IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL DIVISION),
KUMASI - A.D 2018
G.N. BANK GHANA LIMITED - (Plaintiff)
MRS OLIVIA NTI KYEREMEH AND ANOTHER - (Defendant)
DATE: 26TH OCTOBER, 2018
SUIT NO: BFS 74/2015
JUDGES: DR. RICHMOND OSEI-HWERE JUSTICE OF THE HIGH COURT
EMMANUEL AMOAH FOR THE PLAINTIFF
ASEIDU BASOAH FOR THE DEFENDANTS
On the 8th of October, 2014 the Plaintiff instituted an action against the 1st and 2nd Defendants jointly and severally for the following relief:
a. Recovery of the sum of one hundred and sixty-three thousand eight hundred and eighty-five Ghana cedis being outstanding balance on a restructured loan facility granted to the defendant pursuant to a banking facility agreement dated 31st October 2012;
b. Interest on the sum at the contractual rate of 60% per annum from 15th June 2014 till date of final payment; and
c. Alternatively, judicial sale of Plot No. 13 Block H, Agogo, Ashanti-Akim North in the Ashanti region.
The Plaintiff’s Case
The Plaintiff’s case is that it is a limited liability company registered under the laws of Ghana to engage in the business of banking. It is the case that the Defendant has been their client prior to 2010 and that in 2010, the 1st defendant was granted an overdraft facility. As at 31st August 2012, the overdraft balance stood at about GHC 79,054.00. The defendants aver that upon the request of the first defendant, the overdraft facility was restructured into a loan facility to be paid within a period of 24 months at an interest of 3.5% per month. According to the plaintiff, the Defendants’ home at Plot No. 13 Block H Agogo was used as collateral for the loan and the memorandum of the title deeds was deposited with the Plaintiff as evidenced by Exhibit E. The plaintiff has also exhibited a loan facility agreement which was entered between the parties. It is the plaintiff’s case that the 1st defendant has refused to pay off the loan facility which as at 15th June 2014 stood at GHC 163,885.00 and this includes the principal and interest. Also, the 1st defendant has failed to abide by the terms of the loan facility agreement. The plaintiff avers that since 31st October 2012, the 1st defendant has only paid a total amount of GHC 6,445.00 leaving an outstanding amount to be paid. It is the case of the plaintiff that the 1st defendant has admitted her indebtedness to the Plaintiff by exhibiting Exhibit MNK 1.It avers that their Exhibit A is the full version of Exhibit MNK 1.
The Defendants’ Case
It is the case of the defendants that the relationship between the parties began prior to 2010 and that sometime in October 2012, they approached the Plaintiff to convert an overdraft facility granted into a loan facility but the conversion was never done. The 1st defendant says she has paid GHC 151,283.00 as repayment in respect of the overdraft facility of GHC 20,000.00 as indicated by Exhibit MMK 1 and that in spite of all these payments the plaintiff is erroneously claiming that there is still an outstanding amount to be paid. The defendants deny that a restructured loan facility of GHC 82,000.00 was made available to the 1st defendant. The defendants also aver that the plaintiff has failed to show a credible statement of account of the 1stDefendant.
Issues for Determination
After unsuccessful attempts at settlement, the following issues were set down for trial namely:
Whether or not the Defendants owe the Plaintiff the sum of One Hundred and Sixty Thousand and Eighty-Five Ghana Cedis (GHC163, 885.00).
Whether or not the contractual rate of interest is 60% per annum.
Whether it not the agreement at any point in time attracted an interest of 42% per annum.
Whether or not the Plaintiff is entitled to the judicial sale of Plot 13 Block H Agogo Asante-Akim.
Burden of Proof
To succeed in his claim, the plaintiff is required to prove his case to the required standard in civil suits, that is by the preponderance of probabilities as required by sections 11(4) and 12 of the Evidence Act, 1975 (NRCD 323). In other words, the Plaintiff must demonstrate to the satisfaction of the court that his case is more probable than not, else he loses. Thus, in Takoradi Flour Mills v Samir Faris [2005-2006] SCGLR 882 at 884, the Court held as follows:
“It is sufficient to state that being a civil suit, the rules of evidence require that the Plaintiff produces sufficient evidence to make out his claim on a preponderance of probabilities, as defined in section 12 (2) of the Evidence Decree, 1975 (NRCD 323). In assessing the balance of probabilities, all the evidence, be it that of the Plaintiff or the Defendant must be considered and the party in whose favour the balance tilts is the person whose case is the more probable of the rival versions and is deserving of a favourable verdict.”
