IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL DIVISION),
ACCRA- A.D 2019
DR. KWAME OWUSU - (Plaintiff)
FAIRFAX OIL SERVICES LTD AND ANOTHER - (Defendant)
DATE: 8 TH FEBRUARY, 2018
SUIT NO: CM/0051/16
JUDGES: GEORGE K. KOOMSON JUSTICE OF THE HIGH COURT
YVONNE AKUFFO-ADDO FOR KWAME BOAFO AKUFFO FOR THE PLAINTIFF
BAFFOUR GYAWU BONSU ASHIA FOR THADDEUS SORY FOR DEFENDANTS
1. Interpretation of contract
2. Transfer of shares by a company – requirements
3. Offer of shares by a company to an employee-shareholder - factors to consider
4. Damages for constructive termination of employment
5. Sections 22, 56, 57, 59, 61, 62 of the Companies Act 1963 (Act 179)
The Plaintiff by his amended writ of summons issued on the 18th March, 2016, asked for the following reliefs:-
a) A declaration that the Plaintiff is entitled to 2% of the shares in the 2nd defendant company as per his contract of employment.
b) A declaration that the Plaintiff is entitled to 5% of the shares in the 1st defendant company as per his contract of employment.
c) An order directed to the 2nd defendant company to transfer 2% of its shares to the plaintiff.
d) An order directed to the 1st defendant to transfer 5% of its shares to the Plaintiff.
e) An order directed to the defendant companies, its privies, assigns and agents not to conduct themselves in any manner whatsoever which may affect the plaintiff’s economic rights in the shares subject matter of dispute.
Or in the alternative,
i. Damages for breach of contract against the 1st defendant with respect to the Fairfax shares as set out in section 4.3 of his contract or employment.
ii. Damages for breach of contract against the 2nd defendant with respect to the Springfield shares as set out in section 4.3 of his contract of employment
iii. Damages against the 1st defendant for wrongful termination of Plaintiff’s contract of employment Costs of this litigation against defendant companies inclusive of counsel’s fees.
iv. An order directed to the 1st defendant company to pay for the misused portion of Plaintiff’s accrued annual leave.
v. Any further order(s) that this Court may deem fit.
The defendants also counterclaimed against the plaintiff for the following reliefs:-
1) An order directed at Plaintiff to pay to 1st defendant the total sum of GH¢44,400.00 representing the going rental charge for the 1st defendant’s generator for the period 10th September, 2015 to 18th December, 2015 when Plaintiff left 1st defendant’s employment but continued to use 1st defendant’s generator.
2) An order directed at Plaintiff to pay 1st defendant the total sum of USD 110,000.00 representing the going rental charge for 1st defendant’s vehicle for the period 10th September, 2015 to 15th October, 2015 when Plaintiff left 1st defendant’s employment but continued to use 1st defendant’s vehicle.
3) Interest on the sum of GH¢44,400.00 from December 2015 when plaintiff returned the generator to 1st defendant without paying the full rental cost up until the day of final payment.
4) Interest on the sum of USD 110,000.00 from October 15, 2015 when Plaintiff returned the vehicle to 1st defendant without paying the full rental cost up until the date of final payment.
A summary of the basic facts giving rise to this action are that the Plaintiff was an employee of Tullow Group Services Ltd as a geophysicist. The 1st defendant employed the plaintiff and a contract of employment was executed by plaintiff and the 1st defendant after series of negotiations. After his employment, the plaintiff worked for both 1st defendant and 2nd defendant in specific roles as assigned to him.
Issues relating to the enforcement of clause 4.3 of the contract of employment executed between the plaintiff and the 1st defendant could not be resolved by the parties. The relationship between the parties became sour as a result of the issues surrounding the enforcement of clause 4.3 of the contract of employment. This led to the severing of the relationship between the parties with the plaintiff claiming that his contract of employment had been terminated by the defendants and the defendants also alluding that the plaintiff terminated the contract of employment by his conduct. This has brought the parties to court with each party making a claim against the other.
At the pre-trial stage when settlement broke down, the following issues were settled:-
a. Whether or not plaintiff is entitled to 2% of the shares in the 2nd defendant company
b. Whether or not the plaintiff’s employment with the 1st defendant company was wrongfully terminated.
c. Whether or not the plaintiff is entitled to damages for wrongful termination of his employment.
d. Whether or not the plaintiff was employed by both 1st and 2nd defendants.
e. Whether or not the plaintiff has a cause of action against 2nd defendant arising out of the contract executed between plaintiff and the 1st defendant.
f. Whether or not the plaintiff furnished any consideration to 2nd defendant for the shares claimed by plaintiff in 2nd defendant.
g. Whether or not the business relationship that exists between 1st and 2nd defendants makes 2nd defendant liable for contracts executed between plaintiff and 1st defendant.
h. Whether or not the contract made by plaintiff and 1st defendant from which 2nd defendant denied benefit creates a cause of action in plaintiff against 2nd defendant.
i. Whether or not the contract between plaintiff and 1st defendant for 2nd defendant’s shares is valid.
j. Whether or not 2nd defendant has been properly joined to the suit.
k. Any other issues arising out of the pleadings.
In my opinion, the dispute between the parties can well be resolved under the following issues:-
1. Whether or not clause 4.3 of the contract of employment executed between the plaintiff and the 1st defendant is enforceable against the 1st and 2nd defendants.
