ENABLIS ENTREPRENEURIAL NETWORK GHANA -VRS- TULLOW GHANA LIMITED [2021] GHACA 17 (27 May 2021)

IN THE SUPERIOUR COURT OF JUDICATURE IN THE COURT OF APPEAL ACCRA-GHANA CORAM: ADJEI, JA MENSAH, J. A OBENG MANU JNR.,J. A SUIT NO. H1/185/2020 DATE: 27TH MAY, 2021 ENABLIS ENTREPRENEURIAL NETWORK LTD.- PLAINTIFF/RESPONDENT VRS. TULLOW GHANA LTD. - DEFENDANTS/RESPONDENTS J U D G M E N T ADJEI, J. A: I write to concur the ruling in appeal written by my brother Obeng Manu JA in which he dismissed the appeal against the ruling delivered by the High Court on 5th March, 2019. I agree with the conclusion reached by him but would like to express an opinion on some of the legal matters raised in the appeal. The Defendant before the trial High Court who is the Appellant herein filed an application to the High Court to dismiss the Plaintiff’s suit on the basis of absence of capacity to institute the action. It is the refusal by the trial High Court Judge to dismiss the Plaintiff’s suit for want of capacity which has culminated in this appeal. The law is that a person whose capacity is raised has the burden to prove same by cogent evidence else that party’s action shall be dismissed for want of capacity. Capacity is fundamental and goes to the root of every action and where a defendant raises an objection against the capacity of a plaintiff, that cannot be heard on the merits of the plaintiff’s case even where the plaintiff seemingly has a cast- iron case. In the case of Sarkodee I v Boateng II [1982- 83] GLR 715, the Supreme Court held that the trite position is that a plaintiff or petitioner whose capacity to initiate an action is challenged must prove it by cogent evidence else the merits of that plaintiff or petitioner’s case cannot be heard. In the case in point, the Defendant in paragraph 2 of its statement of defence averred that the Plaintiff lacks capacity to Institute the action without a clue to the type of absence of capacity being complained of. The Plaintiff in its paragraph 3 of Reply and Defence to Counterclaim also averred that it has capacity to bring the action and purported to shift the burden of proof to the Defendant. The Defendant in its paragraph 2 of the Statement of Defence pleaded as follows: “The Plaintiff denies paragraph 2 and 3 of the Statement of Defence and puts the Defendant to strict proof of the averments contained therein in limine.” At the application for Directions, the Plaintiff raised the question of capacity of the Plaintiff to maintain an action against the Defendant and at that stage explained that the Plaintiff instituted the action without an authorisation in the form of a resolution from the directors. The Plaintiff rebutted the Defendant’s position and asserted that directors as fiduciaries do not require a resolution to protect the best interest of the company which is a legal personam and can sue and be sued in its own name. The law is that a person who sues a party must exist as a legal entity and have capacity at the time of the institution of the action else the action shall be declared a nullity for want of capacity. The above position was restated by the Supreme Court in the case of Noas Holdings v Ghana Commercial Bank [2005-2006] SCGLR 407. The Supreme Court at pages 412-413 of the record discussed the legal effect of absence of capacity on the part of a company to initiate an action held thus: “Once its legal capacity was challenged and its corporate capacity was placed in issue, it was incumbent upon the appellant to produce more cogent evidence of its existence (such as its registered office address or a copy of its certificate of incorporation) to satisfy the trial court that it has the requisite legal capacity to sue. Since it failed to do so, the trial court was justified in arriving at the conclusion that the Appellants does not exist.” From the above ratio, where a corporate body or a person does not exist at the time of commencement of an action, the action shall be declared a nullity for want of capacity. The second aspect of capacity is where the plaintiff exits and maintains an action in a matter that plaintiff has no cause of action against the defendant. The Defendant’s contention before this Court is that the transaction which culminated in this appeal was between the Defendant and the UT Bank and the Plaintiff therefore lacks capacity to Institute the action in its own right. Furthermore, the Plaintiff did not bring the action against the Defendant as the attorney of UT Bank. I must state that the legal position taken by the Defendant before the trial High Court and upon which the trial Judge delivered her ruling is completely different from the ground of appeal raised by the Defendant before this Court and its legal effect will be addressed in the course of this decision. In the case of Kimon Compania Naviera SARP v Volta Lines Ltd [1973]1 GLR 140, it was held that a person who sues as an attorney on behalf of a principal shall sue in the name of the principal and not in that person’s own name. As stated above, the legal issue under consideration was not one of the legal issues raised before the trial High Court for resolution. Furthermore, whether the transaction was between UT Bank and the Defendant is a matter that can only be resolved by evidence. A legal issue may be raised on appeal for the first time where it is a matter which goes to the root of the appeal and can be resolved without further evidence. The appeal before this Court is an interlocutory and this Court cannot discuss matters which are still pending before the trial High Court for resolution and may require evidence for effective resolution. It will be unfair to permit the Defendant to raise a fresh point on appeal which is not a legal point that can be resolved without evidence. I therefore proceed to discuss the submissions made by the parties before the trial High Court and upon which the notice of appeal was filed by the Defendant. The Defendant raised two legal grounds before the trial High Court to dismiss the Plaintiff’s action. The first ground was that the Plaintiff failed to demonstrate that it had the capacity to initiate the action as a corporate body. The Plaintiff instituted the action as a company limited by guarantee. The Plaintiff in paragraph 1 of its statement of claim vividly described itself as a company limited by guarantee and incorporated under the laws of Ghana to provide, inter alia, entrepreneurs with the necessary skills, training , funding and networking opportunities to support emerging small and medium scale markets. A company may bring an action in its own name and being an artificial entity it can act through its directors who are fiduciaries to the company jointly and severally. The directors of a company are required to act in the best interest of