AGBEMASHIOR AND OTHERS v. STATE INSURANCE CORPORATION AND OTHERS
[1972] 2 GLR 65
HIGH COURT, ACCRA
Date: 8 MARCH 1972
BEFORE: ABBAN J.
CASES REFERRED TO
(1) Goody v. Baring [1956] 1 W.L.R. 448; [1956] 2 All E.R. 11; 100 S.J. 320; 221 L.T. 284; 222 L.T.
233.
(2) Nocton v. Ashburton [1914] A.C. 932; 83 L.J.Ch. 784; 111 L.T. 641, H. L.
(3) Otter v. Church, Adams, Tatham & Co. [1953] Ch. 280; [1953] 1 W.L.R. 156; [1953] 1 All E.R.
168, 97 S.J. 48.
(4) Mathews v. Haydon (1796) 2 Esp. 509; 170 E.R. 437.
(5) Boardman v. Phipps [1967] 2 A.C. 46; [1966] 3 W.L.R. 1009; [1966] 3 All E.R. 721; 110 S.J. 853,
H.L.
(6) Eboe v. Eboe [1961] G.L.R. 324.
(7) Lyell v. Kennedy (1889)14 App.Cas. 437; 38 W.R. 353; 59 L.J.K.B. 268; 62 L.T. 77, H.L.
(8) Way v. Latilla [1937] 3 All E.R. 759; 81 S.J. 786, H.L.
[p.67] of [1972] 2 GLR 65
NATURE OF PROCEEDINGS
ACTION by the plaintiffs against the second and third defendants to recover compensation paid by the
State Insurance Corporation to the second defendant for and on the plaintiffs’ behalf. The facts are
sufficiently set out in the judgment.
COUNSEL
Dr. I. S. Ephson for the plaintiffs.
H. P. Swaniker for the first defendant.
S. K. Tetteh for the second defendant.
The third defendant in person.
JUDGMENT OF ABBAN J.
This is an action brought against the claims manager of an insurance company, a lawyer in private
practice and a registered claims agent. They were sued jointly and severally and the endorsement on the writ of summons reads as follows:
“The plaintiffs’ claim is for a total amount of N¢3,900.00 (three thousand nine hundred new cedis) jointly and severally made against the three defendants, following a motor accident on 17 July 1967, which caused plaintiffs injuries for which the first defendant as insurance agent allegedly paid N¢3,900.00 compensation to the second defendant for onward payment to the plaintiffs. The second defendant alleges having paid to the third defendant N¢3,800.00 for onward payment to the plaintiffs, but the said payment has not been effected or at all despite repeated demands on the defendants by the plaintiffs. ”The first plaintiff gave evidence for himself and on behalf of the other two plaintiffs. He stated that on 17 July 1967, he and the other two plaintiffs were involved in a motor accident on Asamankese-Mepom motor road and they sustained physical injuries. They were sent to the hospital at Nsawam. On their discharge, the third defendant, a registered claims agent stationed at Koforidua, contacted the first plaintiff and offered to make, on his behalf, a claim for compensation for the injuries against the insurance company of the defaulting driver. The first plaintiff then got in touch with the second and third plaintiffs and informed them about the offer of the third defendant. Eventually, all the three plaintiffs accepted the offer of the third defendant and agreed that the third defendant should make the said claims for them.
In pursuing the claims, the third defendant engaged the services of the second defendant, a legal
practitioner in Accra. For some time the plaintiffs never heard about the fate of their claims and in 1968, they checked up from the first defendant, the claims manager of the State Insurance Corporation. To their surprise, they discovered that the necessary compensation due to them had already been paid to the second defendant. According to the first plaintiff, this payment to the second defendant was confirmed by a publication which subsequently appeared in Ghana Gazette No. 88 of 29 October 1968. The Gazette notice showed that the amount paid by the State Insurance Corporation to the second [p.68] of [1972] 2 GLR 65 defendant for and on behalf of the plaintiffs was N¢3,900.00. With this information, the plaintiffs contacted the third defendant who told them that he (the third defendant) had not yet received any money from the second defendant. The third defendant, however, gave the plaintiffs post-dated cheques covering various sums of money which were far less than what had been paid to the second defendant.
These cheques were presented to the bank on the due date, and they were dishonoured. The plaintiffs then tried to trace the third defendant. But the third defendant was nowhere to be found. Consequently, the plaintiffs came to Accra to see the second defendant, who told them that he (the second defendant) had already paid over the proceeds of their claims (less his professional fee of N¢100.00) to the third defendant by a cheque. He showed the plaintiffs the counterfoil receipt of the said cheque. The second defendant then advised the plaintiffs to report the matter to the police. The plaintiffs handed over the case to the police and the third defendant was traced and arrested. But up to date the said N¢3,900.00 has not been paid.
The second defendant partly confirmed the story of the plaintiffs. The second defendant said he was
professionally consulted by the third defendant in 1968 about insurance claims the third defendant
intended to make on behalf of the plaintiffs, and on the instructions of the third defendant, the second defendant wrote to the first defendant after obtaining the medical reports on the injured plaintiffs and the police report in respect of the said accident. The second defendant said in the long run, he was able to settle the claims of the plaintiffs with the first defendant for a total sum of N¢3,900.00 and this amount was paid to him by the first defendant by a cheque issued on Barclays Bank in Accra. The second defendant further averred that it was the third defendant who in fact went to the office of the first defendant and collected the said cheque, and this was on 7 May 1968. When the cheque was brought to the second defendant by the third defendant, the second defendant on the same day, that is, 7 May 1968, filled in a pay-in-slip and gave the cheque in question together with the said pay-in-slip to the third defendant who also paid the same into the clients’ account of the second defendant at the Barclays Bank, Knutsford Avenue, Accra. The pay-in-slip for the N¢3,900.00 was tendered in evidence as exhibit
1. The second defendant stated that at the same time, and on the said 7 May 1968, he issued to the third defendant, by special clearance, a cheque for N¢3,800.00. This amount, according to the second defendant, was to be paid to the plaintiffs as the proceeds of their insurance claims, excluding his professional fee of N¢100.00. The cheque for the N¢3,800.00 was also tendered as exhibit 2. The second defendant said he issued the cheque for the N¢3,800.00,
exhibit 2, in a hurry. He was then attending Manyo Plange Assets Commission at Legion Hall, when the third defendant arrived at this place with the cheque for the N¢3,900.00 from the first defendant; and it [p.69] of [1972] 2 GLR 65 was just outside this hall where the cheque, exhibit 2, was issued to the third defendant, and, in this hurried mood, he made a mistake by dating the cheque (exhibit 2) as 7 February 1968 instead of 7 May 1968. But later, after the third defendant had gone away, the second defendant said he discovered this mistake in the date and made the necessary correction on his counterfoil receipt. The whole cheque book, from which the cheque for the N¢3,800,00 was issued, was tendered as exhibit 3; and it contains all the counter-foil receipts including the counter-foil receipt for the N¢3,800.00. The second defendant therefore
denied liability and contended that it is the third defendant alone who should be made liable to the
plaintiffs’ claim. The case of the third defendant is that he undertook to make insurance claims for the plaintiffs. He obtained a police report concerning the accident, and he briefed the second defendant in Accra and asked him to take up the case. He stated that the second defendant introduced him (third defendant) to a medical officer. The third defendant sent the plaintiffs to this medical officer. The doctor examined the plaintiffs and issued medical reports on them. Two vehicles insured by two different insurance companies were involved in the accident. So the second defendant wrote to the said two insurance companies. One of the companies was the State Insurance Corporation. The third defendant said the two insurance companies at first rejected the claims. The rejection of the State Insurance Corporation was based on the ground that their insured had not reported the accident to them. As a result, the third defendant brought all the plaintiffs to Accra to see the second defendant on the second defendant’s own instruction. The second defendant then explained the position to the plaintiffs; and it was decided that the third defendant should travel with the plaintiffs to Asamankese in search of the insured of one of the vehicles concerned. On the
advice of the second defendant, the third defendant proceeded to Asamankese with the plaintiffs. At
Asamankese they searched for the said insured, and having found him, the third defendant brought to the attention of that insured the consequences of his failure to report the accident to his insurance company, namely, the State Insurance Corporation.
The third defendant said the insured in question in due course made a formal report of the accident to the State Insurance Corporation, and the latter eventually agreed to settle the claims. Discharge forms were sent by the second defendant to the third defendant to be completed by the plaintiffs. The third defendant, according to him, returned the completed forms to the second defendant who also forwarded the same to the first defendant on 28 March 1968. The third defendant stated that on 7 February 1968, the second defendant paid to him (the third defendant) the sum of N¢,3,800.00 by a Barclays Bank cheque, exhibit 2. He contended that this N¢3,800.00 paid to him by the second defendant was part of an outstanding debt of N¢5,660.00 owed him by the second
[p.70] of [1972] 2 GLR 65 defendant. He said he even sued the second defendant in the Circuit Court, Accra, for the balance, and the matter was later settled out of court.
The third defendant, nevertheless, admitted that on 7 May 1968, it was he who brought the cheque for the N¢3,900.00 from the first defendant to the second defendant; and that the second defendant sent him to pay the said cheque into the second defendant’s clients’ account at the Barclays Bank. Knutsford Avenue, Accra, by special clearance. He said after paying the cheque, he intended to go and call the plaintiffs to come to the second defendant in Accra to collect their money. But the second defendant asked him to hold on because he, the second defendant, was involved in a certain case when he was sitting as a chairman of the Kom Commission in Kumasi, and he had to settle the matter by paying the sums involved. As a result, the second defendant was hard up financially and would not be in a position to pay over the N¢3,900.00 to the plaintiffs immediately. He said, under the circumstances, the second defendant instructed him to go and deceive the plaintiffs that the compensation had not yet been paid. In obedience to the second defendant’s instruction, the third defendant said he went and deceived the plaintiffs accordingly. But on 12 June 1968 the plaintiffs called on the third defendant at Koforidua and confronted the third defendant with the information about the payment made by the first defendant to the second defendant. The third defendant said at this stage he could not cover the second defendant any longer; and so he had to confess the truth to the plaintiffs. He, however, asked the plaintiffs to give him one week to enable him to contact the second defendant. He said he wrote to the second defendant through a special bearer who returned without a reply. A week later the second and third plaintiffs called on the third defendant who took them to Accra to see the second defendant. According to the third defendant, the second defendant was not in his office when they arrived there as the second defendant had then left for Cape Coast. He was therefore forced to give the plaintiffs post-dated cheques covering certain sums of money with the understanding that the plaintiffs were not to present those cheques to the bank on the maturity date; but should rather go back to see him in Koforidua after two weeks to find out
whether he had been able to contact the second defendant.
The third defendant alleged that after the said two weeks the plaintiffs called to see him, but he had then gone away to his uncle’s funeral, and the plaintiffs, thinking that he was absconding, reported him to the police who arrested him. He was prosecuted for stealing but was acquitted and discharged. The third defendant contended that he acted as the agent of both the plaintiffs and the second defendant throughout the whole transaction. He further contended that the cheque for the N¢3,800.00 was issued on 7 February 1968 and not on 7 May 1968 as [p.71] of [1972] 2 GLR 65
alleged by the second defendant; and that the amount of N¢3,800.00 as shown on the cheque, exhibit 2, and given to him by the second defendant was not intended to be paid over to the plaintiffs. It was rather intended that it should be kept by him as his money. Before summons for directions was taken in this matter, the plaintiffs discontinued the action against the first defendant. Three main issues were agreed upon by the parties. The first issue is whether the second defendant on the receipt of the sum of N¢3,900.00 from the first defendant paid out the said amount to the
plaintiffs as he was required to do. The second issue is whether the amount of N¢3,800.00 paid to the third defendant by the second defendant was for distribution amongst the plaintiffs, and thirdly, whether the plaintiffs are entitled to the reliefs sought. There are, however, subsidiary issues which ought to be decided at the outset. The most important of them are as follows: Whether the cheque for the N¢3,800.00 (exhibit 2) was issued by the second defendant on 7 May 1968 and handed over to the third defendant on the same date; or whether it was issued on 7 February 1968 (as alleged by the third defendant) but was not cashed by the third defendant until 7 May 1968 and finally, whether the second defendant gave the said N¢3,800.00 to the third defendant in part-payment of an oustanding debt which the second defendant was then owing the third defendant.
There is no dispute that the first defendant settled the claims of the plaintiffs for a total sum of
N¢3,900.00. That is N¢700.00 for the first plaintiff, N¢1,500.00 for the second plaintiff and N¢1,700.00 for the third plaintiff. There is also no dispute that the first defendant paid this amount of N¢3,900.00 by cheque to the second defendant; and there is over-whelming evidence that the amount of N¢3,900.00 never reached the plaintiffs. I have examined the evidence and I am inclined to believe that the second defendant issued the cheque for the N¢3,800.00 (exhibit 2) on 7 May 1968 and not on 7 February 1968.
This cheque was issued out of exhibit 3. The bank statement (exhibit 4) shows that the whole cheque
book (exhibit 3) was sold to the second defendant on 11 April 1968. The first leaf from this cheque book was issued out by the second defendant on the said 11 April 1968; and the leaf bearing No. 256/ 245355, which came immediately before the cheque for N¢3,800.00. was issued out by the second defendant on 29 April 1968. In view of this evidence, how can it be said that exhibit 2 for the N¢3,800.00 was issued on 7 February 1968? After all, on 7 February 1968, the whole cheque book had not in fact been sold to the second defendant by the Barclays Bank.
