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Contract – Agreement -
Memorandum of Understanding -
Recovery of an amount Money -
Interest on the said sum –
Whether or not the judgment is
against the weight of the
evidence - Whether or not the
learned justices with all due
respect to them erred in law -
Whether or not the learned
justice failed to
give sufficient consideration to
the issue of the illegality of
the entire transaction between
the parties - Whether or not the
learned justices failed
to give sufficient consideration
to the issue of restitution.
HEADNOTES
In the High Court, the
Respondent claimed against the
Appellants per for an amended
writ
of summons filed on 7/9/2011
the following reliefs An order
for the recovery of the amount
of US$400,000 (Four Hundred
Thousand Dollars) paid to the
Defendants at their
request and supported by
MEMORANDUM OF UNDERSTANDING
dated 17th day of May
2006 and signed by both parties
and their witnesses and which
the Defendants have failed to
pay to the Plaintiff despite the
abrogation of the said
MEMORANDUM OF UNDERSTANDING by
the Defendants themselves.
Interest on the above US$400,000
(Four Hundred Thousand Dollars)
at the rate of 3% (three
percent) per month from May 2006
up to date of final payment of
the US$400,000 (Four Hundred
Thousand Dollars).An Order for
the recovery of an amount of
US$200,000 (Two Hundred
Thousand Dollars) paid to the
Defendants by the Plaintiff at
Defendants request and supported
by MEMORANDUM OF UNDERSTANDING
dated 6th day of
August 2008 and signed by both
parties and their witnesses and
which the Defendants have failed
to pay to the Plaintiff despite
the abrogation of the MEMORANDUM
OF UNDERSTANDING by the
Defendants themselves. On appeal
to the Court of Appeal, the
Appellants’ appeal was dismissed
but the Learned Justices of the
Court of Appeal also ignored the
fact of termination of the
memoranda upon which the
Respondent sued and granted the
Respondent reliefs with
interests
HELD
For all the reasons set forth,
the appeal by the Appellants
against the judgment of the
Court of Appeal dated 2nd
May, 2013 fails subject to the
correction of the order for
payment of interest as
hereinbefore stated.
STATUTES REFERRED TO IN JUDGMENT
Companies Act, 1963 (Act 179)
Court of Appeal Rules, 1997
(C.I.19)
Money Lenders Ordinance, Cap
176,
Loans Recovery Ordinance Cap
175, the Exchange Control Act,
1961 (Act 71)
Foreign Exchange Act 2006 (Act
723).
Courts (Award of Interest and
Post-Judgment Interest) Rules,
2005 (C.I.52).
CASES REFERRED TO IN JUDGMENT
Kwarteng Vs. Amissah [1962] 1
GLR 241,
Kwame Vs. Serwah [1993-1994] 1
GLR 429
Ghana Commercial Bank Ltd. Vs.
CHRAJ [2003-2004] SCGLR 91
Ekpe Vs. Antai (1944) 10 WACA 19
Hoystead Vs. The Commissioner of
Taxation [1926] A.C. P. 165
Mensah & Others Vs. Ahenfie
Cloth Sellers Association [2010]
SCGLR 650
Schandorf Vs. Zeini [1976] 2 GLR
418
Zagloul Real Estates Co. Ltd.
(No.2) Vs. British Airways
[1998-99] SCGLR 378
In Re Mahmoud & Ispahani [1921]2
KB716.
City & Country Waste Ltd. Vs.
Accra Metropolitan Assembly
[2007-2008] SCGLR 409
Ernestina Boateng Vs. Phyllis
Serwah & 2 Ors. Appeal
No.J4/8/2020 dated 14th
April 2021
Royal Beneficiaries Association
Vs. Mrs. Vivian Mensah & Others
Civil Appeal No.J4/22/2013 dated
26/7/2013
Royal Dutch Airlines KLM Vs.
Farmex Ltd. [1989-90] 2 GLR 682.
Clipper Leasing Corporation Vs.
Attorney-General & Ors, Civil
Appeal No.J4/4/2015 unreported
judgment dated 9th
March, 2016
BOOKS REFERRED TO IN JUDGMENT
DELIVERING THE LEADING JUDGMENT
AMADU JSC
COUNSEL
KWAME BOATENG FOR THE
PLAINTIFF/RESPONDENT/RESPONDENT.
CHARLES HAYIBOR FOR THE
DEFENDANTS/APPELLANTS/
APPELLANTS.
AMADU JSC
(1)
This appeal is from the decision
of the Court of Appeal dated 2nd
May 2013 which dismissed an
appeal
by
the Defendants/
Appellants/Appellants (the
Appellants)
from the
judgment of the High
Court
in favour of Plaintiff/Respondent/Respondent
(‘the Respondents’).
