Barclays Bank of Ghana Ltd. v. Lartey & Ors [1978] GLR 282.



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Edward Wiredu J. The defendants are the administrators of the estate of one Emmanuel Kotoku Lartey (deceased) late of Abossey Okai, who died intestate in Accra on or about 25 November During his lifetime the deceased operated accounts with the plaintiff bank in the name of his business. This business was registered and styled as Scientific Commercial Art Services (Scarts) under the Registration of Business Names Act, 1962 (Act 151).

The facts are not clear as to the nature of the business of Scarts but the undisputed facts show that various sums of moneys made up of loans and overdrafts were advanced to the deceased for the operation of his business. These loans and overdrafts were all taken in the name of Scarts. The plaintiff bank held as securities for these moneys an endowment policy

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of ¢10,000 over the life of the deceased and a landed property situate in Accra on the Nsawam-Avenor road under a deed of mortgage. At the time of his death the accounts operated by the deceased in the
name of Scarts with the plaintiff bank stood at ¢355,085.00 on the debit side.

The facts reveal that after the death of the late Emmanuel Kotoku Lartey a number of meetings was held between some officials of the Bank of Ghana and the defendants about this indebtedness. The Bank of Ghana apparently had guaranteed payment of some of the moneys advanced to Scarts by the plaintiff bank. The facts show that at one of such meetings the defendants resolved and formed a limited liability company known and registered as Scarts Limited. This company agreed to take over the assets and liabilities of Scarts.

Following certain representations made to the plaintiff bank by the Bank of Ghana, the former wrote to the defendants as directors of the newly formed Scarts Limited as follows:

“Barclays Bank of Ghana Limited,
High Street,
Post Office Box 69,
Accra, Ghana.
25th April, 1977.

The Directors,
Scarts Ltd.,
P.O. Box 45,

Dear Sirs,


Following your recent discussions with the Bank of Ghana’s representatives we hereby formally claim payment of the debts due to us in the name SCARTS as under: —
Loan No. 1 .. .. .. .. .. …75,000
Loan No. 2 .. .. .. .. .. …90,000
O/D No. 1 .. .. .. .. .. …110,000
O/D No. 2 .. .. .. .. .. …80,058

We understand from the Bank of Ghana that you are prepared to honour these debts and have indicated to them your willingness to repay every pesewa. Interest on the debts will continue to accrue and we shall be obliged if you will come forward with your early proposals for repayment. The Bank of Ghana advise us also that you would

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like a summary of the facilities granted to SCARTS. We attach copies of correspondence showing how from the initial ¢5,000 overdraft granted in 1972 the facilities were increased to overdraft ¢42,000, loan (to purchase premises) ¢90,000—and loan ¢75,000 for development in 1973. A further increase in overdraft of ¢125,000 was approved in 1974 but this account was broken when it stood at ¢110,000 at the time of the unfortunate death of Mr. Lartey. Further small sums were advanced with the agreement of Bank of Ghana to meet immediate expenses and wages for the factory during the interim period until the administrators took over and this together with the interest accruing on the total debt during the past two to three years has brought the overdraft to its present figure of debit ¢80,058. There was no personal account in the name of the late Mr. E. K. Lartey. We do hold however a S.I.C. endowment policy of ¢10,000 over the life of Mr. E. K. Lartey as part of our security. We require a copy of the death certificate to claim the proceeds from S.I.C. and should be grateful if you would let us have this as a first step towards reducing the indebtedness.

Yours faithfully,
(Sgd.) ?? ??
cc. Bank of Ghana.”

There is no indication that any reply to the above letter was received from the directors of Scarts Limited. In fact the plaintiff bank is emphatic that their letter provoked no response from them.

On 11 October 1977 the plaintiff bank therefore caused to be issued against the defendants as administrators of the deceased an originating summons in the following form:

“An order for judicial sale of all that piece or parcel of land with buildings thereon situate on the Nsawam-Avenor road, Accra, which said piece or parcel of land is more particularly delineated on the plan attached to a deed of assurance dated 15 August 1973 and made between Irweld Engineering and Construction Company Limited of the one part and Emmanuel Kotoku Lartey of the other part (registered No. 1934/1973) which was conveyed to the plaintiff by Emmanuel Kotoku Lartey, now deceased, under a deed of legal mortgage dated 3 December 1972 and expressed to be made between the said Emmanuel Kotoku Lartey (deceased) as ‘Mortgagor’ and the plaintiff bank as ‘mortgagee’ as security for a loan which the mortgagor’s administrators, i.e. the defendants failed to pay despite repeated demands.”

