HIGH COURT, ACCRA
Date: 27 February 2003
COUNSEL:
JUDGEMENT OF AMONOO-MONNEY JA
Amonoo-Monney JA. On 2 October 2000 the plaintiff sued out a writ of summons against the defendant bank in which he claimed the following reliefs:
“(a) A declaration that the plaintiff owns 160,000 paid up shares of the defendant-company.
(b) A declaration that the plaintiff is still a director of the defendant-company and that any purported or alleged removal of the plaintiff as director is null and void.
(c) A declaration that the purported dismissal of the plaintiff as executive director of the defendant-company was wrongful, contrary to the provisions of the Companies Code, 1963 (Act 179) and therefore null and void.
(e) A declaration that plaintiff is entitled to adequate payment for his work as executive director from March 1995 until December 1996 and as director to date.
(f) A declaration that the plaintiff is entitled to receive compensatory payment equal to fifteen percentum of the defendant-company’s capitalisation in respect of his remarkable vision, initiative and enterprise in bringing to reality the defendant-company.
(g) A declaration that the plaintiff is entitled, similarly, to any payments received by Alhaji F El-Aziz as honorarium for promotional work.
(h) General damages.
(i) Costs.”
I must say this case was marked by the prolixity of the pleadings that were filed. The statement of claim that accompanied the writ run into 38 paragraphs, the statement of defence consisted of 35 paragraphs and, for good measure, the reply was made up of 35 paragraphs. At the close of pleadings the issues that were set down for trial were:
“(a) Whether or not the plaintiff owns 160,000 paid up shares of the defendant-company.
(b) Whether of not the plaintiff is still a director of the defendant-company.
(c) Whether or not the plaintiff’s purported removal as director of the defendant-company was valid.
(d) Whether or not it was wrongful and oppressive of the plaintiff’s interest for the defendant-company to have sold majority shares in the defendant-company to SIBC Africa Holdings Limited.
(e) Whether or not the sale of SAHL was with the plaintiff’s knowledge and consent.
(f) Whether or not the plaintiff is entitled to be compensated for his work as executive director from March 1995 to December 1996 and as director up to date.
(g) Whether or not the plaintiff is entitled to receive compensatory payment equal to fifteen percentum of the defendant-company’s capitalisation.
(h) Whether or not the plaintiff is entitled similarly, to any payments received by Alhaji F E Aziz as honorarium for promotional work.
(i) Whether or not any of the directors of defendant-company was involved in fraudulent practices at the defendant-company.
(j) Whether or not any of the directors met the strict criteria for approval as directors of a bank in accordance with the companies Code and the Banking Act.
(k) Any other issues that may be raised on the pleadings.”
The plaintiff and Alhaji El-Aziz Fattau met in Lagos in 1993 and held discussions about establishing a mortgage bank in Ghana. Alhaji Fattau has participated in this action, not in his personal capacity, but as a director and a representative of the defendant-bank. The two men subsequently worked together in furtherance of their common objective and enlisted the assistance of other persons like Joseph Ofori, who later became a director and shareholder of the defendant-bank, in preparing a “feasibility report” and, to some extent, E H Boohene, who also became a director and shareholder, and was also described as one of the promoters of the proposed bank. A company, Union Mortgage Bank Ltd was incorporated on 8 March 1994 with the following as the first directors: Alhaji Fattau El-Aziz, Edward Henaku Boohene, Kwame Charles Serbeh-Yiadom, Samuel Wilfred Yaw Inkoom and Joseph Ofori with Alhaji Fattau El-Aziz and Kwame Charles Serbeh-Yiadom as the subscribers to the regulations of the limited liability company. The Bank of Ghana granted the company a “Licence to operate (the) business of banking” as from 11 November, 1996 and the company became “entitled to commence business” under the Companies Code, 1963 (Act 179) with effect from 17 March 1997.
It appears before the bank could even carry on banking business in accordance with its mandate, it had problems with the Bank of Ghana which resulted in its banking licence being suspended. According to the sixth plaintiff witness, Frances Sackey of the banking supervision department of the Bank of Ghana, Union Mortgage Bank “had a problem with capitalisation and they were asked by Bank of Ghana to look for an institutional investor either local of foreign.” And finally Stanbic was the strategic investor which was found by Union Mortgage Bank. She also said that: “Bank of Ghana realised there was a misrepresentation from their accounts … They were not still getting the ¢1 billion which was the minimum requirement.”
The first of the reliefs that the plaintiff is seeking by his writ, as has been indicated already, is “A declaration that the plaintiff owns 160,000 paid up shares of the defendant-company.” The defendant-company was registered with 10,000,000 shares of no par value and each of the two subscribers to the regulations agreed to take 500,000 shares for a “consideration payable in cash” of ¢500 million. It is undisputed that at this stage neither of the subscribers had provided any valuable consideration, and certainly no cash, for the number of shares indicated against his name in the regulations of the company, exhibit C. One of the conditions imposed by the Bank of Ghana as far back as February 1994, for consideration of the application in connection with a banking licence for the proposed Union Mortgage Bank was that:
“In view of the proposed bank being a development finance institution, the minimum paid-up capital would have to be ¢1 billion. We would also appreciate it if you could provide the share holdings structure and the contributions thereof.” (sic)
In his evidence the plaintiff said that he and his co-promoter, that is Alhaji Fattau, undertook a “restructuring of the shares” in March 1996 and that a meeting of the company’s board of directors held on 9 May 1966 approved the restructuring to reflect the shareholding position of the bank as at 30 April 1996. This is part of the record of his evidence-in-chief.
“Q Give the date.
A The meeting was held on 9 May 1996 to approve the shareholding as at 30 April 1996 my lord.
Q And it’s signed by whom?
A The minutes were prepared by myself. The resolution to forward the document to Parnell Kerr Foster was signed by Alhaji Fattau and myself and certificates were also signed by Alhaji Fattau as chairman.”
