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JUDGMENT:
On the 27th of May,
2008, Daniel Ofori (Plaintiff
herein) sought to sell to the 2nd
Defendant, William Oppong-Bio,
and the 2nd Defendant
sought to purchase listed shares
held by the Plaintiff in CAL
Bank Limited. Pursuant to the
rules of the Ghana Stock
Exchange, (5th
Defendant), the sale and
purchase, i.e. the trade, was to
settle on 30th May
2008 at 11.00 a.m. On 30th
May 2008, the Bank of Ghana
(BOG) intervened in the trade
and asked that it be suspended
pending investigations into
suspicion of money
laundering. 2nd
Defendant who had instructed his
bank, Ecobank Ghana Limited (1st
Defendant) to pay the Plaintiff
in respect of the purchase of
the shares stopped the payment.
5th Defendant also
acting on the instructions of
the Bank of Ghana suspended the
trade in the said CAL Bank
shares on its market.
Following the suspension,
Plaintiff complained to the
Securities and Exchange
Commission (4th
Defendant) about the suspension
of the trade. 4th
Defendant investigated the
complaint and concluded that the
trade had failed. Meanwhile,
before the 2nd
Defendant’s countermand, 1st
Defendant had already issued
three (3) banker’s drafts to
SG-SSB Bank Ltd, Zenith Bank Ltd
and Databank Brokerage Limited
(3rd Defendant).
SG-SSB Bank gave value for the
banker’s draft but the other
two, Zenith Bank and Databank
Brokerage Limited returned the
banker’s drafts to the 1st
Defendant. 2nd
Defendant contended that the
trade had failed because of the
Bank of Ghana’s directive which
was acted upon by 4th
and 5th Defendants.
Dissatisfied with the decision
of the 4th Defendant,
Plaintiff initially sued the 1st
Defendant claiming the following
reliefs:
“a) An order that the Defendant
credits the accounts of the
Plaintiff with the full value of
the Defendant’s banker’s drafts
lodged by the Plaintiff;
b) An order of injunction
against the Defendant from
interfering with the Plaintiff’s
funds representing the full
value of the banker’s drafts
issued by the Defendant;
c) An order that the
Defendant gives value for the
payment order dated the 30th
day of May, 2008 and deposited
into the Plaintiff’s account
with SG-SSB Limited.
d)
Damages
e) Costs”
The Writ of Summons and the
Statement of Claim were,
however, amended on April 4,
2009 to add the following
parties;
- William Oppong-Bio
(2nd Defendant)
- Data Bank
Brokerage Limited (3rd
Defendant)
- Securities and
Exchange Commission (4th
Defendant)
- Ghana Stock
Exchange (5th
Defendant)
In amending the parties to the
action, the Plaintiff also
amended the reliefs to read as
follows:
“a) A declaration that the
shares are the property of the 2nd
Defendant.
b) An order that the name of the
2nd Defendant be
entered unto the Register of
Shareholders of CAL Bank Ltd, as
the holder of the shares which
is the subject matter of the
suit.
c)
An
order that the 1st
Defendant gives full value for
the bankers drafts issued for
the full payment of the shares
bought by the 2nd
Defendant or in the alternative.
d)
An
order for specific performance
of the sale contract note
against the 2nd
Defendant.
e)
An
order of injunction against the
1st Defendant from
interfering with Plaintiff’s
funds representing the full
value of bankers drafts issued
by the 1st Defendant
in payment for the shares upon
the instructions of the 2nd
Defendant.
f)
An
order that the 1st
Defendant gives value for the
payment order dated May 30, 2008
and deposited into the
Plaintiff’s account with SG-SSB
Ltd.
g)
A
declaration that the 4th
Defendant’s ruling that the
trade was not “consummated” and
the shares remain the property
of the Plaintiff is null and
void as not supported by law or
fact.
h)
An
order that the 4th
Defendant directs the 5th
Defendant to enforce its rules
against the 3rd
Defendant to assure payment by
the 2nd Defendant
through the 1st
Defendant.
i)
Damages.
j)
Costs.
k)
Any
other relief (s) as may seem fit
to the Honourable Court.”
At the beginning of the trial
the 3rd Defendant
(Databank Brokerage Limited)
applied successfully to be
struck out of the proceedings as
a party.
The following issues were
settled for determination at the
trial;
“i. Whether or not a valid
contract for the sale of the
Plaintiff’s shares to 2nd
Defendant was concluded between
Plaintiff and 2nd
Defendant?
ii. Whether or not Bank of
Ghana can intervene to
invalidate a share sale
transaction lawfully concluded
between two private individuals
to wit; Plaintiff and 2nd
Defendant?
iii. Whether or not the
sale of Plaintiff’s shares to 2nd
Defendant was vitiated by
intervention of the Bank of
Ghana?
iv. Whether or not 4th
and 5th Defendants
can invalidate a sale lawfully
concluded between two private
individuals to wit; Plaintiff
and 2nd Defendants?
v. whether or not failure
to complete the statutory
formalities of the share sale
transaction between Plaintiff
and 2nd Defendant
invalidates the agreement
concluded between Plaintiff and
2nd Defendant for the
sale of Plaintiff’s shares to 2nd
Defendant ?
vi. Whether or not the
intervention by the Bank of
Ghana and 4th and 5th
Defendants entitled 2nd
Defendant to rescile from the
contract concluded between
Plaintiff and 2nd
Defendant for the Sale of
Plaintiff’s shares to 2nd
Defendant?
vii. Whether or not 4th
Defendant fairly exercised its
statutory powers when it
declared that the agreement by
which Plaintiff sold his shares
to 2nd Defendant
failed for which reason the
shares remained Plaintiff’s?
viii. Whether or not upon
agreement between Plaintiff and
1st Defendant that
part of Plaintiff’s funds be
lodged with 1st
Defendant in fixed deposits, 1st
Defendant is entitled to rescile
from the agreement by virtue of
which Plaintiff lodged his funds
with 1st Defendant?
ix. Whether or not 1st
Defendant is entitled to deny
value to the payment order
issued to the Plaintiff’s
bankers?”
The 4th Defendant
filed an additional issue as
follows:
“Whether or not the 4th
Defendant acted within the
Security Industry Laws?”
The 5th Defendant
also filed the following
additional issue:
“Whether or not the purported
sale of Plaintiff’s CAL Bank
Shares to 2nd
Defendant on the 27th
of May 2008 was consummated in
accordance with the rules of the
5th Defendant?”
I do not intend taking these
issues for resolution as
numbered but hope to resolve
them all, either directly or by
implication, at the end of this
judgment
For a clearer appreciation of
this judgment, I think it is
relevant to examine the
relationship between the
Plaintiff and each of the
Defendants for which the
Plaintiff has sued the
Defendants. Counsel for the 5th
Defendant has submitted in his
written address that the
Plaintiff is not clothed with
cause of action against any of
the Defendants. I see this
submission not only belated but
an over simplification of the
matter before me. It is trite
learning that a defendant is one
who is sued and called upon to
make satisfaction for a wrong
complained of by another i.e.
the plaintiff. A plaintiff must
thus have a cause of action
against a defendant. What
constitutes a cause of action
was enunciated by Lord Diplock
in Letang v. Cooper (1965) 1
QB 323 CA as follows:
“A cause of action is simply
a factual situation the
existence of which entitles one
person to obtain from the court
a remedy against another
person.”
I have no doubt in my mind that
from the pleadings before me the
Plaintiff has a cause of action
which all the Defendants need to
defend else Plaintiff be given
his claims.