2. Whether or not the contract of employment of the plaintiff was constructively terminated by the defendants.
3. Whether or not the plaintiff is entitled to his reliefs against the defendants.
4. Whether or not the 1st defendant is entitled to its counterclaim against the plaintiff.
I have read the submissions filed by both counsel. I have further considered the evidence led by the parties. Consideration has been given to the authorities cited by the parties. Regard has also been given to the contract of employment executed by the plaintiff and the 1st defendant. It is however, useful for me to place emphasis on the contract of employment executed by the plaintiff and the 1st defendant so as to bring to the fore the terms and conditions of the relationship between the parties. The Contract of Employment is as follows:
‘‘INDIVIDUAL EMPLOYMENT CONTRACT
1.1 This document constitutes the terms of employment between Fairfax Oilfield Services (hereinafter referred to as “the company” and Dr. Kwame Owusu (hereinafter referred to as “the Employee”) and supersedes all previous representations negations, commitments and communication whether oral or in writing, between the parties.
In signing this agreement you accept all the terms and conditions of employment as contained in this Agreement.
2. Terms and conditions of Employment
2.1. You will be based at the Company’s Offices in Accra, Ghana.
However, the Company operates in an international environment and may require you, subject to medical fitness, to work in such places as the company may, from time to time, reasonably require, either in Ghana or overseas. You will be expected to travel as required by the Company, both within your home country and overseas, in the performance of your duties.
2.2. The commencement date of this contract is August 01, 2014, contingent of early release from the current employers notice period requirement; you will be required to complete a Personal Details from prior to the commencement of your employment.
2.3. If your services are considered unsatisfactory at any period after, you will be accordingly discharged after two (2) months’ notice, or on payment of two (2) months’ salary in lieu of notice, without recourse to disciplinary proceedings. Similarly, if you wish to resign you must either give two (2) months’ notice or pay two (2) month’s salary to the Company in lieu of notice.
2.4 You will report to Kevin Okyere, Group Chief Executive Officer. The company reserves the right to alter the reporting structure at its discretion.
3. Duties and Responsibilities
3.1. The company is a fair and reasonable employer and will treat you with dignity and respect I all aspects of employment. The company demands and maintains the highest ethical standards in carrying out its business activities and acts within the laws of the land and any regulations applicable to the company’s activities at all times. In return, you are expected to maintain the highest ethical standards and conduct in carrying out your duties and responsibilities on behalf of the company.
3.2. You agree to perform all duties required of the Technical Director- Exploration position and as described I the attached job description, and will fulfil these duties to the best of your abilities. You also agree to perform any other duties associated with the position that the company may from time to time reasonably request to be performed.
3.3. The Company may from time to time, make reasonable changes to the particulars of the position and/or the duties and responsibilities of the position. Where substantial changes are to be made to the particulars of the position or the duties or responsibilities, such changes will be done by the company in consultation with you.
4. Remuneration and other Benefits
Your net salary will be Two Hundred and Seventy Six Thousand US Dollars ($276,000.00) per annum, payable in twelve equal monthly instalments to a bank account of your choice. Each month’s salary will be paid by credit transfer on or around the 25th of each month, for the current month. Your salary will be reviewed annually and awards are made on a “merit only” basis and in accordance with individual performance. The salary shall be exclusive of taxes. All taxes, statutory deductions and contributions legally payable by the company will be paid across to the organization authorised by Statute or Statutory instrument to collect such taxes, deductions or contributions on top of your above mentioned salary.
4.2 Extra Benefits:-
4.2.1. A company vehicle plus driver will be provided for you for the tenure of your contract.
4.2.2. Two business class return ticket per year will be provided for you to Houston.
4.2.3. The company shall provide and install a 40KVA generator at the employee’s residence. Additionally, the company shall provide and cover the cost of the following utilities: electricity, gas, water, broadband internet service, and DSTV premium package and decoder. The company shall also provide 24-hour security personnel at your residence.
Company shares as free carry of 2% in Springfield E&P and 5% in Fairfax shall be transferred to you on August 01, 2014.
5. Annual Leave
5.1. You shall be entitled to thirty (3) working days paid annual leave for the contract year. The holiday year for Fairfax is January to December and if you join part way through the holiday year entitlement will be pro- rated.
5.2 Leave will be taken at times arranged with your immediate Line Manager, taking into account as far as practicable, work requirements and the performance of your duties.
5.3. Sick Leave
You will be entitled to sick leave with pay for the maximum period prescribed by law or as otherwise extended by the prevailing rules of the company where a Medical Certificate issued by an approved Medical Practitioner authorises such absence.
6. Public Holidays
You shall be entitled to all public holidays
6.1. If you have to work during a public holiday, you will be entitled to time off in lieu to be taken shortly after the public holiday on which you worked and at a time agreed with your supervisor.
7.1. You agree not to disclose, either directly or indirectly, to any unauthorized person either during or after employment with the company any confidential information acquired during the course of employment with the company. Any violation of this will lead to disciplinary action being taken.
7.2. This confidentiality requirement applies both when you are in the company’s employment and after you have left the company, until the information is in the public domain.
8. Environment, Health and Safety
8.1. The provisions of the Laws of Ghana regarding safety at the workplace shall be applicable to this Agreement.
8.2. The company shall make reasonable provisions for the safety and health needs of all its employees, which includes the provision of protocols, standards and policies regarding the environment, health and safety, whether written or oral. The company shall also provide adequate protective and safety equipment to all its employees and these shall remain the property of the company.
8.3. In addition, you also agree to take all practicable steps to ensure:
a. Your own safety while at work; and
b. That no action or inaction on your part causes harm to any other person or the environment while at work.
8.4. In the case of accident or illness on the job you will be covered by the Workmen’s Compensation Law of 1987 (PNDC Law 187) and all amendments made thereto.
8.5. Medical and Dental Insurance. The company shall arrange for and provide medical and dental insurance for you and family that is valid and acceptable to providers in the USA and Europe.
