GHANA COMMERCIAL BANK LTD vs. NAOS HOLDINGS LTD [1999-2000] 1 GLR 485

CASES REFERRED TO

(1) Poku v Kwao [1989-90] 2 GLR 82, SC.

(2) Republic v High Court, Accra; Ex parte Ploetner [1984-86] 2 GLR 107, SC.

(3) Siasuom v Kyi [1971] 1 GLR 483, CA.

(4) Korbla II alias Tetteh v Odartei III [1980] GLR 932.

(5) Lewis v Green [19055[sic](2)] 2 Ch 340; 74 LJCH 682.

(6) Mortgage Insurance Corporation v Inland Revenue Commissioners (1888) 21 QBD 352, CA.

(7) Wirth v Weigel Leygonie & Co Ltd [1939] 3 All ER 712.

(8) Mason v Schupisser (1899) 81 LT 147.

NATURE OF PROCEEDINGS

APPEAL by the defendant-bank from the decision of the trial High Court dismissing their application to strike out the plaintiffs’ action, founded on promissory notes issued by the defendants to a third party, on the ground that the originating process by which the plaintiffs commenced the action was improper and constituted abuse

[p.488] of [1999-2000] 1 GLR 485 of process. The facts are sufficiently stated in the judgment of Benin JA.

COUNSEL

S K B Asante & Associates for the defendant-appellant.

Amarteifio & Co for the plaintiff-respondent.

JUDGMENT OF BENIN JA.

The question raised in the court below was whether the originating process adopted by the plaintiffs in seeking redress of a grievance it had against the defendants was appropriate. The plaintiffs claimed to be the holders in due course of five promissory notes issued by the defendants in favour of a company called Sabat Motors to the order of Eaglet Corporation Ltd. The plaintiffs’ came into the picture apparently because Eaglet Corporation indorsed the promissory notes in their favour, but which were dishonoured by the defendants upon presentation for payment on the due date. The plaintiffs went to the High Court by way of an originating summons seeking what happens to be the court’s construction of these instruments as to whether by them they were entitled to payment with interest at the current bank rate.

The defendants filed an application to strike out this originating process on the grounds that there are several facts in dispute which make the process adopted “irregular, improper and constitutes an abuse of the process of the court . . .” The facts alleged to be in dispute were set out in the affidavit in support of the application to which I shall make reference very shortly.

The plaintiffs opposed the application on the ground that they only sought the court’s construction of the documents and to determine the rights of the plaintiffs in relation to the said documents. The plaintiffs also provided rebuttal documentary evidence by way of affidavit annexures.

The trial court considered the facts and the law and ruled that the process adopted was “appropriate.” It went on to hold that:

“However, the defendants are permitted to prove the mala fides of the plaintiffs by providing the court for its examination and consideration, any document that supports their allegation of mala fides, not that of Eaglet/Claremont or any other person, at the hearing of the summons.”

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The material facts raised by the defendants are contained in their affidavit in support of the application to strike out the summons. These are:

“(5) . . . the issuance of the promissory notes by Sabat Motors Ltd, was made in flagrant breach of a contract dated 5 January 1990 between Sabat Motors Ltd and Eaglet Corporation Ltd, the European affiliate of an American off-shore financier, Claremont Group Ltd, which was to provide funding for Sabat Motors Ltd to acquire certain equipment.

(6) That in consideration of the credit facility to be provided by Claremont Group Ltd/Eaglet Corporation Ltd to Sabat Motor Ltd, for the supply of the equipment, the applicant provided a bank guarantee in favour of Claremont Group Ltd, subject to certain conditions.

(7) That the agreement dated 5 January 1996 provided, inter alia, for the supply of equipment by Eaglet Corporation Ltd and its acceptance by Sabat Motors as a condition precedent to the issuance of the promissory notes, the subject matter of this action, but in clear breach of the agreement the promissory notes were issued when the condition precedent viz: the supply of the equipment, had not been complied with by Eaglet Corporation Ltd.

(8) That in further breach of the agreement, Claremont Group/Eaglet Corporation Ltd failed to provide the requisite funding for the supply of the equipment, with the result that there was total lack of consideration on the part of Claremont Group Ltd/Eaglet Corporation Ltd for the promissory notes and a failure to satisfy the pre-condition for the issuance of the promissory notes.

(9) That by reason of the foregoing, Sabat Motors explicitly repudiated the promissory notes by various correspondence to Claremont/Eaglet Corporation and specifically requested the return or the retrieval of the said promissory notes, which request was not honoured by Claremont/Eaglet.