It is trite law that for every
case there is a burden of proof
to be discharged and the party
who bears the burden will be
determined by the nature and
circumstances of the case; see
sections 10 – 17 of our
Evidence Decree 1976 (NRCD 323).
There is no paucity of case
law interpreting these
provisions. In Ababio v
Akwasi 111 [1994-95] Ghana Bar
Report, Part 11, 74 the
court stated that a party whose
pleadings raise an issue
essential to the success of the
case assumes the burden of
proving such issue. Reference is
also made to the cases of
Takoradi Flour Mills v Samir
Faris [2005-06] SCGLR 882
and Re Ashalley Botwe Lands:
Adjetey Agbosu & Ors v Kotey &
Ors [2003-04] SCGLR 420
which further elucidate the
burden of proof as statutorily
provided.
As stated by Justice
Mensa-Boison JA, in the case of
Acquaye v Awotwi [1982-83] 2
GLR 110, the testimony of a
plaintiff is presumptive
evidence which is rebuttable.
The well-known rule of evidence
is that although proof in a
civil case rested on the
plaintiff, that burden was
discharged once the plaintiff
had introduced sufficient
evidence of the probability of
his case. It would then rest on
the defendant to rebut the
plaintiff’s evidence.
Plaintiff and 1st
Defendant
The gravamen of Plaintiff’s
claim is that on May 27th
2008 he put up for sale shares
in CAL Bank Limited on the floor
of the Ghana Stock Exchange (5th
Defendant). He procured the
services of Databank Brokerage
Limited as the Broker of his
shares in this transaction. He
later got to know that the 2nd
Defendant had purchased his
shares through the same Broker,
Databank Brokerage. The sale of
these shares so far as he is
concerned took place on May 30th,
2008. The Broker took him to the
Head Office of the 1st
Defendant where he was given
banker’s drafts issued by the 1st
Defendant as part payment of the
shares. He was given banker’s
drafts representing part of the
total value for the shares sold,
namely, manager’s cheques for
GH¢7.2 million payable to Zenith
Bank Limited; GH¢400,000 payable
to SG-SSB Limited; and GH¢1.02
million payable to the Broker.
The balance of the purchase
price (GH¢6.16 million) was
invested in long term fixed
deposit after being persuaded,
according to his evidence, to
make such investment by Ecobank
staff. He was also issued with
a credit card which he started
using.
The 1st Defendant,
Ecobank’s case is that on May 22nd
2008, Mr. William Oppong Bio (2nd
Defendant) applied to the Bank
for a loan facility to enable
him buy Plaintiff’s shares in
CAL Bank Ltd. The application
was tendered in evidence as
Exhibit “4”. The loan facility
was approved and on May 29th,
2008 an offer letter (Exhibit
“5”) was issued to the 2nd
Defendant. The loan was
disbursed into 2nd
Defendant’s account. On the 30th
of May, 2008, 1st
Defendant on the instructions of
the 2nd Defendant
paid the Plaintiff for the
shares 2nd Defendant
was intending to buy.
1st Defendant’s
witness, George Mensah Asante,
Head of Domestic Banking of 1st
Defendant Bank, in his evidence
confirmed that three (3)
banker’s drafts were issued. He
corroborated the evidence that
the draft to; SG-SSB Limited was
for GH¢400,000.00; Zenith Bank
was for GH¢7,200,000.00; and
Databank Brokerage was for
GH¢1,200,000.00. However, in
the evening of May 30th,
2008, there was news on the
radio that the particular
transaction between the
Plaintiff and the 2nd
Defendant had been suspended by
the Ghana Stock Exchange (5th
Defendant) following a directive
from the Bank of Ghana. The
following Monday, June 2nd
2008, the Bank received
instructions from the 2nd
Defendant to suspend all
payments with respect to the
shares he wanted to purchase
from the Plaintiff.
Mr. Asante testified that acting
on the instructions of the 2nd
Defendant, 1st
Defendant called SG-SSB and
Zenith Bank and told them that
the cheques would not be
honoured if they were presented
for clearing because the
underlying transaction for which
the cheques were issued had been
stopped by the 2nd
Defendant. Upon receiving the
letters from the 1st
Defendant, Zenith Bank did not
present the draft for payment.
SG-SSB however said that they
had given value for the draft
and therefore presented it for
payment the next day. All these
pieces of evidence were not in
serious dispute. SG-SSB Limited
kept presenting the draft at the
clearing house day after day for
clearance but was rejected on
the ground that the underlying
transaction had been stopped.
Mr. Asante also testified that
the 2nd Defendant
even went further and wrote to
them on June 11th,
2008 to cancel the loan granted
him, stating that he had
cancelled the shares sale
transaction. The letter dated
June 11th, 2008 was
tendered in evidence as Exhibit
“10”.
To these defences raised by the
1st Defendant,
Plaintiff’s contention is that
he indeed entered into agreement
for the sale of his shares to 2nd
Defendant, and he was duly paid
by 2nd Defendant for the shares.
This payment made through 1st
Defendant was therefore for his
benefit, and the money was
recognized by 1st
Defendant as belonging to him
(Plaintiff). It was therefore
wrong for 1st
Defendant to accept any
countermand from 2nd
Defendant, the money having been
vested in him, the Plaintiff. He
contends further that as soon as
1st Defendant agreed
to pay him as instructed by 2nd
Defendant, and he was ready to
receive the money, which he did,
2nd Defendant’s
control over the money was lost.
From that time onwards, it is he
who should be taking decisions
with regard to the money. 1st
Defendant should no longer be
acting pursuant to 2nd
Defendant’s instructions in
relation to the money but
Plaintiff’s.
Plaintiff’s contention therefore
is that at this time a new
relationship by way of banker/
customer relations had, by
conduct, been established
between him and 1st
Defendant. Banker’s drafts were
issued on his behalf and his
money invested by 1st
Defendant and even issued a
credit card which he, Plaintiff,
went ahead to use. A valid
contract had thereby been
created between him and the 1st
Defendant regarding the proceeds
of the shares sale transaction
and it was thus wrongful for the
1st Defendant to
purport to cancel the contract
between it (1st
Defendant) and him, Plaintiff. I
do not think there can be any
doubt that a contract can be
made by conduct. The case of
Brogden v Metropolitan Railway
(1876) 2 App Cas 66 is
authority that a binding
contract can result from the
conduct of parties without the
necessity for a formal
contract.
1st Defendant has
defended Plaintiff’s action on
two main grounds. Firstly, 1st
Defendant contends that by
virtue of a Bank of Ghana
directive all banks were
forbidden from giving same day
value to cheques the value of
which exceeds GH¢5,000. In my
view, there was not sufficient
evidence adduced to enable the
Court make a clear finding on
this issue.
The 1st Defendant’s
second point of contention is
that by banking rules cheques
are given value only after three
(3) days because the cheques
have to go through a mandatory
clearing system. For this
reason 1st Defendant
contends that once the cheques
were stopped prior to the
expiration of the 3 day period
SG-SSB Bank Limited could not
have given value to the cheque
before the expiration of the
said period. 1st
Defendant therefore contends
that by reason of the
intervention of the Bank of
Ghana, it owed an obligation to
2nd Defendant to stop
Plaintiff from unjustly
enriching himself.
The fact that 2nd
Defendant was already a customer
of 1st Defendant
Bank, and was given a loan
facility by 1st
Defendant cannot be questioned.
