PAUL JACQUAYE vs. IDEAL FINANCIAL HOLDINGS LTD
  • IN THE SUPERIOR COURT OF JUDICATURE
    IN THE HIGH COURT(COMMERCIAL DIVISION)
    ACCRA - A.D 2016
PAUL JACQUAYE - (Plaintiff)
IDEAL FINANCIAL HOLDINGS LTD -(Defendant)

DATE:  20TH JULY, 2016
SUIT NO:  RPC/07/2015
JUDGES:  HIS LORDSHIP ERIC KYEI BAFFOUR JUSTICE OF THE HIGH COURT
LAWYERS: 
JUDGMENT

Plaintiff claims the following endorsement on its writ issued on 06/07/15 against the defendant:

1. An order for the payment of the sum of Four Million Ghana cedis.

2. Interest on the said sum at the prevailing interest rate from 1st July, 2014 till date of final payment.

3. Damages for breach of contract.

4. Costs.

5. Any other orders the court may deem fit.

 

The plaintiff provides the basis of his claim to the reliefs he seeks in the statement of claim that accompanied the writ. He styles himself as a businessman and a former majority shareholder cum chairman of the Board of Directors of Ezi Savings and Loans Ltd. Plaintiff claims that sometime in 2014, based on a series of negotiations with the defendant, plaintiff agreed to sell his 70% shares in Ezi Savings & Loans amounting to 7.000.000 shares to defendant at a price of Ghc 5.000.000.00. Defendant paid Ghc1.000.000.00 and was supposed to pay Ghc4.000.000.00 by September, 2014, after defendant had completed an audit of Ezi Savings & Loans. To plaintiff the terms of this agreement were initially captured in a memorandum of understanding (MOU) signed between them which provided that if the auditing gave different information from what plaintiff had provided defendant was at liberty to withdraw from the contract and demand a return of the deposit paid with interest on the amount.

 

Bank of Ghana which had regulatory oversight was duly informed and it gave approval for the transaction. Besides the MOU which was signed, the parties also executed what they called Share Purchase Agreement (SPA). Defendant carried out the financial due diligence on Ezi Savings & Loans Ltd and completed same in July, 2014. Plaintiff further claim that defendant duly received the financial due diligence of Ezi Savings & Loans and afterwards decided to proceed with the transaction. That the Board of Ezi Savings & Loans was formally dissolved in a meeting on 21st July, 2014 at Madina. The defendant took over and changed the name of Ezi Savings & Loans to First Trust Savings & Loans Ltd (1st Trust S&L) with a new Chief Executive Officer. In terms of the MOU signed, according to plaintiff, defendant should have paid all the Ghc5.000.000.00 by September, 2014 and yet the defendant has still not fulfilled its promise. Defendant has communicated to him of its intention not to make further payments because of a misrepresentation of information to it. Plaintiff then concludes that defendant has no intention of paying its outstanding obligations unless compelled by the court and hence its claim before the court.

 

DEFENDANT’S ANSWER AND COUNTER CLAIM

Defendant has contested the claim of plaintiff and has counter claimed for the following reliefs in its amended statement of defence and counter claim:

a. Payment of the sums of GH¢698,762.67 (Clydestone), GH¢1,458.62 (Transol) and GH¢167,700.56 and GH¢1,509,644.42 (Parod) owed by the said companies to First Trust Savings and Loans.

b. Interest on the said amounts at the agreed rates from 31/01/15 to the date of final payment.

c. Payment of all other sums of money found due to First Trust Savings and Loans from the Plaintiff together with interest.

d. General damages for fraudulent misrepresentation.

e. An order directed at the Plaintiff to transfer the shares the Defendant purchased from him in Ezi Savings and Loans Ltd to her or that the Registrar of this Court transfers the said shares to the Defendant at the cost of the Plaintiff.

f. Costs on full indemnity basis.