the company. This position was ably discussed by Lord Cranworth in the case of Aberdeen v Blaikie [1843] All ER 249 at page 252. He stated thus: “The Directors are a body to whom is delegated the duty of managing the general affairs of the company. A corporate body can only act by agents, and it is of course the duty of those agents so to act as best to promote the interest of the corporation whose affairs they are conducting. Such agents have duties to discharge of a fiduciary nature towards their principal.” The contention by the Defendant that a company cannot sue in its own name without the directors passing a resolution to that effect is not the true position of the law and has been over generalised. There is the need to draw a distinction between a company suing upon its regulations and an action instituted upon shareholders’ resolution. Under the English law, it was the articles of the company which clothed a company with capacity to institute an action. Under the repealed Companies Act, Act 179 under which the Plaintiff instituted the action, it was the company’s regulation which clothed it with capacity to sue and not by a resolution by either directors or general meeting. The Plaintiff urged this Court to make reference to the Gower’s Report with reference to the commentary on section 137(3) and (5) (b) as an aid to interpretation on the authority of section 10 (1) (b) of the Interpretation Act, 2009 ( Act 792) but I refrained from using it by the fact that the section does not permit judges to use it as an aids of general application to the construction of an enactment unless the Court is concerned with ascertaining the meaning of an enactment. Section 10 (1) (b) of the Interpretation Act, Act 792 provides thus: “10 (1) Where a Court is concerned with ascertaining the meaning of an enactment, the Court may consider (b) a report of a Commission, Committee or any other body appointed by the Government or authorised by Parliament, which has been presented to the Government or laid before Parliament as well as Government White Paper.” The Court is not concerned with ascertaining the meaning of any particular enactment and therefore cannot apply section 10 (1) (b) of the Interpretation Act, Act 792. Section 10 (1) of Act 792 can only be used by the Court as an aid to the construction of an enactment where it is concerned with ascertaining the meaning of an enactment and not for all other purposes. Furthermore, section 10 (2) of the Interpretation Act, Act 792 shall only be invoked as an aid to the construction of an enactment where the Court considers the language of an enactment is ambiguous or obscure. The company’s capacity to sue under its articles of association (regulations or constitution) was discussed in the case of Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113 . The Court of Appeal speaking through Greer LJ in a decision unanimously agreed by Roche LJ and Slesser LJ at page 134 held thus: “I am therefore of the opinion that the learned judge was right in refusing to dismiss the action on the plea that it was commenced without the authority of the Plaintiff company. I think the judge was also right in refusing to give effect to the resolution of the meeting of the shareholders requiring the chairman to instruct the company’s solicitors not to proceed further with the action. A company is an entity distinct alike from its shareholders and its directors. Some of its powers may, according to its articles, be exercised by directors, certain other powers may be reserved for shareholders in general meeting. If the powers of management are vested in the directors, they and they alone can exercise these powers. The only way in which the general body of the shareholders can control the exercise of the powers vested by the articles in the directors is by altering their articles, or, if opportunity arises under the articles, by refusing to re-elect the directors of whose actions they disapprove. They cannot themselves usurp the powers which by the articles are vested in directors any more than the directors can usurp the powers vested by the articles in the general body of shareholders. The law on this subject is, I think, accurately stated in Buckley on Companies as the effect of the decisions there mentioned: see 11 Ed., p.723. For these reasons I am of the opinion that the court ought not to dismiss the action on the ground that it was instituted and carried on without the authority of the plaintiff company.” The legal personality of a company introduced in the celebrated case of Salomon v Salomon (1897) AC 22 clothes a company with capacity to sue and be sued and where a company is suing it derives its authority from the enactment creating it and its constitution and not a resolution. Furthermore, where a wrong is done to a company, it is the company which may sue and not its members. The Supreme Court case of PS Investment v CEREDEC [2012] 1 SCGLR 611 affirmed the proper Plaintiff rule in corporate law and held that where a wrong is caused to a company, it is the company that may sue to remedy the breach and not its members. I am satisfied that directors of a company derive their powers from the company’s regulations to institute an action on behalf of the company and not through a resolution. Where the shareholders of a company require a resolution to commence an action, that power reverts to members at general meeting. One of the principles enunciated in the case of Shaw & Sons (Salford) Ltd v Shaw, supra, is that ordinarily, directors are to drive a company to institute an action but where the directors have clearly evinced an intention not to act or it is established that it cannot sue, the general meeting may sue but it requires resolution to give effect to their action. The Plaintiff’s action was not brought by a general meeting and a resolution to that effect is not required. I am satisfied that the Plaintiff properly instituted the action in accordance with its regulations and company law and practice and I dismiss grounds (b), (c), (d), (e) and (f) of appeal as unmeritorious. The Defendant did not discuss ground (a) of the appeal in its submission and the legal position is that an appellant shall be deemed to have abandoned a ground of appeal where the appellant fails to make a submission on it. The Defendant abandoned the omnibus ground of appeal and on the strength of respectable cases including Zikpuitor Akpatsu Fenu & Others v The Attorney- General & Others ( Civil Appeal No J4/40/2018; delivered on 17th October, 2018 SC , (unreported), I strike out ground (a) of the appeal as having been abandoned by the Defendant. I affirm the ruling of the High Court delivered on 5th March, 2019 and dismiss the appeal as unmeritorious. JUSTICE DENNIS ADJEI JUSTICE OF THE COURT OF APPEAL 9