COURT OF APPEAL
DATE: 19 JULY 1971
ARCHER JA
CASES REFERRED TO
(1) Mensah v. Abrokwa [1961] G.L.R. 502, P.C.
(2) Royal Exchange Association v. Atk. Sjorforsakrings Vega [1902] 2 K.B. 384; 71 L.J.K.B. 739; 87 L.T. 356; 18 T.L.R. 714, C.A.
(3) National Omnibus Services Authority v. Owuo, Court of Appeal, 20 August 1969, unreported; digested in (1969) C.C. 158.
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(4) In re Robinson’s Settlement; Gant v. Hobbs [1912] 1 Ch. 717; 81 L.J.Ch. 393; 106 L.T. 443, C.A.
(5) Khoury v. Azar (1952) 12 W.A.C.A.268; [1953] 1 W.L.R. 21; 97 S.J. 7, P.C. Phillips v. Copping [1935] 1 K.B. 15;104 L.J.K.B. 78; 152 L.T. 175; 50 T.L.R. 533; 78 S.J. 617, C.A.
NATURE OF PROCEEDINGS
APPEAL from a decision dismissing appellant’s action wherein he sought to set aside a sale of a house which he had mortgaged to the first respondent as a security for a loan transaction.
COUNSEL
Gyimah for the appellant.
Ackun for the first and second respondents.
Dwamena for the third respondent.
JUDGMENT OF ARCHER J.A.
Archer J.A. delivered the judgment of the court. The appellant obtained a loan of £G800 from the first respondent, a moneylender, and as security for the loan, he executed a deed of mortgage encumbrancing
his house, a leasehold at Kumasi. Under the terms of the deed of mortgage, the appellant covenanted to repay the loan within twelve months but as he was unable to repay the whole amount within the stipulated period, the first respondent instructed the second respondent, an auctioneer, to sell the mortgaged property relying on a power of sale conferred on him by the mortgage deed. There was subsequently a public auction conducted by the second respondent and at that auction, the third respondent, as the highest bidder, bought the house, the subject-matter of the mortgage.
Thereafter, the appellant took out a writ of summons claiming a declaration that notwithstanding the sale, he was still the owner of the house. The grounds for the declaration sought were contained in the statement of claim which need not be repeated verbatim in this judgment. The three main grounds were that as the first respondent had accepted part-payment after the due date for the repayment of the whole loan he had waived his rights under the mortgage and was estopped from exercising his power of sale. The second ground was that no notice, as required by the terms of the mortgage, was given to the appellant before the sale. The third ground was that, in any case, the mortgage deed did not expressly confer a power of sale on the first respondent.
The case was therefore fought in the High Court at Kumasi on these grounds by the appellant and the three respondents. But it appears from the record that after learned counsels for the respondents had addressed the court on 7 February 1969, the hearing was adjourned to the 12 February for address by the learned counsel for the appellant. On the latter day, learned counsels for the respondents were absent, but learned counsel for the appellant proceeded to address the court and for the first time in the proceedings submitted to the court that as the mortgage deed was not registered under section 24 of the Land Registry Act, 1962 (Act 122), the power of sale was illegally exercised.
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In his judgment, the learned trial judge considered the submission by the appellant’s learned counsel as to non-registration of the mortgage deed but held that this submission should have been specifically pleaded and therefore rejected the submission. The judgment therefore proceeded on the basis that the mortgage deed was effective so as to confer enforceable rights on the appellant and the first respondent. The learned trial judge after evaluating the evidence found as a fact that no notice was given by the first respondent to the appellant but the failure to give notice had been cured by a clause in the mortgage deed which read: “Provided always that the title of purchaser shall not be impeachable on the ground that no case has arisen to authorise the sale or that the due sale was otherwise improperly exercised.” The learned trial judge therefore relied on this protection clause and held that the third respondent was a purchaser for value without notice (of the fact that no notice of intention to sell had been given to the appellant), and therefore refused to set aside the sale to the third respondent.
There is no doubt that if the question of registration under the Land Registry Act, 1962, had not arisen, the learned trial judge’s reasoning on the other issues would have been legally correct and his conclusions would have been unassailable.
Now, what is the law as regards failure to live notice to a mortgagor of an intention to sell mortgage property? The law is that where no notice has been given at all, then the sale is a nullity and no title passes. See the case of Mensah v. Abrokwa [1961] G.L.R. 502 at p. 505, P.C., where the Privy Council stated the law as follows:
“Upon the conclusion arrived at by their Lordships in the previous paragraph no title passed on the sale. An argument which found favour with the native appeal court (but was not adopted by the Land Court or the West African Court of Appeal) was that the failure to give notice was an ‘irregularity’ with regard to which the respondent had to take certain prescribed steps before he could challenge the sale. This argument is unsound. The giving of notice was an essential step and failure to give notice rendered the sale a nullity.”
In the present appeal therefore, as the trial judge found that no notice was given (a finding with which this appellate court cannot interfere because it depended on the credibility of witnesses) the legal conclusion must necessarily be that the sale was a nullity and therefore no title passed to the third respondent, the purchaser at the auction sale. Nevertheless, the learned trial judge held that as there was an express clause in the mortgage deed protecting him, the third respondent took the property as purchaser for value without notice of any defect in the title of the first and second respondents. This conclusion no doubt is based on the premises that the mortgage deed was effective at the time of the sale and that all clauses in the mortgage deed were operative. This conclusion also stems from the learned trial judge’s refusal to countenance the provisions of the Land Registry Act, 1962, which according to him, had not been specifically pleaded. In the words of the learned trial judge:
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“Since the matter of registration is not an issue for trial, I am not prepared to hold that the deed was of no effect and no title could pass under or by virtue of any provision in it or by virtue of any transaction carried out in terms of any such provision. A fundamental issue of this nature must be pleaded since registration could be effected at any time.”
What is the relevant rule of procedure? The Supreme [High] Court (Civil Procedure) Rules, 1954 (L.N. 140A), Order 19, r. 16 provides: [His lordship here read the provisions as set out in the headnote and continued:] This is the general rule but can it be said that the rule is so rigid and inflexible so as to admit no variations or exceptions? The rule is couched in language which shows its objectives, one of them being not to raise a point of fact or law which is bound to take the opposite side by surprise. Indeed that is one of the purposes of all pleadings.
It follows therefore that where there is no element of surprise, the court will entertain the point raised. Moreover, where all the facts relating to the point are before it, the court will not hesitate to consider it. Thus where a statute makes a particular contract invalid, the judge may refuse to entertain the action even though neither party has raised or wishes to raise the objection. See Royal Exchange Association v. Atk. Sjorforsakrings Vega [1902] 2 K.B. 384, C.A. and also National Omnibus Services Authority v. Owuo, Court of Appeal, 20 August 1969, unreported; digested in (1969) C.C. 158 a judgment of the predecessor of this court which was delivered on the 20 August 1969, that is, two days before the Constitution, 1969, came into force, and which judgment by virtue of article 125 (2) of the Constitution, 1969, is binding on this court. In the National Omnibus case, the former Court of Appeal adopted the dictum of Buckley L.J. in re Robinson’s Settlement; Gant v. Hobbs [1912] 1 Ch. 717 at pp. 727—728, C.A. and enunciated the following principle:
“If the matters which are not pleaded or particulars thereof are omitted to be given, are not such as are likely to take the opposite party by surprise, the omission to plead or give them will not be fatal, and the court will be bound to consider the point raised.”
In the present appeal, it was clear to all learned counsel for the parties that although the mortgage deed had been stamped after the sale yet there was no evidence from the document itself that it had been registered under the Land Registry Act, 1962, at the time of the sale, a circumstance which was obvious to the learned trial judge. The circumstance of non-registration did not demand any strict proof or formal proof. The absence of registration was conspicuous ex facie the document yet the court below took the view that the question of registration should have been specifically pleaded.
What is the consequence of non-registration? Section 24 (1) of the Land Registry Act, 1962 (Act 122), provides:
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“24 (1) Subject to subsection (2), of this section, an instrument other than,
(a) a will, or
(b) a judge’s certificate, first executed after the commencement of this Act shall be of no effect until it is registered.”
Section 36 of the same Act defines an “instrument” to mean “any writing affecting land situate in Ghana, including a judge’s certificate and a memorandum of deposit of title deeds.”
It is not in dispute that the mortgage deed was first executed on 27 July 1964, after the Land Registry Act, 1962, had come into force on 2 November 1962 (see L.I. 234). It is also not in dispute that the auction sale took place on 11 May 1967, after Act 122 had come into operation, and therefore as the mortgage deed was writing affecting land situate in Ghana and first executed after the commencement of the Act, section 24 of the Act provides that the mortgage deed in the present appeal “shall be of no effect until it is registered.” What does the phrase “shall be of no effect” mean? It undoubtedly means that it shall be of no legal effect, in other words, it is either void or a complete nullity. Briefly no legal consequences flow from its execution. But the phrase “shall be of no effect” should not be considered in isolation. There is the further qualification to the phrase by the expression “until it is registered.” The qualification therefore renders the document not void but its effectiveness is non-existent until the document is registered.
The learned trial judge appears to have placed the same construction on the words “shall be of no effect until it is registered,” but he qualified his construction by adding that it was a valid document until registered. There is no doubt that he had in mind the passage in the Privy Council judgment in Khoury v. Azar (1952) 12 W.A.C.A. 268 at p. 276, where their lordships stated as follows:
“There remains only the question whether the appellants had a valid equitable mortgage on Plot 571 at the relevant date, or whether the Undertaking was ineffective at the relevant date, by reason of section 22 (1) and (2) of the Kumasi Lands Ordinance, 1943.
Their Lordships have no doubt that the latter is the correct view.”
If one reads the passage carefully, it would be realised that their lordships were using the words “valid” and “ineffective” as antonyms. What is valid is effective and what is invalid is ineffective. Nowhere in the Privy Council decision did their lordships say that a registrable but unregistered document is valid. The marginal note to section 24 of Act 122 reads: “Registration necessary for validity.” However, section 4 of the Interpretation Act, 1960 (C.A. 4), provides that marginal notes do not form part of the enactment but are intended for convenience of reference only, and perhaps it may be unsafe to rely on the marginal note to section 24 (1) of Act 122. Nevertheless, this is not a case where one is relying on
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the maginal note to explain or construe a statutory provision. On the contrary, it is a case where the statutory provision is clear and its substance has been epitomised in a marginal note.
It follows therefore that when section 24 (1) of the Land Registry Act 1962, provides that a document shall of be no effect until it is registered, it means that the document is not valid for all purposes because the formality of registration is necessary to complete its validity. In this respect a clear distinction should be drawn between what is void and what is invalid. What is void or null is always regarded by the law as never having taken place. What is invalid has taken place but something remains to be done to validate it or to give legal force. If a document is deemed to be valid then it must be valid for all it legal purposes but where the law will not give it any effect then clearly the document is invalid.
In the present appeal, the mortgage deed was not registered at the time the power of sale was exercised and therefore the document itself was ineffective and invalid to confer the rights and to impose the obligations stipulated in the mortgage deed. It means that the power of sale was ineffective and therefore the first respondent could not have exercised his power of sale at the time of the auction sale. If it were argued that the document although unregistered yet was valid, then the power of sale contained in the mortgage deed would also be valid at the time of the sale and the sale would also be valid. But this is impossible because one cannot validly exercise a power when that power has been rendered ineffective by statute. In other words, an ineffective power of sale cannot be a valid one. In the result the first respondent had no power of sale at the time of the auction sale and therefore had no title to transfer the property to the third respondent by auction sale.
What about the third respondent? Is he protected? The answer must be no. The learned trial judge gave him protection by relying on an exemption clause in the mortgage deed protecting a purchaser for value without notice of non-compliance with certain requirements in the mortgage deed. But once it is conceded that until registration had been completed, all the rights and obligations in the mortgage deed were ineffective, then it follows that there was no protection clause which could avail the third respondent. As the ineffective and invalid mortgage deed cannot be relied on to on to protect the third respondent, is there any other protection statutory or otherwise which will confer title on him? In the first place, there is no statutory provision in the Land Registry Act, 1962, which protects the third respondent. Nowhere in the Act is it stated that a purchaser for value of land, the subject-matter of a mortgage deed which is unregistered, shall not be affected by the provisions of the Act provided he has no notice that the mortgage deed has not been registered.
In the second place, as the first respondent was a moneylender and as his transaction was no doubt governed by the provisions of the Moneylenders Ordinance, Cap. 176 (1951 Rev.), it is necessary to consider whether.
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the Moneylenders Ordinance affords any protection to the third respondent. Section 23 of the Moneylenders Ordinance, Cap. 176 (1951 Rev.),expressly provides that notwithstanding the provisions of the Ordinance, some of which make moneylending transactions illegal, null and void and others make these transactions unenforceable, a person making any payment bona fide on the faith of the validity of any security without notice of any defect in the security shall not be affected by the operation of the Ordinance. In the present appeal, there is no evidence that any provisions of the Moneylenders Ordinance have been contravened; and therefore the protection, in favour of a purchaser for value without notice, as contained in the proviso to section 23 (1) of the Ordinance cannot be applicable to the third respondent. In any case, subsection (2) of section 23 of the Moneylenders Ordinance, Cap. 176, provides that: “Nothing in this section shall render valid for any purpose any agreement, security, or other transaction, which would, apart from the provisions of this Ordinance, have been void or unenforceable.”