He then tendered in evidence copies of the minutes of this board meeting together with some attached documents as exhibits M, M1-M3, and copies of share certificates as exhibits N, N1-N9.
There is nothing, however, in exhibit M, the minutes of the board meeting recorded by the plaintiff, which shows that the shareholding of the bank or company was discussed, let alone approved. I quote below the entire minutes:
“MINUTES OF BOARD MEETING HELD ON 9 May 1996 AT VALCO TRUST HOUSE, ACCRA
PRESENT
Alhaji F El-Aziz
E H Boohene
K C Serbeh-Yiadom
D B Pabi
ABSENT
J Ofori
PROCEEDINGS
The meeting considered the list of requirements requested by the Auditors, Pannell Kerr Forster in connection with the preparation of the statement of affairs of the bank. The meeting reviewed the list and mandated management to comply fully. The meeting also mandated management to request the auditors for final review meeting on Friday, 10 May 1996 at 3.00 pm.
It was also decided that a letter be sent to the Banking Supervision Department of the Bank of Ghana to come for physical inspection of the premises. In this connection management was mandated to seek the date of the arrival of the strongroom door from Global Computer and to request them for a technical report to tender during the inspection by Bank of Ghana.
The meeting adjourned indefinitely.
(Sgd) K C Serbeh-Yiadom
Secretary”
The resolution that the plaintiff referred to in his evidence was in these terms:
“At a meeting of the board of directors of Union Mortgage Bank Ltd held at its main offices located in the Valco Trust House Accra on 7 May 1996 it was resolved that the cut-off date for submission of the bank’s statement of affairs and other relevant documents to Bank of Ghana shall be Tuesday 30 April 1996.”
Exhibit M2 which is attached to the copies of the minutes and the resolution is headed “Allotment of shares/shareholding Union Mortgage Bank Ltd” and gives the particulars for thirteen persons or companies or institutions including the plaintiff. It is signed by Alhaji Fattau. Against the name of the plaintiff, K C Serbeh-Yiadom, are these particulars: —under “No of shares” 160,000: under “Price of share” ¢1,000; under “Payment” ¢160 million and under “Total” ¢160 million. These particulars are contained in exhibit N8 which is a photocopy of the share certificate of the plaintiff. It is however strange that of all the photocopies of the ten share certificates tendered in evidence, it is only the share certificate of the plaintiff which, contrary to section 53(1) of Act 179, does not seem to be “under the common seal of the company.”
The plaintiff claimed that he had paid for the 160,000 shares. He testified that:
“The shares were valued at that time at ¢1,000 per share bringing the total value to ¢160 million. I paid for the shares through fees that were due me for the work that I did, my vision, my initiative and my enterprise which was calculated at 15 percent of total capitalisation. This was agreed to between me and my co-promoter/co-subscriber…
My lord there are two components to the 160,000 shares. There is the 150,000 shares which is corresponding to the fifteen percent and 10,000 shares which corresponds to fees that came to me from the company called Lands Securities Ltd. This company was incorporated by my co-promoter and myself and the company performs certain functions for the bank.”
The plaintiff said he realised in May or June 2000 that 10,000 shares had been recorded against his name in the company’s annual returns submitted to the Registrar-General’s Department. Exhibit T embodies the annual returns of Union Mortgage Bank Ltd made up to 31 December 1997 and signed by the plaintiff’s own witness, the fifth plaintiff witness, Daniel Benefo Pabi, managing director and also by the second plaintiff witness, Tim Brew (Thomas Marshall Brew) the company secretary and legal adviser. It states that the plaintiff holds 10,000 shares in the company. Exhibit Y which is also the annual returns of Union Mortgage Bank Ltd made up to 31 December 1996 indicates the number of shares held by the plaintiff as 10,000. Attached to exhibit Y, which is also signed by the second plaintiff witness and the fifth plaintiff witness is the “statement of affairs” (financial statements) of Union Mortgage Bank Ltd as at 16 May 1997 prepared by the company’s auditors.
The plaintiff called as one of his witnesses, Mr Tim Brew, the second plaintiff witness, who for two years was the company secretary of Union Mortgage Bank Ltd and in his evidence-in-chief he testified as follows:
“A. The records before me show that the plaintiff has 10,000 shares in exhibit Y and in the photocopy of exhibit T the plaintiff has 10,000 shares.
Q Do you know how the changes came about?
A As I recall by June 1996 when the company had the structure which reflected that the plaintiff had 160,000 shares, this was based on statement of affairs that was submitted to Bank of Ghana in which the value of some premises or a house was shared among the three promoters, namely Alhaji Fattau, E H Boohene and Kwame Charles Serbeh-Yiadom and each had 150,000 shares making a total value of ¢450 million. That statement of affairs was rejected by the Bank of Ghana on the grounds that they needed to replace that property with cash. And as far as I am aware the other two shareholders, namely Alhaju Fattau ad E H Boohene did replace their shareholding with cash. I am not aware that Mr Kwame Charles Serbeh-Yiadom provided cash for his shares as directed by the Bank of Ghana. That to my mind accounts for the reduction by 150,000 to the 10,000 shares from his original 160,000 shares.
Q Was the plaintiff part of that decision?
A The directive came from Bank of Ghana who rejected the statement of affairs and asked for that replacement to be made so it was not a decision of the shareholders themselves to make that replacement.
Q Was the plaintiff informed about the change in the shareholding from 160,000 to 10,000?
A I cannot specifically recall that a letter was written to state that this was the situation but regarding the development or the state of affairs with Bank of Ghana he was aware of that statement of affairs because the board did discuss that for sometime. Q Was there any certificate issued to reflect this change?
A Yes a certificate was issued to reflect this change.
Q Throughout this period, ie from 1996 did the plaintiff inform you that those 160,000 shares were paid for by him?
