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HEADNOTES
The background to this
application is that on 2nd
June, 2008 the plaintiff was
paid an amount of money by the 1st
defendant on behalf of the
original 2nd
defendant in this case. The
payment was for
shares
in Cal Bank Ltd 2nd
defendant bought from the
plaintiff. On receiving the
money plaintiff instructed the 1st
defendant to invest the said
amount in time deposits at an
agreed interest of 30% per
annum. The plaintiff made the 1st
defendant to issue banker’s
drafts covering the remainder
among payable to plaintiff’s
accounts with Zenith Bank and
SSB Bank. On the next working
day 1st defendant
cancelled
the banker’s drafts on the
ground that the trade in the
shares did not settle so
plaintiff was not entitled to
receive the money paid to him.
The issue ended up in litigation
up to the Supreme Court where
the plaintiff prevailed.
By the main judgment dated 25th
July, 2018 the 1st
defendant was ordered to pay to
plaintiff the total amount of
GHS13,760,240.00. 1st
defendant was also ordered to
pay interest on the amount which
was broken down into two parts;
the invested amount of
GHS6,160,240.00 was to attract
interest at the rate of 30% from
2nd June 2008 to the
date of the High Court judgment
and thereafter the interest
shall be calculated at the rate
of interest prevailing at the
date of the High Court judgment
till the date of payment On an
application for review the court
changed the terms for
calculating the interest in main
judgment
HELD
So our final orders will be; The
invested capital i.e. the
GHS6,162,240.00 is to attract
interest at the rate of 30% at
compound interest from 2nd
June, 2008 till date of the
Supreme Court judgment
(25/7/2018), and thereafter at
the statutory rate of interest
prevailing at the time of the
main judgment(25/7/2018) that
is, 13.34%, at simple interest,
till date of final payment. The
defendant shall also pay
interest on the amount of
GHC7,600,000 at the treasury
bill rate of 13.34% from
2/6/2008 till date of final
payment.
STATUTES REFERRED TO IN JUDGMENT
Court (Award of Interest and
Post Judgement Interest) Rules,
2005
c.i.52,
CASES REFERRED TO IN JUDGMENT
Bank of America Canada v Mutual
Trust Co [2002] 2 CLR 601.
The Moorcock (1889) 14 P.D.64
Reigate v Union Manufacturing
Company (Ramsbottom) Ltd and
Elton Cop Dyeing Company Ltd
[1918] 1 KB 592
Quartey v. Norgah [1967] G.L.R.
319,
BOOKS REFERRED TO IN JUDGMENT
Halsbury’s Laws of England Fifth
Edition Volume 49 Paragraph 1304
Halsbury’s Laws of England (3rd
ed.), Vol. 11, para 340
The Law of Contract in Ghana
(2016)
Professor Christine Dowuona
Hammond
DELIVERING THE LEADING JUDGMENT
BAFFOE-BONNIE, JSC:-
COUNSEL
AMA OPOKU AMPONSAH WITH EMMANUEL
DARKO FOR THE 1ST
DEFENDANT/
RESPONDENT/
RESPONDENT/APPLICANT.
THADDEUS SORY WITH NANA BOAKYE
MENSAH-BONSU FOR THE
PLAINTIFF/
APPELLANT/ APPELLANT/RESPONDENT.
BAFFOE-BONNIE, JSC:-
This ruling is in respect of an
application by the 1st
defendant/judgment debtor for
the court to determine the mode
of calculating interest on the
judgment
debt in this case.
The
background to this application
is that on 2nd June,
2008 the plaintiff was paid an
amount of GHS13,762,240.00 by
the 1st defendant on
behalf of the original 2nd
defendant in this case. The
payment was for shares in Cal
Bank Ltd 2nd
defendant bought from the
plaintiff. On receiving the
money plaintiff instructed the 1st
defendant to invest
GHS6,160,240.00 in time deposits
at an agreed interest of 30% per
annum. The plaintiff made the 1st
defendant to issue banker’s
drafts covering the remainder
GHS7,600,00.00 payable to
plaintiff’s accounts with Zenith
Bank and SSB Bank. On the next
working day 1st
defendant cancelled the banker’s
drafts on the ground that the
trade in the shares did not
settle so plaintiff was not
entitled to receive the money
paid to him. The issue ended up
in litigation up to the Supreme
Court where the plaintiff
prevailed.
