IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL DIVISION),
ACCRA - A.D 2019
NANA OSEI AFRIFA - (Plaintiff)
EUGENE K. CHINEBUAH AND HUMPREY TENZAGH - (Defendants)
DATE: 15 TH MARCH, 2019
JUDGES: HIS LORDSHIP ERIC KYEI BAFFOUR ESQ. JUSTICE OF THE HIGH COURT
Plaintiff had sought in his writ the recovery of an amount of One Million and Twenty Nine Thousand Five Hundred and Ninety Ghana Cedis (GH¢1,029,590.00) being the outstanding amount claimed tobe owed to the Plaintiff as well as interest on the amount from 1st, February, 2017 till date of final payment. The other reliefs may not be necessary for the determination of the matter now before the court.
Plaintiff posit that he did enter into a transaction with Defendants wherein he advanced an amount being cedi equivalent of One Hundred Thousand US Dollars ($100,000.00) to the Defendants. That the Defendants were to repay the money together with interest at 50% within ten days with five additional days as grace period. That Defendants failed to repay the monies within the ten days plus the additional five days as per the agreement the monies unpaid will attract a compound interest of 1% per each day of default.
1st Defendant did not deny the granting of such a loan by Plaintiff but only claimed that he acted as a facilitator for the 2nd Defendant who was a friend and needed money. It was further raised that the transaction was an unlawful one as Plaintiff is not a duly registered entity nor licensed to do so under the Borrowers and Lenders Act, 2008, Act 773 or the Money Lenders Act. 1st Defendant also raised as part of his defence that the agreement charging 50% as interest rate plus a compound interest of 1% per day of default as stated under the agreement was unconscionable and ought not to be allowed by the court.
Defendants have paid an amount of GH¢430,000.000 out of the total amount of GH¢1,029,590.00 claimed by Plaintiff. It is to be noted that the amount paid by Defendants represented the equivalent rate of the dollar in cedis at the time the loan was granted by Plaintiff to Defendants in December, 2016 but not the cedi rate to the dollar at the time payment was made. With the principal amount granted by Plaintiff to Defendants per the loan agreement having been paid and the only issue outstanding being that of interest on the monies paid, I was guided by Order 33 Rules 3 and 5 of the High Court (Civil Procedure) Rules, C. I. 47 which states as follows:
“3. The Court may order any question or issue arising in any cause or matter whether of fact or law, or partly of fact and partly of law, and raised by the pleadings to be tried before, at or after the trial of the cause or matter and may give directions as to the manner in which the question or issue shall be stated”.
5. Where it appears to the Court that the decision of any question or issue arising in any cause or matter and tried separately from the main cause or matter substantially disposes of the cause or matter or renders trial of the main cause or matter unnecessary, it may dismiss the cause or matter or make such other order or give such judgment as may be just”.
Accordingly I posed for the consideration of the parties by way of legal arguments the issue as to whether interest on the principal amount paid is exigible, and if so, at what percentage. In that regard, I further ordered the parties to file Affidavits and exhibit the necessary documents that will support their legal submissions before the court. I am safe to assume that with the Defendants paying the principal sum involved, the issues 1, 2 and 4 are now moot and need not be touched on by the court. The said issues concerned resolutions as to whether or not Defendants borrowed money from Plaintiff and if both Defendants are jointly and severally liable.
As there is no dispute now that monies were lent to Defendants by Plaintiff who is a friend, I am confronted with the issue as to the unlawfulness or otherwise of the interest exigible under the contract. The interest exigible is 50% of the principal payable within 10 days plus additional five (5) days grace period. As far as I understand the contract, what it meant was that the amount was to be repaid within two weeks and was to attract 50% interest rate. These issues have become necessary due to some of the fundamental legal points raised by the Defendants in their pleadings. First that the contract charging interest is illegal and contrary to the Money Lenders Act, with Plaintiff being their friend. And even if interest is chargeable, that the 50% rate of interest chargeable under the contract is unconscionable. Among the issues set down for trial after pre-trial was whether the interest agreed upon was unconscionable.
Payment of interest may arise as result of agreement between or among parties, by statutory provisions, by trade usage and damages awarded by the court. Generally as a matter of law interest is payable when parties in an agreement express the intent that the transaction entered into shall attract interest. The law will enforce the mutually agreed transaction agreed between parties arrived at arm’s length and in the absence of any of the vitiating factors such as fraud, unconscionability, illegality and the like. For this is how Court (Award of Interest and Post Judgment Interest) Rules, C. I 52 states as
“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 back 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”
Exhibit ‘A’ attached to the affidavit of Nii Adokwei Codjoe, is the agreement of the parties dated the 1st of December, 2016. Clause 6 of Ex ‘A’ on interest states that the loan amount of US$100,000.00 shall attract an interest of 50% over the ten plus five days grace period. In effect the claim of 50% interest on the amount within the two weeks seems to be supported by the law. See DIAB v QUANSAH  1GLR 101; HELOO v TETTEY  2 GLR 112.