I shall proceed to discuss the issues to ascertain whether plaintiff has led cogent evidence to establish his claim. I shall tackle all the issues together as they are inextricably linked.
Section 25 of the Evidence Act, 1975 (NRCD 323) provides:
“Except as otherwise provided by law, including a rule of equity, the facts recited in a written document are conclusively presumed to be true as between the parties to the instrument, or their successors in interest.”
In Akim Akroso Stool and Others v Akim Manso Stool and Others 1989-90 1GLR 100 at page 106, the Court of Appeal held that:
“what the word in a document mean can only be derived from the document itself. The intention of the parties must be gathered from the written instruments. The function of the court is to ascertain what the parties meant by the words which they have used. The court is to declare the meaning of what is within the instrument and not what was intended to have been written so as to give effect to the intention.”
Exhibit B is the Loan Facility Agreement between the Plaintiff and the 1st Defendant.The terms and conditions of the agreement are captured mainly in the first paragraph of the agreement.It is stated as follows:
“We refer to your application dated 11th September, 2012 and our discussions with you, Olivia NtiKyeremeh, P. O. Box 19, Juaso (the “Borrower”) on the above subject and are pleased to advise that First National Savings and Loans Company Limited (the “FNSL”) has approved your request subject to the following terms and conditions:
Limit at: Konongo
Facility Type: SME Loan
Amount: Eighty-Two Thousand Ghana Cedis (GHS82, 000.00)
Purpose: To term out an existing overdrawn balance on the customer’s current account to enable customer pay-off.
Tenor:Twenty-four (24) months from the date of Disbursement/drawdown
Interest Rate: 3.5% per month
Processing Fee: 3.0% flat (payable upfront)
Repayment: Twenty-four (24) months equal principal and interest installment of GHC6, 287.00.”
From the agreement the loan facility also attracts a penal interest rate of 60% in the event of default.
Attached to exhibit B is exhibit D – a document signed by the 1st defendant and two officials of the plaintiff to indicate the former’s acceptance of the loan facility. The 1st defendant is, however, alleging that she did not sign exhibit D. This is what transpired at page 26 of the record of proceedings during cross examination of the 1st defendant:
Q: Take a look at Exhibit D. I am suggesting to you that you signed Exhibit D?
A: I did not sign the document I can also see Daniel Donfeh's name but the signature was signed for him.
Q: Can you sign a document?
Q: Can you tell the Court why you decided to thumbprint your witness statement?
A: I signed and thumb printed. It was my lawyer who directed me to do so.
Q. Look at Exhibit D where you denied that you signed and your witness statement you have signed. Look at the two signatures together. I am suggesting to you that the two signatures were signed by you?
A: I still maintain I did not sign Exhibit D.
A signature has the legal effect of signifying that a party has read, understood and assents to a contract. The 1st defendant is alleging that the signature which appears on the face of exhibit D and purporting to be hers was forged as it was made without authorization. An allegation of forgery has been made against the plaintiff. However, beside the bare allegation, the 1st defendant failed to lead cogent evidence to substantiate the claim. In Bilson v Rawlings and Anor (1993-1994) 2GLR 413 at page 422, the court held as follows:
“… The law has always been that he who alleges that certain state of fact exists must prove it. And if he failed to discharge the onus on him he cannot rely on any weakness in the first defendant’s case.”
Also, in a civil action, an allegation that a crime such as forgeryhas been committed must be proved beyond reasonable doubt. This rule is encapsulated under section 13 (1) of NRCD 323 which provides:
Section 13—Proof of Crime.
(1) In any civil or criminal action the burden of persuasion as to the commission by a party of a crime which is directly in issue requires proof beyond a reasonable doubt.
In Fenuku v John-Teye [2001-2002] SCGLR 985, it was held (in holding 5) that:
“The law regarding proof of forgery or any allegation of a criminal act in a civil trial was governed by section 13(1) of Evidence Decree, 1975 (NRCD 323), which provided that the burden of persuasion required proof beyond reasonable doubt.”
Thus, the evidence led in proof of criminal allegation in a civil trial must be such that the court should be able to convict on that crime if it were trying it in criminal proceedings.The1st defendant did not lead evidence to establish forgery of her signature as required by the standard of proof of criminal allegation in civil matters.
