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Banking – Contract - Agreement –
Loan – Project financing - Share
purchase agreement - Moratorium
for payment - Default interest –
Negligence -
Leave to Amend - Recovery
of the sum being outstanding
balance of the loan granted to
the Defendant by the Plaintiff
at the request of the Defendant
-
Whether or not the Plaintiff is
entitled to recover the
outstanding sum of from the
Defendant - Whether or not the
Defendant is entitled to the
award as profit lost by the
Defendant - Whether or not the
Defendant is entitled an award
as general damages -
Order 11 rule 9, Order 32 rule
9(2) of the High Court (Civil
Procedure) Rules, CI 47 -
Rule 6(8) of the Supreme Court
Rules, 1990 (C.I. 16),
HEADNOTES
The background to the
controversy is that in the early
1990s, following negotiations
between the Plaintiff the
Defendant and the European
Investment Bank (EIB), a number
of transactions were entered
into for the
financing
of a
project to expand the
factory and operations of the
Defendant. These agreements
included a loan agreement
between EIB and the Plaintiff,
second loan agreement by which
the Plaintiff granted the
Defendant a loan of One hundred
and sixty-five thousand Ecus
(165, 000.00 Ecus). granted the
Plaintiff a loan of Thirty-five
thousand Ecus to part finance
the subscription by the
Plaintiff of shares in the
Defendant. by which the
Plaintiff bought 30,000,000
shares, representing 10% shares
in the Defendant, subject to
terms and conditions and
representative of the Plaintiff
was appointed to serve on the
five-member board of directors
of the defendant. This
representative became the
chairman of the Finance
Committee of the board. Two
European expatriate consultants
were engaged by the Defendant
from 1991 to 1993. Further, on
29th September 1994,
a German expatriate consultant
was appointed as the Managing
Director of the Defendant The
loan agreement between the
Plaintiff and the Defendant
(Exhibit ‘A’) also provided that
in the event of default, the
Defendant would be liable to pay
a default interest of 7.5% on
the outstanding amount The
agreement further provided that
should the Defendant default in
the payment of one instalment,
it would be liable to pay the
entire loan together with all
outstanding interest. The
Defendant defaulted in making
the repayment instalments from
1997 to 2006 The Defendant
averred that by the agreements
referred to, the Plaintiff
became “Fund Manager” of the
loan given to it by the
Plaintiff, that the Plaintiff
assumed control of the Defendant
and that the Plaintiff was
negligent by “improper
supervision” of the Consultant
employed as Managing Director of
the Defendant. After a somewhat
tortuous trial, the High Court,
by a judgement dismissed the
Plaintiff’s claim and gave
judgment for the Defendant
Aggrieved by the judgement of
the High Court, the Plaintiff
appealed to the Court of Appeal.
The Court of Appeal by its
judgement dated 1st
March 2018 affirmed the decision
of the trial High Court.
HELD
In consequence of the foregoing,
we allow the appeal in part. We
allow the appeal in respect of
the award of damages of
¢14,963,505.50 being loss of
profit from 1991 to 2011 to the
Defendant and accordingly
reverse the said award. We also
allow the appeal in respect of
the award of general damages of
¢500,000 to the Defendant by the
Court of Appeal and accordingly
reverse that award.
We, however, dismiss
the appeal and affirm the
decision of the trial High
Court, affirmed by the Court of
Appeal, dismissing the
Plaintiff’s claim against the
Defendant for the repayment of
the loan of 165,000 Ecus.
STATUTES REFERRED TO IN JUDGMENT
High Court (Civil Procedure)
Rules, CI 47
Supreme Court Rules, 1990 (C.I.
16),
CASES REFERRED TO IN JUDGMENT
Koglex Ltd (No2) v. Field [2000]
SCGLR 175
Re Okwe (Dec’d); Dodoo & Anor
v.Okine & Ors [2003-2004] SCGLR
528
Achoro v. Akanfella [1996-97]
SCGLR 207,
Fosua v. Adu Poku v. Dufie &
Adu-Poku Mensah [2009] SCGLR 310
Gregory v. Tandoh IV & Hanson
[2010] SCGLR 975
Allen v Spring, 52 ER, 1245.
Nkrumah v Serwah [1984-86] 1 GLR
190,
Bradford Building Society v
Borders [1941] 2 All ER 205
Hedley Byrne & Co Ltd [1964] AC
465
Caparo Industries Plc v. Dickman
& Ors [1990] 2 AC 605
Republic v. Conduah ex parte
Aaba (substituted by Asmah)
[2013-2014] 2 SCGLR 1032;
Tuakwa v. Bosom [2001-2002]
SCGLR 61;
Oppong v. Anarfi [2011-2012] 2
SCGLR 556.
Hadley v Baxendale (1854) 9
Exch.341
Hedley Bryne & Co. v Heller &
Partners [1964] AC 465
Royal Dutch Airlines & Another
v. Farmex Ltd. [1989-90] 2 GLR
623
Juxon-Smith v. KLM Dutch
Airlines [2005-2006] SCGLR 438,
Victoria Laundry (Windsor)
Limited v. Newman Industries
Limited [1949] 2KB, 528
Overseas Tankship (UK) Ltd v.
Morts Dock and Engineering Co.
(The Wagon Mound) (No 1) [1961]
AC 388
Vacwell Engineering v BDH
Chemicals [1970] 3 All ER 553.
Sarpong & Co v. Silver Star Auto
Ltd 2 [2013-2014] SCGLR 1313
Muller v. Home Finance [2012] 2
SCGLR 1234,
Hydrafoam
Estates Ltd v. Owusu & Ors
[2013-2014] 2 SCGLR.
BOOKS REFERRED TO IN JUDGMENT
DELIVERING THE LEADING JUDGMENT
PROF. KOTEY, JSC:-
COUNSEL
FUI TSIKATA WITH HIM DOMINIC
QUASHIGAH FOR THE
PLAINTIFF/ APPELLANT/ APPELLANT.
E. A. VORDOAGU WITH OLIVER SEBEH
FOR THE
DEFENDANT/ RESPONDENT/
RESPONDENT
PROF. KOTEY, JSC:-
1. Introduction
This is an appeal against the
judgment of the Court of Appeal
substantially affirming the
decision of the trial High
Court, but reversing it in one
small respect.
The background to the
controversy is that in the early
1990s, following negotiations
between the
Plaintiff/Appellant/Appellant
(Plaintiff), the Defendant/
Respondent/ Respondent
(Defendant) and the European
Investment Bank (EIB), a number
of transactions were entered
into for the financing of a
project to expand the factory
and operations of the Defendant.
1.
These agreements included a loan
agreement between EIB and the
Plaintiff, dated 30th
January 1992 and 7th
February 1992 (Exhibit ‘1’), by
which EIB lent to the Plaintiff,
One hundred and sixty-five
thousand Ecus (165,00.00 Ecus)
which was to be on-lent by the
Plaintiff to the Defendant.
2.
A second loan agreement was
entered into by the Plaintiff
and the Defendant, dated 11th
March 1992 (Exhibit ‘A’), by
which the Plaintiff granted the
Defendant a loan of One hundred
and sixty-five thousand Ecus
(165, 000.00 Ecus).
3.
Pursuant to Exhibit ‘1’, EIB
granted the Plaintiff a loan of
Thirty-five thousand Ecus to
part finance the subscription by
the Plaintiff of shares in the
Defendant.
4.
The Plaintiff and the Defendant
entered into a share purchase
agreement dated 7th
April 1992 (Exhibit ‘5’)
by which
the Plaintiff bought 30,000,000
shares, representing 10% shares
in the Defendant, subject to
terms and conditions.
5.
EIB granted the Defendant a loan
of Two million, eight hundred
thousand Ecus (2,800,000.00
Ecus). The said sum of 2.8
million Ecus was to be disbursed
through the Plaintiff.
By Exhibit ‘5’, one (1)
representative of the Plaintiff
was appointed to serve on the
five-member board of directors
of the defendant. This
representative became the
chairman of the Finance
Committee of the board.