 

Defendant claims that plaintiff was not entitled to further payments as he had misrepresented facts regarding the liabilities of Ezi S & L that the assets were Ghc28.970.000 with liabilities being Ghc26.700.000 with a net worth of Ghc2.269.000 which representation had proved to be untrue. Defendant particularizes the misrepresentation in paragraph 4 of the statement of defence as follows:

i. The Plaintiff being the Chairman, majority shareholder and directing mind of Ezi Savings and Loans and having exclusive knowledge of the status of the said company at the date of sale of the shares, failed to fully disclose and/or concealed said facts to/from the Defendant;

ii. The Plaintiff made statements about the status of the said company to the Defendant, recklessly without belief in the truth of same.

 

To defendant, plaintiff was fully aware of the status of the company with the defendant having no means of knowing same. Defendant then claims that the MOU was of no relevance after the signing of the SPA and as plaintiff has misrepresented facts plaintiff is rather in breach of the SPA and needed to indemnify the defendant against losses, liabilities and damages. To defendant even though the Bank of Ghana approved the transaction but it was subject to a condition of plaintiff making good its obligations regarding outstanding loans. That the outstanding loans referred to were loans the plaintiff owed to institutions such as Clydestone Gh. Ltd, Transactions Solutions Gh Ltd., companies which the plaintiff was the sole shareholder and directing mind. These two companies in addition to another, Parod Ltd belonging to the uncle of plaintiff all owed Ezi S&L huge sums of monies.

 

To defendant, plaintiff took personal responsibility for the debt of Parod Ltd. Defendant further claims that an audit of the books of Ezi S & L revealed how plaintiff by means of fraud siphoned Ghc10 million cedis from Ezi to Clydestone and Transol and that he did commit the fraud by not passing the transactions through the books of Ezi S&L which has made defendant now saddled with the payment of the Ghc10 million Ghana cedis.

 

Defendant further contends that it had injected huge sums of monies into the company to resuscitate it from its financial comatose by the time it made the discoveries that it was too late to resile from the contract. And hence its failure to pay the moneys plaintiff is demanding and its counter claim against the plaintiff.

 

REPLY

Plaintiff joined issues with the defendant in its amended reply and defence to the counter claim and denied misrepresenting any facts and parried the claim of fraud levied against him as Clydestone and Transol are independent companies listed on the Ghana Stock Exchange. And further contending that defendant is capable of making demands for the payment of those debts. Again plaintiff rebuff the claim of defendant maintaining that as at the time of the signing of the SPA and when the audit report on Ezi S & L was received, defendant had not yet injected any monies into First Trust except the Ghc1.000.000.00 that had been paid to plaintiff. Plaintiff then proceeded to raise some legal issues of the voidness of any sale of First Trust to the defendant as at the time of transfer First Trust was not the majority shareholder. To plaintiff First trust could not have transferred its shares to defendant as it had not completed the purchase of the shares from Plaintiff when it purported to do the transfer. Plaintiff again claim that defendant has no capacity to demand payments of debt owed to another company.

 

ISSUES FOR TRIAL

With the pretrial hearing failing to amicably resolve the issues as evidenced by lack of amicable solution the following five issues were arrived at as the issues for determination for the court:

i. Whether or not the Plaintiff misrepresented material facts to the Defendant which said facts the Defendants relied on same to its detriment.

ii. Whether or not the Plaintiff should be liable for the debts owed by Clydesone and Transol.

iii. Whether or not the Defendant can use the outstanding amount they owe to the Plaintiff to off-set the debt owed by Clydesone and Transol.

iv. Whether or not the Plaintiff is entitled to his claim.

v. Whether or not Defendant is entitled to its counterclaim.

 

EVALUATION OF THE EVIDENCE AND APPLICATION OF THE LAW

Before proceeding to launch into the evaluation of the evidence, a caution as to the respective burdens borne by the parties in this suit would be worthwhile. It is so trite now that a party asserting a claim bears both the burden of producing evidence and burden of persuasion, the two being components of the burden of proof. Sections 10 and 11 of the Evidence Act, NRCD 323 deals with the burden of persuasion and the burden of producing evidence. And a party bears the burden of persuasion as to each fact the existence or non-existence of which is essential to the claim or defence that a party is asserting. See the following cases: HENRY DOE SAMLAFO V. GREDA &ANOR. [2010] 26 GMJ 94, CA, MAC DAN v. GABRIEL GBORBLESHIE [2015] 85 GMJ 90 at 113. It is pertinent to recognize that the court is dealing not with the claim of the plaintiff but the counter claim of the defendant as well and per the rules of evidence the burden the defendant’s counterclaim is a separate and independent action which the defendant bears the burden of persuasion and of producing evidence in respect of those claims. See NII ODOI ASUMANG v. WILLIAM CHARWAY [2014] 75 GMJ 108, 135 the Court of Appeal held that:

 

It is trite law that a party who counterclaims becomes plaintiff as far as that counterclaim is concerned. The burden of persuasion shifts unto that defendant to establish that claim as if he was a plaintiff.