9. Unauthorized Consultancy
During the period of this contract you shall not engage in any consultancy or other forms of employment without prior written permission of the company
10. Abandonment of Employment
10.1 In event that you absent yourself from work for a continuous period of ten (10) working days without notifying the company or without the company’s consent, you shall be deemed to have vacated post or abandoned employment without notice.
10.2. The company reserves the right to initiate disciplinary action against you whiles attempting to ascertain the reason for the absence if it is discovered that you have breached any of the company’s rules.
11. Termination of Employment
11.1. In the event of serious misconduct, you shall be summarily dismissed following an appropriate investigation and disciplinary procedure.
Serious misconduct includes, but is not limited to:
· Breach of the confidentiality rules
· Breach of the company’s policy or procedures
· Knowingly falsifying or suppressing the records of the company (or that of a client of the company), a statement or any other document or knowingly abetting a similar action by another employee
· Unauthorised possession of the company’s property
· Fraud or dishonesty, whether within the company or in the course of employment with the company or otherwise during the currency of this contract.
· Insubordination and wilful disregard of instructions
· Embezzlement of funds
· Stealing of any property of the company
· Drunkenness on duty
· Sexual misconduct / harassment
· Wilful damage to any property of the company
· Conviction of a criminal offence
11.2. Upon termination of employment, you agree to return to the company all confidential information and company property held by you, regardless of the form in which it exists. This includes all records, files, notebooks, correspondence, papers, documents, disks, diskettes, identification cards and any other form or means or recording and/or storage of such information together with any copies thereof. The value of any property or equipment not returned or damaged shall be deducted from any final payment owed to you.
12.1. In signing this agreement you agree to adhere to the company’s policies and procedures as described in the attached policy document.
12.2. Any changes to the policies and procedures will be communicated to you in writing or other means of communication, e.g. e-mail, which the company deems appropriate.
---------------------------- ---------------------------------- George Ayebah Kevin Okyere HR Manager
I accept the position offered me in this letter on the terms and conditions set out above.
............................ Dr. Kwame Owusu
The general rule was that a document should be given its ordinary meaning, if the terms used therein were clear and unambiguous and the court must effect the true intent of parties to a contract. The Supreme Court in the case of P.Y. ATTA & SONS LTD v KINGSMAN ENT LTD [2007-2008] 2 SCGLR 946 held at the holding (2) thus:
“In considering every agreement, the paramount consideration was what the parties themselves intended or desired to be contained in that agreement. The intentions should prevail at all times. The general rule was that a document should be given its ordinary meaning, if the terms used therein were clear and unambiguous. In conflicting situations like those in the instant case, the process of determining the intentions of the parties should be objective. Objective approach in that context, implied the meaning that the words in the document would convey to a reasonable person seised with the facts of the case…..”
In a latter decision, in the case of GORMAN & GORMAN v ANSONG  SCGLR 174, The Supreme Court elaborated the principles where it held that:
“The general rule regarding the construction of documents was that the court must give effect to the intention of the parties as found in the document and not what was intended to have been written, so as to give effect to the intention expressed. The court would be hesitant to construe private documents outside the four corners of the documents for good reason. Contracts and other written documents between private individuals were presumed, unless otherwise proven, to represent the intentions of the parties. Thus any undue interference by the courts, would fly in the face of the sanctity attached to such documents. However, the general rule was not in any way absolute. Ultimately, interpretation of contracts or documents of any kind must give effect to the true intent of the parties. The courts were in duty bound to give effect to the parties’ written intentions. But the courts must also consider, in appropriate cases, surrounding circumstances, which had the effect of elucidating the intentions of the parties….”
I have examined the contract of employment as a whole and more particularly the clause 4.3 thereof and the pleadings and evidence of the parties. I am of the honest opinion that the parties understand the context and meaning of the phrase “transfer of shares” in the clause 4.3 of the contract of employment. It is to be noted that “transfer of shares” and “an offer or allotment of shares” are not the same under the law as there are different procedures that apply where either a “transfer of shares” or “offer of shares” is intended by the parties. In my view, clause 4.3 of the Contract of Employment is clear and unambiguous.
Transfer of shares is regulated by law. For a person, whether natural or artificial to be able to transfer any shares, that person must have acquired the shares in accordance with law. It is only a shareholder who can transfer shares. Shareholders have the ability to transfer their shares to existing shareholders or third parties. This allows shareholders to sell their shares or for companies to be bought and sold. In the instant case, in the Contract of Employment, clause 4.3 thereof the plaintiff and 1st defendant agreed that 1st defendant was to transfer 5% shares of 1st defendant company and 2% shares of 2nd defendant company to the plaintiff by a certain date. The question is, did the 1st defendant own shares in the 2nd defendant company and also did it own any shares in 1st defendant company to be able to transfer same to the plaintiff? As I have stated earlier, until a person acquires shares, it cannot purport to transfer it to another person. I will first discuss the purported transfer of 2nd defendant shares to the plaintiff.
It is noted that a company upon its incorporation assumes a distinct identity from its members. This rule of separate legal identity which was authoritatively decided by the case of SALOMON v SALOMON (1879) A.C 22: holds that those who control a corporation in fact, or the motives of the promoters for incorporation, or the motives of the stakeholders for obtaining shares in the company, are immaterial. Once duly incorporated, there is a figurative veil that separates and is distinguishes the corporation from the persons who may be behind it or who may control it. Her Ladyship Justice Sophia Akuffo JSC (as she then was) put it thus, in the case of MORKOR v KUMA (EAST COAST FISHERIES CASE) [1998-99] SCGLR at 632:
“Save as otherwise restricted by its Regulations, a company, after its registration, has all the powers of a natural person of full capacity to pursue its authorised business. In this capacity, a company is a corporate being, which, within the bounds of the Companies Act., 1963 (Act 179) and the Regulations of the company, may do everything that a natural person might do. In its own name, it can sue and be sued and it can owe and be owed legal liabilities. A company is, thus, a legal entity with capacity separate, independent and distinct from 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  AC 22, it has, subject to certain exceptions, remained the same in all Common Law countries and is the foundation on which our Companies (Act), 1963 is grounded.”
