readily brings to mind the popular nursery rhyme: 30 days has September, April, June and November…” In any case, the Plaintiff Company was entitled to 50% of the proceeds by virtue of the use of its equipment in the operations under exhibit ‘A’. How then, can the Defendant Company be liable for the repairs of a caterpillar used in the operations? This transaction is really doubtful. The date on exhibit ‘D13’ has also been altered and will therefore be excluded. Apart from these two, the receipts issued after exhibit ‘H 4’ had been executed on 18/06/2008 will be accepted as credible. These are exhibits ‘D 14’ to ‘D 18’ and ‘D 21’. The total amounts stated therein is GH¢15,100.00. I will then add the GH¢3,000.00 signed for and taken by C.O. Kyeremateng on 30/11/2010 (exhibit ‘E’) to arrive at GH¢ 18,100.00. The 2nd and 3rd accounts were never signed and have not been subjected to any independent verification. It appears the some figures on the exhibits J and K series will be of assistance but these will be looked at the latter part of this judgment. Having considered the oral and documentary evidence before me, I think the Plaintiff has been able to prove the sum of GH¢18,100.00 as monies collected on behalf of the Defendant Company by F.O. Kyeremateng and C.O. Kyeremateng after exhibit H4 had been signed. It is obvious, and I also think, that the parties kept poor records of their cash transactions. In the absence of concrete evidence, I am unable to accept the GH¢61,000 quoted by the Plaintiff. The evidence on record supports a total of GH¢38,329.77 and GH¢18,100.00. The grand total is GH¢56, 429.7. That is all that the Plaintiff is entitled to under the 2nd head of claim.
Next to be considered is the issue of the alleged termination of the contract dated 09/07/2007. The Plaintiff tendered in evidence a copy of the letter which the Defendant’s solicitor wrote to the District Forestry Officer on 26/08/2010 as exhibit ‘F’. It reads:
TEMPORARY CESSATION OF OPERATIONS IN FRANCO TIMBERS LIMITED CONCESSIONS.
We act as lawyers for and on behalf of Franco Timbers Limited.
Our client instructs us that one of its Directors, Osei Kyeremateng @ Francis Osei Kyeremateng, died recently, bringing the deceased directors to two, Stephen John Danso, having died earlier; leaving only one surviving Director, John Caesar Cheremateng.
It is obvious that any operations by Franco Timbers Limited when its Directors are reduced to one, two being the minimum legal requirement, is illegal.
It is our instruction; therefore, to inform you that Franco Timbers limited has ceased all operations in its concessions in your District forthwith pending the appointment of other Directors as required by law.
Kindly ensure that nobody does any operations in the Tinti- Bepo Forest Reserve in the name of our client.
LAWYERS FOR FRANCO TIMBERS.
cc. 1. The Chief Conservator of Forests Forestry Department Accra.
2. The Regional Forestry Officer
According to the Plaintiff, the Defendant never notified them until the Forestry Department drew their attention to this letter as a result of which their operations were brought to a halt for a period of two months. The Plaintiff said its second director approached C.O. Cheremateng and he collected an amount of GH¢3,000.00 (exhibit ‘E’) and told them to ignore the letter written by the Defendant’s lawyer. Thus, the Plaintiff resumed operations.
Counsel for the Plaintiff argued that exhibit ‘F’, dated 30/11/2010, terminated the Defendant’s contract with the Forestry Department and did not amount to a mere cessation as contended by counsel for the Defendant. She invited the court to reject the Defendant’s assertion as well as its Counsel’s submissions on this issue and focus on the effect of that letter on the agreement between the parties.
It is quite interesting. The contention here is the interpretation and legal effect of the word “CESSATION”. This is from the verb “cease” which is synonymous with the words halt, stop, refrain or terminate. The verb terminate is also synonymous with cease, discontinue, stop, and end. The ordinary meaning of “cease” in the Oxford Advanced Learner’s Dictionary is “to stop something from happening or existing”. The same dictionary defines “TERMINATE” as follows: to end; to make something end.” From the foregoing, I am in agreement with the stance taken by Counsel for the Plaintiff on the meaning of the word “CESSATION”. But, that is the ordinary meaning and the courts have not always adhered to the ordinary meaning of words in statutes and documents.
