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Contracts -
Insurance - Interpretation -
credit guarantee bonds - Faud -
Punitive damages - Whether the
contract is one of insurance or
of guarantee - The - Whether all
insurance contracts must
indicate how much liability the
insurer exposes itself to -
Whether or not the credit
guarantee bonds are invalid
under the Insurance Act, 2006
Act 724 - Sub-section (1) of
Section 44
HEADNOTES
In this case
the Plaintiff/Appellant
(hereinafter called the
Plaintiff) and the Second
Defendant/Respondent
(hereinafter called the
defendant) are two financial
institutions, which worked
together to secure financing for
two companies controlled in part
by Harold Ntorinkansah, Hansas
Complex and Addicent Foods
Limited. The credit facilities
extended to the companies called
for a repayment schedule on a
monthly basis, with insurance
added to the total borrowed.
The credit facility contracts
mandated that in the event of a
default, “the whole amount of
the outstanding loan and all
accrued interest and other
amounts owing hereunder will
become repayable forthwith and
demand in writing made by NDK at
any time.” As a prerequisite for
issuing these credit facilities,
the plaintiff further required
the companies to secure credit
guarantee bonds from an
insurance company in order to
guarantee payment, which in this
case was the Second Defendant.
Upon the defendant’s securing of
this repayment guarantee, the
Plaintiff extended the credit
facilities to the companies.
The Second Defendant issued
several credit guarantee bonds,
covering the amounts extended as
a part of the credit facilities
to the defendant companies. The
purpose of these bonds was to
ensure the repayment of the
Plaintiff should any type of
future default occur on the part
of the 1st
Defendant. Each credit
guarantee bond stated the
specific sum for which the bond
covered. Months after the
signing of this contract, the
Defendant failed to make good
their obligation to service the
credit facilities put forth to
them by the Plaintiff. The
Second Defendant refused to
honor its obligation as created
by the guarantee bond, The lower
courts settled many of these
accusations, and as such, only
at issue in the present appeal
before the Supreme Court, is the
further claim by the Second
Defendant that the credit
guarantee bonds are invalid
under the Insurance Act, 2006
Act 724 The Second Defendant
maintains that because the
credit guarantee bonds issued
were in fact contracts of
insurance without clear limits
of liability, the law
invalidates them. The Plaintiff
takes the opposite view, namely
that the guarantee bonds are not
insurance contracts, and thus
Act 724 is not relevant to the
dispute.
HELD
THE MAJORITY
Therefore in
deciding whether there is
default of a particular
statutory provision, the courts
of law would take into cognition
life’s realities and presume
that the legislator legislates
in full awareness of the
practicalities of the
situation. Francis Bennion
states in his Statutory
Interpretation, 3rd
ed. section 313, that courts of
law interpret statutes in a
workable manner:
“Illegality The
unworkable consequences of a
particular construction may be
relevant indirectly for example
in measuring how far the effects
of statutory illegality are to
be taken in their application to
contractual obligations.
Parliament will not be assumed
to intend to carry them so far
to make trading impracticable
over a wide area.”(e.s)
For the foregoing
reasons the appeal is allowed to
the extent indicated in this
judgment.
MINORITY OPINION
As was
mentioned in the majority
opinion this case has not been
easy to deal with. It can be
seen from its history that the
plaintiff won at the High Court
but was reversed by 3 Justices
at the Court of Appeal. When
this matter came before us the
court was divided. We therefore
referred same for Amicus Curia
brief. Of the two amici that
responded, The National
Insurance Commission, the
umbrella commission for
insurance companies, came to a
conclusion that supported the
minority opinion, whilst the
other written by S. Kwame Tetteh
and co., external solicitors for
State Insurance Company,
supported the majority view.For
a closure to be brought to this
we hope that an expanded coram
of this court would have the
chance to look at the law again
STATUTES
REFERRED TO IN JUDGMENT
Insurance
Act, Act 724
Motor Vehicle
(Third Party Insurance) Act
1958 NO. 42
Insurance
Law, 1989 (P.N.D.C.L. 227)
National
Health Insurance Act 2003 (Act
650)
CASES
REFERRED TO IN JUDGMENT
Republic v
High Court, Accra; Ex Parte
Yalley (Gyane & Attor Interesed
Parties) [2007-2008] SCGLR 512,
Edward Owen
Engineering Ltd. V. Barclays
Bank International Ltd. (1978) 1
Q.B. 159
Seaton v
Health; Seaton v Burnard (1899)
I Q.B. 782
Trade
Indemnity Co. v Workington
Harbour and Dock Board (1937)A.C
1 at 17
Lep Air
Services v. Rolloswin Ltd.
(1973) A.C 331 H.L at 344-45.
NDK Financial Limited Vrs.
Harold Ntorinkansah & 2 others;
suit № BFS 227/09
NDK Financial Services Limited
Vrs. Addicent Foods & Another;
suit №BRS 228/09;
NDK Financial Services Limited
Vrs. Hansas Complex & 3 Others;
suit № BFS 344/09
Republic vrs
.High Court (Fast Track
Division); Ex Parte National
Lottery Authority (Ghana
National Lotto Operators
Association & others-interested
parties) [2007] SCGLR 390
Boyefio v
NTHC Properties Ltd [1997-98]1
GLR768,
Republic V
High Court (Fast Track
Division)Ex Parte National
Lottery Authority.[2009]SCGLR
390
Republic v.
High Court, Accra; Ex Parte
Attorney General(Delta
FoodsLtd-Interested
Party)[1999-2000]1GLR255
Martin
Alamisi Amidu vrs. The Attorney
General and Two Others (The
Woyome Case)(unreported)Writ No
J1/15/2012 dated 14th
June 2013, and
Martin
Alamisi Amidu vrs. The Attorney
General and 2 others( the
Isofoton Case)(unreported) writ
No J1/23/2012 dated 21st
June,
2012,
Attorney-General v Faroe
Atlantic Co. Ltd. [2005-2006]
SCGLR 271
Attorney-General v Balkan Energy
Ghana Ltd. 2 ors. Unreported, 16th
May, 2012.)
BOOKS
REFERRED TO IN JUDGMENT
Chitty on
contrancts” (Common Law Library
Series) 28th Edition
Volume 2
DELIVERING
THE LEADING JUDGMENT
ATUGUBA, JSC
(FOR THE MAJORITY)
MINORITY
OPINION
BAFFOE BONNIE, JSC:
COUNSEL
PEASAH BOADU
ESQ. FOR THE
PLAINTIFF/RESPONDENT/APPELLANT.
THADDEUS SORY
ESQ. (WITH HIM RICHMOND NUMBO
SAAKA) FOR THE 2ND
DEFENDANT /APPELLANT/RESPONDENT.
___________________________________________________________________
ATUGUBA, JSC
(FOR THE MAJORITY)
This is an
appeal by only the 2nd
Defendant/Appellant/Respondent
against the judgment of the
Court of Appeal dated the 15th
day of November, 2012. The only
part of the decision complained
of as per the Notice of Appeal
is “The part of the judgment
allowing ground (a) of the
grounds of appeal.” The grounds
of appeal are per the said
Notice of Appeal as follows:
“(a) the
learned Justices of the Court of
Appeal, erred in law when they
held
that
Sub-section (1) of Section 44 of
the Insurance Act, Act 724 is
not limited to contracts of
insurance created under the
Motor Vehicle (Third Party
Insurance) Act but every
contractor (sic) of insurance
entered into by the insurer
after the commencement of
Insurance Act, Act 724
(b) The
learned Justices of the Court of
Appeal erred in law when they
held that the credit guarantee
bonds issued in favour of the
plaintiff/Respondent by 2nd
Defendant/Appellant were
contracts of insurance.