A The board at one stage instructed that letters be sent to all the shareholders at that stage for each of them to indicate whether payment has been made for the shares that were allotted and at that stage, I do recall that the plaintiff wrote to say that the shares were his and that they have been paid for him, but no evidence of payment was provided …
Q Now as to the 10,000 that was supposed to be reduced to, was there indication as to how the 10,000 had been paid for?
A The board had determined that for the work done by him. Specifically in respect of the acquisition of the premises in which the bank was housed, it was estimated by the board to be ¢10 million and that was credited to him as payment for the shares.
Q That is the acquisition of the bank premises?
A That is so my lord.”
He continued his evidence-in-chief thus:
“Q Did the company at any point take money from National Trust Holding Co (NTHC)?
A Yes, as part of financial engineering that the company was doing in order to meet the capital requirement of Bank of Ghana; for them to allow us to start operating the company did make some arrangements with NTHC for I think ¢500 million.
Q Was it also capitalised? A It was capitalised among the three shareholders who were the original promoters, that is Ahaji Fattau, Kwame Yiadom and Edward Boohene. Q In what proportion?
A As I recall, I believe it was ¢150 million each. That was part of the arrangement to replace the property which Bank of Ghana had rejected.”
Another witness whom the plaintiff called and who gave evidence on the shares held by the plaintiff and whether he paid fully for them was the fifth plaintiff witness who, for over three years had been the managing director of Union Mortgage Bank Ltd. Part of his evidence under cross-examination was as follows:
“Q The loan which was taken from NTHC how were you going to pay for it?
A As the agreement stipulated we were to invest it in 180-day treasury bills which we did and that convinced NTHC that we meant business. So we were going to pay when the bills matured.
Q You were to pay as the bills matured and when you realized the bills and you paid the company there would still be a shortfall in your capital, wouldn’t it?
A That was so.
Q Now, how did this impact on Bank of Ghana ultimately, this business that you are taking this loan and there is a requirement that your capital should be brought up to ¢1 billion? How did you solve that problem? A Ultimately one of the promoters; Mr Boohene, brought in £100.000 and on conversion it filled this shortfall …
Q Did you notify Bank of Ghana about this money?
A They got to know.
Q Were they satisfied with the bank account?
A They were.
Q The company tried to satisfy the capital deficiency by the value of some property?
A There was an attempt.
Q Can you explain what the com any had tried to do?
A Mr Boohene had a property… It was valued at about ¢450 million and he tried to use it as part of the capital for the bank. Bank of Ghana initially accepted but then they said they will prefer liquid capital instead of fixed capital.
Q So you were forced as it were to go and look for liquid capital?
A That is so.
Q And that is what brought in the £100,000 by Mr Boohene?
A Yes.
Q Now, this money which was converted that is, the £100,000 did you tell us how much it was in cedis?
A It was about ¢315 million at that time.
Q How was this money treated in the books of the company, was it supposed to be encashed to purchase some shares or what?
A It was meant to be equity capital.
Q Against which names was this money allocated as equity capital? A Two members, namely Mr Boohene and Alhaji Fattau Aziz.
Q Can you tell in what proportion the sharing was done?
A 50/50.
Q Now, at the time when the property, that is Mr Boohene s property, had been included in the statement of affairs as capital, it meant the capital was increased by ¢450 million. Now, who were the people who were to benefit from that, as it were, property capital in the company?
A The three promoters—Mr Boohene, Alhaji Fattau and Mr Kwame Charles Serbeh-Yiadom.
Q Again can you tell the court in what proportion this ¢450 million was shared among these three promoters?
A Thirty-three one third percent per promoter.
Q That would mean ¢150 million each?
A That is so.
Q Now, when the Bank of Ghana refused ultimately to accept property capital, what happened to this statement that each had ¢150 million in the equity of the company? A They were withdrawn.
Q So they didn’t have that ¢150 million each anymore?
A That is so.
Q Was the plaintiff aware that this had happened, the fact that he is no longer credited with the ¢150 million?
A He was. All of them were aware.
Q After Mr Boohene had brought in the £100,000 and had been credited to the equity capital of the company and had been allocated to Mr Boohene and Alhaji Fattau did the plaintiff also bring in money to make up for the ¢150 million which had been removed from him as a result of Bank of Ghana’s objection to the property capital? A Not that I was aware of.”
The effect of the evidence of the second plaintiff witness and the fifth plaintiff witness i s that there was on evidence that the plaintiff had paid cash or given valuable consideration to the tune of ¢150 million for 150,000 shares allotted to him.
There was a meeting of the board of directors of Union Mortgage Bank Ltd on 19 November 1996 soon after they had been granted their banking licence. The meeting was attended by Alhaji F El-Aziz, E H Boohene, the plaintiff and the fifth plaintiff witness among others. The minutes of the meeting were recorded by the second plaintiff witness and have been tendered in evidence as exhibit 3. I refer now to some portions of exhibit 3. Under the item “Issue of banking licence” it is recorded:
“Before proceeding to the main business on the agenda, the chairman announced with pride that Bank of Ghana had finally issued Union Mortgage Bank with a bank licence No 154 dated 11 November 1996. Members were pleased with the announcement and asked for copies of the licence as it was passed round for their inspection. The chairman briefed members on the background to the issue of the licence. He said that further to Bank of Ghana’s advice to replace the property in the statement of affairs with cash, the promoters had used National Trust Holding Co (NTHC) loan of ¢500 million to replace the value of the property. In order to maintain the same shareholding structure as advised by Bank of Ghana they had represented the ¢500 million in the statement of affairs as equity for the promoters. He explained further that it was the intention of the promoters to pay cash for the equity so represented in the statement of affairs at a later date. According to him that issue could be resolved internally later.
