DIVISION: IN THE SUPREME COURT
DATE: 4TH MARCH, 1963
BEFORE: VAN LARE, CRABBE AND BLAY JJ.S.C.

CASES REFERRED TO
(1) Thompson v. Webster (1859) 4 Drew. 628; 62 E.R. 241
(2) Twyne’s Case (1602) 3 Co.Rep. 80b; 76 E.R. 809
(3) Freeman v. Pope (1870) L.R. 5 Ch.App. 538; 39 L.J.Ch. 689; 23 L.T. 208
(4) Cadogan v. Kennett (1776) 2 Cowp. 432; 98 E.R. 1171
(5) Middleton v. Pollock; Ex parte Elliott (1876) 2 Ch.D. 104; 45 L.J. Ch. 298
(6) In re Sinclair; Ex parte Chaplin (1884) 26 Ch.D. 319; 53 L.J.Ch. 732, C.A.
(7) Murietta v. South America, etc. Co., Ltd. (1893) 62 L.J.Q.B. 396; 9 T.L.R. 389
(8) Michael v. Gay (1858) 1 F. & F. 409; 175 E.R. 785
(9) Young v. Barnett (1858) 1 F. & F. 320; 175 E.R. 745
(10) Bott v. Smith (1856) 21 Beav. 511; 52 E.R. 957
(11) Royal British Bank v. Turquand (1856) 6 El. & Bl. 327; 119 E.R. 474; 24 L.J.Q.B. 327
(12) Morris v. Kanssen [1946] A.C. 459; [1946] All E.R. 586; 174 L.T. 353, H.L.
(13) Howard v. Patent Ivory Co. (1888) 38 Ch.D. 156; 57 L.J.Ch. 878; 58 L.T. 395

(14) The Zamora (No. 2) [1921] 1 A.C. 801; 90 L.J. 259; 125 L.T. 204, P.C.
[p.216] of [1963] 1 GLR 214
NATURE OF PROCEEDINGS
APPEAL from a judgment of Scott J. delivered in the Divisional Court, Kumasi, on the 13th February,
1959, in which he ordered the release of a store and its contents from attachment and made a declaration
that the plaintiff was the owner of the said store and of its contents. The facts are fully set out in the
judgment of the Supreme Court.
COUNSEL
Akyea-Djamson for the appellants.
A. Dove for the respondent.
JUDGMENT OF CRABBE J.S.C.
This appeal is against a decision of Scott J. given on the 13th February, 1959, in the Divisional Court,
Kumasi, and arises in these circumstances: The appellants (hereinafter referred to as the defendants) took
action against the Northern Territories Traders Ltd. for a debt due and owing, and on the 18th July, 1958,
the writ of summons was served on the managing director of the company, who incidentally is the
husband of the respondent (hereinafter referred to as the plaintiff). On the 23rd July, 1958, the plaintiff ‘s
husband entered appearance for his company, and on the 9th September, 1958, the defendants recovered
judgment against the Northern Territories Traders Ltd. for the sum of £G700 approximately.
Consequently, the defendants attached the goods of the Northern Territories Traders Ltd. in their store in
house No. O.B.433, Kumasi.
The plaintiff then claimed that she was the owner of all the goods in the said store and brought an action
seeking an order of the court to release the store and goods from attachment and to declare her the owner
of the store and the goods therein. The statement of claim filed on her behalf and in which she alleged the
grounds on which her claim was based was in the following terms:
“CLAIMANT’S STATEMENT OF CLAIM
1. The claimant was employed by the Northern Territories Traders Ltd. in September, 1954, as a
storekeeper at a salary of £G20 per month and then promoted to the post of assistant manager at a
salary of £G50 per month as from the 1st April, 1958.

