MANU v. EMERUWA [1971] 1 GLR 442

DIVISION: IN THE HIGH COURT, ACCRA

DATE: 26 MARCH 1971

BEFORE: ABBAN J.

CASES REFERRED TO

(1) Mills v. Charlesworth (1890) 25 Q.B.D. 421; 59 L.J.Q.B. 530; 63 L.T. 508; 39 W.R. 1; 6 T.L.R. 452, C.A.

(2) Harrold v. Plenty [1901] 2 Ch. 314; 70 L.J.Ch. 562; 85 L.T. 45; 49 W.R. 646,17 T.L.R. 545; 8 Mans. 304.

(3) Bassil v. Buckle, Court of Appeal, 18 August 1969, unreported; digested in (1970) C.C. 6.

(4) Smith v. Packhurst (1741) 3 Atk. 135; 26 E.R. 881.

(5) Lloyd v. Lloyd (1837) 2 My. & Cr. 192; 40 E.R. 613.

(6) Coggs v. Bernard (1703) 2 Ld. Raym. 909; or 92 E.R. 107.

(7) Morris v. Martin (C. W.) & Sons Ltd. [1966] 1 Q.B. 716; [1965] 3 W.L.R. 276; 109 S.J. 451; [1965] 2 All E.R. 725; [1965] 2 Lloyd’s Rep. 63, C.A.

NATURE OF PROCEEDINGS

ACTION for damages as a result of the alleged breach of a contract for pledge by the pledgee.

COUNSEL

I. Amoo-Lamptey (C. B. Quist with him) for the plaintiff.

K. F. Asafu-Adjaye (Quansah with him) for the defendant.

JUDGMENT OF ABBAN J.

In this action the plaintiff claims from the defendant: (a) damages of N¢8.00 a day from 15 October 1968, to the date of judgment for the use of the plaintiff’s vehicle, No. GK 6; (b) an order for the return of the said vehicle to the plaintiff. The facts in this case appeared to be simple and straightforward, but they raised very interesting legal points which demanded careful attention.

The plaintiff in his evidence averred that on 15 October 1968, he was in some financial difficulties and he approached the defendant from whom

[p.444] of [1971] 1 GLR 442 he borrowed an amount of N¢1,000.00. The plaintiff promised to refund the N¢1,000.00 in full on 30 October 1968. According to the plaintiff, he deposited with the defendant his vehicle, an Opel Caravan with registration number GK 6, together with its insurance policy, quarter licence and key. The understanding was that the defendant was to keep the said vehicle and those documents as security for the repayment of the said loan of N¢1,000.00. The transaction was embodied in writing which was tendered by the plaintiff as exhibit A. The plaintiff stated that the defendant was not to use the vehicle. But contrary to the agreement, the defendant used the vehicle with the result that the said vehicle was badly damaged.

The only witness for the plaintiff, Kofi Akowua, stated that the plaintiff ‘s said vehicle was sent to his workshop for repairs by the defendant and her son Anthony. This witness, who is a fitter by profession, further averred that on the first occasion when he tested the vehicle at the request of the defendant he found that there was something wrong with the clutch and he repaired it. He said the defendant’s son used the vehicle to learn how to drive and in the course of these driving lessons, the son damaged the steering and the brakes. As a result, the vehicle was sent to his fitting shop for the third time for repairs. He said on this third occasion the letter “L”, written on a white card, had been conspicuously fixed on the car indicating that the vehicle was being used or driven by a learner. Mr. Akowua stated that after he had effected repairs on the vehicle he used to see the vehicle being driven by the defendant’s son, Anthony, in the town and along trunk roads.

The defendant in her evidence stated that about three years ago the plaintiff in the company of another young man went to her shop and asked her for a loan of N¢1,000.00. To be sure of repayment the plaintiff offered his vehicle (No. GK 6) as security and the plaintiff promised to pay the loan within three weeks from that date. She said a document was prepared incorporating the terms as stated above. This document was read over and interpreted to her, she being an illiterate. It must be observed at this stage that the defendant, in her evidence, did not deny the plaintiff’s allegation that the vehicle is now damaged. She did not also deny the plaintiff’s averments that she used the vehicle and that her son was seen very often driving the vehicle not only in the town but also along trunk roads. Again the defendant never denied that her son Anthony had taken driving lessons with the plaintiff’s vehicle and in the process damaged the steering and the brakes.

Counsel for the plaintiff contended that the transaction between the parties was that of pledge, and that the defendant had no right to use the vehicle because there was nothing in the agreement authorising her to use the vehicle and also because there was the likelihood of the vehicle being damaged through usage. Learned counsel for the plaintiff therefore submitted that the defendant breached the contract of pledge and should be condemned in damages which must be calculated at N¢8.00 a day from 15 October 1968, that is, the day the vehicle was deposited with the defendant, up to the date of judgment.

