IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL DIVISION)
KUMASI - A.D 2018
MICHAEL AYUUNE AND 24 OTHERS - (Plaintiff)
BOARD OF DIRECTORS, TEK COOPERATIVE CREDIT UNION LTD - (Defendants)
DATE: 6 TH JULY, 2018
SUIT NO: OCC. 110/2018
JUDGES: DR. RICHMOND OSEI-HWERE JUSTICE OF THE HIGH COURT
On 20th June, 2018 the Plaintiffs/Respondents herein filed a writ of summons claiming the following reliefs against the Defendants/Applicants jointly and severally:
1. Plaintiffs' claims against the Defendants is for an order allowing disqualified candidates to contest the election of the Credit Union scheduled to take place on 08/06/18.
2. An Order compelling the out-going executives of the union to step aside.
3. An order from the Honourable Court appointing interim executives for the Union.
4. An Order from the Honourable Court directing the past executives from doing business in the name of the Union.
5. An Order of interlocutory injunction restraining the Defendants from interfering with the election process of the Union.
6. Any further relief(s) or order(s) as the Honorable Court might deem fit to make.
In this application the Defendants/Applicants herein are praying the honourable court to strike out the writ of summons on grounds of want of jurisdiction and abuse of the court’s process. The grounds of the application are contained in the affidavit in support filed on 26/6/2018. The Respondents are opposed to the application and have demonstrated the grounds in an affidavit in opposition filed on 3/7/2018.
It is the case of the applicants that as Board members of the Tek Cooperative Credit Union Limited they acted on behalf of the company and as such they cannot be sued for acts relating to their stewardship. Counsel for the applicants cited various authorities including Salomon v Salomon and Co. Ltd (1897) AC 22 and section 137 of the Companies Act, 1960 (Act 179) and argued that the company as an artificial legal entity can sue and be sued and that officers of a company cannot be liable for act done on behalf of the company. Thus, it is the Tek Cooperative Credit Union Limited that ought to have been sued since the acts complained of were done on behalf of the company by the defendants/applicants. Counsel further submitted that the applicants as members of the Board of Directors are agents of the company and that an agent cannot sue or be sued in his own name whether the principal is named or unnamed. He cited the Supreme Court case of Nasiru Abdulai Banda v Col. Ayisi, Civil Appeal No. J4/1/2013 (delivered on 7th May, 2014) in support of this principle.
In sum, he urged on the court to dismiss the writ. In his response, counsel for the Plaintiffs/Respondents submitted that the action before the court has to do with the rights of the plaintiffs as provided under article 33(7) of the 1992 Constitution. He charged that the Defendants/Applicants as directors of the company have acted contrary to the bye laws of the company. Counsel’s beef is that the applicants have introduced some measures in respect of election of officers and these measures do not conform to the regulations of the Credit Union. He submitted that even though the Tek Cooperative Credit Union is an artificial person, the acts complained of were performed in the name of the Union by the Defendants in bad faith. Consequently, the Defendants must be held liable for their acts. He invited the court to not only dismiss the instant application but to order the Defendants to step aside as their term of office has elapsed. He also prayed the court to appoint an interim management committee to steer the affairs of the Credit Union.
Before I go into the merits of the application, it is important to deal with an issue of law which relates to the Respondents counsel’s oral application to amend the title of the writ to include the name of Tek Cooperative Credit Union Limited.
Order 16 rule 5 (1) of CI 47 provides that:
“Subject to Order 4 rules 5 and 6 and to the following provisions of this rule, the Court may at any stage of the proceedings upon an application by the plaintiff or any other party grant leave to
(a) the plaintiff to amend the plaintiff’s writ; or
(b) any party to amend the party’s pleading;
on such terms as to costs or otherwise as may be just and in such manner as it may direct.”
Order 16 rule 5 (3) of the High Court (Civil Procedure) Rules, 2004 (CI 47)also provides:
“An amendment to correct the name of a party may be allowed under sub rule (2) notwithstanding that it is alleged that the effect of the amendment will be to substitute a new party if the Court is satisfied that the mistake sought to be corrected was a genuine mistake and was not misleading or such as to cause any reasonable doubt as to the identity of the person intending to sue or intended to be sued.”