It is the case of the Plaintiff in the instant case, that, the 1st defendant agreed to transfer 2% shares of 2nd defendant’s shares to him. There is no evidence on record that the 1st defendant owns any shares in the 2nd defendant company. Yes, it might be true that Mr. Kevin Okyere is a hundred percent (100%) shareholder in the 2nd defendant company. It might also be true that Mr. Kevin Okyere is the Group CEO of the 1st and 2nd defendant companies. It should be noted, however, that Mr. Kevin Okyere is a distinct legal entity, so are the 1st and 2nd defendants. In acting on behalf of 1st defendant to negotiate and execute the contract, Mr. Kevin Okyere was an officer of the 1st defendant company. There is no evidence adduced in this case indicating that Mr. Kevin Okyere acted in his private individual capacity. Therefore, the acts of the 1st defendant company cannot be construed as the acts of Mr. Kevin Okyere, a shareholder. For the 1st defendant to be able to transfer shares in the 2nd defendant company, evidence ought to have been led that 1st defendant had acquired shares in the 2nd defendant company
In any case, the plaintiff testified that Mr. Kevin Okyere owns 100% shares in the 2nd defendant company. If that is so, the question arising is, whose shares were going to be transferred to the plaintiff? Is it 2% of Mr. Kevin Okyere’s shares or 2% of 2nd defendants issued shares? If Mr. Kevin Okyere owns 100% shares in 2nd defendant company, then, there are no existing issued shares for transfer, assuming that is even possible. It has been further argued by the plaintiff that the contract of employment binds the 2nd defendant and therefore requests for an order to that effect. The Contract of Employment that was tendered in evidence discloses that the parties to the agreement are 1st defendant and the plaintiff. The clause 1.1 thereof provides;-
“This document constitutes the terms of employment between Fairfax Oilfield Services (Hereinafter referred to as “the company”) and Dr. Kwame Owusu (Hereinafter referred to as “the Employee”) and supercedes all previous representations, negotiations, commitments and communications whether oral or in writing, between the parties.”
The general rule is that a contract binds only the parties to it. This rule is regarded as the doctrine of privity. In DUNLOP PNEUMATIC TYRE CO. LTD v SELFRIDGE & CO. LTD (1915) A.C 847, the appellants were manufacturers of tyres, covers, tubes etc., while the respondents were retailers of same. In a sale contract between the appellant and A.J. Dew and Co., a wholesale company, the latter undertook not only to desist from selling below the minimum price set by the former (except to members of their cooperative society, who are entitled to a maximum of 10% discount) but also to compel all retailers who purchased from them to undertake to do same. The respondents purchased from Dew and Co. under the said terms but went ahead to sell below the minimum price. The appellant sought to claim damages for the breach. The House of Lords rejected the contention of the appellants on the grounds that there was no contract between the appellants and the respondents. This doctrine was fully and authoritatively stated by Viscount Haldane thus;
“My Lords, in the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing as jus quaesitum tertio arising by way of contract. Such right may be conferred by way of property, as, for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam. A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the provision or to some other person at the promisor request.’
In the instant case, the 2nd defendant company was not a party to the contract between the plaintiff and the 1st defendant as is evidenced by the 1st clause in the Contract of Employment. It would be wrong, therefore, for the plaintiff to sue the 2nd defendant for a contractual term i.e., clause 4.3, which the 2nd defendant was not party to. It is therefore my considered opinion that the plaintiff’s claim against the 2nd defendant should fail. Accordingly, the claim of the plaintiff against 2nd defendant is dismissed.
I now direct my attention to whether or not the claim against 1st defendant for the transfer of 5% of its shares to the plaintiff can be sustained? As I have stated earlier, a person whether natural or artificial can transfer shares which he or it has acquired. The question therefore is, does the 1st defendant own any of its own shares such as would entitle it to transfer same to plaintiff?
Section 56 of the Companies Act, 1963, Act 179 provides:
“(1) Except as provided in this section, a company shall not,
a. Alter the number of its shares or the amount remaining payable on those shares,
b. Release a shareholder or former shareholder from a liability on the shares,
c. Provide a financial assistance, directly or indirectly, for the subscription or purchase of its shares or the shares of its holding company, or
d. Acquire, by way of purchase or otherwise, any of its issued shares or any shares of its holding company.
(2.) For the purposes of paragraph (d) of subsection (1) shares are acquired by the company if they purport to be held on trust for the company although they are registered in the names of nominees.
(3) Subsection (1) does not prohibit a company from voluntarily acquiring its own shares on its conversion to a company limited by guarantee in accordance with Section 11.
(4) In the event of a breach of this section
(a) If the breach is of paragraph (a) or (b) of subsection (1), the purported alteration or release is void and every officer of the company who is in default is liable to a fine not exceeding [five hundred penalty units]
(b) If the breach is of paragraph (c) or (d) of subsection (1) then,
(i) the transaction concerned is voidable, except in favour of a genuine purchaser or seller of shares without knowledge of the breach, by the company and a payment made by the company in respect of that transact is immediately repayable with interest at the rate of five percent per annum or a higher rate that the Courts may think fit to order, and
(ii) Whether or not the transaction is avoided, every officer of the company who is in default is liable to a fine not exceeding five hundred penalty units or twice the amount of a provision or payment made by the company in respect of the transaction, whichever is the greater.
