IN THE SUPERIOR COURT OF JUDICATURE
IN THE COURT OF APPEAL
CORAM
- GBADEGBE, JA {PRESIDING}
DOTSE,JA
AN IN- YEBOAH
CERTIFIED TRUB COpy
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.........................
Registrar
COURT OF APPEAL
H1I92/2006
MERCHANT BANK {GH} LTD.
VERSUS
1. SAOUD BROTHERS & SONS
2. NABIL G. SAOUD
3. THEOPHILUS NORTEY
4. GEORGE F. SAOUD
PLAINTIFFS/APPELLANTS
The question that arises for our determination in these proceedings turns on
section 17 of the Bodies Corporate (Official Liquidation) Act, 1963, Act 180 that is
expressed in the following words:
"On the commencement of a winding up, no action or civil proceedings
against the company, other than proceedings by a secured creditor for the
realization of the security, shall be proceeded with or commenced save by leave
of the Court and subject to such terms as the Court may impose."
The single question for our decision turning on the above section is whether it
was competent for the High Court in the circumstances that I shall now state to
have made an order staying proceedings of the writ of summons herein that
was taken out by the appellant herein on 23 June 2005 against the respondents
herein claiming as against the 1st respondent judicial sale of a property alleged
to be the subject matter of a mortgage deed executed between the appellant and
the said party by way of security for the payment of a contract of debt as well as
judicial sale of certain assets of the 1st respondent company by virtue of
debentures dated 23 August 1991 and 21 January 1999 respectively. The
appellant also demanded from the court in the said writ of summons a claim that
was formulated to be in the alternative for a specific sum of money from the said
1st respondent. As against the other respondents to this appeal there was a
claim in the sum of six billion cedis
being the extent of the 1st respondent's
indebtedness to the appellant that was guaranteed by them.
Some time after service of the writ on the defendants, the respondents herein
submitted themselves to the jurisdiction of the court and entered their defense to
the action. Subsequently, they applied by way of a motion that sought to stay
proceedings against them on the ground that the appellant herein had
~
commenced liquidation proceedings against the 1st respondent company.
Exhibited to the application was a process marked as SBS1 that was an
application to a High Court holden in Kumasi for the official winding up of the
company with the return date fixed for 29 April 2002. From the said exhibit, it is
clear that the petition for the winding up of the company that was filed in the
winding up court on 16 April 2002 was prior in point of time to the issue of the writ
of summons herein. The said application for stay of proceedings was resisted by
the appellant herein and preceded to a hearing that resulted in the judgment, the
subject matter of these proceedings.
In his judgment, the learned trial judge after considering the submissions
made to him upheld the prayer of the respondents to this appeal and made an
order for a stay of proceedings. It appears that in coming to his decision the
learned trial judge took the view that by virtue of section 17 of Act 180, no civil
action whatsoever
may be commenced
or proceeded
with after the
commencement of a winding up against the company. Following the delivery of
the judgment of the court, the appellant appealed to this court seeking the
reversal of the decision of the court below. It is interesting to observe that before
us in this court the parties took the same position as in the court below and
accordingly as stated earlier in the course of this delivery what we have to decide
is whether it was competent for the court below to have made an order for stay of
proceedings in the action herein. While the appellant contended that actions by
secured creditors seeking to enforce the security are excepted from the
prohibition contained in section 17 of the law, the respondents urged us to the
contrary that after the commencement of winding up all civil actions to be good
must be commenced or proceeded with only with leave of the court.
A careful consideration of the submissions made to us by the parties
through their counsel leads me to the conclusion that although the section on
which reliance was placed to stay proceedings forbids certain civil actions it
excepts those mounted by "secured creditors" seeking the realization of the
security. It is to be said that the words by which the section on which these
proceedings turn is so plain and free from any difficulty that there is no need to
resort to any aid to its construction in order to ascertain its true meaning. This
being the case, my next task is to discern if the proceeding to which objection
was taken by the respondents in the court below comes within the exception to
section 17. In my thinking this requires the consideration of who a "secured
creditor" is. I am of the opinion that the words as employed in the section are
used in their ordinary sense. Accordingly, I am of the view that "secured" must
receive the meaning that is attached to it in ordinary parlance as the simple past
tense of the word "to secure." In this sense it refers to the practice of bankers or
lenders in exercising the right to own things that belong to borrowers in order to
ensure or make certain that the money received is paid back. In the realm of
corporate law some examples readily come to mind such as mortgages and
debentures. In the said usage of the word one may for example say that the bank
loan to the company has been secured against the shares of Kofi or that the loan
een secured by a charge on the assets of the company or the loan has
secured by collateral on Ama's building situate at Kumasi. In any of these
nces upon default by the borrower to honor the obligations imposed on him
:r the contract of debt the lender usually proceeds to enforce the security by
ns of an action in court to sell the property that was used to secure the debt.
