Division: IN THE SUPREME COURT
Date: 18 MAY 1964
Before: SARKODEE-ADOO CJ, ACOLATSE AND APALOO JJSC
JUDGMENT OF APALOO JSC
Apaloo JSC delivered the judgment of the court. The material facts of this case are not in dispute and can be stated briefly. Some time in 1956, the respondent and Edward Ramia entered into a partnership for the purpose of carrying on a fishing business. That firm was known as the International Fisheries Company. There is no evidence as to how that partnership fared but in 1958, the two named partners together with Mrs. Ramia formed another partnership. This was called the Sea Gull Fisheries Company. This firm was registered under the Registration of Business Names Ordinance1 on 22 October 1958 (exhibit 5), and took over the assets and liabilities of the International Fisheries Company. In the latter half of 1958, two fishing boats were purchased from France. They are Tonnerre de Brest and Vagabond de Mers. These two boats were assets of the earlier partnership and licences for these boats to be operated in Ghana were both issued on the 21 June 1958 (exhibits 2 and 3). The two boats were subsequently transferred to, and became the assets of, the Seagull Fisheries Company.
The evidence shows that the moneys used in paying for these boats as well as a third one, namely, Le Mortian, were provided by a company known as Edward Ramia Ltd. This company provided these sums at the behest of Edward Ramia one of the partners in the firm of Seagull
Fisheries. Edward Ramia Ltd. had a running account with the appellants, and the latter transferred to France various sums of money between June and November 1958, to named companies in that country for the payment of these boats. It would seem that the company was not itself in credit to make these payments and was enabled to do so by a facility which the appellants extended to it. The total sums transferred in this manner works out at just over twenty thousand pounds. The evidence shows that these payments left Edward Ramia Ltd. in debit in the sum of twenty-one thousand odd pounds.
The Seagull Fisheries Company itself opened an account with the appellants on 10 December 1958. On that day, the respondent and his two partners, namely, Edward Ramia and his wife, subscribed their signatures to a printed form which requested the appellants to open an account in the firm’s name and authorised the latter to honour cheques, bills, etc., signed by any one of the partners and among other things, authorised the appellants to carry out all instructions issued to them in connection with the said account by any one of the partners (exhibit 1). The firm appeared to have applied to the appellants for a facility and the latter were agreeable to granting this on the provision of security. Accordingly, in November 1958, the respondent and his partners executed a bill of sale in favour of the appellants of the two boats Vagabond de Mers and Tonnerre de Brest to secure repayment of such moneys, as the appellants might make available for the company.
It would seem that towards the close of December 1958, the appellants had occasion to express concern to Mr. Ramia about the large debit balance standing against Edward Ramia Ltd. in their books. On 30 December 1958, apparently after being interviewed by the manager Mr. Craig, Mr. Ramia authorised the appellants to transfer to the account of the Seagull Fisheries, the balance of the account of Edward Ramia Ltd. This authority was written out in longhand by Mr. Craig and was signed by Mr. Ramia (exhibit 12). At that date, the debit balance of Edward Ramia Ltd. stood at £G21,863 18s. 6d. This instruction was carried out that very day and the account of the Seagull Fisheries Company was duly debited with this sum (exhibit 6). Before that date, that account was in debit in the sum of £G914 18s. 6d., but by reason of this transfer the account of the partnership stood at £G22,778 17s. “in the red.” A corresponding credit
entry of like amount was made in the account of Edward Ramia Ltd. in the books of the appellants (exhibit 7).
Judging from the debit and credit entries in the appellants’ ledger of the partnership accounts, the Seagull Fisheries Company was doing active business and bank lodgments in favour of the partnership account were fairly frequent, but the account was nearly always in debit. At the close of business on 7 June 1960, the debit against the partnership stood at £G21,074 5s. 9d. On 24 June 1960, the appellants caused to be issued against the partners in the High Court, Sekondi, jointly, a writ specially endorsed as follows: “The plaintiff’s claim is for £G21,074 5s. 9d. being the amount of overdraft as at the close of business on 7 June 1960, with interest at the rate of 91/2 per cent. per annum continuing until payment.” This writ was in due course served on all the partners. As none of them filed a defence or evinced any intention to defend the suit, the appellants’ solicitors by letter requested the court to enter judgment against the partners for the sum endorsed on the writ and costs. To this request, the court acceded and entered judgment for the appellants in the sum claimed and costs. This was on 25 July 1960 (exhibit C).
It is this judgment that the respondent sought in the court below to have set aside on the ground of fraud. The respondent claimed that both the appellants and Mr. Edward Ramia misled him into thinking that the amount claimed represented sums of money genuinely overdrawn by the partnership, when in truth, the debt arose as a result of the transfer to the partnership account of the debit of £G21,863 18s. 6d. owed by Edward Ramia Ltd. to the Bank. The respondent maintained in the court below that had he known the true facts, he would have defended the action and would not have allowed judgment to go against him by default. The appellants for their part, denied that they had in any way misled the respondent or had been
guilty of any act which constituted a fraud on the respondent. They admitted the transfer of the debit of Edward Ramia Ltd. to the partnership account but claimed that they were entitled to do so by virtue of authority conferred upon them by the mandate (exhibit 1) and the letter of authority given them by Edward Ramia (exhibit 12). These averments were controverted by the respondent. In particular, the respondent contended that the mandate (exhibit 1) did not authorise any more than the signing of cheques by any one of the three partners. These various controverted matters were set out as triable issues in a summons for directions and further directions taken out by the respondent. All these issues were agreed to by the appellants and were ordered to be tried.
Broadly speaking, two serious requests were made to the court. Firstly, the respondent asked the court to find that he was misled by the fraudulent misrepresentations of Edward Ramia and the appellants, which resulted in his not defending the action at Sekondi. If the court pronounced in his favour on that issue, it should set aside the judgment obtained against the partnership at Sekondi on the ground of fraud. Secondly, the respondent invited the court to interpret the mandate (exhibit 1) and to hold that on a true and proper construction of it, it did not empower Edward Ramia to authorise the transfer of the debt standing against Edward Ramia Ltd. to the partnership account. The respondent prayed that if the court should accept his interpretation of the mandate, to reverse the debit entry and credit the partnership account with the sum of £G21,074 5s. 9d. that being the sum in respect of which the appellants recovered judgment against the partnership in the High Court at Sekondi.
The learned trial judge determined the first issue in favour of the respondent with extreme clarity. He found that the respondent was made to believe that the debt arose as a result of the transfer of funds by the partnership to purchase spare parts in France. He found this to be the reverse of the truth and proceeded2:
“In fact, it appears that E. Ramia and the bank manager agreed not only not to put plaintiff into the true picture, but to mislead him by telling the plaintiff that the amount had been transferred to purchase spares. As I said there has not been any material conflict in this evidence and I accept it as correct. I furthermore have to accept the plaintiff’s evidence that but for this misrepresentation and collusion on the part of E. Ramia and the bank manager he would have defended the action.”
The learned judge considered that that finding was sufficient to entitle him to set the judgment aside. We share that view of the matter ourselves. The operative part of his judgment is not, however, as clear as one would have wished. Instead of stating plainly that he set the judgment aside, the judge said, “I therefore find that plaintiff has made out his claim to my satisfaction and he must succeed. There will therefore be judgment for the plaintiff for the declaration he seeks.”3 The respondent did not in fact seek a declaration, he sought an order setting aside the judgment obtained against him by fraud. Notwithstanding this slightly obscure phraseology, we think that the substance of what the learned judge did was to set the judgment aside. He had that at the back of his mind and said earlier on, that the facts found by him entitled him to make that order. In any event, that is how the appellants understood the judgment and they made the setting aside the main ground of complaint.
With regard to the second of the issues submitted to him for determination, namely, whether on a true interpretation of the mandate (exhibit 1) the debit transfer to the partnership account was properly made, the learned trial judge declined to decide that. He took the view that if he did, he would be retrying the original issue and contemplated that if he set aside the judgment simpliciter, the appellants would have to re-establish their claim in a subsequent action. Thus the learned judge said4:
“I will direct my attention to the fraud alleged and if I find that the evidence in support of it is strong enough, I would hold that the judgment be set aside on that ground, leaving it to the former judgment-holder to re-establish his claim in another action if he sees fit.”
He maintained this position and in various parts of his judgment warned himself against trying the action on its merits. Thus later in his judgment, he expressed himself thus5:
“There have been only three witnesses in all, but the evidence has been voluminous, covering and in fact re-litigating the whole case again. As I have indicated all I am interested in at this stage and in this case is to rule whether the fraud alleged is established or not, not whether the defendants … could have established their claim.”
After he felt convinced that the fraud was established, he said that alone entitled him to set the judgment aside, but repeated this warning to himself: “If I did more I would be opening and hearing the former claim again, which as I have ruled is not my province now.”6
Accordingly, the learned trial judge shut out from consideration, the merits and demerits of either the appellants’ claim against the partnership or the respondent’s equally pressed claim that on a true construction of the mandate, the debit transfer was incompetent and indeed all other collateral matters germane to the determination of this issue. Having looked at the matter in this way, the learned judge however felt himself able to order a reversal of the debit; an order which, as it seems to us, he could only legitimately make, if he had determined the merits of either claim and had accepted the respondent’s view of the mandate.
The appellants feeling aggrieved at the finding of fraud against themselves and the order of reversal of the debit, appeal to this court on a number of grounds which were subsequently re-arranged during the hearing of the appeal as four.
The first ground of appeal contains a miscellany of complaints. It was submitted that the judgment of the court below was erroneous because the respondent failed to allege or to prove fraud practised on the Sekondi High Court. It was further contended that inasmuch as the judgment in the High Court, Sekondi, was obtained by default and no evidence was offered, it was impossible for fraud to have been practised upon that court. It was submitted that in any event, the representation alleged in paragraph 5 of the statement of claim was incapable of constituting fraud on that court. Counsel for the appellants referred us to the case of Flower v. Lloyd.7 As counsel for the appellants stood firmly on the ground that the action could not succeed without the alleged fraud being practised on the court itself, he argued what is a necessary corollary of his main contention; that the court further erred inasmuch as it heard evidence on matters extraneous to the issue, namely, whether or not fraud was practised on the court. Accordingly, counsel submitted that the order setting aside the judgment was ill-conceived and ought to be set aside.
We are unable to share that view of the matter. As we understood it, the fraud of which the respondent complained, was that Edward Ramia acting in collusion with the manager of the bank, falsely represented to him that the sum which the appellants claimed in the action, represented sums genuinely overdrawn by the partnership. He only learnt the truth afterwards, that is the partnership’s large indebtedness arose as a result of a large debit transfer from Edward Ramia Ltd. to the partnership account. The respondent said, if he had known this to be the truth, he would have defended the appellants’ action at Sekondi. The learned trial judge found this to be the true position. We are aware of no rule of law which lays down that if a
man is misled by this naked form of deceit from resisting an action against himself, he cannot subsequently ask that judgment obtained against him be set aside, if he subsequently discovered the truth. In our opinion, the case of Flower v. Lloyd (supra) is no warrant for the proposition that a judgment obtained by fraud cannot be set aside unless the fraud was committed of the court itself. As we read it, that judgment merely decides that where it is discovered that a judgment was obtained by fraud, or that new matter has been discovered which would have entitled a plaintiff under the old practice to file a bill for review, the proper course for the plaintiff to adopt, is to commence an original action in the High Court impeaching the decree. That, in our view, is precisely what the respondent did in this case. We think that a judgment can properly be said to be obtained by fraud even if no evidence was led and where, as in this case, the respondent abstained from offering resistence because of the fraud. The view which we have formed of the law, is reinforced by the decision of the English Court of Appeal in the case of Thorne v. Smith.8
In that case, the landlord of a dwelling-house having represented to the tenant that he required the house for his own occupation, gave the tenant notice to quit and brought an action against him in the county court claiming possession under the Rent Restriction Act. The tenant, who was legally represented, attended at the court on the day fixed for hearing but did not contest the landlord’s claim and an order for possession was made against him by consent. On possession being given, the landlord did not enter into occupation, but put the property into the hands of estate agents for sale, and it was sold with vacant possession. The tenant upon learning this, brought an action against him claiming compensation on the ground that the order for possession was obtained by misrepresentation. In resisting that claim, it was contended for the landlord, inter alia, that the possession was not obtained by misrepresentation and that in any event no misrepresentation was made to the court inasmuch as no evidence was led. In rejecting that contention, Scott L.J. said9:
“It was argued for the landlord below and before us⎯and decided below⎯that the order for possession was not ‘obtained’ by the misrepresentation, although it was the misrepresentation by the landlord which made the tenant consent to judgment. I cannot accede to any such contention. The word ‘obtain’ raises the issue of cause and effect; and the mere introduction of the tenant’s consensual submission to what he foresaw would be the inevitable result in the judge’s mind of the fact (as he thought) that the landlord bona fide wanted the house for his own occupation, does not sever the casual nexus between the landlord’s misrepresentation and
the court’s order. The order made was, in my opinion, plainly caused by the misrepresentation and it was therefore so obtained within the meaning of the section; for there was no ‘new cause intervening.’ A refinement of the main argument was suggested in the further submission that the misrepresentation could not be said to have been made to the Court by any oral or documentary evidence. That refinement is in my view meaningless, and is not the sort of argument which Parliament intended to be applied in county courts for the solution of disputes between landlords and tenants.”
We respectfully endorse this reasoning.
We think that the judgment obtained against the respondent at Sekondi was obtained by the lowest possible form of deceit, and on the facts which the learned trial judge found, he was entitled to and was indeed right in setting aside the judgment. As to the argument that the court erred in receiving evidence on matters extraneous to the issue, we think that it does not now lie in the mouth of the appellants to make this complaint. A lot of other matters were submitted to the court for adjudication in addition to the main one of fraud. The bank agreed to these issues being tried in a summons for directions and did not oppose viva voce as well as documentary evidence being tendered on these matters. In these circumstances, we think the appellants ought not now to be heard to complain about the reception of evidence on these
matters. It follows that the first ground of appeal fails.
It was next contended rather faintly on behalf of the appellants that the learned judge was wrong when he held that the former judgment should be rescinded on the ground of the discovery of fresh evidence inasmuch as rescission was not sought on this ground. The court actually set the Sekondi judgment aside on the ground of fraud. The judge thought that the respondent had a second string to his bow and that as he discovered the fact of the debit transfer after the judgment, that afforded good ground on which the judgment could be set aside. As he actually based himself on the fraud, his expressed view on this part of the case was merely obiter.
On the third ground of appeal, counsel for the appellants submitted that as the judgment was obtained by default, the respondent ought to have applied under Order 27, r. 16 of the Supreme [High] Court (Civil Procedure) Rules, 1954,10 to have it set aside and inasmuch as he instituted a fresh action, this was wrong and that therefore the action should have been dismissed. We do not scruple in rejecting that argument. The respondent had two courses open to him. He was entitled to his election to proceed under Order 27, r. 16 or to institute fresh proceedings to have the judgment vacated on the ground of fraud. If he chose the latter and more cumbersome method, it was entirely his affair. It is nothing on which the appellants can be heard to complain, much less on appeal. Indeed when a similar submission was made to the English Court of Appeal in the case of Wyatt v. Palmer,11 Lindley M.R. expressed himself as startled by it. Quoting from Mitford on Pleadings (5th ed.) at p. 112, he said: “ ‘If a decree has been obtained by fraud it may be impeached by original bill without the leave of the Court’.” He then continued12:
“Why should not a judgment by default be so impeached? Suppose a man was induced by fraud not to appear, and by that means judgment was obtained against him: I am not prepared to say that because there is a summary method of impeaching that judgment provided by the Rules recourse cannot be had to the old method of impeaching the judgment by action.”
That is our own view of the matter and we told counsel so in the course of the argument. We think this ground of appeal has no merit and we hold that it fails.
That brings us to the last ground of appeal argued and the one in which, as it seems to us, counsel for the appellants, made his most serious point. The last ground has two limbs, the first of which reads:
“The learned trial judge erred in law in that he purported not only to set aside the judgment of the court at Sekondi, but also to order the reversal of the original debit entry and consequential interest, which matter was not before him, but should fall to be decided if at all, only on a retrial of the action in the said court at Sekondi.”
The argument urged on this limb of ground four, consists in the main of a verbal repetition of this ground of appeal with counsel for the appellants’ characteristic emphasis. In our opinion, it is not accurate to say that the question of the reversal of the original debit entry was not before the learned trial judge. That relief was sought in the respondent’s writ and his entitlement to it or not was made an issue in the summons for directions. Evidence was led on this matter by both sides. What we think the appellants can legitimately complain about is that by declining to consider the merits of either claim, the learned trial judge put it out of his power to make an order reversing the original debit. We think he could only properly have made the order if he had adjudicated on the merits of the case put forward by both sides and had come to the conclusion that the transfer of the debit of Edward Ramia Ltd. to the partnership account was wrong. Having decided not to go into the merits of the claim, we think his order reversing the original debit entry was a non sequitur and wrong. Counsel for the respondent at first sought to
support this order and argued that as the appellants were adjudged parties to the fraud, they were liable to disgorge the sum which they had obtained by it and referred us to the old case of Bodenham v. Hoskins.13 The ratio decidendi of that case, so far as we are able to make it out, is that according to the principles of a court of equity, a person who deals with another knowing him to have in his hands or under his control, moneys belonging to a third person must not enter into a transaction with him, the effect of which is that a fraud is committed on the third person. On that principle, the court ordered a bank to repay to a person who had been defrauded a sum of money which had been transferred from his account to offset the culprit’s debit balance.