In interpreting documents, the ordinary meaning is to be adhered to if the words used are so plain and convey the intent of the maker of the document. The courts have held that the subjective-purposive approach should be adopted when there are no ambiguities. Thus in the case of The
Republic v High Court, Accra; Ex Parte Yalley ( Gyane & Attor Interested Parties) ( 2007-2008)
SCGLR 512 at 520, the court held:
“ … the objective purpose, which does not constitute the actual intent of the authors but rather the intentions of a hypothetical reasonable man, should only be deployed if upon such application of the subjective-purposive approach, the statute is still clouded in absurdity, irrationality, mystery or will prove unworkable.”
This, I believe, also applies to the interpretation of documents. In the instant case, the question could be put this way: what did the Defendant company intend to achieve by exhibit ‘F’ when read as a whole? The meaning of exhibit ‘F’ could be ascertained by considering, first, the agreement between the Forestry Department and the Defendant Company, and second, the agreement between the Plaintiff Company and the Defendant Company. Under the circumstances, it will be desirable to adopt the objective-purposive approach instead of the subjective-purposive approach to interpretation. This is so because adopting the subjective approach will create a mischief as regards the legal relations between the parties herein.
The effect of exhibit ‘F’ is two-fold. First, as between the Defendant and the Forestry Department or commission, all operations in the concession were to end until the casual vacancy had been filled. The same cannot be said of the agreement between the Parties to this suit. Exhibit ‘F’ operated to end the contract between the parties to exhibit ‘A’ since the said contract could only be performed by the Plaintiff’s operations on the Defendant’s concession in the Tinti-Bepo Forest Reserve. This agreement was time bound. The Defendant did not cause a copy of exhibit ‘F’ to be served on the Plaintiff Company. Therefore, as between the Plaintiff and Defendant Companies, exhibit ‘F’ operated to end their contractual relationship because the Plaintiff was not to be allowed into the Tinti-Bepo Concession.
If the intention of the maker of exhibit ‘F’ was to comply with the provisions of section 180 (2)of the Companies Act, 1963 Act 179, common sense and sound business practice dictate that the Plaintiff company ought to have been notified in view of the contract between the parties. This section creates an offence if a company continues to carry on business for more than four weeks when the number of directors fall below two at any time. Certainly, the death of F.O. Kyeremateng created a casual vacancy in terms of directors. The precise date of death of F.O. Kyeremateng is not borne out by the evidence. It is unclear whether exhibit ‘F’ was written four weeks after his death to provide some sort of justification for the contents therein. When that casual vacancy was created, the Defendant Company could have filled it in accordance with its Regulations or by an ordinary resolution of the company in general meeting under section 181(5)(b) of Act 179.
As the evidence shows, the Defendant’s representative could not even recollect the last time an Annual General Meeting of the Company was held. Obviously, if the Defendant’s intention was to fill the casual vacancy timeously, that could have been done within four weeks after the death of F.O. Kyeremateng in which case the Company’s operations would not have been interrupted.
In my opinion, the contract in exhibit ‘A’ was abrogated by virtue of exhibit ‘F’. Could it have been revived by the subsequent oral arrangement between the Plaintiff and C.O. Cheremateng for the Plaintiff to resume its operations? I do not think so! There is no evidence on record to show that the Defendant Company wrote back to Forestry Department or Commission for resumption of operations in the concession in issue upon the appointment of a 2nd Director.
There is also no evidence as regards the time the 2nd Director was appointed. Therefore, the Plaintiff’s operations in the Tinti-Bepo Forest Reserve without recourse to the contents of exhibit F and the Forestry Department were illegal. It is therefore not surprising that other illegal chain saw operators are said to have depleted the concession. Having abrogated the contract by virtue of exhibit ‘A’, the parties cannot rely on the terms contained therein.
The subsequent oral arrangements by which C.O. Cheremateng permitted the Plaintiff to re-enter the Concession in issue is independent of exhibit ‘A’. The Defendant cannot instruct the Forestry Department to do one thing and turn round to do the contrary.