The contract between the
Plaintiff and the Defendant for
the loan of 165,000 Ecus
(Exhibit ‘1’) provided for a
five-year moratorium for the
payment of the principal sum
after which the loan was to be
paid in seven annual
installments commencing on 30th
September 2003.
Pursuant to Exhibit ‘1’,
two
European expatriate consultants
were engaged by the Defendant
from 1991 to 1993. Further, on
29th September 1994,
a German expatriate consultant
was appointed as the Managing
Director of the Defendant.
The loan agreement between the
Plaintiff and the Defendant
(Exhibit ‘A’) also provided that
in the event of default, the
Defendant would be liable to pay
a default interest of 7.5% on
the outstanding amount.
The agreement further provided
that should the Defendant
default in the payment of one
instalment, it would be liable
to pay the entire loan together
with all outstanding interest.
The Defendant defaulted in
making the repayment instalments
from 1997 to 2006, during which
period no repayment was made by
the Defendant. Plaintiff
therefore issued a writ of
summons on the 18th
December 2006 claiming the
following reliefs:
“i.
Recovery of the sum of Two
hundred and Forty-eight
Thousand, One Hundred and Seven
Point Eighty-Three Euros (E
248,107.83) or its cedi
equivalent being outstanding
balance of the loan granted to
the Defendant by the Plaintiff
at the request of the Defendant,
which said amount Defendant
has failed and/or refused to pay
to Plaintiff in spite of several
and repeated demands made
therefor;
ii. Interest on the said amount
from 1st November
2006 to date of final payment;
iii. Costs”.
The Defendant filed an amended
Statement of Defence and
Counter-claim on 3rd May 2012.
The
Defendant averred that by the
agreements referred to, the
Plaintiff became “Fund Manager”
of the loan given to it by the
Plaintiff, that the Plaintiff
assumed control of the Defendant
and that the Plaintiff was
negligent by “improper
supervision” of the Consultant
employed as Managing Director of
the Defendant. The Defendant
further averred that the
Plaintiff was negligent in its
disbursement, supervision and
monitoring of the EIB funds
being disbursed to the Defendant
through the Plaintiff. Defendant
has therefore “suffered huge
financial losses and been
plunged into grave indebtedness
as a result of the Plaintiff’s
failure to ensure prudent use of
funds disbursed under
Defendant’s agreement with EIB”.
The Defendant therefore
contended that the Plaintiff was
not entitled to recover the loan
and counterclaimed for the
following reliefs:
“i. Recovery of Defendant’s
investment of 1,515,000 Ecus or
its equivalent of 2 million US
dollars, being the Defendant’s
equity contribution towards the
expansion and modernization of
the Defendant Company under the
EIB loan agreement;
ii. Recovery of the sum of GHC
14,963,505.50, being profit lost
by the Defendant from 1991 to
2011 as a result of the
Plaintiff’s negligence in
failing to supervise the use of
the Defendant’s funds by the
Consultants under the EIB Loan
Agreement;
iii. Cost including legal fees.”
After a somewhat tortuous trial,
the High Court, by a judgement
dated 3rd November
2015,
dismissed the Plaintiff’s claim
and gave judgment for the
Defendant for the recovery
of the sum of Fourteen million,
nine hundred and sixty-three
thousand, five hundred and five
Ghana Cedis and fifty pesewas
(GH¢14,963,505.50) as profit
lost by the Defendant from 1992
to 2011 and awarded costs of
Gh¢20,000 in favour of the
Respondent.
Aggrieved by the judgement of
the High Court, the Plaintiff
appealed to the Court of Appeal.
The Court of Appeal by its
judgement dated 1st
March 2018 affirmed the decision
of the trial High Court.
It also made a further award of
Five hundred thousand Ghana
Cedis (Gh¢ 500,000) to the
Defendant.
1.1 Grounds of Appeal
It is against the judgement of
the Court of Appeal that the
Plaintiff has appealed. By its
Notice of Appeal filed on 4th
April 2018, the Plaintiff stated
the following Grounds of Appeal:
a.
The Court of Appeal erred when
it confirmed the High Court’s
judgement that the
Plaintiff/Appellant was not
entitled to recover the sum
outstanding on the loan facility
having regard to the Bank of
Ghana letter.
b.
The Court of Appeal erred when
it confirmed the judgement of
the High Court holding that the
Plaintiff/Appellant was
negligent in the performance of
its duties under the loan
contract.
c.
The Court of Appeal erred when
without giving reasons, it
affirmed the High Court’s
findings that there was a
special relationship between the
Plaintiff/Appellant and the
Defendant/Respondent.
d.
The Court of Appeal erred when
it affirmed the High Court’s
judgement that the
Defendant/Respondent was
entitled to GH¢ 14,963,505.50 as
compensation for the
Plaintiff/Appellant’s breach of
duty.
e.
The Court of Appeal erred when
it held that the Respondent is
entitled to additional
compensation in general damages
of GH¢ 500,000.00 even though
the Respondent did not endorse
its counterclaim with a claim
for general damages.
f.
The Quantum of general damages
awarded by the Court of Appeal
against the Plaintiff/Appellant
is excessive and against the
weight of evidence.
g.
The Court of Appeal did not
properly evaluate the evidence
on record.
Additional Grounds of Appeal
were filed on 31st
May 2018 stating the following
additional grounds:
1.
The Court of Appeal erred when
it held in affirmation of the
judgement of the High Court that
the Appellant owed a duty of
care to the Respondent whether
arising from contract or trust
or in equity.
2.
The Court of Appeal erred in
holding that any breach of duty
by the Appellant was the cause
of any loss suffered by the
Respondent.
3.
The Court of Appeal erred in
treating conclusions of law in
the judgement of the High Court
as though they were findings of
fact, thereby disabling itself
from sufficiently evaluating and
correcting the errors of law
that they contained.
4.
The Court of Appeal erred in
awarding general damages of GH¢
500,000.00 after having awarded
compensation of GH¢
14,963,505.05.
We have examined the pleadings
of the parties, the judgments of
the trial High Court and the
Court of Appeal and the Grounds
of Appeal and Additional Grounds
of Appeal of the Plaintiff and
have concluded that there are
essentially three issues to be
resolved in this appeal, though
some of these issues involve a
number of other legal and
factual issues.
These are:
i.
Whether or not the Plaintiff is
entitled to recover the
outstanding sum of 165,000 Ecus
from the Defendant.
ii.
Whether or not the Defendant is
entitled to the award of
Fourteen million nine hundred
and sixty-three thousand five
hundred and five Cedis fifty
pesewas (GH¢ 14,963,505.50) as
profit lost by the Defendant
from 1992 to 2011.
iii.
Whether or not the Defendant is
entitled to the award of Five
hundred thousand Ghana Cedis
(GH¢500,000) as general damages.
We now proceed to examine the
first issue.
2. Is the Plaintiff entitled to
recover the Unpaid Loan from the
Defendant?
The trial High court, affirmed
by the Court of Appeal, held
that the Plaintiff was not
entitled to recover the unpaid
loan of 165,000 Ecus from the
Defendant.
The High Court based its
decision on the fact that EIB
was not requiring the Plaintiff
to repay the 165,000 Ecus it
lent to Ecobank. The court
relied on three documents in
arriving at this conclusion. The
first is a letter from EIB to
the Defendant, copied to the
Plaintiff (Exhibit ‘52’). In the
said letter EIB stated in
respect of this loan:
“Due to the apparent incapacity
of AEL to service the above loan
in its present critical
financial situation, we herewith
inform you that the Bank has
decided to allow your company to
suspend temporarily the
servicing of the loan to the
Bank including the unpaid
installment of 30th
September, 1991. We wish to
stress however that AEL will
remain liable to reimburse the
loan and that repayments shall
resume as soon as an improved
financial situation of the
company permits. A new agreement
will then need to be reached
with the Bank.”