The Section 61 of the Companies Act also provides:
“Despite a provision in the regulations to the contrary, a company shall not purchase any of its own shares except on compliance with the following conditions:
a. Shares shall only be purchase out of a credit balance on the shares deals account referred to in Section 63 or out of transfers to that account in the manner referred to in that Section from income surplus as defined in Section 70
b. Redeemable preference shares shall not be purchased at a price greater than the lowest price at which they are their redeemable or will be redeemable at the next date at which they are due or liable to be redeemed; and
c. A purchase shall not be made in breach of Section 62.
The Section 62 further provides;-
A transaction shall not be entered into, by or on behalf of a company by which the total number of its shares or of its shares of any one class, held by person other than the company or its nominees becomes less than 85% of the total number of shares, or of shares of that class, which have been issued. For the purposes of subsection (1), redeemable preference shares shall be disregarded. Where, after shares of a class have been issued, the number of those shares has been reduced, subsection (1) shall apply as if the number originally issued, including shares of that class cancelled before the reduction took effect, had been the number as so reduced.
The Act further provides in Section 59 as follows:-
“(1) despite section 56 a company may, if authorised by its Regulations and subject to compliance with Section 60 to 63,
(a) Create and issue preference shares which are, or at the option of the company are, liable to be redeemed on the terms and in the manner that may be provided in the Regulations and may convert existing shares, whether issued or not, into those redeemable preference shares, or
(b) Purchase its own shares, or
(c) Acquire its own shares by a voluntary transfer to it or to nominees for it.
(2) for the purposes of subsection (1) shares shall not be redeemed, purchased or acquired by the company so long as there is an unpaid liability on those shares.
(3) Where authorised by its Regulations, a company may forfeit the shares issued with an unpaid liability for non-payment of the sums of money due and payable on those shares.
(4) On redemption, purchase, acquisition or forfeiture shares shall be available for re-issue by the company unless the company by alteration of its Regulations cancels those shares; and until re-issued or cancelled, those shares shall be referred to as treasury shares.
(5) Except as provided in section 67 a redemption, purchase, an acquisition or a forfeiture by the company of its shares or the cancellation of shares so redeemed, purchased, acquired or forfeited, shall not reduce the stated capital of the company.
(6) Voting rights shall not be exercised and dividends shall not be payable on the treasury shares, and, except where otherwise stated, treasury shares shall not be treated as issued shares within the meaning of this Act.
The combined effect of the provisions stated above is that the Act has prohibited totally and partially, certain transactions in shares by companies. Relating this to the issue under consideration, it would be said that a company’s right to purchase or acquire its own shares is partially prohibited. The Section 56(1) (d) of the Act prohibits a company from acquiring, by way of purchase or otherwise, any of its issued shares or any shares of its holding company. However, the Section 59 to 63 of the Act makes certain exceptions to this prohibition. For example, if the company’s Regulations authorises the company to purchase or acquire its own shares, the Act permits redemption, purchase, voluntary transfer and forfeiture of shares. Paul L. Davies stated in Gower’s Principles of Modern Commercial Law, 6th Edition, London Sweet and Maxwell at page 254 that:
“The essential difference between redemption and purchase is that, under the latter, agreement of the parties (the selling shareholder and the buying company) will be needed at the time of the purchase. Neither party can force the other to sell or buy if he or it does not want to and if he or it does want to, the terms and conditions will have to be agreed at the time of the purchase....”
By Section 59(1) (b) a company may purchase its own shares as an exception to the prohibition in Section 56(1) (d). However, Section 61 requires that a company may only purchase its shares after complying with certain procedures. A company may also acquire its own shares by voluntary transfer to it or to nominees for that company (Section 59(1) (c)). A holder of a shares is at liberty to transfer it. However, if the company is private, there may be restrictions on the right to transfer by Section 9 (3) (a) of the Act. From the foregoing, it is not in doubt that a company may acquire or purchase its own shares where the crcumstance3s permit it to do so and where it has fulfilled all the necessary procedures and conditions spelt out in either the Company’s Regulations or the Companies Act. The question therefore is, when the contract of employment was executed, had the 1st defendant acquired any of its own shares to enable it to transfer same and if so, does the regulations of the 1st defendant company permit or allow it to even purchase or acquire its own shares? None of the parties led evidence to establish this. The general rule is that a party has the burden of persuasion as to each fact the existence or non-existence of which is essential to the claim or defence that party is asserting. This is clearly stated in Section 14 of the Evidence Act, 1975 (NRCD 323) as follows;
“Except as otherwise provided by law, unless it is shifted a party has the burden of persuasion as to each fact the existence or non-existence of which is essential to the claim or defence that party is asserting.”
The Section 10(1) of the Evidence Act also provides that;
“10(1) for purposes of this Act, the burden of persuasion means the obligation of a party to establish a requisite degree of belief concerning a fact in the mind of the tribunal of fact or the court.”
Section 11(1) of the Evidence Act further provides that:
“11(1) For the purposes of this Decree, the burden of producing evidence means the obligation of a party to introduce sufficient evidence to avoid a ruling against him on the issue.”
In the instant case, it is the plaintiff who has the burden to introduce sufficient evidence to establish that the 1st defendant has the capacity to transfer the shares to him. As a matter of fact, no evidence was introduced by the plaintiff nor the defendant regarding the fact that the 1st defendant owns any shares in 1st defendant company by reason of purchase or otherwise to be able to transfer to plaintiff. Nemo potest plus juris ad alium transferre quam ipse habet (No one can transfer a greater right to another than he himself has). It is also said that no one gives what he does not possess (nemo dat qui non habet).