I therefore accept the second defendant’s explanation and I hold that he made a genuine mistake when issuing the cheque for the N¢3,800.00 by dating it 7 February 1968 instead of 7 May 1968. I am also satisfied that after the second defendant had issued the said cheque on 7 May 1968, he gave it to the third defendant on the same date as [p.72] of [1972] 2 GLR 65
the proceeds of the insurance claims of the plaintiffs. The amount of N¢3,800.00 was not given to the third defendant in part-payment of any debt. The third defendant on the same date of 7 May 1968, cashed the cheque and unlawfully appropriated the said sum of N¢3,800.00 to his own use.
The evidence of the third defendant is most unconvincing. His story that the second defendant wanted to use the said N¢3,900.00 to settle his private debts arising out of a certain case in Kumasi, as well as his evidence that the second defendant asked him to go and deceive the plaintiffs that the compensation had not been paid by the first defendant, is a gross and vindictive lie. The truth of the matter is that the third defendant wanted to defraud the plaintiffs and to deprive them of the money; and in pursuance of that intention he concocted that story. It was a device of his own and the second defendant had no hand in it. As already indicated, the defendants were sued jointly and severally, and it must now be considered whether the second defendant, despite the payment he made to the third defendant, should still be held liable to the plaintiffs’ claim or whether he was justified in paying the amount to the third defendant instead of paying it direct to the plaintiffs. The answers to these questions will ultimately depend on the relation in which the second defendant stood towards the money and towards the plaintiffs. From the evidence, I find that the third defendant persuaded the plaintiffs to allow him to make the insurance claims for them, and the plaintiffs after agreeing to the third defendant’s request, did constitute the third defendant their agent. Although the plaintiffs were aware that in pursuing the claims, it was likely that the third defendant might engage the services of a lawyer, the plaintiffs, nevertheless, gave the third defendant absolute discretion in the matter. I also find that it was the third defendant and not the plaintiffs who briefed and instructed the second defendant about the insurance claims. It is true that the second defendant wrote to the first defendant in the names of the plaintiffs; but he did so on the instructions of the third defendant. Even the fees of N¢100.00 which the second defendant charged were negotiated by the third defendant on behalf of the plaintiffs. All the necessary communications intended for the plaintiffs had to be passed through the third defendant. In short, the second defendant had no direct access to or dealing with the plaintiffs. The plaintiffs, at all material times, regarded the third defendant as their lawful representative and the person who was to collect the proceeds of their claims from the second defendant for them. All that the second defendant was required to do was to carry out the instructions of the third defendant with care and diligence. A lawyer owes a duty to his client to be honest, skilful and careful and his only other duty is not to take advantage of the presumed influence of a solicitor over his client. In Goody v. Baring [1956] 1 W.L.R. 448 at p. 453, Danckwerts J. said:
[p.73] of [1972] 2 GLR 65 “The standard on which a solicitor’s liability for negligence depends has recently been described by Harman J., and his remarks have been approved by the Court of Appeal in Simmons v. Pennington & Son (a firm) ([1955] 1 W.L.R. 183, 188). In that case Harman J., as quoted by Hodson L.J., said: ‘I do not think I need deal at any great length with the question of a solicitor’s liability for negligence. It is the same as anybody else’s liability; having regard to the degree of skill held out to the public by solicitors, does the conduct of the solicitor fall short of the standard which the public has been led to expect of the solicitor’? ”In the case of Nocton v. Ashburton [1914] A.C. 932 at p. 956, H.L. Viscount Haldane L.C. in his well-known speech, observed as follows: “My Lords, the solicitor contracts with his client to be skilful and careful. For failure to perform his obligation he may be made liable at law in contract or even in tort, for negligence in breach of a duty imposed on him”: See also Otter v. Church, Adams, Tatham & Co. [1953] 1 W.L.R. 156 at p. 159. On the facts of the present case, the second defendant never failed in his duty as a lawyer. He did not fall short of the duty which he owed, as a lawyer, to the plaintiffs, by paying the money to the third defendant. For it was within the ostensible authority of the third defendant to receive the money from the second defendant. The third defendant in collecting the N¢3,800.00 from the second defendant was, in fact, acting within the scope of his authority and I hold that the second defendant paid the amount to the third defendant as the lawful agent or representative of the plaintiffs. There is no evidence to show that at the time payment was made to the third defendant, the second defendant knew that the third defendant was a fraudulent person. The second defendant believed the third defendant to be an honest agent of the plaintiffs, though the second defendant had been unfortunate in his speculation. All the same, he cannot be blamed for the fraudulent conduct of the third defendant. It will be inconsistent with the general principle of the law to hold an innocent person responsible for not taking measures to prevent the commission of a fraud which he has no reason to anticipate. It was the plaintiffs who put this rogue in their own place and clothed him with authority to collect the proceeds of their claims; and I do not see how in a situation such as this, the second defendant should be made to suffer for the fraud of the third defendant. In the circumstances, I hold that the second defendant acted properly and with complete honesty in paying the sum of N¢3,800.00 to the third defendant and that the payment made by the second defendant to the third defendant operated as payment to the plaintiffs. As was said by Lord Kenyon in Mathews v. Haydon (1796) 2 Esp. 509 at p. 510, “where a person authorises another to receive money for him, payment to the party so authorised is payment to the principal. ”Consequently, the second defendant is not
[p.74] of [1972] 2 GLR 65 accountable to the plaintiffs in any sum or at all. The third defendant is the only person who should be made liable to the claim of the plaintiffs.