In my view, a banker/customer
relationship also arose when 1st
Defendant believed, and it was a
fact, that through the
compliance by 1st
Defendant of 2nd
Defendant’s instructions paid
money to Plaintiff and
recognized Plaintiff as the
owner of the money. The evidence
before the Court confirms that
payment orders were made upon
Plaintiff’s instructions to 1st
Defendant which instructions 1st
Defendant obeyed. And as stated
above the balance on the sale
proceeds of GH¢6,162,240.00 was
to be invested by 1st
Defendant on Plaintiff’s
behalf. Arising from this fact
Plaintiff contends that he would
not have been able to procure
compliance by 1st
Defendant to his orders to draw
the banker’s drafts and invest
the aforesaid sum on his behalf
if 1st Defendant had
not recognized him as the owner
of the funds.1st
Defendant therefore acted
wrongfully by refusing to honour
the payment orders drawn upon
Plaintiff’s instructions.
In Taxation Commissioners v.
English, Scottish and Australian
Bank Limited (1920) AC 683,
it was held that to determine
whether or not a banker customer
relationship had been
established duration of the
relationship was not of the
essence. The material portion
of the judgment is as follows:
“Their Lordships are of the
opinion that the word ‘Customer’
signifies a relationship
in which duration is not of
the essence. A person whose
money has been accepted by the
bank on the footing that they
undertake to honour cheques up
to the amount standing to his
credit is, in the view of their
Lordships, a customer of the
bank in the sense of the
statute, irrespective of whether
his connection is of short or
long standing. The contract is
not between an habitue
and a newcomer, but between a
person for whom the bank
performs a casual service, such
as, for instance, cashing a
cheque for a person introduced
by one of their customers, and a
person who has an account of his
own at the bank.”
The same point was made by
Bailhache J in the case of
Ladbroke and Co v. Todd (1914)
Com. Cas 256 (1914-15) All ER
1134. In that case, a man
was told by the bank that he
could not draw against a cheque
until cleared. But Bailhache J
held that in order to become a
customer it was not necessary
that “he should have drawn any
money or even that he should be
in a position to draw money”.
In Woods v. Martins Bank
Limited (1959) 1 QB55; (958) 3
ALL ER 166, Salmon J
held that the relationship of
banker and customer existed
between the parties from the
time when the bank accepted
instructions from the plaintiff
to collect monies from a
building society, to pay part to
a company he was going to
finance and “retain to my order
the balance of the proceeds,”
although there was at the time
no account. There was a
likelihood that an account would
be opened shortly after. There
were early negotiations from
which it could normally be
inferred that Woods would open
an account with the bank and
that the bank was willing for
him to do so, so that a contract
was concluded between them.
As I have already stated, I am
in no doubt that there was a
banker/customer relationship
established between the
Plaintiff and the 1st
Defendant when 1st
Defendant complied with the
instruction by 2nd
Defendant to make payment to the
Plaintiff, and I will so find.
It appears obvious to me that
the instant case has a lot to do
with what a banker’s draft is
and the factual and legal
incidents of a banker’s draft. I
will therefore want to dwell a
little more on banker’s drafts
as distinct from ordinary
cheques. I have stated above
that the 1st
Defendant issued banker’s drafts
to SG-SSB, Zenith Bank and
Databank.
So what is a banker’s draft? A
banker’s draft (also called a
bank cheque or in the US a
cashier’s check (cheque) is a
cheque for which the funds are
taken directly from the banking
institution rather than the
individual drawer’s account.
On the other hand, a normal
cheque represents an instruction
to transfer a sum of money from
the drawer’s account to the
payee’s account. When the payee
deposits cheque into its
account, the cheque is verified
as genuine (or “cleared”, a
process typically taking several
days) and the transfer is
performed (usually via a
clearing house or similar
system). Any individual or
company operating a current
account (or checking account)
has authority to draw cheques
against the funds stored in that
account. However, it is
impossible to predict when the
cheque will be deposited after
it is drawn. Because the funds
represented by a cheque are not
transferred until the cheque is
deposited and cleared, it is
possible the drawer’s account
may not have sufficient funds to
honour the cheque when the
transfer finally occurs. This
dishonoured or “bounced” cheque
is now worthless and the payee
receives no money, which is why
cheques are less secure than
cash.
By contrast, when an individual
requests a banker’s draft he
must immediately transfer the
amount of the draft (plus
applicable fees and charges)
from its own account to the
bank’s account. An individual
without an account at the
issuing bank may request a
banker’s draft and pay for it in
cash subject to applicable
anti-money laundering law and
the bank’s issuing policies.
Because the funds of the
banker’s draft have already been
transferred they are proven to
be available; unless the draft
is a forgery or stolen, or the
bank issuing the draft goes out
of business before the draft is
deposited and cleared, the draft
will be honoured. I must say
here that it is therefore
imperative that there must be
money stored in the account of
the bank issuing the banker’s
draft.
In Ghana, a cheque is defined in
section 72 (1) of the Bills of
Exchange Act 1961 (Act 55) as
follows:
“A cheque is a bill of
exchange drawn on a banker
payable on demand”
Section 1 of the same Act 55
defines a bill of exchange as
follows:
“A bill of exchange is an
unconditional order in writing,
addressed by one person to
another, signed by the person
giving it, requiring the person
to whom it is addressed to pay
on demand or at a fixed or
determinable future time a sum
of money to or to the order of a
specified person or to bearer.”
The Bills of Exchange Act makes
no distinction between a
manager’s cheque and an ordinary
cheque. It is a notorious fact
that in Ghana cheques take three
(3) days to clear. In the new
Cheque Codeline Clearing with
Cheque Truncation Guidelines and
Operational Procedures issued by
the Bank of Ghana/ Ghana
Interbank Payments and
Settlements Systems Limited
(GhIPSS) in 2009, which are
supposed to ensure a faster way
of clearing, cheques still take
2 days to clear and all bills of
exchange are covered just like
before. Paragraph 1.2 states as
follows:
“The guidelines and operational
procedures (Guidelines) shall
apply to cheques and other
payments. The term “Cheque”
shall have the same meaning as
provided in the Bills of
Exchange Act 1961 (Act 55)”
I shall find that in Ghana, at
the time the share sale
transaction in question took
place any type of cheque,
without exception, had to go
through clearing for a period of
3 days.
One of the main points on which
Plaintiff hinged his case was
that banker’s drafts are as good
as cash. In the book Miche on
Bank and Banking 1992 Edition
at pages 37 and 38
the learned author explains the
difference between a normal
cheque and a bank draft as
follows:
“A banker’s cheque, as popularly
understood, is a cheque, a draft
or other order for payment of
money, drawn by an authorised
officer of a bank upon either
his own bank or some other bank
in which funds of his bank are
deposited. The terms “draft”
and “cheque” are, in some
instances, used interchangeably,
and the ordinary meaning of the
term “cheque” is sufficient to
include a draft, the two
distinguishing feature between
the two being that in case of a
draft the drawer is a bank while
in case of the ordinary cheque
the drawer is an individual, so
that an instrument purporting to
be a draft which is drawn by the
drawer upon itself and payable
at a bank is in effect a
cheque..... A bank draft is a
bill of exchange drawn by a bank
on its correspondent bank,
issued at the solicitation of a
stranger purchasing it.....
There is no legal difference in
the meaning of the terms ‘draft’
and ‘cashier’s cheque’. A
cashier’s cheque is a bill of
exchange drawn by a bank on
itself, accepted in advance by
the act of its issuance, and it
is not generally subject to
countermand.”