Members expressed their appreciation at the creativity displayed in solving the liquidity problem of the bank in order to meet the Bank of Ghana’s requirements for issuance of banking licence. They however pointed out that the NTHC funds were a loan to Union Mortgage Bank that must be paid back the on due date. It could not therefore be equated with promoters’ equity payment. The loan was simply used to sort out the property issue and was also not equivalent to the promoters’ effort.”
By the evidence, when the NTHC loan was repaid with interest on 24 April 1997 as per exhibit 10, the bank’s capital naturally and predictably fell below the minimum of ¢1 billion. This is how EH Boohene’s £100,000 came in and it was used by E H Boohene himself and Alhaji Fattau to pay for their shares to the tune of ¢150 million each. This left ¢150 million cash to be paid by the plaintiff for 150,000 of the shares he held in the company. The plaintiff did not pay for these shares and since there was still a shortfall, the minimum capital requirement of ¢1 billion was satisfied by the payment of ¢150 million by Living Zoe Enterprise Ltd for 150,000 shares.
From the evidence led in this action, and from the case and contention of the plaintiff, there are some matters that are worthy of note and deserve to be commented upon. The alleged fifteen percent of the capitalisation of the company that the plaintiff claimed was due to him was not pleaded and the plaintiff was not able to establish, even on the preponderance of the probabilities, that there was any such agreement made between him and his co-promoter in Lagos in 1993, or at any other place or time, for that matter, let alone any such agreement between him and Union Mortgage Bank Ltd. Alhaji Fattau denied any such agreement and even assuming, for the purposes of argument, that there was any such agreement between the two promoters, was that agreement, per se, and without more, binding on the company that was subsequently formed? Surely even if there was any such agreement Alhaji Fattau could not be said to be acting, at that time, as the agent of a non-existent entity. The plaintiff has not instituted any action personally against Alhaji Fattau, his co-promoter and co-subscriber to the regulations, and the impression appears to be created by both the plaintiff in his evidence and his counsel in his submissions that they cannot differentiate between the role of Alhaji Fattau qua promoter arising from a chance meeting in Lagos in 1993 and Alhaji Fattau as director and representative in this action of the defendant-bank. The second plaintiff was not treated as a hostile witness. He was called by the plaintiff as his witness and therefore put forward by the plaintiff as a witness of truth. If he gave evidence that even in the estimation of the plaintiff or his counsel does not support the plaintiff’s claim or case, it does not lie in the mouth of the plaintiff or his counsel to say he lied to the court. On the supposed payment of ¢150 million for 150,000 shares for plaintiff, counsel stated in his written address:
“The plaintiff’s portion was duly paid back from proceeds due him from the defendant-company by way of fees calculated at fifteen percent of total capital on or before but not later than 8 November 1996 when the defendant-company obtained its operational licence.”
The obvious question that flows from this statement is, “if the fees due to the plaintiff, paid for the 150,000 shares valued at ¢150 million, why then is the plaintiff asking for relief (f) if that amount or payment had already been taken care of and accounted for in relief (a)?”
As regards exhibit N8, the photocopy of the share certificate of the plaintiff, which is not under the common seal of the company, section 54(1) of Act 179 provides that:
“54. (1) Statements made in a share certificate under the common seal of the company shall be prima facie evidence of the title to the shares of the person named therein as the registered holder and of the amounts paid and payable thereon.”
This means that there is no conclusive presumption that the holder of a share certificate in fact has title to the shares indicated in the certificate or that he has indeed given value for the shares as stated in the certificate. Counsel for the plaintiff referred in his address to section 54(2) of Act 179 which states that:
“(2) If any person shall change his position to his detriment in reliance in good faith on the continued accuracy of the statements made in such certificate the company shall be estopped in favour of such person from denying the continued accuracy of such statements and shall compensate such person for any loss suffered by him in reliance thereon and which he would not have suffered had the statement been or continued to be accurate.’”
(The emphasis is mine.) This provision cannot avail the holder of the certificate himself who must be deemed to know the true position. It applies, I hold, to third parties who change their positions to their detriment by relying in good faith on the accuracy of the certificate. The plaintiff knew the true position. He was present at the board meeting held on 19 November 1996. He must have known how the company dishonourably manipulated their accounts in order to fulfil the minimum equity requirement to enable the company to get the banking Licence. He is not a stranger to exhibit N8. In fact it appears he is even one of the two directors who signed exhibit N8. From the foregoing I hold that there is no legal or factual basis for this court to make the declaration sought by the plaintiff in relief (a) and I accordingly dismiss that claim.
The plaintiff is also asking for “A declaration that the plaintiff is still a director of the defendant-company and that any purported or alleged removal of the plaintiff as director is null and void.” The plaintiff gave evidence that he was in Lagos, Nigeria when he received, through his solicitors in Accra, notice dated 3 February 1997 of an extraordinary general meeting which was scheduled to be held at the boardroom of the bank on 25 March 1997. The first business that was to be transacted at this extraordinary general meeting, according to the notice, was “To pass a resolution to remove Mr K C Serbeh-Yiadom as a director of the company for impeding the progress of the company.” He said he duly came to Accra to attend the meeting but no meeting was held that day and he learnt that the meeting had rather been held on 12 March 1997, that he was not informed of any change of date for the meeting and his solicitors in Accra had also not received any letter communicating the change of date for the meeting. He went to the Registrar-General’s Department where he learnt, to his surprise, that a return had been filed indicating that he had been removed as a director of Union Mortgage Bank Ltd with effect from 12 March 1997.
The defendant’s representative contended that they sought to inform the plaintiff of the change in date through his solicitors through whom they gave him notice of the first date for the meeting but the solicitors declined to accept the notice claiming they had ceased to act for the plaintiff. The plaintiff, however, denied this. The defendant then sent a notice dated 10 February 1997 to the Lagos address of the plaintiff (exhibit K1) by registered air mail which arrived in Lagos in April 1997. The postal envelope was tendered in evidence as exhibit K2.
