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JUDGMENT:
Plaintiff has filed a Writ
against the Defendants for the
following reliefs:
“a. An order for the recovery of
an amount of One Million Three
Hundred and Nintey Seven
Thousand Five Hundred Ghana
Cedis (GH¢1,397,500.00).
b. Interest on the said amount
till date of final payment.
c. An order for the recovery of
an amount of Two Hundred
Thousand Ghana Cedis
(GH¢200,000.00).
d. Interest of the said sum
till date of final payment.
e. Cost of instituting this
action including Solicitors
cost.
f. Such further order(s) as
this Honourable Court may deem
fit”.
The Plaintiff’s case is that
upon the submission of an
application for credit
facilities by 1st
Defendant it granted two term
loan facilities to the
Defendants on 12th
July 2006 as follows:
a.
A
term loan of One Million Ghana
Cedis (GH¢1,000,000.00) to
support the importation of
medicine.
b.
A
short term loan facility of One
Hundred and fifty Thousand
United States Dollars
(US$150,000.00) to refinance
outstanding letters of credit.
c.
An
overdraft facility of Two
hundred Thousand Ghana Cedis
(GH¢200,000.00) to augment the
working capital.
On 21st June, 2007
the Plaintiff granted to the 1st
Defendant a medium term loan
facility of One Million three
Hundred and Ninety Seven
Thousand Five Hundred Ghana
Cedis (GH¢1,397,500.00) solely
to restructure the 1st
Defendant’s existing term loan
facilities granted to it on the
12th of July, 2006.
The loan was to be repaid in
sixty (60) equal monthly
principal instalments of Twenty
Three Thousand Two Hundred and
Ninety-One Ghana Cedis,
Sixty-Six Pesewas
(GH¢23,291.66), each payable on
the last business day of each
month commencing the 31st
of October, 2007. Plaintiff
states further that the 1st
Defendant represented by the 2nd
Defendant and 3rd
Defendant duly accepted the
terms and conditions in the term
loan letter dated 21st
June 2007, and duly executed
same.
The 1st Defendant
provided the following as
security for the term loan:
“a. First ranking legal
mortgage over Plot Number 44,
Block N,
Ahodwo, Kumasi with an open
market value of Nine Hundred and
Ninety Five thousand United
States Dollars (US$995,000) and
a forced sale of Seven Hundred
and Ninety Six Thousand United
States Dollars (US$796,000) as
at June 2006.
b. First ranking legal
mortgage over Plot Number 8,
Block W,
West Nhyiaso with an open market
value of Three Hundred and Sixty
thousand United States Dollars
(US$360,000) and a forced sale
value of Two Hundred and Eighty
Thousand United Stated Dollars
(US$280,000) as at July 2006.
c. First ranking mortgage over
Property Number 3, Jasmine
Close, East Legon, Accra with an
open market value of Seven
Hundred and Twenty Thousand
United States Dollars and a
forced sale value of Five
Hundred and Seventy Six Thousand
United States Dollars
(US$576,000) as at July 2006.
d. Unlimited personal
guarantee by the 2nd
Defendant supported by his
statement of means”.
However the 1st
Defendant defaulted in repayment
of the instalments. By the
terms and conditions of the
facility if the 1st
Defendant Company fails to make
repayment on any amount due, the
full amount of the loan together
with interest shall immediately
be made payable to the Plaintiff
Bank.
Plaintiff claims that 1st
Defendant has persistently
refused, failed and/or neglected
to repay the principal and
interest as agreed upon despite
several demands to do so. The
2nd Defendant has
also failed and/or refused to
make good the default of the 1st
Defendant in accordance with the
Personal Guarantee he executed,
in spite of demands made on him
to do so. As at 30th
June, 2009 Defendants were
indebted to the Plaintiff in the
sum of Two Million One Hundred
Thousand, Five Hundred and Forty
Eight Ghana Cedis Eighty Six
Pesewas (GH¢2,100,548.86) on the
medium term loan facility and
Four Hundred and Seventy Nine
Thousand One Hundred and Seventy
Seven Ghana Cedis Seventy Six
Pesewas (GH¢479,177.76) on the
overdraft facility.
The Defendants on the other
hand, contend that the 1st
Defendant started the
construction of a
US$12,000,000.00 factory in
Kumasi. After having expended
US$3,000,000.00 on the said
construction, the Plaintiff
approached it and specifically
undertook to provide funds for
its completion. The Plaintiff
was made aware at the time it
agreed to undertake the
completion of the factory that a
minimum sum of US$9,000,000.00
would be required for the
purpose. The Plaintiff as a
result of this paid all sums
owed by the 1st
Defendant to its previous
financiers directly and thus
assumed the sole responsibility
of providing funds for the
completion of the factory.
When the original agreement
prepared unilaterally by the
Plaintiff was presented to the 1st
Defendant for its signature, the
latter realized that the object
of the finance being provided
had been misstated in all
material particulars. The
Plaintiff undertook to make the
relevant corrections for
re-signing and at all times
material gave the impression
that the document would be
redone to reflect the state of
affairs but failed to do so.
The Plaintiff rather than
ensuring that adequate funds are
made available for the
completion of the factory made
baseless demands for recovery of
monies given in partial
satisfaction of its
obligations. It is the
Defendants’ case therefore, that
it is rather the Plaintiff which
is in breach of its undertaking
to provide sufficient funds for
the completion of the said
factory and therefore is not
entitled to the reliefs it is
seeking.