The author stated further that:
“A cashier’s cheque is accepted
by the very act of issuance; it
becomes a primary obligation of
the issuing bank rather than the
purchaser, and represents an
absolute irrevocable promise of
the bank to honour same when
presented for collection;
neither the bank nor the
purchaser has any authority to
countermand the cheque after
issuance. Larimore v Weyard
& Son, 16 Banker.201 (Bankr.
M.D. Fla.1981). Uniform
Commercial Code gives customer
the right to order his bank to
stop payment only on an item
payable to his account; customer
cannot order a bank to dishonour
a cashier’s cheque, since it is
not payable from his own account
within the meaning of the Code.
Santos
v. First Nat’l State Bank,
186 N.J Super. 52, 451 A.2d 401
(1982)”
Premised on this quotation, B.T
Aryeetey JA, sitting as an
Additional High Court Judge, in
the case of Nurudeen Salley &
10 Ors. v. Pyram Saving And
Loans Company Limited and Shadow
Tanko Alhaji (Unreported
Judgment dated 22nd
November 2002 in Suit No. C4/99)
held that the special
characteristic of a banker’s
draft is that it is not subject
to countermand. This is what
his Lordship said:
“In effect a bank draft
circulates in the commercial
world as a primary obligation of
the issuing bank, substituting
for the money represented, and
such cannot be countermanded.
That means as soon as a purchase
of a bank draft is made in
favour of a named payee, as is
in this case, the purchaser does
not, by virtue of the purchase
of the draft, acquire any
interest in the draft, which
would entitle him to interfere
with the payee’s interest in the
draft.”
Because of the peculiar nature
of the bank draft the
relationship between the holder
and the issuing bank assumes
quite a different
characteristic. At page 56 of
the book referred to above, the
difference is explained as
follows:
“The relationship between a bank
and a holder of a cheque issued
by it is that of a debtor and
creditor. The purchase of a
cashier’s cheque establishes no
trust relationship, but of
debtor and creditor, between the
bank and the purchaser, the
transaction being one of
purchase and sale and the cheque
being merely evidence of the
bank’s indebtedness to the
holder.”
Again at page 41 of the book the
learned author narrates the
primary responsibility of the
issuing bank of a bank draft as
follows:
“Cashier’s cheque
is a special kind of instrument,
quite different than normal
cheque, designed to pass in
commercial transactions as next
best thing to cash; it is a bill
of exchange drawn by bank or
other issuer; on itself, and
accepted in advance by act of
being issued and issuing bank
assumes position of primary
liability to payee and purchaser
customer does not have any right
to order bank to stop payment
when cheque is presented see
Crosby v. Lewis (1988) Fla App.
523.”
The Supreme Court also has held
in Guinness Ghana Limited v.
Rafsco Distributing Limited
(2007-2008) SCGLR 151, that
the drawer of a cheque or any
other bill of exchange
undertakes that, on due
presentation for payment, the
instrument will be paid.
Accordingly, if the drawer of a
cheque countermands it, a cause
of action arises against him on
this undertaking.
I will find that a banker’s
draft indeed is as good as
cash. However I will
distinguish the instant case
from that of Nurudeen Salley
& 10 Ors. v. Pyram Saving and
Loans Co Ltd & Shadow Tanko
Alhaji and Guinness Ghana
Ltd v Rafsco Distributing Ltd.
To be able to clearly see the
distinction, I will ask the
following questions: Who is the
drawer in the instant case? The
answer is Plaintiff: Who are the
payees? They are SGS-SSB, Zenith
Bank, and Databank: Who is the
issuing bank? That is the 1st
Defendant. And so what is the
role of the 2nd
Defendant in all this? 2nd
Defendant was the one whose
funds were being dealt with.
Now, in the case of Nurudeen
Salley, it was the drawer of
the banker’s draft who
countermanded the cheque. In,
the instant case it was not the
Plaintiff (the drawer of the
banker’s draft) who
countermanded the cheque; it was
2nd Defendant.
Neither was it the payee; SG-SSB
nor Zenith Bank, nor Databank
that countermanded the cheque.
The case of Nurudeen Salley
does not envisage the situation
in which the funds belong to
another person (the 2nd
Defendant in the instant case)
and was paid to the drawer of
the drafts (Plaintiff herein) in
anticipation of a trade
settling. As stated above, the 2nd
Defendant countermanded
because the underlying contract
had been suspended. And, with
regard to the Guinness
case, as stated above, the 2nd
Defendant was not the drawer of
the cheque.
In the instant case, the
Plaintiff is alleging that the
banker’s drafts issued by 1st
Defendant were countermanded by
the 2nd Defendant,
but that the instruction
wrongfully carried out by the 1st
Defendant. The 1st
Defendant is contending that it
only carried out instructions of
the 2nd Defendant. To
enable the Court make a
determination as to the effect
or otherwise of the said
instructions issued to the 1st
Defendant by the 2nd
Defendant, I shall now look at
the relationship between the
Plaintiff and the 2nd
Defendant. I am aware there are
issues yet to be resolved
between Plaintiff and the 1st
Defendant but findings as they
relate to the Plaintiff and the
other Defendants will help
resolve these issues.
Plaintiff and 2nd
Defendant
It is the Plaintiff’s case that
there was a completed contract
of sale between him and the 2nd
Defendant. The 2nd
Defendant denies this.
In Chitty on Contract Volume
1 30th Edition, 2008
the learned authors state at
page 143 paragraph 2-001 that:
“The first requirement for the
formation of a contract is that
the parties should have reached
agreement. Generally speaking
agreement is reached when an
offer is made by one of the
parties (the offeror) and is
accepted by the other (the
offeree or acceptor). Such an
agreement may however lack
contractual force because it is
incomplete or because its
operation is subject to a
condition which fails to
occur------“
The question to ask is; are
there rules in the stock market
which limit the terms and extent
to which the Plaintiff and 2nd
Defendant can contract? Trading
on the floor of the Stock
Exchange is subject to special
rules contained in the Trading
and Settlement Rules of the
Ghana Stock Exchange Rules
Book. For the purpose of the
events surrounding the 27th
May 2008 trade in shares between
the Plaintiff and 2nd
Defendant, two of the rules,
namely, Rules 46 (1) and 50 (1)
are imperative when considering
the existence of offer and
acceptance culminating in an
enforceable contract. Under
Rule 46(1);
“The clearing and settlement for
the trading session (“T”) shall
take place three (3) business
days after the related trading
session which is (T+3) at 11.00
am or within a given time frame
that the Exchange shall specify
by notice of amendment to this
rule.”
Rule 46(2) schedule D paragraph
9 states as follows:
“(9) Thus, on T+3 payments
shall be made against delivery
i.e. (Delivery versus Payment
DVP)”
Per Rule 50 (1): “A trade is
said to have failed or been in
default if a member
(a)
fails
to deliver securities or make
payment within the time
specified by the rules; or
(b)
issues
to another member a cheque which
is dishonoured.”
Accordingly, for the transaction
in question to have settled,
there should have been delivery
of the shares to the Purchaser
at 11.00 am, whilst the
purchaser delivered payment
(cheque) simultaneously. This
is what is referred to as DVP
(Delivery versus Payment). So to
have a binding agreement in
respect of a share trade on the
floor of the Ghana Stock
Exchange the conditions in the
said Rules 46(1) and 50 (1) must
both be satisfied.
