AGRICARE COMPANY LIMITED vs. CHICKS & CHICKEN SERVICES LIMITED & ANOR
  • IN THE SUPERIOR COURT OF JUDICATURE
    IN THE HIGH COURT
    KUMASI - A.D 2019
AGRICARE COMPANY LIMITED - (Plaintiff/Respondent)
CHICKS & CHICKEN SERVICES LIMITED & ANOR - (Defendants/Applicants)

DATE:  18TH JANUARY, 2019
SUIT NO:  OCC 30/2019
JUDGES:  DR. RICHMOND OSEI-HWERE, J
LAWYERS:  FRANCISCA ADJO AYIVOR FOR HENRY ASANTE FOR PLAINTIFF/RESPONDENT
LESLEY AMEDIOR FOR MICHAEL GYAN OWUSU FOR THE 2ND DEFENDANT/APPLICANT
RULING

The incorporation of a company has many advantages, chiefly among them is the separate legal entity status bestowed upon the company. This advantage is a creation of law and has limited the liability of those who incorporate and manage the company’s affairs. It is, therefore, axiomatic to state that a company 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 [1897] 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. [1897] AC 22, it has, subject to certain exceptions remained the same in all common law countries and is the foundation on which our Companies Code, 1963 is grounded."

From the foregoing, it is clear that the 1st defendant company herein 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.’’

 

In the instant application before me, the 2nd defendant/applicant (hereinafter referred to as the applicant) is praying the court for an order to set aside the writ of summons and statement of claim filed by the plaintiff/respondent (hereinafter referred to as the respondent) against him on the ground that he is not a proper party to the suit. The applicant’s contention is that in all the transactions between the respondent and the 1st defendant herein, he only acted on behalf of the latter in his capacity as its Managing Director. Counsel for the applicant relied on the corporate personality principle and argued that the act of the applicant is the act of the company and that the applicant cannot be personally liable for the debt flowing out of the company’s transactions with the 1st defendant.

 

The respondent is opposed to the application. Counsel for the respondent cited the case of Amartey v Social Security Bank (1987/88) 1GLR 497 and argued that where specific allegations have been made against an officer of a company that officer can be sued. She referred to paragraph 10 of the statement of claim where the respondent alleged that the applicant made representations to personally see to the payment of the supplies. Counsel also made capital out of exhibit A1, a letter written by the applicant which sought to give some assurances relating to the payment of debt owed by the 1st defendant to the respondent. It was the submission of counsel that these assurances amounted to a guarantee on the part of the applicant. She therefore submitted that having defaulted in the payment, the applicant can also be held liable.

 

I have perused the statement of claim as well as the said exhibit A1. It is apparent that the applicant wrote the letter in his capacity as the Managing Director of the 1st defendant company. It was authored on the letterhead of the 1st defendant company and the applicant signed as the MD of the 1st defendant. The content of the letter speaks for itself. Indeed, the applicant gave some personal assurances but that was done in his capacity as the MD of the company. As an MD, he speaks and acts on behalf of the company. He is the face and directing mind of the company. It is in this spirit that he assured the respondent that payment will be made promptly after supply. It is also in this spirit that he assured the respondent of payment of the outstanding debt. Therefore, if the 1st defendant has defaulted in the payment, what the respondent should do is to sue the 1st defendant only. The MD as an agent of the company is indemnified by the company. He cannot sue or be sued on matters relating to his stewardship. Whatever action he (applicant) took as he carried on the business of the 1st defendant company is deemed to be the action of the latter and as such he is insulated against civil or criminal liability. The applicant is only liable unless it could be established that, for instance, he acted fraudulently or he is 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 applicant 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]are 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 applicant has acted fraudulently, as fraud has not been particularized on the face of the writ. Also, the record does not show that the applicant went on a frolic of his own with reckless indifference. The only allegation levelled against him relates to the assurances he gave concerning the capability of the 1st defendant company and that is what MDs do in projecting their companies anyway. Therefore, in the absence of any evidence of false misrepresentation, it will be inappropriate to ascribe liability to applicant to warrant the lifting of the veil of incorporation. In the circumstance, it is the 1st defendant company that can be sued not the applicant.

 

For the foregoing reasons, the application succeeds. I hereby strike out the name of the applicant from the writ of summons and statement of claim filed on 24/10/2018.

There will be no order as to costs.

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