Defendants have counterclaimed
for the following:
“a) An order for the plaintiff
to specifically perform its
agreement and undertaking to
provide sufficient funds for the
completion of the 1st
defendant’s factory at Ayigya,
Kumasi.
OR IN THE ALTERNATIVE
b) General special punitive and
the exemplary damages for the
plaintiff’s breach of contract.
c) SUCH FURTHER ORDER(S) as the
Honourable Court may deem fit.”
The issues set down for
determination are as follows:
1.
Whether or not the Plaintiff
undertook to provide funds
sufficient for the completion of
the Defendant factory in Kumasi
2.
Whether or not the Plaintiff is
in breach of its undertaking
3.
Whether or not the Defendants
are entitled to their
counterclaim
4.
Whether or not the Defendant has
defaulted in respect of the loan
agreement.
5.
Whether or not the Plaintiff is
entitled to its claim
In my opinion however the main
issue for determination is the
first one; a determination of
the first issue will resolve the
other issues. But before I
discuss this issue, I shall look
at two legal issues raised by
Counsel for Defendants in his
written address. The first one
is the “PROPRIETY OF ISSUING
A WRIT IN THE NAME OF A FIRM”.
As rightly stated by
Counsel, Order 4 rule 1 of the
High Court (Civil Procedure)
Rules, 2004 (C.I.47) provides
that any person may begin and
carry on proceedings in person
or by a lawyer. And indeed, the
definition of a lawyer, per
Order 82, indicates that
representation has to be a
person and not a legal firm. In
my opinion however, Counsel is
being pedantic. On the Writ of
Summons, the Solicitor for the
Plaintiff is stated as “AB &
David (Richard Amofa), albeit
the writ is said to be issued by
AB & David Law.
It is my further opinion that
this issue, if it was to be
raised at all, ought to have
been raised at the beginning of
the trial, and that the issue
has now become moribund. This
is because Richard Amofa
appeared in person throughout
the trial; it is not the legal
firm that was coming to Court.
In any case the new High Court
(Civil Procedure) Rules (C.I.47)
is meant to move away from the
era of unnecessary
technicalities that had hitherto
beleaguered the legal practice,
hence the insertion of Order 81
rule 1.
The second legal issue raised by
Counsel for Defendants is the “PROPRIETY
OF SUING THE 2ND AND
THE 3RD DEFENDANTS”.
The Plaintiff has sued Kojach
Limited (1st
Defendant) together with its
Managing Director, Kojo
Akyeampong (2nd
Defendant) and its Deputy
Managing Director, Rita Huberta
Akyeampong (3rd
Defendant). 2nd and 3rd
Defendants are described as the
Managing Director and a
Director, and the Deputy
Managing and a Director,
respectively of 1st
Defendant Company in the
Statement of Claim. The 2nd
and 3rd Defendants
are also said to have “duly
accepted the terms and
conditions in the term loan
letter dated 21st
June, 2007 and duly executed
same”. The 2nd
Defendant is again referred to
in the pleadings as having
provided unlimited personal
guarantee for the facility
granted to 1st
Defendant.
However, from the evidence
adduced, both 2nd and
3rd Defendants
provided Personal Guarantees
(Exhibits “C” and “D”) for the
facilities. Furthermore, the
evidence before the Court is
that the three (3) landed
properties (Plot No.44 Block “N”
in the Ahodwo Layout of Kumasi;
piece of land situate and lying
at East Legon Bawalashie –
Accra; and Plot No.8, Block “W”
in the West Nhyiaso Extension
Layout, Kumasi) given as
security for the facilities are
properties owned jointly by the
2nd and 3rd
Defendants; see Exhibits “P”,
“Q” and “S” respectively. The
evidence before the Court
however is that 1st
Defendant subsequently informed
the Plaintiff that the property
situate at Jasmine Close, East
Legon, Accra was not available.
As to whether or not the 2nd
and 3rd Defendants
can be held liable for the claim
for the recovery of the amounts
of GH¢1,397,500.00 and
GH¢200,000.00 together with
interest, the position of the
law is very clear. Section 139
of the Companies Act, 1963 (Act
179) provides the three (3)
categories of people whose acts
shall be treated as acts of a
company as; Shareholders, Board
of Directors and the Managing
Director. These are said to be
the alter ego of the company;
they personify the company.
This position was succinctly
stated in the case of
Lennards Carrying Company
Limited v. Asiatic Petroleum
Company Limited [1915] AC 705,
when Viscount Haldane L.C.
said as follows:
“.....a corporation is an
abstraction. It has no mind of
its own any more than it has a
body of its own; its active and
directing will must consequently
be sought in the person of
somebody who for some purposes
may be called an agent, but who
is really the directing mind and
will of the corporation, the
very ego and
centre of the personality of the
corporation. That person may be
under the direction of the
shareholders in general meeting;
that person may be the board of
directors itself, or it may be
and in some companies it is so,
that that person has an
authority co-ordinate with the
board of directors given to him
under the articles of
association, and is appointed by
the general meeting of the
company, and can only be removed
by the general meeting of the
company”.