Applying Rule 46 (1) to the
trade of 27th May,
2008, the 5th
Defendant’s witness, Kofi Sadick
Yamoah Managing Director of the
Ghana Stock Exchange, in his
evidence explained what
procedures have to be followed
to accomplish a settlement at
T+3. He explained that at T+0
(trading day) the Broker had to
take the certificate bearing the
names of the seller to the
Registrar (NTHC) for
verification and signature and
have everything prepared for the
settlement day. By T+3, at the
latest 11.00 am, the Broker, if
he is acting for both seller and
buyer, as was the case of
Databank Brokerage in the
instant suit, had to confirm
with the Stock Exchange that
settlement had taken place, in
which case there must have been
a transfer of the security to
the buyer and the buyer must
have effected payment. A cheque
is one mode of payment but as is
stated in Rule 50 (1) (b), where
the cheque is dishonoured the
trade fails.
On the settlement day, again,
according to Rule 50 (1), there
must be delivery versus payment
(DVP) by which the seller must
deliver the securities and the
buyer make payment. The witness
for the 5th
Defendant, Mr. K.S. Yamoah, said
under cross-examination that the
delivery and the payment had to
be simultaneous and therefore
failure to achieve the two
simultaneously by 11.00a.m would
mean that the trade had failed.
Upon instructions from the 2nd
Defendant, following the
intervention of Bank of Ghana in
the shares sale transaction, 1st
Defendant stopped payment of the
three banker’s drafts. It is
not in dispute that the trade
was to settle at 11.00 am on 30th
May, 2008. The evidence before
the Court indicates that the
letter from BOG to the Ghana
Stock Exchange directing the
suspension of the trade arrived
at the Exchange by 13.00 hours
GMT (1.00 pm) on Friday 30th
May, 2008. Mr. G. M. Asante’s
uncontroverted evidence was that
2nd Defendant
instructed 1st
Defendant to pay for the shares
he was buying, on 30th
May, 2008. At the trial, the
representative of the
Plaintiff’s Broker, Mr Patrick
Kingsley-Nyinah’s admitted that
the banker’s drafts were
collected from the 1st
Defendant Bank between 2.00 pm
and 3.00 pm on the 30th
of May, 2008. This did not meet
the 11.00 am deadline prescribed
by the rules of the Exchange.
The further evidence before the
Court is that the banker’s
drafts collected by Plaintiff
from the 1st
Defendant were not deposited
with the payee banks until the
next working day of 2nd
June, 2008. Therefore, the BOG’s
intervention in the form of the
letter dated 30th
May, 2008, took place before the
cheques which were collected
from 1st Defendant
were delivered. On the same 2nd
June, 2008, 1st
Defendant received instructions
from 2nd Defendant to
suspend all payments with
respect to the shares. And on
the same day, 1st
Defendant called SG-SSB Bank and
Zenith Bank to tell them that
the cheques would not be
honoured if presented for
clearing. The “STOP PAYMENT”
letter to SG-SSB dated 2nd
June, 2008 was tendered in
evidence as Exhibit “7”. 1st
Defendant’s witness, Mr Asante,
explained that even if Plaintiff
had been paid with cash for the
shares, by reason of the
cancellation of the underlying
contract 1st
Defendant would still have
claimed back the cash from the
Plaintiff for lack of
consideration.
According to the Ghana Stock
Exchange letter dated 6th
June, 2008 (Exhibit “W”)
addressed to the Executive
Director of Databank Brokerage
Limited, there was no evidence
from Databank as required, of
transfer having been effected.
The said letter stated that; “Databank
Brokerage Ltd had therefore as
at that time, technically
breached Rule 46 (1) and 51(4)
of the Trading and Settlement
Rules.” With regard to the
letter from BOG ordering 1st
Defendant Bank to honour its
payment order of Gh¢400,000 to
SG-SSB Bank, Mr Asante said it
was explained to BOG that the
underlying transaction had been
stopped and therefore 1st
Defendant was not required to
honour the draft.
Before I draw conclusion as to
whether or not there was
settlement in terms of T+3, let
me quickly look at the
involvement of Bank of Ghana.
It is a fact that the Bank of
Ghana has supervisory and
regulatory authority in all
matters relating to banking
business in Ghana; as per
section 2 of the Banking Act,
2004 (Act 673). Furthermore, the
Bank of Ghana has supervisory
capacity over transfer of shares
involving a bank albeit where
this transfer of shares affects
significant shareholdings.
Sections 34 – 36 of Act 673 make
provision for the Bank of Ghana
to investigate any matters
involving a listed or unlisted
bank where the transaction is
likely to be detrimental to the
bank.
With regard to the argument by
BOG about money laundering, all
banks and financial institutions
are to adhere to the Anti Money
Laundering Act, 2007 (Act 749)
which is to deter people and
organizations from attempts to
transform illegally acquired
wealth into clean resources. The
Act gives banks the legal
authority to question and report
large and suspicious lodgement
of funds and suspicious
transactions to a money
laundering authority instituted
with the passage of the law.
I will however state here that
there was no evidence placed
before the Court to challenge
the authority of the Bank of
Ghana to intervene in the trade
of 27th May, 2008
except the assertion by Mr
Kingsley Nyinah of Databank (the
Broker) in a letter to Bank of
Ghana that its intervention was
arbitrary. I am unable to agree
or disagree with Mr
Kingsley-Nyinah’s opinion that
Bank of Ghana’s action was
arbitrary simply because I have
not heard them. Suffice it to
say that all the Defendants,
most of whom are financial
institutions, obeyed BOG’s
directive without question.
Be that as it may, the Bank of
Ghana’s intervention prevented
the fulfilment of the vital
condition, delivery versus
payment (DVP). In my opinion,
even though the said BOG
intervention occurred after
11.00 am on the 3rd
day (i.e. T+3), there is no
evidence that the share
certificate representing the
shares had been transferred to
William Oppong-Bio by 11.00 am
or even at the time of the
intervention. And even if by
collecting the Banker’s drafts
for payment Plaintiff had been
put in funds on 30th May 2008, I
am of the opinion that the
banker’s draft or manager’s
cheque had not been cleared –
the source of the funds to be
used had been withdrawn and
therefore the funds from which
the banker’s draft had to be
honoured was not available.
Hence payment for the shares
could not be said to have been
made as at 11.00am on 30th
May, 2008, and I will so find.
The Broker, in his evidence, did
not agree that the trade did not
settle. He said by the time
Databank received the letter
from the Ghana Stock Exchange
the seller had been paid for the
shares that he sold by way of
banker’s drafts “because we
received the banker’s draft
before the letter and also the
shares had been transferred into
the name of the buyer.” This
however contradicts his
assertion in his letter to the
Stock Exchange that the
intervention had produced an
inequitable situation of the
seller being in funds and the
security not having been
transferred.
Plaintiff’s further case is that
the share sale transaction fully
satisfied the corporate rules on
the transfer of shares as
provided for in the Companies
Act of 1963 (Act 179). Section
95 provides as follows:
“(1) Except as expressly
provided in the company’s
Regulations shares are
transferable without restriction
by written transfer in common
form.”
According to the Plaintiff, the
fact that Plaintiff’s shares
were duly transferred into 2nd
Defendant’s name is evidenced by
Exhibit “H”. I would disagree
with the Plaintiff’s position.