These provisions amplify the fact that a writ can be amended to add a party’s name to the parties in a suit. This is, however, subject to the grant of leave by the court. Order 16 rule 11 regulates the method of applying for leave to amend a writ as follows:
“(1) An application for leave to amend a writ or a pleading shall be made on notice to all the other parties to the action.
(2) The application shall specify precisely the nature of the amendment intended to be made.
(3) An affidavit may be used in an application for leave to amend under this rule.”
With utmost respect to Respondents’ counsel, his oral application for leave to amend the title of the writ to add the name of Tek Cooperative Credit Union Limited is incompatible with the rules of court. If the Plaintiffs/Respondents wanted to amend the title of the writ they ought to have filed an application on notice to all the parties to the action. A breach of this fundamental procedure cannot be cured by Order 81 since it goes to the jurisdiction of the court to hear the application. Consequently, the application to amend the title of the writ to include the name of Tek Cooperative Credit Union Limited as a party to the suit is not worthy of a sympathetic consideration and the same has failed.
Can the Applicants be sued?
To ascertain whether the Applicants were properly sued, we need to analyse the capacity of companies and the individuals who control these companies within the context of civil liability.
The applicants are members of the Board of Directors of Tek Cooperative Credit Union Limited. Tek Cooperative Union is a limited liability company formed and registered under the Laws of Ghana. Consequently, it is a legal entity distinct from its members. Hence it is capable of enjoying rights and of being subject to duties which are not the same as those enjoyed or borne by its members i.e. the shareholders, directors and officers of the company. This fundamental principle of corporate personality and its distinctiveness from its members was first espoused in the celebrated case of Salomon v Salomon  AC 22 where Lord Macnaghten held:
"The company is at law a different person altogether from the [shareholders]...; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands received the profits, the company is not in law the agent of the [shareholders] or trustees for them. Nor are the [shareholders], as members liable in any shape or form, except to the extent and in the manner provided by the Act."
This position of the law is captured in section 24 of the Companies Act, 1963 (Act 179) which provides as follows:
‘‘Except to the extent that a Company's Regulations otherwise provide, a company registered after the commencement of this Act and an existing company which, pursuant to section 19, adopts Regulations in lieu of its memorandum and articles of association shall have, for the furtherance of its objects and of a business carried on by it and authorised in its Regulations, all the powers of a natural person of full capacity.’’
The provisions of Section 24 of the Companies Act have been applied in numerous cases including Morkor v Kuma [1998 - 99] SCGLR 620 where the Supreme Court held at page 632 per Sophia Akuffo JSC (as she then was) as follows:
"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 Code, 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 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.  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, 1963 is grounded."
From the foregoing, it is clear that a company such as Tek Cooperative Credit Union Limited upon incorporation has become a separate and distinct entity from its shareholders, directors and officers, and the Courts will seldom attach personal liability to such shareholders, directors and officers whose acts are the acts of the company except in very limited circumstances. Sections 139 and 140 of Act 179 also espouse this fundamental principle of corporate personality. In Bousiako Co., Ltd. V. Ghana Cocoa Marketing Board; Kwabo-Osekyere Construction Works Ltd. V. Ghana Cocoa Marketing Board (Consolidated) [1982-83] GLR 824, the Court explained the legal effect of these provisions. Osei-Hwere J (as he then was) held at page 842:
‘‘Sections 139(a) and 140 of the Companies Code, 1963 (Act 179) regulate the above proposition. By section 139 it is provided, among others, that any act of the board of directors or managing director, for instance, while carrying on in the usual way the business of the company should be treated as the act of the company itself; and accordingly the company shall be civilly liable therefore to the same extent as if it were a natural person …
Section 140 also provides for situations when the acts of any officer or agent of a company shall be deemed to be acts of the company. These are, for instance, when the company, acting through its board of directors, or managing director, shall have expressly or indirectly authorised such officer or agent to act in the matter or shall have represented the officer or agent as having its authority to act in the matter. In any of these events the company shall be civilly liable therefore to the same extent as if it were a natural person.’