2. The claimant was not paid the salary due to her from the 31st March, 1957, to the 1st April, 1958,
amounting to £G240, and then for further four months (from the 1st April, 1958, to the 31st July,
1958) amounting to £G200, thus bringing the total salary in arrears due to the claimant to £G440.
3. On the 31st July, 1958, the claimant agreed with the said company that the business of the company
being carried on in a store room in house No. O.B.433, together with the goodwill, be sold to the
claimant at a price of £G1,160 10s.

4. It was further agreed that the salary of £G440 due to the claimant should go in part payment of the
purchase price and that the claimant should pay the balance of £G720 10s. there and then; it was in
fact paid.

5. On the 18th August, 1958, a document was executed by a representative of the said company and the

claimant to evidence the transaction in writing.

[p.217] of [1963] 1 GLR 214
6. The claimant therefore says that by virtue of the said agreement of the 31st July, 1958, she is the sole

owner of the said store situate in house No. O.B.433 together with all its equipment.

7. Wherefore the claimant’s claim is for an order that the said store attached at the instance of the
plaintiff-judgment-creditor herein be declared the property of the claimant, and be released from
attachment forthwith.”

The defendants denied that the plaintiff was the owner of the store, and then made the following specific
charges against her: (1) that the execution of the deed dated the 18th August, 1958, amounted to a
conveyance in fraud of creditors; (2) that the purported sale was not authorised by the Northern
Territories Traders Ltd. and therefore was of no legal effect; and (3) that there was collusion between the
plaintiff and the Northern Territories Traders Ltd.
Although the defendants did not expressly plead the Statute of Fraudulent Conveyances, 1571,1 it is clear
from paragraph 3 of their statement of defence in which charge (1) above was made that they intended to
plead that statute.
The Statute of Fraudulent Conveyances, 1571, provided in effect that all conveyances and dispositions of
property real or personal, made with the intention of delaying, hindering, or defrauding creditors, should
be null and void as against them, their heirs, etc., and assigns. It further provided that nothing therein
contained should extend to any estate or interest made on good consideration and bona fide to any person
not having, at the time, any notice of such fraud. This statute has been held to be of general application
and therefore applies in this country.
The burden of proving the intent to defraud is on the creditor who impeaches the conveyance, but the
intent may be inferred from evidence of the circumstances in which the conveyance was made. As to
what may in general be evidence of the fraudulent intent Kindersley V.C. in Thompson v. Webster2 said:
“The language of the Act being that any conveyance of property is void against creditors, if made with intent
to defeat, hinder or delay creditors, the Court is to decide, in each particular case, whether, on all the
circumstances, it can come to the conclusion that the intention of the settlor, in making the settlement, was to
defeat, hinder or delay his creditors.”
The most striking feature of this case is that at the time when the purported sale to the plaintiff took place,
of the store together with the goods, the defendants had already issued their writ of summons against the
Northern Territories Traders Ltd., and the managing director had entered appearance on the 23rd July,
1958, that is to say, about a week earlier and before the purported sale. The plaintiff was at this material
time the assistant manager of the store, the subject-matter of this case, and
[p.218] of [1963] 1 GLR 214
there can be no doubt whatsoever that she knew of the civil action pending against the company.
The company was at this time heavily indebted to several people and it had not sufficient funds to pay
salaries of the staff including that of the plaintiff. It was in these circumstances of pecuniary
embarrassment when an action for debt was pending against the company that the managing director
decided to sell the store and the goods to the plaintiff. A voluntary conveyance pendente lite has on it the
badge of fraud, unless the pending action is frivolous or speculative; but where there is adequate
