12 Jun Attitsogbe V. Cfc Construction & Read, [Supreme Court] Civil Appeal No. J4/21/2004, March 8, 2006 / [2005-2006] Scglr 858, Sc
“In our opinion, therefore, the courts in Ghana have the right to set aside as unconscionable any dealing, whether by contract or by gift, where on account of the special disability of one of the parties, he or she is placed at a serious disadvantage in relation to the other. The categories of special disability should not be regarded as closed. … Poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary: these are all circumstances which in the right context can justify the courts’ intervention on the basis of the equitable principles embodied in the doctrine of unconscionable bargain. Where a party successfully makes a case that he or she has a special disability, or the facts of a case lend themselves to an application of the doctrine, the onus devolves on to the dominant party to demonstrate that the transaction was fair, just and reasonable. If the dominant party fails to show that the transaction was fair, just and reasonable, the court is entitled to set the transaction aside.”
This case was a further appeal to the Supreme Court from the Court of Appeal, which had affirmed the decision of the High Court in a suit instituted by the Respondents. The Second Respondent, the widow of the former owner of the First Respondent, a construction company, claimed to be its sole shareholder and director. By the Appellant’s own admission in his counterclaim, the Second Respondent was “old and weak” as of April 1986.
The Respondents alleged that the Appellant was removed as a director of the First Respondent at an extraordinary general meeting held in September 1991. Consequently, they sought a declaration that the Appellant is neither a director nor a shareholder of the First Respondent Company. The Appellant, however, contended that he remained a director, as his removal did not comply with the Companies Act, 1962 (Act 179). He further claimed to hold a 5% shareholding in the company, acquired through a share transfer agreement signed by the Second Respondent. Although no cash consideration was paid, the Appellant asserted that the shares were transferred in exchange for services rendered.
Evidence at trial also showed that the Appellant acted as trustee of the Second Respondent and managed her personal affairs. The High Court set aside the share transfer on the grounds of undue influence, which arose from the fiduciary relationship between the Appellant and the Second Respondent. The Court of Appeal upheld this decision. Dissatisfied with the outcome, the Appellant appealed to the Supreme Court, which was called upon to determine whether the Appellant had been validly allotted the shares in the company.
The Supreme Court, after reviewing the evidence on record, held, independently of the doctrine of undue influence, that the transaction by which 5% of the Second Respondent’s shares in the company were transferred to the Appellant should be set aside on the ground of unconscionability. The Apex Court affirmed that, in equity, courts have jurisdiction to grant relief against unconscionable dealings. This equitable jurisdiction generally extends to situations where a party to a transaction was under a special disability in dealing with the other party, such that there was a significant absence of equality between them. Where such a disability was sufficiently evident to the stronger party, it becomes prima facie unfair or ‘unconscientious’ for that party to procure or accept the weaker party’s consent to the impugned transaction in the circumstances in which it was obtained. In such cases, the onus shifts to the stronger party to establish that the transaction was fair, just, and reasonable.
On the facts of the present case, the Supreme Court held that the Second Respondent’s advanced age, infirmity, and dependence on the Appellant in matters concerning the company’s business constituted a special disability sufficient to warrant the application of the doctrine of unconscionable bargain. The Court identified the principal flaw in the transaction between the Second Respondent and the Appellant as the Appellant’s failure to ensure that the Second Respondent had adequate access to independent legal or financial advice. Given her condition, the Court observed that, in the absence of independent advice, there could be little doubt that a court of equity would set aside the transaction, unless it was shown to have been fair, just, and reasonable.
Insight: Although courts generally uphold the sanctity of contract, respecting the principles of party autonomy and freedom of contract, they retain an equitable jurisdiction to intervene in cases where a transaction is found to be unconscionable. In this case, the Supreme Court reaffirmed that where one party is subject to a special disadvantage such as advanced age, infirmity, or dependence on the other party, and that disadvantage is known or ought to be known to the stronger party, equity may intervene to set aside the transaction that is unfair to the disadvantaged party. The Court emphasized that the failure to ensure access to independent advice in such circumstances can render a transaction manifestly unfair. Thus, while contractual freedom remains a foundational principle, it is not absolute, and courts will not permit it to be used as a shield for exploiting the vulnerable through unconscientious bargains.
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AUTHOR:
Peter Korsi Simpson.
Trainee Legal Associate.