An action was commenced by the Plaintiff Bank against the Defendants herein for the recovery of the outstanding balance on a loan facility extended to the 1^st Defendant, acting through the 2^ndDefendant. The 2^nd and 3^rd Defendants were the guarantors under the loan agreement. By the time the trial commenced, the principal amount and interest up to the maturity date had been paid off, albeit long after the agreed due date. It is based on this fact that the Plaintiff is calling on the Defendants to pay the interest which accrued after the maturity date.

Even though the 3^rd Defendant had been coming to court, it turned out that the writ of summons and statement of claim were only served on him just before the trial. Besides, the 3^rd Defendant did not file any pleadings. This being a court of record, the filing of pleadings is mandatory. V.C.R.A.C. Crabbe J.S.C. underscored the functions and importance of pleadings in Hammond v Odoi (1982-83) GLR 1215 at 1235 thus:

“Pleadings are the nucleus around which the case - the whole case — revolves. Their very nature and character thus demonstrate their importance in actions, as for the benefit of the court as well as for the parties. A trial judge can only consider the evidence of the parties in the light of their pleadings. The pleadings form the basis of the respective case of each of the contestants. The pleadings bind and circumscribe the parties and place fetters on the evidence that they would lead. Amendment is the course to free them from such fetters. The pleadings thus manifest the true and substantive merits of the case…” See also Accra Tema City Council v Ntim (1969) CC 62, CA; Order 82 rule 3 of the High Court (Civil Procedure) Rules, 2004 (C.I. 47) and Tindana v Chief of Defence Staff (No. 2) (2011) SCGLR 732.

Having failed to file his pleadings, the 3^rd Defendant cannot be said to have participated in this trial, for he has not set any case for the court to consider. Under the circumstance, the instant trial is between the Plaintiff, 1^st and 2^nd Defendants.

I wish to make certain observations before I proceed to consider the main issue before this court. I noticed that even though the 1^st Defendant is a Limited Liability Company, an appearance was entered on its behalf by one Kwame Bonsu Poku who is not a lawyer. This sins against the provisions of order 4 rule 1 (2) of the High Court (Civil Procedure) Rules, 2004, C.I. 47 which reads:

“A body corporate shall not begin or carry on proceedings except by a lawyer, unless permitted to do so by an express provision of any enactment.”

Again, by section 42 of the interpretation Act, 2009 Act 792, “ the expression “may” is to be construed as permissive and empowering , and the expression “ shall” as imperative and mandatory. By a strict interpretation and application of Order 4 rule 1(2) of C.I. 47, the said Kwame Bonsu Poku had no business in entering appearance on behalf of the 1^st Defendant Company. The appearance filed by Kwame Bonsu Poku ought to have been struck out to enable the 1^st Defendant to comply with the rules of procedure but this was not done. However, the matter was partially settled at pre-trial. Terms of settlement were signed and the same entered as consent judgment. The sole issue before me is the payment of interest. At this advanced stage, undue delay will be caused if the 1^st Defendant is to go back and correct its errors. Therefore, I will apply the provisions of Order 1 rule 1(2) of C.I. 47 and allow the defective appearance to stand. It reads:

“These rules shall be interpreted and applied so as to achieve speedy and effective justice, avoid delays and unnecessary expense, and ensure that as far as possible, all matters in dispute between parties may be completely, effectively and finally determined and multiplicity of proceedings concerning any of such matters avoided.”

Now, I turn to the sole issue for determination. That is, whether or not the Plaintiff is entitled to interest on the sum of GH¢ 7, 571.03 from 17^th May, 2014?

The burden of proof of this issue first lies on the Plaintiff who maintains that the Defendants are liable to pay interest on the sum claimed. The head of Recoveries of the Plaintiff Company testified on its behalf. His evidence was to the effect that the 1^st defendant defaulted in payment of the facility extended to it for twelve months. As at the time this action was commenced, the Plaintiff’s Representative said the balance outstanding was GH¢7,571.03. The 2^nd Defendant Paid GH¢4,000.00 out of that amount in two installments and later paid the balance of GH¢3,571.03. Even though the principal has been paid off, he told the court that the Defendants have refused to pay the interest which continues to run at the agreed rate of 39% and default charges of 5%. The loan agreement was tendered as exhibit A and the interest calculation document as exhibit B. This evidence was corroborated by PW1. According to PW1, the interest due to be paid is GH¢971.00 but this excludes the default interest. And, in spite of verbal and written notices sent to the Defendants, she has refused to settle her indebtedness.

These are the terms of the loan agreement (exhibit A) as regards interest:

3. INTEREST

The Borrower shall pay an interest of GH¢1,015.63 per month. Upon Default, the following shall apply:

a. A penalty fee of 5% calculated on the installments(s) due from the first to thirty day of default after which it attracts 1% per day until the date the total amount outstanding will be paid in full

b. All expenses incurred in the process of recovering the loan amount outstanding.