consideration the evidence required to establish fraudulent intention must be strong. Inadequacy of
consideration, however, is evidence of fraud.
Another striking feature of the case is that the transaction which resulted in the conveyance of the store and goods to the plaintiff was made in secret. The deed of conveyance dated the 18th August, 1958,N under which the property in the goods passed to the plaintiff was signed only by the plaintiff and her husband, the managing director; there were no witnesses to its execution. Secrecy is always evidence of fraud, though it is not in itself conclusive. Sir Edward Coke’s advice, in Twyne’s Case3 as to gift in
satisfaction of a debt, made by one who is indebted to others also, is:
“Let it be made in a public manner, and before the neighbours, and not in private, for secrecy is a mark of
fraud. Let the goods and chattels be appraised by good people to the very value, and take a gift in particular
in satisfaction of your debt. Immediately after the gift, take the possession of them; for continuance of the
possession of the donor, is a sign of trust.”
It seems to me that in this present case the advice of Sir Edward Coke fell on deaf ears.
There is also no clear evidence that the plaintiff was ever in possession of the store. Neither the plaintiff
nor her husband could say the exact date in July 1958 when she effectively took possession. The
evidence does not show what duties a director of the company performed, but it is clear that about a year
earlier the plaintiff had relinquished her directorship on the grounds that she was pre-occupied with
domestic duties. Both the plaintiff and her husband agreed that the plaintiff worked for the company
from 1957 to July 1958 and that she did not receive her salary during this period. I am unable to
reconcile this evidence with the following vague statement by the plaintiff: “I took possession of store at
the end of July 1958.” It is to me a point of some importance, small though it is, that the plaintiff and her
husband sedulously refrained from giving evidence of the exact date on which possession was delivered
to the plaintiff. However, in paragraph two of the statement of claim the plaintiff averred that she was an
employee of the company from the 1st April, 1958, to the 31st July, 1958. To my mind this is a clear
admission by the plaintiff that the company was owner of the goods in the store up to the end of July
1958. Consequently it cannot be that the plaintiff was the owner of the store at the same time. In order to
show an honest intention to part with the property the delivery of the
[p.219] of [1963] 1 GLR 214
possession must be actual and complete and must exclude entirely the doctrine of reputed ownership.
There is no reliable evidence in this case that the plaintiff was in actual occupation of the store before or
after the 31st July, 1958.
A voluntary conveyance will be void under the Statute of Fraudulent Conveyances on the ground of
actual or express fraudulent intention on the part of the grantor, and it can be impeached by either existing
or subsequent creditors. Where, however, the fraudulent intent in a voluntary conveyance is not apparent
it can be presumed from the circumstances. “The principle on which the statute [of 13 Eliz., c. 5.]
proceeds is this, that in all matters persons must be just before they are generous, and that debts must be
paid before gifts can be made”: see Freeman v. Pope.4
The case for the plaintiff was that the sale of the goods in the store was for valuable consideration, and
her evidence in support of this claim was as follows:
“When I stopped working the company was indebted to me in the sum of £G440. I entered into agreement
with the company whereby the company sold me goods in store valued £G1,160 10s. and I paid cash £G720
10s. and salary due to me of £G440 was credited to me as part of sale price.”
If this evidence of the plaintiff is true then it means that she was one of the numerous creditors of the
company and therefore the conveyance executed in her favour was in good faith and valid. In those
circumstances it would be immaterial whether the managing director knew at the time that execution
would be issued against the company if the defendants recovered judgment. Thus in Middleton v.
Pollock5 Jessel M.R. said that the meaning of the section, “is that the debtor must not retain a benefit for

