STATE CONSTRUCTION CORPORATION vs. HASNAW CO LTD AND ANOTHER [2001-2002] 2 GLR 141

CASES REFERRED TO

(1) Wells v Wells [1914] P 157, CA.

(2) Spence v Coleman [1901] 2 KB 199, CA.

APPEAL by the Divestiture Implementation Committee (DIC) to the Court of Appeal from the decision of the trial judge ordering that the accounts of the DIC at the Bank of Ghana be attached to satisfy the judgment debt of the State Construction Corporation which had been placed on divestiture. The facts are sufficiently stated in the judgments of Brobbey and Gbadegbe JJA.

Dr L K Agbosu for the appellants.

Kpatsa for the respondents.

Brobbey JA. The respondents obtained a judgment against the State Construction Corporation for the payment of certain sums of

[p.143] of [2001-2002] 2 GLR 141 moneys. While the respondents were attempting to go into execution, the State Construction Corporation was placed on divestiture. According to the respondents, the Divestiture Implementation Committee was charged by the Divestiture of State Interests (Implementation) Law, 1993 (PNDCL 326) to manage the assets and liabilities of the State Construction Corporation.

The respondents resorted to garnishee proceedings in their efforts to execute the judgment. The proceedings were rather directed at the Divestiture Implementation Committee for the reason that the Divestiture Implementation Committee had sold the assets of the State Construction Corporation and paid the proceeds into the Divestiture Implementation Committee accounts at the Bank of Ghana. The Divestiture Implementation Committee resisted the garnishee proceedings on a number of grounds. The trial judge nevertheless ordered that the accounts of the Divestiture Implementation Committee at the Bank of Ghana be attached to satisfy the judgment debt. Dissatisfied with the order, the Divestiture Implementation Committee appealed to this court on a number of grounds.

This is a simple case. Broadly, there are three issues that arise to be considered. These are:

(1) Whether a person or body against whom a garnishee order may be issued need to be a party to the case before the order can be issued.

(2) Whether a person found liable to pay debt automatically becomes the subject against whom an order of garnishee can be ordered.

(3) What is the correct procedure to be followed under the High Court (Civil Procedure) Rules, 1954 (LN 140A) where the person against whom an order of garnishee is sought denies that he holds money belonging to the judgment debtor.

The short answer to the first question is that the person against whom a garnishee order is sought need not be a party to the original case whose judgment is sought to be executed. Order 45 of LN 140A that regulates garnishee proceedings contains no provision, which requires that a person must be made a party to the case before a garnishee order can be made against him.

The second question raises the issue of the person responsible

[p.144] of [2001-2002] 2 GLR 141 to pay debts. A person adjudged liable to pay debts is placed in almost the same position as the judgment debtor. Such a person must necessarily be made a party to the proceedings so that he will be given the opportunity to be heard in his defence before he will be adjudged responsible to pay the debt. In the instant case, the argument of the respondents that the Divestiture Implementation Committee had taken over the assets and liabilities of the State Construction Corporation meant that the Divestiture Implementation Committee was being saddled with responsibility for the payment of the debts of the State Construction Corporation. That responsibility to pay the debt, according to the respondent, springs from the notion that the Divestiture Implementation Committee more or less has stepped into the shoes of the State Construction Corporation in the sense that it virtually owns the State Construction Corporation. Owing the State Construction Corporation carries with it owing the assets as well as the liabilities of the State Construction Corporation. Being liable could logically be taken to mean that the Divestiture Implementation Committee was the body with the responsibility to pay the debts. However, that concept of liability cannot be ruled upon without first making the Divestiture Implementation Committee a party to the case and in the second place hearing the Divestiture Implementation Committee so that it can put forward what defence it may have against the accusation that it is responsible for paying the debts of the State Construction Corporation. These are the basic concepts of natural justice that should not have been ignored by the trial judge. In so far as the trial judge failed to allow the Divestiture Implementation Committee to be made a party and she further failed to allow the Divestiture Implementation Committee to make its defence against the accusation that it was responsible to pay the debts of the State Construction Corporation, the order peremptorily making the Divestiture Implementation Committee liable to pay the debts of the State Construction Corporation merely because it had taken over its assets and liabilities was wrong.