In my opinion, the contract that was created per exhibit ‘A’ came to an abrupt end by virtue of exhibit ‘F’. The parties cannot rely on that contract to claim any benefits or assert any right. The Plaintiff was not supposed to be on the Defendant’s concession after exhibit ‘F’ was written until otherwise instructed by the Forestry Department. There is no evidence on record to show that this ever happened. If the Plaintiff’s operations in the concession in issue were barred per exhibit ‘F’, obviously, the Forestry Department would not have approved of any stock survey. The Plaintiff’s assertion that the stock survey was refused because the stock had been depleted could have been proved by positive evidence. It appears the Plaintiff merely repeated the averments contained in its statement of claim without further proof. Going by the principle of proof in civil suits as spelt out in the case of Zambrama v Segbedzi (1991) 2 GLR 221, which was applied in Continental Plastics v IMC Technique GMBH (2009) SCGLR 298 at 307 per Georgina Woode CJ, the Plaintiff was under a duty to lead cogent evidence to prove those averments and for the court to assess the evidence on the balance of probabilities. The Plaintiff’s oral evidence on the issue of stock survey is not reliable. Having failed to convince the court, the ruling on that issue goes against the Plaintiff.
The final issue for determination relate to monies allegedly lost by the Plaintiff subsequent to exhibit ‘F’. I have already found that even though exhibit ‘F’ halted the agreement between the Defendant and the Forestry Commission for an indefinite period, it operated to terminate the agreement between the parties before me which was time bound. Naturally, the Plaintiff who had committed resources in performance of this agreement will incur some losses. The Defendant ought to have known this fact.
The Plaintiff is claiming the sum of GH¢70,800.00 as special damages and it is enjoined by law to prove that strictly. In Delmas Agency GH Ltd v Food Distributors International (2007-2008) SCGLR 748 at 760, Seth Twum JSC stated:
“… Where the plaintiff has suffered a properly quantifiable loss, he must plead specifically his loss and prove it strictly. If he does not, he is not entitled to anything unless general damages are also appropriate.”
In support of the claim for GH¢70,800.00, the Plaintiff tendered two agreements, namely, exhibits ‘M’ and ‘L’ series. These are agreements the Plaintiff entered into when it rented equipment to enable it perform its obligations under the contract. According to the Plaintiff’s representative, advance payment had to be made before the equipment were released to them.
For his part, the Defendant contended that the Plaintiff was to use its own equipment for the operation. In other words, the Defendant’s view was that equipment rental by the Plaintiff from a third party was not envisaged by the parties at the time exhibit ‘A’ was executed.
The relevant portion of exhibit ‘A’ reads:
“Franco Timbers Limited has agreed to hire timber operating equipment consisting of chain Saws, Timber extraction Tractor, Timber hauling trucks and other auxiliary machines from Alhassan Musah Timbers Limited.
Alhassan Musah Timbers on its part has agreed to hire out and operate from its own resources, the above mentioned equipment to effect the felling, extraction and hauling of logs from concessions as Tinti-Bepo Forest Reserve and any others to be released by the concessionaire (FRANCO TIMBERS LIMITED).”
Once again, I will apply the rules of interpretation. What was the intention of the parties to exhibit ‘A’ as regards the renting of equipment? Careful analyses of the portion of exhibit ‘A’, quoted above, shows that at the material time, the parties intended that the Plaintiff company will rent out its own equipment to the Defendant Company. Alhassan Musah Timbers’ obligation was not merely the provision of equipment from any third party. Thus, by going all out to rent equipment from a third party, the Plaintiff acted contrary to the agreement contained in exhibit ‘A’. Probably, if the contract had not come to an abrupt end, the Defendant would not have known that the said equipment did not belong to the Plaintiff company.
If the parties intended that the Plaintiff could hire or rent equipment from a third party to execute the contract, that ought to have been expressly stated in the agreement. It was therefore not in the contemplation of the Defendant Company at the time of the contract that the Plaintiff will make any advance payments to a third party as regards the equipment to be used. In any case, the Defendant Company was not privy to that rental agreement. Therefore, it will be unfair for the Plaintiff to spring a surprise on it by producing rental agreements it had with a third party and expect the Defendant to pay for the cost of hiring those equipment. If the Plaintiff had used its own equipment as envisaged under the contract, then after exhibit ‘F’ had been written, the company could have taken reasonable steps to mitigate its losses. Under the circumstance, the question of special damages does not even arise and I find that the Plaintiff is not entitled to the special damages claimed.