The mere fact of the name of the
2nd Defendant
appearing in the list of CAL
Bank shareholders (Exhibit “H”)
is not sufficient proof of
transfer. In my opinion, the “written
transfer in common form”
stated in Section 95 (1) of Act
179 assumes that the rules of
the Ghana Stock Exchange have
been complied with. The
unchallenged evidence of
Emmanuel Mensah Appiah, Head of
the Market Surveillance
Department of the 4th
Defendant at the time in
question, was that their
investigations revealed that the
transfer in the Register of
shares was done on the very day
of the trade, when the trade had
not settled.
In my opinion, the inflexible
T+3 and DVP rules had not been
achieved at 11.00 am on Friday
30th May, 2008. It
is my further opinion that the
trade failed, or in the parlance
of the Stock Exchange, did not
settle for lack of
consideration, and I will so
find.
Plaintiff and 4th
Defendant
That the 4th
Defendant is the apex regulator
of the Securities Industry in
Ghana is an incontrovertible
fact. In the exercise of its
powers and functions under the
Securities Industry Act, 1993
(PNDCL 333), as amended, 4th
Defendant is empowered by PNDCL
333 to, inter alia, resolve any
dispute or complaint regarding
the conduct of trading at the
Exchange.
Section 8 (c) empowers the
Director-General of 4th
Defendant, upon receipt of a
complaint, dispute or violation
arising under PNDCL 333 to
investigate the matter and
submit same to the
administrative hearings
Committee within 30 days. There
is a proviso which states that
he/she shall not refer same to
the administrative hearings
committee if (a) he considers
the matter to be frivolous or
vexatious or (b) in his/her
opinion he/she can settle the
matter or complaint to the
satisfaction of the parties. Per
the provisions, after 4th
Defendant has intervened an
aggrieved person may then invoke
the jurisdiction of the court
for a determination of the
issues arising out of the share
sale transaction.
The evidence on record is that
complaints were made by various
persons involved in the share
sale transaction to 4th
Defendant in accordance with the
said section 8 (c) (1). The 4th
Defendant invited all the
parties involved, took evidence
from them and subsequently
concluded its investigations.
The investigations revealed,
according to the 4th
Defendant, that the trade had
failed under Rules 46 (1) and 50
(1) of the Ghana Stock Exchange
Rules, having been intervened by
the Bank of Ghana. The
investigation also revealed that
the Plaintiff did not have all
the 14,308,231 shares that he
purported to sell on the date of
the sale, and same was testified
by the 4th
Defendant’s witness, Mr E. M.
Appiah, at the trial.
I have taken note of the fact
that the result of the
investigations conducted by 4th
Defendant revealed that the
total shares of 14,130,000 CAL
Bank shares traded on 27th
May 2008 were owned by three (3)
people, namely; Daniel Ofori,
the Plaintiff (13,308,231
shares); Esther Frimpong
(771,769 shares); and Boateng
Opoku-Gyamfi (50,000 shares).
The 771,769 shares sold by the
Plaintiff on behalf of Esther
Frimpong was part of 778,414
shares purchased by the
Plaintiff from the said Esther
Frimpong. The 778,414 shares
were made up of 731,215 shares
bought on the 22nd
day of May 2008. The difference
of 47,199 shares was also
purchased on 23rd,
May 2008.
Per section 46 (1) of the Ghana
Stock Exchange Rules the two
purchases would settle or would
become the property of Plaintiff
on the 27th and 28th
of May respectively. However
the Plaintiff attempted to sell
same on 27th May when
he did not yet have ownership of
them. Interestingly however,
the Registrars, NTHC Ltd, had
purportedly transferred the
778,414 shares to the Plaintiff
on 27th May 2008 when
the trade cycle had not been
concluded. So clearly on 27th
May 2008 when the Plaintiff
purported to sell 14,398,231
shares he did not have all those
shares to sell; it was based on
an assumption that the trade
would settle. Obviously the
famous principle nemo dat
quod non habet is relevant
here. In the words of Her
Ladyship the Chief Justice Mrs.
Georgina Wood (JSC), in
Memuna Amoudy v. Mr. Kofi Antwi,
Civil Appeal No. J4/6/2004
delivered on 24th
November 2004: “.....the
well-known rule nemo dat quod
non habet applies with much
force in this instant case and
the plaintiff cannot be entitled
to the relief sought.”
I do not find the 4th
Defendant liable to the claim
made by the Plaintiff against
it.
Plaintiff and 5th
Defendant
The 5th Defendant,
Ghana Stock Exchange is the only
licensed stock exchange in Ghana
and it was on the floor of the
Exchange that the trade in
question took place; and it is
the rules and regulations of the
5th Defendant that
applied to the said trade. The
Plaintiff claims that the
actions of the 5th
Defendant (together with that of
the 4th Defendant) in
attempting to reverse a fully
settled trade without lawful
justification is a gross abuse
of authority. That, the 5th
Defendant is fully aware that
there is no legal basis for
their actions but continue in
breach of their own rules,
regulations and laws to the
detriment of the Plaintiff.
Plaintiff is thus praying for an
order directed at 5th
Defendant to enforce its rules
against the Broker to assure
payment by the 2nd
Defendant.
Technically speaking, the
transaction involved two brokers
representing the sell and the
buy sides of the bargain,
notwithstanding the fact in the
instant case one broker
represented both the sell and
buy sides. The evidence before
the Court is that the Exchange
does not deal with individuals
but with brokers and therefore
the Exchange did not deal
directly with the Plaintiff.
Like the 4th
Defendant, the 5th
Defendant contends that there
was no concluded contract for
the transfer of the Plaintiff’s
shares to 2nd
Defendant. This is premised on
the reason that the Bank of
Ghana had intervened in the
purported trade within the T+3
cycle and before it settled. In
consequence there was never a
delivery of the CAL Bank shares
by the Plaintiff. Furthermore,
payment was never made by the 2nd
Defendant after he had stopped
the payment order of the bank
drafts. The condition of
deliver versus payment was never
satisfied.
Rule 37 of the Trading and
Settlement Rules (Part C) –
Exhibit “25”- gives 5th
Defendant power to validate or
cancel an order or contract made
in listed shares. But there is
no pleading or evidence that 5th
Defendant exercised its powers
pursuant to the said rule. The 5th
Defendant’s contention is that
Bank of Ghana had the power to
intervene because CAL Bank
Limited, a registered Bank falls
within the ambit of the
regulatory powers of the Bank of
Ghana. Bank of Ghana satisfied
5th Defendant that it
had cause to investigate the
transaction to protect the
banking industry in its capacity
as the supervisor of the Banking
industry under the Banking Act,
2004 (ACT 673).
The 5th Defendant
contends further that the
request for information on the
transaction from 5th
Defendant and 5th
Defendant’s compliance with same
is both within the powers of BOG
and 5th Defendant.
Accordingly the BOG’s directive
to 5th Defendant
which put the said transaction
on hold pending investigation,
is also both within the powers
of the BOG and the 5th
Defendant. This intervention in
5th Defendant’s view
frustrated the sale of
Plaintiff’s shares to 2nd
Defendant. The reason according
to 5th Defendant
being that compliance with the
BOG’s directive by 5th
Defendant is in the best
interest of the Securities
Industry which supersedes the
loss of profit by any particular
investor.
I want to state here that Mr
Yamoah, Managing Director of the
5th Defendant’s
contention regarding technical
breaches by Plaintiff in the
conduct of the trade, as stated
in his letter (Exhibit “W”)
appears to me to be an
afterthought since no previous
allegations of technical
breaches were ever made against
the trade. The fact remains that
5th Defendant had the
power to cancel the trade but it
did not. Mr Yamoah, in his
evidence, also explained why 5th
Defendant demanded trade levies
from the Broker. He said that
correspondence from the Broker
gave the Exchange the indication
that the trade had settled and
thus the Exchange was entitled
to demand trade levies. And when
the levies were not forthcoming,
the Broker was suspended for
non-payment of levies.