The second document relied on by
the trial High Court is a letter
of approval of the EIB loan by
the Ministry of Finance, dated
17th April 1991
(Exhibit ‘27’). In that letter
the Ministry of Finance stated
that:
“A private Ghanaian Company
(Aluminium Enterprise Ltd) has
informed this Ministry that the
European Investment Bank is
considering the grant of loan
from risk Capital resources
under the third ACP-EEC
Convention (Lome III) to finance
its expansion programme”.
The Court found that “risk
capital” meant that the EIB
recognised from the inception of
the project that the project
could result in a profit or
loss.
The third document relied on by
the Court is a letter of
approval of the loan by the Bank
of Ghana, dated 3rd
March 1992 (Exhibit ‘2’). In the
said letter, the Bank of Ghana
stated that;
“If AEL becomes bankrupt, goes
out of business or cannot repay,
EIB will not call its loan to
EBG”.
The Court found that the
Defendant was not in a position
to pay back the loan. It
therefore concluded that in the
circumstances it would be unjust
for the Plaintiff to recover the
165,000 Ecus from the Defendant.
This decision of the trial High
Court was affirmed by the court
of Appeal.
Counsel for the Plaintiff, Mr.
Fui Tsikata has vigorously
challenged this conclusion. He
contends that the statement
quoted from Exhibit 2 does not
state that the Defendant shall
not repay its loan to the
Plaintiff and is a reference to
the obligations of the Plaintiff
to EIB only. He argued that the
Defendant is not a party to the
loan agreement between the
Plaintiff and EIB (Exhibit ‘1’)
and has no rights under that
agreement.
Mr. Tsikata submits:
“There is nothing in this letter
which says the Respondent is
excused from its obligations to
the Appellant on the ground that
it cannot repay the loan the
former has made. The fact that
the Appellant is on-lending
money it has borrowed from EIB
does not transfer the terms of
the agreement between it and EIB
into that between these parties.
The two agreements are separate
and give rise to distinct rights
and obligations of their
respective parties.”
Mr. Tsikata is technically
correct, but we are more
persuaded by the reasoning of
the trial High Court and the
Court of Appeal and the basis of
their conclusion. The series of
transactions and agreements
entered into by the Plaintiff,
the Defendant and EIB, including
Exhibits ‘1’ and ‘A’, are parts
of a complete whole relating to
the expansion and modernization
of the factory of the Defendant,
and must be construed as such.
It is for this purpose that EIB
granted the loan of 165,000 Ecus
to the Plaintiff for onward
lending to the Defendant. EIB
cannot recover the 165,000 Ecus
from the Plaintiff and there is
no evidence that it has
attempted to do so. The project
failed and the Defendant is not
in a position to repay the loan.
In the circumstances, it is our
considered view that it would be
unconscionable for the Defendant
to be ordered to repay the
amount of 165,000 Ecus to the
Plaintiff. We therefore affirm
the decision of the trial High
Court and the Court of Appeal
that the Plaintiff is not
entitled to recover the said sum
of 165,000 Ecus from the
Defendant.
We will now proceed to deal with
the second issue, the award of
damages of GH¢ 14,963,505.50 to
the Defendant, being loss of
profit from 1992 to 2011.
3. Recovery of Loss of Profit by
the Defendant
As we have noted, the Defendant
counterclaimed for the recovery
of the said sum of GH¢
14,963,505.50 from the Plaintiff
as loss of profit from 1991 to
2011.
The Defendant stated in its
statement of defence that at the
time of the execution of the
loan agreement between the
parties, Mr. B.K. Amandi, the
founder and majority
shareholder, was the chairman of
the board of directors and
managing director of the
Defendant. The statement of
defence also stated that
following the execution of the
loan agreement, a German
consultant, Mr. Trosch was
appointed Managing Director in
September 1994. The Defendant
continued that the Managing
Director was appointed to be
responsible for project
implementation and subsequent
operation of the facilities and
that any “deviation from this
arrangement or interference from
the Defendant would cause EIB to
withdraw the loan”. The
Statement of Defence further
averred that a representative of
the Plaintiff was appointed as a
director of the Defendant and
became the Chairman of the
Finance Committee of the board
of directors of the Defendant.
The statement of Defence then
alleges that this representative
of the Plaintiff became the
“Fund Manager” of the project
and that this “meant that the
Plaintiff Company was solely in
charge of the supervision of the
Consultant, loan disbursement,
approval of procurement requests
and approval and inspection of
materials supplied under the
contract on arrival.”
The Statement of Defence further
alleged that, “the Defendant
started experiencing a downturn
in its finances as a result of
the lack of proper supervision
of the project by the Plaintiff
as expected of the Plaintiff
based on the Plaintiff’s Finance
Contract with EIB and the
On-Lending Agreement between the
Plaintiff and the Defendant”.
The Defendant then averred that
“the Plaintiff’s negligence
by improper supervision of the
consultant has caused the
Defendant to date a loss of
5,000,000 (five million US
dollars)”. The Defendant
then provides the following
particulars of
negligence.
“PARTICULARS OF NEGLIGENCE
i. Failure to implement internal
control systems with respect to
EIB funds being disbursed to the
Defendant.
ii. Poor reporting procedures
between the Finance Committee
chaired by the Plaintiff and the
Consultant for the project.
iii. Breach of stationary
requirements in some aspects of
acquisition, disbursement and
reporting of the said EIB loan.”
On the basis of the foregoing
the Defendant counterclaimed as
follows:
“Recovery of the sum of fourteen
million nine hundred and
Sixty-three thousand, five
hundred and five Ghana cedis
(GH¢14,963,505.50) being profit
lost by the Defendant from 1992
to 2011 as a result of the
Plaintiff’s negligence in
failing to supervise the use of
the Defendant’s funds by the
Consultants under the EIB loan
Agreement.”
The trial High Court, affirmed
by the Court of Appeal, held
that the Defendant was entitled
to recover the GH¢14,963,505.50
from the Plaintiff, being loss
of profit from 1992-2011.
The High Court based its
decision on the following
grounds.
First, the High Court held that
the Plaintiff as a bank with
professional skills and with
responsibilities placed on it by
the loan contract (Exhibit ‘A’)
had a duty of care towards the
Defendant.
Second, the High Court held that
from the totality of the
evidence the Plaintiff was
negligent in the performance of
its duties under the loan
contract. The Court also held
that the Defendant was entitled
to recover damages for the
Plaintiff’s negligence in the
performance of its duties under
the loan contract.
Third, the High Court held that
the Plaintiff was in breach of
the loan contract. The court
also held that the Defendant was
entitled to recover damages in
contract for breach of the loan
contract.
The Court of Appeal made a
concurrent finding that the
Plaintiff was negligent and
affirmed the award of damages of
GH¢14,963,505.50.
Without much examination and
analysis of the facts and the
law, the Court of Appeal
affirmed the trial Court thus:
“The Trial Court found from the
totality of the evidence placed
before it that the Appellant was
negligent in the performance of
its duties under the contract.
From the evidence on record and
the evaluation done by the trial
judge, we are satisfied that the
Appellant was negligent in the
performance of its duties under
the loan contract. The
conclusion reached by the Trial
Court in our view is not
perverse of the record.”
The Court of Appeal relied on
Koglex
Ltd (No2) v. Field [2000] SCGLR
175 and Re Okwe (Dec’d);
Dodoo & Anor v.Okine & Ors
[2003-2004] SCGLR 528
and affirmed what it treated as
findings of fact by the trial
Court.
But a determination that a party
has been negligent in the
performance of its duties under
a contract is not a finding of
fact. As counsel for the
Plaintiff submitted, it is a
conclusion of law arrived at
from the application of the law
to established facts. Koglex
(No2) v. Field (supra) and Dodoo
v. Okine (supra) are
therefore not decisive in this
situation.
Even in relation to the
treatment of findings of fact by
an appellate court, the Court of
Appeal’s statement of the law is
too simplistic and hence
misleading. The proper
formulation of the principle is
that an appellate court can only
vary a trial court’s findings of
fact where on the totality of
the evidence, the findings are
clearly not supported by the
evidence, are unreasonable or
perverse, are inconsistent with
important documentary evidence
or the trial court has wrongly
applied a principle of law.
