June, 2024

The concept of Trusts is not alien to corporate, or commercial law and in fact has a wide variety of applications in commercial contexts. In most cases, the trust relationship would commonly arise through an express trust or by operation of law. Nevertheless, in rare instances, the courts may impose a trust relationship in commercial transactions where it is equitable to do so, for example, to prevent one party from unjustly enriching itself at the expense of the other.

This was the clarion call of the Supreme Court through Samuel A. Asiedu J.S.C in the recent case of CIVIL APPEAL NO. J4/08/2022 BERTHA ANSAH-DJAN VS PRYCE KOJO THOMPSON & THE REGISTRAR GENERAL (Bertha Ansah-Djan case) where the Court was called upon to infer the existence of a trust in a rather unexpected arena: the ownership of a company, an area where Trusts are expressly executed but seldom implied.

This article seeks to evaluate the decision of the Supreme Court in Bertha Ansah-Djan case and examine the utility of this decision in light of the current company laws, policies and directives from the Office of the Registrar of Companies (ORC).  

The Legal Nature of Trust.:

According to Underhill and Hayton Law of Trusts and Trustees 14th Edition, a Trust is an equitable obligation, binding a person called a Trustee to deal with property over which he has control for the benefit of persons called the Beneficiaries. In the case of  Soon boon Seo v Gateway Worship Centre[1], the Supreme Court adopted the definition penned by B. J. da Rocha and C. H. K. Lodoh, in “Ghana Land Law and Conveyancing (2nd Edition)” at pages 105-106 that “a Trust was a concept in equity whereby one person (called “the Trustee”) holds the nominal or legal title in property which has been made available to him by another person (called “the Settlor”) for the benefit of some other person (called “the Beneficiary”)”.

Whenever there is a trust, the nominal title to the property is held by the trustee and the equitable right to enjoy the property is vested in the beneficiary.[2] The trustee, or another person on behalf of the trustee, has legal title to the trust assets and has the power and the duty (for which they are accountable) to manage, employ or dispose of the assets according to the terms of the trust and their special duties under law.[3]

How Trusts are Created:

In most cases, trusts are created by the express agreement of the parties involved. This type of trust is referred to as Express Trust. Express Trusts can either be private or public. For Private Express Trusts, the settlor creates the trust and appoints trustees to hold the property for the benefit of an identified beneficiary. For example, a testator may appoint trustees to manage the affairs of his estate until his child attains a specific age after which the estate passes unto him (Testamentary Trusts). On the other hand, Public Trusts, also known as charitable trusts are created not for the benefit of a specific person or persons but for the enjoyment of the public. For example, trusts for the advancement of religion, education, relief of poverty and for other purposes beneficial to the community.[4]

Apart from Express Trust, trusts may also be created by operation of law. These types of trust arise where the law in certain instances implies the existence of trust in a relationship. Implied trusts are either Constructive or Resulting Trusts. A Resulting Trust is implied where property is purchased in the name of another person who is viewed as the legal owner and trustee of the property, holding same in trust for the purchaser as the beneficiary. In this instance whether a resulting trust is presumed is dependent on the relationship between the parties (e.g. purchase of property in the name of a child is presumed to be a gift rather than a resulting trust[5]).  Resulting Trust can also arise from an express trust where the settlor fails to dispose of the whole beneficial interest in the property, e.g., the beneficiary could not be identified, then the property will be held in resulting trust by the trustee for the settlor. Unlike Resulting Trusts which consider the intention of the parties, Constructive Trusts arise through operation of law regardless of the parties’ intentions. A Constructive Trust is an equitable remedy imposed by a court to benefit a party that has been wrongfully deprived of its rights as a result of a person obtaining or holding a legal property right which they should not possess due to unjust enrichment or interference, or due to a breach of fiduciary duty.

Brief Facts: Bertha Ansah-Djan Case.

The Plaintiff issued the writ in the High Court for a declaration that she was the sole holder of the issued shares of a transport company known as Pergah Transport Company Limited (“the Company”) which, according to her, she solely founded in 1999. According to the Plaintiff, she and the 1^st Defendant, were good friends and as a result of the relationship, she executed a share transfer agreement transferring 70% of the total shares of the company to the 1^st Defendant. However, it is the Plaintiff’s case that this transfer was repudiated due to the 1^st Defendant’s inability to pay for the transferred shares thereby rendering her the sole shareholder of the Company.