By the main judgment dated 25th
July, 2018 the 1st
defendant was ordered to pay to
plaintiff the total amount of
GHS13,760,240.00. 1st
defendant was also ordered to
pay interest on the amount which
was broken down into two parts;
the invested amount of
GHS6,160,240.00 was to attract
interest at the rate of 30% from
2nd June 2008 to the
date of the High Court judgment
and thereafter the interest
shall be calculated at the rate
of interest prevailing at the
date of the High Court judgment
till the date of payment.
The GHS7,600,000.00 was to
attract interest at the rate
prevailing at the time of the
High Court judgment from 2nd
June, 2008 till final payment.
On an application for review the
court changed the terms for
calculating the interest in main
judgment
to;
1.
The GHS6,162,240.00 was to
attract interest at the rate of
30% from 2nd June
till date of the Supreme Court
judgment (25/7/2018), and
thereafter at the statutory rate
of interest prevailing at the
time of the main judgment
(25/7/2018).
2.
The GHS7,600,000.00 was now to
attract interest at the
statutory rate as at 25/7/2018
from 2nd June, 2008
till the date of payment.
Following upon the review
judgment of the court the
plaintiff filed a motion on
notice seeking to amend its
entry of judgment filed on the
basis of the main judgment. In
the attached proposed entry of
judgment the plaintiff
calculated the interest rate on
the investment amount of
GHS6,162,240.00 on the basis of
compound interest. Secondly, he
stated the statutory rate of
interest as at 25/7/1018 as 22%.
In its affidavit in answer, the
1st defendant
calculated the interest on the
investment at simple interest
and stated the prevailing rate
of interest as at 25/7/2018 as
13.34%. It is this difference
between the parties that the 1st
defendant has prayed the court
to resolve.
In justification for calculating
the interest on the investment
at compound interest the
plaintiff exhibited a letter
from the Bank of Ghana which in
answer to an enquiry from the
plaintiff stated that;
“where a financial institution
holds on both principal and
interest against a customer’s
demand of both and in breach of
its mandate, until a time the
financial institution is to make
payment, the new interest should
be compounded on the matured
principal and interest (new
principal) until such a time as
the financial institution makes
good its obligation by honouring
the payment of both new
principal and interest”.
Plaintiff also referred to
Halsbury’s Laws of England Fifth
Edition Volume 49 Paragraph 1304
where it is stated as follows;
“Compound interest was not
usually allowed except where
there was an agreement, express
or implied to pay it, or where
the debtor had employed the
money in trade and had
presumably earned it, or unless
its allowance was in accordance
with a usage of a particular
trade or business.”
He submitted that the letter of
the Bank of Ghana is testimony
of the custom and practice in
the banking industry. He also
referred us to the case of
Bank
of America Canada v Mutual Trust
Co [2002] 2 CLR 601.
The defendant on the other hand
has argued that compound
interest calculation is not the
normal thing upon a court
judgment and that by
C.I.52,
it would only be applied
where an agreement or an
instrument states compound
interest as the manner for
calculating interest. It
contends that in this case
though it was agreed that the
investment would attract 30%
interest, no manner of
calculation was specified so the
interest has to be simple
interest.
The defendant’s contention that
the parties to the investment in
this case which is contained in
a written document did not agree
anything on the manner of
calculating interest is
difficult to accept. An
agreement for a time deposit is
not complete without a term on
the manner of calculation of
interest since after a year
interest would have accrued on
the principal. It is either that
the investment should be rolled
over or, interest should be paid
to the investor’s account and
the principal re-invested. We
use the term time deposit as
that was what was stated and
admitted in the interrogatories
but in his evidence, the
plaintiff stated that he
requested that his money should
be put in a fixed deposit.
