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I
JUDGMENT:
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GH¢4,000 were withdrawn from the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withdrawn constitutes a breach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 the
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 a 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
II.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 Defendant’s
request to make further
deductions for the subsequent
months. More importantly the
said clause II.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
last 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. Cas. 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 is 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.W.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 plus 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.
(SGD)
BARBARA
ACKAH-YENSU (J)
JUSTICE OF
THE HIGH COURT
COUNSEL
GEORGE HEWARD MILLS
- PLAINTIFF
THADDEUS SORY
- DEFENDANT
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