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BOUR AND OTHERS v. KOJO AND OTHERS


  • appeal
  • 1962-07-10
  • SUPREME COURT
  • 2 GLR 30-34
  • Print

VAN LARE, SARKODEE-ADOO AND ADUMUA-BOSSMAN, JJ.S.C.


Summary

Contract?-Written?-Statute of Frauds?-Whether contract of indemnity an independent transaction?-Whether it should be read as subject to memorandum and articles of association of a company subsequently incorporated.

Headnotes

By a written agreement signed by the parties, the plaintiffs undertook to provide securities to the Bank of West Africa to enable the bank to make cash advances to a company which had not then been incorporated. Both the plaintiffs and the defendants were, with three other persons, to be directors of the said company. By the same agreement the defendants undertook to indemnify the plaintiffs in respect of any sums they were called upon to pay to the bank for moneys advanced to the company but unpaid by the company.[p.31]The proposed company was incorporated, and the said agreement was acted upon by the plaintiffs who paid to the bank G4,033 5s. 2d., representing the balance of unpaid advances plus interest and charges. They then sued the defendants in the High Court claiming to be indemnified in accordance with defendants' undertaking. The defendants contended that the agreement should be read subject to the memorandum and articles of association of the company. This contention was rejected by Crabbe, J. who found that the agreement was an original and independent transaction, not affected in any way by the memorandum and articles of the company. The defendants appealed.

Judgement

APPEAL from a judgment dated the 4th February, 1961 (unreported) delivered by Crabbe, J. (as he then was) in the High Court, Kumasi, upholding the plaintiffs' claim for the sum of G4,033 5s. 2d. under a contract of indemnity made between the parties.

JUDGMENT OF ADUMUA-BOSSMAN J.S.C.

Adumua-Bossman J.S.C. delivered the judgment of the court. This appeal is against a judgment dated the 4th February, 1961, of the High Court, Kumasi, (Crabbe, J. as he then was) whereby the plaintiffs?' claim for the sum of G4,033 5s. 2d. as amount due and payable under a contract of indemnity between the parties, was upheld.

The events leading to the institution of the action are briefly these. Both parties, plaintiffs as well as defendants, were at the material times, members of a limited liability company (which will be referred to shortly henceforth as the company) incorporated under the Companies Ordinance1, in force in 1957, with a share capital of G250,000, and with the primary object as set out in the memorandum exhibit C:

"To represent the interests of the whole of the producers of cocoa and other raw materials of Ghana, and on their behalf to assemble and sell or otherwise deal with the whole of the cocoa-crop of Ghana, and for that purpose carry on the business of a Central Selling Agency and, if possible, of a Central Purchasing Society, and the business of Buyers of cocoa and other cultivated and naturally produced products of West Africa, and of Sellers, Dealers, Shippers and Manufacturers therein."

By the articles of association (hereinafter shortly called the articles) the company was organised on a regional basis and this case arose out of the activities of some of the members of the Ashanti regional division having its offices in Kumasi. The four plaintiffs together with [p.32] three others, namely Mr. B. D. Addai, Opanin Kwaku Tano, and Mr. Owusu Nyantekyi were directors of the company in Kumasi, and all the directors together with the defendants constituted the management committee of the said regional division. It is not clear on what date in 1957 after the signing of the memorandum and articles on the 26th September, 1957, certificate of incorporation was issued to the company before it commenced its business operations; but by the 8th July, 1957, a few months before the incorporation of the company, the agreement on which the claim in the action is based, was entered into and reduced into writing and signed by the parties (see exhibit D). For the present it is only necessary to note that its general effect was that the plaintiffs undertook to provide mortgages and other securities and guarantees to the Bank of West Africa, Kumasi Branch (hereinafter referred to shortly as the bank) at the request of their three fellow directors together with the defendants, for the bank to make cash advances to the company, no doubt when it shall have been incorporated and come into being, for purposes of its business operations; the defendants in their turn undertook and bound themselves to indemnify the plaintiffs in respect of any sums which they shall have been called upon to pay to the bank for moneys advanced to the company but unpaid by the company. In conformity with the terms of the agreement, the plaintiffs provided securities by way of mortgages of their personal properties and gave written guarantee, whereupon the bank made cash advances to the company. By the 30th September, 1958, the company was indebted to the bank in the sum of G4,033 5s. 2d. representing balance of unpaid advances together with interest and charges thereon, and this amount the plaintiffs were called upon to settle. They arranged and paid by instalments and by the 8th September, 1959, completed settlement, and they thereafter instituted the action resulting in this appeal claiming to be indemnified in that amount in accordance with the defendants' undertaking contained in the agreement exhibit D.