Useful as this decision is, we do not think that it really answers the point. Had the learned trial judge addressed his mind to the case on its merits and arrived at a decision that the debit transfer to the partnership account was not lawfully authorised, we do not think it can possibly be argued that the court would, in that case, not have been within its rights to order a reversal of the debit. Counsel for the respondent however conceded this point and submitted that all the evidence necessary to determine this matter was before the trial judge and that we should make good his omission by determining the matter ourselves. He contended that the only justification the appellants put forward for their action was the mandate (exhibit 1), and that therefore the case stands or falls by a correct interpretation of that mandate. Counsel argued, we think, rightly, that sitting in this court, we were just as competent at the trial court to
construe that document.
We were much attracted by this submission and as we felt disposed to adopt this course, we asked counsel for the appellant what his reaction was to it. Counsel resisted it strongly and submitted that if we took that course, we would be taking unto ourselves the function of a trial court. He told us that in addition to the construction of the mandate, he had further evidence. He had since the conclusion of argument, caused to be sent to us, a letter dated 6 April 1961 (a copy of which we assume he has sent to counsel for the respondent) and in which he set out in paragraph 4, the further evidence he proposed to lead on a retrial. It seems to us that some, at least, of these matters were brought up before the court below. It completely passes our understanding why if the further evidence was considered necessary, it was not led in the court
below as the appellants well knew that the respondent invited the court to adjudicate on the merits of the appellants’ claim. We find it impossible to resist the conclusion that the appellants are taking advantage of the learned judge’s error of omission to have another bite at the cherry.
As we said, the last ground of appeal was on two limbs, the first of which we have dealt with. The second limb of ground four complains that: “The learned judge erred in law in setting the former judgment aside upon the ground of an alleged fraud practised against the plaintiff alone.” It was contended on this ground that as the alleged fraud was, on the evidence, practised on the plaintiff alone, the court cannot lawfully set aside the judgment against the other partners and that inasmuch as the court purported to do so, it was in error. This submission is not without merit as a judgment against a firm is no more than a judgment
against the individuals who constitute the firm. Looking at the matter purely from the point of view of principle, it seems to us that the court cannot set this judgment aside at the instance of Edward Ramia, he being a party to the fraud. The position of Mrs. Ramia who has not been shown to be a party to the fraud, but who has nevertheless not complained, is far from clear. In order to counter this submission, counsel for the respondent referred us to a number of old cases including the cases of Western National Bank of the City of New York v. Perez, Triana & Company14; Re Frances Handford & Company15; Clark v. Cullen16; Johnson v. Stephens & Others17; Alliance Bank v. Kearsley18 and In re Riches and Marshall’s Trust Deed.19 We have looked at all these cases and have ourselves examined the case law on the subject and in particular have looked at view expressed by McNair J., on a kindred submission in the case of Brewer v. Westminster Bank Limited20 and the criticism of that judgment by the learned editor of Paget’s Law of Banking (6th ed.), p. 50 and also the decision of the English Court of Appeal in Hirschorn v. Evans.21
Having given this matter our due consideration, we have come to the conclusion that we ought to set aside the order of reversal of the debit made by the court below and thus put the parties in the position in which they were before the issue of the specially endorsed writ. The appellants will thus be enabled, should they think fit, to re-agitate their claim against the respondent and any of his partners and the latter would be entitled to meet such claim with such defences as are available to him. We fully appreciate that this course would subject the parties to a further litigation. We regret this, but we think in all the circumstances, the
justice of this case does not admit of any other course.
We accordingly affirm the judgment of the court below setting the judgment aside on the ground of fraud, but we delete and set aside that part of the judgment which ordered the appellants to credit the Seagull Fisheries Company with the sum of £G21,863 18s. 6d. with interest. Save and except this variation the appeal is dismissed.
As to costs in this court the appellants having been partially successful, we order that the respondent do recover from them one-half of the costs of this appeal, but the order as to costs in the court below will stand.
DECISION
Appeal dismissed.
T.G.K.