(c) The
learned Justices of the Court of
Appeal erred in law when they
held that the credit guarantee
bonds issued by Glico to the 1st
Defendant was silent on the
specific sum that Glico would
pay should the 1st
Defendant default in paying
credit to facilities granted it
by NDK and therefore lacked
certainty contrary to the
provision under section 44(1) of
the Insurance Act, Act 724.
(d) The
learned Justices of the Court of
Appeal erred in law when they
failed to consider the fact that
the guarantee bonds were issued
by the 2nd
Defendant/Appellant….”
Brief Facts
In this case
the Plaintiff/Appellant
(hereinafter called the
Plaintiff) and the Second
Defendant/Respondent
(hereinafter called the
defendant) are two financial
institutions, which worked
together to secure financing for
two companies controlled in part
by Harold Ntorinkansah, Hansas
Complex and Addicent Foods
Limited. The credit facilities
extended to the companies called
for a repayment schedule on a
monthly basis, with insurance
added to the total borrowed.
The credit facility contracts
mandated that in the event of a
default, “the whole amount of
the outstanding loan and all
accrued interest and other
amounts owing hereunder will
become repayable forthwith and
demand in writing made by NDK at
any time.”
As a
prerequisite for issuing these
credit facilities, the plaintiff
further required the companies
to secure credit guarantee bonds
from an insurance company in
order to guarantee payment,
which in this case was the
Second Defendant. Upon the
defendant’s securing of this
repayment guarantee, the
Plaintiff extended the credit
facilities to the companies.
The Second
Defendant issued several credit
guarantee bonds, covering the
amounts extended as a part of
the credit facilities to the
defendant companies. The
purpose of these bonds was to
ensure the repayment of the
Plaintiff should any type of
future default occur on the part
of the 1st
Defendant. Each credit
guarantee bond stated the
specific sum for which the bond
covered.
The relevant
part of these guarantee
contracts reads that, “If the
Customer shall fail to repay to
the Bank the said facility then
we Glico…will upon demand of the
Bank pay to the Bank any sum
that is due and owing to the
facility. This guarantee shall
remain in force so long as there
is any sum due and owing from
the Customer to the Bank on the
facility”. (e.s) This contract
is the basis for the Second
defendant’s liability in the
case that the Defendant should
default on any part of their
obligations to the Plaintiff.
Months after
the signing of this contract,
the Defendant failed to make
good their obligation to service
the credit facilities put forth
to them by the Plaintiff.
Upon their
default, the Plaintiff began the
action that is presently before
the court to regain the capital
extended to the Defendant.
The Second
Defendant refused to honor its
obligation as created by the
guarantee bond, seeking to
invalidate the contract based
upon allegations and accusation
of improper dealings between the
plaintiff, the Defendant, and
employees of Glico Insurance
itself.
Issues on
Appeal to the Supreme Court
The lower
courts settled many of these
accusations, and as such, only
at issue in the present appeal
before the Supreme Court, is the
further claim by the Second
Defendant that the credit
guarantee bonds are invalid
under the Insurance Act, 2006
Act 724. Specifically, the
Second Defendant points to
section 44(1) of Act 724, which
states that, “Subject to
subsection (2) a contract of
insurance entered into by an
insurer after the commencement
date is void if it is a contract
under which the insurer
undertakes a liability the
amount, or maximum amount of
which is uncertain at the time
when the contract is entered.”
(e.s)
The Second
Defendant maintains that because
the credit guarantee bonds
issued were in fact contracts of
insurance without clear limits
of liability, the law
invalidates them. The Plaintiff
takes the opposite view, namely
that the guarantee bonds are not
insurance contracts, and thus
Act 724 is not relevant to the
dispute.
Further at
issue before this Court, is the
proper scope with which to
extend section 44. Subsection 1
of the Insurance Act prohibits
insurance contracts containing
unfixed limits of liability;
section 44 subsection 3 further
reads that, “This section
applies to motor insurance
contracts despite anything to
the contrary in the Motor
Vehicles (Third Party Insurance)
Act, 1958 (No. 24). “(e.s) The
plaintiff promotes the
interpretation found by the High
Court, which uses subsection 3
to limit the scope of subsection
1 to only those insurance
contracts involved with motor
vehicle insurance. On the other
end of the spectrum, the 2nd
Defendant advocates a reading of
subsection 3 in line with that
of the Court of Appeal, which
held that subsection 3 merely
seeks to ensure that all
contracts of insurance, and
especially motor vehicle
insurance contracts, be
specifically limited by a
maximum amount of liability.
Decision of
the Court
The High
Court and the Court of Appeal
have split concerning the proper
scope of Act 724. Though
subsection 3 makes mention of
the Motor Vehicles Act, the High
Court erred in interpreting that
subsection to limit the scope of
the Act to those types of
insurance contracts. The true
meaning of the Act, based upon
accepted methods of statutory
interpretation, is more in line
with the holding of the Court of
Appeal, that all insurance
contracts in which the insurer
undertakes liability for an
uncertain amount will be
invalidated by the law.
A subjective
purpose approach to statutory
interpretation is currently the
most favoured method of
statutory interpretation.
Recently ruling for the Supreme
Court, in Republic v High Court,
Accra; Ex Parte Yalley (Gyane &
Attor Interesed Parties)
[2007-2008] SCGLR 512, Wood CJ
said:
“It is well
established, that as a general
rule, the correct approach to
construing statutes is to move
away from the literalist,
dictionary, mechanical or
grammatical to the purposive
mode…. In other words, the
ordinary meaning projects the
purpose of the statutory
provisions and so readily
provides the correct
purpose-oriented solution.”
Following the
approach advocated by her
Ladyship, the meaning of Act 724
is clear; all insurance
contracts must indicate how much
liability the insurer exposes
itself to, and failure to do so
will invalidate the contract.
This reading of subsection 1 of
the Insurance Act to include all
insurance contracts elucidates
the mention in subsection 3 of
motor vehicle insurance
contracts. Because subsection 1
makes no difference between
types of insurance contracts,
all insurance contracts must
thereby conform to the
requirements of the Insurance
Act. As the Motor Vehicle
Insurance Act created special
requirements for motor vehicle
insurance contracts, the mention
of these contracts specifically
in subsection 3 is meant purely
to diminish any doubt that
subsection 1 also applies to
motor vehicle insurance
contracts. Further, it is
impossible to coherently read
subsection 3 as limiting the
scope of subsection 1 to only
motor vehicle insurance
contracts, as proposed by the
High Court.
Subsection 2
of section 44 allows for
regulations to exempt certain
contracts of insurance, or
certain classes of descriptions
of contracts. This subsection
could also extend to motor
vehicle insurance contracts.
The preamble
of the Act also demonstrates
that the purpose behind the Act
was to revise much of the
insurance industry. The
Memorandum that accompanied the
Act further exemplifies this
purpose for revision and greater
clarity, as well as getting
motor vehicle insurance more in
line with the rest of the
insurance industry. The
relevant part of the Memorandum
provides that:
“Amendments
proposed by the consultants to
be made to the current law were
so numerous and cumbersome that
it was thought expedient by the
government on the recommendation
of the National Insurance
Commission to repeal both the
Insurance Law, 1989 (P.N.D.C.L.