 

Also, in NOTEY v. AFRICAN INSTITUTE OF JOURNALISM & COMMUNICATION [2014] 77

GMJ 1 at 40, it was held that:

 

Without any doubt a defendant who files a counterclaim assumes the same burden as the plaintiff in the substantive action if he/she is to succeed. This is because a counterclaim is distinct and separate claim on its own which must also be proved according to the same standard of proof prescribed by sections 11 and 14 of the Evidence Act (1975).”

 

See also OPANIN KWASI ASAMOAH v. KWADWO APPEA [2003-04] SCGLR 226 at 246, JASS

CO. LTD. &ANOR. v. APPAU&ANOR. [2009] SCGLR 269; FOSUHENE v. OWUSU [2011] 32 GMJ 163.

 

How did the plaintiff prove his claim and how was defendant able to prove its counterclaim?

 

Plaintiff testified in person and among the documents admitted in favour of the plaintiff were the following critical ones: Ex ‘B’ – the MOU the parties signed on the 27th of May, 2014; Ex ‘C’ – the Share Purchase Agreement (SPA) which was signed on the 19th of June, 2014; Ex ‘D’ a financial due diligence report conducted at the instance of defendant to verify the financial health and also the representations made by plaintiff regarding Ezi Savings and Loans. It is instructive to note that Ex ‘D’ though admitted into evidence was unsigned. The law is quite clear that an unsigned document has no probative value and indeed void. See the decision of Court of Appeal in PROVENCAL v ZWENNES [2008-2009] 2 GLR 492; also REPUBLIC v. HIGH COURT, TEMA, EX PARTE OWNERS OF MV ESSCO SPIRIT [2003-04] 2 SCGLR 689 at 694, per Twum JSC; MARTIN AMIDU No. 3 v. A.G., WATERVILLE & WOYOME [2013-14] 1 SCGLR 606 at 658,

 

Beyond our jurisdiction, the Nigerian courts in the case of A-G, ABIA STATE v. AGHARANYA [1999] 6 NWLR (Pt. 607) 362 at 371 that: “It is well settled that an unsigned document is worthless and void.

 

Again, Tobi JSC of the Nigerian Supreme Court in the case of Omega Bank Nigeria PLC v. O B C Ltd., Suit No. SC 77/2002, dated Friday 7th January, 2005 NSC decided:

A document which is not signed does not have any efficacy in law…. The document is worthless and a worthless document cannot be efficacious. To me, the exhibit has no probative value.”

 

So the court will exclude Ex ‘D’ tendered by the plaintiff as a court of law has a discretion to exclude a document that had been admitted into evidence, when at the time the court was writing its judgment it is the opinion that such a document should not have been admitted into evidence in the first place. Nonetheless, this will not occasion any harm to the plaintiff, as luckily enough for the plaintiff, the defendant tendered the signed copy of the same document as Ex ‘16’.

 

Defendant on the hand testified through its Chief Executive Officer, Nii Kotei Djanie, its three witnesses, who testified through a subpoena; Dw1 and former managing director of Ezi Savings and Loans, Nii Ayitey Armah, Dw2 – Victor Tetteh who testified of conducting the due diligence that defendant requested for. Then finally there is also the evidence of John B. Warrisah, from Bank of Ghana. Cumulatively, they tendered the following documents to bolster the defence and counter claim of the defendant: a writ issued by the estate of Kofi Jacquaye as Ex 1 series, series of correspondence on overdraft balance of liabilities of Transol, Cladystone and Parod as Ex 2, 3 and 4.