The 2^nd Defendant who is highly educated executed exhibit A without any form of duress or undue influence and is therefore bound by the terms therein. Therefore, going by the terms of exhibit A, the 1^st Defendant is liable to pay interest to the Plaintiff. Per the same agreement, the term of this loan was twelve months. That is, from 24/04/2012 to 25/03/2013, with a monthly installment payment of GH¢ 3,567.71. The payments made by or on account of the 1^st Defendant with the exception of the last tranche of GH¢ 3,571.03 paid after the commencement of this action, are captured in its statement of account, exhibit 2. Having perused exhibit 2, I find that the loan re-payment was not done in accordance with exhibit A. Even though payments totaling GH¢3,600.00 per month were made for about five months, the 1^st Defendant defaulted in September, 2013. From December, 2013, irregular payments below the agreed monthly installment payment were made. A payment of GH¢1,000.00 was made on 02/07/2014 and the Plaintiff commenced the instant action on 03/07/2014. Another payment of GH¢ 2000.00 was made on 09/09/2014. Thus, by the 1^st Defendant’s own showing, the loan was not paid off within the agreed twelve months duration. The Plaintiff was therefore entitled to invoke the default interest or penalty interest clause but the evidence shows that the Plaintiff was very magnanimous and did not invoke that clause.

Having established the 1^st Defendant’s liability and its refusal to pay the outstanding interest on the loan, the burden of persuasion shifts onto the Defendants to lead evidence to the contrary. The 2^nd Defendnat testified for herself and on behalf of the 1^st Defendant. Her defence was that she was paying the loan on behalf of the 1^st Defendant in accordance with the loan agreement until six months down the line when she fell ill and was hospitalized for over six months. During that period, one Kwame Bonsu Poku was appointed as the Managing Director of the 1^st Defendant. He made various payments to the Plaintiff and so did family members and well wishers. Continuing, the 2^nd Defendant said all efforts to obtain a statement of account from the Plaintiff to enable her know the 1^st Defendant’s actual indebtedness proved futile. The statement, (exhibit 2) was given to her on

27/10/2014, after her Lawyer had written to the Plaintiff as per exhibit 1. The 2^nd Defendant further testified that she could not tell her indebtedness from exhibit 2 so she went back to the Plaintiff on 28/10/2014 when she was informed that her debit balance was GH¢3,571.03. She paid this amount in full on 30/10/2014 together with the interest. Her concern was that she approached officers of the Bank, specifically, one Mr. Hammond to explain her predicament and even though they agreed that she could pay what she could afford, they continued to calculate interest and dragged her to court. Her reaction to the demand notice (exhibit C) was that she never received the same.

A friend of the Defendant who described herself as an employee of First Allied Savings and Loans corroborated the Defendant’s evidence that the Plaintiff denied her a statement of account until a Lawyer wrote to the Bank. She made reference to the practices of her institution and testified that the Plaintiff ought to have sent reminders and then follow up with demand notices before instituting an action against the Defendants. In cross-examination, she conceded that this procedure is not universal. It is also in her evidence that when a defendant is sued, interest is frozen and that party pays only the amount endorsed on the writ of summons. Again, she said this is a practice of First Allied Savings and Loans.

In cross-examination, the Plaintiff demonstrated through paragraph 5 of the Defendants’ statement of defence filed on 16/05/2014, that the 1^st Defendant was aware of its debit balance even though a statement of account had not been given to the company. PW1 also offered an explanation as to why the 1^st Defendant’s statement of account was not given to the 2nd Defendant prior to exhibit 1. This is what transpired in cross-examination between the 2^nd Defendant and PW1:

Q. Because the loan re-payment schedule was not followed, there was no way I could know my balance without a bank statement that is why I requested for a statement.

A. When the statement was requested, she was given.

Q. I was only given my statement after I had consulted a lawyer. The statement was given to me on 27/10/2014 when I presented a note from the lawyer to the plaintiff.

A. Per customer confidentiality, statement cannot be requested in any means or anyhow. It should be written. The initial one was not so. When the normal procedure was followed, she was given.

Q. That is true. You insisted I write. I requested for a sheet to write but they were not ready to accept a hand written request.

A. You were asked to go and write and bring it but you did not do so.

The above discourse shows that if the 2^nd Defendant had followed the laid down procedure, the statement of account of the 1^st Defendant would have been given to her. Having failed to comply with the plaintiff’s procedure as regards the release of statement of accounts to its customers, the 2^nd Defendant cannot put the blame at the door step of the Plaintiff or any of its officers. It is true that a statement of account would have been the best guide as to the 1^st Defendant’s indebtedness but that was not the only way. It is trite law that a company cannot be incorporated in Ghana unless it has at least two directors. In the circumstances of this case, if the 2^nd Defendant was hospitalized, it was the duty of the 2^nd Director to ensure that the Company’s business was going on smoothly. Per the 2^nd Defendant’s evidence, one Kwame Bonsu was appointed a Managing Director (MD) during that crisis period. The question is what prevented the said MD from writing to the Plaintiff for the 1^st Defendant’s statement of account? No reasonable explanation has been given by the defendants. The Defendants knew the terms of the loan agreement. They were also given a repayment schedule. The alleged friends and well wishers of the 2^nd Defendant could not have made payments into the 1^st Defendant’s account without authorization. Definitely, someone from the company must have given them the account details. It follows that the same person or persons could have furnished the company with payment advice or a deposit slip or any other evidence of payment into the account.

Having defaulted, it was the duty of the 1^st Defendant Company to do a reconciliation of its account to know its debit balance. If the Defendants were minded to pay off the loan, they would have done so after taking reasonable steps to reconcile its accounts.

The 2^nd Defendant also contended that no demand notice was given to them. The Plaintiff tendered exhibit C, dated 28/09/2013 which the 2^nd Defendant insisted was never delivered to them. That is immaterial at this point because the 1^st Defendant resumed payments in October, 2013 after exhibit C had been written in September. However, there is no evidence of a demand notice sent to the 1^st Defendant after it started defaulting from January, 2014.

Section 32 of the Borrowers and Lenders Act 773 provides that: