COURT OF APPEAL
DATE: 3 JULY 1967
BEFORE: OLLENNU, APALOO AND LASSEY JJ.A.
NATURE OF PROCEEDINGS
APPEAL from a decision of the High Court, Kumasi, setting aside a sale of the respondent’s farms to theappellant. The facts are fully stated in the judgment of Ollennu J.A.
COUNSEL
Osei Nti for the appellant.
David S. Effah for the respondents.
JUDGMENT OF OLLENNU J.A.
This is an appeal from a judgment of the High Court, Kumasi given in two suits consolidated. The claims made in the two cases are identical and read as follows:
“(1) An order of the court setting aside the sale of the plaintiff’s farms described in the schedule hereto attached on 16 March 1961 by the third defendant on the instructions of the first defendant to the second defendant on the grounds that the said sale was unlawful and irregular and that there was collusion between the second and third defendants.
(2) An order of the court re-opening the loan transaction between the plaintiff and the first defendant under the Loans Recovery Ordinance on the ground that the interest charged was harsh and unconscionable.
(3) An order of the court in the exercise of its equitable jurisdiction to protect the plaintiff as mortgagor from the first defendant as mortgagee nullifying the sale of the plaintiff’s said properties by the first and third defendants to the second defendant and permitting the plaintiff to pay to the first defendant the amount reasonably due to him under a mortgage transaction between them.”
The case of the plaintiff in the first suit is that in February 1960, he as an elder of the Agogo stool raised a loan of £G400 from the first defendant, and was charged interest of £G200 thereon, but that in a mortgage deed which he had prepared on the transaction, the first defendant caused the sum of £G90 to be inserted as the interest charged. And the case of the plaintiff in the second case also is that on the same day in February he too raised a loan of £G300 from the first defendant, and was charged interest of £G150, but that in a deed of mortgage he caused to be prepared to evidence the transaction, the first defendant caused an amount of £G50 only to be inserted as the interest charged. The loans were secured with farms. These two loans were proved to have been taken to finance a stool dispute which led to the deposition of the second defendant, the appellant herein, from the Agogo stool.
The plaintiffs led evidence that they defaulted in paying the debts when they became due, and thereupon the third defendant, a licensed
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auctioneer, went to them at Agogo and informed them and the Agogohene that the first defendant had instructed him to sell the mortgaged farms. They said that at their request the third defendant agreed to give them time within which to pay. Consequently, they said, they went to Kumasi and paid an amount of £G400 to the third defendant on account of the two transactions, leaving a balance of £G600. They then requested the third defendant to go with them to the creditor, the first defendant, to apply to him for time within which to pay the balance due. But, they said, the third defendant assured them that he himself would come to Agogo to inform them of the result. A few days later, they said, the third defendant came to them at Agogo while they were at funeral and told them that the first defendant had agreed to extend the time by two months; the third defendant claimed and was paid £G30 by the plaintiffs for his services in obtaining the extension of time. But two days later, while they were still engaged on the funeral celebrations, the plaintiffs were informed that the third defendant had rushed to the town, conducted a mock sale, and had declared one Frimpong, arelative of the second defendant, the purchaser. The plaintiffs thereupon rushed to their solicitor and handed to him £G650 to settle the debt.
In paragraphs (14), (15), (16), (17) and (18) of the statement of claim filed by them, each of the plaintiffs pleaded as follows:
“(14) On 14 March 1961 the third defendant came to Agogo and represented to the plaintiff and other elders and the paramount chief of Agogo that he had discussed the matter with the first defendant who had agreed to stop the sale and give the plaintiff and Opanin Debra a further two months within which to pay the total balance due to the first defendant.
(15) Owing to the above representation the plaintiffs and Opanin Debra were induced to take no steps to pay the balance due to the first defendant in order to avoid the sale of their properties.
(16) Contrary to what he had told the plaintiff and Opanin Debra the third defendant came to Agogo on 16 March 1961 and conducted a hurried sale of the properties of the plaintiff and Opanin Debra to one Kwadjo Frimpong who was the only bidder in the street. The circumstances surrounding the sale point irresistibly to collusion between the said Kwadjo Frimpong and the third defendant.