There is also Ex ‘14’ being cash of various investment that had been made by the defendant by 28th of August, 2014, the financial due diligence report already referred to as Ex ‘16’ and Ex ’18’ being Bank of Ghana’s tabulation of the investment made by defendant after purchase of the majority shares of Ezi Savings and Loans.

 

MISREPRESENTATION

The court is called to action first to answer whether Paul Jacquaye misrepresented facts and information during the days of the negotiations for the purchase of his 70% shares in Ezi Savings and Loans Ltd which had made defendant act to his detriment. It would be worthwhile before dealing with the evidence on record that I set out the perimeters of the law on misrepresentation.

Representation according to the Law of Contract by Chesire & Fifoot, 15th Ed at page 332, the learned authors states that:

 

“is a statement of fact by one party to the contract (the representor) to the other (the representee) which while not forming a term of the contract is yet one of the reasons that induces the representee to enter into the contract. So a misrepresentation is simply a representation that is untrue”.

 

According to Dowuona Hammond, in her work Contract Law in Ghana, such a misrepresentation could be a fraudulent, negligent or innocent misrepresentation. And to constitute a misrepresentation it has been noted that the statement must be in relations to existing facts or state of affairs or past state of affairs as mere state of intention or opinion is not enough to establish misrepresentation. See BISSET v WILKINSON [1927] A.C. 177. It is also worthy of note that contracts for the sale of shares of a company, insurance contracts e.t.c are in a special category that are usually termed as contracts uberrimae fidei. In such contracts the law require that material information are disclosed or not hidden as its discovery may have dire consequences on the contract.

 

As defendant is the one alleging misrepresentation, clearly then, the onus probandi falls on him. Among some of the claim of defendant in support of the misrepresentation allegation are, one that the plaintiff did not fully disclose the financial health of Ezi S & L to them. For instance in the MOU, Ex ‘B’ it states as follows:

 

“The buyer [defendant] is reliably informed by the seller [plaintiff] that the total liability is 26.7 million Ghana cedis, the total assets are 28.970 million Ghana cedis and the net worth of the company is 2.269 million Ghana cedis”.

 

Again this clause finds its way into Ex ‘C’ the Share Purchase Agreement (SPA) at clause 6 which states as follows:

 

“The  buyer  has  already  paid  a  deposit  to  the  seller  pursuant  to  signing  a  Memorandum  of Understanding (MOU) by the parties on the 27th May, 2014 … on the proviso that the seller had reliably informed the buyer that the total liabilities of the company is 26.7 million Ghana cedis, the total assets are 28.970 million Ghana cedis and the net worth of the company is 2.269 million Ghana cedis …”

 

The question is when plaintiff made this claim of the net worth of Ezi being 2.269 million Ghana cedis, was that true or false?

 

That was palpably untrue as plaintiff did not provide any basis to the court of the source of this claim he made to the defendant. Ex ‘16’ being the financial due diligence report shows that the worth of Ezi S & L at the time of the sale was negative Ghc19.6 million. For Victor Tetteh, the auditor who conducted the audit confirmed it in his evidence in the following:

Q. Take a look at Ex ‘C’ and look at item number 6, paragraph 6. The plaintiff told the defendant that the net worth of the company was Ghc2.269 million cedis. Can you tell the court what you found out by your investigations?

A. After our field work that is on the due diligence and being impairment losses, the net worth of the company after our work is a negative Ghc19.6 million”

 

Indeed when plaintiff came under cross examination he failed to disclose the basis of the representations made to the defendant in the following exchanges:

Q. You made a number of representations to the defendant and these are contained in Ex ‘C’, is that correct

A. Yes My Lord,

Q. At the time you told defendant that the liabilities of Ezi Savings and Loans was 26.7 million Ghana cedis, you are aware the defendant had not seen the books of Ezi Savings and Loans

A: Yes My Lord

Q. What was your source of this information about the status of the company that you gave to defendant?

A. The accounts of the company.

Q. Which accounts of the company.

A. The management accounts of the company.

Q. Did you show it to the defendant.

A. No my lord the defendant was to conduct a due diligence information for himself”

 

As the information put out by the plaintiff has turned out to be completely untrue, I will hold and find that there had been a misrepresentation. And this misrepresentation did not only induce the defendant to enter into the contract for the purchase of the shares of plaintiff but the said false statements found their way into both Ex ‘B’ and ‘C’, as part of the terms of the contract.