The fact however, should not be lost that an agreement specifying a certain rate of interest to be payable does not lead to the inevitable and irresistible conclusion that the said interest rate should be enforced by the court. As stated supra an agreement regarding interest like the general principles governing contract may be impeached on grounds of fraud, duress, undue influence, mistake, illegality etc. Defendants impeach the agreement regarding the payment of 50% interest rate for the two weeks for the repayment as unconscionable and two that the agreement charging interest is tainted with illegality as Plaintiff is not a licensed money lender and only led Defendants to believe that he was only helping a friend during times of dire financial difficulties and was therefore estopped from demanding interest on the monies. These two are not light legal points of law that have been raised. I tackle them as follows:
According to Black’s Law Dictionary, 8th edition, it defines unconscionability to mean
“showing no regard for conscience; affronting the sense of justice, decency, or reasonableness”.
Not to be unconscionable is for the contract charging interest rate on a holistic examination to be reasonable, fair, justifiable, not excessive and neither harsh. See AHENFIE CLOTHE SELLERS ASSOCIATION v PHILOMINA MENSAH & OTHERS, J4/7/2010 dated 21st July, 2010.
In the 3rd edition of the Halbury’s Laws of England, Vol. 17 paragraph 1313, makes the same point that equity has over the years assumed an undoubted jurisdiction to grant relief against every specie of fraud, including cases where it may be apparent, from the intrinsic nature and subject of the bargain itself, that it was one which no man in his right senses would make on the one hand, and no honest and fair man would accept on the other, in that case there is said to be an inequitable and unconscionable bargain. See also WOOD v ABREY  56 E. R 588; CROSWELL v POTTER  1 WLR 255; CFC CONSTRUCTION LTD v ATTITSOGBE [2005-2006] SCGLR 858 SC.
In the ATTISOGBE case, the apex court had the opportunity to espouse the doctrine of equitable unconscionability by setting aside a bargain on the basis of a party’s old age implying a disability and noted as follows:
“the courts in Ghana have the right to set aside as unconscionable any dealing whether by contract or by gift, where on account of the special disability of one of the parties, he or she is placed at a serious disadvantage in relation to the other… poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary, these are all circumstances which in the right context can justify the courts’ intervention on the basis of equitable principles embodied in the doctrine of unconscionable bargain. Where a party successfully makes a case that he or she has a special disability or the facts of a case lend themselves to an application of the doctrine, the onus devolves on the dominant party to demonstrate that the transaction was fair, just and reasonable. If the dominant party fails to show that the transaction was fair, just and reasonable, the court is entitled to set the transaction aside”.
Having fortified myself with the law on equitable doctrine of unconscionability are there any peculiar facts and circumstances regarding this case that may lead a court of conscience to accede to the invitation by the Defendants that the contract charging an interest rate of 50% for a two week period for the repayment of the loan was unconscionable?
The Defendants are acclaimed to be astute businessmen in the petroleum industry and went into the transaction with eyes wide open. There is no disability like illiteracy, infirmity of body or mind or any such here. But that is not all the disability when dealing with unconscionability. Is there any evidence that the Defendants received independent financial advice before signing the agreement? Should a court of law uphold a loan contract of $100,000 that was repayable within two weeks demanding 50% as interest rate more especially when such contracts are boiler plate contracts leaving the borrower with no option to sign it as it is or leave it?
What it simply meant was that for the period of fourteen days, that Defendants had Plaintiff’s money, Defendants were to repay in all a total amount of US$150,000.00. A court of law being a court of conscience cannot ignore the harsh, excessive interest rate for this short period. It is mind boggling for a contract to demand such payment of interest rate and the court on the whole will not endorse such demand for the payment of such outrageous interest rate, so I find. The contention of Defendants regarding the unconscionability of the interest rate succeeds.
Again, Defendants have contended as a way of escaping the payment of interest that the Plaintiff is not a licensed money lender within the terms of the law and cannot charge interest on the loan granted them. With the repeal of the Money Lenders Ordinance, CAP 176 by section 47 of the Non-Bank Financial Institutions Act, 2008, Act 774, the applicable provision would be the Act 774. By section 2 of Act 774 it states that:
“(1) A person shall not provide any of the services specified in the First Schedule unless that person holds a valid licence issued for that purpose under this Act”.