Therefore, as the plaintiff has
argued, this is a proper case
where the court is required to
imply a term on the manner the
principal and interest were to
be treated after one year in
order to give efficacy to the
agreement of the parties. The
leading case on implied terms of
contracts is
The
Moorcock (1889) 14 P.D.64
In that case the defendants, a
wharf operators, in
consideration of charges for
landing and storing their cargo,
agreed to allow the plaintiff, a
ship owner, to discharge his
vessel at the defendants’ jetty,
which extended into the River
Thames, where the vessel must
necessarily ground at low water.
The bed of the river adjoining
the jetty was vested in the
Conservators. The defendants had
no control over the bed of the
river, and had taken no steps to
ascertain whether it was or was
not a safe place for the vessel
to lie upon. The vessel, on
grounding, sustained damage from
the uneven condition of the bed
of the river adjoining the
jetty:—
At page 68 of the report Bowen
L.J stated the law as follows;
“I believe if one were to take
all the cases, and they are
many, of implied warranties or
covenants in law, it will be
found that in all of them the
law is raising an implication
from the presumed intention of
the parties with the object of
giving to the transaction such
efficacy as both parties must
have intended that at all events
it should have. In business
transactions such as this, what
the law desires to effect by the
implication is to give such
business efficacy to the
transaction as must have been
intended at all events by both
parties who are business men;
not to impose on one side all
the perils of the transaction,
or to emancipate one side from
all the chances of failure, but
to make each party promise in
law as much, at all events, as
it must have been in the
contemplation of both parties
that he should be responsible
for in respect of those perils
or chances.”
The principle was further
explained in the case of
Reigate v Union Manufacturing
Company (Ramsbottom) Ltd and
Elton Cop Dyeing Company Ltd
[1918] 1 KB 592 where at
page 605 of the report Scrutton
L.J said;
‘[a] term can only be implied if
it is necessary in the business
sense to give efficacy to the
contract, that is , if it is
such a term that it can
confidently be said that if at
the time the contract was being
negotiated someone had said to
the parties “what will happen in
such a case”, they would both
have replied ”Of course, so and
so will happen; we did not
trouble to say that; it is too
clear”.
From the nature of the
investment contract entered into
by the parties, its
effectiveness depends on the
manner the principal and
interest were to be dealt with
after each year because the
reason for the contract was
clearly in order for the
plaintiff to earn interest on
his money and for 1st
defendant to have use of the
funds for its banking business.
However, the parties did not set
a date for the fixed deposit to
cease but the rate of interest
was agreed at 30% per annum. So
if at that time a third party
standing by had asked what would
happen to the principal and
interest after one year of the
fixed deposit running and the
money is not returned to the
depositor, the question is; what
would have been the answer? We
have no doubt in our mind that
the answer would have been, “of
course the principal and
interest together should roll
over.” In our understanding, the
situation would not be different
if it were even a call deposit
as the 1st defendant
contends. After one year of the
investment interest of 30% would
have accrued on the amount and
if the plaintiff did not call
for the amount, what would have
happened to that interest?
Furthermore, the law also allows
a court to imply some terms into
a contract in accordance with
the custom of the contract. In
her book “The
Law of Contract in Ghana” (2016)
Professor Christine Dowuona
Hammond states the law as
follows at page 151;
“Often a contract is set against
the background of customary
practice that is familiar to all
those who engage in the
particular trade or business.
Thus quite often negotiations
leading to the making of a
contract are carried out against
the background of a certain
commercial or business practice
or usage and it may safely be
assumed that such custom or
usage are intended to govern the
parties’ contract.”
In
Quartey v. Norgah [1967] G.L.R.
319, C.A. Ollennu
J.A. (as he then was) quoted
with approval the following
passage in
Halsbury’s Laws of England (3rd
ed.), Vol. 11, para 340:
"Where persons enter into
contractual obligations with one
another under circumstances
governed by a particular usage,
then that usage, when proved,
must be considered as part of
the agreement. The contract
expresses what is peculiar to
the bargain between the parties,
and the usage supplies the
rest."
This is where the letter of the
Bank of Ghana comes in. It
states that where at the end of
the period when interest would
accrue on the investment, one
year in this case, if the money
is not returned then the
principal and interest together
is expected to be re-invested.