 

Nonetheless, having so found as a fact that there was a misrepresentation made by plaintiff to the defendant; what then is the effect of such a misrepresentation on the contract? I pose this question for my consideration because the fact that there is a misrepresentation does not ipso facto lead to the irresistible conclusion that the contract is void. Such a contract only becomes voidable and may be set aside by the party that has been affected by the misrepresentation.

 

Ex ‘B’, the MOU and Ex ‘C’ the Share and Purchase Agreement (SPA) were signed on 27th May, and

19th June, 2014 respectively. The misrepresentations regarding the net worth of Ezi became material terms of the contract between the parties. As these two contracts predated the Audit Report, Ex ‘16’ which is dated the 14th of July, 2014. I glean that less than a month after the contract was concluded, defendant had a full glimpse of the real condition of Ezi S & L. Defendant seems to have done nothing upon discovery of the misrepresentations made by plaintiff. One could see from the evidence on record that on 21st of July, 2014, exactly a week after Ex ‘16’ was ready and available showing the perilous situation of Ezi S & L that defendant was purchasing, the parties met and plaintiff formally handed over Ezi S & L to defendant through Nii Kotei Dzanie.

 

It is my understanding of the law of contract that as misrepresentation only makes a contract voidable at the instance of the innocent party, the law afford the following options to the innocent party. First such innocent party may rescind the contract and seek for restitution. This option is intended to cancel the contract and restore the parties to their positions before the contract was entered into. The only ground upon which rescission may not be possible is where the circumstances are such that ‘restitutio in integrum’ is impossible. The net effect of rescission is that the contract is terminated ab initio as if it had never existed. The parties are put in status quo ante. See the case of ABRAM STEAMSHIP CO. v WESTVILLE SHIPPING CO. LTD [1923] AC 773 @ 81.

 

Second, an innocent party may choose not to rescind but affirm the contract. This may expressly or impliedly be done by the innocent party. Affirmation is deemed complete and binding if a party fully aware of the misrepresentation either expressly or impliedly by conduct affirms the contract. Which option did defendant exercise?

 

The parties expressly agreed under clause 10 of Ex ‘C’ that either party had the liberty to terminate the agreement if there was a breach of a provision of the agreement by the giving of a 30 days’ notice for such a breach to be remedied. This is complimented by Ex ‘B’ clause 3(e) and (f) that the buyer could withdraw and demand a refund of the deposit made plus 30% interest per annum on the amount paid as deposit. Nii Kotei Djanie, CEO of defendant, under cross examination provide the reason why he claims defendant did not rescind the contract in the following:

Q. You told the court that according to the terms you had the right to withdraw from the transaction, is that correct?

A: That is correct

Q: But you did not exercise your right, is that correct.

A. I didn’t have such a time to exercise my right, … the time that all these things have been unfolding, we have moved from a point I could have withdrawn. We had injected capital in to the business, we have gotten approval from the Central Bank, and we have started rebranding the company. So it was practically impossible and we had done all that we could do to settle the accounts with Mr. Jacquaye but he refused”.

 

Is that true as defendant’s CEO claims that it had gotten to a point it could not pull out? There is no evidence adduced by defendant that as at 14th July, 2014 when Ex ‘16’ had been made available to the defendant showing the accounts of Ezi S & L as being in red, defendant had injected a lot of money into the company it had purchased. Indeed Ex ‘18’ shows that per the records of Bank of Ghana, defendant had only injected an amount of Ghc200.000 into the new company it purchased as at 24th of June, 2016, that is three weeks after defendant had received the due diligence report it commissioned to be done on his behalf. Ex ‘18’ demonstrates that virtually all the investment and capital injection were after 14th July, 2014 when defendant knew how false the information provided it by plaintiff was. Having failed to exercise the option of rescinding the contract when it had made minimal injection into Ezi S & L, it lies foul in the mouth of defendant to turn round to claim that when it realized the misrepresentations of Paul Jacquaye it could not rescind it.

