Eid v. Eid & Anor. [1979] GLR 290.

EID V EID & ANOR [1979] GLR 290.
Ref.: Administration of Estates Act, S.1
JUDGMENT OF APALOO C.J.
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The respondents are infants now aged eleven and nine respectively and are the children of the late Sami Aziz Eid. The latter although in origin a Lebanese, acquired Ghanaian citizenship by naturalisation. He died at Accra on 3 August 1969 intestate possessed of real and personal property.

On the deceased’s death, his brother and wife jointly obtained letters of administration in respect of his estate. His widow has since remarried and is the second defendant in this matter. She is not an appellant before us. She is, of course, the mother of the infant respondents. The deceased’s brother is the first defendant and is the only appellant in this court.

The letters of administration were granted to the appellant and the deceased’s widow on 3 June 1970.

Barely six months after obtaining grant, the administrators executed “an agreement” which gave rise to this action. It was signed on 8 December 1970 (exhibit A). The evidence shows that the only persons beneficially entitled in the assets of the intestate, are his infant children that is the respondents. It would seem the only substantial property left by the deceased is a bakery—buildings and stock-in-trade—at Tema. It was known as the Tema Alpha Bakery.

By this “agreement” which was expressed to be made between the said administrators qua administrators, the self-same persons qua trustees of the infant respondents and the respondents as third parties, the administrators as trustees transferred the said Alpha Bakery to a company formerly known as Semi African Enterprises Ltd. but now known as

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Piccadilly Biscuits Ltd. in consideration of shares said to be issued to the respondents by the said company.

The evidence does not disclose a great deal about the company, or who are the brains behind it. What seems clear is that the appellant has a substantial interest in that company. He holds the majority of the equity shares in the company and is the chairman of its board of directors. The intestate himself seems to have held some shares in that company but it was said he became disenchanted with it, severed his association with the company and by himself established the bakery business. It is unclear what the deceased did with his shares. It would seem, however, that at the date of his death, he ceased to have any interest in the Piccadilly Biscuits Ltd.

It seems plain that the intestate’s widow must have repeated the “agreement” of transfer. Her father who brought these proceedings on behalf of his infant grand-children, claimed that the former Mrs. Johanna Sami Eid was “pressurised” into signing this “agreement.” The appellant did not apparently make any issue of this. Mr. Elias Mansour Sakour as the next friend of the respondents brought this summons to have the aforesaid agreement annulled or at least declared unenforceable on a number of grounds, some of which impeach the formal validity of the “agreement” and a number attack the substance of it. The substantial ground advanced for setting aside the agreement is that it was inimical to the interests of the infants.

The learned judge held the agreement void on the ground that although the administrators purported to appoint themselves trustees of the infants, yet on a true construction of the instrument, they did not in fact do so and accordingly, could not transfer the bakery to the appellant’s company. He then granted a number of the consequential reliefs prayed for, namely, accounts, and conversion of the intestate’s estate into cash and payment of that sum into court.

The deceased’s brother who was the first defendant in the court below seeks by this appeal to have the judge’s holdings reversed on two grounds formulated in the notice of appeal: (1) that the trial court was wrong in its interpretation of the law; (2) that the judge’s findings were wrong having regard to the application before the court. These two grounds were argued together and the argument advanced by counsel was this: Firstly, it was urged that section 1 of the Administration of Estates Act, 1961 (Act 63), makes personal representatives trustees, and therefore no formal appointment was necessary and that the judge was wrong in denying validity to the appointment. Secondly, the agreement validly appointed the personal representatives as trustees and since section 102 of the Act entitles them so to do, the judge should not have nullified such appointment. Thirdly, not only was the appointment validly made, but the investment of the property made by the trustees, was in the interest of the infants and the judge should have so held.