See
Achoro v. Akanfella [1996-97]
SCGLR 207, Fosua v.
Adu Poku v. Dufie & Adu-Poku
Mensah [2009] SCGLR 310 and
Gregory v. Tandoh IV & Hanson
[2010] SCGLR 975.
Perverseness is therefore not
the only basis upon which a
trial court’s findings of fact
may be disturbed.
We are of the view that the
grounds on which the Court of
Appeal affirmed the decision of
the High Court that the
Plaintiffs were negligent in the
discharge of their obligations
towards the Defendant, were
insufficient. More
fundamentally, the Court of
Appeal’s treatment of the High
Court’s conclusion that the
Plaintiff was negligent in
discharging its obligations
towards the Defendant as a
finding of fact was misplaced,
it being clearly a conclusion of
law arrived at upon the
application of the law to the
facts.
Having disposed of the grounds
upon which the Court of Appeal
affirmed the decision of the
High Court, we now undertake an
examination of the decision and
reasoning of the High court.
But before that, we consider it
important that we spend some
time addressing the procedural
issues arising from the timing
and stage of the proceedings at
which leave was granted for the
amendment of the Statement of
Defence and Counterclaim and the
subsequent conduct and course of
the trial.
3.1 Order Granting Defendant
Leave to
Amend Pleadings and
Subsequent Course of Proceedings
The application for leave to
amend the Statement of Defence
and Counterclaim was filed on 23rd
April 2012. The application was
fiercely resisted by the
Plaintiff but was granted by the
trial judge on 30th
April 2012. The amended
Statement of Defence and
Counterclaim was filed on 3rd
May 2012. At the relevant time,
the Plaintiff had closed its
case and the defendant’s
representative (Defendant’s
first witness as described in
the record of appeal) had
concluded his testimony, but a
witness for the Defendant was in
the box giving evidence.
By the amendment, the Defendant
introduced for the first time a
counterclaim by which it sought
reliefs including that
formulated as follows:
“Recovery of the sum of fourteen
million nine hundred and sixty
three thousand five hundred and
five Ghana Cedis and fifty
pesewas (GH 14, 963, 505.50)
being profit lost by the
defendant from 1992 to 2011 as a
result of the Plaintiff’s
negligence in failing to
supervise the use of the
Defendant’s funds by the
Consortium under the EIB loan
agreement.”
Although the amendment
introduced materially new facts
and issues and was resisted, it
was granted by the trial High
Court. Having introduced
materially new facts that were
substantial in nature, the
Defendant had altered the
character of its case and
rendered it an inappropriate
application for amendment.
See
Allen v Spring, 52
ER, 1245. Indeed, in
Nkrumah v Serwah
[1984-86] 1 GLR 190, the
Court of Appeal upheld the
refusal by the High Court to
allow an amendment which sought
to reconstruct the case of the
plaintiff as the defendant
before us was enabled to do.
After the amendment, the witness
who was then in the box
concluded his testimony and the
Defendant’s representative was
subsequently recalled, at the
instance of the Defendant, to
lead further evidence in the
matter following which he was
cross-examined by counsel for
the Plaintiff. Thereafter,
certain interlocutory
applications that have no useful
bearing on the appeal herein
were pursued by the parties and
dealt with by the court.
Addresses were then filed by the
parties and the matter was
adjourned for judgment.
It is observed that as the
amendments introduced
substantially new facts which
were not part of the evidence
tendered by the parties previous
to it and formed the substratum
of the amended reliefs, the
trial High Court, as a matter of
practice intended to ensure a
fair trial, should have applied
itself in such a manner that the
Plaintiff was given the
opportunity to cross-examine the
Defendant on its new facts and
to rebut the said facts by
resort to further evidence. The
case of
Bradford Building Society
v Borders [1941] 2 All
ER 205, 219 is persuasive
authority for the proposition
that where an amendment alters
the case of a party, his
adversary should be given the
opportunity to lead evidence
directed to the specific charges
raised in the new pleading and
to have the opportunity in
examination and
cross-examination of answering
the facts raised against him.
The amendment introduced, among
others, a counterclaim for loss
of profits in a huge sum. The
nature of the said claim being
in damages is by
Order 11
rule 9 of the High Court (Civil
Procedure) Rules, CI 47
deemed to be traversed. Due
process therefore required that
the Plaintiff be given the
opportunity to explain by
evidence the charges made
against it.
Further, although the matter had
progressed considerably at the
time of the amendment, the Court
was not precluded from directing
a course of proceedings that is
derived from the Rules such as
further directions being taken
on the substantial amendments.
For without directions being
taken on the new issues the
facts giving rise to them cannot
be tried. The point being made
here is that there cannot be a
trial on contested facts without
directions being taken on them.
Where, as in this case,
directions had been taken long
before the amendment was allowed
then the trial High Court was
required to ensure compliance
with
Order 32 rule 9(2) of C.I.47
which provides that;
“Any application subsequent to
the application for directions
and before judgment as to any
matter capable of being dealt
with on an interlocutory
application in the action shall
be made under the application
for directions by two clear
days’ notice to the other party
stating the grounds of the
application.”
In our considered view, as the
trial had reached an advanced
stage before the trial High
Court allowed the amendments, it
was required to make further
orders that will ensure a fair
trial including the opportunity
to the Plaintiff to lead
evidence in rebuttal of the new
matters introduced by the
amended pleading. It is not
enough to have the Defendant
merely recalled to testify on
the new facts and be cross
examined on them particularly
when the Defendant changed the
nature of its case. The
requirements of a fair trial
include offering parties the
opportunity to be cross-examined
by their adversaries on the case
which such adversaries have in
order to enable the court reach
a decision on the contested
facts. The process of deciding
what the facts in issue are in a
case is so critical to the
decision-making process that any
proven violation results in a
miscarriage of justice. The
failure of the Defendant to ask
the Plaintiff any questions at
all about the new facts
introduced, in our view had a
prejudicial effect on the
requirements of a fair trial; a
trial in which each party is
offered the opportunity to put
across his version of the
matter to the other side. That
failure, in our considered view
deprived the new facts on which
the Defendant’s counterclaim was
based of any efficacy such as to
form the basis of a decision on
the ground that the issues
raised by the amendment went
through a one-sided deliberation
contrary to the settled practice
of the court resulting in grave
injustice to the Plaintiff.
How can our system of trial
which is anchored on fairness
sanction a trial in which a
defendant to a counterclaim was
not asked any question by the
plaintiff on the materially new
facts on which his right to
relief on the counterclaim is
based? Accordingly, for reasons
of rules of procedure and
evidence which are intended to
ensure a fair trial, the
amendment ought not to have been
allowed by the trial High Court
such as to have been the
foundation of a judgment against
the Plaintiff on the
counterclaim.
Regarding amendments that may be
made with leave of the court in
the course of a trial, although
the Court has a wide discretion,
where as in this case the
application is made at a very
late stage in the proceedings,
the court should consider among
others whether such an amendment
could have been made at an
earlier stage of the proceedings
bearing in mind its likely
effect on the evidence which had
already been tendered by the
parties. Also, it is important
that our courts uphold the need
to avoid delays and achieve
speedy disposal of actions as
provided for in Order 1 rule 2
of the High Court (Civil
Procedure), Rules, CI 47.
It is therefore our considered
opinion that to avoid the
situation which arose in the
course of the trial of the
matter herein, the Rules of
Court Committee should consider
amending the existing provision
on amendments with leave in
order to limit the very general
formulation of the power to
amend that is provided in Order
16 rule 5 of CI 47 by
introducing a proviso, such as
is contained in the Indian Code
of Civil Procedure Order 6 rule
7, as follows:
“Provided that an application
for amendment shall not be
allowed after the trial has
commenced, unless the court
comes to the conclusion that in
spite of due diligence, the
party could not have raised the
matter before the commencement
of the trial.”