 

Again, learned counsel, Martin Danso, Esq. contends that the defendant did not want to rescind the contract and pay a 5% penalty. It is true that defendant would have paid a 5% penalty but defendant would have come out better off as there would have been a 30% interest on the amount of Ghc1 million it paid plaintiff plus the Ghc200.000 it had already injected. It is therefore, not correct, I find, that defendant could not have rescinded the contract from my analysis supra.

 

What the parties agreed to regarding the right of rescission is buttressed by section 214 of the

Companies Act, Act 179 which states as follows:

 

“If a director of a company, having acquired as such director any special information which may substantially affect the value of the shares or debentures of the company or any associated company, shall buy or sell any such shares or debentures without disclosing such information to the seller or purchaser thereof, the purchase or sale shall be voidable at the option of the seller or purchaser within twelve months after the date of the agreement to sell or buy

 

Having not rescinded the contract, I find that defendant choose the option of affirmation of the contract. How? In full glare of Ex ‘16’ telling defendant of the liabilities of Ezi S & L in terms of non-payment of its taxes, its debts to Transol, Parod and Clydestone, it choose to make the following injections: hired offices by the 24th of July, 2014 and paid Ghc302.400, cash injection of Ghc400.000 on 31st of July, 2014, another cash injection of Ghc295.000 on 11th of August, 2014 such that by 22nd August, 2014 defendant had spent Ghc5,617.272 on the new company it bought. See Ex ‘18’.

 

Being aware after 14th July, 2014 of the poor health of Ezi S & L, and yet made those whooping investment, it cannot be said that the defendant had been persuaded by the misrepresentation to make those capital injection when it could have withdrawn. See the case of IRVINE v KIRKPATRICK [1950]7 BELL APP 186 that under such circumstances therefore:

 

“the misrepresentation and the concealment go for just nothing, because it is not dolus qui dat locum contractui”.

 

See also the case of LONG v LLOYD [1958] 1 WLR 753.

 

With the affirmation of the contract by defendant can the claim of defendant that he should not be made to pay any more monies to Plaintiff a legitimate claim to make? For Nii Kotei Djani admits that the contract sum to be paid to plaintiff was 5 million cedis and also concedes that it had only paid 1 million to him. As to the rest of the monies the following are his answers:

Q. So the remaining 2 million cedis to be paid after 60 days, has not been done

A. My Lord, I have no monies to pay to Mr. Paul Jacquaye

Q. So have you paid the money or not

A. I have no monies to be paid to Paul Jacquaye”

 

Defendant’s CEO spoke as if he was a law unto himself and could dictate, vary the terms of a contract at his own whim and caprice. A court of law cannot allow such blatant violation of the very terms of a contract a party has signed unto to be treated with scant respect.

 

ALLEGED LIABILITY OF PLAINTIFF FOR THE DEBTS OF COMPANIES HE HAS MAJORITY SHARES

Defendant in the second and third issues is seeking that plaintiff be made personally liable for the debt of Clydestone, Transol and Parod and further seeks that the outstanding amount of 4 million due plaintiff be diverted to settle the indebtedness. Defendant has listed various sums owed by Ezi S&L to these three companies at the time of the takeover. As these lending are deemed to be connected lending, Dw3 claim that Bank of Ghana requested that plaintiff be liable and pay those monies. Exhibits 4, 5, 6, 7 and 8 are series of correspondence between Clydestone, Transol and Ezi S& L and most of the letters signed by Ayitey Armah Tetteh, Dw1, then the managing director of Ezi S&L, whiles some were signed by Plaintiff. They seems to deal with proposals by Clydestone and Transol of efforts the companies were making to retire the facilities they had taken with Ezi.

 

According to Dw3, Bank of Ghana ordered plaintiff to personally pay those monies as they are companies related to him and besides, plaintiff did not seek the approval of Bank of Ghana before Ezi S & L lent to those connected companies. The rule that a company has separate existence independent of its directors and shareholders is notorious that downloading the authorities is the subject of a full thesis writing. Where a member even holds all the shares of a company, the debts of the company are independent of the personal debts of the individual. See the celebrated case of SALOMON v SALOMON & CO LTD. [1895-9] ALLER 33; MORKOR v KUMA (EAST COAST FISHERIES CASE) [1998] @632.