With regard to the first point made by counsel, I cannot find any warrant for the contention that section 1 of Act 63 by itself appoints

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personal representatives as trustees. The only relevant part of the section is subsection (1) which provides, “The movable and immovable property of a deceased person shall devolve on his personal representatives with effect from his death.” The fact that the properties devolve upon them by the force of the section although they may have no beneficial interest in them, makes them fiduciaries and they incur the obligation for fair and honest dealing which equity imposes on trustees. But I cannot accept that that fact makes them trustees’ strictu sensu and thus entitles them to exercise the wide powers in relation to the property possessed by trustees. The fact that the personal representatives are empowered by section 102 of the Act to appoint themselves to the office, shows that they cannot have been appointed by section 1 which merely vests the deceased’s assets in them. The fact that on counsel’s own showing, the personal representatives availed themselves of section 102 and appointed themselves trustees, shows they themselves cannot have believed that they have already been appointed to that office by virtue of section 1. If they so believed, their action under section 102 makes no sense.

I think, however, there is considerable force in counsel’s second complaint that the personal representatives validly appointed themselves trustees by reason of the power conferred on them by section 102. In holding the contrary, the judge expressed himself:

“Reading the agreement in question, it is clear that the defendants merely purported to act as trustees of the plaintiffs’ estate. Although section 102 of the Administration of Estates Act, 1961, entitled the defendants to appoint themselves trustees, they did not in fact so appoint themselves. They could therefore not by merely describing themselves as trustees validly transfer the Alpha Bakery to the Semi African Enterprises Ltd. In return for shares for the infants. I therefore declare the agreement null and void . . .”

It is not quite accurate to say that what the administrators did was merely to describe themselves as trustees. In the introductory part of the deed, they so described themselves. But in paragraph 7 of that instrument, the following appears: “And for that matter the administrators have constituted themselves as trustees.” Unless the law lays down that they could only validly appoint themselves by the use of certain specified words, I cannot see the judge’s difficulty. The marginal note to section 102 did describe the right as “Power to appoint trustees.” If the administrators had said, “We hereby appoint ourselves as trustees,” it could not be argued that they had not lawfully assumed that office. It seems strange that their act should be held invalid because instead of “appointing” themselves, they “constituted” themselves as trustees. The judge seems to have placed too much premium on the words used when the intention is so plain. The court was exercising equity jurisdiction which looks at the intent rather than the form. I think the judge’s approach was narrow and is at odds with equity principle. At any rate, as a matter of language, the word “constitute” is a synonym of “appoint.” According to Chambers’s Twentieth Century Dictionary, (1964 ed.) p. 226 the word

“constitute” inter alia means “to set up; to establish; . . . to appoint” In my opinion, the administrators validly exercised the power conferred on them by section 102 and appointed themselves trustees of the estate of the infants. In that capacity, they could deal with the estate in any manner permitted by law. I think the judge’s contrary holding was erroneous. That was the only reason the court gave for invalidating the exercise of the power of investment by the trustees. Had the exercise of this power been otherwise faultless, I should feel obliged to differ from the judges conclusion.

But it was urged by counsel for the next friend of the infants that the exercise of the power of investment was inimical to the interests of the infants. This was disputed. The learned judge did not pronounce on that question. Both submissions were reiterated before us and in particular, it was urged for the appellant that the investment was in the interest of’ the infants and was perfectly proper. Contrariwise, it was submitted for the infants that their assets were invested in a private company liable to fluctuations and it was, on that account, unsafe and injurious to the best interests of the infants.

I do not doubt that trustees have, in general, wide powers of investment. Such a power in the eyes of equity is a fiduciary power which ought to be exercised with a signal eye to the benefit of the beneficiaries. It is also a well-settled principle of equity that a trustee may not profit from his trust. He also ought not to put himself in a position in which his duty to the beneficiaries conflicts or is likely to

Conflict with his own interest. The only person seeking to defend the investment of the infants’ assets in the company, is the appellant. His co-trustee, the infants’ mother, has repented the transaction.

How does this transaction stand in the eyes of equity? On his own showing, the appellant is a self-appointed trustee of the estate which solely belongs to infants. He transferred all the assets to a company in which he is said to have substantial interest in return for shares in that company. No independent valuation was made of the estate or the shares. The infants did not receive any independent advice; indeed no one represented their interests in this transaction. The court as the overall guardian of the interest of infants was not asked to scrutinise, much less, approve of this transaction. And the business into which the infants’ assets have been invested is one, which depends, for its success, on the vagaries of import licence. I feel no doubt whatsoever that this investment was made in breach of the appellant’s fiduciary obligation to the infants. It was wholly prejudicial to their interests and amounts to a gross breach of trust.

In my opinion, the infants are entitled to have these shares converted into cash. This so-called investment is not binding on them. Shorn of the refined legal process employed, the plain truth of this matter is that the appellant as a trustee of trust money which belongs to infants, employed that money in his own business. His liability in such a case is not open to doubt. He is chargeable with interest or the beneficiaries can, at their choice, call upon him to account for all profits he has received:

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see Burdick v. Garrick (1870) 5 Ch. App. 233. The infant beneficiaries by their next friend prayed for this relief. I hold them entitled to it. With regard to the rate of interest, the authorities seem to indicate that the trustee is chargeable with five per cent interest on the money so employed. In present-day economics, that is much too low. If the appellant had borrowed this sum from the bank for the purpose of his business, he would have paid interest at the prevailing rate. I do not think he should be better off because he came by this money through breach of his fiduciary obligation to his infant nephews. The appellant must pay interest at the current bank rate which I understand is twelve and a half per cent.

The next friend of the infants also sought and obtained from the court below an order that the appellant furnish proper accounts of the administration. That has not been questioned in this court. It cannot have been because that is the main vehicle by which a court of equity ensures performance of the trustee’s fiduciary obligation. I think it is a proper order. Both trustees have unfitted themselves for the office of fiduciaries and they ought to be relieved of their office. They should be ordered to exercise their powers under section 102 of Act 63 and appoint fit and proper persons as trustees to administer the estate of the infants. Such trustees should be approved by the court. The funds which will become available by reason of the conversion of the infants’ estate into cash should be lodged in the court below and put in safe and proper investments approved by the court. Although I was unable to agree with the judge below that the deed, as drafted, failed to appoint the appellant and the former Mrs. Sami Eid as trustees, I think, applying the ordinary principles of the law of trusts, the consequential reliefs which the court granted were right and ought to be affirmed. It follows that this appeal should fail.

The infant respondents were successful in the court below and although their next friend was put into considerable expense in vindicating their rights, no award for costs was made in his favour. Accordingly, he asked by the respondents’ notice that this omission be made good and that he be awarded costs in the court below. This was resisted on the ground that costs are entirely in the judge’s discretion and as he did not make an award, it must be assumed that the judge exercised this discretion against awarding costs and this exercise of discretion could not be impeached.

It is true Order 65, r. 1 of the High Court (Civil Procedure) Rules, 1954 (L.N. 140A), in terms provides that “ costs of and incident to all proceedings . . . including the administration of estates and trusts, shall be in the discretion of the Court or Judge.” But like all judicial discretions, it must be exercised judicially.

The normal principle is that costs follow the event. In Ritter v. Godfrey [1920] 2 K.B. 47 at pp. 52-53,

C.A. Lord Sterndale M.R. gave expression to the principle in these words:

“ . . . there is such a settled practice of the Courts that in the absence of special circumstances a successful litigant should receive his costs, that it is necessary to show some ground for exercising a discretion by refusing an order which would give them to him. The

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discretion must be judicially exercised, and therefore there must be some grounds for its exercise, for a discretion exercised on no grounds cannot be judicial. If, however, there be any grounds, the question of whether they are sufficient is entirely for the judge at the trial, and this Court cannot interfere with his discretion.”

See also Laryea v. Quao (1940) 6 W.A.C.A. 228 at p. 230 and Worbi v. Asamanyuah (1955) 14

W.A.C.A. 669.

In this case, although the judge found in the infants’ favour, he said nothing at all about costs. There is no discoverable reason why if the judge had applied his mind to the matter, he would have refused to award costs in favour of the next friend of infants who felt obliged to bring a successful suit to expose unlawful conversion of infants’ property and breach of trust by trustees. I think the judge’s omission to award costs in favour of the successful respondent in the court below was due to a genuine oversight. We ought to make good this omission by awarding costs in his favour in this court. In all the circumstances, I would award the respondent ¢500 costs in the court below. He will also have his costs in this court.

KINGSLEY-NYINAH J.A.                I agree.

FRANCOIS J.A.                                 I also agree.

 

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