Division: IN THE SUPREME COURT
Date: 25TH MAY 1964
Before: SARKODEE-ADDO CJ, OLLENNU AND ACOLATSE JJSC
JUDGMENT OF OLLENNU JSC
Ollennu JSC delivered the judgment of the court. The respondent, commenced these proceedings at Kumasi, in the Land Division of the then Supreme Court, claiming (i) an order to set aside the sale of a farm made under a mortgage, (ii) accounts of the proceeds of the said farm, and (iii) damages for wrongful sale thereof. The material averments in his statement of claim are that he mortgaged the farm in dispute and another one to secure a capital loan of £G300 and interest of £G150 thereon; that when payment became due, the mortgagee, the first appellant, placed public notice advertising the farms for sale at public auction without giving him one month’s notice of his intention to sell as provided under the mortgage; that upon an approach the respondent made to the first appellant, the latter agreed to postpone the sale for a year; and that in breach of his agreement to postpone the sale, and without informing the respondent, the first appellant caused the farm to be sold three months after the date originally advertised for the sale to be made. The sale was conducted by the third appellant, a licensed auctioneer, and the farm was knocked down to the second appellant, the highest bidder at the auction sale.
The defence of the first and third appellants at the trial was that the sale was made in compliance with the provisions of the mortgage deed; they denied the allegation that the first appellant agreed to postpone the sale. And the defence of the second appellant was that he was a bona fide purchaser without notice of the breach of the condition to give notice, and his title is therefore protected by the purchaser’s protection clause in the mortgage deed.
Five issues were set down for trial, the most important of them were: (1) whether the mortgage debt was made of £G300 principal with £G150 interest thereon, (2) whether or not one month’s notice was given to the plaintiff (respondent) before the property was sold, (3) whether or not the first defendant (appellant) agreed to postpone the sale, and consequently had the auction notices filed in February 1958 withdrawn, and (4) whether fresh auction notices were filed before the sale of the property in May 1958.
It appears that although the respondent had all these and other issues set down for trial, his main complaint at the trial was, that the sale was void because in February 1958 the first appellant, after he had had the property advertised for sale (by auction notice, exhibit A, dated 20 February 1958), agreed to postpone the sale for a period of twelve months, but that he committed a breach of this agreement. This is borne out in the evidence he gave just before the conclusion of his evidence-in-chief where he said: “I say in view of the subsequent agreement the defendant should not have sold the farm and the sale is unlawful and should be set aside.” It is also confirmed in the final address of his counsel to the court below, the full text of which is as follows: “Action not on the ground that no notice was served but on the ground that
property was released from attachment – no fresh notice went out.”
The learned commissioner, in a fairly short judgment, made a brief summary of the evidence led on behalf of the parties without making any critical examination or evaluation of any of them; he then concluded by entering judgment for the plaintiff in the following terms:
“I accept the evidence of the plaintiff, and that the defendant agreed to the extension of time to 30 January 1959, and that the sale of plaintiff’s cocoa farm in May 1958 was unlawful and that plaintiff had no notice as required under the mortgage. I therefore give judgment for the plaintiff, set aside the sale of plaintiff’s cocoa farm set out in his statement of claim, order an account of the proceeds of the cocoa collected from the time of the sale to date of judgment, but as no damage has been proved, I award no damages . . .”
Where rights such as the right of a mortgagee, have accrued to a party under a contract, the party cannot be postponed in the exercise of that right except by express waiver, or by an agreement enforceable at law, not to exercise that right until a future date. Such agreement not to exercise the right may be enforced in one of two ways: (i) by action for injunction to restrain the promissor from exercising the right before the postponed date, or (ii) where the right has been exercised in contravention of the agreement, by action for damages for breach of that agreement. A breach of that agreement will not render the exercise of the right illegal so as to avoid it completely.
Therefore upon the finding of the commissioner that the first appellant agreed to extend the time to 30 January 1959, it became quite clear that the respondent’s claim was misconceived, and the commissioner should, upon his said findings, have dismissed the same.
We would observe in passing, that the learned commissioner must have used the term “agreement” in its ordinary sense, and not as a legal term, namely, an agreement enforceable at law, because there is no evidence upon which he would be justified in law in holding that there was a contract between the first appellant and the respondent the performance of which can be enforced against the first appellant in a court of law. There was no agreement by deed, and there was no consideration moving from the respondent to the first appellant for the alleged oral agreement. Therefore the finding that there was an agreement is wrong.
The main grounds of appeal argued are: (i) the learned commissioner erred in setting aside the sale, since upon a proper construction of exhibit B (the indenture of mortgage) the purchaser got a good title, notwithstanding any irregularity leading to the sale, and (ii) the learned commissioner erred in law in ordering accounts because none of the defendants is an accounting party vis a vis the plaintiff.