It may therefore appear that the
2nd and 3rd
Defendants are not necessary as
parties for the determination of
the real dispute between the
Plaintiff and the 1st
Defendant herein because they
cannot be personally held
responsible for the 1st
Defendant’s acts. There is also
no indication that the Plaintiff
is contending that the corporate
veil be pierced as illustrated
in the celebrated case of
Salomon v. Salomon & Co [1897]
A.C. 22, HL. The Supreme
Court of Ghana in Morkor v
Kuma (East Coast Fisheries Case)
[1998-99] SCGLR 620 stated
per curiam that:
“….counsel for the
respondent, in his statement of
case, stated that the appellant
was sued so as to ensure that
the respondent collect his
money. We do not believe this
constitutes sufficient
justification for lifting the
veil, otherwise, every time a
company defaults in the
settlement of debts, any person
who combines the roles of chief
executive, shareholder and
director would, ipso facto,
become personally liable. This
would defeat the very essence of
business incorporation. In the
absence of cogent evidence, one
cannot see how or why the
positions held by the appellant
or her acts of negotiating and
co-signing the agreement would
constitute sufficient
justification for lifting the
veil.”
However, as stated above, both 2nd
and 3rd Defendants,
“irrevocably and unconditionally
guarantee (d) payment of and
agree (d) to pay and satisfy the
Bank on written demand all sums
of money which now are or at any
time or times hereafter may
become due or owing or may be
accruing or becoming due to the
Bank by the Obliger...” The 2nd
and 3rd Defendants
are therefore parties by virtue
of the fact that they guaranteed
the loan facilities.
The evidence before the Court is
also that the 2nd and
3rd Defendants gave
their properties as security for
the loan facilities granted to
the 1st Defendant by
the Plaintiff. Furthermore, in
the Amended Statement of Claim,
the Plaintiff pleaded that it
was claiming in the alternative,
the following:
a.
A
judicial sale of the following
mortgaged properties:
i.
First
ranking legal mortgage over Plot
Number 44, Block N, Ahodwo,
Kumasi with an open market value
of nine hundred and ninety five
thousand United States Dollars
(US$95,000) and a forced sale
value of seven hundred and
ninety six thousand United
States Dollars (US$796,000) as
at June 2006.
ii. First ranking legal
mortgage over Plot Number 8,
Block W, West Nhyiaso with an
open market value of three
hundred and sixty thousand
United States Dollars as at July
2006.”
And even though the Plaintiff
did not amend its Writ to
reflect these reliefs, it is
trite learning that where there
is an amendment of the reliefs
in the Amended Statement of
Claim, it would automatically
amend the reliefs on the Writ.
In any case, even if the reliefs
being sought had not been
amended, by the fact that
evidence had been allowed in,
the Court could make an order
with regard to the properties in
question. The 2nd and
3rd Defendants
therefore had to come in to
protect their properties. They
were therefore necessary parties
to protect their properties.
I will now discuss the first
issue set down for the trial
vis-à-vis the evidence placed
before the Court.
Whether or not the Plaintiff
undertook to provide funds
sufficient for the completion of
the Defendant factory in
Kumasi.
The Plaintiff’s case as
presented by the Plaintiff’s
representative (Daniel Kwesi
Sarpong, a Senior Relationship
Manager) in his evidence, is
that Plaintiff agreed in 2006 to
liquidate the 1st
Defendants indebtedness to two
(2) Banks, Barclays Bank and
Trust Bank and give 1st
Defendant a Term Loan to enable
the Company revamp its
business. Per the facility
letter dated July 12, 2006
(Exhibit “A”) the 1st
Defendant was granted a term
loan of the equivalent of
GH¢1,000,000.00 (Ten billion
Cedis) which was to be used to
refinance the borrower’s
indebtedness at Barclays Bank
and Trust Bank. Out of the said
facility of GH¢1,000,000.00 the
sum of GH¢100,000 was to be used
towards the construction of the
borrower’s new factory. The
loan was to be repaid in full by
31st July 2010 in
forty-eight (48) equal
instalments. Plaintiff also
granted 1st
Defendants working capital
facility which was a deferred
Letters of Credit of US$150,000,
and an overdraft facility of
GH¢200,000; see Exhibit “B”.
With regard to the Term Loan, 1st
Defendant failed to repay the
loan as agreed and made a
request to Plaintiff for the
facility to be restructured; see
Exhibit “E”. The request was
granted and the facility
restructured per Exhibit “F”.
Mr. Sarpong explained to the
Court that Plaintiff put all the
balances i.e. term loan,
overdraft and the drawn part of
the Letters of Credit, together
into one loan facility with a
moratorium period. Again the 1st
Defendant defaulted in payment
and the facility was again
restructured. Yet again, the 1st
Defendant defaulted and the
facility was restructured for a
third time.
2nd Defendant however
contended in his evidence that
the completion of the factory
was central to the transaction
between the parties herein which
agreement Plaintiff breached,
and this resulted in the 1st
Defendant’s default.
Furthermore, the restructuring
that was done was a unilateral
proposition made by Plaintiff,
hence they refused to sign the
loan documents; Exhibit “5”
series.
It is trite law that for every
case there is a burden of proof
to be discharged and the party
who bears the burden will be
determined by the nature and
circumstances of the case; see
sections 10 – 17 of our
Evidence Decree 1976 (NRCD 323).