Exhibit C is the loan application form which is endorsed with the passport sized photograph and signature of the 1stdefendant. Exhibit E is also a memorandum of deposit of title deeds which is evidence of the delivery and deposit of title deeds and related documents of property situate at Plot No. 13 Block H Agogo in the Ashanti Akim North District. Following the loan agreement, the documents were deposited with the plaintiff with the intent to create a security as and by way of mortgage of property in favour of the plaintiff. It is not for nothing that exhibit E was signed by the 1st defendant. It was executed in furtherance of the loan facility agreement and this corroborates the fact that there is in existence a loan agreement duly signed by the 1st defendant. I have looked at the 1st defendant’s signatures as captured in the witness statement as well as exhibits C and E and in the absence of any evidence to the contrary, I can concludethat the aforesaid signatures are consistent with the 1st defendant’s signature in exhibit D. The result is that the loan agreement (exhibit B) is authentic and the court will therefore give effect to the terms. Exhibit B was executed following an application by the 1st defendant to the plaintiff for the latter to convert an overdraft facility into a loan facility. While the plaintiff insists that the overdraft facility was never converted into a loan, the defendant insists that per exhibit B the overdraft facility was restructured into a loan. The plaintiff and 1st defendant exhibited bank statements in exhibits A and MMK 1 respectively in a bid to proof their point. A bank statement is invaluable in clarifying the transaction details between a bank and its customer.
In effect, the bank statements (exhibits A and MMK 1) are the primary documents that can be used to ascertain whether or not the overdraft facility was indeed restructured into a loan as dictated by the loan facility agreement (exhibit B). After examining both bank statements, I make the following findings of fact:
1. From the Statements, the Defendant’s request to restructure the overdraft facility into a loan (Term loan) on October 31, 2012 was not adhered to i.e. the overdraft facility which stood at GHC82,567.75 as at 31st October, 2012 per page 3 of Exhibit A was never converted into a loan resulting in accrued interest as well as penalties.
2. Since the overdraft facility was maintained on the account after 31st October 2012, other charges were applied to the account. Evident on the Bank statement are charges on the OD (overdraft), interest on the overdraftetc. which applied after 31st October, 2012.For instance, on 30th December, 2011 charges on Overdraft (OD) amounted to GHC 2,257.82.
3. There were other credit transactions on the current account to reduce the overdraft balance amidst the application of the charges and interests on the account for the same period under review.
4. A total credit balance of GHC151, 283 for the period 08 April 2010 to 08 April 2015 could be reconciled on the two Bank statements.
5. The total debit balances on both statements could, however, not be reconciled. While the figure GHC371,791.80 appeared on exhibit A, exhibit MMK 1 recorded GHC330,997.63.
6 The balance on exhibit A recorded GHC179, 714.63 (GHC330, 997.63 - GHC371, 791.80) which represents the overdraft position as at 29th October, 2014 and that of exhibit MMK 1 recorded GHC220, 508.80 (GHC371,791.80 - GHC151,283.00) which also represents a negative position (overdraft position) as at 29th October, 2014.
7. Finally, there is no evidence of a term loan (loan) facility on the Bank Statements tendered.
From the foregoing, it is clear that even though the parties agreed to the restructuring of the overdraft facility into a loan facility, the same was not implemented by the plaintiff. However, having regard to the conditions in the Banking Facility Agreement dated October 31, 2012, the 1stdefendant ought to have paid a total amount of GHC150,888.00 by the date of maturity on a regular monthly payment scheduled as specified in the contract. This amount represents the restructured loan of Eighty-two Thousand Ghana Cedis (GHC82, 000) plus interest rate of 3.50% per month payable on a monthly installment of GHC6, 287 for twenty-four (24) months.
It is evident from the Bank Statement (exhibit A) that the Defendant had made some payments into the account after 31st October, 2012 which it is believed was to service the facility. The total payments from 31stOctober, 2012 to 29th December, 2014 amounted to GHC7, 190. Thus, the outstanding balance payable after the maturity period of the loan agreement is GHC143,698 (i.e. GHC150,888.00 – GHC7,190).This is against the debit balance on the overdraft facility which per exhibits A and MMK 1 amounted to GHC220,508.80and GHC179,714.63 respectively as at 29th December 2014. In the circumstance, I will reopen the loan transaction to effectuate the intentions of the parties under the loan facility agreement (exhibit B) and to ensure that the 1st defendant pays the amount fairly due in line with section 1 of the Loan Recovery Act, 1918 (Cap 175). It provides as follows:
“1. Re-opening a money-lending transaction
(1) The Court may re-open a transaction where the transaction is harsh and unconscionable or isotherwise a transaction in respect of which a court of equity would give relief.