Conversely, it was the 1^st Defendant’s case that the idea to set up the Company was his and his only. He stated that Plaintiff’s involvement in the company was as a result of the restraints imposed on him because he was the Managing Director of SSB Bank at the time. Thus, he caused his friend, the Plaintiff, to register the Company on his behalf. The 1^st Defendant led evidence to the fact that he solely financed the formation of the company with his own resources and provided the startup capital. He maintained that he   procured the necessary loans for the company and that two of the three directors were nominated by him. He stated that he was the owner of the company but gave 30% of the shareholding in the company to the Plaintiff. He also argued that whatever shares the Plaintiff held at the formation of the company was held by the Plaintiff in trust for him. He also relied on the same share transfer agreement tendered by the Plaintiff as his evidence. As such he counterclaimed against the Plaintiff for a declaration that he was the legal and beneficial owner of 70% of the total shares in the company.

The trial High Court dismissed the claims of the Plaintiff and held for the 1^st Defendant on his counterclaim. Dissatisfied with the judgment, the Plaintiff appealed to the Court of Appeal which dismissed the appeal and affirmed the judgment of the High Court. The Plaintiff being dissatisfied, appealed to the apex court for a final determination of the matter. 

Decision of the Supreme Court:

The primary issue for determination by the Supreme Court revolved around discerning the true nature of the ownership structure of the Company. In addressing this issue, the Court sought to determine whether upon all the evidence before it, it would be necessary to make an inference that the intention of the parties was for a trust to be created in respect of the ownership of the Company.

First, the Court meticulously reviewed the evidence presented by the 1^st Defendant that he procured the loans that led to the formation of the Company. It was argued on behalf of the Plaintiff that loans given to a Company, or gratis gifts were not equivalent to acquiring shares in the Company, especially where there was no evidence of an agreement with the Company to that effect. 

In evaluating these circumstances, the Court took the position that there was a presumption that where a person provides money required to purchase property, he intended to obtain an equitable interest in the property acquired. Therefore, where the property is purchased in the name of someone who did not provide the purchase money, he will be presumed to hold the legal title in trust for the provider. The Supreme Court therefore agreed with the finding that the Plaintiff held the shares in the company in trust for the 1^st Defendant.

In coming to this decision, the Supreme Court relied on the principle of resulting trust as espoused in the English case of Dyer v. Dyer[6] which was affirmatively applied in re Wiredu (Decd.); Osei vs. Addai[7], and  in re Fianko Akotuah (Decd); Fianko & Another vs. Djan & Others[8] and extended the principle to apply in corporate and business domain and held that trust is a rule of equity in respect of which evidence could be adduced to show that notwithstanding the terms of a writing between two parties and notwithstanding the fact that the legal estate in property is expressed in writing to beholden in one party, the factual and true situation is different, in that, the beneficial interest yields to a different party whose name may be completely absent from the terms in the writing but who has extended the purchase money for the property. 

The Court considered the following:

1. Where a person provides money required to purchase property, he intends to obtain an equitable interest in the property acquired. Therefore, where the property is purchased in the name of someone who did not provide the purchase money, he will be presumed to hold the legal title in trust for the provider. Thus, the 1^st Defendant having proven that he provided the financial strength of the Company which the Plaintiff did not, the Courts came to the conclusion that the disputed shares were held in trust for him.

2. In fact, the Plaintiff corroborated this fact of monetary advancement by admitting in the box that the 1^st Defendant contributed to the financial health of the Company. The 1^st Defendant also provided relevant supportive documentation including cheques issued by him.

3. From the record the 1^st Defendant had a heavy presence in the formation and management of the Company. The Courts took into particular significance the 1st Defendant’s influence in appointing company directors, indicative of his substantial role in the governance of the Company. The Court found that the 1^st Defendant continued to engage in the appointment of directors of the Company and the Plaintiff did not raise any issue with the nominations of people to serve as directors of the Company by the 1^st Defendant notwithstanding that the 1^st Defendant’s name was not formally stated, initially, as being a shareholder of the Company. The parties were therefore bound by their conduct.

4. The Plaintiff voluntarily prepared and executed the Deed of Transfer as a testimony to her trusteeship of the shares of the Company for the benefit of the 1^st Defendant who was the equitable owner of the shares. The deed of transfer was made between the Plaintiff and the 1^st Defendant and not the Company qua company and the 1^st

Ultimately, the Supreme Court concurred with the previous courts’ decisions, affirming the existence of a trust relationship and dismissing the Plaintiff’s claims.

Implication of the Decision in Light of the Introduction of the Beneficial Ownership Form under the Companies Act, 2019 (Act 992):

The Company whose shareholding was in dispute in this case was incorporated in the year 1999 when the Companies Act,1963, (Act 179) was the governing law. Act 179 has since been repealed by the Companies Act, 2019, (Act 992) which in order to ensure greater transparency in share ownership and company control, has introduced the concept of beneficial ownership.