Counsel for defendant contended in his address that the defendant-company duly complied with the provisions of Act 179 as to the giving or service of notice of meetings. Section 155(1) of Act 179 states that:
“155. (1) Notice may be given by the company to any member or director either personally or by sending it through the post addressed to him at his registered address, or by leaving it for him with some person apparently over the age of sixteen years at such address.
(4) Where a notice is sent by post, service shall be deemed to be effected by properly addressing, pre-paying, and posting a letter containing the notice and to have been effected at the expiration of forty-eight hours after the letter containing the same is posted.
(5) The letter need not be registered but where it is sent to an address outside Ghana it shall be despatched by air mail.”
Section 156 of Act 179 provides that: “The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting.” Regulation 68 of the company’s regulations, exhibit C, also provides that: “The office of director shall be vacated in accordance with section 184 of the Code and any director may be removed from office in accordance with section 185 of the Code.” The provisions of section 185 of Act 179 are in these terms:
“185. (1) Subject to the provisions of section 300 of this Code and to the following subsections, a company may by ordinary resolution at any general meeting remove from office all or any of the directors notwithstanding anything in its Regulations or in any agreement with any director …
(4) On receipt of notice of an intended resolution to remove a director under this section the company shall forthwith send a copy thereof to the director concerned and such director, whether or not he is a member of the company, shall be entitled,
(a) to be heard on the resolution at the meeting; and
(b) to send to the company a written statement, copies of which the company shall send with every notice of the general meeting or, if the statement is received too late, shall forthwith circulate to every person entitled under section 154 of this Code to notice of the meeting in the same manner as notices of meetings are required to be given.”
It is a salutary and well-known principle of law that a person should be given the opportunity of being heard when he is accused of any wrong doing before any action is taken against him. Sections 155 and 156 of Act 179 are general provisions that deal with service of notice for meetings generally, whiles section 185 deals specifically with the matter of removal of directors. When dealing therefore with the question of the removal of a director of a company one has to consider the combined effect of these sections of the Code. In order that proper effect may be given to section 185(4)(a) of Act 179, I am of the opinion that where, as in this case, an extraordinary general meeting of a company is held to remove a director and that director does not attend the meeting at which a resolution to remove him is to be moved, care must be taken to ascertain that he has in fact been properly made aware of the meeting. This is so because to enable him defend himself the law stipulates that even where the director to be removed is not a member or shareholder of the company he shall nevertheless “be entitled” to be heard at the meeting. This provision may be contrasted with section 153(1) of Act 179 which requires that “The notice of a meeting shall specify the place, date and hour of the meeting, and the general nature of the business to be transacted thereat in sufficient detail to enable those to whom it is given to decide whether to attend or not;. . .” (The emphasis is mine.) It may be unusual for a director who is informed of a meeting at which a resolution to remove him as a director will be moved to decide nevertheless not to attend the meeting. The spirit of section 185(4)(a) of Act 179 assumes greater relevance where, as in this case, the notice of the change in the date of the meeting was sent to the address of the plaintiff in Lagos and also where the change of date of the meeting meant that the meeting was going to be held about two weeks earlier and not later than the original date notified. I am also of the opinion that the defendant-company did not fully comply with the mandatory provisions of section 185(4) of Act 179, which provides that: “On receipt of notice of an intended resolution to remove a director under this section the company shall forthwith send a copy thereof to the director concerned . . .” (The emphasis is mine.) The “copy” of what is to be sent forthwith to the director concerned is not something that emanates or originates from the company itself. The notice that informed the plaintiff of the original date of the meeting (exhibit K) is a one-sheet one-page document or letter under the hand of the secretary of the company. That letter was not received by the company from some other source and the copy that should be sent to the “director concerned” is “notice of an intended resolution to remove a director” which the company receives, obviously from the intended mover of the removal resolution who, himself, must give to the company the notice stated in section 185(2) of Act 179.
Having regard to all the circumstances of the case that I have discussed under this head of claim or relief, I hold that the defendant-company did not comply with the letter and spirit of section 185(4)(a) of Act 179 and I therefore make a declaration in favour of the plaintiff that his removal as a director of Union Mortgage Bank Ltd, now Stanbic Bank (Gh) Ltd on 12 March 1997 was wrongful and null and void.
The plaintiff further seeks “A declaration that the purported dismissal of the plaintiff as executive director of the defendant-company was wrongful, contrary to the provisions of the Companies Code and therefore null and void.” It is not clear from the evidence as to when or how the plaintiff became, assumed the title of, or was made executive director of Union Mortgage Bank Ltd. Exhibit F which is a letter from the company to the head, banking supervision department of the Bank of Ghana dated 24 October 1995 was signed by the plaintiff as “Executive Director” and Alhaji F El-Aziz as “Chairman.” In August 1996 the plaintiff wrote a letter to the chairman of the board of directors of Union Mortgage Bank Ltd dated 9 August 1996 under the heading “Discontinuation of Executive Functions” (exhibit 1) in which he stated:
“I am, therefore, giving notice that with effect from 31 August 1996, I shall cease to be part of the management team. I must say that I will, however, continue to assist management whenever I am called upon to do so.”
He signed the letter with the title “Executive Director (Interim).” The letter seems to have been copied to the managing director. However, subsequently, the plaintiff sent another letter to the chairman of the board of directors of the bank dated 25 October 1996 with copies to the managing director and the secretary/legal adviser. The one-paragraph letter headed “Re: Discontinuation of Executive Functions” was in these terms:
“I refer to my letter dated 9 August 1996 on the above. I have given the matter careful consideration and have decided to rescind that earlier decision. I will also like to use this opportunity to protest, as before, any purported board decision whose purpose is to remove me from executive position in the bank.”