As stated earlier, there is no evidence before me that shows that the 1st defendant as a legal entity had acquired any of its shares to enable it to transfer same to the plaintiff.
Assuming for a moment, that, by “transfer of shares” the parties even meant
“allotment or offer of shares”, can the said clause 4.3 be enforced? When a company is first formed, it will usually issue such number of shares as will enable the company to start doing business. Later, it may issue shares for various reasons, one of such is to issue shares to new and existing employees as “employee-shareholders.” Employees on employee- shareholder contracts are given shares in the business in exchange for giving up some employment rights. However, a company that intends to issue new shares must comply with the law and procedures, as the issuance of new shares has the effect of diluting existing share values or percentage holdings.
For example, where a company intends to issue new shares with a view to offer same to an employee-
shareholder, that company must comply with Section 22 of the Companies Act subsection (2)(b) and Section 57 thereof. These Sections provide;
“22. (1) a company may, by special resolution, alter or add to its Regulations or adopt new Regulations.
(2) For the purposes of subsection (1), (b) the number of the company’s shares may be altered in accordance with Sections 11, 57 to 63, 75 to 79, 218 or 231 but not otherwise;
57. (1) A company may, by alteration of its regulations,
(a) Increase the number of its shares by creating new shares, or
(b) Reduce the number of its shares by cancelling shares which have not been taken or agreed to be taken by a person or by consolidating its existing shares, whether issued or not, into a smaller number of shares.
My understanding of these provisions is that, for a company to be able to create and issue new shares, it must first alter its Regulations by a special resolution to that effect. In the case before me, no evidence has been led by any of the parties to establish that the 1st defendant passed a special resolution to alter its regulations to increase its shares. It is only in so doing that 1st defendant can even offer or allot new shares to the plaintiff in an employee-shareholder arrangement as the evidence and pleadings of the plaintiff shows that Mr. Kevin Okyere owns 100% of the shares in 1st defendant company. It is therefore my considered opinion that the provision in clause 4.3 of the
Contract of Employment executed between the plaintiff and the 1st defendant cannot be enforced. For the foregoing reasons the reliefs (a), (b), (c), (d) and (e) of the plaintiff’s claim is dismissed. This brings me to the issue as to whether or not the plaintiff’s employment was wrongfully terminated.
A constructive dismissal occur when an employer substantially changes the terms of an employee’s contract of employment which the employee does not consent to, either explicitly or implicitly. Where the employer creates a situation in the workplace, which renders the continuation of the employment relationship intolerable for the employee, to such an extent that the employee has no other option available but to resign, the employee would be deemed to have been constructively terminated. In MOHAZAB v DICK SMITH ELECTRONICS (1995) 61 IR 200, an Australian case, Mohazab was an employee of Dick Smith Electronics. During questioning about the disappearance of stock in the store, the employee was told that he was to either resign or face a police investigation. A letter of resignation was prepared by the employer and given to the employee to sign. After this occurred, the employee brought an unlawful termination action. Dick Smith argued that the employee voluntarily resigned because of his concerns regarding the police investigation. The court decided that the decision to resign or face police investigation amounted to termination at the initiative of the employer because the employee had no effective or real choice but to resign, and it was only because of his employer’s action that termination had occurred.
Again, in RIND v AUSTRALIAN INSTITUTE OF SUPERANUATION TRUSTEES (2013) FWC 3144, an employer who refused to provide part- time work to an employee returning from parental leave was found to have acted unreasonably for reasons including that the request for part time work was made in accordance with the relevant enterprise agreement and the company had made no efforts to replace a company contracted to do the work on a part-time basis with a full time employee since the refusal. The court concluded that the employer was engaged in a course of conduct that justified the employee treating the employment at an end because there was an unreasonable refusal to perform the employer’s obligations to the employee under the terms of the Enterprise Agreement and found that the employee had been constructively dismissed.
In the South Africa case of PRETORIA SOCIETY FOR THE CARE OF THE RETARDED v LOOTS, (1997) 6 BLLR 721 (LAC) the South African Labour Appeal Court stated that:
“The enquiry is whether the employer, without reasonable and proper cause, conducted itself in a manner calculated or likely to destroy it, or seriously damage the relationship of confidence and trust between employer and employee. It is not necessary to show that the employer intended any repudiation of the contract: the courts function is to look at the employer’s conduct as a whole, and determine whether its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it.”
In the Canadian case of POTTER v NEW BRUNSWICK (LEGAL AID SERVICES COMMISSION) (2015) CARSWELL NB 87 (SCC) the Supreme Court of Canada stated that constructive dismissal can take two forms:
1. A single unilateral act by the employer that breaches an essential term of an employee’s employment contract; or
2. A series of acts by the employer that, taken together, show the employer no longer intends to be bound by the employment contract.
Some of the examples of ways that may constitute constructive dismissal are:
The employer demoting an employee or reducing the employee’s remuneration;
The employer refusing, by words or conduct, to allow the employee to fulfil the conditions of employment such as locking an employee out of a building or removing supporting staff;
The employer harassing or abusing an employee;
The employer giving the employee the choice of accepting a fundamental change or being fired.
By such types of action, employers essentially cease to meet their obligations and are therefore terminating the employment contract. Employees can therefore treat the contract as fundamentally breached and consider themselves as being dismissed through the employer’s actions. In the instant case, the plaintiff contend that in September 2015, defendant’s Director Mr. Kevin Okyere, convened a meeting at which he asked the plaintiff to work for four months without the payment of salaries. The explanation given to the plaintiff was that the 1st defendant company was going through financial hardship and was unable to pay salaries for the four months. According to plaintiff, Mr Kevin Okyere, at the said meeting indicated that anyone unwilling to work without pay for the said period could resign or leave the employment of 1st defendant. The plaintiff contended that he rejected the proposal and refused to work for four months without pay. The plaintiff further stated that at the close of the meeting he was given a document headed “Mutual Abrogation of Contract”.
This document, according to the plaintiff, was intended to terminate his contract of employment with the 1st defendant. Plaintiff said he refused to sign the document. The Mutual Abrogation of contract was tendered in evidence as Exhibit KO15. Plaintiff further tendered his email in which he rejected the Mutual Abrogation of contract as Exhibit KO17. In Exhibit KO17, the plaintiff stated as follows:
‘‘Dear Kevin et al,
I have reviewed the two documents that George sent to me for my review. In order to respond to the second document titled “CONSULTANCY AGREEMENT”, I suggest we first conclude and settle on the matters related to the employment contract. The related document sent by George titled “MUTUAL ABROGATION OF EMPLOYMENT CONTRACT.” I cannot sign the document because I do not accept that there ever was a mutual abrogation of my employment contract. I assert that the majority owner(s) of Fairfax and Springfield E&P decided to abrogate my employment contract. You rightly make claim in the document for company assets in my possession. I too have claims under the employment contract and wish to request that the majority owner(s) to fulfil their obligations under the provisions of the contract.
After several months of threatening to shut down Fairfax, you finally on Friday, 28th August, 2015 stated to Dominic and me, in a meeting with you and Geena, that you had no more money to put into Fairfax because you had invested more than three million dollars on Fairfax in excess of your intended budget. You asked us to resume the meeting on Monday, 31st August to consider ways forward. During that meeting Dominic and I brought to your attention that although Fairfax had not brought in income from external sources, it had done a lot of work for and completely supported Springfield E&P under the service agreement between the two. That argument did not persuade the majority owner(s). We adjourned the meeting and reconvened on Tuesday, 1st September.
In this meeting, the majority owner stated that Dominic and I work without income for up to four months by which time he believed the Petroleum Agreement for Springfield E&P’s Block 2 of the Kosmos Relinquished WCTP area would have been concluded. We responded that we were not able to do that. We offered that the company borrows money for two to four months given the time frame discussed. That was also refused. Fairfax was to be closed. It was stated by the majority owner that no company or individual who had ever applied for a block in Ghana had ever retained technical staff. Springfield E&P was to continue therefore without technical staff. The meeting was ended. Dominic and I offered that should Springfield E&P ever need our input, it could be done under individual consultancy arrangements. I consider that my employment has been constructively terminated by the majority owner(s) of Fairfax and Springfield E&P and abrogated my contract. Under clause 11.2 of my contract, I expect to return the company car (in 4 months as agreed with Kevin at the meeting on Thursday, 3rd September), the diesel generator installed by the company at my home, the company cell telephone, id card, and the SurfacePro computer.
Similarly, I expect the following obligations to be fulfilled by the company.
1. Clause 2.3 requires the company to pay me two (2) months’ salary in lieu of the required two (2) months’ notice.
2. Clause 4.3 states that “Company shares as free carry of 2% in Springfield E&P and 5% in Fairfax shall be transferred to [me] on August 01, 2014. I request and expect that the long overdue transfer of the shares shall take place with immediate effect.
3. Under clause 5.1, I expect to be paid for the unused portion of my accrued annual leave.
4. Under clause 4.2.2, I expect to be paid two (2) business class roundtrip tickets between Accra and Houston, Texas.
5. Under clause 8.5, the company owes me for the cost of “medical and dental insurance for [me] and family valid and acceptable to providers in the USA and Europe”. Despite the many reminders, this benefit was never provided.
I hope we can come to an amicable and speedy disengagement of the employer-employee arrangement between me and the Fairfax and Springfield E&P entities with each side fulfilling their respective required obligations under the contract we signed on 9th July, 2014.
Dr. Kwame Owusu’’
When Mr. Kevin Okyere received the Exhibit KO17, he also responded with Exhibit KO18 which is as follows:-
‘‘From: Kevin Okyere
Date: September 9, 2015 at 10:27:45 AM GMT
TO: Kwame Owusu
Dr. Kwame Owusu Subject:
Re: contracts Dr,
I am very disappointed to receive your email making all those claims. Under your employment you and Dominic were supposed to bring in contracts into Fairfax to sustain the company. Although I lobbied on the management level with GNPC you never followed up to chase any of the contracts just as Dominic didn’t pull his weight so you both contributed to Fairfax running into bankruptcy although you were empowered with all the equipment and software you told us you needed. On the shares we never came to an agreement and you didn’t perform your job so you are not getting any shares in Fairfax or Springfield. Your contribution was clearly not performed so if you consider this as a termination then it’s due to non -performance hence I am not entitled to give you any shares and I surely will not do so.
I am not paying for medicals or anything. If you had gone for contracts which would have brought in income then maybe we would have not shut down but you and Dominic’s inability to bring income hence leading to intentionally or purposely causing financial loss to the company. Pay me the $3.5 million you two made me spend and then we can talk about your medicals.
On the car being kept for 4 months is my prerogative and I have the right to change my mind at any time. I think a criminal investigation have to be lunched on causing financial loss and running the company down because we have found out that one you did some side deals causing money to be wasted for personal gains by aligning with vendors to overcharge and consultants to over- charge.
I will advise myself according and as I mentioned I will let you know what I decide.