himself. It has no regard whatever to the question of preference or priority among the creditors of the
debtor.”
Further the fact that she said that she paid cash the sum of £G720 10s. which is more than half the total
value of the goods, would be some evidence that the sale and conveyance were made bona fide and for
value. In these circumstances if her evidence is true an onus was cast upon the defendants to show either
by adducing evidence or by cross-examination that the plaintiff was a party to the fraudulent intention of
the company. Thus, in Cadogan v. Kennett6 Lord Mansfield C.J. referring to the Statute of Fraudulent
Conveyances made the following observations:
“The statute does not militate against any transaction bona fide, and where there is no imagination of fraud.
And so is the common law. But if the transaction be not bona fide, the circumstance of its being done for a
valuable consideration, will not alone take it out of the statute. I have known several cases where persons
have given a fair and full price for goods, and where the possession was actually changed; yet being done for
the purpose of defeating creditors, the transaction has been held fraudulent, and therefore void.
[p.220] of [1963] 1 GLR 214
One case was where there had been a decree in the Court of Chancery and a sequestration. A person with
knowledge of the decree, bought the house and goods belonging to the defendant, and gave a full price for
them. The Court said, the purchase being with a manifest view to defeat the creditor, was fraudulent, and
therefore, notwithstanding a valuable consideration, void. So, if a man knows of a judgment and execution,
and, with a view to defeat it, purchases the debtor’s goods, it is void, because the purpose is iniquitous. It is
assisting one man to cheat another, which the law will never allow.”
It is therefore necessary to make a critical examination of the evidence and to determine whether the
conveyance was voluntary or for valuable consideration and above all whether it was made with a
fraudulent intention.
According to the plaintiff she was employed by the company as storekeeper from 1954 to July 1958 at a
monthly salary of £G20. From 1957 to July 1958 the company could not pay her the agreed salary. The
company was no doubt in financial straits. Nevertheless, her salary was increased to £G50 in March 1958
because she assumed greater responsibilities in the company. According to her calculations the company
owed her £G440 by the end of July 1958. But her husband, the managing director of the company, gave a
different period in which the plaintiff was employed. According to him the plaintiff was employed from
April 1957 to July 1958; he did not say what the salary of the plaintiff was and certainly made no
reference whatsoever to a £G50 increase in the salary of the plaintiff. Yet in the agreement (exhibit A)
signed by him it was made to appear that the company owed the plaintiff £G440, being arrears of salary.
He produced no books of the company to show that the company in fact employed the plaintiff and paid
her a fixed salary.
On the plaintiffs own evidence — and taking it for what it is worth — the amount of money due to her
from the company as arrears of salary would be £G530. It means therefore that the statement in the
agreement (exhibit A) in the terms “arrears of salary due from the company to the purchaser £G440” is
palpably false. Such a false statement of a material fact in a conveyance for valuable consideration as
showing part of the consideration for the transfer is in my view some evidence of fraud: see In re Sinclair;
Ex parte Chaplin.7
After a careful and anxious consideration of the evidence of the plaintiff and that of her husband, I cannot
resist coming to the conclusion that the plaintiff was never an employee of Northern Territories Traders
Ltd. and that no arrears of salary was due to her. Consequently I hold that she was not a creditor who
could be preferred to other creditors of the company.
As regards the sum of £G720 10s. — cash which was part of the consideration there is no evidence where