(10) That there was full notification by Sabat Motors Ltd to Claremont/Eaglet of all the defects and flaws in the

[p.490] of [1999-2000] 1 GLR 485 issuance of the promissory notes, but notwithstanding such notification and the repudiation of the promissory notes by Sabat Motors Ltd, Claremont/Eaglet endorsed the said promissory notes for the benefit of the respondent who now purports to be “a holder in due course”, which is denied by the applicant. . .

(12) That it is transparent from the foregoing that there are serious issues of fact in dispute which cannot be resolved in these proceedings by way of an originating summons, consequently this is not a proper case to be commenced by an originating summons and in that regard the respondent’s instant action ought to be dismissed with costs . . .

(14) That in the circumstances, the respondent’s instant action commenced by way of an originating summons is irregular, improper and constitutes an abuse of the process of the court and accordingly must be dismissed. . .”

The plaintiffs exhibited some letters from the defendants confirming the promissory notes. The trial court, as I said earlier, considered the facts and the relevant law and rules of practice and procedure in coming to its decisions. The defendants who were dissatisfied have appealed to this court on the following grounds:

“(a) The trial court erred in law holding that the commencement of the instant proceedings by the plaintiff-respondents by way of an originating summons as regular and appropriate, notwithstanding the conflicting mass of evidence adduced by both parties to the action.

(b) That trial court erred in law in ruling that the commencement of the proceedings by way of originating summons was regular and appropriate notwithstanding that the respondents’ application in this case does not raise a question of construction of an instrument or in any way depend upon the construction of an instrument, which error has occasioned the appellants substantial miscarriage of justice.

[p.491] of [1999-2000] 1 GLR 485

(c) The trial court erred in law in ruling that the commencement of the proceedings by way of originating summons was appropriate, notwithstanding the existence of sharply disputed facts which can only be tested by viva-voce examination.

(d) That trial court erred in law in holding that the plaintiffs were holders in due course when:

(i) no evidence was led to establish that status; and (ii) the trial court itself conceded that the good faith of the plaintiffs was disputed by the defendants and ought to be proven, which error has occasioned the defendants substantial miscarriage of justice.

(e) The trial court misapplied the provisions of Order 54A of the High Court (Civil Procedure) Rules, 1954 (LN 140A) to the proceedings, having regard to the fact that a decision one way or the other on the affidavits filed would not determine all matters in dispute between the parties but would involve further litigation thereby making the proceedings by way of originating summons inappropriate.

(f) The trial court erred in law in restricting the scope of the defendants’ case to providing documentary evidence of the plaintiffs’ mala fides, thereby denying the defendant the opportunity to adduce all relevant evidence, as fraud, that would vitiate the validity of the plaintiffs’ status a holders in due course and indeed the validity of the promissory notes themselves.”

I shall take these grounds according to the order by which they were argued by counsel for the defendants, except ground (f) which I shall deal with alongside (a) and (c). First, grounds (a) and (c) were argued together. Order 54A, r 1 of the High Court (Civil Procedure) Rules, 1954 (LN 140A) under which the summons was issued provides that:

“1. Any person claiming to be interested under a deed, will, or other written instrument, may apply by originating summons for the determination of any question of construction arising

[p.492] of [1999-2000] 1 GLR 485 under the instrument, and for a declaration of the rights of the persons interested.”

This provision has been interpreted by the Supreme Court in the case of Poku v Kwao [1989-90] 2 GLR 82, SC to be the proper and indeed the appropriate procedure where the sole or principal question at issue is, or is likely to be one of the construction of a deed or of any instrument, or some other question of law, or in which there is unlikely to be any serious and substantial dispute as to the relevant facts. And in the case of Republic v High Court, Accra; Ex parte Ploetner [1984-86] 2 GLR 107, SC, the Supreme Court held that the case before the High Court was not a proper one to commence by originating summons because, among other factors, on the face of the affidavit a decision one way or the other would not determine all matters in difference between the parties but would involve further litigation. See also Siasoum v Kyi [1971] 1 GLR 483, CA.

It was the contention of counsel for the defendants that (i) a lot of conflicting evidence was adduced by both parties; and (ii) there was a substantial dispute as to the facts. These facts related to (a) lack of consideration; (b) repudiation of the promissory notes; and (c) mala fides. The trial court resolved the first two on the affidavits before it and called for further evidence to resolve the third. In resolving the first two questions of fact, the trial court relied solely on two letters written by the defendants confirming the promissory notes.