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(17) The plaintiff shall contend that the said sale was induced by fraud: the representations made by the third defendant to the plaintiff and Opanin Debra in paragraph (14) above were false and were made to lull the plaintiff and Opanin Debra into inaction so that the collusive sale of their properties could be made.
(18) The second defendant is the ex-chief of Agogo and is a bitter political opponent of the paramount chief of Agogo and the plaintiff and Opanin Debra who supported his destoolment.” In reply to those paragraphs of the statements of claim the second defendant pleaded as follows: “(1) The second defendant admits paragraphs (1) and (2) of the statement of claim but makes no admission as to the matters collusive as alleged in paragraph (3) to (15) (both inclusive) thereof. (2) The second defendant denies that the said Frimpong was the only bidder in the street and denies that the said sale was collusive as alleged in paragraph (16) of the statement of claim or at all. (3) The second defendant does not admit that the said sale was fraudulent or induced by fraud as alleged in paragraph (17) of the statement of claim and if which is not admitted the same was fraudulent or induced by fraud, the second defendant will contend that he is in an innocent purchaser for value of the said farms and was in no way a party to the said fraud.
(4) The second defendant will contend that paragraph (18) of the statement of claim is immaterial to this action and irrelevant and will apply that the same be struck from the pleading.” The issues joined for trial are:
“(a) Whether or not the mortgage deed executed between the plaintiff and the first defendant and by virtue of which the plaintiff’s farms were sold was void and unenforceable.
(b) Whether or not the sale of the plaintiff’s farms should be set aside on the grounds of fraud, irregularity, collusion, or any other ground.
(c) Whether the plaintiff is entitled to the other reliefs claimed in his writ.” On the first issue the learned judge of the High Court found that on each of the two loans the first defendant charged interest of 50
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per cent contrary to section 13 of the Moneylenders Ordinance, Cap. 176 (1951 Rev.). Consequently heheld that the documents prepared on the transaction by the first defendant, a licensed moneylender, did not truly state the principal amounts lent and the interest charged. By virtue, therefore, of section 26 (2) of the Moneylenders Ordinance, he declared the transactions void and unenforceable. In the result he held that the same were void of effect. The evidence led by the plaintiffs as regards the representation made by the third defendant was not controverted, the third defendant not having appeared at the trial. Nevertheless the learned judge made a very critical examination of the evidence in that regard, and came to the conclusion that it is true. He had no hesitation in holding that the sale was fraudulent.
On the issue of collusion, the learned judge accepted the evidence of the fourth witness for the plaintiffs as to what actually happened at the purported sale, and rejected that given by the second defendant and his first witness, the said Kwadjo Frimpong, who was alleged to have made the purchase on behalf of the second defendant. However, the learned judge held that the second defendant is a bona fide purchaser for value. Finally, the learned judge entered judgment for the plaintiff in each of the two cases against the respective defendants for the declaration he sought.
Against the judgment the second defendant only appealed on the ground that “The learned trial judge having found as a fact that the second defendant purchaser was a bona fide purchaser for value without notice of any fraud erred in setting aside the sale.” In support of the appeal, counsel for the appellant referred the court to proviso (i) to section 23 (1) and to section 26 (2) of the Moneylenders Ordinance, Cap. 176 (1951 Rev.). Section 26 (2) provides as follows: “Every such promissory note or other contract in respect of which an offence has been committed under this section shall, subject to the provisions of section 23, be void and unenforceable.” And proviso (i) to section 23 (1) says: “Provided that notwithstanding anything in this Ordinance—
(i) any agreement with, or security taken by, moneylender in respect of money lent by him after the commencement of this Ordinance shall be valid in favour of any bona fide assignee or holder for value without notice of any defect due to the operation of this Ordinance and of any person deriving title under him.” Counsel submitted that these two sections of the Ordinance, together provide complete protection to the second defendant, whom the trial court has declared to be a bona fide purchaser for
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value without notice of the fraud. Consequently, counsel submitted that the learned judge of the court below misdirected himself by not directing his attention to these sections of the enactment. If, says counsel, the learned judge had properly directed himself he would have been compelled by law to dismiss the case against the second defendant.