The summons was accompanied by a fourteen-paragraph statement setting out the facts relied on by the plaintiff bank to support their claim.

After entry of appearance by the defendants, the solicitor for the plaintiff bank on 17 October 1977 moved the court for the hearing of the

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summons. Opposition to the summons was by an eleven-paragraph affidavit which reads as follows:

“(1) I am the deponent herein and the second defendant in this case.
(2) I have the authority of the first and third defendants to swear to this affidavit on our joint behalf as administrators of the estate of Emmanuel Kotoku Lartey (deceased) who was our brother.
(3) As administrators of his estate we were responsible for the administration of his personal properties and that we are accountable to the beneficiaries of his estate in this regard.
(4) Scientific Commercial Art Services which was operated by the deceased was treated by us as a different entity and we did not consider that company, per se, as part of his personal estate.
(5) The plaintiffs are aware that Scientific Commercial Art Services Ltd. was formed to take over the assets and liabilities of Scarts which was originally operated by the deceased and that Scarts Ltd. assumed responsibility for any loan or overdraft facility granted to Scarts subject to strict proof by the plaintiffs that there was in fact such loan or overdraft facility and that it was utilised by Scarts.
(6) It is our view that the late Emmanuel Kotoku Lartey did not operate any personal account with the plaintiff bank and that all accounts with the plaintiffs were in the name of Scarts and that this fact was acknowledged in a letter addressed to the directors of Scarts Ltd. by the plaintiffs dated 25 April 1977 a photostat copy of which is herewith attached.
(7) The alleged loan or overdraft by the plaintiff bank in respect of the property for which the originating summons is seeking an order for a judicial sale could not have been made to the deceased in person, who on the admission by the plaintiffs, did not have any personal account with the bank.
(8) As far as the defendants are concerned, they are not personally liable for any advances made in favour of Scarts whose assets and liabilities have been taken over by the Scarts Ltd., and cannot accept any alleged debts owing to the plaintiffs by Scarts.
(9) The defendants, as administrators of the estate of the late Emmanuel Kotoku Lartey, will demand strict proof of any debts if any, for which the deceased was personally responsible, since they were not notified of any such debts after publication of their notice to creditors in July 1975.
(10) The defendants will put the plaintiffs to strict proof that the alleged loan or overdraft facility was utilised by the deceased.
(11) Wherefore I swear to this affidavit in opposition to the originating summons on behalf of the defendants praying that the same be dismissed on the grounds of incompetence.” Page 286

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At the hearing of the summons it was agreed that the propriety of the plaintiffs’ actions against the defendants which seems to be one of the main issues raised by the defendants be taken first as a preliminary issue.

Arguing in support of the objection Mr. Hansen for the defendants strongly contended that the action against the defendants was misconceived. He argued that Scarts as a registered entity was an artificial legal entity with a personality quite distinct from the deceased who ran it. He argued that as an artificial legal entity Scarts had as one of its attributes perpetual succession and this continued to exist on the death of Mr. Lartey. He referred to Professor Gower’s Modern Company Law (3rd ed.), pp. 68 and 69 and the case of Salomon & Co. v. Salomon [1897] A.C. 22, H.L. to support his contention. He submitted that such an artificial legal entity even if it had only one member was a corporation aggregate as opposed to a corporation sole in which an office was personified. Counsel therefore contended that Scarts being an artificial legal person with perpetual succession and having a distinct personality from the deceased, it was wrong for the plaintiff bank to hold the defendants who are only responsible for the personal debts of the deceased liable for the indebtedness of Scarts. Learned counsel further contended that it was incompetent for the plaintiff bank to sue Scarts since it no longer existed with the incorporation of Scarts Ltd., which had taken over the assets and liabilities of Scarts. He therefore submitted that the present action against the defendants as administrators was misconceived and should be dismissed.

For the plaintiff bank, Mr. Puplampu in a contrary submission argued that the facts of the plaintiffs’ case had been misappreciated by learned counsel for the defendants. He submitted that Scarts was not an incorporated company under the Companies Code, 1963 (Act 179), to be accorded the privileged attributes of such an incorporated company. He dismissed as untenable the arguments that Scarts was a legal entity with a distinct personality from the deceased. According to counsel for the plaintiffs Scarts is merely a business name registered under the Registration of Business Names Act, 1962 (Act 151). He argued that Act 151 did not give Scarts any perpetual succession. He contended that the plaintiffs’ action against the defendants was based on a mortgaged deed executed on 3 December 1973 between the deceased as a mortgagor and the bank whereby the property sought to be sold was conveyed by the
deceased to the plaintiff bank as security. He contended that the present action by the plaintiffs was to enforce the legal rights conferred on them under the said mortgage deed. He argued that the term “of SCARTS” appearing immediately after the name of the deceased in the deed was merely descriptive of the identity of the mortgagor. Counsel therefore argued that the deceased as a mortgagor under the instrument dated 3 December 1973 and registered No. 191/1974 was answerable for any defaults under
the terms of the deed. He therefore submitted that the defendants as the administrators of the deceased mortgagor have been properly sued under the mortgage agreement and dismissed as ill-conceived the objection to the plaintiffs’ action against them.