3.2 Consideration of the
Findings of the Trial High Court
We begin our examination of the
findings and conclusions of the
trial High Court with a summary
of the arguments of Counsel.
First, Counsel for the
Plaintiff, Mr. Fui Tsikata
contended that there was no
“special relationship” between
the Plaintiff and the Defendant.
Counsel argued that Exhibit ‘A’
is a standard loan agreement and
that it did not create a
“special relationship” of a
fiduciary nature between the
parties. Counsel therefore
submitted that Plaintiff did not
have a fiduciary duty or a
tortious duty of care to the
Defendant.
Second, Counsel for the
Plaintiff contended that the
Plaintiff was not negligent in
the performance of a contractual
duty. Counsel argued that no
non-contractual duty of care was
assumed or breached by the
Plaintiff towards the Defendant.
Counsel further submitted that
the verification and monitoring
duties assumed by the Plaintiff
under Exhibit ‘1’, the contract
between the Plaintiff and EIB,
did not confer any rights on the
Defendant. Counsel further
argued that the Defendant, not
the Plaintiff, was responsible
for ensuring that the project
was properly executed and that
monies disbursed to it were
applied to the project.
Third, Counsel for the Plaintiff
submitted that the High Court
failed to show that the actions
or omissions of the Plaintiff
are the proximate or direct
cause of the loss of profits of
GH¢ 14,963,505.50 by the
Defendant. Counsel also argued
that the Defendant failed to
prove that it has lost GH¢
14,963,505.50 nor that this loss
was entirely caused by the acts
and omissions of the Plaintiff
alone.
Counsel for the Defendant, Mr.
E.K. Vordoagu supported the
findings and decisions of the
trial High Court and its
affirmation by the Court of
Appeal.
Counsel for the Defendant argued
that the relationship
established between the
Plaintiff and the Defendant, the
Plaintiff’s acquisition of 10%
shares in the Defendant, the
appointment of a representative
of the Plaintiff onto the board
of directors of the Defendant,
the appointment of the said
representative as the chairman
of the Finance Committee of the
board, the appointment of
consultants and the Managing
Director and the obligations
assumed by the Plaintiff under
Exhibits ‘1’ and ‘A’ established
a “special relationship” between
the parties. Counsel further
argued that this “special
relationship” imposed a duty of
care on the Plaintiff. Counsel
relied on
Hedley
Byrne & Co Ltd [1964] AC 465
and Caparo Industries Plc
v. Dickman & Ors [1990] 2 AC 605.
Second, counsel for the
Defendant argued that the
Plaintiff was negligent in its
management of the execution of
the project and in breach of its
contractual obligations under
exhibits ‘1’ and ‘A’.
We begin our examination and
analysis of the findings and
decisions of the trial High
Court, affirmed by the Court of
Appeal, by reiterating that an
appeal is by way of rehearing.
See
Republic v. Conduah ex parte
Aaba (substituted by Asmah)
[2013-2014] 2 SCGLR 1032;
Tuakwa v. Bosom [2001-2002]
SCGLR 61; and Oppong v.
Anarfi [2011-2012] 2 SCGLR 556.
It must be pointed out that the
Defendant’s counterclaim is an
action in tort for negligence.
It is not an action for breach
of contract or for breach of
fiduciary duty. In an action
based upon negligence, the
Plaintiff must plead and
establish facts showing:
i.
that the Defendant owed a duty
of care to the Plaintiff;
ii.
that the Defendant breached the
duty of care; and
iii.
as a result of such breach of
duty the plaintiff suffered
damage.
iv.
that damage was not too remote.
3.2.1 The Duty of Care
A party claiming in negligence
must, to succeed, plead and
establish facts clearly showing
the relationship which existed
between himself and the
Defendant just prior and during
the time of the injury, from
which relationship the existence
and nature of the duty can be
determined. There is no doubt
that a relationship existed
between the Defendant and the
Plaintiff. There was a banker
and customer relationship. There
was a borrower and lender
relationship. There was also a
contractual relationship which
gave rise to numerous rights and
obligations (which we will
return to).
It is therefore clear that the
Plaintiff owed the Defendant a
tortious duty of care as well as
contractual obligations. As the
trial High Court rightly pointed
out, these duties coexist and
run parallel to each other. But
they are separate and distinct
duties.
3.2.2 Breach of the Tortious
Duty of Care
The trial High Court, affirmed
by the Court of Appeal, held
that the Plaintiff was in breach
of its duty of care and that the
Plaintiff has been negligent in
the performance of its duties
under the loan contract, in
particular, in the performance
of its monitoring and
supervision of the project.
The particulars of negligence
pleaded by the Defendant were:
i.
Failure to implement internal
control system with respect to
EIB funds being disbursed to the
Defendant.
ii.
Poor reporting procedures
between Finance Committee
chaired by the Plaintiff and the
Consultant for the project.
iii.
Breach of stationary
requirements in some aspects of
acquisition, disbursement and
reporting of the said EIB loan.”
These are rather nebulous and
imprecise.
Article 6.03 of Exhibit ‘A’
states that:
“MONITORING OF PROJECT
EXPENDITURE
So long as disbursement of the
loan under the contract between
EIB and AEL remains unpaid, EBG
undertakes to verify and report
in writing to EIB as expenditure
takes place that each
disbursement under this contract
and under the contract referred
to, has been properly expended
on THE PROJECT.”
Article 7 of Exhibit ‘A’
provides that:
“7.01 Information Concerning the
Project
EBG shall ensure that AEL
(a) Deliver to EIB (i)
every 3 (three) months until THE
PROJECT is completed a report on
the implementation of THE
PROJECT;
(ii) six (6) months after the
completion of the PROJECT, a
Project Completion Report and
(iii) from time to time, any
such further document or
information concerning the
financing, implementation and
operation of THE PROJECT as may
reasonably require;
(b) Submits for the approval of
EIB without delay any material
change to the general plans,
timetable or expenditure
programme for THE PROJECT, by
relation to the disclosures made
to EIB prior to signing of this
contract;”
(d) Maintains accounting records
which clearly show the
investments relating to the
financing of THE PROJECT
(e) Provide to EIB, within
ninety (90) days of disbursement
evidence acceptance to EIB that
the sum disbursed has been
utilized exclusively for the
financing of THE PROJECT; and
(f) Generally informs EIB of any
fact or event known to AEL which
might substantially prejudice or
affect the conditions of
execution or operation of THE
PROJECT.
7.03 Visits
So long as the loan is
outstanding AEL shall ensure
that persons designated by EBG
and/or EIB are permitted to
inspect the sites, installations
and works comprising THE PROJECT
and are provided with all
necessary assistance to enable
them make such examinations as
they consider necessary.”
The trial High Court held that
two British Consultants engaged
soon after the commencement of
the project to monitor and
assist in the implementation of
the project failed in the
performance of their duties.
Similarly, a German consultant
who was appointed as Managing
Director from September 1994 to
1997 failed in the discharge of
his duties. The trial High Court
also held that the Finance
Committee of the board of
directors of the Defendant which
was chaired by a representative
of the Plaintiff failed to
provide the board with
information.
The trial High Court therefore
found that from the totality of
the evidence the Plaintiff “was
negligent in the performance of
its duties under the loan
contract”. This conclusion was
affirmed by the Court of Appeal.
The conclusion of the High Court
is somewhat perplexing. The
court had rightly pointed out
that there was a concurrent
tortious duty of care and
contractual duties assumed by
the Plaintiff under Exhibit ‘A’.
What does “negligence in the
performance of its duties under
the loan contract mean”?
Does it mean that the Plaintiff
failed to perform its monitoring
and supervision obligations
under Articles 6 and 7 of
Exhibit ‘A’. Or does it mean the
that the Plaintiff performed its
duties, but the standard of its
performance did not reach the
professional standard required
of a bank? Because, if the
Court’s conclusion is that the
Plaintiff failed to perform its
duties under the contract, this
would amount to breach of
contract, not negligence. The
proper cause of action would
then be a claim for breach of
contract at contract law, and
not an action in negligence at
tort law. As we have stressed,
the Defendant’s counterclaim is
an action in tort for
negligence, not an action for
breach of contract.