The board of directors, managing director and other top officers normally carry out the managerial functions of a company. They speak and act on behalf of the company. They are the faces and the directing minds of the company. It is in this spirit that the defendants performed their duties including their supervision of the said elections. Therefore, if the plaintiffs have a problem with the conduct of the elections what they should do is to sue Tek Cooperative Credit Union not the Board of Directors. Indeed, the Board of Directors as agents of the company are indemnified by the company. They cannot sue or be sued on matters relating to their stewardship. Whatever action Applicants took as they carried on the business of Tek Cooperative Credit Union is deemed to be the action of the latter and as such they are insulated against civil or criminal liability. The Applicants are only liable unless it could be established that, for instance, they acted fraudulently or they are involved in wilful misconduct. It is only under such circumstances that the figurative veil of incorporation could be lifted by the court to reach the Defendants/Applicants for redress. For the circumstances warranting the lifting of the corporate veil, it was aptly held by the court per Sophia Akuffo JSC (as she then was) in Morkor v Kuma [1998-1999] SCGLR 620, 634 as follows:
“[W]ere there any other proven factors driving the case, such as fraud, improper business conduct, deliberate attempt at evasion of legal obligations, or other devices or wilful misdeeds on the part of the appellant, which would have justified lifting the veil in other to reach the appellant for redress.”
In the instant case, there is no evidence to suggest that the Applicants acted fraudulently, as fraud has not been particularized on the face of the writ. Also, the record does not show that the applicants acted on a frolic of their own with reckless indifference. Indeed, the allegations levelled against them although damning in nature, the Respondents did not demonstrate with affidavit evidence whether the Applicants acted ultra vires to warrant the lifting of the veil of incorporation. So long as they had the power to supervise the said elections it is difficult to ascribe personal liability to them for any infraction. In fact, the Respondents by their own showing concede that Applicants have the power to conduct the elections, it is the mode of conduct that they are not happy about. In the circumstance, it is the company that should be liable not the Defendants/Applicants.
The Plaintiffs are also seeking to remove the defendants as members of the Board of Directors per the reliefs sought in the writ. The procedure for removal of a director of a company is set out under section 185 of Act 179. Under the law, a director may be removed by members in a general meeting by passing an ordinary resolution. When that fails, the member can seek relief under section 218 of Act 179 – for a court order aimed at removing a person as a director. In Pinamang v Abrokwa  2 GLR 384 at 389-390, Lamptey JA (as he then was) described the procedure as follows:
“One of the reliefs sought by the applicants was formulated as relief (b) as follows: ‘(b) an order that the current chairman of the board [p.390] of directors of the company be removed from the board. The first observation I wish to make is that Act 179 specifically provided for the procedure and the mode for the removal of a director of a limited liability company under section 185. Prima facie, to remove a director of a company from the office of a director, the procedure spelt out under section 185 of Act 179 must be followed by the company. It seems to me that the applicants must satisfy the court that resort to section 218 of Act 179 had become necessary as a final and last resort. In other words, the affidavits of the applicants must on the face of it show that the applicants resorted to section 185 without avail and without success. That as a last resort, the almighty power of the court must of necessity be called in aid of the applicants. There was no evidence to show that the applicants had unsuccessfully attempted to remove the named director chairman pursuant to section 185 of Act 179. It is only after this unsuccessful exercise pursuant to section 185 of Act 179 that resort to section 218 of Act 179 could be justified. The lower court, in my opinion, had no jurisdiction to hear and determine the relief sought under head (b) of the reliefs. The complaint made under head (b) is not one envisaged by section 218 of Act 179 and should have been refused and dismissed in limine by the learned trial judge.”
It is therefore clear that in the instant action the court has no jurisdiction to remove the Applicants as directors of Tek Cooperative Credit Union Limited based on the complaints of the Respondents. What the Respondents can do, if they so wish, is to table a motion at the general meeting of the company for the removal of the Applicants. It is when that fails that Respondents can come under the ‘oppressive remedy’ action and seek relief for an order removing the Defendants/Applicants as directors. The position of the common law relating to the right of the minority members or individuals of a company to institute proceedings against the company is espoused in the celebrated case of Foss v Harbottle(1843) 2 Hare 461. The rule in Foss v Harbottleis to the effect that a court will generally refuse to entertain action by minority shareholders or individuals members of a company. The Ghanaian law has modified the rule in Foss v Harbottle. Under sections 217 and 218 of the Companies Act 1963 (Act 179) individual members are vested with the right to sue a company.