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The sole issue raised for determination in this ruling is the propriety of the plaintiffs’ action against the defendant. In other words whether the defendants are the proper persons to be sued under the mortgage
agreement dated 3 December 1973. In determining this issue, the first question to be answered is who is the mortgagor under that instrument. The recitals of the deed read as follows:

“This Mortgage is made the 3rd day of December, One thousand Nine hundred and Seventy-three (1973) BETWEEN EMMANUEL KOTOKU LARTEY of ‘SCARTS’ P. O. BOX 45 Mamprobi, Accra (hereinafter called ‘the Mortgagor’) of the one part and BARCLAYS BANK OF GHANA LTD., a Company incorporated in Ghana and having its registered office situate at Barclays Bank Building, P.O. Box 2949, Accra (hereinafter called ‘the Bank’), of the other part.”

(The emphasis is mine.)

The issue here is whether on the true construction of the mortgage deed the mortgagor is “Emmanuel Kotoku Lartey of ‘Scarts’.” If it is the latter, whether the defendants are the proper persons to be sued. It is trite law that a company once incorporated acquires a legal entity distinct from its members and this is so even if it had only one member. Such a company also enjoys perpetual succession: see Salomon & Co. v. Salomon [1897] A.C. 22, H.L. and Stepney Corpn. v. Osofsky [1937] 3 All E.R. 289, C.A. Such is the true intent and spirit of the Companies Code, 1963 (Act 179). A company thus incorporated can sue and be sued in its incorporated name and can own property distinct from that of its members. The provisions
of Act 179 make it abundantly clear that once incorporated all matter relating to the affairs of the company are dealt with in the name of the company which is also answerable for all debts incurred in the
name of the company. The various provisions of the Companies Code refer to the company and not to its individual members.

Unlike Act 179, the Registration of Business Names Act, 1962 (Act 151), was not intended to confer any distinct legal personality on any business name registered under it. The provisions of the Act are a clear pointer to this. Whilst the provisions of Act 179 refer to the company, those of Act 151 refer to the individuals registering their business names. The fact that registration under Act 151 does not confer perpetual succession on business names registered under it is borne out by section 10 (1) of the Act. Act 151 protects the exclusive use and right of the person registering the business name. It is also clear from the provisions of Act 151 that the registrar deals solely with the person registering the business name, and this is understandable because it is only the “business name” which is registered and someone must be responsible for such registration. I therefore hold in my ruling that Scarts as registered under Act 151 did not acquire any legal personality distinct from the person of Emmanuel Kotoku Lartey who carried on business under that name. I also reject as untenable the submission that Scarts enjoyed a perpetual succession under Act 151.

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It follows from the above observations that whether Scarts or the deceased is the mortgagor under the instrument in question the defendants as administrators of the late Emmanuel Kotoku Lartey who registered the name Scarts, are answerable under the instrument and therefore the proper persons to be sued under it.

Assuming for the purpose of argument that my observations above are wrong and that Scarts acquired a distinct legal personality under Act 151 then the question arises who is the “mortgagor” under the instrument in question? For it is the common area of agreement amongst counsel that the mortgagor is the person answerable for the payment of the sum secured under the instrument.

A careful examination of the instrument itself reveals that the mortgagor is Emmanuel “Kotoku Lartey of Scarts”. Some attempt was made to capitalise on the term “of Scarts” by learned counsel for the defendants but I find in my ruling that Mr. Puplampu’s view that the term is merely descriptive of the deceased is to be preferred to Mr. Hansen’s view which appeared to suggest that the term was an indication of the fact that the deceased was merely acting for Scarts: see the Mortgages Decree, 1972 (N.R.C.D. 96), Sched. II, the model precedent, where a similar descriptive term has been used to describe the parties.

I find in my ruling therefore that the mortgagor under the instrument executed on 3 December 1973 is the late Emmanuel Kotoku Lartey. On his demise therefore the defendants as his administrators and personal representatives are answerable to the plaintiff’s claim under the said instrument.

The preliminary objection therefore fails and the same is hereby dismissed.

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