proceedings that are commenced in court are civil in their nature and their
pose is one of realization of the security changing or converting, that which
s used to secure the repayment of the debt into money. That is usually done
a sale conducted under the supervision of the court- a judicial sale but may
;Iude the appointment of a receiver in respect of the mortgaged property. See:
Ictions 15-18 of the Mortgages Decree, NRCD 96.So stated, the word "realise"
section 17 is used in the technical legal sense as opposed to its ordinary
leaning of coming to the understanding of a situation. I think that it is in this
3chnical legal sense that section 15 of the Mortgages Decree; NRCD 96 also
Jses the word in sub-section (b) thereof in relation to the rights of a mortgagee
In default as follows:
" Upon failure of performance of an act or acts secured by the
mortgage the mortgagee may realise his security in the mortgaged
property in all or any of the ways provided in this Part, and in no
other way notwithstanding any provision to the contrary in the
mortgage."
Having reached the meaning that is to be placed on the words in the context
that they were employed, I now pass to a consideration of the appellant's plaint
as formulated in the writ of summons herein in order to ascertain if they offend
against the prohibition contained in section 17 of the law. In my view, I think that
all the reliefs demanded from the court against the first respondent company that
sought to sell its assets are in their nature proceedings seeking to realize the
security taken by the appellant who must have lent some money to the company.
Then there is the claim expressed in the alternative for money. I think that
although strictly speaking it is a claim for money that relief is only a recognition of
the borrower's right in equity to redeem its property when proceedings have been
commenced against it by a creditor upon default to pay up under the terms of the
contract of debt and our courts have since the coming into being of the Courts of
Chancery of old and the development of equitable rules and remedies that are
today part of the common law of Ghana granted to the real owners- beneficial
owners the right to pay up their indebtedness and resume ownership of the
properties used as collaterals to secure
the repayment of the debt. This
principle has been statutorily provided for in section 20 of the Mortgages Decree,
NRCD 96 The remedy that is provided to the borrower known as the equity of
redemption thus secures to him a release or discharge of the property. In my
opinion, therefore, that head of claim cannot be a good ground for objection
under section 17 of the law.
There is also the relief made against the second to fourth defendants in the
court below. I note that as at the time that the application on which these
proceedings turns was filed in the court below only the first and second
defendants had entered their appearance to the writ and taken further steps in
the matter. Therefore, I cannot consider the claim against those who did not
submitted themselves to the jurisdiction of the court below by the entry of
appearance.
Regarding this head of claim, I observe that since it is not one
against the company there can be no objection to it under section 17.The law
does not prevent joinder of causes of action-that is a matter regulated by the
rules of civil procedure The effect of the consideration of the claims before the
court below is that the action was properly before the court and that the objection
taken against them that was upheld by the learned trial judge is wrong. I think
that the application by the respondents herein ought to have been dismissed by
the court below.
Before concluding this delivery, I wish to turn to the effect of winding up on
actions taken against companies in winding up. Where the action is commenced
after the commencement of winding up not being one at the instance of a
secured creditor to realize its security then leave of the court must first be
obtained to issue out the writ. If there is a default in seeking the leave of the court
then such an action would have been improperly constituted and may when
properly objected to be struck out. I do not think that the proper course of action
by a defendant in such a circumstance is to apply to stay proceedings. The right
to stay proceedings in my view relates to pending actions that do not seek to
realize security and even in this latter category, a careful reading of section 17 of
the law leads one to the conclusion that there is as regards such pending actions
a stay of proceedings by operation of law. The effect of winding up on pending
proceedings not seeking the realization of security may be likened to interpleader
summons taken after judgment in a cause, which has by operation of law a stay
of execution. Therefore, it appears that having regard to the fact that the writ of
summons herein was issued after the commencement of winding up the prayer
of the respondents to the court below for an order of stay of proceedings was one
that was not legitimately open to them. If there were to be an objection to the
action at all the remedy as earlier on observed is to have the action that was
commenced without leave of the court struck out on the ground that not having
complied with the mandatory provisions of a statute namely section 17 of Act 180
it was improperly constituted. See- Heward-Mils v Heward-Mills [1992] 1 GLR
153 at 161 per Adjabeng JA (as he then was). This observation is made for
future guidance only. Since the application that was filed in the court below was
argued fully resulting in a decision that is now on appeal to us in my view nothing
of consequence now attaches to the form of the application; the irregularity
having been waived by the party entitled to object thereto.
The result in our judgment is that the instant appeal succeeds. In place of
the order of the court below staying proceedings in the action herein is
substituted an order dismissing the application.
S.GBADEGBE
JUSTICE OF APPEAL
J.DOTSE
JUSTICE OF APPEAL
ANINYEBOAH
JUSTICE OF APPEAL
MR. KW AME A. BOAFO FOR THE DEFENDANTSIRESPONDENTS
MR. STANLEY AMARTEFIO FOR THE PLAINTIFF/APPELLANT.