The mortgage deed, exhibit B, relied upon by the respondent contained a “purchaser’s protection clause” which reads as follows:
“PROVIDED ALWAYS that the title of a PURCHASER shall not be impeachable on the ground that no case has arisen to authorise the sale or that the due notice was not given or that the power of sale was otherwise improperly exercised”.
The principle of law governing rights of parties to a mortgage containing this clause is set out in Coote’s Law of Mortgages (9th ed.), Vol. II, at p. 925 as follows:
“Where conditions are imposed upon the exercise by a mortgagee of his power of sale, the right of mortgagor to restrain a sale on the ground that the conditions have not been complied with is frequently to a great extent neutralized by the insertion of a provision, usually called the purchaser’s protection clause,’ declaring that, upon any sale purporting to be made in pursuance of the power, the purchaser shall not be bound to inquire whether the conditions have been performed or observed. In such a case the mortgagee can sell, and make a good title to a bona fide purchaser without notice of the breach of the conditions, and the contract for sale
will bind the mortgagor, whose only remedy will be in damages against the mortgagee . . .”
This principle of law was applied in the English case of Dicker v. Angerstein.1 That was a suit in respect of a sale under a mortgage which contained the “purchaser’s protection clause.” The claim was that the sale was invalid, because the mortgagee failed to give notice and also that if accounts were taken it would show that the security was satisfied before the sale. It was held that in view of that clause, “the sale, having been made to a bona fide purchaser without notice, was valid, even if the security should prove to have been satisfied.” In the course of his judgment, Jessel M.R., after setting out the “purchaser’s protection clause” as contained in the deed of mortgage in question said2
“It appears to me that this is put in about as plain language as you can put it, that the right to sell shall be so absolutely vested in Tidy as to give a good title to the purchaser, that is, to a bona fide purchaser, which this gentleman is, notwithstanding that the power of sale is not really exercisable; if it purports to be in exercise of the power, which this sale was, it is to be deemed within the power, which means that the remedy of Angerstein is against Tidy in damages, which is supposed to be a sufficient protection to the mortgagor; and no doubt, in the case of a solvent mortgagee, it is a very efficient protection. But, then, it is said it does not apply to the case where the power of sale is not exercisable because the mortgage has been paid off. The answer is that it applies to that case as well as to every other. It is a case in which it is still a sale purporting to be made, although the mortgage money has been handed over, and the mortgagor has not taken either the precaution of getting back the mortgage deeds, which he could have got back, or of getting a reconveyance,nor an indorsement which would have the same effect.”
We cite those words with approval. Again in Akyeampong v. Atakora,3 a mortgagee gave notice of intention to sell at a time when the mortgage debt had not become due and payable, but sold about three months after payment had become due and the debt had remained unpaid. The West African Court of Appeal held that the notice was bad and therefore the sale was wrongful, but not void, therefore the bona fide purchaser was protected, and that the remedy of the mortgagor and protection for damage against the mortgagee, if he could prove substantial injury resulting to him from the wrongful sale; not being able to prove any such injury, the claim of the mortgagor was dismissed.
Now having found as a fact that the first appellant failed to give the respondent notice as required under the mortgage, exhibit B, it was incumbent upon the learned commissioner then to consider the “purchaser’s protection clause” provided in the mortgage and to give effect to it as the law requires. This the learned commissioner failed to do. If he had done so, he would have been obliged upon the authorities to dismiss the respondent’s case.
The law makes it incumbent upon us to do that which the trial court ought to have done but failed to do, i.e. in this instance, to dismiss the plaintiff’s case.
One more observation should be made. In a sale either in execution or under a mortgage, a clear distinction should be drawn between an irregularity and an illegality. An irregular sale may be voidable or give cause for action in damages if certain conditions are proved to exist, e.g. substantial injury to debtor. On the other hand an illegal sale is void ab initio and no title passes under it. This point of law is fully discussed in Kwabena v. Aninkora.4 Applying the principle in that case and in Akyeampong v. Atakora (supra) to the present case, we would
say that at its very best, the sale would merely be irregular, not illegal. Therefore the respondent’s remedy, if any, will depend upon proof of substantial injury. But the learned commissioner found upon the facts that the respondent proved no damage. Upon his said finding, the commissioner should have dismissed the respondent’s claim upon that ground also.
Thus it is made abundantly clear that the judgment of the learned commissioner cannot be supported upon any ground whatsoever; in the interest of justice it must be vacated.
The appeal is therefore allowed, the judgment of the court below is set aside including the order as to costs; any costs paid to be refunded. For that judgment the following is substituted: The respondent’s claim is dismissed against each of the appellants, and judgment entered thereon for the appellants. The appellants will have their costs in the court below to be taxed, and their costs in this court fixed at £G82 16s. 9d. Court below to carry out.
DECISION
Appeal allowed.
T. G. K.