The 5th Defendant
also contends that in the
intervening period when the sale
was suspended, the 2nd
Defendant withdrew his offer to
purchase Plaintiff’s shares
before the suspension of the
sale was lifted, for which
reason the intended contract had
been aborted because 2nd
Defendant’s acceptance of
Plaintiff’s offer was no longer
available at the time. In 5th
Defendant’s view therefore there
could not be a contract between
Plaintiff and 2nd
Defendant for the sale of
Plaintiff’s shares to 2nd
Defendant. Here again the
evidence before me does not find
the 5th Defendant
liable to Plaintiff’s claim.
What I find to be Plaintiff’s
last pivot is his contention
that the 2nd
Defendant could not resile from
the agreement with him because
the only grounds upon which a
party to a valid contract can
resile arises in circumstances
where fraud, misrepresentation
and/or mistake have been alleged
and proved by the party seeking
to avoid the contract. But in
the instant case no fraud has
been alleged and proved. It is
therefore very clear that the
main issue to be determined now
is the effect of the Bank of
Ghana’s intervention on the
transaction in question. Could
it be said that the sale of
Plaintiff’s shares to 2nd
Defendant was vitiated by the
intervention of the Bank of
Ghana?
It is trite learning that
contracts – or apparent or
purported contracts – can be
invalidated by vitiating
factors. A contract may be
vitiated by mistake (including
non est factum), undue
influence, duress, public
policy, illegality,
unconscionability,
misrepresentation, fraud or
frustration. This means that a
court may refuse to enforce a
contract on any of the
above-listed grounds. If a
contract is found by the court
to be vitiated, the contract may
be declared void or voidable.
I have already discussed the
Bank of Ghana’s intervention in
the shares sale transaction the
subject matter of this present
suit and the grounds for the
intervention. The dispute
before the Court having resulted
from a trade in shares I will
discuss whether any vitiating
factors arise in relation to the
banking laws with respect to a
trade in shares. Section 34 of
Banking Act, 2004 (Act 673)
prohibits prima facie the
acquisition and/ or disposal of
shares in a banking institution
of 10%. The fact of the matter
is that the shares in question
did not amount to 10% of the
total shareholding of CAL Bank
Ltd.
Section 35 of Act 673 states
that the Bank of Ghana may
disapprove of a transaction in
shares where the person
acquiring the shares may
exercise detrimental influence
over the bank, or the person
selling the shares is either a
director or promoter of the bank
or the person selling the shares
has a quantity of shares
sufficient to allow the person
to exercise a significant
influence over the management of
the bank, or the transaction in
shares may be detrimental to the
bank. However, none of the
parties in the instant suit
pleaded that any of the
situations listed in sections 34
and 35 of the Banking Act
existed in this transaction.
Nonetheless, it is trite
learning that obligations under
contracts may be terminated
(i.e. discharged) by various
means: lawfully by performance,
agreement or frustration; or
unlawfully by breach of a
condition. Sometimes obligations
become impossible to perform for
a variety of reasons. When an
unforeseeable, unexpected and
uncontemplated event occurs to
make impossible, illegal or
radically different the
performance of a contract, it is
said to have been frustrated.
The supervening event must be
beyond the control and
contemplation of the parties. A
justification in relying on the
doctrine of frustration is the
court’s endeavour to do justice
between the parties and declare
as discharged a contract which
has suffered from a radical and
major intervening event which
was outside the contemplation of
the parties or reasonable
persons and which has made the
performance of the contract
impossible or oppressive.
On the definition or explanation
of frustration the classic
judgment of Blackburn J in
Taylor v. Caldwell (1863) All ER
309, at pg 833 and 839
respectively state as follows:
“Where, from the
nature of the contract, it
appears that the parties must
from the beginning have known
that it could not be fulfilled
unless when the time for the
fulfilment of the contract
arrived some particular
specified thing continued to
exist, so that, when entering
into the contract, they must
have contemplated such
continuing existence as the
foundation of what was to be
done; there, in the absence of
any express or implied warranty
that the thing shall exist, the
contract is not to be construed
as a positive contract, but as
subject to an implied condition
that the parties shall be
excused in case, before breach,
performance becomes impossible
from the perishing of the thing
without default of the
contractor” (pg. 833).
“the principle seems to us to be
that, in contracts in which the
performance depends on the
continued existence of a given
person or thing, a condition is
implied that the impossibility
of performance arising from the
perishing of the person or thing
shall excuse the performance.”
(pg. 839).
In the case of Barclays Bank
v. Sakari (1996) SCGLR 639 at
page 645, the Supreme Court
per Acquah JSC (as he then was)
defined the Common Law doctrine
of frustration as follows:
“Briefly,
frustration occurs when an
external event of some kind,
which is not the responsibility
of either party, renders
performance of the contract
impossible: see Taylor v
Caldwell (1863) 122 ER 309;
or radically different from what
had been contracted for: see
also Davis Contractors v.
Fareham UDC (1956)2 All ER 145,
HL. Now whether in any
particular situation,
frustration has occurred or not
is a question for the court to
determine. And since the event
in question must render
impossible or radically
different the performance of the
contract, there can be no valid
finding of frustration in any
situation without construing the
contract to determine the nature
of the obligation created on the
parties. For it is not any
event affecting any term of a
contract that amounts to
frustration. Some of the
authorities, like Taylor v.
Caldwell (Supra) hold that
it must affect the subject
matter of the contract. Goddard
J. In Taterm Lted v. Gamboa
(1939) 1 KB 132, based
the doctrine of frustration on
“the disappearance of the
foundation of the contract.”
And in proper test for
frustration is: if the literal
words of the contract were to be
enforced in the changed
circumstances, would this
involve a fundamental or radical
change from the obligation
originally undertaken?”
A breakdown of Acquah JSC’s
definition in Barclays Bank
Ghana Limited (supra)
reads as follows:
(a)
There must be an external event
of some kind;
(b)
The external event must not be
the responsibility of either
party;
(c)
The external event renders the
contract’s performance
impossible; or
(d)
It renders the contract’s
performance radically different
from what had been contracted
for.
Thus, for a contract to be
deemed to be frustrated, (a),
(b) and (c) must occur, or, in
the alternative, (a), (b) and
(d) must occur. Having broken
down the definition of
frustration, the Court will now
determine whether the contract
in question was frustrated or
not. In this connection, the
observation of Acquah JSC (as he
then was) in the Barclays
Bank Ghana Limited v. Sakari
case (supra), and quoted in
extenso hereunder becomes very
relevant:
“Thus Lords Reid and
Radcliffe emphasized in Davis
Contractors case that the first
in determining whether
frustration has occurred is to
construe the contract to
discover the scope of the
original obligation; then, to
examine the situation after the
even to find out what would be
the new obligation; and finally
to compare the original with the
new obligation to see whether it
would be radically or
fundamentally different.
Another method of determining
frustration is the implied term
theory ably expounded by Lord
Loreburn in F-A Tamplin SS Co
Limited v. Anglo-Mexican
Petroleum Products (1916) 2 AC
937, by which theory the
Court ought to examine the
contract and the circumstances
carefully to see whether the
parties contemplated a
particular thing or state to
exist. If they did, then, the
term would be implied.” (At
pg. 646).