the plaintiff got that money from. She had no banking account and no other source of income. The books
of
[p.221] of [1963] 1 GLR 214
the company were not produced to show whether this amount was in fact received by the company.
The whole transaction was conducted secretly by a man and his wife and one of the charges which the
defendants made against the plaintiff was that there was collusion between her and the Northern
Territories Traders Ltd.
“Collusion, in sense in which it is used in this Order [R.S.C. Ord. 57, r. 2 (b) under which an applicant for
relief by way of interpleader had to satisfy the court that he did not collude with any of the claimants] does
not necessarily entail anything morally wrong, although the word has acquired a meaning generally
associated with something morally wrong . . . The word in the interpleader order has its logical signification,
that the applicant . . . must not play the same game as one of the parties.”
See Murietta v. South America, etc. Co., Ltd.8 per Charles J. It was entirely a question of fact for the trial
judge to determine whether the conduct of the plaintiff was morally wrong or whether she was playing the
same trick as her husband, the managing director of the company.
After reading the evidence in cold print I can fully appreciate the force of the following observations
made by learned trial judge that, “The claimant gave her evidence in a most unimpressive manner and the
circumstances surrounding the transaction appear highly suspicious.”
In view of this finding that the circumstances were highly suspicious it was for the trial judge to direct
himself in such a way that he could come to a firm conclusion whether or not the intention of the
managing director of the company was to defeat, hinder or delay his creditors. Thus in Michael v. Gay9
where the issue between the claimant and execution creditor was whether certain goods at the time they
were seized by the sheriff were the property of the claimant, Willes J. charged the jury in these words10:
“The colourable assignment of property for a pretended debt, as a trick and device, with intent to defeat
execution creditors, is fraudulent and void against such creditors under the statute of Elizabeth, and is not the
less so merely on account of some small advance the better to colour the transaction. And if you believe that
the true and real object of the assignment was to defeat creditors, and that it was a mere sham, and not meant
to have its professed effect as between the parties—you ought to find for the defendant.”
The jury gave verdict for the defendant.
The learned trial judge, however, in the instant case made the following findings:
“It has however, been clearly established that the judgment-creditors did issue writs of fi. fa. on other
properties of the defendant-company to satisfy their judgment and it has not been rebutted that the value of
these properties
[p.222] of [1963] 1 GLR 214
is in excess of the amount awarded to the judgment-creditors . . . Having regard to these particular facts, on
the evidence as adduced, I cannot hold that the agreement was a fraudulent and fictitious one.”
The words “these particular facts” in the foregoing passage from the judgment refer, no doubt, to the
finding that the judgment-creditors had seized other valuable properties of the judgment-debtors sufficient
to satisfy the judgment.
With respect to the learned trial judge, I think he misdirected himself by applying the wrong test. In my
opinion the correct test that he ought to have applied in the case was that contained in the charge to the
jury by Willes J. in Young v. Barnett11 that, “the question is, whether it is real or only colourable, and for

the sole purpose of being used to defeat the execution.”
In applying the wrong test the learned trial judge disabled himself from deciding the real issue between
the parties. If in spite of the execution on other property sufficient in value to satisfy the defendants’
judgment the learned judge nevertheless found that the sale was made with a view to defeat the
defendants’ execution it was his duty to set aside the transaction as void even though he was satisfied that
the plaintiff had given full consideration. In Bott v. Smith,12 the court in setting aside a deed for which
full consideration had been given made the following observations:
“It is said, that when this transaction is set aside, the plaintiff will get very little by it. But if I am of opinion
that it is void under the statute, I am bound to come to that conclusion. Even if full consideration had been
given, that is not sufficient, because, as is shewn in the case of Atkins (Stileman v. Ashdown, 2 Atk. 477),
the consideration may be given in such a form as to defeat the judgment creditor; and this is a case in which
it might defeat the judgment creditor.”
In this case the plaintiff failed to prove the value of the other properties which alone she alleged were
sufficient to satisfy the judgment debt. In my judgment the learned trial judge erred in allowing such
irrelevant and bare assertions to deflect him from the course of justice.
The last submission of the appellants’ counsel in support of the appeal was that the transaction between
the plaintiff and the debtor-company was a nullity. Even though this was not pleaded yet I think the point
can legitimately be raised here since facts relevant to the proof of nullity of the transaction are, in my
opinion, relevant to the issue whether or not the sale was genuine or a sham.
Counsel for the appellants referred to the articles of association of the Northern Territories Traders Ltd.
(exhibit E) which showed that there were three directors of the company; he also referred to Schedule 1,
Table A, Part 16, Article 80 of the Companies Ordinance.13 Article 80 reads, “The quorum necessary for
the transaction of the business of the
[p.223] of [1963] 1 GLR 214
directors may be fixed by the directors, and unless so fixed shall (when the number of directors exceeds
three) be three.” Counsel then argued that since the directors of the Northern Territories Traders Ltd. were
only three a quorum necessary for the transaction of a valid business would be that fixed by law. In other
words the Northern Territories Traders Ltd. could not hold meeting to transact business unless all the
three directors of the company were present at such a meeting. I think this argument is well founded.
The books of the company were not produced in order to prove that the alleged meeting of the 22nd May,
1958, at which the decision to sell the goods was taken did in fact take place. One of the directors, one
Mr. Aku of Kumasi, was never called by the plaintiff to give evidence and it was admitted that the third
director, one Mr. Kamil Saad, was absent from the country at the time. With regard to this third director,
however, the managing director held a power of attorney. But counsel for the appellants submitted that
such a power of attorney from a director in England did not make the managing director an alternate
director. There is no evidence of any resolution by the board of directors in the manner prescribed under
section 74 of the Companies Ordinance and counsel submitted that Halabi by himself alone had no power
to dispose of the property of the company.
To this submission counsel for respondent, Mr. Dove, replied that even if there was no quorum, a point he
did not concede, the agent of the company, Halabi, had ostensible power to sell and that the plaintiff
could not be presumed to know “the indoor management” of the company. She would be justified in
assuming, counsel urged, that everything had been done regularly by the company. Counsel relied in
support of his contention on the statement of the rule in the case of Royal British Bank v. Turquand.14
The rule is that persons dealing with a company are bound to read the public documents of the company