The last issue concerns garnishee proceedings. Order 45 of LN 140A regulates garnishee proceedings. Order 45, r 1 of LN 140A generally covers the situation where a third party such as a bank on behalf of the judgment debtor holds some money. The third party will then be subpoenaed to court to show why he should not be

[p.145] of [2001-2002] 2 GLR 141 ordered to pay the judgment debt from the funds held on behalf of the debtor. The third party in that context will be described as the garnishee. Three situations will arise here: If the garnishee does not dispute the debt, or if he does not appear, an order may be made under Order 45, r 3 of LN 140A for the garnishee to pay the debt. The second situation is that if the garnishee disputes his liability to pay the debt, an order will be made under Order 45, r 4 of LN 140A for the judgment creditor to prove that the garnishee holds money on behalf of the debtor that may be used to pay the debt. Order 45, r 4 of LN 140A clearly sets out what to do when an issue arises after the garnishee has disputed liability and it is that: “. . . any issue or question necessary for determining his liability [may] be tried or determined in any manner in which any issue or question in an action may be tried or determined. . .” In the instant case, even if the garnishee order were properly made against the Divestiture Implementation Committee as the respondent contended, the Divestiture Implementation Committee disputed the liability to pay the debts of the State Construction Corporation and therefore the trial judge should have applied Order 45, r 4 of LN 140A and tried the issue of liability. For failing to do that, the order she made for execution to issue against the Divestiture Implementation Committee was wrong. The third situation arises where the garnishee suggests that the debt to be attached belongs to some third party. Order 45, r 5 of LN 140A covers that. In that situation, what the court is required to do is to order that third party to appear to state the nature and particulars of his claim upon the debt. The initial error committed by the trial judge was that assuming that the garnishee was the Bank of Ghana, that bank should have been invited under Order 45, r 5 of LN 140A to respond to the allegations made by the respondent in respect of moneys held on behalf of the State Construction Corporation. That bank was not invited at all. Therefore Order 45, r 5 of LN 140A was not complied with.

If the Bank had been invited and had mentioned that the Divestiture Implementation Committee was the third party holding the moneys of State Construction Corporation, the court would have been expected to give the third party a hearing by following what Order 45 of LN 140A provides. If the third party did not dispute the debt or its liability or did not appear in court, the trial

[p.146] of [2001-2002] 2 GLR 141 judge could have applied Order 45, r 3 of LN 140A and ordered execution to be levied. If the third party disputed the debt or its liability, the trial judge was bound to apply Order 45, r 4 of LN 140A and to have tried the issue of liability. These are the procedures envisaged by the next rule, that is Order 45, r 6 of LN 140A which expressly refers to “. . . any issue or question to be tried or determined according to the preceding rules of this order . . .”

The interpretation put on Order 45, r 6 of LN 140A by counsel for the respondent cannot be right and that unfortunately was what appealed to the trial judge and which she applied. That interpretation presupposed that whenever the third party appears, the judge can proceed to make an order against that third party for execution to issue. If that interpretation were correct, it would imply that the rules on garnishee would differ when the garnishee introduces a third party as the one with interest in the money sought to be attached. The rules on garnishee proceedings should be the same and they should be as stated in Order 45 of LN 140A. It cannot be correct to state that if the garnishee disputes liability by him, the issue of liability should be tried; on the other hand, if the third party disputes liability, that issue should not be tried but the third party can straight away be ordered to pay the judgment debt.

Again, in so far that the trial judge failed to comply with the provisions of Order 45, r 4 and 5 of LN 140A before ordering execution to be levied against the Divestiture Implementation Committee, which could only have been brought into the case as a third party, that order was wrong.

The orders made by the trial judge cannot be sustained in law or on the facts. The appeal succeeds and is allowed.

Gbadegbe JA. This appeal raises the question whether the garnishee proceedings taken out by the respondents to these proceedings in the lower court against the applicant was good? The respondents who has recovered judgment against the State Construction Corporation in a bid to enforce the judgment in its favour by means of the attachments of the debts of the said judgment debtor commenced proceedings by way of the proposed attachment of debts by applying to the court that the garnishee therein named as the Bank of Ghana appear before the learned trial judge to explain why funds being held by it on behalf of the

[p.147] of [2001-2002] 2 GLR 141

Divestiture Implementation Committee, the applicant, should not be attached in satisfaction of the judgment entered against the State Construction Corporation. Sometime after the grant of the order purporting to be nisi, the applicant applied to the lower court for an order striking out the said process of garnishee on the ground that it was not a party to the action and had never been aware of the proceedings in which the judgment sought to be enforced was recovered. I think also that one can infer from the application which was filed in the court below by the applicant that it was contending that it was not heard before the order seeking to have its moneys attached was made. The said application was vehemently opposed by the respondents.

The court below after hearing the parties thereto ruled in favour of the respondents by dismissing the application and thereafter without taking any evidence from the garnishee, basing itself solely on the refusal of the applicant’s application to have the order nisi set aside, directed that the moneys owing from the State Construction Corporation to the respondents be paid from moneys which the respondents had in their affidavit deposed to were in the hands of the applicant. It was alleged against the applicant by the respondents that it had taken over the management of the State Construction Corporation which was then under divestiture as a receiver and had in the exercise of its management powers sold certain assets of the State Construction Corporation which funds were being kept by it.

Following the order made by the court below upon the refusal of the application of the applicant, which order had the effect of an order absolute, the applicant appealed to this court for a reversal of the said order on the grounds contained in the notices of appeal lodged on 15 May 2001 and 11 June 2001, respectively. As I said earlier, this appeal turns essentially on whether the processes which the respondents took out to have the applicant’s debts attached were in their nature regular or authorised by the applicable rules of the High Court, (Civil Procedure) Rules, 1954 (LN 140A), Order 45 or both?.

I have examined the said rules patiently and I am of the view that the processes were fundamentally flawed and that the order absolute in respect of which this appeal arises is one which must be discharged for the following reasons: In the first place the applicant

[p.148] of [2001-2002] 2 GLR 141 was not a judgment debtor within the contemplation of Order 45, r 1 of LN 140A. It being so, it was not liable for the payment of the judgment debt and consequently in so far as the processes which initiated the attachment of the debts commenced against it but not the State Construction Corporation, there was such a fundamental irregularity that the proceedings based thereon were null and void and of no effect.

Again under Order 45, r 5 of LN 140A the learned trial judge could only have directed that the applicant appear before it only when having lawfully had the garnishee appear under Order 45, r 1 of LN 140A in respect of moneys being held by it on behalf of the judgment debtor, the State Construction Corporation, the garnishee, did suggest that the moneys belonged to a third person or that such person had a lien on it, in this case the applicant, wherefore the court could by itself have directed the said third party to appear to explain why the said moneys which the garnishee must have contended were for it should not be utilised in the payment of the debts. It is to be observed that the appearance of that person is by the court qua court having regard to the evidence provided by the garnishee at its appearance pursuant to the order nisi and not by means of a process issued by the judgment creditor, as was the case in the court below. It appears that in seeking to have the debts attached, the respondent commenced the processes from Order 45, r 5 instead of Order 45, r 1 and thereby enabled the person whose liability had been established in the action in respect of which the judgment was entered—the judgment debtor—from having its moneys attached with the result that a non-party to the action had to satisfy the payment of the debts. I think that the entire process was wrong and not justified by the relevant rules and accordingly, this court has no discretion in the matter other than to do the obvious of discharging not only the order absolute which directed the applicant to pay the debts of the State Construction Corporation but also that on which it was based, namely the order nisi.

What is in issue here, it must be said, is not whether if the correct procedure were resorted to, the respondent could not at a certain stage have had the moneys held by the applicant to be utilised in the payment of the judgment debt, but purely a matter of due process as can be read from the applicable rules contained in Order 45 of LN 140A. In any event for the applicant to have been

[p.149] of [2001-2002] 2 GLR 141 lawfully directed to pay up instead of the judgment debtor, the court should have adverted its mind to the rules, particularly Order 45, rr 1, 5, 6 and 7. A clear examination of the rules on the matter reveal that in their nature the proceedings contemplate two stages: the first under Order 45, r 1 and then depending on what transpires at the appearance of the garnishee before the court, steps by way of the examination of the garnishee or a third person under Order 45, r 5 and then depending on the availability of the funds, an order to pay up the debt, which payment is regarded by the law as a valid discharge of the debts sought to be attached. The first stage results in the making of an order nisi while that subsequently is known as the order absolute. As it is, the proceedings with which we are now concerned side-stepped the rules which served as the condition precedent to calling upon a person other than the garnishee to pay up from moneys held by it on behalf of the judgment debtor without ensuring that the relevant conditions had first been met. I must say that although there was an order made which was described as one nisi it was one which was made without ensuring that the process actually issued in the manner provided under Order 45 r 1 of LN 140A seeking to have the moneys of the judgment debtor attached in the first instance but instead sought to have that of a third person, namely the Divestiture Implementation Committee attached when the condition precedent for the making of an order under the rules in particular Order 45, rr 5, 6 and 7 of LN 140A was not present. I also think that in the absence of the application having had judgment recovered against it in which its liability to satisfy such judgment was not in doubt, the order made against it the subject matter of these proceedings was one which is not sanctioned by the rules of the court th below. On this point I wish to refer to a passage from Halsbury’s Laws of England (4 ed), Vol 17, para 528 at p 328 as follows: “Money in the hands of a third person, where the relation of debtor and creditor does not exist between him and the judgment debtor, cannot be attached.” Thus, moneys in the hands of trustees in bankruptcy and liquidators cannot as a rule be attached in satisfaction of debts for the relation of creditor and debtor that is crucial in such proceedings do not exist in such situations. See Wells v Wells [1914] P 157, CA and Spence v Coleman [1901] 2 KB 199, CA. What these reasons point to is that the instant appeal succeeds and in particular, I hereby set aside the

[p.150] of [2001-2002] 2 GLR 141 order directing the Bank of Ghana to pay up from moneys allegedly held by it on behalf of the applicant, the judgment debt recovered against the State Construction Corporation. In place thereof, I substitute an order allowing the application by the applicant to have the process which issued out on 23 March 2001 in the nature of a garnishee proceedings struck out as incompetent.

Adinyira JA. I have read the judgment of my brother, I agree with this that the appeal be allowed, and therefore have nothing useful to add.

Appeal allowed.

DRKS