In the First Schedule, the persons listed include, among others, money lending operations. It is therefore safe for me to find that Plaintiff having lent money charging interest will make him a money lender. For a money lender has been defined to be:
“a person whose business is that of moneylending or who carries on or advertises or announces or holds out in any way as carrying on that business, whether or not that person also possesses or owns property or money derived from sources other than the lending of money and whether or not that person carries on the business as a principal or as agent”.
It is therefore correct for me to find that Plaintiff is a money lender and is caught by section 2(1) of Act 774 and need a license to operate. In the affidavit, there is no evidence of such license having been displayed. Not showing evidence of that, does it make the contract between the parties illegal?
As was explained by Brobbey JSC in the AHENFIE CLOTHE SELLERS ASSOCIATION case supra that a contract may be described as illegal, void, null, enforceable, unenforceable, voidable, e.t.c and that each word carries its own meaning and connotation.
An illegal contract has been defined in Osborn’s Concise Law Dictionary, 8th edition, at page 169 as:
“A contract that is prohibited by statute (e.g. one between traders for minimum resale prices) or at common law as being contrary to public policy (such as agreements in restraint of marriage). It is void and neither party can recover money paid under it.”
The concept of illegality was first stated by Lord Mansfield in the case of HOLMAN v JOHNSON  1 COWP 341@343 that:
“If from the plaintiff’s own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and the defendant were to change sides, and the defendant was to bring this action against the plaintiff, the latter would then have the advantage of it, for where both are equally in fault, potior est conditio defendantis.”
And in the well-known case of SCOTT v BROWN  2 QB, 724 and at 728 where Lord Justice Lindley noted that:
“No court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal if the illegality is duly brought to the notice of the court and if the person invoking the aid of the court is himself implicated in the illegality”
Ex turpi causa non oritur actio ("from a dishonorable cause an action does not arise") and ex dolo malo non oritur actio (“No court will lend its aid to a man who finds his cause of action upon an immoral or an illegal act) as well as well as in pari delicto potior ex condition defendantis are triumvirate principles in contract law that set a defendant free from his obligations under an immoral or illegal contract.
For a contract to be deemed to be to be void and illegal, it must arise out of an illegal act. But a contract which contravenes a statute may not be void but voidable. The plaintiff having engaged in the business of lending money without the requisite license from the Bank of Ghana does not render the contract a void one so as to discharge whatever obligations that the Defendants were supposed to perform under the contract. There are specific penalties spelt out under section 3 of the Moneylenders Act, 1941 as:
(1) A person commits an offence if that person
(b) carries on business as a moneylender without being in possession of a valid moneylender’s license authorizing that person to do so…
And the penalty spelt out is 200 penalty units and for subsequent offence to a term of imprisonment for six months and in case of body corporate a fine of 200 penalty units and for subsequent offence 1000 penalty units.
I find no evidence on record also to conclude that the monies given out was meant to be a friendly assistance as Defendant. As it was noted in the AHENFIE case that:
“what cannot be denied is that a friendly assistance does not attract interest. Where the money given out as friendly assistance attracts interest of 52% or 23% that transaction will cease to be friendly let alone an assistance”.
With no evidence that Plaintiff is licensed to carry on the business of money lending and having the interest charge to be unconscionable, my duty as a Judge is not to encourage breaches of statutory provisions. As was noted by Date-Bah JSC in REPUBLIC v HIGH COURT; FAST TRACK; EXPARTE NATIONAL LOTTERIES J5/22/2009 dated 22nd July, 2009 that:
“No judge has authority to grant immunity to a party from the consequences of breaching an Act of Parliament. But this was the effect of the order granted by the learned judge. The judicial oath enjoins judges to uphold the law, rather than condoning breaches of Acts of Parliament by their orders.
Had it been only the unconscionability, I would have been prepared to re-open the transaction but there is also the element of a breach of a statutory provision, which is section 2 of Act 774. For the breach of Act 774, I hold that interest on the monies lent should not be payable so as not to encourage breach of statutory provisions. I will however, as the amount provided to Defendants was $100,000.00, order the Defendants to pay the $100,000.00 or its cedi equivalent as at today but not its equivalence as at the time the loan was granted to Defendants. This will ensure that Plaintiff does not suffer any depreciation in terms of the value of the money that was kept by Defendants.