The issue of executive director came up for discussion at the board meeting attended by the plaintiff and held on 19 November 1996. The meeting was also attended by the fifth plaintiff witness as managing director, and Alhaji Fattau as chairman, among other directors. The minutes of the meeting which were recorded by the second plaintiff witness and tendered in evidence as exhibit 3 contain the following relevant portion:
“Executive Directorship
Mr K C Serbeh-Yiadom raised the issue of executive directorship which he said concerned his personal welfare. He said that as a result of his promotional effort, he had lost his job and lucrative practice in Lagos. He had been persuaded by his colleagues to be an executive director and had all along been acting in that capacity. He emphasised that he wanted the position of executive director, adding that if someone created something, he was entitled to be part of it. He invited the board to take a second look at the issue and stressed that he would not take a contrary position lying down …
A member also pointed out that it was the board which made appointments and if Mr K C Serbeh-Yiadom felt he had a case for being appointed executive director he should make a formal representation to the board for consideration. He added that even in the event of the board appointing him as executive director, the terms of payment of such appointment would have to be approved at a general meeting …
Some members advised Mr K C Serbeh-Yiadom to bring up a paper on the issue as agreed by the next meeting of the board . . . Members concluded discussion of the matter by affirming that Mr K C Serbeh-Yiadom should submit a paper to the board at its next meeting to state his case.”
The plaintiff did not submit the paper as requested by the board. The board later took a decision that “with the exception of the managing director, no shareholder or director of the bank shall be appointed a member of staff of the bank.” This information was conveyed to the plaintiff in a letter dated 13 December 1996 and signed by the fifth plaintiff witness, which also informed the plaintiff that “and therefore you are to cease forthwith from holding yourself out as the executive director of the bank.”
Regulation 78 of the regulations of the company states that:
“The board of directors may exercise the powers conferred by section 192 of the Code to appoint one or more of their body to any other office or place of profit under the company, other than the office of auditor, for such period and on such terms as they may determine and, subject to the terms of any agreement entered into in any particular case, may revoke such appointment.”
The contention of plaintiff’s counsel that this regulation was either “abolished” or “amended” in respect of this issue of executive director is untenable. Moreover, section 204 of Act 179 which was cited in his argument is not applicable to this case.
In the course of the trial a lot of fuss was made about regulation 64 of the regulations of the company and in the course of his evidence the plaintiff even ventured to interpret that regulation to the court, maintaining that Edward Afriyie, E W Assumang and A E Amoah were not qualified to be appointed directors because according to his understanding of regulation 64 each of them did not hold the minimum share qualification of ten percent of issued of shares. This weird interpretation is wrong. There was no evidence led to indicate that these persons were not qualified to be directors of Union Mortgage Bank Ltd or that they were not properly appointed as directors.
Section 192(b) of Act 179 provides that:
“(b) the directors may from time to time appoint one or more of their body to such other office for such period and on such terms as they may determine and, subject to the terms of any agreement entered into in any particular case, may revoke such appointment.”
In this trial the plaintiff has not produced any letter from the board appointing him as executive director. It appears from exhibit 3 that the plaintiff was negotiating with the board or pleading with them to appoint him or regularise his position or accord him the official position of executive director of the company; but that did not materialise. He did not submit for consideration the paper that was requested. It is significant that the letter that was written to him did not seek to terminate or revoke any appointment that he held. The letter merely asked him to cease forthwith from holding himself out as the executive director of the bank. I hold that even if the board had appointed him as the substantive holder of the office of executive director, they had the power under section 192(b) of Act 179 to revoke the appointment. I am accordingly unable to make the declaration sought by the plaintiff and I dismiss his claim.
Under his relief (d) the plaintiff seeks “A declaration that it was wrongful and oppressive of the plaintiff’s interest for the defendant-company to have sold majority shares in the defendant-company to SBIC, Africa Holdings Ltd without the plaintiff’s knowledge and consent.” It is quite clear from the evidence that Union Mortgage Bank Ltd had problems with capitalisation and their banking licence was suspended and the Bank of Ghana directed that they should look for an institutional investor, local and foreign. Reference has already been made to the evidence of sixth plaintiff witness of the banking supervision department of the Bank of Ghana. The plaintiff was aware of the initial fruitless attempts through Databank to interest investors in the equity participation of the bank. The plaintiff tendered in evidence as exhibit O a letter dated 9 October 1997 from the Deputy Governor of the Bank of Ghana to the promoters, Union Mortgage Bank Ltd, requesting that “the shareholding structure of the proposed bank be expeditiously broadened by the inclusion of institutional shareholders.” The plaintiff complained that the question of institutional investor was handled by the directors of Union Mortgage Bank without reference to him although the letter was addressed to the promoters. It was Alhaji Fattau and E H Boahene who were delegated by the board to go to South Africa to negotiate with the institutional investor that was eventually found, that is SAHL. If this letter had to be dealt with by the promoters, E H Boahene was also a promoter. He was described as such by both the second plaintiff witness and the fifth plaintiff witness. He is described as a promoter in exhibit 3, and in a letter dated 24 October 1995 which was sent to the head, banking supervision department, Bank of Ghana and signed jointly by the plaintiff and Alhaji Fattau (exhibit F), the promoters were named as Alhaji F El-Aziz, EH Boahene and K C Serbeh-Yiadom. On the question of an institutional investor the Bank of Ghana in a letter to the bank gave them up to 31 December 1998 to get the investor. At the request of Union Mortgage Bank Ltd the Bank of Ghana granted an extension to 31 March 1999 adding that:
“As you are aware the issue relating to the appropriate capitalisation has dragged on for too long and we expect that you would intensify efforts to satisfy the condition on or before the stipulated date to avoid any embarrassment.”
On the issue of shares beyond the initial one million shares the second plaintiff witness gave evidence that:
“The company went to a general meeting and passed a special resolution authorising the board to increase the shares that will be issued up to 5 million. So within that authorisation other additional moneys were allowed to be paid for additional shares.
Q That is increase from one million shares to 5 million shares?
A Yes.
Q Was the plaintiff present at this meeting?
A Yes, as I recall.”
In the course of his evidence the plaintiff said as a result of a court order he was able to get access to some documents of Union Mortgage Bank Ltd relating to the acquisition of majority shares in the bank by a South African company, SBIC African Holdings Ltd (SAHL). One of the documents he thus obtained and tendered in evidence as exhibit V was a copy of the minutes of an extraordinary general meeting of Union Mortgage Bank Ltd held on 9 July 1999. By exhibit V the minutes were recorded by the fifth plaintiff witness but the document had not been signed by him. The fifth plaintiff witness claimed he left the service of Union Mortgage Banks Ltd as managing director on 30 June 1999 and could not therefore have been at the meeting to record the minutes. Alhaji Fattau who gave evidence as a representative of the defendant-company tendered in evidence exhibits 16-28L which deal with a meeting of the board of directors of Union Mortgage Bank Ltd as well as the extraordinary general meeting of the bank, held on the same day, namely 9 July 1999. By these exhibits the notices for both meetings were issued and signed by the fifth plaintiff witness D B Pabi and he also recorded the minutes of both meetings. The minutes of both meetings, exhibits 18 and 19, do not just bear his name as recorder but they also bear his signature. The text of exhibit V corresponds with that of exhibit 19. The fifth plaintiff witness denied signing any of the documents relating to the two meetings but Joseph Ofori a director and shareholder of Union Mortgage Bank Ltd who gave evidence as the first defendant witness said his notices for the meetings were handed over to him at the offices of the bank by the fifth plaintiff witness whom he saw at the meeting and who recorded the minutes. Alhaji Fattau said the fifth plaintiff witness certainly sent notices for the extraordinary general meeting to all members of the company, including the plaintiff. The first defendant witness further said that he is familiar with the signature of the fifth plaintiff witness and he identified the fifth plaintiff witness’s signature after his own in exhibit 26 which is a list of persons who attended the extraordinary general meeting with their signatures against their names. He said all those who signed exhibit 26 were present at the meeting. The fifth plaintiff witness said he continued to go to the offices of the bank after June 30 1999, not to work, but to inquire about his arrears of salary which were paid to him on 22 September 1999. Both Alhaji Fattau and the first defendant witness insisted that the fifth plaintiff witness resigned from the bank by a letter dated 14 September 1999, exhibit GG which bears his signature. The fifth plaintiff witness denied writing or signing exhibit GG which is in the same terms as exhibit 30 also dated 14 September 1999 and signed by Joseph Ofori the first defendant witness also resigning his office as a member of the board of directors of Union Mortgage Bank Ltd. It is clear on the face of the exhibits (GG and 30) that copies were sent to the Registrar-General’s Department who stamped the documents on receipt at their “General Registry.”
The fifth plaintiff witness further testified thus when he was recalled at the request of learned counsel for the plaintiff:
“Q Do you remember signing this document (ie exhibit GG)?
A I did not sign.
Judge It is not your signature?
A It looks like my signature …
Judge Mr Pabi, as regards exhibit GG I heard you say that you don’t remember writing a letter to yourself and you said you did not sign exhibit GG, but you said it looks like your signature. Now, the other documents with the signatures, do they look like your signature or they are far from it, ie exhibits 16, 17, 18, 19, 26 and 28G?
A They look like my signature.
Q Is it your case that, although the signatures look like your signature, your only reason for saying you did not sign the documents is that, according to you, you had nothing to do with the company after 30 June 1999?
A That is so my lord.”
The regulations of the company provide as follows:
“54. 1 No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business.
2. The quorum shall be five shareholders holding in aggregate not less than fifty per cent of all the shares of the company issued arid outstanding . . .
72. 1 The quorum necessary for the transaction of business of the directors shall be three and must include at least one of the two directors named in regulation 64 above.”
The two directors referred to here are Alhaji Fattau El-Aziz and Kwame Charles Serbeh-Yiadom. The fifth plaintiff witness, Daniel Benefo Pabi, is not a shareholder of the company and his presence at a general meeting of the company is not necessary to ensure or secure the validity of proceedings or resolutions or decisions of the meeting. His absence from a meeting of the board of directors of the company will not necessarily render proceedings a nullity. As a corollary his presence at a meeting of the board of directors of the company is not mandatory, essential or a legal imperative for according the proceedings and decisions of the meeting legal validity and competence. I cannot see how if the fifth plaintiff witness did not attend the meetings or record the minutes or sign documents in connection with the meetings of 9 July 1999 the defendant company through its officers will say he did so and sink to the ignoble depths of falsifying documents and suborning persons to personate the fifth plaintiff witness and imitate his signature which may appear to be a “perfect forgery.” From the totality of the evidence on this matter and the stance of the fifth plaintiff witness, I am of the view that once the fifth plaintiff witness had earlier said on oath that he left the company on 30 June 1999 and after that date had nothing to do with the company except perhaps to pursue the question of his arrears of pay, when later he was confronted with documents about events that occurred just nine days after 30 June in which he took part on behalf of the company with his accompanying signature, he must have thought it was not safe to admit he had made a mistake and so chose the easy but by no means safe and well-advised path of apparent consistency and stuck to the earlier testimony. I find on the preponderance of the probabilities that exhibits 16-28L are genuine and that the two meetings were indeed held on 9 July 1999 and that the minutes of both meetings were recorded and signed by the fifth plaintiff witness.