 

 

 

It is a fact that the debts of the three companies together with interest accrued on the monies they borrowed had exhaustively been made bare by Ex ‘16’ when Dw2 undertook the audit of Ezi S & L.

Why did not defendant confront plaintiff about this liability since 14th of July, 2014 when it discovered this until it was sued by plaintiff. These debts I find are debts of companies which plaintiff happens to have interest in them and that will not make plaintiff personally liable for those debts. I have taken a careful look at Ex ‘1’ series. A suit by the estate of Kofi Jacquaye against First Trust Savings & Loans. First Trust admitted owing the estate and terms of settlement were filed wherein installment payments to liquidate the debt were made. It is my view that if indeed First Trust genuinely believed that it was not liable for those debts it would have made it clear in its defence or in the alternative it could have issued a third party notice for indemnity by the plaintiff, if it was entitled to one. Having so admitted its liabilities it is estopped from claiming that plaintiff should be made liable for the debts it admitted owing.

 

The corporate veil is not pierced lightly. There must be evidence that the companies were set up as a sham and used for the perpetuation of fraud or it never had an independent existence. See ATLAS MARITIME CO SA v AVALON MARITIME LTD [1991] ALL ER 769; MAJDOUB & v W BARTHOLOMEW & CO LTD [1962] 1 GLR 122; OWUSU v THORNE LTD [1966] GLR 90.

 

The defendant is asking the court to lift the corporate veil and hold the plaintiff personally liable. In law the corporate veil may be lifted by one, the Companies Act, Act 179, or two by some other legislation and three by the court when it is just and fair to lift the corporate veil. The veil could be lifted under Act 179 in one of the following ways: when a company carries on business for more than six months without a member under section 38 of the Act, second, when a company carry on business for more than four weeks after the number of directors have fallen below two under section 180 of the Act. Three when there is a violation of the following sections of Act 179 – section 121(1)(2) regarding failing to affix its name at a conspicuous place, section 29 when a company fails to furnish the Registrar in duplicate vital information on the directors and finally when a company breaches the minimum capital requirement.

 

Defendant in its counterclaim seems not to have rooted its claim for the lifting of the veil on any of the above grounds supra.

 

There are other laws whose breach may invite the lifting of the corporate veil. One is when in the course of official winding up of a company under the Bodies Corporate (Official Liquidation) Act, Act 180, it appears that the companies business had been carried out with intent to defraud creditors of the company and two where there had been massive violations of the Internal Revenue Act, 2000, Act 592. I could glean that the prayer of the defendant in its counter claim is also not founded on this.

 

Can it therefore be the lifting of the veil where the court finds it just and equitable to do? For in the

MORKOR case supra, Sophia Akuffo JSC noted that the courts will lift the corporate veil if:

 

“it is shown that the company had been established to further fraudulent activities or to avoid contractual liabilities, the veil will be lifted”

 

Among some of the factors that will make a court exercise its discretion to lift the corporate include, among others, where there had been fraud, improper business conduct, deliberate attempt at evasion of legal obligations, wilful misdeeds, then the veil will be lifted to reach the persons behind the company.

 

Defendant’s representative in his witness statement in paragraphs 18 and 19 claim that plaintiff used Clydestone and Transol to siphon an amount of Ghc10 million from Ezi S&S. Plaintiff’s counsel confronted defendant’s representative in the following exchanges:

Q: Take a look at Ex 19, is that the IT audit report you are referring to?

A: Yes My Lord

Q. Can you show us which page of the report was mentioned that Paul Jacquaye has siphoned 10 million cedis from Ezi Savings and Loans?

A. It is a voluminous report. I think the purported fraud by Paul Jacquaye is something that cannot only be found in this document but others as well. My Lord, Jacquaye used very sophisticated formulas to fraud the Bank and each and every day I discover an aspect of the fraud.