It is the Court’s duty to
determine from the true position
between the parties as to
whether the contract is
frustrated or not. I will
here refer to the observation of
Lord Wright in the English case
of Denny, Mott and Dickson
Limited v. Fraser (James) & Co.
Limited (1944) 1 All ER 678 at
683 before I make my
finding. This is what he said:
“Where, as generally happens,
and actually happened in the
present case, one party claims
that there has been frustration
and the other party contests it,
the Court decides the issue and
decides it ex post facto
on the actual circumstances of
the case. The data for decision
are, on the one hand, the terms
and construction of the
contract, read in the light of
the surrounding circumstances,
and, on the other hand, the
events which have occurred. It
is the court which has to decide
what is the true position
between the parties.”
In the instant case, according
to the Ghana Stock Exchange
Rules every transaction effected
on the Exchange must be
consummated on T+3. Rule 46(1)
of the Ghana Stock Exchange
Rules dated December 2006 states
as follows:
“The clearing and settlement
for a trading session (T) shall
take place three (3) business
days after the related trading
session which is (T+3) at 11
am. Or within a given time
frame that the Exchange shall
specify by notice of amendment
of this rule”
The above rule is mandatory and
does not admit any enlargement
of time unless by an amendment
of the said rule. Therefore if
anything intervenes that
stretches the transaction life
outside the T+3 rule, that
transaction is frustrated. In
this particular case it is clear
that the intervening cause (novus
actus interveniens)
emanated from the Bank of Ghana
and same was through no fault of
either buyer or seller. The
transaction therefore was
frustrated by the Bank of
Ghana. In fact after the
frustrating event not even the
parties can agree to revive or
proceed with the same
transaction because the legal
position is that that
transaction is dead.
In the case of Hirji Mulji v.
Cheong Yeong Steamship Co Ltd
(1926) AC 507, the House of
Lords, per Lord Sumner held as
follows:
“An event occurs, not
contemplated by the parties and
therefore not expressly dealt
with in their contract, which,
when it happens, frustrates
their object. Evidently it is
their common object that has to
be frustrated, not merely the
individual advantage which one
party or the other might have
gained from the contract. If so,
what the law provides must be a
common relief from this common
disappointment and an immediate
termination of the obligations
as regards future performance.
This is necessary, because
otherwise, the parties would be
bound to a contract, which is
one that they did not really
make. If it were not so, a
doctrine designed to avert
unintended burdens would operate
to enable one party to profit by
the event and to hold the other,
if he so chose, to a new
obligation.”
The transaction that took place
on the 27th day of
May 2008 was therefore
frustrated having failed under Rule
46(1) and 50(1) of the Ghana
Stock Exchange Rules without
fault from either party, and
same are discharged of their
obligations and shall be
governed by Part 1 of the
Contracts Act, 1960 (Act 25).
Section 1(1) of the Contracts
Act, 1960 (Act 25) states that;
“Where
a contract to which sections 1
to 4 apply has become impossible
of performance or been otherwise
frustrated, and the parties to
that contract have for that
reason been discharged from the
further performance of the
contract, this section shall,
subject to sections 2 and 3,
have effect in relation to that
contract”.
I will find that the said trade
of 27th May, 2008,
even if it had not failed for
want of settlement under Rule 46
(1) and (2) of the Ghana Stock
Exchange Trading and Settlement
Rules was nevertheless
frustrated for reasons that this
trade falls under Acquah JSC’s
definition of the doctrine of
frustration in Barclays Bank
Gh Ltd v Sakari (supra);
i.e. that the trade became
radically different. The
particulars of why, after BOG’s
intervention, the trade became
radically different from that
contracted for by the parties
are not far-fetched. During the
suspension of the trade by 5th
Defendant on the advice of BOG,
trade in CAL Bank shares on the
floor of the Exchange was
continuing while the shares the
subject matter of this suit
remained frozen. That
compromised 2nd
Defendant’s ability to trade in
the shares that he had purchased
on the said 27th of
May, 2008, and to make profit
out of it.
The BOG intervention halted the
process of T+3 and with the
interest on 2nd
Defendant’s loan taken for the
purpose of purchasing the shares
running, the transaction became
frustrated. The evidence before
the Court is that the said BOG
suspension was lifted on 13th
June, 2008: a definite period.
However, at the time of the
suspension the same was for an
indefinite period. With the
uncertainty of time, the market
circumstances with regard to the
price of the shares in question
could radically change such that
it would be unjust to hold the
buyer to the transaction. The 2nd
Defendant thus wrote to 1st
Defendant on 11th
June, 2008 (Exhibit “10”) to
cancel the loan granted it had
been granted for the purpose of
buying the shares, stating that
he had cancelled the shares sale
transaction.
The undisputed evidence on
record shows that prior to the
transaction of 27th
May, 2008 the price of CAL Bank
shares was 65GP per share. The
trade sent the share price to
over GH¢1.00. The suspension
of the trade by BOG brought the
share price back to 65GP per
share and since then the share
price continued to dip primarily
due to BOG’s intervention. Thus,
the lifting of the suspension by
BOG did not restore confidence
in CAL Bank shares as expected.
The parties could not be
restored to the positions they
were on 30th May,
2008 when Bank of Ghana
intervened in the transaction
notwithstanding the lifting of
the suspension by BOG after
their investigations on 13th
June, 2008. To all intents and
purposes, the BOG’s intervention
on 30th May, 2008
unleashed an irrevocable fatal
blow to the said transaction of
27th May, 2008
notwithstanding the subsequent
lifting of the said sanction by
BOG on 13th June,
2008.
In summing up, what appears
from the evidence adduced which
to me is critical in the
determination of this case is
the issue whether the trade in
the shares settled. I have made
a clear finding that the trade
did not settle. I hold therefore
in conclusion that the evidence
from the 4th and 5th
Defendants is convincing that
the trade in the shares between
the Plaintiff and 2nd
Defendant did not settle. In
terms of terms of rules 46 and
50 of the Stock Exchange it can
not be said that there was a
completed contract between the
Plaintiff and 2nd
Defendant such that the shares
were effectively transferred to
the 2nd Defendant,
even before the Bank of Ghana
intervened as mentioned in this
judgment, and I will so hold.
The failure to settle the trade
was sufficient and acceptable
grounds for the 2nd
Defendant countermanding the
payment to the Plaintiff since
no shares could be transferred
to him. 1st Defendant
was also entitled in the
circumstances of this case to
carry out the instructions of
the 2nd Defendant.
The failed trade indeed
discharged both parties
(Plaintiff and 2nd
Defendant) from any further
obligation under the agreement
for the sale of the shares.
I will hold further that the
contract between the Plaintiff
and the 2nd Defendant
was frustrated by the
intervention of the Bank of
Ghana, and therefore all parties
are discharged from further
performance. I will accordingly
dismiss the Plaintiff’s claim in
its entirety.
Costs of GH¢2,500 awarded in
favour of each Defendant against
the Plaintiff.
(SGD)
BARBARA ACKAH-YENSU (J)
JUSTICE OF THE HIGH COURT
COUNSEL
THADDEUS SORY
- PLAINTIFF
ANDY DARKO
- 1ST
DEFENDANT
NANA ASANTE
BEDIATUO
- 2ND
DEFENDANT
NII OMAN
BADOO
- 4TH
DEFENDANT
KOFI
ABOAGYE
- 5TH
DEFENDANT
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