Question Tag: Legal Action

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  • 10 Marks

AA – May 2018 – L2 – Q1b – Regulatory Framework and Audit Responsibilities

Compares the responsibilities of directors and auditors in relation to annual financial statements, focusing on potential legal action for misleading audit opinions.

Atu Emma & Co Chartered Accountants has audited Great Tribulation Ltd for 10 years. In 2017, the Directors found out that the company has been borrowing to finance operating expenses and this has gone on for the past two years. They have advised their lawyers to commence legal action against the auditors for misleading the Directors into approving the annual financial statements after they have given an unqualified audit opinion.

Required: Compare the responsibilities of the directors and auditors regarding the annual financial statements of Great Tribulations Ltd. (10 marks)

Responsibilities of the directors and auditors regarding annual financial statements:

  1. Preparation of financial statements:
    • Directors’ responsibility: The directors have a legal responsibility to prepare financial statements giving a true and fair view, which implies that they have been prepared in accordance with relevant IASs and IFRSs.
    • Auditors’ responsibility: The auditor’s duty is to carry out an audit (according to International Standards on Auditing) and give an opinion on whether the financial statements present fairly, in all material respects, the financial position of the entity. They will have to consider whether the relevant accounting standards have been properly followed.
  2. Estimates, judgments, and accounting policies:
    • Directors’ responsibility: The directors are responsible for making estimates and judgments underlying the financial statements and selecting appropriate accounting policies.
    • Auditors’ responsibility: The auditor must assess the appropriateness of the directors’ judgments and modify the audit opinion if disagreements arise leading to a conclusion that the financial statements are not free from material misstatement.
  3. Fraud and error:
    • Directors’ responsibility: Directors have the duty to prevent and detect fraud and error without any materiality threshold attached to this responsibility.
    • Auditors’ responsibility: Auditors are responsible for obtaining reasonable assurance that the financial statements are free from material misstatements, including those caused by fraud. They must maintain professional skepticism throughout the audit and consider management override of controls.
  4. Disclosure:
    • Directors’ responsibility: The directors must disclose all information required by law and accounting standards.
    • Auditors’ responsibility: Auditors must review whether all required disclosures have been made and ensure overall adequacy. If key information (e.g., related party transactions) is not disclosed by directors, auditors must include it in their report.
  5. Going concern:
    • Directors’ responsibility: Directors are responsible for assessing whether the business is a going concern and must make forecasts for at least 12 months from the reporting date, disclosing significant uncertainties if they exist.
    • Auditors’ responsibility: Auditors are responsible for reviewing the directors’ assessment of the going concern assumption, evaluating the adequacy of disclosures, and ensuring that financial statements are prepared on an appropriate basis.

(Total: 10 marks)

  • 5 Marks

BCL – May 2017 – L1 – Q7d – Negotiable Instruments

Explain the implications of a discrepancy between the written and numeric amounts on a cheque.

d) Kofi Mensa presented a cheque made out in his name to the BBB Bank. The drawer intended that the drawee withdraw an amount of GH¢2,000.00 which was written in words. The amount written in figures, however, showed GH¢200.00.

Required: Explain the chances of Kofi Mensa in any legal action against the BBB Bank. (5 marks)

 

Explain the chances of Kofi Mensa in any legal action against the BBB Bank. (5 marks)

Answer: Under the Bill of Exchange Act, where the sum of money payable is expressed in words and also in figures, and there is a discrepancy between the two, the sum denoted by words is the amount payable. For this reason, BBB Bank will be justified to pay GH¢2,000.00 to Kofi Mensa. (5 marks)

  • 6 Marks

BCL – Nov 2016 – L1 – Q2c – Sale of Goods/Hire Purchase

Determine if Tracy Achiaa has legal grounds to recover the impounded vehicle.

Orlando Motors, an American Automobile Company, paid for three (3) cars and consigned them to Mr. Kobby Ayensu in Ghana by a bill of lading; vehicle No. GTB 7084 was one of the three (3) cars. Mr. Kobby Ayensu, as the consignee, took delivery of the vehicles and registered vehicle No. GTB 7084. He later sold the vehicle he registered to Tracy Achiaa. The appropriate change of ownership was then effected. Later, one Mr. Oko Lartey who was claiming interest in the cars, sued Mr. Kobby Ayensu in respect of the cars and immediately went to court and obtained an order resulting in the impounding of the vehicle from Tracy Achiaa.

Required:
Explain whether there is any legal basis for Tracy Achiaa to take action to recover the impounded vehicle.

There is a legal basis for Tracy Achiaa to take action to recover the impounded vehicle:

  • Tracy Achiaa was a bona fide purchaser for value without notice under the provisions of the Sale of Goods Act, 1962 (Act 137), and, therefore, had a legal interest in the vehicle. By the provisions of Section 26 of Act 137, property in the vehicle had passed to her.
  • Even if under an agreement between Mr. Oko and Mr. Kobby Ayensu, Mr. Ayensu could be regarded as a mere agent of Mr. Oko, and as a mercantile agent in possession, Mr. Ayensu could, under Section 30 of Act 137, validly dispose of the vehicle to Tracy Achiaa.
  • The vehicle was shipped to Mr. Kobby Ayensu by Orlando Motors Ltd. as consignor, and Mr. Kobby Ayensu as consignee. By the bill of lading, Mr. Kobby Ayensu was the owner of the vehicle, as proclaimed to the whole world, and therefore, Tracy Achiaa validly acquired the vehicle from Mr. Ayensu under a contract of sale, which passed on valid title in the vehicle to her. Tracy Achiaa is, therefore, protected, on the face of it all, by Act 137.
    (3 points at 2 marks each = 6 marks)
  • 8 Marks

BCL – Mar 2024 – L1 – Q2a – Tort

Analyze whether Atta Mante and the other residents will succeed in a court action against the Adiso District Council for nuisance.