Beneficial ownership is one of the inroads made by Act 992 to curb misuse of the corporate entity for purposes of tax evasion, money laundering and economic and organized crimes by insisting on the declaration of any trust relationships under which shares in a company are held. Act 992 therefore requires companies to file particulars of their beneficial owners with the ORC.

The first schedule of Act 992 defines a beneficial owner” to mean an individual who directly or indirectly ultimately owns or exercises substantial control over a person or company;  who has a substantial economic interest in or receives substantial economic benefits from a company whether acting alone or together with other persons;  on whose behalf a transaction is conducted; or who exercises significant control or influence over a legal person or legal arrangement through a formal or informal agreement

Section 35(2) Act 992 also explicitly imposes an obligation on all shareholders of companies, who are not the beneficial owners of the shares they hold to provide the company with the particulars of the beneficial owner at the time of becoming shareholders or within twenty-eight (28) days of a change in their status. The law goes further at Section 35(14) of Act 992, to prescribe sanctions of a fine or term of imprisonment of not less than one year or both against any shareholder who fails to declare the beneficial ownership of his shareholding or provides a false or misleading information about such beneficial ownership.

Thus, though the Supreme Court made no pronouncements on the current requirements for filing particulars of beneficial ownership at the incorporation of the Company, execution of the share transfer deed and its alleged repudiation took place well before the promulgation of Act 992, it is posited that the ratio espoused by the Supreme Court in this case might have limited application to similar facts under the current Company Law dispensation.

The reasoning for this assertion is two-fold. The first being that it is unlikely that a presumption of beneficial interest (Implied Trust) would be made in favour of a person who has failed to assert this interest as required by law and such a person would be estopped from resiling from the contents of the beneficial ownership form filed with the Office of the Registrar General (ORC). The court is therefore likely to presume (in the absence of a vitiating factor) that the person stated on the beneficial ownership forms of the company and filed with the ORC in compliance with Section 35 is the true beneficial owner of the shares. Secondly, it is unlikely that the courts will allow extrinsic evidence, other than evidence substantiating a vitiating factor such as mistake, fraud, undue influence, etc. to rebut this presumption or finding as doing so will condone the breach of a statute and grant the person asserting beneficial ownership immunity from their wrongful and blatant breach. As stated by Date Bah Jsc in the case of Republic v High Court, Accra, Exparte National Lottery Authority[9], “no judge has authority to grant immunity to a party from the consequences of breaching an Act of Parliament…. To do so is for the court to act in excess of the court’s jurisdiction as the courts have been bound to hold that the courts’ own law, that is common law as defined in Article 11(2) of the 1992 constitution must give way to Statute.”

On the other hand, it is arguable that if the law intended other sanctions, other than what is expressly provided in Section 35(14), to apply for failure to disclose beneficial ownership, same would have been expressly stated by the promulgators of the law. Proponents of this argument are likely to contend that, if a person asserting beneficial ownership of shares can provide an express trust indicating that the shares were being held in trust for him by the shareholder, the court ought to recognize and give effect to this agreement. This argument, however, begets the question of whether such an agreement amounts to illegality, same having been made with the purpose of circumventing the law. Can parties contract out of a binding duty imposed by statute? Applying a purposive approach to interpretation can it not be said that allowing such an agreement to stand would defeat the purpose of the disclosure of beneficial ownership requirement, which is to foster greater transparency in a bid to combat tax evasion, money laundering and other organized crimes? For those asserting that failure to uphold an express trust in this regard might amount to unjust enrichment, can it not be said that being an equitable remedy the proponent of the trust agreement must come with clean hands, and being party to an agreement intended to breach statute cannot be evidence of clean hands.

Whichever way we look at it, it would appear that the Bertha Ansah-Djan case would have limited application under Act 992, taking into account the disclosure of beneficial ownership requirement introduced by Act 992, which has brought into play significant variables outside the purview of this judgment.

Conclusion

In conclusion, the recent judgment in BERTHA ANSAH-DJAN CASE though laudable for upholding the applicability of the principles of resulting trust, in the corporate domain is not likely to endure as binding judicial precedent with respect to similar facts concerning a company subject to the provisions of Act 992.

[1] [2009] SCGLR 278

[2] Ghana Land Law and Conveyancing 2^nd Ed- BJ Da Rocha and CHK Lodoh.

[3] Article 2 of the Hague Convention on the law applicable to trust and on their recognition.

[4] See Re Belling (1967) Ch 425/ Hauxwell v Barton-upon-Humber UDC (1974).

[5] See Okai v Okoe [2003-04] SCGLR 393.

[6] (1788) 2 Cox Eq. Cas. 92 at p. 93

[7] [1982-83] GLR 501

[8] [2007-2008] 1 SCGLR 165

[9] (2009) SCGLR, 390 @ Page 393