CASE INFORMATION OF Kojo Adjepong v. Kwaku Fokuo & Akosua Badu
Court: West African Court of Appeal
Jurisdiction: Gold Coast (Ghana)
Date: [Date not stated in the extract provided]
Coram: Harragin, C.J.; Baker, Ag. C.J.; and M’Carthy, J.
Case Type: Appeal from the Chief Commissioner’s Court, Ashanti
Subject: Equity — Trust — Public Policy — Fraud and Collusion — In Pari Delicto — Equitable Co-ownership
FACTS OF THE CASE
The plaintiff-respondent, Kojo Adjepong, claimed that he was a co-owner of certain leasehold property in Kumasi together with the 1st defendant-appellant, Kwaku Fokuo.
The plaintiff further claimed that although the property was registered in the name of the 2nd defendant-appellant, Akosua Badu, she merely held the property in trust for the plaintiff and the 1st defendant.
The property had been transferred to Akosua Badu by the plaintiff and Kwaku Fokuo as part of an arrangement intended to safeguard the property from possible execution by creditors.
The dispute eventually reached the West African Court of Appeal, which remitted the case to the Chief Commissioner’s Court for a trial de novo, particularly because allegations of breach of trust, fraud and collusion had not previously been investigated.
Upon retrial, the Chief Commissioner’s Court found that the property was jointly owned by Kojo Adjepong and Kwaku Fokuo and that they had transferred it to Akosua Badu to protect it from possible seizure in execution of debts.
The defendants appealed.
ISSUE BEFORE THE COURT
The principal issue on appeal was:
Whether the plaintiff was entitled to equitable relief where the property had been transferred to another person for the purpose of protecting it from possible execution by creditors, having regard to the doctrine of public policy and the principle of in pari delicto.
ARGUMENT OF THE APPELLANTS
The appellants argued that the agreement relied upon by the respondent was contrary to public policy because the transfer was made to prevent the property from being seized by creditors.
They contended that the plaintiff should therefore not be permitted to obtain relief from a transaction which had an unlawful or improper purpose.
DECISION OF THE COURT
The West African Court of Appeal dismissed the appeal and affirmed the judgment of the lower court, subject to a variation concerning the nature of the plaintiff’s ownership.
The Court declared that the property was jointly owned by the respondent and the 1st appellant as equitable co-owners, and that the 2nd appellant held the property in trust for them.
REASONING OF THE COURT
The Court considered the general principle that a person who participates in a transaction contrary to public policy may ordinarily be prevented from seeking assistance from the court.
The Court referred to Gascoigne v. Gascoigne (1918) 1 K.B. 223, where a party who had transferred property for the purpose of protecting it from creditors was not permitted to rely upon his own fraudulent purpose to recover the property.
However, the Court also considered the important equitable exception recognised in Reynell v. Sprye, 1 D.M. & G. 660 at 679.
The principle is that where parties to an illegal or public-policy-defeating transaction are not equally blameworthy, and public policy would be advanced by granting relief to the more excusable party, the court may grant such relief.
In the present case, although the respondent had participated in the arrangement, the Court found that the appellants had subsequently engaged in fraud and collusion.
The Court therefore concluded that, having regard to the whole conduct of the parties, they were not in pari delicto.
The Court was also influenced by the fact that creditors of the respondent and the 1st appellant had advanced money towards the construction of the building and were in possession of some of its rooms as security.
If the fraudulent transfer to the 2nd appellant were upheld, those creditors could lose the security upon which they had relied.
Consequently, the Court considered that public policy was advanced by granting relief to the respondent.
THE DOCTRINE OF IN PARI DELICTO
The Latin expression in pari delicto means “in equal fault.”
The general principle is that where two parties are equally involved in an illegal or improper transaction, the court will ordinarily refuse to assist either party in enforcing the transaction or recovering under it.
However, the rule is not absolute.
Where the parties are not equally blameworthy and public policy would be better served by granting relief to one of them, the court may intervene.