At the trial the defendants could not, and did not, deny that advances were made to the company by the bank which the company were unable to repay, and that the plaintiffs paid the amount claimed in the writ to the bank in satisfaction of the outstanding balance due from the company to the bank.

The defendants however by their statement of defence raised what was purely a legal defence to the effect that the agreement, exhibit D should be read subject to the memorandum and articles of the company (exhibit C) in which event, (a) the agreement was null and void because the memorandum and articles did not empower the parties to the agreement, exhibit D to arrange a loan for the company; (b) the loans having been arranged on behalf of and given to the company the plaintiffs' remedy, if any, lay against the company; (c) the company not having gone into liquidation for assets and liabilities to be computed, the action was premature; and (d) the articles having laid down a procedure for settling disputes between members in relation to the company's business and the plaintiffs not having resorted to that procedure, the action should be struck out. These contentions counsel for the defendants argued and pressed before the learned trial judge, who however rejected all of them and allowed the plaintiffs' claim. On the main contention on behalf of the defendants, he said:

"I am of the opinion that exhibit D is an original and independent transaction; I do not think that the terms of that agreement are anyway affected by the clauses of the memorandum and articles, exhibit C."

[p.33]

There can be no doubt that the question whether or not the agreement, exhibit D, should be read as subject to the memorandum and articles is the substantial question for determination in the case, and it is significant that counsel for the defendants-appellants in his final reply conceded that the prevalence of almost all his contentions depended entirely on his view of that question being held to be correct. Was the learned trial judge therefore wrong in his decision above set out, and counsel's contention or view to the contrary that the agreement, exhibit D ought, as a matter of legal compulsion, to be read as subject to or incorporating the memorandum and articles, exhibit C, well-founded? I think not. It is to be observed that the agreement of indemnity contained in exhibit D is subject to the Statute of Frauds 2 by section 4 of which "any special promise to answer for the debt, default, or miscarriage of another person" must be in writing in order to be enforceable. (See Sutton Co. v. Grey.3) In respect of such contracts subject to the Statute of Frauds, the principle is clearly established by the case of Boydell v. Drummond 4 that separate documents could not be joined together to make a memorandum in writing to satisfy the requirements of the statute, unless there was a sufficient reference from one writing to another contained in the documents themselves to show that they were intended to be read jointly with the memorandum, without the necessity of recourse to parol evidence to show such intention. So in that case, in the course of his judgment for the court, Ellenborough, C.J. said5:

?"On conference with my brothers, finding that we are all of opinion that the action is not maintainable on one of the grounds of objection taken to it ... I cannot connect the subscription of the plaintiffs?' name in the book with the prospectus; nor does the defendant's letter refer to the prospectus produced at the trial ... If there had been a plain reference to the particular prospectus, that might have helped the plaintiff; but there is nothing of the kind.?"

In the much later case of Franco-British Ship Stores Co. Ltd. v. Compagnie des Chargeurs Francaise6 Sankey, J. (afterwards Lord Chancellor) explained the same principle in these words:

?"The rule is that the connexion between several documents must appear on the face of the documents themselves. (Smith's Leading Cases 12th ed. Vol. 1, P. 345). See too Ridgway v. Wharton (6 H.L.C 238.). The statute is not complied with unless the whole contract is embodied either in some writing signed by the party or in some paper referred to in a signed document and capable of being identified by means of the description of it contained in the signed paper.?"

Upon the most careful examination of the written agreements, exhibits D and C, no "internal reference" to each other, or "intrinsic connection" between them will be found to exist, as required by the principle of the above authorities, and many others on the same point, and I am satisfied therefore that the learned trial judge was right when he described exhibit D as "an independent transaction ?- the terms of which agreement are not in any way affected by the clauses of the memorandum and articles of association, exhibit C." [p.34]

Having regard to that view which I am impelled to take of the substantial question for determination in the appeal, all the other subsidiary contentions either cease to have any force or fail altogether and with them the appeal, which I would accordingly dismiss with costs in favour of the plaintiffs-respondents.

Decision

<P>Appeal dismissed.</P>

Plaintiff / Appellant

J. Reindorf

Defendant / Respondent

N.Y. B. Adade

Referals

(1)  Sutton & Co. v. Grey [1894] 1 Q.B. 285, C.A.

(2)  Boydell v. Drummond (1809) 11 East. 141; 103 E.R. 958

(3)  Franco-British Ship Stores Co., Ltd. v. Campagnie des Chargeurs FranÇaise (1926) 42 T.L.R. 735

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