(2)
In the High Court, the
Respondent claimed against the
Appellants per for an amended
writ
of summons filed on 7/9/2011
the following reliefs;
“(1) An order for the
recovery of the amount of
US$400,000 (Four
Hundred Thousand Dollars) paid
to the Defendants at their
request and supported by
MEMORANDUM OF UNDERSTANDING
dated 17th day of May
2006 and signed by both parties
and their witnesses and which
the Defendants have failed to
pay to the Plaintiff despite the
abrogation of the said
MEMORANDUM OF UNDERSTANDING by
the Defendants themselves.
(2)
Interest on the above
US$400,000 (Four Hundred
Thousand
Dollars) at the rate of 3%
(three percent) per month from
May 2006 up to date of final
payment of the US$400,000 (Four
Hundred Thousand Dollars).
(3) An Order for the recovery
of an amount of US$200,000 (Two
Hundred Thousand Dollars) paid
to the Defendants by
the Plaintiff at Defendants
request and supported by
MEMORANDUM OF UNDERSTANDING
dated 6th day of
August 2008 and signed by both
parties and their witnesses and
which the Defendants have failed
to pay to the Plaintiff despite
the abrogation of the
MEMORANDUM OF UNDERSTANDING
by the Defendants themselves.
(4) Interest at the rate of
3% per month (three percent) on
the
above US$200,000 (Two Hundred
Thousand Dollars) from February
2009 up till date of final
payment of the US$200,000 (Two
Hundred Thousand Dollars).
(5)
An Order for the Recovery of
an amount of GHC100,000 (One
Hundred Thousand Ghana Cedis)
paid to the Defendants by the
Plaintiff at the Defendants’
request and supported by
MEMORANDUM OF UNDERSTANDING
dated 13th day of
August 2008 and signed by both
parties and their witnesses and
which the Defendants have failed
to pay to the Plaintiff despite
the abrogation of the
MEMORANDUM OF UNDERSTANDING
by the Defendants themselves.
(6) Interest on the said
GHC100,000 (One Hundred Thousand
Ghana Cedis) at the rate of 2.5%
(two point five percent) from
May 2009 up to date of final
payment of the GHC100,000.00
(one hundred thousand Ghana
Cedis).
(7) Any other order or orders
as to this court may seem just”.
(3)
At the close of trial, though
the Learned High Court Judge
found in favour of the
Respondent, she did not grant
the reliefs for interest
payments in the terms the
Respondent prayed for. Her final
orders were as follows;
“(1) An order for the recovery
by the Plaintiff of an amount of
US$400,000.
(2) Since the contract
(Exhibit ‘A’) was terminated in
May 2009
and interest had been paid by
the Plaintiff as agreed,
Plaintiff is not entitled to any
pre-judgment interest on the
principal amount of US$400,000.
(3) An order for recovery by
the Plaintiff of an amount of
US$200,000.
(4) Interest at the rate of
3% per month on the said amount
of
US$200,000 from February 2009
until May 2009.
(5) An order for the
recovery by the Plaintiff of an
amount of
GHC100,000.
(6) Interest on the said
GHC100,000 at the rate of 2.5 %
per month
from April 2009 until
May 2009.
(7) I will further order that
Defendants pay interest on all
the
three (3)
principal amount at the agreed
upon interest rates
from
November 2009 until date of
final payment.
(8) Costs assessed
at GHC5,000 against the
Defendants”.
While in paragraph 2 of her
final orders, the Learned Trial
Judge stated that the Respondent
was not entitled to an order for
interest at the agreed interest
rate because the respective
memoranda had been terminated,
her order at paragraph 7 seems
to grant the relief for interest
she had earlier said the
Respondents were not entitled
to.
(4)
On appeal to the Court of
Appeal, the Appellants’ appeal
was dismissed but the Learned
Justices of the Court of Appeal
also ignored the fact of
termination of the memoranda
upon which the Respondent sued
and granted the Respondent
reliefs with interests in the
following terms;
“1. The
Defendants/Appellants are
ordered to pay the Plaintiff/
Respondent the sum of US$400,000
(Four Hundred Thousand United
States Dollars) with interest
thereon at the contractual rate
of 3% per month from May 2009 to
date of final payment.
2. The
Defendants/Appellants are
ordered to pay the Plaintiff/
Respondent the sum of US$200,000
(Two Hundred Thousand United
States Dollars) with interest at
the contractual rate of 3% per
month from February 2009 to date
of final payment.
3. The
Defendants/Appellants are
ordered to pay the Plaintiff/
Respondent the sum of GHC100,000
(One Hundred Thousand Ghana
Cedis) with interest at the
contractual rate of 2.5% per
month from June 2009 to date of
final payment”.
This issue of payments of
interest will be dealt with
exhaustively in this judgment.
(5)
APPEAL TO SUPREME COURT
By notice of further appeal to
this court, the Appellants
assailed the judgment of the
Court of Appeal on grounds
formulated and set out as
follows:-
“a. The judgment is against
the weight of the evidence.
b. The learned justices
with all due respect to them
erred in law
when they failed to give
sufficient consideration to the
issue of the illegality of the
entire transaction between the
parties.
c. The learned
justices failed to give
sufficient consideration to
the issue
of restitution.
d. The learned justices
failed to give sufficient
consideration to
the status of the 2nd
Defendant/Appellant/Appellant
who was sued in his capacity as
the chairman and Chief Executive
of the 1st Defendant
company”.
Contrary to the intention to
file further grounds of appeal
upon the receipt of the record
of proceedings, no further
grounds had been filed nor
argued by the Appellants.
(6)
In their statement of case in
this appeal, the Appellants have
changed strategy by relying on
completely new particulars of
illegality different from those
considered in the High Court and
the Court of Appeal. In the High
Court, it was the Trial Judge
who in her judgment suo motu
raised an issue about whether
the 2nd Appellant
acted within the law by raising
capital from his company whereas
it not a public liability
company. This was because the
evidence of the 2nd
Appellant was that the monies
covered by the memoranda were
investments the Respondent made
in the 2nd
Appellant’s company. The Trial
Judge held that such conduct
contravened Section 9(3)(d) of
the Companies Act, 1963 (Act
179) (now repealed) and
would not only be illegal but
will render the memoranda the
parties signed unenforceable.
However, the Trial Judge
proceeded to dismiss that
contention holding that since
the Respondent did not base his
action on the illegality, the
remedy of restitution was
available to them by which the
court could order the Appellants
to return the monies to them.
The Appellants then made this
issue a ground of appeal and
argued before the Court of
Appeal that, the Trial Judge did
not properly apply the
principles of the defence of
illegality that she herself
raised and that, if she did, she
would not have granted the
remedy of restitution but would
have dismissed the Respondent’s
action on ground of illegality.
On this issue of the defence of
illegality and restitution, the
Court of Appeal took the view
that there was no breach of
Section 9(2)(b) of Act 179 since
the facts in this case do not
portray a public offer by the
Appellants to raise capital. In
the view of the Court of Appeal,
since there was no illegal
conduct the defence did not
arise.
(7)
In the instant appeal, when the
Appellants stated in their
grounds (b) and (c) that the
Court of Appeal did not
adequately consider the
illegality of the whole
transaction and also whether
restitution as a remedy was
available in the circumstances
of the case, it was expected
that they were referring to
Section 9(2)(b) of Act 179.
Since the grounds of appeal
alleged that the Court of Appeal
erred in law without particulars
of the error as required by the
Rule 8 (4) of the Court of
Appeal Rules, 1997 (C.I.19), the
Appellants could not be
referring to a point of law the
Court of Appeal did not have the
opportunity to consider.
However, contrary to the above,
the Appellants have in their
Statement of Case argued the
ground of illegality on the
basis of the provisions of the
Money Lenders Ordinance, Cap
176, the Loans Recovery
Ordinance Cap 175, the Exchange
Control Act, 1961 (Act 71) and
the Foreign Exchange Act 2006
(Act 723). Under Cap 176, a
license is required before a
person can engage in the
business of money lending.
Consequently, the Appellants now
contend for the first time in
this court that the Respondent
herein lent money to them on
three occasions without being
licensed for the purpose.
Furthermore, the Appellants
allege that the transactions
were in foreign currency and by
the provisions of Acts 71 and
723, both Respondent and
Appellants required licenses to
deal in foreign currency and not
having procured those licenses,
the transactions breached those
statutes and therefore are
unenforceable The Appellants
case is therefore that the three
Memoranda of Understanding that
the Respondent based his claims
on in this case, violate the
above listed statutes and
consequently are illegal and
ought not to be enforced by the
court. Neither can the court
order restitution in favour of
the Respondent for moneys passed
on the basis of the illegal
instruments.
(8)
The Appellants admit that this
is the first time they are
raising the issue of breaches of
these statutes but they argue
that it is permissible to do so.
They have referred us to the
cases of Kwarteng Vs. Amissah
[1962] 1 GLR 241, Kwame
Vs. Serwah [1993-1994] 1
GLR 429 and Ghana
Commercial Bank Ltd. Vs. CHRAJ
[2003-2004] SCGLR 91 and
submitted that where a
fundamental point of law arises
on the basis of evidence on
record the point can be taken
for the first time on an appeal.
The Respondent however asserts
that the principle of law being
relied upon by the Appellants is
not applicable on the facts of
this case in that, for a ground
of law to be allowed at a late
stage in a case, the evidence on
the record must be conclusive as
to its applicability. They argue
that whether or not they had
licenses to lend money and deal
in foreign currency are
questions of fact and since the
issues were never raised at the
trial stage and evidence not
having been adduced on them, it
is presumptive for the
Appellants to claim they had
breached the statutes in
question.
(9)
We have perused the record of
the case and read the evidence
that was led at the trial and
are of the opinion that there is
not much dispute as to the facts
of the case. At the trial, only
the 1st Respondent
and the 2nd Appellant
and one other witness testified
and tendered documents. What it
means is that the Appellants
submissions will be tested
against the evidence on record
in order to determine whether
there is conclusive proof of
violations of the statutes as
they allege. If there is no
proof of violations, then as the
Court of Appeal held, there will
be no proof of illegality and
the defence would not arise. We
intend to consider all the
grounds of appeal together under
the headings of the statutes in
issue.
(10)
The Money Lenders Ordinance, Cap
176.
The evidence of the Appellants
at the trial was that the
Respondent invested in their
business for returns and that
they were able to pay returns on
the investment up to May 2009.
Thereafter, their business went
bad in consequence of which they
wrote to abrogate the investment
agreement. This is what led to
the consideration of Section
9(2)(b) of Act 179 dealing with
the conditions under which
investments may be made in a
limited liability company. From
the submissions of the
Appellants in their statement of
case, they seek to abandon this
evidence of the payment being an
investment to one of it being a
loan contracted from a money
lender by the 1st
Appellant. But the law does not
allow the Appellants to change
their case at will especially
after judgment has been given
based on a certain set of facts.
In the case of Ekpe Vs. Antai
(1944) 10 WACA 19 at page
22 Kingdom C J, approved the
following fundamental statement
of the common law; “The law
of estoppel has been very
clearly defined by Lord Shaw in
the judgment of the Privy
Council in the case of
Hoystead Vs. The Commissioner
of Taxation [1926]
A.C. P. 165 wherein
he says:- “In the opinion of
their Lordships it is settled,
first, that the admission of a
fact fundamental to the decision
arrived at cannot be withdrawn
and a fresh litigation started,
with a view to obtaining another
judgment upon a different
assumption of fact; Secondly,
the same principle applies not
only to an erroneous admission
of a fundamental fact, but to an
erroneous assumption as to the
legal quality of that fact.
Parties are not permitted to
begin fresh litigations because
of new views they may entertain
of the law of the case, or new
versions which they present as
to what should, be a proper
apprehension by the Court of the
legal result either of the
construction of the documents or
the weight of certain
circumstances. If this were
permitted litigation would have
no end, except when legal
ingenuity is exhausted. It is a
principle of law that this
cannot be permitted,
and there is abundant
authority reiterating that
principle.”
(11)
Therefore, the transactions that
resulted in this suit cannot be
re-packaged by the Appellants as
one between them and a person
engaged in the business of money
lending for which the Respondent
required a license under Cap
176. Another issue raised by the
Appellants is the source of the
funds paid to the Appellants by
the Respondents which in the
contention of the Appellants
gives rise an issue of
illegality. When the same issue
confronted this court in
Mensah & Others Vs. Ahenfie
Cloth Sellers Association [2010]
SCGLR 650, this court per
Brobbey JSC at page 697 held
that :- “In deciding the
issue of the core or main
business of the Plaintiff, the
source from which the money is
obtained to be loaned out should
not be allowed to cause any
confusion. A person lending
money may take his own money to
lend out or borrow from a source
like a bank to lend out. Where
the money comes from is
irrelevant. It is the object of
giving out the money which
matters. That object determines
whether it is money given out as
a benevolent gesture, friendly
assistance or may be lent to
make more money by way of profit
from the interest earned on the
money lent”. In the
instant case, contrary to the
contention of the Appellant, we
find the source of the funds
given to the Appellants by the
Respondent as inconsequential in
the determination of the appeal.
The Appellants argument on the
issue is consequently rejected
and dismissed.
(12)
Apart from our view that the
evidence does not support a
money lending transaction so as
to require a license, this court
has now settled the question of
enforceability of money lending
agreements entered into without
the requisite money lenders
license as required under Cap
176. In the Mensah & Others
Vs. Ahenfie Cloth Sellers
Association (supra)
this Court enforced a contract
which contravened the statutes
on moneylending, i.e. Cap 176.
Speaking for the court, Brobbey
JSC held at page 705 as follows;
“It was not the true
intention of the legislature
when it passed Caps 176 and 175
to prohibit lending and
borrowing. Moneylending and
borrowing were not proscribed or
prohibited by Cap 176 or 175.
All that the legislature did by
the two statutes was to regulate
the methods of lending and
borrowing by getting lenders to
acquire licenses which place
some obligations on them for the
protection of borrowers. That
was what Section 5 of Cap 176,
which regulated lending money
without license was intended
for. A contract may be in
violation of a statute and yet
it may be enforceable. Such a
contract can be described as
voidable. It is not void but
may be enforced on the
satisfaction of certain
conditions”. For the
reasons explained above, the
defence of the Appellants that
the two lower courts ought not
to have granted the Respondent
reliefs under the Memoranda of
Understanding for being money
lending transactions in
violation of Cap 176 is
dismissed.
(13)
The Exchange Control Act, 1961
(Act 71) and the Foreign
Exchange Act, 2006 (Act 723).
The Appellants contend that the
Memoranda covering payment to
them in foreign currency
violated the above statues that
make it an offence for a person
resident in Ghana to lend or
make payment in foreign
currency. The first payment of
US$400,000.00 was made at a time
Act 71 was in force and the
second payment of US$200,000.00
was made when Act 723 had come
into force. However, the
Appellants appear not to pay
attention to the full wording of
the provisions. First, Section
1(2) of Act 71 provided as
follows;
“Section 1 - Dealings in Gold
and External Currency.
(1)
The Minister responsible for
Finance (in this Act referred to
as "the Minister") shall
prescribe such banks or other
bodies or persons as he thinks
fit to be authorised dealers in
gold and external currency for
the purposes of this Act.
(2)
Except in such circumstances as
may be prescribed, no Ghana
resident other than an
authorised dealer shall buy or
borrow any gold or external
currency from, or sell or lend
any gold or external currency
to, any person other than an
authorised dealer.
Thus, by subsection (2) of
Section 1, it is lawful for an
authorized dealer to sell or
borrow external currency and it
is also lawful to sell or lend
external currency to an
authorized dealer. So if for the
sake of argument we consider the
new case of the Appellants that
the investment made by the
Respondents was lending external
currency, the question which
arises is; what is the proven
evidence in this case? The
evidence on the record is that
the Appellants were operating as
a forex bureau and a bank and
that is how the Respondent came
into a business relationship
with them leading to him
investing in them. That
testimony of the Respondent that
the Appellants operated a forex
bureau from which he regularly
changed cedis to foreign
exchange to send to his children
studying abroad was not
controverted under
cross-examination. The lawyer
for the Appellants in cross
examining Respondent was rather
concerned about whether the
Respondent did due diligence
investigations about the
Appellants. Though in his
testimony, the 2nd
Appellant stated that his
company was into real estate
development, he did not deny
that he operated openly as a
forex bureau and regularly sold
external currency to members of
the public. We take judicial
notice of the fact that by the
2006 when the parties entered
into the transactions in
question in this case, the
Minister of Finance of Ghana had
licensed many companies in Ghana
as forex bureau entities to deal
in foreign currency. The
irresistible inference from the
evidence on record is therefore
that, the Appellants were
authorized dealers in foreign
currency. Consequently, contrary
to the claim of the Appellants,
there has been no violation of
Act 71 in the transactions in
question since the external
currency was lent to an
authorized dealer.
(14)
The Foreign Exchange (Act 723).
Section 1 and 3.
They provide as follows:-
“1. Authority of Bank of Ghana
(1) The Bank of Ghana is the
licensing, regulatory and
supervisory
authority to
give effect to this Act.
(2) The Bank may require a
person who is resident or who
conducts
business in the country
to;
(a)
furnish the Bank with details of
part or the whole of that
person’s foreign exchange
transactions; or
(b)
provide returns in a form
prescribed by the Bank
accompanied with details of that
person’s foreign exchange
transactions.
3. Requirement of a License
(1) A person shall not
engage in the business of
dealing in foreign
exchange without a licence
issued under this Act.
(3)
The Bank (Bank of Ghana) shall
prescribe the banks or other
corporate bodies or persons that
it considers competent to engage
in the business of dealing in
foreign exchange.
(4)
The Bank shall issue or renew a
licence to engage in the
business of dealing in foreign
exchange subject to conditions
that the Bank shall determine
from time to time.
(5)
The business of dealing in
foreign exchange includes the
(a) purchase and
sale of foreign currency,
(b) receipt or payment of
foreign currency,
(c) importation and exportation
of foreign currency, and
(d) lending and
borrowing of foreign currency.
Section 29 of the Act makes it
an offence to engage in the
business
of dealing in foreign
currency.
(15)
From Section 3(1), it is clear
that what the Act prohibits is
engaging in the “business
of dealing in foreign exchange”
without a license. The Act does
not proscribe the possession of
foreign exchange by a resident
of Ghana. The evidence on the
record is that the 1st
Respondent made the payments of
the foreign exchange to the
Appellants from his foreign
exchange account with SSB Bank.
There is no dispute about the
fact that banks in Ghana at the
time of the transactions were
authorized by the Bank of Ghana
to open accounts in foreign
exchange for residents from
which accounts the holders of
the accounts could make and
receive payments in foreign
currency. This was clearly
anticipated by Section 1(2)
which empowers the Bank of
Ghana, the supervising and
regulatory agency of government,
to review transactions in
foreign exchange by any Ghanaian
resident.
(16)
It is therefore fallacious to
assert that the two payments
made by the Respondents to the
Appellants in this case amounted
to the “business of
dealing in foreign exchange.”
When the Act classifies lending
foreign exchange under the
definition of the business of
dealing in foreign exchange, it
must be understood to mean
lending as a regular business
activity and not a specific
lending to only one person on
account of a specified agreed
purpose as in this case.
Therefore even if we treat the
investment the Respondent made
in the 1st Appellant
as lending by the Respondent,
our view is that it does not
qualify as engaging in the
business of lending foreign
exchange and therefore no
license was required under
Section 3 of Act 723. As we
stated earlier, the borrowing in
foreign exchange by the
Appellants would not be in
violation of the provision since
the Appellants were authorized
to deal in foreign exchange. The
effect of the above explanation
of Act 723 is that on the
evidence on record, there was
no violation of the Act and the
defence of the Appellants on
this ground also fails and is
dismissed.
(17)
In any event, the Appellants
must realize that a contract
entered into in violation of a
statute is not automatically
void and unenforceable. In
Schandorf Vs. Zeini
[1976] 2 GLR 418 the Court
of Appeal dealt with a case of
sale of a house wherein part of
the purchase price was paid in
foreign currency contrary to the
Exchange Control Act, 1961 (Act
71). The Defendant raised the
defence that because the payment
contravened the Act, the court
ought not to decree specific
performance of the agreement but
the Court of Appeal rejected
this argument and affirmed the
judgment of the High Court. The
case of Zagloul Real Estates
Co. Ltd. (No.2)
Vs. British Airways
[1998-99] SCGLR 378
involved rent payment in cedis
instead of in foreign currency,
which resulted in a violation of
the External and Diplomatic
Missions (Acquisition or Rental
of Immoveable Property) Law,
1986 (PNDCL 150). In the Supreme
Court, the issue of restitution
under the illegal tenancy
agreement came up but the court
refused to order restitution for
the reason that the indemnity
agreement at the center of the
dispute was a clever device
dishonestly contrived by both
parties to defeat the ends
sought to be achieved by the
statute. The common law has over
the years maintained a
distinction between contracts
that the law would consider void
for breach of statute and those
that may be enforced even though
they are in violation of a
statute – See the case of In
Re Mahmoud & Ispahani
[1921]2 KB716.
(18)
The modern approach to
determining the defence of
illegality is for the court to
exercise a discretion in
deciding whether or not to
enforce illegal contracts
applying a number of factors. In
City & Country Waste Ltd. Vs.
Accra Metropolitan Assembly
[2007-2008] SCGLR 409 at
pages 436 of the report this
court, through Date-Bah, JSC
approved of the following
recommendations in the Law
Commission’s Paper No 154;
“We have said that we believe
that there is a continued need
for some doctrine of illegality
in relation to illegal contracts
and that, in certain
circumstances, it is right that
the law should deny the
plaintiff his or her standard
rights and remedies. However, we
have also explained how, in some
situations, we believe that the
plaintiff is being unduly
penalized by the present rules.
This injustice would seem to be
the inevitable result of the
application of a strict set of
rules to a wide variety of
circumstances, including cases
where the illegality involved
may be minor, may be wholly or
largely the fault of the
defendant, or may be merely
incidental to the contract in
question. We consider that the
best means of overcoming this
injustice is to replace the
present strict rules with a
discretionary approach under
which the courts would be able
to take into account such
relevant issues as the
seriousness of the illegality
involved, whether the plaintiff
was aware of the illegality, and
the purpose of the rule which
renders the contract illegal.
The adoption of some type of
discretionary approach has the
support of the vast majority of
academic commentators in this
area; and it is the approach
which has been followed in those
jurisdictions where legislation
has been implemented.”
(19)
Also, in the recent decision of
this court in the case of
Ernestina Boateng Vs. Phyllis
Serwah & 2 Ors. Appeal
No.J4/8/2020 dated 14th
April 2021 in Civil Appeal
No/J4/11/2020 Pwamang JSC
stated at page 19 of the
judgment as follows:-
“In line with our decision in
City & Country Waste case, we
adopt the discretionary approach
for determination of the
question whether or not to allow
a claim for recovery of trust
property that on the evidence is
tainted by illegality. The
discretion is to be exercised on
consideration of the following
factors; a) the seriousness of
the illegality, b) whether the
denial of the claim would be a
proportionate response to the
illegality, bearing in mind that
punishment is a matter for the
criminal courts, and c) whether
it would be harmful to the
integrity of the legal system to
allow the claim”.
(20)
On the facts of the instant case
and considering the purpose of
the foreign exchange control
legislations, even if we accept
the new case of the Appellants
that the Respondent by the
second Memorandum of
Understanding covering the
US$200,000.00, engaged in the
business of lending foreign
exchange without license
contrary to Section 3 of Act
723, the violation is of such a
minimal nature that the court
would exercise its discretion in
favour of the Respondents by
ordering restitution of the
money to them because the
statute itself has provided for
the penal consequences of any
violations which will therefore
not render restitution
unavailable to the Respondents
under the circumstances.
(21)
Loans Recovery Ordinance, Cap
175.
In their arguments, the
Appellants have complained that
the interest that was awarded in
favour of the Respondent by the
High Court and the Court of
Appeal presumably on the terms
contained in the memoranda is
excessive and unconscionable so
this court should exercise the
authority conferred on it by
Section 1 of Cap 175 and re-open
the transaction and revise the
rate of interest downwards. In
the case of Royal
Beneficiaries Association Vs.
Mrs. Vivian Mensah & Others
Civil Appeal No.J4/22/2013
dated 26/7/2013 this court per
Anin Yeboah JSC (as he then
was) considered similar
circumstances as in the instant
case and held thus:- “It
is apparent that the appellant
had paid fifteen million cedis
for every week and had indeed
paid for thirty eight weeks out
of the fifty - two weeks which
was agreed as the terms of the
contract. It must be pointed out
that by simple calculation of
the outstanding balance the
appellant had paid C570,000,000
and was left with only C
210,000,000 .00 to be paid to
the Respondent. Given the amount
of money paid by the Appellant
to the Respondent a so-called
company limited by guarantee, we
are of the view that the whole
transaction which is obviously
unconscionable should be
re-opened for the court to
impose its terms favorable under
the circumstances .’’
(22)
In the case of Mensah Vs.
Ahenfie Cloth Sellers
Association (supra) this
court re-opened a money lending
transaction and revised the
interest payable downwards.
Thus, there is abundant
authority for the submission
that, in appropriate cases, the
court would re-open money
lending transaction and reduce
the interest payable. However,
there is even a more fundamental
issue about the interest awarded
by the courts below in this case
that has to be addressed first.
In deciding to award the
interests claimed by the
Respondent on the dollar amounts
claimed, which was on the basis
of the agreement contained in
the respective memoranda, both
lower courts stated that they
were applying the Courts
(Award of Interest and
Post-Judgment Interest) Rules,
2005 (C.I.52). The issue
is whether the Courts below
complied with C.I.52 and its
interpretation by the court
which is binding on them. The
structure of C.I.52 is in two
parts with different provisions;
one dealing with pre-judgment
interest which may be awarded to
cover the period from the
accrual of the cause of action
to the date of judgment. The
second is interest payable for
the period between judgment and
final payment of the substantive
judgment debt. Section 1 in
respect of pre-judgment interest
provides 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”.
(23)
In awarding the Respondent
interest on the amounts
found due, being
US$400,000.00, US$200,000.00 and
GHS100,000.00, respectively, the
Court of Appeal ordered interest
at 2.5% per month from June
2009, to date of final payment.
The court said the parties were
subject to a contractual rate by
which the court was referring to
the memoranda that were signed
stating the rate as 2.5%. Those
memoranda provided that interest
was to be paid until further
notice. But the undisputed
evidence before the court was
that the agreements in this case
were effectively terminated by
the letter written to that
effect by the Appellants dated
28th May, 2009
tendered by the Respondents as
Exhibit “D” which the
Respondents have acknowledged.
Even in the endorsement of the
reliefs on the writ of summons,
the Respondent stated clearly
that the respective memoranda
had been abrogated. What this
means is that at the time the
Respondent commenced action in
court, there was no subsisting
agreement on a rate of interest
payable on the monies given by
the Respondent to the
Appellants. In those
circumstances, the Court of
Appeal erred in ordering
interest at the rate of 2.5% per
month. Under the provisions of
Rule 1 of C.I.52, the interest
rate ought to have been at the
prevailing rate and at simple
interest. The correct
pre-judgment interest payable in
the case is therefore at the
prevailing annual rate of
interest from June 2009, to the
date of judgment of the High
Court, which is 12th
October 2011. It is provided in
Rule 2 on post-judgment interest
as follows:-
Rule 2 - Post Judgment Interest
“2. (1) Subject to
sub-rule (2) each judgment shall
bear interest at the
statutory interest rate from the
date of delivery of the judgment
up to the date of final payment
(2) Where the
transaction which results in the
judgment debt is
a. contained in an instrument,
b. evidenced in writing, or
c. admitted by the parties
and the parties specify in the
instrument, writing or admission
the rate of interest which is
chargeable on the debt and which
is to run to the date of final
payment, then that rate of
interest shall be payable until
the final payment”.
(Emphasis supplied).
(24)
Under Rule 1(1), of C.I.52,
judgment debts are to bear
interest at the statutory rate
on the date of judgment up to
the date of final payment. A
different rate of interest would
only apply to a judgment debt if
there is a subsisting agreement
that states a rate to run to the
date of final payment. In the
instant case, firstly, there is
no subsisting agreement on a
rate of interest payable.