[p.445] of [1971] 1 GLR 442

Learned counsel for the defendant, on the other hand, argued that in construing exhibit A, which embodied the terms of the transaction, the court should confine itself to the four corners of that document and must not go outside the document to find the intention of the parties. Counsel contended that from exhibit A, it is clear that the parties intended to create a mortgage and not a pledge. Counsel argued that if they had intended to create a pledge they would not have used words like “covenant,” “hereby assign” and “absolute assignment” and that the court should hold that exhibit A constituted a mortgage of a personal chattel. On this basis learned counsel for the defendant submitted that by exhibit A, the ownership of the plaintiff, so far as the vehicle was concerned, was transferred absolutely to the defendant who was entitled to use it in any manner she liked. Counsel also contended, half-heartedly, that the defendant in any case never used the vehicle even though she could have done so.

It must be decided, first and foremost, whether the parties intended to create a pledge or a mortgage of personal chattel. A pledge is a transfer of the immediate possession of goods or chattels by way of security for the payment of a debt or performance of an obligation. In Mills v. Charlesworth (1890) 25 Q.B.D. 421 at p.424, C.A. Lord Esher M.R. said: “A pledge, in the ordinary sense of the term, is a case in which money is advanced on goods or chattels which are given into the possession of the person who advances money on them.” When a pledge is made the pledgor is divested of the physical possession of the chattels pledged but retains his title to the chattels and the interest of the pledgee does not amount to property in the sense of rights of ownership. But the pledgor has no right to the chattels without paying off the debt and until the debt is paid off, the pledgee has the whole present interest: See Harrold v. Plenty [1901] 2 Ch. 314 at p. 316. On the other hand, a mortgage is a kind of security which passes the property in the goods out and out to the mortgagee. That is, under a mortgage the security is the transfer, contingently, of the legal or the equitable ownership; and unlike a pledge there is the incidental right of foreclosure.

In the light of this distinction what then was the nature of the transaction intended by the parties? In cases of this kind, and especially where all the parties to the agreement are illiterate, the court should not restrict itself to the words used in the document to determine the true nature of the transaction intended by the parties. It is the substance of the transaction, and not the form, which must be looked at. The oral evidence and the circumstances surrounding the agreement must also be considered so far as they tend to disclose the actual intention of the parties. In delivering his judgment in the case of Bassil v. Buckle, Court of Appeal, 18 August 1969, unreported; digested in (1970) C.C. 6, Azu Crabbe J.A. in a dissenting judgment said:

“Equity looks at the substance of the transaction and not merely at the form. It is the essence of the transaction that matters, and the Court of Equity will not be restricted to the words in the deed, but will admit extrinsic evidence to inform itself of the true nature of the [p.446] of [1971] 1 GLR 442 transaction. The court will receive any or all the facts and circumstances surrounding or attending the transaction in question, ‘in so far as they tend to disclose its true significance and the actual design of the parties’.”

With this principle in mind, I have examined carefully the document exhibit A together with the evidence before me and I have come to the conclusion that the parties intended to create and did create a pledge and both of them in fact understood that to be the position. The plaintiff in his evidence said: “On 15 October 1968, I borrowed N¢1,000.00 from the defendant and I pledge my vehicle to her as security for re-payment the terms of re-payment were set out in an agreement.” The defendant also stated in the course of her evidence-in-chief as follows:

“I was in my store when the plaintiff came with one young man and said he wanted a loan of N¢1,000.00. He asked me to give him a loan of N¢1,000.00 and to be sure of repayment he was going to offer me his car as a security. But that he would come after three weeks to refund the loan and to take back his car.” Even if I restrict myself only to the four corners of the document, exhibit A, as advocated by counsel for the defendant, I would still say that the transaction was that of a pledge. The parties endeavoured to express their intention in writing. But it appears that exhibit A was clumsily prepared. Certain phrases or words like “absolute assignment,” “covenant” and “absolutely” were put in the document by whoever prepared it, without appreciating their legal significance. These words rather tended to create ambiguities on the face of the document. Nevertheless, in the consideration of the whole document, with particular reference to clause (2), which stated that the defendant was to hold on to the vehicle but to give it up to the plaintiff on the payment of the loan, it is clear that a contract of pledge was intended. In cases of this kind, all the terms of the document must be looked at and whatever may be the phraseology adopted or used in some particular part of the document, if on the consideration of the whole document there are grounds appearing on the face of the document affording proof of the real intention of the parties, then that intention ought to prevail against the obvious and ordinary meaning of those words. Lord Willes C.J. in the case of Smith v. Packhurst (1714) 26 E.R. 881 said at pp. 881-882:

“Another maxim is, that such a construction should be made of the words in a deed, as is most agreeable to the intention of the grantor, the words are not the principal things in a deed, but the intent and design of the grantor; we have no power indeed to alter the words or to insert words which are not in the deed, but we may and ought to construe the words in a manner the most agreeable to the meaning of the grantor, and may reject any words that are merely insensible … the art of construing words in such a manner as shall destroy the intent may shew the ingenuity of counsel, but is very ill becoming a judge.”