There is no paucity of case
law interpreting these
provisions. In Ababio v
Akwasi 111 [1994-95] Ghana Bar
Report, Part 11, 74 the
court stated that a party whose
pleadings raise an issue
essential to the success of the
case assumes the burden of
proving such issue. Reference is
also made to the cases of
Takoradi Flour Mills v Samir
Faris [2005-06] SCGLR 882
and Re Ashalley Botwe Lands:
Adjetey Agbosu & Ors v Kotey &
Ors [2003-04] SCGLR 420
which further elucidate the
burden of proof as statutorily
provided.
The well-known rule of evidence
is that although proof in a
civil case rested on the
plaintiff, that burden was
discharged once the plaintiff
had introduced sufficient
evidence of the probability of
his case. It would then rest on
the defendant to rebut the
plaintiff’s evidence. As stated
by Justice Mensa-Boison JA, in
the case of Acquaye v Awotwi
[1982-83] 2 GLR 110, the
testimony of a plaintiff is
presumptive evidence which is
rebuttable.
But before I analyse the
evidence placed before the
Court, I shall again refer to
another submission made by
Counsel for the Defendants in
his written address. Counsel
contends that the evidence
adduced on behalf of the
Plaintiff was a departure from
its pleadings that it never gave
an undertaking to provide funds
for the purpose of completing
the Defendant’s factory. I have
looked at the Plaintiff’s
pleadings and the evidence led,
and I fail to see the
contradiction Counsel is talking
about. In my opinion the
evidence of the Plaintiff’s
representative, Mr Sarpong, was
in consonance with Plaintiff’s
pleadings. I believe that as I
proceed with this judgment, it
will become more apparent why I
have taken this view.
The Plaintiff adduced cogent
evidence to support its claim
that 1st Defendant
received facilities from the
Bank, and that 1st
Defendant has defaulted in
repaying. The evidence of Mr.
Sarpong was that the agreement
between the Plaintiff and 1st
Defendant for the various
facilities were all reduced into
writing. The first facility of
GH¢1,000,000 was covered by
Exhibit “A”, and the
restructured facility of
GH¢1,397,500 by Exhbit “F”.
The agreements executed by the
parties however do not refer to
any such undertaking. Exhibit
“A” simply states under
“Purpose” that ¢1,000,000
(GH¢100,000) will be used
towards the construction of the
1st Defendant’s new
factory. The Defendants however
have asserted that they
negotiated for the facilities
with Plaintiff on the
unequivocal understanding that
Plaintiff would solely finance
the completion of construction
of their new factory. The
Defendants therefore contend
that they cannot be held liable
to pay the debt because
Plaintiff breached its
undertaking to complete the
construction of the 1st
Defendant’s factory.
It is trite law that generally
where parties have formally
recorded the whole of their
agreement in writing, the
written document, prima facie,
is taken to be the whole of the
contract. The terms of such
written contract are said to be
limited to the contents of the
written document and nothing
more. The general position of
the law is that where an
agreement is wholly reduced into
writing, extrinsic evidence will
not be admitted to add to, vary
or contradict the terms of the
written agreement.
This position was enunciated in
the case of Kaguin Enterprise
(Ghana) Ltd v. Umarco (Ghana)
Ltd [2000] SCGLR 530
where Ampiah JSC referred to
Chitty on ‘Contracts’, 27th
Edition Vol. 1 “General
Principles” at page 600
paragraphs 12-081, as
follows:
“ ‘It is often said to be a
rule of law that if there be a
contract which has been reduced
into writing, verbal evidence is
not allowed to be given ……., so
as to add to or subtract from,
or in any manner to vary or
qualify the written contract’.
Indeed in 1897, Lord Morris
accepted that “parol testimony
cannot be received to
contradict, vary, add to or
subtract from terms of a written
contract or the terms in which
the parties have deliberately
agreed to record any part of
their contract”. This rule is
usually known as the ‘parol
evidence rule’.”
In paragraph 12-082 of ‘Chitty
on Contracts’ (referred to
supra) the Authors continued –
“However, the parol evidence
rule is and has long been
subject to a number of
exceptions. In particular,
since the nineteenth century,
the courts have been prepared to
admit extrinsic evidence of
terms, additional to those
contained in the written
document if it is shown that the
document was not intended to
express the entire agreement
between the parties”
This principle is conterminous
with the “General Terms and
Conditions” in Exhibits “A” “B”
and “F” captioned Whole
Agreement, Variation of Terms,
No Indulgence which states
that:
“The agreement created upon
acceptance of the letter by the
Borrower shall constitute the
whole agreement between the Bank
and the Borrower relating to the
subject matter of the Letter.
No addition to, variation, or
amendment, or consensual
cancellation of any of the terms
contained in the letter shall be
of any force or effect unless it
is recorded in writing and is
signed on behalf of the Bank by
one of its authorized officials
and accepted by the Borrower.
No indulgence shown or extension
of time given by the Bank shall
operate as an estoppel against
the Bank or waiver of any of the
Bank’s right unless recorded in
writing and signed by the Bank.
The Bank shall not be bound by
any express or implied term,
representation, warranty,
promise or the like not recorded
herein, whether it induced the
conclusion of ay agreement
and/or whether it was negligent
or not.”
On this point alone, I could
make a finding that no evidence
ought to be allowed to be led to
contradict the terms of the said
exhibits; i.e. the agreement
between the parties, but I shall
resist that temptation. I shall
discuss further the position of
the law with regard to accepting
extrinsic evidence. Lord
Hoffmann in his speech in
Investors Compensation Scheme v
West Bromwich Building Society
[1998] 1 W.L.R. 896 stated
thus:
“I do not think that the
fundamental change which has
overtaken this branch of the
law, particularly as a result of
the speeches of Lord Wilberforce
in Prenn v Simmonds [1971] 1
W.L.R. 1381 at 1384-1386 and
Reardon Smith Line Ltd v
Hansen-Tangen, Hansen-Tangen v
Sanko Steamship Co [1976] 1
W.L.R. 986 is always
sufficiently appreciated. The
result has been, subject to one
important exception, to
assimilate the way in which such
documents are interpreted by
judges to the common sense
principles by which any serious
utterance would be interpreted
in ordinary life. Almost all the
old intellectual baggage of
“legal” interpretation has been
discarded.”
Lord Hoffmann summarised the
principles into five (5). The
third of Lord Hoffmann’s five
principles was that:
“The law excludes from the
admissible background the
previous negotiations of the
parties and their declarations
of subjective intent. They are
admissible only in an action for
rectification. The law makes
this distinction for reasons of
practical policy and, in this
respect only, legal
interpretation differs from the
way we would interpret
utterances in ordinary life.
The boundaries of this exception
are in some respects unclear”.
One reason for the exclusion was
explained by Lord Wilberforce in
Prenn v. Summonds (supra)
as follows:
“The reason for not admitting
evidence of these exchanges is
not a technical one or even
mainly of convenience.. ..It is
simply that such evidence is
unhelpful. By the nature of
things, where negotiations are
difficult, the parties’
positions, with each passing
letter are changing and until
the final agreement, though
converging, still different. It
is only the final document which
records a consensus. If the
previous documents use different
expressions, how does
construction of those
expressions, itself a doubtful
process, help on the
construction of the contractual
words? If the same expressions
are used, nothing is gained by
looking back; indeed something
may be lost since the relevant
surrounding circumstances may be
different. And at this stage
there is no consensus of the
parties to appeal to.”
Other reasons that have been
advanced to justify the rule are
that it reduces uncertainty and
unpredictability in the
resolution of disputes; that it
prevents unfairness to third
parties who may be unaware of
the course of negotiations; and
that the admission of evidence
about the course of negotiations
would subvert the objective
approach to the interpretation
of contracts that is the bedrock
of the English approach.
In the Rio Assu (No.2) [1999]
1 Lloyd’s Rep. 115 at 124, CA,
Walter L.J said:
“The negotiations of a contract
can often be a compromise. It
is dangerous to make the
assumption that one party
intended to have something
supplied or provided for by the
contract, or that the other
party intended to have something
else supplied or provided by the
contract. Contracts are
negotiated and ultimately each
may think that he has what he
wishes, but it is for the Court
to interpret the language of the
contract. There is no doubt
about the correctness of the
principle.”
Despite this ringing endorsement
the principle has not won
universal acceptance; and it is
not a principle that is
recognised by some other
jurisdiction. In Investors
Compensation Scheme v. West
Bromwich Building Society
(supra), Lord Hoffmann said that
the boundaries of this principle
are unclear; and in BCCI v.
Ali [2002] A.C. 251 Lord
Nicholls questioned whether the
policy underlying the principle
still holds good today. The
most sustained attack on the
principle in a common law
jurisdiction is that of Thomas J.
In Yoshimoto v Canterbury
Gold International Ltd. [2001] 1
N.Z.L.R. 523. His Honour
said:
“I would also reiterate that,
for the purposes of this case, I
am not seeking to entirely
abrogate the rule that evidence
of prior contractual
negotiations is not receivable
to ascertain the meaning of a
contract. What I am suggesting
is that the rule should not be
treated as an absolute and rigid
rule to the point where the
court is called upon to impose
an interpretation which does not
accord with the parties’ actual
intention. The objective basis
would remain. But that basis
would be enhanced by approaching
the task of determining what the
contract would convey to a
reasonable person without
artificially restricting the
background knowledge available
to the parties at the time they
completed the contract. Subject
to the caution which I will
shortly stress, that background
knowledge should be able to
include reference to matters
that might otherwise come under
the general heading of
negotiations where such a
reference would undoubtedly
assist to ascertain the true
meaning of the parties’
contract. Thus, in this case,
the clause in the draft
agreement and the deleted
recital E would assist the
reasonable person reading the
words of the contract to
determine what the parties
intended cl6.3 to mean, as
distinct from their subjective
intentions divorced from the
wording used.
Nor is it remotely suggested
that such evidence be received
without caution. Obviously, the
evidence must be reliable. No
doubt documentary evidence will
tend to be more reliable than
oral evidence. The reason
usually given to justify the
exclusion of prior negotiations
is that the parties’ position
will change with each passing
communication until the final
agreement which records a
consensus. That reason is
essentially a generality.
Whether or not this so and, if
so, the extent to which it is
so, will depend on the
particular circumstances of each
case. Those particular
circumstances can be taken into
account in determining the
weight, if any, to be given to
the evidence of the prior
negotiations.
In so far as what I have urged
is not a total rejection of the
rule excluding evidence of prior
negotiations it is unnecessary
to address the perceived policy
reasons for that rule. Relaxing
the absolute and rigid nature of
the rule can be done without
corroding the underlying
policy.”
On appeal to the Privy Council
[2004] N.Z.L.R 1 their
Lordships said that this was not
the occasion to re-examine the
scope of the principle, as the
evidence of earlier drafts of
the contract was, as Lord
Wilberforce had predicted,
unhelpful
To enable the Court determine
all the issues in dispute
between the parties herein once
and for all, I shall follow the
school of thought which allows
for relaxing the otherwise
absolute and rigid nature of the
parole evidence rule “without
corroding the underlying
policy”. So, what evidence did
the Defendants, who asserted,
lead to prove their case?
The 2nd Defendant in
his evidence-in-chief alleged
that the Plaintiff made an oral
promise before and after the
execution of Exhibits “A” and
“B” (facility agreement) to
provide sufficient funds to
complete its factory, but failed
to incorporate those terms in
Exhibits “A” and “B”.
Nonetheless it is clear from
the evidence that the Defendants
upon being offered Exhibits “A”
and “B” did not only accept by
signing and initialling each
page but convened a Board
meeting within two days after
the date on Exhibits “A” and “B”
and passed Exhibit “X” (a board
resolution) to accept and
approve the offer without any
qualms or protestation.
Subsequently, the 2nd
and 3rd Defendants
without any protestation jointly
and severally guaranteed the
repayment of the total
indebtedness upon demand by the
Plaintiff. This made the
contractual terms of Exhibit “A”
and “B” binding on both the
Plaintiff and Defendants in the
absence of fraud or
misrepresentation.
In the case of Wilson v.
Brobbey (1974) 1 GLR 250 at 253
it was held that;
“Whenever a man of
full age and understanding, who
can read and write, signs a
legal document which is put
before him for signature – by
which I mean a document which,
it is apparent on the face of
it, is intended to have legal
consequences – then, if he does
not take the trouble to read it
but signs it as it is, relying
on the word of another as to its
character or contents or effect,
he cannot be heard to say that
it is not his document.”
This is what 2nd
Defendant said under
cross-examination:
“Q: These are the offer
letters that were given to you
and these are the offer letters
that you are saying you
complained about?
A: Yes
Q: When these offer letters
were brought to you as you are
saying did you point out those
mistakes to the officer who
brought them?
A: Yes my Lord.
Q: You pointed out those
mistakes and you signed the
offer letters?
A: On the basis that a
third one which was the facility
letter was coming.
Q: You noticed there were
mistakes in the offer letter yet
you signed them?
A: Yes my Lord I signed and
they also signed despite the
mistakes.
Furthermore on the 8th
of September, 2006 two months
after the execution of Exhibits
“A” and “B” the 1st
Defendant again wrote Exhibit
“V” to the Plaintiff by
recapturing the terms and
purpose as agreed between the
parties in Exhibits “A” and “B”
and further applied for an
additional Five Billion cedis
(¢5,000,000,000.00), without
raising any issue regarding the
Plaintiff’s failure to build its
factory or any issue regarding
the correctness or otherwise of
the terms and purpose of
Exhibits “A” and “B”. And barely
a fortnight after the execution
of Exhibits “A” and “B”, 1st
Defendant wrote Exhibit “W” to
the Plaintiff, recapturing the
contents of Exhibits “A” and “B”
without any complaint whatsoever
regarding the facility
agreement, and even requested
for additional capital from the
Plaintiff.
1st Defendant again
wrote a letter (Exhibit “E”) to
the Plaintiff requesting for the
restructuring of its debt owed
under Exhibits “A” and “B” after
it had defaulted in the
repayment schedule contained
therein. In Exhibit “E” the 1st
Defendant never attributed its
failure to comply with the
repayment schedule to the
Plaintiff’s alleged promise to
solely and unequivocally
construct its factory but to
major operational difficulties
and further applied to the
Plaintiff to not only
restructure the facility but to
grant it a ninety (90) day
moratorium on the repayment of
the principal and interest.
This application for
restructuring was granted by the
Plaintiff which culminated in
the execution of Exhibit “F” (a
new term loan agreement) for the
purpose of restructuring the 1st
Defendant’s existing facilities
with the Plaintiff which it had
defaulted to repay.
From the evidence, all of the
above took place before the date
(i.e February 3, 2009) stated on
the loan documents which were
tendered in evidence as Exhibit
“5” series, and which 1st
Defendant refused to sign. 2nd
Defendant’s evidence that the
third (3rd) offer
letter promised by the Plaintiff
did not arrive until ten (10)
months later is also quite
confusing in view of the
evidence adduced.
Finally, the evidence placed
before the Court is that it is
HFC Bank that has the factory in
question as security for a
facility granted by H.F.C. Bank
to the 1st Defendant.
According to the Plaintiff’s
representative, the agreement
was that the 1st
Defendant was to arrange with
HFC Bank so that the mortgage on
the factory is shared pari
passu but the 1st
Defendant did not pursue the
matter with HFC Bank. This is
what the Plaintiff’s
representative said under
cross-examination:
“Q: You know that the
provision of fund to complete
the Ayigya factory of the 1st
Defendant was central to your
relation with them?
A: It is not true
Q: I am putting it to you
that the entire discussion
initially which ended with both
agreements related to the
completion of the Ayigya
factory.
A:
No it is not true and the
Ayigya factory you have
mentioned HFC in this whole
scheme if we were going to fund
the project of that magnitude
then we would as well say that
give us the documents on this
property as our security because
we knew HFC was funding the
project we never took that as
security we went ahead to take
other properties of the customer
as security for what we were
providing.”
He testified further as follows:
“ Q. So for the avoidance of
doubt you will agree with me
that the question of completion
of the factory was central to
your transaction?
A.
No
that wasn’t central to our
agreement with the customer. As
I explained yesterday there was
a principal financier to that
project and that was HFC Bank
and indeed they are taking
charge over the factory property
and therefore whatever we gave
to Kojo as our letters states
and as his own letter stated was
to help him complete his
factory.”
The evidence of the Plaintiff’s
representative is corroborated
by Exhibits “Z” and “Z1” (the
Statement of Claim by HFC Bank
in its case against the 1st
& 2nd Defendants
herein, and the Statement of
Defence respectively).
Paragraph 6 of Exhibit “Z”
states that the 1st
Defendant’s factory building was
mortgaged to secure a loan
facility from HFC Bank.
Paragraphs 6, 7, 8, and 9 of
Exhibit “Z1” which are 1st
Defendant’s own averments also
lend credence to Plaintiff’s
evidence as credible and rather
contradicts 1st
Defendant’s assertion that
Plaintiff herein undertook to
solely and unequivocally finance
the construction of the same
factory.
In my opinion, this piece of
evidence shows that even if
Plaintiff was to finance the
construction of the 1st
Defendant’s factory, it was not
the case that the Plaintiff was
solely responsible to do so. It
is for this reason that I
earlier opined that Plaintiff’s
evidence did not contradict its
pleadings. Plaintiff’s case has
always been that the purpose of
the loans was not to solely
finance the completion of
construction of the 1st
Defendant’s factory, but rather
to pay off 1st
Defendant’s debt in other banks.
Under “Purpose” in Exhibit “A”
therefore, the chunk of the
facility of GH¢1,000,000 was to
pay off 1st
Defendant’s existing
indebtedness to other banks.
The Plaintiff granted the 1st
Defendant a facility of just
GH¢100,000 towards the
construction of the factory
which Plaintiff accepted without
protest. HFC Bank had also
undertaken to do same and indeed
had taken the factory property
as security for the facility it
granted to 1st
Defendant.
The evidence before the Court is
that 1st Defendant
required US$9.000, 000 to
complete the construction of the
new factory. Plaintiff granted
it only GH¢100,000. This was
wholly inadequate, and yet there
is no proof before the Court
that Defendants protested to
Plaintiff. The question is why?
Is it because Plaintiff had
never undertaken to solely and
unequivocally finance the
completion of construction of
the factory?
I will find that 1st
Defendant’s assertion that
Plaintiff had undertaken to
solely finance the completion of
the construction of the 1st
Defendant’s new factory, and
that this undertaking was
central to the agreement between
the parties, has not been
proved.
I will also find that 1st
Defendant indeed has defaulted
in respect of the loan
agreement. 2nd
Defendant did not lead any
cogent evidence to prove
otherwise. His evidence was
rather that it was through no
fault of theirs that 1st
Defendant defaulted. And on this
kind of position, Acquah JSC had
this to say in Barclays Bank
(Ghana) Ltd v Sakari [1997-98] 1
GLR 746 at 753:
“When a bank lends money to its
customers, the obligation of the
customer is to repay the loan.
If the loan is sought for, let’s
say, a business venture, and the
business flops resulting in
massive financial loss to the
customer, this misfortune,
though may be due to no fault of
this customer, does not change
the nature of the obligation of
the customer to repay the loan
he had contracted for. He will
still be obliged to fulfil his
obligation. Thus, the obligation
of a borrower in a loan contract
as opposed to other types of
contracts is to repay the loan
and not the performance of the
purpose for which the loan was
sought.”
As I have indicated, 2nd
Defendant did not lead credible
evidence to convince the Court
they had made any payments to
the Plaintiff. This is what he
said:
Q: Did you make any
payments within 2006 to 2007
when the facility was
restructured?.
A: Like he just said the
repayments were suppose to start
at the end of July, the facility
letter was dated 12th
of July supposedly after being
signed all over it may reach us
around the end of July so I am
surprise that he is saying that
we should make repayment for a
facility that has not even hit
our desk. Number two, my Lord I
can lead the court to understand
that the facilities that were in
the offer letter some of them
became even available to us as
at January 2007 because
negotiations were still going on
with the other banks as to the
take over which the banks did
not want to, so some of the
facilities like the overdraft
and the re-financing facility of
150,000 (One Hundred and Fifty
thousand) became available to us
in January of the following
year, almost six, seven eight
months after the offer letter.
So I did not know how he would
want even repayment to be
commenced when analysation of
the facility had not been done.
Q: Did you make any
payments within that period,
2006 and 2007.
A: Some payments were made
within that period but like I
said the finalization of the
offer was not even concretized
within six months.
Q: So you made some
payments?
A: Yes we made some
payments because the account was
funding (running).
Q: What about 2007 when the
restructured facilities did you
make payments to that effect?
A: The restructuring like I
said is a request by them to be
in the good books of Bank of
Ghana because they always say
Bank of Ghana auditors are
coming so we need a letter to
show that the client is
committed to the facility they
provide us with a letter, they
come verbally to request for
them but we document written
ones and give it to them with
regards to making their request
so normally more often than not
all our understandings and
agreements whilst we do such
letters do not come to..
By court:
Mr. Acheampong, the question was
did you make any payment in
2007?
A: 2007 my Lord, till I
look through our document I may
not be able to recollect that.
Per Exhibit (“F”) dated June 21,
2007, 1st Defendant
was granted a medium term loan
facility of ¢13, 975,000,000 (GH¢1,397,500)
which was a consolidation of the
existing facilities granted to
the 1st Defendant,
this was the evidence led by
Plaintiff’s representative. This
facility was to attract interest
at the rate of 2% per annum
above the Bank’s Base Rate
prevailing from time to time.
Per the Demand Letters dated
June 16, 2008 (Exhibit “G”);
February 26, 2009 (Exhibit “H”);
and May, 20 2009 (Exhibit “L”)
the loan was to be repaid by 60
monthly instalments commencing
October 31, 2007. From the
Demand Letters dated May 20,
2009 the amount of GH¢1,397,500
was a consolidation of the Term
Loan of GH¢1,000,000, Deferred
Letters of Credit/Short Term
Loan of US$150,000, and
Overdraft of GH¢200,000. Demand
notices (Exhibits “J” and “K”,
were also sent to the 2nd
and 3rd Defendants)
giving them notice of the
default. I therefore do not see
the basis for the claim for the
additional sum of GH¢200,000 and
Plaintiff has not adduced any
evidence to support this claim.
As stated above, Defendants also
did not adduce any cogent
evidence in rebuttal of the
Plaintiff’s evidence.
I will find that upon the
execution of Exhibit “F” by the
Defendants, the 1st
Defendant is under an obligation
to repay the said loan facility
in accordance with the
agreement.
Plaintiff is also claiming
interest on the said amount. The
basis of awarding interest on
amounts due and owing was
succinctly stated by the eminent
Lord Denning in the case of
Harbutt’s Plasticine v Wayne
Tank Co. Ltd [1970] 1 All ER 225
as follows:
“…it seems to me that the basis
for an award of interest is that
defendant has kept the plaintiff
out of his money; and the
defendant has had use of it
himself. So he ought to
compensate the plaintiff
accordingly.”
Also, the Court (Award of
Interest and Post Judgement
Interest) Rules, 2005 (C.I. 52)
states as follows:
“ Rule 1 – Order for payment of
interest.
1.
If the
court in a civil cause or matter
decides to make an order for the
payment of interest on a sum of
money due to a party in the
action, that interest shall be
calculated
a.
at the
bank rate prevailing at the time
the order is made, and
b.
at
simple interest
but where an enactment,
instrument or agreement between
the parties specifies a rate of
interest which is to be
calculated in a particular
manner the court shall award
that rate of interest calculated
in that manner.”
Rule 2 states that each judgment
debt shall bear interest at the
statutory interest rate from the
date of delivery of the judgment
up to the date of final payment.
I will therefore find that
Plaintiff is entitled to an
award of interest on the amount
of GH¢1,397,500 at the agreed
contractual rate from October,
2007 until date of judgment.
Subsequently, interest shall be
calculated at the prevailing
bank rate until date of final
payment.
I will further find that for
reasons stated above, that 2nd
and 3rd Defendants
are not responsible for the acts
of the Company, the 2nd
and 3rd Defendants as
officers of 1st
Defendant Company cannot be held
jointly and severally liable
with 1st Defendant
for recovery of the 1st
Defendant’s indebtedness to
Plaintiff. 2nd and 3rd
Defendants are nonetheless
liable under the Personal Deeds
of Guarantee they presented as
security for the facilities.
Plaintiff has claimed in the
alternative for judicial sale of
the properties belonging to 2nd
and 3rd Defendants.
The Plaintiff has an equitable
mortgage over the said
properties tendered in evidence
as Exhibits “Q” and “P”.
Plaintiff, pursuant to Section
18(1) of the Mortgages Act, 1972
(NRCD 96) is therefore entitled
to an order for judicial if the
1st Defendant Company
fails to pay the debt owed to
Plaintiff and Plaintiff may, if
it so desires, proceed to go for
the properties used as security
for the
facilities; which properties
happen to be owned by the 2nd
and 3rd Defendants;
and I will so find.
In conclusion, I find from the
totality of the evidence placed
before the Court that the
Plaintiff, on the preponderance
of probabilities, has proved its
case and hold that Plaintiff
recovers from 1st
Defendant, an amount of one
million three hundred ninety
seven thousand five hundred
Ghana Cedis (GH¢1,397,500.00),
together with interest at the
agreed contractual rate from
October, 2007, until date of the
judgment; and subsequently at
the prevailing bank rate until
date of final payment.
I shall dismiss the 1st
Defendant’s counterclaim for the
reason that they did not lead
sufficient evidence to prove
their claim.
Costs assessed at GH¢5,000
against the Defendants.
(SGD)
BARBARA ACKAH-YENSU (J)
JUSTICE OF THE HIGH COURT
COUNSEL
RICHARD AMOFA
- PLAINTIFF
KWASI AFRIFA
- DEFENDANT
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