227) and the Ghana Reinsurance
Organization Law, 1984 and
replace them with a new
Insurance Act.
The
recommendations of the
consultants were subjected to
thorough consultation with
stakeholders such as the Ghana
Insurers Association, the Ghana
insurance Brokers Association,
the Insurance Institute of Ghana
and the National Insurance
Commission, and form the basis
of this Bill.
The Bill will
ensure the effective
administration, supervision,
regulation, monitoring and
control of the business of
insurance to protect the
insurance policy holder and the
insurance industry apart from
health insurance which is
provided for under the National
Health Insurance Act 2003 (Act
650)”
Continuing
after clause 41 the said
Memorandum states at p. viii
thus:
“The next
group of clauses deals with
insurance business. Clause 42
requires an insurer to carry on
insurance business and other
business specified in
Regulations to be made under the
Act as business considered to be
carried on in connection with or
for the purposes of the
insurance business of an
insurer.
Clause 43
requires an insurer to carry on
its business substantially in
accordance with its recent
business plan approved and
lodged with the Commission.
Clause 44
requires insurers to avoid
entering into contracts of
insurance of unlimited amounts
after the commencement date of
the Act, except those exempted
by Regulations made under the
Act. The Commission in
consultation with the insurance
industry will come out with a
formula in the regulations for
computing standard compensation
in respect of injury and
deceased claims arising out of
motor accidents.”
This reading
of the Insurance Act, and the
memorandum that accompanies it,
seeks to create certainty
concerning the prerequisites
required in contracts of
insurance, as well as to protect
insurance policy holders.
Without this certainty, insurers
could be held responsible and
bound to contracts of dubious
validity and uncertain value.
Insurers need a guaranteed
protection under the law that
contracts will not have an
unfixed sum read into them,
potentially opening them up to
endless liability. The Act
seeks to create clearer
guidelines for insurance
contracts, and such a purpose
must be imposed into the
understanding of the statute.
The analysis
above merely provides clarity as
to the rules and requirements
that contracts of insurance must
abide by if they hope to be
valid under the law. This
clarity does not, however,
resolve the current ambiguity
concerning the status of the
financing obligations offered by
the Defendant. The 2nd
Defendant extended guarantee
bonds as repayment security for
the credit facilities obtained
by 1st Defendant.
If these
bonds are found to be contracts
of insurance, then they are
required to abide by the
requirements of Act 724 and be
issued for a certain amount or a
certain maximum amount,
otherwise they will be
invalidated. However, no such
requirement exists for mere
contracts of guarantee, which
have also been known as
performance bonds. Thus, if in
the current case these bonds are
found to be contacts of
guarantee, then they will be
binding even without fixed
amounts, or maximum amounts, of
liability for the insurer.
Under the
common law, these two types of
contracts have been noted for
their shared similarities, while
also remaining separate before
the law. In Edward Owen
Engineering Ltd. V. Barclays
Bank International Ltd. (1978) 1
Q.B. 159 at 169-70, the court
held that:
“A
performance bond is a new
creature so far as we are
concerned. It has many
similarities to a letter of
credit, with which of course we
are very familiar…. All this
leads to the conclusion that the
performance guarantee stands on
a similar footing to a letter of
credit. A bank which gives a
performance guarantee must
honour that guarantee according
to its terms. It is not
concerned in the least with the
relations between the supplier
and the customer The bank must
pay according to its guarantee,
on demand, if so stipulated,
without proof of conditions.”
While the
obligation of banks to pay the
amount guaranteed is clear,
under the common law, the courts
have noted the two contracts
share very many similarities. In
Seaton v Health; Seaton v
Burnard (1899) I Q.B. 782, the
court per Romer L.J. expounded
this point thus:
“The
difference between these classes
of contract does not depend upon
any essential difference between
the word “insurance” and the
word “guarantee”. There is no
magic in the use of those words.
The words, to a great
extent, have the same meaning
and effect; and many contracts,
like the one in the
case now before us, may with
equal propriety be contracts of
insurance or contracts of
guarantee.”
The dividing
line between these two contracts
appears blurred, but the
differences in the treatment and
expectations of them before the
law are very apparent. Presently
Act 724 places upon contracts of
insurance the requirement of
containing specific amounts to
insurer liability.
These
differences in treatment and
requirement make the task of
differentiating between two very
similar types of contracts all
the more important, with the
courts utilizing a number of
different methods to do so. At
common law the use of extrinsic
evidence has been advocated to
help this exercise. Courts have
noted and focused on how the
parties themselves treat the
contract, what the contract
actually protects against, and
the mutual balance of
information that exists between
the parties. This consideration
of extrinsic evidence is
exemplified by Lord Atkin’s
opinion in Trade Indemnity Co. v
Workington Harbour and Dock
Board (1937)A.C 1 at 17, H.L as
follows:
“The first
question that arises in regard
to the plea of non-disclosure is
whether the contract is one of
insurance or of guarantee. The
form of the contract is a money
bond for 50,000 (pounds)
conditioned for the performance
by the contractors of the
contract in all things
whatsoever. The defendants are
described in the bond as the
“surety”: but they say that they
are an insurance company; they
were approached through
insurance agents: this is well
known form of insurance
business; and they have
reinsured their risks with other
persons carrying on business in
the insurance world, notably at
Lloyd’s. On the other hand the
contract demanded by the Dock
Board was a guarantee; the
defendants in the contract style
themselves sureties; the
contract appears in substance to
be a contract to answer for the
debt, default or miscarriage of
another; and the express
provisions negativing release of
the “surety” upon a variation of
the contract or forbearance as
to time indicate that the
parties were thinking of the law
as to guarantees. I entertain no
doubt that this was a guarantee,
and the rights of the party
should be regulated on that
footing.”
See also Lep
Air Services v. Rolloswin Ltd.
(1973) A.C 331 H.L at 344-45.
Upon
consideration of the principles
prescribed by the common law as
recounted supra, the answer as
to whether the contract at
present is a contract of
insurance or a guarantee could
have been very thorny. But Act
724 seems to have settled the
matter by defining insurance
business in such a way, that it
is our thinking that the same
definition should apply to
insurance contracts. This fact,
reinforced again by the preamble
and purpose of the Act, seems to
indicate that insurance business
also comprehends insurance
contracts. Consequently, the
question of whether the contract
in this case is one of insurance
or a guarantee is governed by
the definition of “insurance
business” in section 211 as
follows:-
“The business of undertaking
liability to indemnify a person
in respect of loss or damage,
and the liability to pay damages
or compensation contingent upon
the happening of a specified
event and any business
incidental to insurance business
and reinsurance business.”(e.s)
Applying this
definition to the contract in
this case, it is quite clear
that these bonds fall within the
terms of certain 211, as the
contract relates to the
liability of Glico to indemnify
the plaintiff in respect to loss
or damage upon default of the
companies to whom the facilities
were granted. As such, they are
to be considered contracts of
insurance, which must adhere to
the requirements of Act 724.
Act 724
requires Glico to have
undertaken a liability the
amount, or maximum amount, of
which was certain. Based upon
the evidence submitted, the
contract does in fact comply
with this requirement, making
the contract binding and
enforceable.
Uncertainty
as to either the maximum amount
of insurer’s liability, or
uncertainty of the amount of
liability is enough to
invalidate a contract under Act
724. This does not mean that the
insurer must know, upon signing
the contract, what his or her
exact liability is at any
specific future moment. Such a
reading would lead to the
invalidation of almost every
insurance contract; as such
knowledge is inherently
impossible to have.
In truth,
this requirement merely asks
that the insurer know the
structured amount of the
liability. This requirement can
inter alia, be met from having
both a set cap to insurer
liability along with a timetable
of due payments. Having these
two sets of information allows
an insurer to know both the
maximum extent to his or her
liability, as well as an
approximate understanding of
when the payments would become
due. At hand in the present
case, we have both of these
pieces of information.
The guarantee
bond may seem to offer neither a
maximum amount to liability nor
any liability amount at all.
This seems especially if the
bond is read very narrowly, as
advocated by the defendant, who
focuses solely on, “Glico… will
upon demand of the Bank pay to
the Bank any sum that is due and
owing to the facility. This
guarantee shall remain in force
so long as there is any sum due
and owing from the Customer to
the Bank on the facility.”
However, such a narrow reading
does not paint the true and
whole picture.
It is first
necessary to read each and every
guarantee bond in full. Doing so
will reveal that each individual
bond lists the amount guaranteed
on behalf of the companies,
which indicates the maximum
amount of liability for the
Defendant. It is incorrect to
say that the defendant is open
to “any liability” as a plain
reading of the whole bond
clearly indicates the maximum
amount of liability the
Defendant takes upon himself.
Further, the
guarantee bond must be read in
conjunction with the credit
facilities, as the two contracts
are inextricably linked to one
another. The guarantee bonds
were issued so as to guarantee
the repayment of these
facilities. The amount that the
insurer would be liable for was
scheduled to change as these
facilities were paid off, as a
repayment schedule was included
in each of these credit
facilities contracts. The
insurer, upon issuance of these
bonds, had a very good idea how
much could be owed upon the
occurrence of each of the
specified dates of repayment.
This clear
repayment schedule along with
the maximum caps to the
defendant’s liability mean that
each of the guarantee bonds meet
the requirement of contracts of
insurance as stipulated by Act
724. The maxim certum est quid
certum reddi potest has not
fallen into disuse. The
certainty of the amount and the
maximum amount in the Glico
bonds in this case makes the
question whether they are
contracts of insurance or
guarantee rather academic.
The Amici
Curiae Briefs
We are
grateful to the National
Insurance Commission and the
State Insurance Company Limited
for their amici curiae briefs
submitted in response to our
invitation.
We note that
both briefs agree with the
opinion herein that the
provisions of s.44(1) of the
Insurance Act, 2006 (Act 724)
are not limited to Motor
Vehicles Insurance.
However while
the National Insurance
Commission is certain that the
Glico bonds herein are contracts
of Insurance, the State
Insurance Company Limited takes
the contrary view but
alternatively submits that even
if they are contracts of
Insurance they are not invalid
for uncertainty of liability
under s.44(1) of Act 724.
Contrariwise the National
Insurance Commission is of the
clear view that “The guarantee
bonds issued by GLICO Insurance
Company Ltd are of uncertain
liability and therefore void”
It will
however be seen that the
position taken by us in this
judgment, supra is in accord wit
the views expressed by the State
Insurance Company Limited under
the hand of S. Kwami Tetteh,
Tetteh & Co in paragraphs 21 to
23 thereof as follows:
“21. Glico
argues that those bonds qualify
as contracts of insurance but
invalid under section 44(1).
The appellant, the creditor,
argues to the contrary, Even if
Glico were right, those bonds
would be in full compliance with
section 44 because the quantum
of debt is stated in full. The
requirement for full disclosure
of the insured amount under
section 44 is intended to
introduce transparency into the
business. Regrettably, the
requirement has become a
difficult issue because, in the
nature of things, the insurer
can neither foresee the future
nor make a reliable pre-estimate
of future loss. The insurer
thus takes a gamble.
22. In each
bond, Glico undertook to pay the
debt in the event of default by
the debtor. The mention of the
quantum of debt satisfied
section 44(1). The parties
envisaged that the debtor would
service the debt. Accordingly,
Glico undertook to pay the
amount outstanding if the debtor
partially serviced the debt.
Neither Glico nor the creditor
could have predicted default,
the outstanding or timing, and
section 44(1) could not have
demanded disclosure of reducing
balances of a debt. Business
persons enter into debt
transactions with pious hope of
fulfillment but unexpected
developments dash their hop. At
page 8 of the record, the
plaintiff’s witness expressed
such hope, insisting under
cross-examination that the
plaintiff did not expect any
default. Surely, if Glico
suspected possible default, it
would not have issued the bond.
23.
Therefore in deciding whether
there is default of a particular
statutory provision, the courts
of law would take into cognition
life’s realities and presume
that the legislator legislates
in full awareness of the
practicalities of the
situation. Francis Bennion
states in his Statutory
Interpretation, 3rd
ed. section 313, that courts of
law interpret statutes in a
workable manner:
“Illegality
The unworkable consequences of a
particular construction may be
relevant indirectly for example
in measuring how far the effects
of statutory illegality are to
be taken in their application to
contractual obligations.
Parliament will not be assumed
to intend to carry them so far
to make trading impracticable
over a wide area.”(e.s)
For the
foregoing reasons the appeal is
allowed to the extent indicated
in this judgment.
(SGD) W. A. ATUGUBA
JUSTICE OF THE SUPREME COURT
(SGD) S. O. A. ADINYIRA
(MRS)
JUSTICE OF THE SUPREME COURT
(SGD) V. AKOTO BAMFO
(MRS)
JUSTICE OF THE SUPREME COURT
_____________________________________________________________
MINORITY OPINION
_____________________________________________________________
BAFFOE BONNIE, JSC:
The judgment against which this
appeal emanates is from three
consolidated suits namely;
1.
NDK Financial Limited Vrs.
Harold Ntorinkansah & 2 others;
suit № BFS 227/09
2.
NDK Financial Services Limited
Vrs. Addicent Foods & Another;
suit №BRS 228/09; and
3.
NDK Financial Services Limited
Vrs. Hansas Complex & 3 Others;
suit № BFS 344/09
The facts and the issues in the
suits are generally common
except the details. The common
facts are that the plaintiff
(NDK), a financial institution
granted credit facilities to the
1st defendant in each
of the suits. In the three
suits, that is suit number
BFS/227/09; suit number
BFS/228/09 and BFS/344/09, the
plaintiff is seeking for an
order for recovery of the sum of
GH¢417,842.39; GH¢1,095,730.76
and GH¢192,539.71 respectively,
being balances due and owing on
the credit facilities extended
by the plaintiff to the
defendants together with
interest at the agreed interest
rate.
Glico in all the suits provided
what is called a “Credit
guarantee bond” as a condition
precedent to the approval and
disbursement of each of the loan
facilities to the 1st
defendant. The 1st
defendant in each of the suits
defaulted in servicing the loan
facility by way of repayment of
the credit facilities granted it
by NDK. It is this default on
the part of the 1st
defendant that necessitated NDK
to initiate the suits in the
High Court (Commercial Division)
against the defendants in each
of the suit. In suit number BFS
227/09, NDK advanced a credit
facility in the sum of
GH¢300,000.00 to the 1st
defendant. Glico issued three
credit guarantee bonds in the
total sum of GH¢550,000.00 to
secure payment of the credit
facility advanced to the 1st
defendant by NDK. In suit number
228/09, NDK advanced a total sum
of GH¢698,000.00 to the 1st
defendant. In this instance
Glico issued three credit
guarantee bonds in the sum of
GH¢224,220.00, GH¢370,000.00 and
GH¢740,000.00 respectively to
secure the credit facility. The
1st defendant unable
to pay for the credit facility
within the stipulated period
sought for an extension of the
period from NDK to enable 1st
defendant make payment. The
extension was granted by NDK on
condition that the 1st
defendant procured a credit
guarantee bond for the extension
requested. The 1st
defendant turned to Glico for
assistance in terms of providing
the credit guarantee bond.