The act of the directors of Union Mortgage Bank Ltd in securing a strategic institutional investor to acquire majority shares in the company was, in my opinion, for the good of the company, and saved the company from “embarrassment”, to use the word of Mr E Asiedu-Mante then head, banking supervision department of the Bank of Ghana. The directors embarked on a desperate attempt to improve considerably the capitalisation situation of the bank, with the Bank of Ghana, as it were, breathing down their necks, because the banking licence of Union Mortgage Bank Ltd had been suspended and the Bank of Ghana was threatening to withdraw the licence completely if by a certain deadline they had not succeeded in getting the institutional investor. I do not see how this act can be said to be wrongful and oppressive of the plaintiff’s interest. Even going by the plaintiff’s contention that he owned 160,000 shares he was not the majority shareholder for him to complain that he had lost that position with the entry of SAHL There is no evidence that he has lost even the 10,000 shares which the defendant admits he owns in the company. This case is clearly distinguishable from the factual situation in the case of Mahama v Soli [1977] 1 GLR 215, CA. The plaintiff has not made out any case for the declaration he seeks and I dismiss his action in respect of relief (d).
The plaintiff is also asking for “a declaration that the plaintiff is entitled to adequate payment for his work as executive director from March 1995 until December 1996 and as director to date.” From the formulation of this relief, it seems the plaintiff is admitting that his disputed office of undefined executive director terminated in December 1996. The second plaintiff witness in his evidence-in-chief, obviously in support of the plaintiff’s case, said:
“Q Are you aware if the plaintiff had any remuneration for these works?
A At that stage we were all being paid allowances because the company was not all that strong financially to pay us salaries but we the other members, as I mentioned, the managing director, the general manager, myself and the other staff, we had contract of employment and so we were expecting certain levels of remuneration but in the interim we were paid some allowances and I am aware that Kwame Yaidom was also being paid some allowances at that stage.”
The fifth plaintiff witness, for his part, also said this in his evidence-in-chief:
“Q Now when you joined the bank as managing director were there any provisions or discussions on allowances for yourself and the staff?
A There was a remuneration scale for the junior staff, that is, secretarial assistants, the driver and messenger. Later on the board requested me to draw up senior staff conditions of service and pay. This was submitted and approved in about November 1996. In the interim, management drew allowances as approved by the board.”
Paragraph 2 of exhibit G which the fifth plaintiff witness wrote in his capacity as managing director on the directions of the board of directors to the plaintiff reads:
“Further to the above, I am also directed to inform you that you are henceforth not entitled to the use of any facilities enjoyed by management staff of the bank including remuneration and the use of an office and the bank vehicle save those facilities and privileges enjoyed by directors and shareholders of the bank.”
This no doubt means that the plaintiff was receiving “remuneration.” Regulation 80 of the company’s regulations, exhibit C stipulates that:
“No remuneration shall be payable to any director in respect of any office or place of profit to which he is appointed under the foregoing regulations unless and until the terms of his appointment have been approved by ordinary resolution of the company in general meeting in accordance with section 194 of the Code.”
Section 194 of Act 179 provides that:
“194. (1) Subject as hereinafter provided in this section, the fees and other remuneration payable to the directors in whatsoever capacity, shall be determined from time to time by ordinary resolution of the company, and not by any provision in the Regulations or in any agreement, which provision shall be null and void.
(2) The fees payable to the directors as such shall be determined from time to time by ordinary resolution of the company and not in any other way …
(4) Where any director holds any other office or place of profit under the company in accordance with section 192 or 193 of this Code, the terms of his appointment may provide for his remuneration in respect thereof but he shall not be entitled to any remuneration additional to the fees to which he is entitled as director unless and until the terms of his appointment to such office have been approved by ordinary resolution of the company.”
In the face of such clear and unambiguous provisions of Act 179, what declaration is the plaintiff asking the court to make? Declarations made by courts must be backed by law and cannot fly in the face of statutory provisions. A court must observe, obey and apply the law and not disregard it and make meaningless unenforceable orders or declarations. The plaintiff is asking for a declaration that he is entitled to “adequate payment.” What does “adequate payment” mean? Who determines the adequacy of payment for work done or office held within the context of a company registered under Act 179? A court cannot usurp the powers and functions of the competent organs of a company and render them redundant. The second plaintiff witness says the plaintiff was receiving allowances. How much did he receive and for what period? There is no legal basis for the declaration sought and I accordingly refuse it and dismiss it.
The plaintiff further seeks:
“A declaration that the plaintiff is entitled to receive compensatory payment equal to fifteen percentum of the defendant company’s capitalisation in respect of his remarkable vision, initiative and enterprise in bringing to reality the defendant-company.”
One important matter that should be noted is that in this action the defendant-company did not counterclaim and so on all the reliefs claimed the burden of persuasion is on the plaintiff. This relief for fifteen per centum “compensatory payment” has already been dealt with in dealing with the first relief concerning the “160,000 paid-up shares” and I accordingly have no option but to dismiss it as unsupportable both in law and in fact.
The plaintiff is also by his writ asking this court for yet another “declaration that the plaintiff is entitled, similarly, to any payments received by Alhaji F El-Aziz as honorarium for promotional work.”
The plaintiff did not plead this matter and did not lead any evidence to show that Alhaji FEl-Aziz.has received any payments, I suppose from Union Mortgage Bank Ltd, or the defendant-company, as honorarium for promotional work. The question may be asked; why the linkage? If the plaintiff is legally entitled to any payment in his own right he must stake his claim and insist on his legal rights. There is no legal or factual basis for the court to make the declaration sought and it is refused and the claim dismissed.
In the result, the action brought by the plaintiff against the defendant-company or bank fails and it is dismissed, save that the action succeeds in one relief and the court grants the plaintiff a declaration that the removal of the plaintiff as a director of Union Mortgage Bank Ltd, now Stanbic Bank Ghana Ltd, on 12 March 1997 was wrongful and null and void.
I award costs of ¢15 million in favour of the defendant against the plaintiff.
