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Per its Writ
of Summons, Plaintiff is seeking
against Defendant, the following
reliefs: 1. Recovery of the sum
of Two Hundred and Twenty-Five
Thousand Five Hundred and Ninety
United States Dollars Eighty
Cents (US$225, 590.80) being the
outstanding balance on a
facility of US$400,000.00
granted by the Plaintiff, at the
request of the Defendant which
said amount was due and owing as
at the 31st day of March, 2008
to the Plaintiff and which
amount Defendant has failed
and/or refused to pay to
Plaintiff in spite of several
and repeated demands made
therefor 2. Interest on the said
amount at an agreed interest
rate of 9.9. % per anum plus an
additional of 6% per anum
payable on the outstanding
arrears from the 31st day of
March, 2008 till date of final
payments. 3 Costs." It is the
case of the Plaintiff that it
advanced a personal loan of
US$400,000.00 to the Defendant
for a period of Sixty (60)
months payable on monthly basis
with interest accruing thereon.
The loan transaction between the
parties was governed and covered
by a loan agreement which had
specified terms and conditions
covering same. Plaintiff called
in and terminated the facility
according to the terms and
conditions stipulated in the
agreement. Plaintiff says it
called in the facility as a
result of a default on the part
of the Defendant. Defendant was
given time to settle or retire
his indebtedness but, he did not
comply, as a result of which the
Plaintiff had no choice than to
offset his indebtedness by using
the available cash security.
There was still an outstanding
amount and the Plaintiff thus
instituted the instant action to
recover same. The Defendant has
denied Plaintiff's claim. It is
his case that the loan facility
was called in under
unjustifiable circumstances as a
result of which the Plaintiff
was therefore in breach of the
loan agreement. Defendant also
contends that due to the
negligence of Plaintiff some
monies amounting to GH¢4,000
were withdrawn from the
Defendant's account. The monies
withdrawn constitutes a breach
of trust unbecoming of a bank of
Plaintiff's stature. The
Defendant contends further that
he contracted the loan to build
a hotel but has since been
unable to complete it due to the
Plaintiff's unjustifiable
call-in of the loan facility.
Thus it has become very
difficult to secure another loan
to complete the project. This
has caused a lot of financial
loss and income to the
Defendant. Defendant has thus
counterclaimed for the
following: a. General damages
for the breach of the loan
agreement b. General damages for
negligence and for breach-.'of
trust. c. Special damages I.
Monies illegally withdrawn from
the Defendant accounts without
his consent amounting to GH¢4,000
ii. Interest on the said GH¢4,000
at the prevailing bank rate iii.
Estimated loss of Profits of GH¢5,400
per day had the Hotel been
completed on schedule. From the
pleadings and evidence led,
there are some undisputed facts.
They are that: 1. Plaintiff was
granted a loan facility of
US$400,000 by Defendant on 30th
April 2006 to be repaid within a
period of five (5) years and
with a repayment schedule of
sixty (60) equal monthly
instalments. 2. The facility was
a personal loan to be used to
complete Defendant' hotel
project in Elmina 3. The loan
was secured by a. A lien on
Flexi plus of US$50,000 held in
Defendant's account; b. Lien
over US$60, 000 also held in
Defendant's account, c. Mortgage
over property described as No.
159 Shippi Link, Cantonments
owned by Defendant; and d.
Mortgage over Bart Plaza Hotel
Building in Elmina. 4. There was
an agreement that there would be
an automatic deduction from
Defendant's account every month.
5. Monthly payments were stalled
because there was not sufficient
money in Defendant's account. 6.
Plaintiff agreed to deduct
instalment payment from
Defendant's account over which
Plaintiff had a lien for Le
month of July 2007. 7. Plaintiff
subsequently refused Defendant's
request for the instalment
payments for September and
October 2007 to be deducted from
his account. 8. The facility was
called-in by Plaintiff as per
letter dated 12th November 2007
(Exhibit "D") in which letter
Plaintiff was given notice of
termination to enable him settle
or retire his indebtedness. The
main issue in contention in my
opinion, is whether or not
within the terms of the loan
agreement the Defendant was in
breach that entitled the
Plaintiff to call in the
facility. Plaintiff is claiming
that Defendant was in breach of
the loan agreement for failure
to pay some monthly instalments,
and thus by virtue of Clause.