[p.447] of [1971] 1 GLR 442

See also the dictum of Lord Cottenham L.C. in Lloyd v. Lloyd (1837) 40 E.R. 613 at p. 617. The next question is whether the defendant as a pledgee could use the vehicle. A pledgee, as already indicated, has a special interest in the chattel pledged. In general, all that the pledgor requires in the personal obligation of the pledgee is that on the re-payment of the loan the chattel shall be given back to the pledgor and for the time being the pledgee shall be responsible for its safe custody. In the instant case, there is nothing in the agreement showing that the defendant was not entitled to use the vehicle and I would say that the fact that the car key, the insurance policy and the quarter licence covering the vehicle were all given to the defendant, is an indication that the defendant was expected to make reasonable use of the vehicle. At any rate, on the general principle, the defendant was entitled to use the vehicle, care being taken not to damage it, that is, the defendant could make reasonable use of the vehicle and as a pledgee she was only required to take that degree of care which may reasonably be looked for, having regard to all the surrounding circumstances. So that if through her negligence the vehicle were lost or damaged the defendant would be liable to an action. The defendant would be liable, not for using the vehicle, but for using it in a negligent manner and thereby causing damage to it. See the dictum of Holt C.J. in the celebrated case of Coggs v. Bernard (1703) 92 E. R. 107 at p. 112; and also Halsbury’s Laws of England (3rd ed.), Vol. 29, para. 418 at p. 219.

From the evidence, I am satisfied that the defendant’s son, with the consent of the defendant, made unreasonable and unnecessary use of the plaintiff’s vehicle. The son went to the extent of using it for driving lessons while the defendant looked on unconcerned; and I believe that the steering, the brakes and the other parts of the vehicle were damaged through the rough handling of the vehicle by the defendant’s son. I consider this to be nothing but gross negligence on the part of the defendant who as a pledgee was under a duty to take all reasonable precautions to protect the vehicle from depredation. The fact that the actual damage to the vehicle was caused not by the defendant herself but by the defendant’s son is irrelevant. It is clear from the evidence that the defendant never raised objections to her son using or driving the vehicle. The inference is that it was she who allowed the son to use the vehicle and she must be held vicariously liable for the negligent acts of her son. In Morris v. C. W. Martin & Sons Ltd. [1966] 1 Q.B. 716, C. A. Lord Denning M.R. in reading his judgment said at p. 728:

“[W]e may deduce the general proposition that when a principal has in his charge the goods or belongings of another in such circumstances that he is under a duty to take all reasonable precautions to protect them from theft or depredation, then if he entrusts that duty to a servant or agent, he is answerable for the manner in which that servant or agent carries out his duty. If the servant or agent is careless so that they are stolen by a stranger, the master is liable.”

[p.448] of [1971] 1 GLR 442

While the case was pending before the court and in order to preserve the vehicle this court made an interim order, on 9 February 1970, appointing the registrar of the High Court, Kumasi, as a receiver and manager to take charge of the vehicle and to keep the same pending the final determination of the suit. At that time the vehicle was in such a deplorable state that it could not be driven from the defendant’s premises to the precincts of the High Court, Kumasi, rather it had to be towed. The plaintiff’s evidence on this was not challenged and I have no reason to disbelieve him. I therefore find that the plaintiff’s vehicle is now unroadworthy and considerable repairs will have to be made on the vehicle before it can be put on the road again. The cost of such repairs, in all fairness, ought to be borne by the defendant. I now come to the question of damages. The plaintiff did not lead evidence as to the present value of the vehicle and its value at the time it was deposited with the defendant. Neither did he tell the court as to how much it will cost to repair the vehicle. He only gave evidence with respect to what he was earning from the vehicle when the vehicle was in his possession. But I think that does not solve the problem because it is impossible to take the total amount as representing his loss of earnings from 15 October 1968, up to the present date to be equivalent to the cost which will be incurred in repairing the car. In any case, as has already been held elsewhere in this judgment, the defendant, as a pledgee, was entitled, at least, to the reasonable use of the vehicle pledged; and in these circumstances it is difficult to understand why the plaintiff should attempt, in the first place, to claim damages against the defendant for using the said vehicle. The defendant’s only liability is to make good any damage caused to the vehicle as a result of her negligence when exercising her right of user. The plaintiff’s claim against the defendant for damages for using the vehicle is therefore misconceived and it is accordingly dismissed. I will however enter judgment for the plaintiff for:

(a) the return of the vehicle,

(b) all the necessary expenses which the plaintiff will have to incur in order to make the said vehicle roadworthy,

(c) all the expenses, if any, incurred by the receiver and manager since 9 February 1970, up to the present date.

In order to ascertain (b) and to obviate the practical difficulties likely to arise, I hereby order that the said receiver and manager should take steps to have the vehicle examined and the cost of repairs estimated by the engineer in charge of the State Transport Corporation, Kumasi. The said estimated cost of repairs together with the details of the receiver’s expenses in (c) should be filed within three weeks from today and copies thereof served on counsel for the parties. Thereafter, the court can be moved for a final order discharging the receiver and manager and releasing the vehicle

[p.449] of [1971] 1 GLR 442 to the plaintiff. The plaintiff having partly won the action is entitled to some costs which I assess at N¢120.00.

DECISION

Judgment for the plaintiff.

T. G. K.