Q. Prior to taking over the company, you did a due diligence#

A. Yes My Lord

Q. Both legal and financial

A. Yes My Lord

Q. Did any of these reports mention anything about this 10 million Ghana cedis fraud

A. My Lord sophisticated fraud cannot be revealed by just an audit report”.

 

Well, if the fraud allegedly perpetuated by plaintiff cannot be revealed by audit report both legal and financial, then how would such a fraud be discovered before the court? That the court believe the word of mouth of defendant unsupported by any evidence to demonstrate fraud? In the case of REDDAWAY v BOWHAM [1896] AC 199 @ 221 Lord McNaughton noted on fraud as follows and which was quoted with approval in the case of FOFIE v ZANYO [1992] 2 GLR 475 that:

 

“fraud is infinite in variety; sometimes it is audacious and unblushing; sometimes it pays a sort of homage to virtue, and then it is modest and retiring; it would be modesty itself if it could only afford it. But fraud is fraud all the same, and it is fraud and not the manner of it, which calls for the interposition of the court”

 

Defendant on the issue of fraud bears the burden of proof to show that the debts of Transol, Clydestone and Parod that the conduct of plaintiff towards defendant had been fraudulent and that plaintiff acted fraudulently and dishonestly as fraud is dishonesty as describes by Dr. Twum JSC in the case of BROWN v QUARSHIGAH [2003-2004] 2 SCGLR 930 and at 946 stated as follows:

 

‘at common law a charge of fraud is such a terrible thing to bring against a man that it cannot be maintained in any court unless it is shown that he had a wicked mind… in short fraud is dishonesty’

 

The standard of proof of fraud even in a civil case is one of proof beyond reasonable doubt. Section 13 (1) of the Evidence Act states that:

 

‘In any civil or criminal action the burden of persuasion as to the commission by a party of a crime which is directly in issue requires proof beyond a reasonable doubt’.

 

The defendant with full eyes opened when it received the audit report that showed the loans taken by those companies from Ezi Savings & Loans, it did nothing and indeed as I have found when it went ahead to affirm the contract. I do not find any fraudulent conduct by plaintiff in the loans Transol, Clydestone and Parod took from Ezi. Defendant is at liberty to pursue those companies for the loans it owes First Trust Savings and Loans Ltd. Accordingly the court declines the invitation to order plaintiff to be personally liable for the debts of the companies. Similarly it cannot order the defendant to pay the 4 million Ghana cedis it owes plaintiff to the three companies.

 

I cannot rest this judgment without raising and commenting on one critical issue that came up during trial and which demands the attention of the court.

 

This is the claim made in paragraph 6 of the amended statement of defence wherein learned counsel state that with the signing of the Ex ‘C’, the Share and Purchase Agreement and the MOU was of no relevance. With profound respect, that cannot be correct as Ex ‘C’ states under clause 13 that the MOU, Ex ‘B’ and ‘C’ constitutes the sole and entire agreement of the parties. It cannot therefore be correct that after the signing of Ex ‘C’, Ex ‘B’ no longer had any effect.

 

Courts have never existed to draft and craft terms of contracts for parties and it does not lie in the hands of parties to seek to change fundamental clauses they have agreed to in a contract. The fact that performance of the contract may be onerous for a party is no ground for the court to seek to verify the terms of the performance of the contract. This time honoured principle was emphasized by the Nigerian Supreme Court in KAYDEE VENTURES LTD V. HON MINISTER OF FED. CAPITAL TERRITORY & 2ORS (2010) 1 CLRN at page 110

 

“ contract … deemed to have voluntarily entered into it [by parties]and therefore bound by its terms. Where the contract is reduced into writing, it is that document that invariably constitutes the guide to its interpretation. And the parties will not be allowed to read into such contract terms upon which they reached no agreement and thus not forming part of the contract.”

 

In the end the court dismiss the counter claim of the defendant save to say that upon payment of its liabilities to plaintiff, plaintiff is ordered to transfer the share of purchase to the defendant. The prayer of plaintiff on the other hand is granted in respect of the following:

1. An order for the payment of the sum of four million Ghana cedis.

2. Interest on the said amount at the prevailing bank rate from the time they became due till date of final payment

 

In the exercise of the discretion of the court I will refuse to award nominal damages in favour of the plaintiff as its own conduct towards defendant in terms of the misrepresentation makes it unjust to be awarded any such damages.

 

I will award cost of Ghc 10.000.00 in favour of plaintiff.