11.0. (a) of the said agreement,
it was entitled to call-in the
loan. Defendant on the other
hand, denies that there was any
default. His reason being that
there was sufficient money in
his accounts which Defendant had
taken lien over. Moreover
Plaintiff had agreed to deduct
the monthly instalment for July,
2007 and there was no reason why
Plaintiff refused Defendants
request to make further
deductions for the subsequent
months. More importantly the
said clause 11.0 (a) did not
give the Plaintiff the right to
terminate the agreement in the
manner it did. In his evidence,
Defendant stated that in his
opinion the reason why Plaintiff
took the decision to terminate
the agreement was because of a
letter he wrote to the bank
which in his opinion, was a fair
critique of the operation of the
bank, but which the Plaintiff
did not take kindly to. The
relationship of banker to
customer is one of contract; see
Foley v. Hill [1848] HL Cas.28.
It consists of a general
contract, which is basic to all
transactions, together with
special contracts which arise
only as they are brought into
being in relation to specific
transactions or banking
services. So, to the specific
contract in question; Exhibit
"B'. The crucial clause in
Exhibit "B" is clause II, and it
reads: "11.0
Termination/Suspension The Bank
has the right to terminate
suspend and/or call up the
facility if the terms and
conditions stipulated in this
agreement are not met by the
Borrower including: a. Failure
to pay any sum when due. b.
False or untrue representations
and warranties made prior to and
during the tenure. c. Whether
the Bank has reason to believe
that the Borrower may not be
able to abide by the terms and
conditions of the facility. d.
Failure to abide by any other
covenant term or conditions
detailed in this agreement. e.
If the borrower shall take or
permit to be taken, any actions
or proceedings whereby any of
his properties shall or may be
liable to be assigned or in any
manner transferred or delivered
to other person whether
appointed by the borrower or
otherwise whereby such property
shall or may be distributed
among creditors of the Borrower.
In the event of suspension the
right of Borrower to draw upon
the facility shall continue to
be suspended until the event
which gave rise to such
suspension shall have ceased to
exist to the satisfaction of the
Bank or until the Bank shall
have notified the Borrower that
the right to draw upon the
facility has been restored.
Notwithstanding any suspension
or termination pursuant to the
above, all the provisions of
this agreement shall continue in
full force and effect to the
benefit and protection of the
Bank's interest. The evidence
led by Plaintiff's
representative, Nana Kofi Bame
(P.W.1) was that the loan
agreement was breached because
of the failure of Plaintiff to
pay two (2) instalments for
September and October 2007. He
said that by virtue of the
agreement, Plaintiff had the
right to call-in the facility.
The Defendant in his evidence
denied that there was any
default to talk about. The
position of that law is that
monies lent to a customer are
repayable either on demand or at
a specified future date. Term
loans usually list events of
default on the occurrence of
which repayment can be demanded
before the date on which the
bank reserves the right to make
prior demand; the agreement
however may present difficulties
of construction as is being
contended by Counsel for
Defendant. This occurred in the
English case of Titford Property
Co. Ltd. v. Cannon Street
Acceptances Ltd [22nd May 1975,
unreported] Where the Defendant
merchant bank had granted the
claimant companies fixed term
overdrafts to finance their
property development business.
There was a separate account and
overdraft facility for each
project. Each facility letter
contained the following clause:
"9' All monies due by you,
whether by way of capital or
interest, shall be payable on
demand, and you shall have the
right to re-pay all monies due
without notice." The lenders
demanded repayment before the
fixed expiry date of certain of
the facilities and appointed
receivers on default in
repayment. The claimants applied
for injunctive relief. Goff J
viewed the construction of the
facility letters as an issue
which did not depend on disputed
facts and which he was therefore
bound to decide. He held (i)
that 'due' in the first of
Clause 9 meant 'due, whether
presently payable or not,' this
being clear from the second part
of the clause; but (ii) that
Clause 9 so construed was
'completely repugnant to the
whole facility' and accordingly,
it had to be modified, by
reading it as subject to the
provision as to the duration of
the facility, or ignored
altogether. The Titford case may
be compared with Williams and
Glyn's Bank v. Barnes [1981] COM
LR, 205, where a bank granted an
overdraft facility which it knew
was to be used to finance a
particular transaction. However,
the overdraft was expressly
repayable on demand and was not
granted for a fixed period.
Peter Gibson J held that the
bank was entitled to demand
repayment at any time. In Lloyds
Bank PLC v. Lampert [1999] 1 All
ER (Comm) 161, CA, a facility
letter provided that the loan
would be 'repayable in full on
demand' but that the bank
intended to make the facility
available until a specific date.