Glico obliged and issued a
credit guarantee bond in the sum
of GH¢1,220,000.00.
In suit number BFS 344/09, NDK
granted a credit facility in the
sum of GH¢ 134,000.00 to the 1st
defendant. Glico again issued a
credit guarantee bond in the sum
of GH¢730,000.00 to secure the
repayment of the credit facility
advanced to the 1st
defendant by NDK.
NDK claims against Glico simply
were for the recovery of the
various sums due and owing on
the credit facilities extended
to the 1st defendant
by the plaintiff repayment of
which were secured by the
defendants but which credit
facilities the defendants had
failed to pay despite several
demand notices.
Glico, in defence, denied any
knowledge of the credit
guarantee bonds issued by its
General Manager, Mr. Derek
Amoah, alleging fraud and
collusion between NDK, the said
defendants and Glico’s General
Manager, Mr. Derek Amoah. Glico
therefore counterclaimed as
follows:
a.
Suit Number BFS/227/09;
A declaration that the credit
guarantee bond number
GG/BON/08-00237 dated 22nd
October 2008 issued by Derek F.
Amoah in the name of the 2nd
defendant is legally
unenforceable and void on the
grounds of fraud and collusion
among the plaintiff, 1st
defendant and Derek F. Amoah.
b.
Suit Number BFS/228/09;
A declaration that the credit
guarantee bond number
GG/BON/08-00236 dated 22nd
October 2008 issued by Derek F.
Amoah in the name of the 2nd
defendant is legally
unenforceable and void on
grounds of fraud and collusion
among the plaintiff Harold
Ntorinkansah hiding behind the 1st
defendant and Derek Amoah.
c.
Suit Number BFS/344/09;
A declaration that the credit
guarantee bond dated 2nd
October 2008 issued by Derek F.
Amoah in the name of the 2nd
defendant is legally
unenforceable and void on the
grounds of fraud and collusion
among the plaintiff, 3rd
defendant and Derek F. Amoah.
Glico further counterclaimed for
the following common reliefs in
all three suits
“1. Punitive damages
against plaintiff for fraud and
/or collusion.
2. An order directed at Bank of
Ghana to sanction the plaintiff
for statutory infraction
3. Costs, including
lawyers fees”.
Harold Notrinkansah, Addicent
Foods Limited, Hansas Complex
and Millicent Ntorinkansah
failed to file a defence and
consequently, NDK filed an
application for default judgment
and the court entered final
judgment against the said
defendants for the reliefs
endorsed on the Writs of
Summons. The case therefore
proceeded between NDK and Glico.
From the pleadings, the fact
that the facilities were granted
by NDK to the 1st
defendants in the three cases
did not appear to be in dispute
nor the fact that the facilities
granted by NDK had not been paid
back by the 1st
defendants.
However, it appeared from the
pleadings, that the main issues
for determination by the trial
court were;
1.
Whether Glico knew of the bonds
issued by its General Manager
Derek Amoah and if it did not
know, whether Glico should be
bound by the act of Derek Amoah
in issuing the bonds in the name
of Glico and
2.
Whether the transaction
concerning the issuance of the
credit guarantee bonds by
Glico’s General Manager, smack
of collusion and fraud between
him (Derek Amoah), NDK and the
other defendants.
After the trial, the court below
held that NDK Financial Services
is entitled to all the reliefs
sought in the writ and therefore
dismissed Glico’s counterclaim
with costs of GH¢3,000.00
against it.
Aggrieved by the said judgment,
Glico filed four main grounds of
appeal. There is no evidence on
the record that additional
grounds of appeal were filed by
Glico upon receipt of the record
of appeal as was indicated in
the Notice of Appeal.
At the Court of Appeal counsel
argued his grounds as follows;
Ground (a) reads as follows:
“In the face of the conclusive
documentary evidence
demonstrating that all the
credit guarantee bonds the
plaintiff is seeking to enforce
were unlimited and the amounts
uncertain in quantum in
contravention of section 44 (1)
of the Insurance Act, Act 724
which renders such insurance
instruments void, the trial
judge misinterpreted the law
that the section applied only to
motor insurance”
Counsel for Glico set the tone
for his argument on this ground
by quoting section 44 (1) of Act
724 and questioned what the true
and proper meaning of the
section should be.
At the High Court the trial
judge when referred to section
44, of the act had opined as
follows,
“In my opinion, a further
reading of section 44,
particularly 44 (3) indicates to
me that the provision is
referring to motor insurance.
It is to ensure that the law is
not used to limit liability
payable as a result of death or
permanent disability”.
At the Court of Appeal,
counsel’s comment on the opinion
of the court supra was that the
court put a restrictive
interpretation on the statutory
provision under consideration in
that the trial court did not
indicate which rule of
construction permitted the
conclusion the court reached.
Counsel contended that the
interpretation that should be
placed on the statutory
provision under construction is
that section 44 (1) of the
statute invalidates every
contract on insurance entered
into by every insurer in all
cases in which the insurer
undertakes a liability the
amount or the maximum amount of
which is uncertain at the time
when the contract is entered
into. Counsel contended further
that the statute does not limit
its effect to any type of
insurance contract and as such
does not affect motor insurance
only as held by the court
below. Counsel was of the
strong view that sub-section (2)
of section 44 of the Act
confirms without allowing any
room for doubt that it does not
in any way diminish the effect
of subsection (1).
Counsel added that, a cursory
look at the credit guarantee
bonds purportedly issued by
Glico to secure payment of the
credit facilities advanced to 1st
defendant in each of the three
suits reveals that they are
indeed void on grounds of lack
of certainty as to the eventual
amount for which Glico
purportedly exposed itself to
liability in Exhibits T, 1,8,20
and 32. Counsel continued that
what is obvious from each of the
credit guarantee bonds is that
although it recites clearly the
specific sum for which the
credit guarantee bond is
required, it does not say the
specific sum of money for which
Glico would eventually be liable
to pay upon default of the 1st
defendant in respect of whom the
credit guarantee bond is
issued. Counsel emphasized on
the portion of the credit
guarantee bond which reads that
“any sum that is due and owning
on the facility” and submitted
that it is clear that the
liability of Glico is open as it
lacks certainty and section
44(1) of Act 724 invalidates
such contract. Counsel, finally
on this ground, cited the
Supreme court case of the
Republic vrs .High Court (Fast
Track Division); Ex Parte
National Lottery Authority
(Ghana National Lotto Operators
Association & others-interested
parties) [2007] SCGKR 390
and submitted that by the said
decision, the court below is
clearly wrong in refusing to
uphold Glico’s submissions on
the illegality of the credit
guarantee bonds the subject
matter of the suit in terms of
section 44 (1) of Act 724.
