KUMASI - A.D 2015

SUIT NO:  BFS/306/14

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 1st Defendant, acting through the 2ndDefendant. The 2nd and 3rd 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 3rd 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 3rd 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 3rd 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, 1st and 2nd Defendants.

I wish to make certain observations before I proceed to consider the main issue before this court. I noticed that even though the 1st 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 1st Defendant Company. The appearance filed by Kwame Bonsu Poku ought to have been struck out to enable the 1st 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 1st 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 17th 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 1st 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 2nd 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:




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 2nd 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 1st 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 1st 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 1st 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 1st 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 1st 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 2nd Defendnat testified for herself and on behalf of the 1st Defendant. Her defence was that she was paying the loan on behalf of the 1st 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 1st Defendant. He made various payments to the Plaintiff and so did family members and well wishers. Continuing, the 2nd Defendant said all efforts to obtain a statement of account from the Plaintiff to enable her know the 1st 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 2nd 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 1st 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 1st 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 2nd 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 2nd Defendant had followed the laid down procedure, the statement of account of the 1st 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 2nd 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 1st 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 2nd Defendant was hospitalized, it was the duty of the 2nd Director to ensure that the Company’s business was going on smoothly. Per the 2nd 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 1st 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 2nd Defendant could not have made payments into the 1st 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 1st 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 2nd Defendant also contended that no demand notice was given to them. The Plaintiff tendered exhibit C, dated 28/09/2013 which the 2nd Defendant insisted was never delivered to them. That is immaterial at this point because the 1st 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 1st Defendant after it started defaulting from January, 2014.


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


32 (1)   Where a borrower fails to make payment on due date for a payment, the lender shall give notice of default to the borrower in writing and request the borrower to pay the amount due within 30 days.

32 (3)   If a borrower fails to pay or make satisfactory arrangements to pay the amount outstanding to the lender within 30 days after the date of receipt of the notice, the lender may enforce the rights provided for under this Act.


Under the Act, the Lender’s rights include taking a legal action to recover the principal amount plus any accrued interest. The purpose of “serving a demand notice” on a defaulting customer is to remind the customer to perform that customer’s obligations under a credit agreement. In the instant case, the 2nd Defendant knew that the 1st Defendant was in default and had been going to the Plaintiff Bank for negotiation prior to this action. I do not think the failure to serve a demand notice on the 1st Defendant prior to the filing of this suit has resulted in any injustice to the 1st Defendant. As rightly submitted by counsel for the Plaintiff, the obligations of a borrower under section 20 (3) of the Borrowers and Lenders Act, 2008 Act 773 include payment of the principal amount, the accrued interest charges, a prepayment charge, if any, agreed between the borrower and the Lender, and the other fees and charges payable by the borrower to the lender up to the date for settlement. The failure to serve a demand notice on a defaulting customer does not take away the customer’s obligations under section 20(3) of Act 773 or under any loan agreement. The customer will still be required to make good his or her indebtedness to the Lender. In my opinion, the excuses given by the 2nd Defendant for the non- payment of the 1st Defendant’s debt are legally untenable.


For the Plaintiff, counsel cited numerous authorities and urged the court to compel the Defendants to pay the accrued interest. I have had the benefit of reading the decisions in Harbutt’s Plasticine Ltd v Wayne Tank & Pump Co. Ltd ( 1970) 1 All ER 225 and London, Chatham & Dover Railway Co. V South Eastern Railway Co,. (1893) AC 429. In Akoto v Gyamfi-Addo (2005-2006) SCGLR 1018, the Supreme Court took the view that the general principle for the award of interest to a party was that such a party had been unjustifiably kept out of money due to him or her for the relevant period. In the instant case, the interest being sought by the Plaintiff is derived from the loan agreement and they are entitled to be paid that interest The Defendants have failed to offer any credible evidence as to why they should not be compelled to pay the interest which they are liable to pay.


A careful reading of exhibit A shows that the Plaintiff calculated the interest of GH¢1,015.63 per month for twelve months and added the same to the principal amount of GH¢30,000.00 before arriving at the monthly installment payments. Per exhibit A, other charges applied. Consequently, if the 1st Defendant had amortized the loan by making the agreed installment payments over a period of twelve months, all the accrued interests would have been taken care of. Upon default, the Plaintiff was to calculate interest on any amount outstanding by applying the penalty fee agreed upon. The evidence shows that by 19/09/2014, the entire loan and interest for the twelve months had been paid off. It is to be noted that full payment was made approximately six months after the due date.


The Defendants did not challenge the Plaintiff’s testimony that the agreed interest translated to 39% per annum as the same was admitted in their statement of defence. Therefore, any amount outstanding after the maturity period, i.e. 25/03/2013, attracted interest at the rate of 39% p.a. plus the penalty fees agreed upon. I notice from the Plaintiff’s calculations in exhibit C that an interest rate of 41% per annum was used instead of the agreed 39% per annum but the additional default interest of 5% for the first 30 days, and 1% per day for the subsequent days were not applied. It is my considered opinion that the 1st Defendant will be better off paying the 41% interest per annum than the 5% for 30 days and 1% per day default interest. If the default charges are applied, the defendants will have to pay interest higher than the 41% per annum. In order to do substantial justice, I accept the Plaintiff’s calculations in exhibit C and hold that the Plaintiff is entitled to an amount of GH¢961.48 as interest which accrued on the outstanding balance of the loan after the maturity period.


The 2nd Defendant was sued as guarantor in respect of the loan granted to the 1st Defendant. This is contained in paragraph 2 of the Plaintiff’s statement of claim which the 2nd defendant admitted in paragraph 2 of the statement of defence filed on 28/08/2014. This means that the 2nd Defendant undertook to pay off the loan and any accrued interest should the principal debtor fail to do so. In the circumstance, judgment is entered against the 1st and 2nd Defendants jointly and severally in the sum of GH¢961.48. Cost of GH¢200.00 is awarded against the 1st and 2nd Defendants.