However, there is no doubt in my mind that the Plaintiff did suffer a detriment as a result of the abrogation of the contract between the parties. What should be the measure of damages? I think the court should attempt to achieve “restitutio in intergrum”. The evidence shows that the Plaintiff carried out some operations on the Defendant’s concession as late as the year 2011.This can be seen from exhibits P7 to P 10 dated 14/01/11 to 28/02/2011. The Plaintiff said it ceased operations for two months and then resumed, following an oral arrangement with C.O. Cheremateng. Granted, that the Plaintiff had used its own equipment as stated in the contract, they would have been idle for a while. As indicated earlier, the Plaintiff would have had to mitigate its losses. From the foregoing, I think general damages of GH¢ 5,000.00 will be adequate for the Plaintiff.
I now turn to the Defendant’s belated counterclaim for an amount of seven million, five hundred and fifty four thousand nine hundred and seventeen Ghana Cedis, five pesewas (GH¢7,554,917.5). This counterclaim was filed on the second amendment to the Defence. The Defendant assumes the burden of proof on the averments in its counterclaim. The same standard of proof is required as in the Plaintiff’s claims. That is, proof on the preponderance of probabilities as spelt out under sections 12(1) and 12 (2) of the Evidence Act, 1975 NRCD 323.
The Defendant’s representative testified that the Plaintiff Company has not fully shared the proceeds from the operations on the concession with the Defendant Company as captured in exhibit ‘A’. He relied on the Plaintiff’s exhibits ‘K’ series to support his counterclaim. Exhibit ‘K’ series relate to log purchases from the Concession in issue. The Defendant argued that the total proceeds from the log sales amounted to GH¢ 15,109,835.00. And, per exhibit ‘A’, the Defendant Company is entitled to 50% of the proceeds. The Defendant’s representative who obviously forgot that he was representing a company stated:
“The GH¢61,000.00 stated by the Plaintiff is not correct since I have not got anything from the exhibit ‘K’ series. The Tree Information Form (TIF) attached to exhibit ‘2’ is not properly accounted for. This is one of the forms that the forestry commission requests that once you fell the trees they have allowed you to cut, you call upon them to come and take measurements before you cut it into pieces…”
The Plaintiff disagreed with the Defendant’s evidence on the counterclaim as captured above. For the Plaintiff, counsel argued that the exhibit ‘J’ series, which is later in time to exhibit ‘K’ series essentially, contains all the information which is captured in the exhibit ‘K’ series with the exception of the amount, as clearly illustrated during cross-examination by the Defendant’s representative. Counsel invited the court to find that the amounts indicated in the exhibit ‘K’ series were expressed in the old currency and this common occurrence after the redenomination exercise in the year 2007 was corrected by both parties in the exhibit ‘J’ series.
Further, counsel drew the court’s attention to the Defendant’s representative’s palpable lack of knowledge on the details of the agreement and his failure to involve the appropriate officers of his company, one of whom ironically contradicted his claims and gave evidence in support of the Plaintiff’s claims.
Counsel for the Defendant in response to these arguments, urged the court to disregard them as being untenable. In his view, the Plaintiff could not have been in error for the entire year of 2008 and that the exhibit ‘K’ series is a true reflection of the proceeds from the logs which were sold under exhibit ‘A’.
I have carefully digested the analyses made by both counsel based on the evidence adduced by their respective clients. I have already indicated in the course of this judgment that both parties cannot assert any rights or benefits under exhibit ‘A’ after the agreement contained therein came to an end per exhibit ‘F’. In strict terms, therefore, the Defendant’s counterclaim for that ridiculous amount of money premised on exhibit ‘A’ cannot hold.
That notwithstanding, the evidence shows that the parties had an oral arrangement by which the Plaintiff re-entered the concession and carried out operations without clearance from the Forestry Commission. In the words of the Plaintiff’s representative, the Defendant’s representative received an amount of GH¢3,000.00 from them and told them to ignore exhibit ‘F’. The Defendant’s representative was never straight forward in his dealings with the Plaintiff company. The exhibit ‘J’ series was not signed by the parties but appears to be a replication of the figures in the exhibit ‘K’ series pertaining to log purchases. The figures in the exhibit ‘K’ series appears to be the handiwork of a mathematically challenged person who obviously confused the tens, ones etc. I find that the volume of logs sold under the exhibit ‘K’ series, which also appear in the exhibit ‘J’ series could not have been worth the amount stated in the Defendant’s counterclaim. The Defendant’s representative who at times was domiciled in the USA did demonstrate his lack of understanding in the parties operations. Is it not surprising that he is relying on the Plaintiff’s documents to prove the Defendant’s counterclaim? Clearly, this counterclaim is an afterthought. The Defendant’s representative can best be described as a person who plays around figures in an attempt to reap undeserved benefits. It is as though he is looking for a treasure on the proverbial spider’s grave!
Equity is fairness. Whether or not exhibit ‘A’ is operational, the Plaintiff has carried out timber operations in the Defendant’s concession and cannot be expected to keep all the benefits. The Defendant’s representative signed exhibit ‘K’ series. I will read the figures contained in exhibit ‘K’ series in conjunction with the log sales captured in exhibits J2 and J3. Even though the exhibit ‘J’ series were not signed, the information therein has already been captured in the exhibit ‘K’ series. I find that exhibits ‘J2’ and ‘J3’ are a true record of the log sales for the period stated therein. Thus, I will accept the amount of GH¢ 21,606.38 as the value of logs sold for the 2008/2009 period under review. Even though I have taken the position that exhibit ‘A’ is no longer in force, I will award 50% of this amount in favour of the Defendant in the interest of justice. And that is, GH¢10,803.19. This must be deducted from the advances given to the Defendant Company through F.O. Kyeremateng (now deceased) and C.O. Kyeremateng.
For the 2010/2011 period, I notice that the log purchases contained in the exhibit P series , based on which exhibit ‘N’ series was prepared was not signed by any representative of the Defendant Company unlike the exhibit ‘K’ series. Exhibit ‘N’ series have also not been subjected to any independent scrutiny. No signatures appear on these documents. Both Counsel failed to comment on the exhibit ‘P’ series. I have warned myself of the danger in relying on a company’s statement of account which has not been verified. I am unable to rely on the exhibits ‘P’ and ‘N’ series. The parties will have to go into proper accounts to be able to determine the actual volume of logs sold for the period March to September, 2010 and January to February, 2011.
The parties must agree on a qualified auditor/accountant to assist them. For this exercise, the parties shall apply for copies of all Tree Information Forms (TIF) for the relevant period from the Forestry Department at Nkawie as well as copies of the receipts evidencing stampage fees and royalties paid. Any other relevant document in possession of either party must also be given to the auditor/accountant. After the requisite deductions have been made, it is only fair that the parties share the net proceeds equally.
Judgment entered for the Plaintiff as follows: GH¢56, 429,7 as monies advanced to the two directors of the Defendant Company and GH¢ 5,000.00 as general damages for breach of the agreement between the parties.
On the Defendant’s counterclaim, I enter judgment in favour of the Defendant in the sum of GH¢10,803.19, representing 50% of the proceeds from the 2008/2009 log sales from the Defendant’s Tinti-Bepo Forest Reserve Concession.
When the sum of GH¢61,429.19 is set off against the GH¢61,429.7, the Defendant shall pay the difference of GH¢50,625.50 to the Plaintiff Company. The Parties are given a period of 60 days to comply with the order for auditing/accounting and to bring a closure to this long and winding litigation.
On the issue of interest, the parties knew that their resources will be locked up for a period when they engaged in this kind of transaction. I will therefore not award any interest prior to judgment. I however award post judgment interest on the judgment debt at the prevailing bank rate from the date of delivery of judgment till date of final payment. Cost of GH¢5,500.00 is awarded against the Defendant in favour of the Plaintiff Company