The trial High Court also based
its finding of negligence on the
part of the Plaintiff in the
execution of the project on a
number of other factors relating
to the operation and management
of the project.
As has been noted, one of the
reasons given by the High court
was that a representative of the
Plaintiff was appointed as a
member of the Board of Directors
of the Defendant. But that a
representative of the Plaintiff
was appointed as one of five
members of the board does not
amount to taking control of
Defendant. The Plaintiff’s
representative was one of five
board members including Mr.
Amandi, the founder and majority
shareholder of the Defendant,
who was Chairman of the board of
directors throughout the life of
the project. It was the entire
5-member board of directors that
was collectively responsible for
the direction and control of the
affairs of the company.
A second reason given by the
High Court is that the
Plaintiff’s representative was
appointed Chairman of the
Finance Committee of the board
and that the Finance Committee
was the “Fund Manager” for
project. Again, we have
difficulty agreeing with the
trial High Court. Though the
Plaintiff’s representative was
Chairman of the Finance
Committee, the committee had two
other members. The other members
were not appointed by the
Plaintiff. It is therefore
difficult to understand why the
failings of the Finance
Committee, if any, should be
attributed solely to the
Plaintiff. Furthermore, the
Finance Committee, important
though it was, was a Committee
of the board. It was answerable
to and indeed reported to the
board. There was no evidence
that the Chairman and other
members discharged their
fiduciary obligations to the
company by holding the Finance
Committee to account. Board
meetings should have been
summoned and reports demanded
from the Finance Committee. If
there was “poor reporting
procedures between the Finance
Committee chaired by the
Plaintiff and the consultant for
the project” this cannot be
blamed solely on the Finance
Committee, which was itself
under the supervision of the
board of directors of the
Defendant. The Defendant was
also culpable in failing to
ensure, through its board of
directors, that proper reporting
procedures were adhered to by
the Finance Committee and the
Managing Director.
We also note that requests for
disbursements by the Defendant
to the Plaintiff were to be
signed by the Managing Director
and the Board Chair (Mr. B.K.
Amandi) and were so done at all
material times. The Board
Chairman (DWI), seeks to
exonerate himself by alleging
that he signed the requests
under duress and that he had
been told that the loan would be
withdrawn if he interfered in
the running of the company. It
is difficult to believe this
allegation of duress. No
sufficient evidence was given to
substantiate this claim of
duress. In any case, how was the
Plaintiff to know of, let alone
be responsible for, the actions
and circumstances of the Board
Chairman and majority
shareholder? It is also
important to note that the
representative of the Plaintiff
and Chairman of the Financial
Committee was not a signatory to
the disbursement requests.
Another way in which the
Defendant tries to establish
that the Plaintiff was in
control of the Defendant is to
allege that the two British
consultants and the Managing
Director were appointed by the
Plaintiff. This is not borne out
by the evidence. The evidence
shows that the two British
consultants and the Managing
Director were appointed by EIB
with the approval of the
Defendant. The two British
consultants and the German
Managing Director were appointed
pursuant to Exhibit ‘1’, Article
1.04 (f) of which provides that
“AEL shall have entered into a
technical assistance and
know-how transfer agreement on
terms and a party acceptable to
the BANK”. The BANK in Exhibit
‘1’ is a reference to EIB not
the Plaintiff.
The Memorandum of Understanding
between the Defendant and Mr.
Trosch, prior to his becoming
Managing Director of the
Defendant and dated 12th
July 1994, (Exhibit ‘61’) in
paragraph 3 of its recitals
stated as follows:
“With the consent of EIB, MR
WOLFGANG TROSCH, an aluminum
resmelting Consultant of
Germany, has been engaged by AEL
to direct AEL’s project as
Managing Director for periods
ranging from two, three or more
years.”
Exhibit ‘61’ was executed by the
Defendant, represented by B.K.
Amandi (chairman), Mr. Trosch
and EIB. The Plaintiff is not a
party to Exhibit ‘61’.
Further, the Contract of Service
of Mr. Wolfgang Trosch, dated 29th
September 1994 (Exhibit ‘32’) by
which Mr. Trosch was engaged as
Managing Director was between
the Defendant and Mr. Trosch.
The contract was signed by Mr.
B.K. Amandi, (Chairman) on
behalf of the Defendant. Again,
the Plaintiff was not a party to
Exhibit ‘32’ and there was no
reference to the Plaintiff in
the contract. Simply put, Mr.
Trosch was an employee of the
Defendant. There was no basis
for holding the Plaintiff liable
for the acts and omissions of,
or responsible for the
supervision of the Defendant’s
Managing Director.
The establishment of an
“internal control system with
respect to the EIB funds being
disbursed to the Defendant” was
not the responsibility of the
Plaintiff. Article 1.04 (g)
provides that AEL shall have
entered into an agreement on
terms and with a party
acceptable to the BANK to
reorganize its accounting and
administrative procedures. It
was therefore the Defendant’s
responsibility to establish the
internal control system.
The Defendant had the burden of
pleading and proving negligence.
The Defendant failed to plead
negligence with sufficient
particularity. The “Particulars
of Negligence” pleaded were
nebulous, imprecise or
meaningless. It was the
responsibility of the Defendant
to establish, on a balance of
probabilities, how and in what
respects the Plaintiff was “negligent
in the performance of its duties
under the loan contract.”
This it failed to do.
We therefore reverse the
conclusion of the trial court
that the Plaintiff was
negligent.
3.2.3 Breach of Contract
The trial High court also held
that the Plaintiff was in breach
of contract. This, despite the
fact that the defendant had not
counterclaimed for breach of
contract. In fact, there was no
discussion of the issue of
breach of contract such as there
was for negligence under the
subheading, “Was the
Plaintiff Negligent?”. At
the end of the consideration of
whether or not the Plaintiff had
been negligent, the Court
concluded at page 51 of the
judgement that “I find from
the totality of the evidence
placed before the court and
following from the discussions
above, that the Plaintiff
was negligent in the performance
of its duties under the loan
contract”.
The court then proceeded to
consider the “Consequences of
Breach” and opens with this
startling statement at page 52
of the judgement, “As I
already stated in my opinion
there was a breach of the loan
contract by the Plaintiff”.
But there had been no such
previous conclusion. This
conflation of breach of contract
and negligence is unhelpful and
unjustified.
A finding that the Plaintiff has
been “negligent in the
performance of its duties under
the loan contract” is not
the same as the conclusion that
“there was a breach of the
loan contract by the Plaintiff”.
The standards required to arrive
at those two conclusions and the
consequences that flow from them
may also be different.
And this is particularly so
where, as in this action, the
Defendant has not counterclaimed
for breach of contract.
3.2.4 Damages
The conflation by the trial High
Court of the claim for
negligence with one for breach
of contract continues with its
consideration of the
consequences of the conduct of
the Plaintiff. Subtitled
“Consequences of Breach”, it
opens with this revealing
paragraph on pages 52 of the
judgement.
“As already stated, in my
opinion there was a breach of
the loan contract by the
Plaintiff. So, what are the
consequences of this breach?
What remedies are available to
the Defendant? Defendant is
entitled to recover damages in
contract for the breach.”
The High Court then referred to
the locus classicus on
remoteness of damage for breach
of contract,
Hadley v
Baxendale (1854) 9 Exch.341
in discussing the principles
governing the award of damages
for breach of contract. But, as
we have reiterated, the
counterclaim of the Defendant is
not for breach of contract but
for the tort of negligence.
The trial High Court continued
by discussing the principles
governing the award of damages
in negligence. It then referred
to the locus classicus on
the recovery of damages for
negligent misstatement,
Hedley Bryne & Co. v Heller &
Partners [1964] AC 465.