On this ground of the appeal,
Counsel for NDK in answer,
submitted that section 44 (1) of
Act 724 is not applicable to the
facts of this case and therefore
its interpretation is totally
unnecessary, the reason being
that at law there is a clear
difference in the nature and
legal effect of a contract of
insurance and a gurantee bond.
Counsel for NDK referred to
“Chitty on contrancts”
(Common Law Library Series) 28th
Edition Volume 2 on
“specific contracts” at
paragraph 41-014 which described
a contract of insurance as
follows:
“A contract of insurance is one
whereby one party (the insurer)
undertakes for consideration to
pay money or provide a
corresponding benefit of the
other party (the assured) upon
the happening of an event which
is uncertain either as to
whether it has, or will occur at
all or as to the time of its
occurrence, where the object of
the assured is to provide
against a cost or to compensate
for prejudice caused by the
event or for his old age [where
the event is the reaching of a
certain age by the assured] or
where the event is the death of
the assured] for the benefit of
others upon his death. It is
these objectives which
distinguish insurance from
gaining or wagering. When
embodied in a document the
contract is usually called a
policy, but save in the case of
marine issuance an oral contract
of insurance though rare, is
perfectly valid and may be
indeed also be described as a
policy.
Counsel further referred to
paragraph 44-014 of the same
source supra where Performance
Guarantee also called
Performance Bond or Guarantee
Bond is described as;
“Exceptionally stringent
contracts of indemnity. They are
contracted undertakings normally
granted by banks to repay
specified sum in the event of
any default in performance by
the principal debtor of some
other contract with a third
party, the creditor. Such
guarantees are sometimes called
“first guarantees”.
“The bank or other financial
institution which grants a
performance guarantee will of
course demand a counter
guarantee or indemnity from the
customer whose requests the
guarantee is granted. As the
customer will be liable to
reimburse the bank on their
payment under the guarantee and
as he will be unable to prevent
the bank from paying (except in
cases of fraud) when demand is
made on the bank, his position
is clearly perilous”
Counsel for NDK again referred
to the case of Edward Owen
Engineering Limited Vrs.
Barclays Bank International
Limited [1978] QB 159
where it was held that;
“These performance guarantees
are virtually promissory notes
payable on demand while such a
counter indemnity by a customer
in favour of a guaranteeing bank
takes effect according to its
terms. There is clearly no
concept of counter indemnity or
repayment of liability paid by
the bank or insurance company as
in this case in a contract of
insurance solely undertaken by
insurance companies”.
Counsel argued further that in
the instance case, evidence was
led by NDK to show that Glico
took a counter indemnity in the
form of landed properties from
the 1st defendant on
whose behalf the guarantee bonds
in issue were not contract of
insurance.
In respect of the complaint
against the interpretation that
the trial court put on section
44 of Act 724, Counsel for NDK,
submitted that to interpret it
to cover credit guarantee bonds
would be totally unacceptable
and cannot be supported in law.
Counsel submitted that under the
circumstances, this ground of
appeal ought to fail.
In their judgment The Court of
Appeal said among other things,
“In 2006 when Act 724 was
passed, the Motor Vehicles
(Third party Insurance) Act was
already in existence. A careful
reading of the earlier Act
discloses that it does not
contain any provision similar to
sub-section (1) of section 44.
In our view since under the
Motor Vehicles (Third Party
Insurance) Act contracts of
insurance are created, be it in
the form of Insurance Policy
etc, the drafters of Act 724 did
not want to give room for doubts
to be created as to whether
contracts of insurance made
under Motor Vehicles (Third
Party Insurance) Acre were
exempted. Thus sub-section
(1). In our further view
sub-section (1) of section 44 of
Act 724 is not limited to
contracts of insurance created
under the Motor Vehicles (Third
Party Insurance) Act but every
contract of insurance entered
into by an insurer after the
commencement date of Act 724.
We therefore agree with Counsel
for Glico that the trial court
ought not to have limited
section 44 of Act 724 to
insurance contracts under the
(Motor Vehicles Third Party
Insurance) Act.
“Another issue that was raised
by counsel for Glico is that the
credit guarantee bonds that were
issued by Glico did not specify
the sum of money which Glico was
eventually to be liable upon
default on the part of each of
the 1st defendants
contrary to the provision under
section 44 (i) of Act 724.
As Counsel for Glico rightly
pointed out, each of the credit
guarantee bonds recited the
specific sums advanced to each
of the 1st defendants
mentioned in the credit
guarantee bonds. Counsel for
Glico pointed out further that
the operative part however, does
not state the specific sum of
money that Glico would
eventually be liable to pay upon
default of each of the 1st
defendants. The operative parts
of the credit guarantee bonds
state that;
“Now therefore the condition of
obligation is that if the
customer shall fail to repay the
Bank the said facility then we
Glico General Insurance Company
of P. O. Box 4251, Accra will
upon demand of the bank pay to
the bank any sum that is due and
owing on the facility. This
guarantee shall remain in force
for so long as there is any sum
due and owing from the customer
to the bank on the facility.”
Counsel for Glico contended that
it is clear from the operative
part quoted supra that Glico’s
liability is open to “any sum
that is due and owing to the
facility” which section 44 (1)
of Act 724 clearly invalidates
as a contract. It is clear from
the operative part of the credit
guarantee bonds i.e. Exhibits T,
1,8,20 and 32 that there is no
indication of the specific
amount that Glico is expected to
pay in case of default on the
part of the 1st
defendants to pay the credit
facilities to NDK extended to
the said defendants.
Section 44 (1) of Act 724 makes
it clear that any contract of
insurance entered into after the
commencement date is void if the
insurer undertakes a liability
the amount or maximum amount of
quantum of the liability of the
insurer to be stated on the face
of the contract and not to be
left wide open.
In fact from the definition of
Performance Guarantee also
called Performance Bond or
Guarantee Bond stated in
paragraph 44-014 of Chitty on
Contracts supra which was quoted
by Counsel of NDK, the fact that
they are contracts of indemnity
normally granted to “repay
specific sum in the event of any
default in the performance by
the principal debtor” is made
clear [Emphasis mine]. The
credit guarantee bonds issued by
Glico in favour or 1st
defendant guaranteeing to repay
NDK in case of default on the
parts of the 1st
defendants are contracts of
insurance and therefore the law
requires that the amount that
Glico undertook to indemnify NDK
should have been specified. It
is clear from the face of the
Credit Guarantee Bonds issued by
Glico to the 1st
defendants that it was silent on
the specific sum that Glico
would pay should the 1st
defendants default in paying the
credit facilities granted them
by NDK and therefore lacked
certainty contrary to the
provision under S.44 (1) of Act
724.
Under the circumstances, we will
allow ground (a) of the appeal.”
With this conclusion on ground
(a) of the notice of appeal, the
findings of the Court of Appeal
on the other grounds were
rendered irrelevant as the whole
contracts that gave rise to the
transactions had been nullified.
Being aggrieved by this holding
by the Court of Appeal, the
plaintiff has appealed to this
court on the following grounds.
(a) the learned justices of the
Court of Appeal, erred in law
when they held that Sub section
(1) of section 44 of the
insurance Act, act 724 is not
limited to contracts of
insurance under the Motor
Vehicle (third party
insurance)Act but every
contractor(sic) of insurance
entered into by the insurer
after the commencement of
Insurance Act, Act 724
(b)The learned Justices of the
Court of Appeal erred in law
when they held that the credit
guarantee bonds issued in favour
of the plaintiff/respondent by 2nd
Defendant/Appellant were
contracts of insurance
© The learned justices of the
Court of Appeal erred in law
when they held that the credit
guarantee bonds issued by Glico
to the !st defendant was silent
on the specific sum that Glico
would pay should the !st
defendant default in paying the
credit facilities granted it by
NDK and therefore lacked
certainty contrary to the
provision under section 44(1) of
the Insurance Act, Act 724.