(2) The Court in re-opening a transaction under subsection (1) may take an account between thelender and the person sued, and may, despite
(a) a statement or settlement of the account, or
(b) an agreement purporting to close previous dealings and create a new obligation, re-open an account already taken between them, and relieve the person sued from payment of a sum of money in excess of the sum adjudged by the Court to be fairly due in respect of the principal, interest and charges as the Court having regard to the risk and the circumstances, may adjudge to be reasonable …”
Consequently, it is ordered that the 1st defendant pays the outstanding balance of GHC143, 698 (i.e. GHC GHC150,888.00– GHC7,190) which should have been paid to the plaintiff upon maturity of the loan.
Is the plaintiff entitled to the penalty rate of 60% per annum?
In Dunlop Pneumatic Tyre Co. Ltd v New Garage & Motor Co. Ltd  AC 79 the court per
Lord Dunedin defined a penalty in relation to liquidated damages as follows:
‘‘a) It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.
b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid. This though one of the most ancient instances is truly a corollary to the last test ... etc”
A straightforward example of the application of the Dunlop Pneumatic Tyre Co. Ltd criteria is Campbell Discount Co. Ltd v Bridges  AC 600, where the House of Lords struck down as a penalty a clause in a high purchase agreement requiring the hirer to pay compensation for premature termination on the grounds that the clause provided a sliding scale which operated in the wrong direction: the less the depreciation of the vehicle, the greater was the compensation payable.
Penalty clauses are not generally enforceable under the common law. It is, however, important to note that the common law principle of a penalty clause has seen a recent modification in two consolidated English cases: Cavendish Square Holding BV v Talal El Makdessi and Parking Eye Limited v. Beaveis  UKSC 67. The UK Supreme Court took the position that a clause would not be judged penal unless same “imposes a detriment on the contract breaker which is out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation”.
The Ghanaian court seems to adopt the position of the common law in striking out penalty clauses in liquidated damages claims. In Adjei v Oteng alias Ama [1997-98] 1 GLR 725, Holding 1, Afreh (JA as he then was) held:
‘‘When the parties to a contract stipulated the sum to be paid by way of damages in the event of a breach, the sum stipulated might be classified as liquidated damages or a penalty but not both. The essence of a penalty was a payment of money stipulated as in terrorem of the offending party, but the essence of liquidated damages is a genuine covenanted pre-estimate of damage. However, that issue was a question of construction to be determined upon the facts and inherent circumstances of each particular contract as at the time of making the contract. It would only be allowed where it was found to be liquidated damages and not a penalty. In the instant case, the payment of 50 percent of the deposit stipulated in the contract was not a genuine pre-estimate, at the time the contract was made, of the loss the plaintiff would incur if the defendant broke the contract. It was an extravagant and unreasonable amount in comparison with the greatest damage or loss that at the time of the contract the parties could genuinely estimate the plaintiff would suffer in the event of a breach by the defendant. Since it was clear that it was in the nature of a threat held over the defendant in terrorem—as a security to the plaintiff that the defendant would perform the contract—the sum stipulated was a penalty. Accordingly, the plaintiff could not claim it. Dictum of Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd  AC 79 at 86-87 applied.’’
In construing whether a clause is in truth a penalty, the court looks beyond labelling to ascertain whether indeed the sum stipulated is a genuine pre-estimate of the loss suffered as a result of the breach. In the instant case, the penalty clause of 60% per annum amounts to payment of GHC 86,218.80 per annum for the breach. This amount is unconscionable and out of proportion to the legitimate interest of the plaintiff. From the facts, payment of the compound interest together with the principal sum is enough given the fact that the compound interest of 3.5%is relatively high as compared to the commercial bank rate. I am therefore persuaded by the dictum of Afreh (JA as he then was) and consequently strike out the penalty clause as extravagant and unconscionable. I am emboldened to take this decision in the light of two Supreme Court decisions i.e. Mensah and Others v. Ahenfie Clothes Sellers Association  SCGLR 680 and Mensah and Ors v. Royal Beneficiaries Association [2013-2014] 2 SCGLR where the Supreme Court struck down interest rates as they were held to be unconscionable.
In conclusion, I enter judgment in favour of the plaintiff against the 1stdefendant in the amount
of GHC143,698 plus interest at the commercial bank rate from 29th December, 2014 till date of final payment.In the alternative, the plaintiff can cause judicial sale of property situate at Plot No. 13 Block H Agogo in the Ashanti Akim North District to defray whole or part of the debt.
Costs of GH¢8,000.00 is awarded against the Defendants.