I thought at this stage the defendants were only drawing attention to the fact that very serious questions of fact are involved; it did not mean the court should decide on the questions of fact when the party had not declared an intention to rely on only affidavit evidence or otherwise. And also it was too early to determine those questions. Yet, the trial court could not be seriously faulted since it had to determine the application one way or the other. But I think the trial court failed to appreciate the points raised by the defendants that Sabat Motors repudiated the promissory notes before Eaglet endorsed same for the plaintiffs. It was on account of this that the defendants charged the plaintiffs with mala fides. And the trial court, having given leave for the issue of mala fides to be tried, seemed to have agreed, albeit prima facie, that there was some factual dispute, and a substantial one at that, to be resolved. The plaintiffs claim to be holders in due course and for that reason it must be established that:

[p.493] of [1999-2000] 1 GLR 485

(i) they became the holders before the due date and without notice that it had been previously dishonoured, if such was the fact: (ii) that they took them in good faith and for value, and that at the time the instrument was negotiated to them they had no notice of any defect in the title of the person who negotiated it: see section 27(1) of the Bills of Exchange Act, 1961 (Act 55). See also Halsbury’s Laws of England, (4th ed), Vol 4, p 169, para 388 where it is stated that as regards the defectiveness of a person’s title to an instrument, it may be established that he obtained it “by fraud, duress, or force and fear, or other unlawful means or an illegal consideration, or when he negotiates it in breach of faith, or in such circumstances as amount to fraud.”

The defendants have raised pertinent questions as regards the fact that there was a total lack of consideration so the instruments were repudiated before the plaintiffs got them. Very material issues of fact arise, namely: (1) was there no consideration provided for the instruments?; (2) were they repudiated by Sabat Motors?; (3) if they were, was it before they got into the hands of the plaintiffs?; and (4) were the plaintiffs aware of the repudiation before they became holders of the instruments? Having regard to the facts raised by the defendants, if found established, they would mean Eaglet negotiated the instruments in breach of faith, failed to provide any consideration and so the notes were repudiated to the knowledge of the plaintiffs. In these circumstances, the plaintiffs cannot in law claim to be holders in due course of the promissory notes. These are very substantial issues of fact which cannot appropriately be determined by the process of originating summons.

In another reasoned judgment, this court decided in the case of Korbla II alias Tetteh v Odartei III [1980] GLR 932, CA that originating summons was not appropriate where there was likely to be any substantial dispute, and that where there are disputed facts which can only be tested by viva voce examination, the initiation of proceedings by resorting to originating summons is most inappropriate. In the instant case, it is my considered opinion that the facts are so complex and involve several parties, some of whom are presently not before the court, that it may not be possible to prove them by affidavits only. And even if the parties wish to tender only affidavit evidence, yet the facts are so intricate and plentiful that the court will have to make several findings of fact before it can con-

[p.494] of [1999-2000] 1 GLR 485 strue the instruments, thus defeating the very purpose of this process which is expeditious hearing on mainly question of law.

Secondly, as decided by the Supreme Court in the Ex parte Ploetner case (supra). This process is resorted to only if the construction of the instrument will settle the litigation. See also Lewis v Green [1905] 2 Ch 340. But as it has turned out here, even at the end of its ruling, there is still an outstanding issue of fact for which the court is calling for evidence by affidavit to enable it decide on the summons. The court itself realised it could not deal with the summons by way of legal arguments only; it needed to ascertain the facts, thereby rendering the process inappropriate. I am not saying the court can never ascertain the facts: it cannot do so where the facts are in serious dispute requiring a lot of evidence, especially viva voce evidence.

Whilst on this, I will take the last ground of appeal at this stage, since it is closely linked up with my second reason for disagreeing with the court below. The trial court called for affidavit evidence only on the question of the plaintiffs’ mala fides. Even though viva voce evidence is not always necessary, a court is not entitled to restrict a party to any form of testimony, oral or documentary or both; it is a discretion for the party on issues of fact, to determine how to present his evidence. And, indeed, it is dangerous and plainly unjust for a court, in order to satisfy a party who is accused of having adopted a wrong process, to compel the other party to present his case in a particular position. The trial court must have realised that taking oral evidence on the question of mala fides would render the originating process inappropriate; hence the call for only affidavit evidence. The conclusion reached is surely wrong as it fetters the hands of the defendants, and it is also a recognition that the summons could not be determined by construing the instruments only. Though Order 54A, r 4 of LN 140A entitles the court to call for evidence, it does not mean it can shut out a party who may wish to offer oral testimony if his case also rests on oral evidence, for example if he seeks to rely on a parol agreement. It must be borne in mind that an agreement in writing may be varied or even repudiated orally in some cases.