This is the important qualification illustrated by Kojo Adjepong v. Kwaku Fokuo & Akosua Badu.
PUBLIC POLICY AND EQUITY
The case demonstrates that the doctrine of public policy is not applied mechanically.
The court must consider the entire circumstances and conduct of the parties.
Although a transaction may have been entered into for an improper purpose, the court may nevertheless grant equitable relief where:
- the parties are not equally culpable;
- one party has engaged in fraud or collusion;
- refusing relief would produce an unjust result; and
- granting relief would better advance public policy.
Thus, equity may intervene where strict application of the in pari delicto principle would itself produce an outcome contrary to public policy.
TRUST AND EQUITABLE OWNERSHIP
Another important aspect of the case concerns the distinction between legal title and equitable ownership.
Although Akosua Badu’s name appeared as the registered lessee, the Court held that she did not beneficially own the property.
She held the property on trust for Kojo Adjepong and Kwaku Fokuo.
The Court therefore declared the plaintiff and the 1st defendant to be equitable co-owners, while the 2nd defendant was merely the trustee.
This illustrates an important equitable principle:
Legal title may be vested in one person while the beneficial or equitable interest belongs to another.
CASES REFERRED TO
Gascoigne v. Gascoigne (1918) 1 K.B. 223
The case illustrates the general principle that a person may be prevented from recovering property where the claim depends upon his own fraudulent or improper purpose.
Reynell v. Sprye, 1 D.M. & G. 660 at 679
The case establishes the important qualification that where parties to an illegal or public-policy-defeating transaction are not equally at fault, and public policy would be advanced by granting relief to the more excusable party, the court may grant relief.
EXAMINATION FOCUS
Students should remember this case under the following themes:
Equity + Trust + Public Policy + Fraud + Collusion + In Pari Delicto + Equitable Co-ownership
A good examination answer should explain that although the in pari delicto doctrine may ordinarily prevent a party from obtaining relief from an improper transaction, the doctrine is not absolute.
Where the parties are not equally blameworthy and public policy would be advanced by granting relief, the court may intervene.
SIMPLIFIED EXPLANATION
Imagine A and B jointly own a property but transfer it into C’s name to protect it from possible creditors.
Later, C tries to claim the property as her own.
Ordinarily, A might have difficulty asking the court to enforce an arrangement that was created for an improper purpose.
But if C has acted fraudulently and the parties are not equally at fault, the court may refuse to allow C to benefit from the wrongdoing.
That is essentially the lesson of this case.
Equity looks at the conduct of the parties and the interests of justice, rather than applying the rule blindly.
WHY THIS CASE MATTERS
Kojo Adjepong v. Kwaku Fokuo & Akosua Badu is important because it demonstrates the relationship between public policy and equitable relief.
It shows that:
- the in pari delicto principle is not absolute;
- fraud and collusion may affect the court’s willingness to deny relief;
- public policy can justify granting equitable relief;
- a registered holder may hold property on trust for another; and
- equitable ownership may exist notwithstanding the legal title being vested in another person.
KEY PRINCIPLE
The central principle from the case may be stated as follows:
Where parties to a transaction contrary to public policy are not equally blameworthy, and the conduct of one party involves fraud or collusion, the court may grant equitable relief to the more excusable party where doing so advances public policy.
CONCLUSION
Kojo Adjepong v. Kwaku Fokuo & Akosua Badu demonstrates the flexibility of equity in dealing with transactions affected by public policy considerations.
Although the plaintiff had participated in the arrangement by which the property was transferred to the 2nd defendant, the Court considered the subsequent fraud and collusion of the appellants and concluded that the parties were not in pari delicto.
The Court therefore upheld the plaintiff’s equitable interest and declared that the property was jointly owned by the plaintiff and the 1st appellant as equitable co-owners, while the 2nd appellant held the property in trust for them.
The case is therefore a useful authority on:
PUBLIC POLICY + IN PARI DELICTO + EQUITY + TRUST + FRAUD + COLLUSION.
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