After citing the Titford
Property case and the Williams
and Glyn's Bank case, Kennedy LJ
said (at 167-168): "I am wholly
un-persuaded that the words
'repayable on demand' used in
the facility letter do not mean
what they say. It is in no way
inconsistent for a bank or any
other lender to grant a facility
which it and the borrower both
envisage will Iast for some
time, but with the caveat that
the lender retains the right to
call for repayment at any time
on demand" This decision was
followed in Bank of Ireland v.
AMCD (Property Holdings)Ltd's
[2001] 2 All ER (Comm) 894 in
which the Defendants had
arranged funding of £1.4m from
the claimant bank for a property
development venture. The
facility letter provided for a
term of 12 months from the first
use of the facility, and for
repayment on demand or, in the
expected ordinary course of
events', from the sale of the
development within 12 months.
The letter also provided that in
the event of the non-payment of
any money due which had not been
rectified to the satisfaction of
the bank, the bank would be
entitled to make demand for
immediate repayment The court
held that it was not seriously
arguable that the provisions of
a facility letter which
envisaged (i) that the facility
would be available for a period
of 12 months; and (ii) that the
bank was entitled demand
immediate repayment in the event
of non-payment, were repugnant
to or overrode in any way a
clear statement that repayment
was to be made 'on demand.
Further, it was trite law that
parties to a contract were free
to determine for themselves what
primary obligations they would
accept, and in the instant case
there was no warrant for
treating the repayment provision
otherwise than in accordance
with the terms. No business
person could have understood
that provision in any sense
other than that for which the
bank contended, namely that the
amounts advanced were repayable
on demand, but that, if all went
well, the bank would expect to
receive repayment from the sale
of the development. In his
written address, Counsel for
Defendant submitted that a
cursory reading of Clause 11 .0
(a) of Exhibit "B" would suggest
that failure by Defendant to pay
any instalment resulted in an
automatic breach of clause 11.0
(a) of Exhibit "B". The question
however is whether it can be
fairly contended that where, as
in this instant case, out of a
total of over 60 instalments,
Defendant makes default in the
payment of two, the intention of
the parties was that the
agreement should automatically
terminate. In this regard,
Counsel relied on the case of
Biney v. Biney [1974] 1 GLR 318
CA, in which case it was opined
that interpretation/construction
of deeds and documents should
take into account "the mind and
intention of the author". Hence,
whether it can fairly be
contended that where, as in the
instant case, out of a total of
60 instalments, if Defendant
defaults in payment of 2, the
intention of the parties was
that the agreement should
automatically terminate.
Defendant's position is that
Plaintiff's decision to
terminate Exhibit "B" is
unjustifiable. It is the case
that in the last resort, when
parties have differing views
about what their contract means
or what its effect on their
legal rights and obligations is,
their difference must be settled
by the court, or by arbitration.
In arriving at its conclusion
the court applies relatively
well established principles of
construction. It is commonly,
though inaccurately, thought
that the purpose of interpreting
a contract is to discover the
actual intentions of the
contracting parties. In Pioneer
Shipping Ltd v. B.T. P. Tioxide
Ltd [1982] A.C. 724, Lord
Diplock said: "The object sought
to be achieved in constructing
any contract is to ascertain
what the mutual intentions of
the parties were as to the legal
obligations each assumed by the
contractual words in which they
sought to express them." The
position of the law is that the
intention of the parties must be
ascertained from the language
they have used, considered in
the light of the surrounding
circumstances and the object of
the contract, in so far as that
has been agreed or proved. Thus
in Leader v. Duffey [1888] 13
App. Gas. 294, Lord Halsbury
L.C. said: "...I agreed that you
must look at the whole
instrument, and inasmuch as
there may be in accuracy and
inconsistency, you must, if you
can, ascertain what is the
meaning of the instrument taken
as a whole in order to give
effect, if it be possible to do
so, to the intention of the
framer of it". This rule of
interpretation which requires
that in interpreting a deed or
instrument it must be read as a
whole was also stated in the
case of Boateng v. Volta
Aluminium Co. Ltd [1984-86] 1
GLR 734, CA Defendant's
contention is that under and by