The third defendant, as an agent, stood in a fiduciary relationship to the plaintiffs and a duty was therefore imposed on him to account to the plaintiffs for all moneys received by him on behalf of the plaintiffs. The legal position was clearly stated by Lord Hodson in the recent case of Boardman v. Phipps [1967] 2 A.C. 46, H.L. The learned and noble lord at p. 105 said:
“The proposition of law involved in this case is that no person standing in a fiduciary position, when a demand is made upon him by the person to whom he stands in the fiduciary relationship to account for profits acquired by him by reason of his fiduciary position and by reason of the opportunity and the knowledge, or either, resulting from it, is entitled to defeat the claim upon any ground save that he made profits with the knowledge and assent of the other person.
I take the above proposition from the opening words of the speech of Lord Wright in Regal (Hastings) Ltd. v. Gulliver ([1967] 2 A.C. 134, 154) where he states the proposition in the form of the question which he answered as had all the members of your Lordship’ House in such a way as to affirm the proposition. It is obviously of importance to maintain the proposition in all cases and to do nothing to whittle away its scope or the absolute responsibility which it imposes.”
The liability of an agent to account to his principal was discussed by Ollennu J. (as he then was) in Eboe v. Eboe [1961] G.L.R. 324. See also Lyell v. Kennedy (1889) 14 App.Cas. 437 at 463, H.L. per Lord MacNaghten. I must now consider whether the third defendant should be asked to refund the whole amount of N¢3,900.00 to the plaintiffs. The contract of agency which existed between the plaintiffs and the third defendant indicated that the work was not to be gratuitous. So that the third defendant would have been entitled to a reasonable remuneration even if the exact amount of the remuneration had not been agreed upon: See Way v. Latilla [1937] 3 All E.R. 759, H.L.
However, in the present case, the plaintiffs agreed to pay to the third defendant, one-third of the proceeds of the claims as commission, and the fee to be charged by a lawyer, in case one was employed, was to form part of this one-third commission. Thus, the amount which the third defendant ought to have passed on to the plaintiffs on 7 May 1968 was two-thirds of N¢3,900.00. That is, two-thirds of N¢700.00, of N¢1,500.00 and N¢1,700.00. It will not therefore be fair to ask the third defendant, despite his fraudulent conduct, to account for the full amount of N¢3,900.00. Nevertheless, since the third defendant failed in his duty [p.75] of [1972] 2 GLR 65 to render account within a reasonable time after demand by the plaintiffs, he should not be allowed to escape payment of interest on the amount which he ought to have paid to the plaintiffs.
Accordingly, judgment will be and is hereby entered against the third defendant and in favour of all the plaintiffs in the manner as follows: the third defendant should pay the first plaintiff the sum of ¢446.66 2/3; to the second plaintiff an amount of ¢1,000.00 and to the third plaintiff the sum of ¢133.33 1/3. The third defendant is ordered to pay interest on each of the said amounts at the rate of five per cent per annum, calculated from 7 May 1968 up to the date of judgment. The plaintiffs are entitled to their costs fixed at ¢800.00 inclusive of counsel’s fee. The plaintiffs’ claim against the second defendant is dismissed with costs assessed at ¢200.00 against the plaintiffs.
DECISION
Judgment for the plaintiffs against the third defendant with costs. Action against second defendant dismissed with costs.
