Merchant bank vrs Saoud brothers &sons and others ( H1/92/2006) [2002] GHACA 1 (29 April 2002);





                     DOTSE, JA





                 V E R S U S








Gbadegbe JA read the judgment of the court as follows:


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 has been secured by a charge on the assets of the company or the loan has been secured by collateral on Ama’s building situate at Kumasi. In any of these instances upon default by the borrower to honor the obligations imposed on him under the contract of debt the lender usually proceeds to enforce the security by means of an action in court to sell the property that was used to secure the debt.


The proceedings that are commenced in court are civil in their nature and their purpose is one of realization of the security changing or converting, that which was used to secure the repayment of the debt into money. That is usually done by a sale conducted under the supervision of the court- a judicial sale but may include the appointment of a receiver in respect of the mortgaged property. See: sections 15-18 of the Mortgages Decree, NRCD 96.So stated, the word “realise” in section 17 is used in the technical legal sense as opposed to its ordinary meaning of coming to the understanding of a situation. I think that it is in this technical legal sense that section 15 of the Mortgages Decree; NRCD 96 also uses the word in sub-section (b) thereof in relation to the rights of a mortgagee on 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  





                                                                                      ANIN YEBOAH

                                                                                    JUSTICE OF APPEAL