It is clear from these correspondences that the 1st defendant intended to change a fundamental condition in the contract of employment between the plaintiff and the 1st defendant which related to remuneration and other benefits as stated in clause 4 thereof. It is further clear that when the plaintiff refused to accept the mutual abrogation of the contract, the 1st defendant, acting through its Director, Mr. Kevin Okyere became disappointed as reflected in the opening paragraph of Exhibit KO18. I have examined the evidence adduced by the parties on this issue and I must say that I am convinced the plaintiff has succeeded in discharging the onus placed on him by law to lead sufficient and credible evidence on the issue. The 1st defendant’s attempt not to pay the plaintiff for a period of four months constitutes a fundamental change in clause 4 of the Contract of Employment.
Furthermore, the ‘‘Mutual Abrogation of Contract’’ which the 1st defendant gave to the plaintiff to review and sign, in my view, constitutes an act by the employer giving the employee the choice of accepting the fundamental change or being fired under the guise of “mutuality”. By such action, the 1st defendant, essentially ceased to meet its obligations and therefore terminating the employment contract. The plaintiff or any other employee so affected can therefore treat the contract as fundamentally breached and consider himself as being dismissed through the employer’s actions. I hold therefore that the 1st defendant constructively terminated the employment of the plaintiff with its own actions. Having found that the plaintiff’s employment was constructively terminated by the 1st defendant, the question that should be considered next is whether or not the plaintiff is entitled to compensation and if so, how much compensation? Section 64(2) (c) of the Labour Act, 2003 (Act 651) makes provision of compensation as one of the remedies for unfair termination of a worker’s contract of employment. An employee whose employment is wrongfully terminated is entitled to compensation.
The measure of damages is the quantum of what the aggrieved party would have earned from his employment during such reasonable period, determinable by the court, after which the employee should have found alternative employment. The Supreme Court in ASHUN v ACCRA BREWERY LTD  SCGLR 81 held at the holding (2) that:
“An employee who has been wrongfully dismissed, had the duty of mitigation of damages. Accordingly, the employee had the duty to take steps to find alternative employment. In principle, in the absence of any contrary statutory or contractual provision, the measure of damages for wrongful termination of employment under the Common Law of Ghana was compensation based on the employee’s current salary and other conditions of service for a reasonable period within which the aggrieved party was expected to find alternative employment. In other words, the measure of damages was the quantum of what the aggrieved party would have earned from his employment during such reasonable period, determinable by the court, after which the employee should have found alternative employment. That quantum was subject to the duty of mitigation of damages.”
Then in the case of KLAH v PHOENIX INSURANCE CO. LTD  2 SCGLR 1139, the Supreme Court in a matter relating to award of compensation to an employee who had been wrongfully dismissed held that:
“Where an employer wrongfully dismisses an employee as in the instant case, which was the finding made by the trial judge and rightly affirmed by the Court of Appeal; the measure of damages is calculated largely on the basis of the principles applicable to actions of breach of contract as enunciated in Hardley v Baxendale (1854) 9 Ex. 341 and 354-355. “where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered as either arising naturally i.e., in the usual course of things from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of a breach of it.” The principle is to place the injured party as far as money could do so in the position he would have been but for the breach (Royal Dutch Airways v Farmex (1989-90) 2 GLR 623.”
In the case before me, the parties, that is, the 1st defendant and the plaintiff, agreed that in the event of any termination by any of the parties to the employment contract, that party must give two (2) months’ notice to the other party or payment of two months’ salary in lieu of notice. I have examined the circumstances surrounding the constructive termination of the employment of the plaintiff by the 1st defendant. I have also given consideration to the nature of profession the plaintiff has. Consideration has also been given to the state of 1st defendant company as at the time of the termination. It is clear from the evidence on record that the fortunes of 1st defendant was declining. I am of the considered opinion that the plaintiff is entitled to reasonable compensation to cover the wrong he has suffered and any unpaid benefit that he has lost, which I assess as three months net salary. The evidence shows that the plaintiff was earning an annual net salary of USD 276,000.00 (see exhibit KO5, the Contract of Employment).
USD 276,000.00 divided by 12 = USD 23,000.00
Therefore USD 23,000.00 x 3 = USD 69,000.00
In the circumstances, I award to the plaintiff the sum of USD 69,000.00 as compensation for the constructive termination of his employment against the 1st defendant.
I have given consideration to the counterclaim of the 1st defendant. I must say that I find no reason why this counterclaim was even asked for. In the first place, it was the 1st defendant that gave the vehicle and the generator to the plaintiff for his personal use as some of the benefits attached to his employment. When the plaintiff requested to use the generator and same was declined, the reasonable thing to be done by the 1st defendant was for officers of 1st defendant to give notice of their intention to collect the generator from the plaintiff. From there, all that the 1st defendant had to do was to go for the generator. Again the vehicle which was assigned to the plaintiff was driven by a driver who was working for the 1st defendant. I do not see how it should be a problem for 1st defendant to withdraw the said vehicle if it had given the plaintiff notice sufficient to allow the plaintiff to look for an alternative means of transport. Given all these consideration, it is my considered opinion that it is unreasonable for the 1st defendant to be asking for compensation for the use of the vehicle and generator for the short period between the date of the termination and the date these items were handed over. Accordingly, I refuse the counterclaim of the 1st defendant. Same is dismissed.
In conclusion, I must say that I sympathise with the plaintiff for the situation he found himself, especially leaving his previous job which was apparently more lucrative. However, as Wiredu JSC (as he then was) stated in the case of FRIMPONG V NYARKO (1989-90) SCGLR 734 at 742 that:
“The justice to be dispensed is justice within the law and not one of sympathy. Judicial sympathy, however plausible, can never be elevated to become the principle of law.”
I shall award to the plaintiff costs assessed at GH¢15,000.00 against 1st defendant. To the 2nd defendant I award costs in its favour against the plaintiff assessed at GH¢10,000.00.