virtue of Exhibit "B", upon
default by Defendant in the
payment of any instalment, the
natural consequence and/or
remedy as per Exhibit "B" was
not the calling-in of the loan
facility and for that matter
terminating same. This is
because there is also the option
provided under clause 13 of
Exhibit "B" which provides as
follows: "In the event of
default in repayment terms and
other conditions, the Bank shall
be at liberty to sett off and
apply any and all deposits
(general or special, time or
demand, provisional or final) at
any time held or other
indebtedness at any time owing
by the Bank to or for the credit
of the Borrower against any and
all of the obligations of the
borrower which may now or
hereinafter exist under this
Agreement or any other Agreement
and whether such deposit,
indebtedness or obligations may
be un-matured or contingent. The
Bank's rights hereunder are in
addition and without prejudice
to other rights and remedies
including without limitation,
other rights of set off which it
may have." Defendant's view
there is that having regard to
clause 13.0 of Exhibit "B" even
if Defendant had breached clause
11.0 (a) the remedy was to apply
clause 13.00 by using some of
his funds standing to his credit
with Plaintiff to pay off any
instalment due and owing to
Plaintiff. There is a second
reason why Defendant contends
that there was no breach by
Defendant of Exhibit "B" that
justified Plaintiff's decision
to terminate the agreement. The
reason being that the parties
had themselves recognised the
fact that the failure by
Defendant to pay one instalment
did not warrant the calling in
of the facility. Defendant's
evidence was that when there was
not sufficient money in
Defendant's account to meet the
instalment payment for the month
of July 2007, P.W.1 advised
Defendant to apply for the use
of his cash security for payment
of his instalments. According to
Defendant, this arrangement was
consistent with clause 13.0 of
Exhibit "B". In my opinion the
Defendant is asking the court to
do equity. However, it is common
knowledge that equity follows
the law and where the law is
clear the court cannot do
equity. I am saying this because
the parties herein entered into
a contract, Exhibit "B".
Contracts freely entered into by
parties with capacity are
treated in law as scared. The
law is concerned with the free
will of the parties and not with
the fairness of the terms of a
valid contract. Courts uphold
the sanctity of contracts for a
number of related reasons.
Firstly, there is a judicial
deference to the contracting
parties. The argument here is
this; if the parties have freely
come to terms, the courts must
defer to the parties and respect
those terms. Secondly, courts
find themselves incompetent, and
are therefore reluctant, to
substitute terms freely entered
into by parties themselves. Anin
J.A put it succinctly in his
dissenting judgment in Addision
v. A/S Norway Cement Export Ltd
[1973] 2 GLR 151 at 162, as
follows: "The parties must make
their own contract; and the
courts will not make a contract
for them.." It is my opinion
that the language used in clause
11 is very, simple and therefore
there is no need for the court
to attempt to ascertain the
presumed intention of the
parties. The parties herein
agreed that Plaintiff had the
right to terminate, suspend
and/or call up the facility if
Defendant failed to pay any sum
when due (emphasis mine). There
is no ambiguity with regard to
this term of the contract. It is
one of the rules of construction
that where words of a contract
are clear, the Court must give
effect to them even if they have
no discernible commercial
purpose. So in Safeway Food
Stores Ltd v. Banderway Limited
[1983] 267 E.G. 850 Goulding J
rejected an invitation to depart
from the literal meaning of the
words. He said. "It may not be
what one would think most
probable, but there is nothing
absurd about it, nothing
insensible about it. For all
that I am entitled to know in a
construction case, the matter
may have been so arranged as the
result of bargaining on various
points between the original
landlord and the original
tenant. If I assume that they
had a common intention different
from what the words express, I
think I am merely guessing and
accordingly on this point the
defendant succeeds." And in
Charter Reinsurance Co. Ltd V.
Fagan [1966] 3 All ER 46 HL,
Lord Mushill said: "There comes
a point at which the court
should remind itself that the
task is to discover what the
parties meant from what they
have said, and that to force
upon the words a meaning which
they cannot fairly bear is to
substitute for the bargain
actually made one which the
court believes could better have
been made. This is an
illegitimate role for the court.