The assignee who should enjoy protection under the proviso to section 23 is defined in section 22 (2) of the Ordinance. The notice which can deprive a purchaser (an assignee) of the protection given by the aforesaid proviso to section 23 (1) of the Ordinance, is notice of a defect due to the operation of the Ordinance, e.g. where, as in this case, the principal sum lent and the interest charged thereon are not truly stated or where they are left blank in the promissory note or other document evidencing the transaction. It was neither alleged nor was any evidence led to prove that the second defendant had notice of the defect complained of in this case. Therefore prima facie the argument of counsel for the appellant appears unanswerable. In reply to these submissions, counsel for the respondents submitted (i) that the appellant is not protectedby the provision, because he is an assignee “by operation of law” and not an assignee by inter vivos assignment within the meaning of the proviso to section 23 (1) as defined in section 22 (2) of the Ordinance; and (ii) that in any event the trial court erred in holding, upon its own findings of fact, that the second defendant is a bona fide purchaser for value without notice of the fraud. The submission that the second defendant is an assignee “by operation of law” is misconceived; the term “by operation of law” is used in contradistinction to assignment inter vivos. By that phrase “assignment by operation of law” is meant devolution upon testacy or intestacy. The second defendant does not base his claim upon devolution, he claims by right of purchase, i.e. by inter vivos disposition or assignment. Therefore if the case had rested solely upon knowledge of a defect in the loan transaction, the second defendant would have enjoyed protection under the said proviso to section 23 (1) of the Ordinance.
On the point that the trial court erred in its findings that the second defendant is a bona fide purchaser for value without notice, counsel referred to paragraph (17) of the statement of claim where it is alleged that the second defendant acted in collusion with the auctioneer, the third defendant, to fake the sale. Counsel then referred to the positive findings made by the learned judge (i) that he rejected the account of the sale given by the second defendant and Frimpong, his first witness and accepted the evidence of Kwaku
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Agyei, the fourth witness for the plaintiffs, and (ii) that “ I do not believe that the second defendant would give Frimpong an open mandate to go and bid at an auction sale to any extent, when he does not know what to be sold beforehand. I am sure he knew what was to be sold.” Counsel submitted that the evidence which the learned judge accepted is that there was no sale at all; and that all that happened was that the auctioneer, the third defendant, arrived accompanied by two men at a spot in the town close to where the defendant was, Frimpong walked from the second defendant to meet them, and as he got close the third defendant declared him purchaser of the farms. That finding coupled with the further finding made by the learned judge that the second defendant knew what was going to happen, is conclusive evidence of collusion in the fraudulent sale, so that the second defendant had knowledge of and was tainted with the fraud as regards the sale, though he had no knowledge of the defect in the documents.
Now, since the learned judge did not rest his decision solely on the defect in the documents, but went further to find that the sale is fraudulent, counsel for the plaintiffs is right in his submission, that upon the findings of fact made by the learned judge himself, he erred in holding that the second defendant is a bona fide purchaser for value of the legal estate without notice. Upon the evidence taken as a whole, no room is left for doubt that the fraudulent sale was the culmination of collusion between the second and third defendants to defraud the plaintiffs.
In the light of these facts, it is clear that the learned judge erred in holding that the second defendant is a bonafide purchaser for value without notice of the fraud. But although the learned judge misdirected himself by non-direction on the proviso to section 23 (1) of the Moneylenders Ordinance, Cap. 176 (1951 Rev.), and further erred in holding that the second defendant is a bona fide purchaser for value without notice, justice was done by his final order entering judgment for the plaintiffs against the second defendant.
For these reasons, I would dismiss the appeal with costs.
JUDGMENT OF APALOO
I agree.JUDGMENT OF LASSEY J.A.
I also agree.
DECISION
Appeal dismissed.
S.O.