The Adiso District Council has been dumping garbage in a quarry close to a residential area at Abobo, where Atta Mante resides, and that Atta Mante alleged that the dumping of the refuse has often caused offensive and pestilential smell from vapours in the area, and that the stench emanating from the refuse had seriously interfered with their comfort and well-being. The Council denied having caused any discomfort to Atta Mante and the other residents and contended that the act complained of by Atta Mante and other residents, were conferred on the Council by law.

Required:

Explain whether Atta Mante and the other residents will succeed in any court action against Adiso District Council. (8 marks)

The area under consideration is nuisance. Nuisance is divided into public nuisance and private nuisance, although it is quite possible for the same conduct to amount to both.

A public nuisance is a crime, while private nuisance is a tort. Nuisance actions have concerned pollution by oil or noxious fumes, interference with leisure activities, offensive smells from premises for keeping animals, or noise from industrial installations.

The prevailing stance of nuisance liability is that of protection of private rights in the enjoyment of land, so that control of injurious activities for the benefit of the community is incidental.

In narrowing the scenario to private nuisance, Winfield and Jolowicz on Torts define private nuisance as unlawful interference with a person’s use or enjoyment of land, or in connection with some right over or in connection with it. Generally, the essence of nuisance is a state of affairs that is either continuous or recurrent or an activity that unduly interferes with the use or enjoyment of land. Not every slight annoyance, therefore, is actionable. Stenches, smoke, the escape of effluent, and a multitude of different things may amount to nuisance.

In the present scenario, the nuisance complained of is within the residential area of which Atta Mante and others reside. The claim is the recurrence of no more failing than the enjoyment of their rights to the land. The balance of interest is not being personal to Atta Mante but to the wider residential community.

Therefore, Atta Mante and the other residents will succeed in a court action against Adiso District Council.

(8 marks)

  • 20 Marks

BCL – Nov 2019 – L1 – Q1 – Sources of Law

Explanation of judicial precedent, grounds for departing from it, distinction between adversarial and inquisitorial systems, and a case scenario on employment termination.

a) What is judicial precedent? (2 marks)

b) State TWO (2) grounds under which the courts will depart from a judicial precedent. (4 marks)

c) Ghana legal system is adversarial rather than the inquisitorial approach. In TWO (2) ways, explain the distinction between them. (4 marks)

d) Koby Afadzie and Odartey Nelson were employed by Alfar Preparatory School to teach Mathematics and Social Science, respectively. By the terms of their employment, the two were to be on probation for eight (8) months before they could be fully appointed. Similarly, Adu Owusu and Kafui Yaw were engaged by the school as casual workers charged with the responsibility of keeping the school compound and classrooms clean. After the period of probation, the school authorities informed Koby Afadzie and Odartey Nelson that the school was not interested in giving them permanent appointments because of unsatisfactory performance. On the other hand, Adu Owusu and Kafui Yaw had their appointment terminated without any reason. The four (4) workers intend to take legal action against the school for compensation, accusing it of unfairly terminating their respective appointments.

Required:
Explain whether the workers will succeed in their respective intended legal action. (10 marks)

a) The doctrine of judicial precedent means that a judge is bound to apply a decision from an earlier case to the facts of the case before him, provided, among other conditions, that there is no material difference between the cases on hand and the previous case. Lower courts in adjudicating a case before it must apply a ‘binding’ precedent developed by a Superior Court. (2 marks)

b) The grounds on which a court may decline to follow it include:

  • If facts can be distinguished.
  • If the previous decision was made per incuriam, i.e., without taking account of some essential points of law.
  • Where the previous decision is in conflict with fundamental principles of law.
  • If the ratio decidendi is obscure.
    (2 points @ 2 marks each = 4 marks)

c) An inquisitorial system is a legal system in which the court, or a part of the court, is actively involved in investigating the facts of the case. This is distinct from an adversarial system, in which the role of the court is primarily that of an impartial referee between the prosecution and the defense. (2 marks)

This adversarial system gives the opposing side the opportunity to compete in convincing the judge and jury based on the facts they present. In this situation, the Judge or Magistrate operates independently and is expected to deliver his judgment after hearing out each of the parties. (2 marks)

d) The issue to be determined in the scenario is whether, by law, workers on probation and casual workers, are entitled to compensation in a situation of termination of their respective appointments.

  • The first group of workers in the question are those on probation whose appointments have been terminated without being paid compensation.
  • The second categories are casual workers.

Section 66 of the Labour Act, 2003, Act 651, of Part VIII, states that the two (2) categories of workers cannot have the intervention of the National Labour Commission, to negotiate for redundancy pay and for any mitigation in the event of a dispute. In other words, by law, the two (2) categories of workers cannot complain that their appointments have been unfairly terminated. (2 points for 3 marks each = 6 marks)

That the workers cannot, therefore, succeed in any intended legal action because the provisions in Part VIII of the Labour Act, 2003, Act 651 do not cover them. (4 marks)

(Total: 20 marks)

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