Particularly in the field of
commerce, where the parties need
to know what they must do and
what they can insist on not
doing, it/s essential for them
to be confident that they can
rely on the court to enforce
their contract according to its
terms." Plaintiff also had the
right to terminate, suspend
and/or call up the facility
"where the Bank has reason to
believe that the Borrower may
not be able to abide by the
terms and conditions of the
facility". The evidence placed
before the Court was that
Defendant never used monies or
proceeds from his personal
earnings as stated in Exhibit
"J" of which Defendant was a
signatory. Rather, Defendant
made the monthly instalment
payments from the loan itself
and when the money got finished
he, albeit on the advise of his
relationship manager, P.V.1,
requested for the bank to deduct
the July 2007 instalment from
his account with the Bank. In my
opinion Plaintiff had good
reason to believe that Defendant
may not be able to abide by the
terms and conditions of the
facility. Moreover, Plaintiff
had applied for additional
funding from Defendant but his
request had been rejected. I
will therefore find that
Defendant was in breach of the
Contract Exhibit "B" and
therefore Plaintiff was entitled
to call in the facility. So,
Defendant called in the loan
facility on the 12th of
November, 2007 and Plaintiff was
given up till the 3rd of
December, 2007 to clear his
indebtedness. Failure to do so
necessitated a set off as
provided for in clause 13 of
Exhibit "B". By virtue of clause
7.0 of the loan agreement,
Plaintiff took a four-leg
security from Defendant. Clause
13.0 provided that in the event
of default of the repayment
terms, the bank shall be at
liberty to set off and apply any
and all deposits held by the
Bank for Defendant against any
obligations of the Defendant.
Per Exhibit "J" which is a Deed
of Assignment, Defendant
assigned two (2) foreign
currency accounts to Plaintiff
as part of the security for the
loan facility. And by virtue of
the said Exhibit "J" and clause
13.) of Exhibit "B", Plaintiff
exercised its right of set-off.
A banker's set off is a right,
not an obligation. Accordingly,
a customer who maintains two
current accounts has, in the
absence of agreement, no right
to draw a cheque on one on which
the balance is insufficient to
meet it and expect the cheque to
be paid if the combined balance
is sufficient. See Direct
Acceptance Corporation Ltd. v.
Bank of New South Wales [1968]
88 WN NSW 498 per Macfarian J.
Thus upon termination of the
contract, Plaintiff applied the
monies in the assigned accounts
to off-set the balance
outstanding on the loan
facility. Defendant's claim is
that there is yet an outstanding
balance of US$225,590.80 as at
31st day of March 2008. P,W.1
tendered in evidence Exhibit
'C", a loan report that was
generated to track the repayment
instalment and/or any other
commitments that are due. From
the above, I will find that
Plaintiff has established its
case and is therefore entitled
to its claim. Defendant, as
earlier stated, has
counterclaimed, As I have
already stated, there is no
doubt that even though the loan
granted to Defendant was
described as a personal loan, it
was understood between both
parties that it was for the
purpose of completing
Defendant's hotel project in
Elmina. However, I have not made
any finding that Plaintiff
breached the contract and
therefore no award of damages
arises. It is trite learning
that the purpose of damages is
to put the party who has
suffered as a result of a breach
of contract in nearly the same
position that he would have been
had the other party not broken
the contract. In Delmas Agency
Ghana Ltd. V. Food Distributors
International Ltd [2007-2008]
SCGLR 748, it was held that
general damages or as such as
the law will presume to be the
natural or probable consequence
of the defendant's act. It
arises by inference of the law
and therefore need not be proved
by evidence. Where the Plaintiff
has suffered a properly
quantifiable loss, he must plead
specifically his loss and prove
it strictly. I will find that in
the circumstances of this case,
Defendant is not entitled to
general damages. Neither is he
entitled to special damages for
the estimated loss of profits of
GH¢5,400 per day had the hotel
been completed on schedule. As I
have state there has been no
finding that there has been a
breach by the Plaintiff.
Defendant is also claiming
general damages for negligence
and/or breach of trust but did
not lead sufficient evidence to
assist the court make a
determination on this. I will
therefore find that Defendant is
not entitled to this claim. With
regard to the claim for special
damages for monies illegally
withdrawn from the Defendant's
accounts without his consent
amounting to GH¢4,000.00, the
issue has become moot since
there is evidence that the
Defendant was invited to go for
a refund of the said money. The
letter from Plaintiff was
tendered in evidence by
Defendant's first counsel as
Exhibit '2". In the
circumstances, I will find that
Defendant is not entitled to
this claim nor the claim for
interest on the said amount. In
conclusion, I will find that
Plaintiff is entitled to its
claim and hold that Plaintiff
recovers from Defendant the sum
of US$225,590.80 together with
interest at the agreed interest
rate of 9.9.% per anum pIus an
additional of 6% per anum
payable on the outstanding
arrears from the 31st day of
March, 2008 till date of final
payment. I will dismiss all of
Defendant's Counterclaim. Costs
assessed at GH¢2, 500.00 against
Defendant. COUNSEL GEORGE HEWARD
MILLS - PLAINTIFF THADDEUS SORY
– DEFENDANT+ |