(d)The learned Justices of Court
of Appeal erred in law when they
failed to consider the fact that
the guarantee bonds were issued
by the
“2ndDefendant/Appellant…”.
It can be seen that the grounds
of appeal have been formulated
solely based on the provisions
of section 44 of the Insurance
Act, Act 742.
As can be seen from the recount
of the facts earlier in this
judgment the main issue to be
resolved is the scope and
meaning of section 44 of The
Insurance Act, Act 742 in the
light of the wording in the
guarantee bonds at issue in this
case.
Section 44 of the Insurance Act,
Act 742 reads as follows;
“44 (1). Subject to subsection
(2) a contract of insurance
entered into by an insurer after
the commencement date is void if
it is a contract under which the
insurer undertakes a liability
the amount or maximum amount of
which is uncertain at the time
when the contract is entered.
(2). Regulations may prescribe
contracts of insurance or
classes or descriptions of
contracts of insurance that are
exempt from subsection (1).
(3). This section applies to
motor insurance contracts
despite anything to the contrary
in the Motor Vehicles (Third
Party Insurance) Act, 1958 (№.
24).
(4). The Commission in
consultation with the insurance
industry shall by regulations
prescribe a formula to compute
the compensation in respect of
injury and deceased claims
arising out of a motor accident”
We have read the majority
opinion on the first two grounds
of appeal and we agree with the
analysis and conclusions in
part. In other words we agree
with the lead opinion and the
learned justices of the court of
appeal that Sub section (1) of
section 44 of the insurance Act,
act 724 is not limited to
contracts of insurance under the
Motor Vehicle (third party
insurance)Act but every contract
of insurance entered into by the
insurer after the commencement
of Insurance Act, Act 724
We also agree with the Majority
opinion and the learned justices
of the court of appeal when they
held that the credit guarantee
bonds issued in favour of the
plaintiff/respondent by 2nd
Defendant/Appellant were
contracts of insurance. We
believe that the majority
opinion has dealt extensively
with this ground of appeal and
there is no need to belabor it.
We are however unable, with
respect, to agree with the
conclusions arrived at by the
opinion of our learned brother
with regard to grounds 3 and 4
of the appeal.
Ground C and D of the appeal
read as follows;
© The learned justices of the
Court of Appeal erred in law
when they held that the credit
guarantee bonds issued by Glico
to the !st defendant was silent
on the specific sum that Glico
would pay should the !st
defendant default in paying
credit to facilities granted it
by NDK and therefore lacked
certainty contrary to the
provision under section 44(1) of
the Insurance Act, Act 724.
(d) The learned Justices of
Court of Appeal erred in law
when they failed to consider the
fact that the guarantee bonds
were issued by the
“2ndDefendant/Appellant…”.
The respondent argued before the
Court of Appeal and repeated
before us that in the light of
the provisions of section 44(1)
of the act, the guarantee bonds
issued by the Respondent Glico
were all null and void because
they lack certainty with regard
to the liability of Glico.
The appellant on the other hand
argues that a careful
examination of the credit
guarantee bond shows that a
specific sum for a specific
period is stated in the bond and
that the so called operative
part of the bonds only state
that in the event that the
customer shall fail to pay the
facility on the due date, Glico
shall upon demand made by the
Bank pay to the Bank any sum
that is due and owing on the
facility. Any additional sum
payable under the bond shall
arise only upon default of the
customer and the amount shall be
calculated in accordance with
the interest on the facility.
Therefore it was wrong for the
Court of Appeal to have
concluded that there was
uncertainty as far as the amount
payable was concerned. Counsel
concluded this by tying it with
the ground 4 of the appeal to
the effect that the credit
guarantee bonds in issue were
issued by the respondent herein
who collected premiums before
they issued same. So they ought
not to be allowed to take
advantage of its own wrong,
granting that its own
documents/guarantee bonds were
illegal.
Section 44(1) reads as follows;
“44 (1). Subject to
subsection (2) a contract of
insurance entered into by an
insurer after the commencement
date is void if it is a contract
under which the insurer
undertakes a liability the
amount or maximum amount of
which is uncertain at the time
when the contract is entered.”
The relevant part of the
guarantee bonds at issue reads
as follows
“If the customer shall fail to
repay to the bank the said
facility then we Glico… will
upon demand of the Bank pay to
the Bank
any sum due and owing
to the facility. This guarantee
shall remain in force so long as
there is any sum due and
owing from the Customer to
the Bank on the facility”(e.s)
Reading these two formulations,
that is, the law and wording in
the guarantee bonds, we find it
difficult to arrive at any other
conclusion other than the fact
that that the bonds are void for
uncertainty. We believe there
cannot be any other conclusion.
A careful reading of the bonds
indicate that a credit facility
for a specific sum was advanced
to each of the defendants. Each
credit guarantee bond also
recites the specific sum of
money advanced by way of credit
facility. What is obvious
however from each credit bond is
that although it recites the
specific sum for which the
credit guarantee bond is
required, it does not say the
specific sum of money for which
the respondent would be
eventually liable upon
default of each of the 1st
defendants in respect of whose
eventual liability the credit
bond is issued. It is this this
lack of uncertainty which is
frowned upon by the law. No
derogation is possible from the
effect of section 44(1) of the
Act. The section states in
unequivocal terms that a
contract of insurance is void if
there is no certainty of
liability assumed by the
insurer. That is the law and it
does not make for any
exceptions, at least not in
terms as being advocated by the
appellants. As was stated by the
Supreme court in the case of
Boyefio v NTHC Properties Ltd
[1997-98]1 GLR768,
“The
law was clear that where an
enactment had prescribed a
special procedure by which
something was to be done, it was
that procedure alone that was to
be followed”
The position of the law is that
every court is bound to apply
and ensure the compliance with,
statutes of the land and so
courts must give effect to such
statutes and avoid anything that
would amount to condoning an
illegality. Two quotes from the
case of Republic V High
Court (Fast Track Division)Ex
Parte National Lottery
Authority…..[2009]SCGLR 390,
will be apposite here.
“No judge has authority to grant
immunity to a party from the
consequences of breaching an Act
of Parliament….The judicial oath
enjoins judges to uphold the
law, rather than condoning
breaches of Acts of Parliament…”
Date-Bah JSC (pg. 402)
“It is communis opinion among
lawyers that the courts are
servants of the legislature.
Consequently any act of a court
that is contrary to a
statute…is, unless expressly or
impliedly provided, a nullity.”
Atuguba JSC (pg. 397)
Insurance is a global concern.
It is inconceivable for
insurance business to be entered
into where the limit of the
liability is not determined.