and to see that a proposed transaction is not inconsistent therewith, but they are not bound to do more;
they need not enquire into the regularity of the internal proceedings—”the indoor management”—and
may assume that all is being done regularly. Thus where the articles give the directors power to enter into
certain transactions by resolution, an outsider like the plaintiff here, as her counsel contended, may take it
for granted that the necessary resolution has been passed.
There are, however, certain important exceptions to this rule, one of them being that it applies only to
irregularities that otherwise might affect a genuine transaction. In this case the transaction between the
plaintiff and the Northern Territories Traders Ltd. reeks so strongly of fraud that I do not think the rule in
Turquand’s Case can avail her.
[p.224] of [1963] 1 GLR 214
Another important exception to the rule is that a person who deals with a company and who has notice of
an irregularity in its internal management in connection with the subject-matter of his dealings cannot
take shelter behind the rule: see Morris v. Kanssen15; also Howard v. Patent Ivory Co.16
In this case the plaintiff occupied such a position of responsibility in the debtor-company at the time of
the civil action that she cannot pretend to be unaware either of the impossibility of securing a quorum at
the alleged meeting of the 22nd May, 1958, or that no resolution was passed at such a meeting. The
evidence of her husband was that, “At the time this action was pending my wife was an employee of the
company. She was assistant manager there. I was served with writ on the 18th July, 1958. I entered
appearance on the 23rd July, 1958. This store was sold when action was pending.”
I have no doubt on the evidence that the plaintiff knew or was in a position to know that there was no
meeting by the board of directors at which Halabi was empowered to sell the company’s goods to her.
“There are two senses in which a man is said not to know something because he does not want to know it. A
thing may be troublesome to learn, and the knowledge of it, when acquired, may be uninteresting or
distasteful. To refuse to know any more about the subject or anything at all is then a wilful but a real
ignorance. On the other hand, a man is said not to know because he does not want to know, where the
substance of the thing is borne in upon his mind with a conviction that full details or precise proofs may be
dangerous, because they may embarrass his denials or compromise his protests. In such a case he flatters
himself that where ignorance is safe, ‘tis folly to be wise, but there he is wrong, for he has been put upon
notice and his further ignorance, even though actual and complete, is a mere affectation and disguise.”
See per Lord Sumner in The Zamora (No. 2).17
In my view the conveyance was not intended to operate as a real transfer of the store and the goods
therein and the whole exercise was a cloak to defraud the creditor in the pending action.
For the above reasons I would allow this appeal.
JUDGMENT OF VAN LARE J.S.C.
I agree as in my opinion the seizure of the goods was lawful and the judge should have ordered the sale to
proceed.
JUDGMENT OF BLAY J.S.C.
I also agree, and I am of the same opinion as my brothers.
DECISION

Appeal allowed.
J. D.

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