Secondly, even the terminated
agreement did not provide that
in the event of default and the
court gives judgment, the rate
of 2.5% shall run till the date
of final payment. Therefore, the
post judgment interest in this
case is to be at the prevailing
rate as of 12th
October 2011 and from that date
till final payment of the
amounts found due to be paid to
the Respondent. It would be
noted that whereas Rule 1 uses
the term “bank rate
prevailing”, Rule 2
mentions “statutory
interest rate”. However,
Rule 4 states that statutory
interest rate is the bank rate
of interest prevailing.
(25)
Rule 4 (2) of C.I.52 provides
that:- “Where there is
doubt as to the prevailing bank
rate, the 91 days Treasury Bill
rate as determined by the Bank
of Ghana shall be the prevailing
bank rate”.
The question which arises in
this case is, what is the
applicable prevailing rate since
the Respondent sued to recover
the money in foreign currency
and the court has awarded the
judgment in foreign currency?
This question was settled in the
majority judgment of this court
in the case of Royal Dutch
Airlines KLM Vs. Farmex Ltd.
[1989-90] 2 GLR 682. The
Headnote of the Report is as
follows;
“Held, granting the application
(Adade and Aikins JJ.S.C.
dissenting): the rate of
interest payable on the sum of
£23,800 awarded as damages
should be the pound sterling
commercial rate at simple
interest prevailing in the
United Kingdom as at the date of
final judgment, i.e. 19 December
1990 and not the bank rate
prevailing in Ghana.”
In that decision Wiredu JSC
(as he then was) at page 694
explained the reason for the
majority opinion as follows:-
“On its face, the language
of L.I. 1295 of 1984 impels me
to conclude that its application
is to be limited to transactions
dealt with in local currency and
must not be stretched to cover
and include transactions
involving the use of foreign
currencies . . . Equity follows
the law and the principle of law
underlying the award of damages
is restitutio in integrum. If
this principle is to be achieved
in the instant case then I think
the proper view to take of the
matter is to allow the
application and to construe the
term "Bank rate " as at 19
December 1990 as stated in the
order of this court with
reference to the "Bank rate"
prevailing at the relevant date
in the United Kingdom.
(26)
Indeed this court applied this
interpretation of prevailing
rate on a judgment awarded in
United States Dollars in the
case of Clipper Leasing
Corporation Vs. Attorney-General
& Ors, Civil Appeal
No.J4/4/2015 unreported
judgment dated 9th
March, 2016. In that case this
court held inter alia as
follows:- “Appellant would
be entitled to interest on the
amount. The lease agreement in
this case did not state any rate
of interest to be applied in the
event of default in payment. In
the suit in the London court
Appellant claimed interest at
the rate of 1.5% or such rate as
the court may award. However, in
accordance with the Courts
(Award of Interest and Post
Judgment Interest) Rules, 2005
(C.I.52) and the decision of
this court in the case of Royal
Dutch Airlines ( KLM ) Vs.
Farmex Ltd. (No.2) [1989-90] 2
GLR 682, we award interest at
the prevailing bank rate of
interest of the United States
Dollar in New York.”
(27)
In the instant case, since the
Respondent sued for payment in
United States Dollars and have
obtained judgment in that
currency, the interest they are
entitled to is simple interest
annual rate of the interest
prevailing in New York on 14th
October, 2011 payable on the
total sum of USD600,000.00 from
June 2009, till date of final
payment. As for the interest
rate of the sum of
GHS100,000.00, it shall be at
the simple interest at the 91
day Bank of Ghana Treasury Bill
as of 14th October
2011, payable from June 2009,
till date of final payment.
These are the rates of interest
the Respondent is legally
entitled to. In the
circumstances the complaint of
the Appellants about excessive
and unconscionable rate of
interest claimed by the
Respondent and awarded by the
courts below loses its force and
does not deserve to be
considered.
(28)
For all the reasons set forth,
the appeal by the Appellants
against the judgment of the
Court of Appeal dated 2nd
May, 2013 fails subject to the
correction of the order for
payment of interest as
hereinbefore stated.
I.O. TANKO AMADU
(JUSTICE OF THE SUPREME COURT)
ANIN YEBOAH
(CHIEF JUSTICE)
G. PWAMANG
(JUSTICE OF THE SUPREME COURT)
N. A. AMEGATCHER
(JUSTICE OF THE SUPREME COURT)
M. OWUSU (MS.)
(JUSTICE OF THE SUPREME
COURT)
COUNSEL
KWAME BOATENG FOR THE
PLAINTIFF/RESPONDENT/RESPONDENT.
CHARLES HAYIBOR FOR THE
DEFENDANTS/APPELLANTS/
APPELLANTS.
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