It continued by referring to the
concept of “economic loss” and
concluded that the Defendant is
counterclaiming for recovery of
the amount of GH¢ 14,963,505.50,
being profit lost by the
Defendant from 1992 to 2011.
This apparently seamless
movement from negligence to
breach of contract is
unsatisfactory and does not
conduce to clarity. At the end
of the discussion by the trial
High Court of the principles
governing the award of damages
for negligence and breach of
contract, it was still not clear
which principles, contract or
tort, would be applied in
determining what damages, if
any, the Defendant is entitled
to. For the purpose of clarity
and to provide future guidance
to courts governing, we restate
the principles governing the
award of damages for negligence
and for breach of contract.
3.2.5 Principles Governing the
Award of Damages for Breach of
Contract and Negligence
‘Damages’ is a sum of money
claimed as compensation or
awarded by a court as
compensation to the
plaintiff/claimant for harm,
loss or injury suffered by the
plaintiff/claimant as a result
of a tortuous act or breach of
contract committed by the
defendant or his agent. When a
plaintiff makes a claim for
damages, the plaintiff or
claimant is required under the
law to provide evidence in
support of the claim and to
provide facts that would form
the basis of assessment of the
damages he will be entitled to.
The general principle underlying
the award of damages in both
tort and contract is the
principle of restitutio in
integrum. The plaintiff or
claimant court considers two
main factors: (a) remoteness of
damages (i.e. the proximate
cause of the breach); and (b)
the measure of damages (i.e.,
the quantum or amount of damages
to be awarded). The Supreme
Court in the case of
Royal
Dutch Airlines & Another v.
Farmex Ltd. [1989-90] 2 GLR 623,
at page 625
explained:
“On the measure of damages for
breach of contract, the
principle adopted by the courts
was restitutio in integrum, i.e.
if plaintiff has suffered damage
not too remote – he must, as far
as money could do it, be
restored to the position he
would have been in had that
particular damage not occurred.
What was required to put the
plaintiffs in the position they
would have been in was
sufficient money to compensate
them for what they had lost…”
This principle was restated by
the Supreme Court in the case
of
Juxon-Smith v. KLM Dutch
Airlines [2005-2006]
SCGLR 438, at page 442
as follows:
“Where a party has sustained a
loss by reason of a breach of
contract, he was, so far as
money could do it, to be placed
in the same situation with
respect to damages, as if the
contract had been performed. In
carriage of persons contracts,
as in the instant case, the
normal measure of damages for
failure to carry, was the cost
of obtaining substitute
transport less the contract
price and consequential losses
such as hotel expenses and the
like and non-pecuniary loss such
as physical inconvenience and
discomfort”.
Remoteness of Damages for Breach
of Contract
As stated, recovery of damages
is limited by the rules of
“Remoteness of damages”, which
require that the damages to be
awarded must not be too remote,
but must be proximate to the
tortious act or the breach of
contract. Generally, a victim of
a breach of contract is entitled
to compensation for any loss
which results from the breach as
long as the loss is not too
remote or one which the
plaintiff could have avoided by
taking reasonable steps in
mitigation.
Remoteness of damages in
contract is governed by the
principles enunciated in
Hadley v Baxendale (1854) 9 Ex
341, which held that damages
for losses incurred would only
be recoverable if such losses
were “within the contemplation
of the parties” at the time the
contract was made.
Alderson B. stated in Hadley
v. Baxendale:
“where two parties have made a
contract which one of them has
broken, the damages which the
other party ought to receive in
respect of such breach of
contract should be such as may
fairly and reasonably be
considered as either arising
naturally, i.e. according to the
usual course of things, from
such breach of the contract
itself, or such as may
reasonably be supposed to have
been in the contemplation of
both parties, at the time they
made the contract, as a probable
result of the breach of it”.
Hadley v. Baxendale
stated two tests for determining
when damages are proximate and
recoverable and when they are
too remote and therefore
unrecoverable. These are: (i) do
the damages arise naturally from
the breach? and (ii) were the
damages reasonably contemplated
by both parties at the time they
made the contract as a probable
result of the breach? If the
answer to any of these two
questions is yes, then damages
are proximate, not too remote
and therefore recoverable.
In
Victoria Laundry (Windsor)
Limited v. Newman Industries
Limited [1949] 2KB, 528,
Asquith L.J. reformulated the
rule in Hadley v. Baxendale
and stated that the single test
for determining the remoteness
of damages is whether the loss
was ‘reasonably foreseeable as
liable to result from the
breach’ and what was reasonably
foreseeable by the defendant
depends on the state of the
defendant’s knowledge.
Assessment of Damages
In torts, the purpose of the
award of damages is to put the
plaintiff in the position he
would have been in if the tort
had not been committed.
[restitutio in integrum].
Damages are therefore awarded to
compensate the plaintiff for the
losses he has actually suffered
as a result of the tort.
The primary test for determining
whether a harm is too remote as
a consequence of the defendant’s
negligence is set out in Overseas
Tankship (UK) Ltd v. Morts Dock
and Engineering Co. (The Wagon
Mound) (No 1) [1961] AC 388,
which held that remoteness was
satisfied if the loss is
“reasonably foreseeable”. The
case held that to establish
whether the claimant’s harm is
too remote, the question to be
asked is: “Was the kind of
damage suffered by the claimant
reasonably foreseeable at the
time the tort occurred?”
According to the formulation of
this remoteness test, it is only
the type of damage that must
have been foreseeable, not the
extent. As stated in Salmon on
Torts (14th edition at page
719), “It is sufficient if
the type, kind, degree or order
of harm could have been foreseen
in a general way.” Thus, the
defendant will be liable,
provided the type of harm and
its manner was reasonably
foreseeable, even if the extent
of the harm was not foreseeable.
Vacwell Engineering v BDH
Chemicals [1970] 3 All ER
553.
The contractual test for
remoteness is therefore
significantly narrower than its
tortious counterpart.
Recovery of Economic Loss
A significant distinction
between tort and contract claims
is the possibility of claiming
for pure economic loss. Claims
for purely economic losses have
been traditionally available in
contract but not in tort.
However, in cases involving
negligent misstatement, the
decision in Hedley Byrne & Co
Ltd v Heller & Partners Ltd [1964]
AC 465, carved out a category of
cases where pure economic loss
is recoverable. In Hedley Byrne,
the court recognized that a duty
of care can be established even
if there was no contractual or
fiduciary relationship between
the parties. Such a duty of care
could be deemed to exist if
there was a “special
relationship” between the
parties which demanded that care
should be taken that the
statement or representation
being made is accurate. Such a
special relationship will be
deemed to exist in cases
involving professional or
business relationships, where,
even in the absence of contract,
it can be established that the
representor knew or ought
reasonably to have known that
the person to whom the
representation was made was
likely to act or rely on the
representation to his detriment.
In Hedley Byrne, Lord
Reid stated that a special
relationship would arise where
it was clear that:
The party seeking information or
advice was trusting the other to
exercise such a degree of care
as the circumstances required,
where it was reasonable for him
to do that, and where the other
gave the information or advice
when he knew that the inquirer
was relying on him. Thus, in the
case of advice given by a
negligent professional, the law
on negligent misstatement is
likely to apply and subsequently
a claim in pure economic loss
will be available.
3.2.6 Measure of Damages
The trial High Court awarded
damages of Fourteen Million Nine
hundred and Sixty-three Thousand
Five hundred and five Cedis
Fifty pesewas (Gh¢14,965,505.50)
being loss of profit from 1992
to 2011 to the Defendant.
We have already reversed the
conclusion of the trial High
Court that the Plaintiff was
negligent in the performance of
its duties towards the
Defendant. But we consider it
important to examine the amount
of damages awarded to the
Defendant.
The trial High Court essentially
relied on two documents in
determining the amount of loss
suffered by the Defendant. The
first is a report prepared by
Deloitte & Touche, dated 9th
April 2012 (Exhibit ‘71’). The
second is a letter from Bank of
Ghana approving the project,
dated 3rd March 1992
(Exhibit ‘2’). This letter,
stated that upon successful
completion of the project
“AEL would be in a position to
earn as much as $ 5 million per
annum from the export of its
products”.
