IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL DIVISION)
KUMASI - A.D 2018
HFC BANK GHANA LIMITED - (Plaintiff)
NAASEI BOAKYE ENTERPRISE LIMITED - (Defendant)
DATE: 24 TH JANUARY, 2018
SUIT NO: MISC/07/2017
JUDGES: DR. RICHMOND OSEI-HWERE JUSTICE OF THE HIGH COURT
SULLEYSAMBIAN FOR THE APPLICANT
DR. ERNEST OWUSUDAPAAH FOR THE RESPONDENTS
This ruling seeks to determine the merits of the preliminary legal objection in relation to a motion on notice for judicial sale of mortgage property. The said motion was filed on 10/11/2016 and the respondents filed an affidavit in opposition to the motion as well as a supplementary affidavit on 22/11/2016 and 13/10/2017 respectively. Subsequent to the filling of the motion, several attempts were made to settle the matter out of court but the efforts fell through. When the motion finally came up for hearing on 23/10/2017, counsel for the defendants/respondents raised a preliminary legal objection to the motion. Counsel for the respondents submitted that the preliminary legal objection is founded on the ground that the non-registration of the deed of mortgage sought to be enforced is contrary to the clear provisions of the Mortgages Act,1972 (NRCD 96) particularly section 3(2) as well as section 24(1) of the Land Registry Act, 1962 (Act 122). Counsel submitted that a mortgage is an instrument affecting land and it is a statutory requirement that an instrument affecting interest in land must be registered in accordance with Act 122. He further submitted that the use of the word “may” in section 3(2) of NRCD 96 should not to be interpreted to mean a permissiverequirement since such interpretation will do violence to the object and purpose of establishing a registration regime for instruments affecting interest in land. Counsel submitted that a mortgage ought to be registered in order for it to be accorded validity which is a prerequisite to the enforcement procedure under s 18 of NRCD 96. He emphasized that the power of the court to order a judicial sale of mortgaged property relate to a valid mortgage.
Counsel also submitted that the mortgage in contention being a contract of guarantee cannot be enforced by a judicial sale and that the proper method for seeking redress for the alleged breach ought to be by writ of summons and not by originating motion. He cited Order 2 rule 2 of CI 47 as well as Order 59 rule 2 to buttress the point. In response to the preliminary legal objection, counsel for the plaintiff/applicant submitted thatthe legal objection is misconceived. He cited Order 2 r 2 and stated that there is an existing enactment in the Mortgages Act which makes provision for enforcement of mortgages by judicial sale so the argument that they ought to come by writ of summons is untenable. He made reference to s 3(2) of NRCD 96 and submitted that failure to register a mortgage does not derogate the substance of the mortgage. Counsel cited a Supreme Court decision in Anthony Wiafe v Dora BorkaiBortey and Victoria Amoo  104 GMJ 161 at 167 where it was held that non-registration of an instrument does not derogate from the contract. Counsel emphasized that the fact of non-registration does not affect the rights of the parties. He further submitted that a non-registered mortgage may not meet the requirements of legal mortgage but meets the requirements of an equitable mortgage which can also be enforced. Counsel invited the court to dismiss the preliminary legal objection.
From the foregoing, the issues for determination are: 1. whether the unregistered deed of mortgage can be enforced by the court; and 2. whether a deed of mortgage can be enforced by judicial sale. A mortgage is an instrument affecting land and as such falls within the ambit of section 24(1) of the Land Registry Act, 1962 (Act 122) which provides for the compulsory registration of instruments affecting land. Section 24(1) of Act 122 states:
“24. (1) Subject to subsection (2), of this section, an instrument other than,
(a) a will, or
(b) a judge’s certificate
first executed after the commencement of this Act shall be of no effect until it is registered.”
In Asare v Brobbey  2 GLR 331 at 337, CA, the Court of Appeal delved into the legal effect of s 24(1) of Act 122, it observed in its judgment as follows:
“It follows therefore that when section 24(1) of the Land Registry Act, 1962 provides that a document shall be of no effect until it is registered, it means that the document and its contents cannot have any legal effect until registration has been completed. This also means that the document is not valid for all purposes because the formality of registration is necessary to complete its validity. In this respect a clear distinction should be drawn between what is void and what is invalid. What is void or null is always regarded by the law as never having taken place. What is invalid has taken place but something remains to be done to validate it or to give it legal force. If a document is to be valid it must be valid for all legal purposes but where the law will not give it any effect then clearly the document is invalid.”
The Court of Appeal continued:
“In the present appeal, the mortgage deed was not registered at the time the power of sale was exercised and therefore the document itself was ineffective and invalid to confer the rights and to impose the obligations stipulated in the mortgage deed. It means that the power of sale was ineffective and therefore the first respondent could not have exercised his power of sale at the time of the auction sale. If it were argued that the document although unregistered yet was valid, then the power of sale contained in the mortgage deed would also be valid at the time of the sale and the sale would also be valid. But this is impossible because one cannot validly exercise a power when that power has been rendered ineffective by statute. In other words, an ineffective power of sale cannot be a valid one. In the result the first respondent had no power of sale at the time of the auction sale and therefore had no title to transfer the property to the third respondent by auction sale.”
A considerable body of case law have also followed the dictum of the Asare v Brobbey case (supra) on the ineffectiveness of an instrument which has not been registered. These cases include: Amefinu v Odametey  2 GLR 135, CA; Hammond v Odoi [1982-83] GLR 129 SC; Nartey v Mechanical Lloyd Assembly Plant Ltd [1987-88] GLR 86, SC and Odametey v Clocuh [1989-90] GLR 14 SC. In Amuzu v Oklikah [1997-98] 1GLR 89-143, however, the Supreme Court exercised the power to depart from its previous decision under article 129(3) of the 1992 Constitution and modified the law bordering on the legal effect of s 24(1) of Act 122. Consequently, the rigid application of s 24(1) has paved the way for what is deemed as a fairer and a more equitable application. The court construed section 24(1) taking into consideration the equitable doctrines of fraud and notice. It held that registration does not make an instrument unimpeachable and that in situations where there are conflicting instruments over land, an unregistered instrument may prevail over a registered one if the latter was procured by fraudulent means or with notice of the former’s encumbrance. The decision of the Supreme Court is summed up in holding 4 of the report as follows:
“The Land Registry Act, 1962 (Act 122) did not abolish the equitable doctrines of notice and fraud and neither had it conferred on a registered instrument a state-guaranteed title. Besides, since equity would not permit a statute to be used as an instrument of fraud or inequitable conduct, section 24(1) of Act 122 should not be interpreted in a way that would facilitate fraud in the acquisition and sale of lands. Accordingly, a later executed instrument could only obtain priority over an earlier one by registration under section 24(1) of Act 122 if the later instrument was obtained without fraud and without notice of the earlier unregistered instrument. Thus registration did not create an absolute title. Accordingly, in the instant case, the respondent’s later instrument, exhibit B, could not take priority over the appellant’s earlier instrument, exhibit A, by its registration under section 24(1) of Act 122 because since the respondent had actual notice of the appellant’s purchase of the disputed property, he would be held to have had constructive notice of and to have been bound by the contract of sale between the appellant and the vendor, and the terms of the contract including equities which under the contract the appellant had against the vendor. Accordingly, the judgments of the High Court and the Court of Appeal would be set aside. Hackman v Arkhurst (1921) FC ‘20-’21, 101 and Crayem v Consolidated African Trust Ltd (1949) 12 WACA 443 applied. Boateng v Dwinfour  360, CA cited. Asare v Brobbey  2 GLR 331, CA not followed.”
In the present case, counsel for the applicant has invited the court to treat the unregistered mortgage as an equitable mortgage which can be enforced by the court. Indeed, equitable mortgages are enforceable under common law and since by virtue of article 11 of the 1992 Constitution common law is part of Ghanaian law, counsel’s argument sounds very attractive. It is, however, a well-established principle thatwhere there is conflict between the common law and the terms of a statute, the statutory provision should prevail. See Ghana Commercial Bank v CHRAJ [2003-2004] SCGLR 91. There is a point of divergence between equitable mortgage under the common law on one hand and equitable mortgage under the Ghanaian statute on the other. Section 19 of NRCD 96 makes provision for the circumstances under which a deed of mortgage could be described as an equitable mortgage. Section 19(1) of NRCD 96 provides as follows:
“Except as otherwise provided by this Act, or any other enactment or by express agreement among encumbrances, priorities among encumbrances shall be in order of time, the first encumbrance in time having priority, subject to the operation of the rules of equity including the rules concerning fraud, estoppel for gross negligence or otherwise, purchase for valuable consideration without notice of prior interest and the priority of legal over equitable interests where equities are equal.” (Emphasis mine)
My understanding of the above provision is that the law will only give priority to an unregistered mortgage and treat same as an equitable mortgage where a later registered mortgage was procured by fraud or with notice of the other party’s encumbrance. Thus, while both the common law and Ghanaian statute recognize the equitable doctrines of fraud and notice in the enforcement of a mortgage; a mere non-registration does not translate a mortgage into an equitable mortgage under Ghanaian statute. For an unregistered mortgage to be described as an equitable mortgage it must have been confronted with a rival instrument which must have been procured by fraud or with notice of the unregistered instrument’s encumbrance.
In the instant case, there is no attempt to enforce a rival instrument in respect of the mortgaged property. More so, there is no evidence of fraud or notice in relation to a rival claim to qualify the present deed of mortgage as an equitable mortgage under the statute. The result is that the deed of mortgage does not meet the requirement of an equitable mortgage under Ghanaian law for it to be enforced by the court. This does not imply that the unregistered deed of mortgage is void. In holding 4 of the Amuzu v Oklikah case (supra) it was held that non-compliance with the provision of section 24(1) of Act 122 does not render an instrument null, void or invalid.What it means is that the rights of the mortgagee to enforce the document has not crystallized under the law. Not until the deed of mortgage is registered under s 24(1) of Act 122 the same cannot be enforced. I now turn my attention to the next issue i.e. whether or not the application can be made by originating motion on notice.
Order 19 rule 1 (1) & (2) of CI 47 provides that:
“(1) Every application in pending proceedings shall be made by motion.
(2) Proceedings by which an application is to be made to the Court or a Judge of the Court under any enactment shall be initiated by motion and where an enactment provides that an application shall be made by some other means, an application by motion shall be deemed to satisfy the provision of the enactment as to the making of the application.”
It is also provided under section 18(1) of the NRCD 96 as follows:
“On the failure of performance of an act secured by the mortgage, the mortgagee may apply to the Court for an order for the judicial sale of the mortgaged property, and on being satisfied as to the existence of grounds for the application, the Court shall, on the conditions that it considers just and equitable, grant an order for judicial sale of all or a part of the mortgaged property.”
Meanwhile Order 2 rule 2 provides that:
“Subject to any existing enactment to the contrary all civil proceedings shall be commenced by the filing of a writ of summons.”
It is clear from the combined effect of Order 19 rule 1 of CI 47 and section 18 of NRCD 96 that an order for judicial sale of mortgaged property can be sought by originating motion on notice backed by an affidavit.The affidavit filed is designed to set out the case of the applicant. In the instant application, a careful reading of the motion paper, however, suggests that the application is laced with a liquidated claim and therein lies the problem. The motion paper reads:
“Motion on Notice by SulleySambian of Sambian& Co Solicitors for and on behalf of the Plaintiff/Applicant herein praying the Honorable Court for an order of judicial sale of the Respondents properties and or in the alternative, or both, the immediate payment of an amount of Five Million Two Hundred and Seventy Four Thousand Seven Hundred and Sixty One Cedisand Ninety Five pesewas which was used mortgaged (sic) for credit facilities granted to the Respondents upon the grounds set out in accompanying affidavit and for such further Order or Orders as to the Honorable Court may deem fit.”
Clearly, in an attempt to enforce the deed of mortgage through judicial sale, the applicant is also trying to circumvent the laid down procedure applicable to a liquidated claim by seeking it through an originating motion on notice rather than a writ of summons as required by Order 2 of CI 47. This is an error which cannot be condoned by the court. For, it is trite learning that where the rules of procedure prescribe a mode of enforcing a right or seeking a relief same must be adhered to, as failure to do so in accordance with the prescribed mode is not only an irregularity but a nullity since it raises the fundamental issue of jurisdiction. See Ayikai v Okaidja III  1SCGLR 205, 208 per Gbadegbe JSC.
As far as the liquidated claim is concerned, the action is a nullity. It is, however, my considered opinion that Order 81 of CI 47 could be invoked to cure the defective nature of the motion in order to save the application for judicial sale of the mortgaged property. Order 81 rule 1(1) of CI 47 provides:
“Non-compliance with Rules not to render proceedings void
(1) Where, in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of anything done or left undone, been a failure to comply with the requirements of these Rules, whether in respect of time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any document, judgment or order in it.”
Be that as it may, it has already been established that the application for judicial sale of the mortgaged property is premature. The preliminary legal objection is therefore upheld. The instant application is incompetent and the same is hereby struck out.
Costs of GHc3, 000.00 is awarded against the plaintiff/applicant.