That will be against public
policy because it would subject
some insurance companies to
endless liabilities which may be
far beyond the capital means of
the companies. Every Insurance
company does business in the
light of the knowledge of its
own assets or funds. For
example if the company is worth
fifty thousand, It will be
perfectly legitimate for it to
accept business worth, say
twenty thousand cedis. Because
it knows that its funds and
assets meet the liabilities. If
one insurance client is allowed
to claim any amount which is not
specified and therefore cannot
be envisaged by the insurance
company, the insurance company
would not have been given the
opportunity to enter into the
business in the light of its own
knowledge of its assets or
funds. That will be necessary
consequences of validating
unlimited claims against
insurance companies. Upholding
the case of NGK will validate a
situation where an insurance
company will be subject to
claims to which it had not had
the chance to commit itself
because the claim will be
undetermined and therefore
unknown. That will make the
position of all insurance
companies most precarious. That
will be the argument that will
go against the operations of
insurance companies. Quite
clearly, that will be grossly
against public policy.
To avoid such potential dangers
that may confront insurance
companies as well as the
customers of insurance company,
the only safe way is to uphold
the law that the limit of every
insurance business should be
predetermined and known in order
to make the business valid. Any
insurance contract which allows
unlimited claims should be
declared invalid and void.
I believe the decision, as put
forth by the majority will be a
landmark one which may set the
dangerous precedent of
subjecting insurance companies
to liabilities which they cannot
envisage and therefore cannot
commit themselves to meet. For
this principle alone, the case
of Glyco should be upheld so
that the appropriate precedent
will be set. To hold otherwise
will virtually spell the
collapse of some insurance
companies by subjecting them to
claims they have not envisaged
and therefore have not prepared
themselves to meet. That will be
dangerous. Public policy alone
should forbid open-ended
insurance contracts. That is why
the law is as it states in
section 44
Finally we believe that the law
that limits should be set should
be given a purposive
interpretation. The purpose of
that law is to ensure that the
insurance company is subjected
to claims it can envisage and
has consciously undertaken to
commit itself to meet, not
claims it has not had the chance
to consider whether its assets
are in a position to meet
because the upper limit remains
undetermined. Society does not
expect the law be interpreted in
such a way as to pave the way
for the collapse of companies by
legalizing unconscious
commitments.
GROUND 4
Tied to the third ground of
appeal is the 4th
which seeks to say that granting
that the interpretation being
put on the section 44 by the
respondent is correct, since the
bonds which are being sought to
be nullified were issued by the
respondents herein, their
nullification will tantamount to
the respondents being allowed to
take advantage of their own
wrong doing. In other words, the
respondents are estopped from
denying the validity of the
bonds they issued.
To this argument, the respondent
has provided an incisive
response. He said
‘The law is that estoppel cannot
be used as an excuse to validate
an illegal contract. The law is
that where as in this case 2nd
Defendant’s case is that a
transaction is illegal not just
on grounds of fraud and
collusion (which was not
accepted) but also that it
breached statutory provisions
regulating it, estoppel cannot
be invoked to validate the
transaction”
Counsel then cited the cases of
Republic v. High Court,
Accra; Ex Parte Attorney
General(Delta
FoodsLtd-Interested
Party)[1999-2000]1GLR255
where Acquah JSC(as he then
was),said,
“For it is trite knowledge that
the doctrine of estoppel cannot
be invoked to render valid an
act or transaction which a
statute forbids”
Then the case of In re
Kwabeng Stool; Karikari v.
Ababio II Justice Ampiah
also said;
“…Estoppels of all kinds are
subject to one rule: they cannot
override statutory provisions.
Thus where a particular
formality is required by statute
no estoppel will cure the
defect”
We couldn’t agree more.
If we may draw an analogy from
Article 118(1),(2)and (3) which
read;
181(1) “Parliament may, by a
resolution supported by the
votes of a majority of all
members of parliament, authorize
the government to enter into an
agreement for the granting of a
loan out of any public fund or
public account.”
(2) “An agreement entered into
under clause (1) of this article
shall be laid before Parliament
and shall not come into
operation unless it is approved
by a resolution of Parliament
(3) No loan shall be raised by
the Government on behalf of
itself or any other public
institution or authority
otherwise than by or under the
authority of an act of
Parliament.”
In the
various actions that have arisen
in our courts for non-compliance
with the provisions of these
articles of the constitution
like, Martin Alamisi Amidu
vrs. The Attorney General
and Two Others (The Woyome
Case)(unreported)Writ No
J1/15/2012 dated 14th
June 2013, and
2).
Martin Alamisi Amidu vrs. The
Attorney General and 2 others(
the Isofoton Case)(unreported)
writ No J1/23/2012 dated 21st
June,
2012,
the Court’s
interpretation of these
provisions of the constitution
have been very strict. The fact
that certain acts had been
performed under the contracts
and certain rights had accrued,
never influenced the courts in
declaring the contracts null and
void for failure to seek
parliamentary approval.
When this
issue of part performance,
accrued rights and unjust
enrichment in respect of illegal
contracts was raised in the
Woyome case (supra) this is what
the Supreme Court said;
“ A contract
which breaches article 181(5) of
the Constitution is null and
void and therefore creates no
rights. (See The
Attorney-General v Faroe
Atlantic Co. Ltd. [2005-2006]
SCGLR 271 and The
Attorney-General v Balkan Energy
Ghana Ltd. 2 ors. Unreported, 16th
May, 2012.) It should not be
legitimate to evade this nullity
by the grant of a restitutionary
remedy. Although one accepts
the cogency of the argument that
there is need to avoid unjust
enrichment to the State through
its receipt of benefits it has
not paid for, there is the
higher other countervailing
argument that the enforcement of
the Constitution should not be
undermined by allowing the State
and its partners an avenue or
opportunity for doing indirectly
what it is constitutionally
prohibited from doing directly.
The supremacy of the
Constitution in the hierarchy of
legal norms in the legal system
has to be preserved and
jealously guarded. Thus the
flexibility that the Supreme
Court introduces in the CCWL
case is to be exercised
sparingly in the case of
breaches of the Constitution.
The requirement that
international business contracts
to which the Government is a
party should be approved by
Parliament has a purpose and it
should be made clear to
Government and its partners that
non-compliance with the
requirement, directly or
indirectly, will have
consequences. We are
accordingly inclined to the view
that, where article 181(5) has
been breached, a restitutionary
remedy would be in conflict with
the Constitution and therefore
not available”.
We believe
that the guarantee bonds issued
by the respondents lacked
certainty with respect to the
amount of money for which the
respondent became liable on
breach. This was a breach of
section 44 of the Insurance Act,
Act 742, and therefore invalid.
We so hold.
CONCLUSION
As was
mentioned in the majority
opinion this case has not been
easy to deal with. It can be
seen from its history that the
plaintiff won at the High Court
but was reversed by 3 Justices
at the Court of Appeal. When
this matter came before us the
court was divided. We therefore
referred same for Amicus Curia
brief. Of the two amici that
responded, The National
Insurance Commission, the
umbrella commission for
insurance companies, came to a
conclusion that supported the
minority opinion, whilst the
other written by S. Kwame Tetteh
and co., external solicitors for
State Insurance Company,
supported the majority view.
For a closure
to be brought to this we hope
that an expanded coram of this
court would have the chance to
look at the law again.
(SGD) P. BAFFOE BONNIE
JUSTICE OF THE SUPREME COURT
(SGD) J. ANSAH
JUSTICE OF THE SUPREME COURT
COUNSEL
PEASAH BOADU
ESQ. FOR THE
PLAINTIFF/RESPONDENT/APPELLANT.
THADDEUS SORY
ESQ. (WITH HIM RICHMOND NUMBO
SAAKA) FOR THE 2ND
DEFENDANT /APPELLANT/RESPONDENT. |