This would amount to the
investment earning compound
interest.
On the basis of the above
analysis we are unable to agree
with the 1st
defendant that the contract did
not provide for a manner of
calculating interest and was an
incomplete contract. The 1st
defendant definitely had an
understanding of all the terms
of the investment contract and
so did the plaintiff. The law in
these circumstances would imply
the remaining terms to make the
business that the parties
entered into effective.
We therefore hold that the
manner for calculating interest
on the invested amount of
GHS6,120,240.00 shall be at 30%
compound interest from 2nd
June, 2008 to 25/7/2018, the day
of the our main judgment.
The next issue is the rate to be
applied in calculating the post
judgment interest. C.I.52
defines statutory rate as the
“prevailing bank rate”. However,
that definition itself is
ambiguous. In the banking
industry there are more than one
prevailing bank rates at any
particular time and they differ
significantly. The statute does
not say whether it is the
prevailing borrowing rate of the
bank or the prevailing lending
rate. To complicate matters
further, the definition does not
mention any particular bank
whose prevailing rate is
applicable even though the rates
differ among the banks and even
in one particular bank the
prevailing rate differs
depending on the sector of the
economy the transaction relates.
The statute says;
“Where there is doubt as to the
prevailing bank rate, the 91
days Treasury Bill rate as
determined by the Bank of Ghana
shall be the prevailing bank
rate.”
It is based on this that the 1st
defendant argues that the 91
days Treasury Bill rate as at
25/7/08 of 13.34 % ought to be
applied. But the plaintiff
rightly argues, this provision
comes into play when there is
doubt as to the quantum of the
rate, then the quantum of the
Treasury Bill will be used. The
issue we have here is which of
the several prevailing bank
rates we shall choose and apply.
We must admit that the issue is
far more complicated and the
C.I.52 has left a number of
thorny issues hanging. It is
nonetheless unclear to us the
grounds for using the lending
rate in the construction
industry as the basis for
calculation as being suggested
by the judgment creditor. To him
the facts of this case make the
prevailing lending rate of the
Bank of Ghana which is 17% to be
the rate that meets the
contemplation of C.I.52. The
defendants retained the
plaintiff’s funds against his
will and it is reasonable to
conclude that the money soured
up the 1st
defendant’s operational funds
and the appropriate compensation
to the plaintiff in the
circumstances of this case is
for it to pay interest at 17% to
him. But in our view, these
matters are to be determined on
a case by case basis until the
rule maker addresses the
ambiguity in the meaning of
“prevailing bank rate”. The
wording of the statute is such
that once there is a dispute as
to the prevailing bank rate, the
treasury bill rate is
applicable. So the defendant
shall pay interest at 13.34% on
GHC7,600,000.00 at simple
interest from 2/6/2008 to date
of final payment.
So our final orders will be;
1. The invested capital i.e. the
GHS6,162,240.00 is to attract
interest at the rate of 30% at
compound interest from 2nd
June, 2008 till date of the
Supreme Court judgment
(25/7/2018), and thereafter at
the statutory rate of interest
prevailing at the time of the
main judgment(25/7/2018) that
is, 13.34%, at simple interest,
till date of final payment.
3.
The defendant shall also pay
interest on the amount of
GHC7,600,000 at the treasury
bill rate of 13.34% from
2/6/2008 till date of final
payment.
P. BAFFOE-BONNIE
(JUSTICE OF THE SUPREME COURT)
ANIN YEBOAH
(CHIEF JUSTICE)
V. J. M. DOTSE
(JUSTICE OF THE SUPREME COURT)
Y. APPAU
(JUSTICE OF THE SUPREME COURT)
G. PWAMANG
(JUSTICE OF THE SUPREME COURT)
COUNSEL
AMA OPOKU AMPONSAH WITH EMMANUEL
DARKO FOR THE 1ST
DEFENDANT/
RESPONDENT/
RESPONDENT/APPLICANT.
THADDEUS SORY WITH NANA BOAKYE
MENSAH-BONSU FOR THE
PLAINTIFF/
APPELLANT/ APPELLANT/RESPONDENT.
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