The Deloitte report,
commissioned by the Defendant
during the pendency of this
action, projected that the total
profit that the Defendant would
have made from 1991 to 2011 if
the project had been
successfully completed and gone
into operation would have been
over Gh¢14,963,505.50.
But what is the probative value
of these two reports in
establishing the amount of
economic loss suffered by the
Defendant.
Counsel for the Plaintiff, Mr.
Fui Tsikata has vigorously
challenged the probative value
of these reports. He points out
that the report contains
expressions? of qualifications
and disclaimers by its authors.
For example, Deloitte states in
paragraph 2 that it accepts
“no responsibility, liability or
representation to any person
whatsoever in respect of the
contents” of the report.
Counsel also points out that the
report is addressed to the
Defendant and expressly states
that it is not making “any form
of representation regarding the
sufficiency of the procedures….
[it] performed for your
information need.” The report
further states that it does not
make any “representation or
warranty….as to the accuracy or
completeness” of the report.
Deloitte further described the
report as “highly speculative”.
Counsel for the Plaintiff
further points out the report
was not tendered by Deloitte.
The Plaintiff was therefore not
afforded an opportunity to
cross-examine the authors of the
report.
Counsel for the Defendant on the
other hand, submitted that
Exhibit ‘71’ is not speculative.
He contends that, in the nature
of things, the Defendant could
not have provided the actual
loss of profit suffered by the
Defendant. In the circumstances
counsel argued, a projection of
the loss of profits, such as
Exhibit ‘71’ should suffice.
We have carefully considered the
judgement of the trial High
Court and the Court of Appeal
and the submissions of counsels
for the Plaintiff and the
Defendant and are of the
considered view that the damages
of GH¢14,963,505.50 awarded to
the Defendant cannot be
supported. There is no adequate
basis for the amount awarded.
Both Exhibits ‘2’ and ‘71’ are
projections, not actual losses.
As has been pointed out above,
damages for negligence are
awarded to compensate the
claimant for the losses he has
actually suffered as a result of
the tort. It must be pointed out
that Hedley Byrne (supra)
did not alter the mode for the
assessment of damages in
negligence; it only established
that in certain circumstances
economic loss was recoverable
for negligent misstatements. In
any event, the instant claim is
not one for negligent
misstatement.
The Court of Appeal affirmed the
damages of GH¢14,963,505.50
awarded by the trial High Court
to the Defendant. The Court of
Appeal relied on
Sarpong & Co v. Silver Star Auto
Ltd 2 [2013-2014] 1313
as authority for not varying the
amount of damages awarded by the
trial High Court. In Sarpong
& Co, (supra) the Supreme
Court stated at page 1348;
“Where they have not found any
legal basis for altering the
damages awarded by the Court of
first instance, it was not open
for the Court of Appeal to vary
the damages awarded”.
But we are not seeking to vary
the amount of damages awarded by
the trial High Court. We are
saying that after careful
examination of the law and the
facts, there is no basis for the
amount of damages awarded to the
Defendant. The Defendant had
responsibility for proving that
it had actually suffered the
loss it was claiming. It failed
to do so.
We therefore reverse the
decision of the trial High
Court, affirmed by the Court of
Appeal, awarding specific
damages of GH¢14,963,505.50 to
the Defendant.
4. General Damages
The Court of Appeal, like the
trial High Court below it,
dismissed the Defendant’s
counterclaim for restitution.
However, the Court of Appeal
suo motu awarded the
Defendant general damages of
Five Hundred Thousand Cedis
(GH¢500,000.00). The Defendant
did not counterclaim for
damages. The Court of Appeal
justified this extraordinary
step on the basis of the
principle of “doing substantial
justice”. The court relied of
Muller
v. Home Finance [2012] 2 SCGLR
1234, where this court
stated on page 1238 that:
“It is not the duty of the Court
in civil cases to make the case
for the parties. The duty of the
trial High Court was to enter
judgement for the party on what
he asked for and not to give him
what him what the court thought
he needed. However, it is fairly
now established that on the
principle of doing substantial
justice, the court might in some
circumstances grant a party,
reliefs not asked for provided
the grant of that (those) relief
will help achieve substantial
justice to the case and bring
litigation to an end between the
parties”.
The Court of Appeal also
referred to
Hydrafoam
Estates Ltd v. Owusu & Ors
[2013-2014] 2 SCGLR.
We find this application and
extension of Muller
(supra) troubling and
unwarranted. Muller
(supra) specifically refers to
the trial court. The trial High
Court did not make an award for
general damages. The Court of
Appeal was exercising an
appellate jurisdiction. The
Defendant had not counterclaimed
for general damages and the
trial High Court did not award
any. The Court of Appeal made
this award suo motu for
the first time without offering
the parties an opportunity to be
heard on the issue.
This goes contrary to the spirit
of the Court of Appeal Rules,
1997 (C.I.19) and the rules of
natural justice. Rule 8(8) of
C.I.19 provides that;
“...the Court in deciding the
appeal shall not be confined to
the grounds set out by the
appellant but the Court shall
not rest its decision on any
ground not set out by the
appellant unless the respondent
has had sufficient opportunity
of contesting that case on the
ground.”
Rule 8(8) of C.I. 19 is not as
explicit on the issue as
Rule 6(8)
of the Supreme Court Rules, 1990
(C.I. 16), but it is our
considered view that it is
animated by the same spirit and
has the same effect. Rule 6(8)
of C.I. 16 provides that:
“Where the Court intends to rest
a decision on a ground not set
forth by the appellant in his
notice of appeal or any matter
not argued before it, the Court
shall afford the parties’
reasonable opportunity to be
heard on the ground or matter
without re-opening the whole
appeal”.
As we have noted, the Defendant
did not claim for general
damages and the trial High Court
did not award general damages.
The Defendant claimed for
restitution. This claim was
dismissed by the trial High
Court; and this dismissal was
affirmed by the Court of Appeal.
It is not right for the Court of
Appeal, having affirmed the
dismissal of the claim for
restitution, to proceed to award
general damages to the
Defendant, without affording the
parties an opportunity to be
heard on the matter.
It is not even clear why the
Court of Appeal considered the
issue of the restitution. The
Court of Appeal was not seised
with that matter. It was the
Defendant who counterclaimed for
restitution. This was dismissed
by the trial High Court. The
Defendant did not appeal against
the dismissal of the High Court
of the claim for restitution. It
is our considered opinion that
the Court of Appeal erred in
dealing with the claim for
restitution and awarding general
damages in lieu thereof. The
Court had no jurisdiction to
deal with that matter.
5. Conclusion
In consequence of the foregoing,
we allow the appeal in part.
We allow the appeal in respect
of the award of damages of
¢14,963,505.50 being loss of
profit from 1991 to 2011 to the
Defendant and accordingly
reverse the said award. We also
allow the appeal in respect of
the award of general damages of
¢500,000 to the Defendant by the
Court of Appeal and accordingly
reverse that award.
We, however, dismiss the appeal
and affirm the decision of the
trial High Court, affirmed by
the Court of Appeal, dismissing
the Plaintiff’s claim against
the Defendant for the repayment
of the loan of 165,000 Ecus.
PROF. N. A. KOTEY
(JUSTICE OF THE SUPREME COURT)
V. J. M. DOTSE
(JUSTICE OF THE SUPREME COURT)
N. S. GBADEGBE
(JUSTICE OF THE SUPREME COURT)
Y. APPAU
(JUSTICE OF THE SUPREME COURT)
S. K. MARFUL-SAU
(JUSTICE OF THE SUPREME COURT)
COUNSEL
FUI TSIKATA WITH HIM DOMINIC
QUASHIGAH FOR THE
PLAINTIFF/ APPELLANT/ APPELLANT.
E. A. VORDOAGU WITH OLIVER SEBEH
FOR THE
DEFENDANT /RESPONDENT/
RESPONDENT. |