It is interesting to note that counsel for the plaintiffs agreed that the defendants were entitled to prove the issue of mala fides, largely as an issue of fact. In his address this is what counsel wrote:

[p.495] of [1999-2000] 1 GLR 485

“In proving the mala fides of the plaintiff-respondents, the defendant-appellants may by documentary or oral evidence prove fraud or any other fact which proves that the plaintiff-respondents are not holders in due course.”

(The emphasis is mine.) It seems counsel for the plaintiffs does not even agree with the trial court’s decision confining the parties to only affidavit evidence, and I think counsel is perfectly right. Counsel continued:

“Order 54A does not preclude a trial of lack of good faith or fraudulent behaviour of a party by evidence given orally, or by affidavit evidence. And, at that stage the defendant-appellants are at liberty to prove that they had been contacted by previous endorsees and they had declined to confirm the validity of the promissory notes or that the plaintiff-respondents were aware of the fraudulent behaviour of their indorsees and therefore cannot be holders in due course.”

Counsel acknowledges that the defendants are entitled to lead all the evidence they have, in order to disprove the validity of the promissory notes, particularly through the mala fides of the plaintiffs, and with this awareness one wonders why this process was adopted. The procedure provided by Order 54A of LN 140A does not permit a full trial by way of examination, cross-examination, etc of witnesses on oath; it does not permit the trial court resolving disputed questions of fact after taking evidence. Indeed, if this is permitted, the very essence of the process will be completely eroded, if not destroyed, which is to allow for determination of matters based on law only, or construction of deeds, instruments contracts etc, or both and declaring the rights of parties under them without recourse to viva voce examination. If a trial by examination of witnesses, or even by resolving several disputed facts has to take, place, albeit by affidavits, this process is clearly inappropriate. It is worthy to follow the decision in Lewis v Green (supra) that inasmuch as questions, both of fact and of construction were involved, and a decision of the question of construction would not, in whichever way they were divided, necessarily put an end to the litigation, an originating

[p.496] of [1999-2000] 1 GLR 485 summons was not the proper mode of procedure. Therefore, I will uphold grounds (a), (c) and (f).

Ground (b). From the decided authorities I mentioned earlier, the use of Order 54A of LN 140A is in order if there is a question of construction involved and which determines the rights of the parties. It is the contention of the defendants that there is no question of construction raised hereto as to involve order 54A of LN 140A. It is plainly a question of the plaintiffs seeking to recover money from the defendants using, for their authority or evidence, the promissory notes. By definition, a promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum which is certain in money. Essentially, therefore, it is a promise to pay a sum of money only: see Mortgage Insurance Corporation v Inland Revenue Commissioners (1888) 21 QBD 352 at 358, CA per Bowen LJ. See also Wirth v Weigel Leygonie & Co Ltd [1939] 3 All ER 712 at 720 per du Parcq LJ.

It is the view of counsel for the appellants that this “is an obvious case of a claim for payment of the amounts represented on the promissory notes with interest.” He submitted that:

“No issue of construction of interpretation of the promissory notes was raised or was posed by the respondents as the principal issue… Having regard to the fact that the respondents’ claim was in essence a claim for the payment of money based on the promissory notes, the resort to the use of originating summons by the respondents was clearly inappropriate and untenable … in a claim for payment of money and Interest based on a promissory note, as in the instant case, the respondent was obliged under Order 2, r 1 of LN 140A to commence the action by a writ of summons and not by way of an originating summons.”

This is the response of counsel for the plaintiff-respondents:

“The question posed for determination by the High Court does not claim for an order for payment for the face value of the promissory notes with interest. The issue is whether the plaintiff-respondents are entitled to payment with interest the

[p.497] of [1999-2000] 1 GLR 485 face value of the promissory notes. The answer to the question is in the construction of the promissory notes … There is no claim for money and interest before the High Court of justice so Order 2, r 1 of LN 140A is the appropriate order to have resort to.”

A promissory note is in the nature of a contract; hence the requirements of consideration etc to validate it, and also the existence of factors which can vitiate a contract. And a court can construe a contract under Order 54A of LN 140A if it is in writing, since a written contract is an instrument within the meaning of the rule: see Mason v Schupisser (1899) 8 LT 147. Hence if the contract is to pay money, it can be construed by the court as such. A party may also go to court to seek declaratory reliefs only even by a writ of summons. Thus where there is a written contract for the payment of money, a party may go to court by way of an originating summons. Hence it is no argument that because a claim is essentially to recover money with interest, it cannot be begun by originating summons, especially if it is realised that a promissory note is nothing but a document which consists substantially of a promise to pay a sum of money. This ground of appeal is accordingly rejected.

Next, ground (d). The trial court set out the requirements in law to make a person qualify as “a holder in due course.” It set out the facts relied upon by the parties and said that “there is absolutely nothing on the face of the promissory notes to show that there is any defect on them . . .” The court was referring to documentary evidence which it found was not available so that the defendants might not be aware of. From the definition of “a holder in due course” which I set out above and which the trial court rightly held, a holder in due course qualifies as such if, among others[sic](3) factors he took the instrument in good faith and without knowledge of any defect in the title of the one from whom he got it. These are largely questions of fact. But certain presumptions immediately come into play in favour of a holder if the promissory note appears regular and complete on its face. First, it raises a rebuttable presumption that the holder is a holder in due course since by making a deed, a person is presumed to intend the ordinary consequences of his voluntary act; and moreover, an official act, like the one in question, is presumed to have been regularly preformed, so the person denying it will have to

[p.498] of [1999-2000] 1 GLR 485 assume the burden of persuasion. Hence, I do not agree with counsel for the defendants when he says the burden of persuasion lies on the plaintiffs since the promissory notes appear regular and complete on their face, which is the only evidence, albeit prima facie, that they require to establish their status. Next, subject to any relevant law or equity, the facts as recited in a document are conclusively presumed to be true as between the parties and their successors in interest. So whichever presumption is applied, it ensures to the benefit of the holder, so the burden of proof shifts to the person challenging same if the holder decides to rely solely on the instruments and allow same to speak for themselves, if regular and complete on their faces.

But the trial court having realised the need to prove at least a vital ingredient, that of mala fides, it means that the plaintiffs do not yet qualify yet as holders in due course for their rights to be so declared under the instruments. And as I have held, this question of fact cannot be dealt with in the restrictive manner proposed by the trial court. Mala fides, as conceded by counsel for the plaintiffs, involves a lot, including even matters of fraud, and no doubt you cannot compel a party to prove fraud by affidavit evidence only. It would be a fraudulent act by the plaintiffs against the defendants if the former knew that the notes had been repudiated by Sabat Motors due to total lack of consideration before they (the plaintiffs) acquired them from Eaglet. Fraud vitiates everything, and if established, it would be conclusive evidence of mala fides and therefore prevent the plaintiffs from being holders in due course. Thus with the serious issue like mala fides raised and accepted by the trial court, the only conclusion open was to strike out the originating summons to enable a writ to be issued under Order 2, r of LN 140A. It is for the foregoing reasons that I allow ground (d).

Finally, ground (e). It is the contention of counsel for the appellants that there would still be some further litigation even after a determination by the court, so the process of originating summons is inappropriate. He cited for his reference the issue of mala fides. I think counsel has not given the correct interpretation to the trial court’s decision. The trial court actually called upon the defendants to prove mala fides to enable it determine the originating summons, having taken the view that the plaintiffs had nothing to prove beyond tendering the promissory notes which are regular and complete on their faces. Thus it was not an additional litigation that the trial

[p.499] of [1999-2000] 1 GLR 485 court’s decision to call for evidence was inviting so as to be caught by the principle in Lewis v Green (supra) which was approved in the Ex parte Ploetner case (supra) that originating summons was not appropriate if it would not determine all the matters in difference between the parties. It must be noted that the trial court was not determining the summons itself but was dealing with an application to strike out the summons. This ground fails.

In conclusion, it is my view that there are serious and substantial questions of fact which call for evidence, oral or documentary or both to resolve. The parties must be given every opportunity to present their case in the best possible way they deem fit. This particularly applies to the defendants who strenuously seek to reject their own act, a burden which they assume and a heavy one at that.

They know and believe these notes have been repudiated due to total failure of consideration and defect in the title of the holder, Eaglet. They know and believe the plaintiffs were aware of these antecedent facts before they took the notes. So the defendants must be allowed to answer the question posed by the trial court namely: “How then was the plaintiff-applicant to know all the oral agreements the defendants-respondents claim they had made with Eaglet and Sabat?” The answer may be in oral evidence if there were any “oral agreements” as acknowledged by the trial court. And with that acknowledgment, surely the originating summons is not the appropriate process to resolve serious and substantial disputed facts which might require viva voce examination.

I will allow the appeal and set aside the trial court’s conclusions strike out the originating summons to pave the way for the plaintiffs, if they are so minded, to issue a writ of summons by virtue of Order 2, r 1 of LN 140A.

JUDGMENT OF FORSTER JA.

I agree.

JUDGMENT OF AFREH JA.

I also agree.

DECISION Appeal allowed.

LSNA

Endnotes

1 (Popup – Footnote) [sic] same in original. 2 (Popup – Footnote) [sic] same in content 3 (Popup – Footnote) [sic] same in content