Section 217 provides that members of a company may apply to the court for injunction to restrain the company from doing any act or entering into any transaction which is illegal or ultra vires or which infringes any provision of its regulations, or from acting on any resolution not properly passed in accordance with the Act and the company’s Regulations. The courts reserve the right to declare such acts void. Furthermore, section 218 gives members the right to sue for ‘remedy against oppression’. A person can sue in the capacity of member, director, secretary, employee or otherwise to protect his or her interest in the company. Section 218 of Act 179 provides:
“(1) Any member or debenture holder of a company or, in a case falling within section 225 of this Code, the Registrar may apply to the Court for an order under this section on the ground
(a) that the affairs of the company are being conducted or the powers of the directors are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the members or debenture holders or in disregard of his or their proper interests as members, shareholders, officers, or debenture holders of the company; or
(b) that some act of the company has been done or is threatened or that some resolution of the members, debenture holders or any class of them has been passed or is proposed which unfairly discriminates against, or is otherwise unfairly prejudicial to, one or more of the members or debenture holders.
(2) If on such application the Court is of opinion that either of such grounds is established, the Court may, with a view to bringing to an end or remedying the matters complained of, make such order as it thinks fit: and, without prejudice to the generality of the foregoing may by order,
(a) direct or prohibit any act or cancel or vary any transaction or resolution; or
(b) regulate the conduct of the company's affairs in future; or
(c) provide for the purchase of the shares or debentures of any members or debenture holders of the company by other members or debenture holders of the company or by the company itself and in the case of purchase of shares by the company without regard to the limitations imposed by sections 59 to 63, other than subsections (4) and (5) of section 59 of this Code.”
From the reliefs sought in the writ, it is palpably clear that the Plaintiffs/Respondents are seeking to enforce their rights under sections 217 and 218 of Act 179. In view of this, it is my considered opinion that the instant action ought to have commenced by originating motion on notice as dictated by the above provisions of the Companies Act rather than a writ of summons. Why do I say so?
It is provided under Order 2 rule 2 of CI 47 as follows:
“Subject to any existing enactment to the contrary all civil proceedings shall be commenced by the filing of a writ of summons.”
In the case of Jonah v Kulendi and Kulendi[2013-2014] SGCLR 272, the Supreme Court had the opportunity of pronouncing on the issue of form of the action provided by statute as against actions generally commenced under Order 2(2) of CI 47. It held inter aliathat:
“… A statute like the Legal Professional Act 1960 (Act 32) could both be procedural and substantive. It confers rights to be exercised and regulates the procedural steps for seeking reliefs for the violations of these rights. In our respectful opinion, as the Act itself regulates its own procedure for redressing any cause of action arising from it, this court should not resort to any statute for assistance.”
In his concurring opinion Dotse JSC held inter alia as follows: -
“The procedure outlined under the Legal Profession Act 1960 (Act 32) must therefore be deemed to be superior to any rule of procedure stated under Order 2 Rule 2 of the High Court (Civil Procedure) Rules 2004 (C.I. 47) which states that ‘subject to any existing enactment to the contrary all civil proceedings shall be commenced by the filing of a writ of summons’. Since the procedure in Act 32 is contrary to that provided in C.I. 47 and is contained in a substantive law, that contained in C.I. 47 must give way as is regulated by Article 11(i)(a) to (e) of the Constitution 1992.”
Sections 217 and 218 of Act 179 under which the plaintiffs’ reliefs are grounded provide the form of action in originating motion on notice. See Re Asiedu’s Application; Asiedu v. Ghana Fibre Industries Ltd. and Others(1968) GLR 617-620. See also Amos Wedzi vs Richard Wedzi and Hotel Majorie ‘Y’ Ltd Civil Appeal No. H1/60/2015 (11TH February, 2016) CA. Thus, the use of a writ of summons by the plaintiffs/respondents to commence their action is inconsistent with the provisions of sections 217 and 218 of Act 179 and on the authority of Jonah v Kulendi and Kulendi (supra) same can be held to be incurably bad, as it cannot properly invoke the jurisdiction of the trial court. This is because 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
 1SCGLR 205, 208 per Gbadegbe JSC. Therein lies another reason why the instant writ is improper.
The conclusion is that the plaintiffs’ action per the writ of summons is not only incompetent in substance but in form as well. For the foregoing reasons, the application succeeds. I hereby strike out the writ of summons filed against the Defendants/Applicants on 20/6/2018.
There will be no order as to costs.