It is obvious that even if section 23 of Cap. 176 had been applicable the protection would have been neutralised if there had been another enactment rendering the mortgage deed void or unenforceable. But here in this case, apart from the provisions of Cap. 176 which are inapplicable, there is another enactment, that is to say, section 24 of the Land Registry Act, 1962, which makes the mortgage deed invalid and of no legal effect and therefore the third respondent as a purchaser for value has no protection and cannot keep the property because no title passed to him.
If the learned trial judge had not refused to entertain section 24 of the Land Registry Act, 1962, he would no doubt have come to the same conclusion. However, he summed-up his views on the matter in the words:
“Since the matter of registration is not an issue for trial, I am not prepared to hold that the deed was of no effect and no title could pass under or by virtue of any provision in it or by virtue of any transaction carried out in terms of any such provision. A fundamental issue of this nature must be pleaded since registration could be effected at any time.”
The learned judge rightly regarded the matter as fundamental; but could it have been an issue? It was not an issue because it was plain law to which the three respondents could not have had an answer even if they had been given the opportunity of replying to it in the court below. In this court learned counsel for the first and second respondents had no answer. Learned counsel for the third respondent also had no answer but endeavoured to find some statutory protection for his client without success. In Phillips v. Copping [1935] 1 K.B. 15 at p. 21 C.A., Scrutton L.J. said: “it is the duty of the Court when asked to give a judgment which is contrary to a statute to take the point although the litigants may not take it.”
In the present appeal, the respondents were asking the court below to give them judgment but fortunately the learned counsel for the appellant
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drew the court’s attention to section 24 of the Land Registry Act, 1962, which rendered the mortgage deed ineffective and invalid and the court below should have been grateful to him. In any case, even if the learned counsel for the appellant had not raised the matter in his address, it was competent for the learned trial judge to have applied section 24 (1) of Act 122 otherwise, in the words of Scrutton L.J., he would be giving a “judgment which is contrary to a statute.”
It should also be observed that the mere possibility that an instrument can be registered any time does not mean that the instrument has any legal effect from the date of execution up to the date of registration. Section 24 of Act 122 minces no words when it provides that the instrument shall have no effect until it is registered.
A clear distinction should be drawn between a contract which for all purposes is valid but has to take effect from a future date on the one hand, and a contract which is rendered invalid by statute because a certain formality has not been complied with on the other. In the former case, the contract is perfectly valid but its performance has been postponed to take place in future. In the latter case, there is no valid contract at all because a statutory formality is lacking. The facts of the present appeal fall in the latter case. The formality of registration required by statute had not been complied with at the date of the sale, and therefore the contract had no legal effect and all powers contained therein were invalid. It must be pointed that before Act 122 came into force, the Land Registry Ordinance, Cap. 133 (1951 Rev.), did not contain provisions similar to those in section 24 of the Land Registry Act. Before 2 November 1962, there was nothing like compulsory registration of documents relating to land. Such documents if they remained unregistered lost only their priority. However since November 1962, all documents relating to land must be registered in order to have any legal effect at all. This is an innovation and it has such serious consequences that no conveyancer should fail to advise his client to comply with section 24 of Act 122.
Learned counsel for the third respondent (purchaser) half-heartedly referred to section 24.
(2) of the Act which provides: “Nothing in this Act shall operate to prevent any instrument which, by virtue of any enactment, takes effect from a particular date from so taking effect.” Now, is there any other enactment which provides that the mortgage deed in this appeal should take effect from some date even before registration? There is no such enactment as the mortgage deed was purely an agreement between the appellant and the first respondent and the mortgage deed itself mentions no such other enactment. Learned counsel for the third respondent attempted to rely on section 12 (1) of the Moneylenders Ordinance, Cap. 176, which provides that no moneylending contract shall be enforceable unless there is a memorandum in writing signed by the parties. He argued that once there was writing then the contract was enforceable. But this submission ignores the fact that
although the mortgage deed in this appeal was in writing, yet it was writing affecting
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land and therefore section 12 of Cap. 176 was also subject to the overriding provisions in section 24 of Act 122. In any case, there is nothing in section 12 of Cap. 176 which provides that moneylending transactions shall take effect from a particular date. It follows that section 24 (2) of Act 122 cannot avail the third respondent.
In conclusion, the court below delivered a judgment contrary to the express provision of section 24 (1) of the Land Registry Act, Act 1962, by conferring rights when the statute provides that no legal rights can arise from an unregistered document affecting land. The sale to the third respondent was therefore a nullity and the appeal should be allowed as the appellant is entitled to all the reliefs he seeks.
DECISION
Appeal allowed.
K. T.
