ACCRA - A.D 2018

SUIT NO:  RPC/137/15


1. Interest rates          

2. Guarantors’ liability on a loan contract

3. The Borrower’s and Lender’s Act and its effect on loan contracts

4. Defendants’ failure to attend trial


In a writ issued out of the Registry of this Court, the Plaintiff claimed the sum of GH¢259,603.58 being the outstanding balance on the facility together with interest of 4% per month compounded daily on the outstanding balance of GH¢259,603.58 from 24th March 2015 till date of final payment. The Plaintiff described itself in its Statement of Claim as being a private equity company providing financial support to corporate entities. It stated that it had advanced to the 1st Defendant Company a loan facility for the construction of a 6 unit classroom block and other ancillary facilities at the Adabia Primary School. The 2nd to 5th Defendants had offered personal guarantees towards 1st Defendant’s repayment of the said facility.


According to the Plaintiff, the facility which was to run for 360 days at an interest rate of 4% per month compounded daily was secured by a letter dated 7th September 2011 from the Architectural and Engineering Services Ltd for the issuance of joint payment certificates to enable the Defendants honour payment.


It was the Plaintiff’s case that though the initial certificate was raised in the joint names of Plaintiff and 1st Defendant, the Defendants managed to secure payment solely thus denying the Plaintiff of any benefit under the certificate. The Plaintiff contended that the Defendants’ conduct was fraudulent. It gave the particulars of fraud as the following:

a) Defendants securing the cheques for payment in their sole names.

b) Defendants appropriating the cheques for their sole benefit without reference to the Plaintiff and contrary to the investment agreement.


The Defendants filed a joint defence in which they denied receiving a facility from the Plaintiff. They also stated that even if they had received a facility from the Plaintiff, this would have been in contravention of the Borrowers and Lenders Act, 2008 (Act 773) particularly at section 18.


The Plaintiff in Reply contended that the denial of ever taking a facility was dishonest and contended further that to allege illegality to the grant of the said facility was also a misapprehension of the law.

The issues set for trial are:

1. Whether or not Plaintiff is duly licensed to operate as a financial institution?

2. Whether or not the facility agreement between the parties is unlawful having regard to the Borrowers and Lenders Act?

3. Whether or not the Defendants have breached their obligations to pay under the said facility agreement?

4. Whether or not the Plaintiff is entitled to its claims?

5. Any other issue(s) that may arise from the pleadings.


In keeping with the High Court (Civil Procedure) (Amendment) Rules 2014, (CI87), the Court on 13th December 2016 ordered the parties to file their witness statements for case management to proceed. The Plaintiff was to have filed its witness statement on or before 22nd December 2016.  The Defence was to file its witness statements within 14 days of being served. The matter was adjourned to 19th January 2017 for the case management conference. Though the Plaintiff filed its witness statement within time, the Defendants failed to do so.


The suit was eventually adjourned to 15th March 2017. As at 17th October 2017, the Defendants had failed to file their witness statements. They had also failed to present themselves in court in spite of several hearing notices served on them on 27th January 2017, 13th February 2017, 29th June 2017 and 14th July 2017.

Rule 7A of Order 32 states thus:

The High Court (Civil Procedure) Rules, 2004 (CI 47) referred to in these Rules as the principal enactment is amended in Order 32 by the insertion after rule 7 of a new rule 7A Case Management

7A. (1) When on an application for directions the Court has dealt with all of the matters, the Court shall

(a) Give directions for the management of the case and set a time table for the taking and giving of directions and the trial; or

(b) Fix a case management conference and give direction relating to the management of the case as the Court thinks fit.

(2) The parties shall lodge with the Registrar a pre-trial check list four clear days before the date fixed for the case management conference or pre-trial review or both, the Judge may make any of the following orders:

(a) Strike out the action if the non-complying party is a plaintiff;

(b) Strike out the defence and counterclaim as the case may be if the non-complying party is a defendant;

(c) Order any party to pay costs; or

(d) Make any other appropriate order.


The court ordered the Plaintiff to state its case for consideration and the suit was further adjourned to 17th October 2017 for the court to hear the Plaintiff’s evidence on its claim. The Defendants failed to appear in court. In Ankumah v. City Investment Co. Ltd (2007/2008) SCGLR 1064 it was held that a court was entitled to give judgment if a party failed to appear after he had been given notice of the proceedings. For then it would be justifiable to assume that he did not wish to be heard. In the case of Re: West Coast Dyeing and Another (1987/88) 2 GLR 561, the court held that when a party refused to attend the trial and to testify, the court would be entitled to proceed with the trial and to determine the case on the basis of evidence adduced.

It is further provided for in Order 36 r 1 (2) of the High Court Civil Procedure Rules (2004) CI 47 thus:

1. (2) where an action is called for trial and a party fails to attend, the trial Judge may

(a) where the plaintiff attends and the defendant fails to attend, dismiss the counterclaim, if any, and allow the plaintiff to prove the claim;


The court therefore proceeded to hear evidence on the Plaintiff’s claim in spite of the Defendants’ refusal and/or failure to attend the hearing. The Plaintiff’s representative told the court in his witness statement that an amount of GH¢50,000.00 was disbursed to the 1st Defendant for the construction of a 6 unit classroom block at Adabia Primary School. This facility was secured by a letter from the AESL and guaranteed by the other Defendants. His witness statement more or less rehashed the events listed in the Statement of Claim. According to the Plaintiff, it did not operate as a financial institution by taking deposits from customers but rather invested in businesses. They claimed their operations did not offend any law and did not contravene the Borrowers and Lenders Act.

The court has carefully examined the Plaintiff’s case in its entirety. There are 2 agreements i.e. Exhibit A which is indicative of a facility to the tune of GH¢220,000.00. Exhibit B is however for a facility of GH¢80,000.00 out of which the 1st Defendant received GH¢50,000.00. Exhibit B was signed by 6th Defendant on behalf of 1st Defendant. Obviously, a company being an artificial person would act through individuals and in this case, 1st Defendant Company acted through 6th Defendant. One is therefore reminded of Bolton Engineering Co. Ltd v. TJ Graham & Sons Ltd (1957) 1 QB 159 where Lord Denning stated as follows:

A company may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot represent the mind and will. Others are directors and managers who represent the directing mind and will of the company and control what it does. The state of mind of these managers is the state of mind of the company and is treated as such.


In the case of Morkor v. Kuma (East Coast Fisheries Case) (1998/99) SCGLR 620 @ 632, the court per

Akuffo JSC (as she then was), stated the position of the law regarding companies thus:

Save as otherwise restricted by its regulations, a company after its registration has all the powers of a natural person of full capacity to pursue its authorized business. In this capacity, a company is a corporate being, which within the bounds of the Companies Act, 1963 (Act 179) and the Regulations of the company may do everything that a natural person might do. In its own name it can sue and be sued and it can owe and be owed legal liabilities. A company is, thus a legal entity with a capacity separate, independent and distinct from the persons constituting it or employed by it. From the time the House of Lords classified this cardinal principle more than a century ago in the celebrated case of Salomon v. Salomon & Co (1897) AC 22, it has subject to certain exceptions, remained the same in all common law jurisdictions and is the foundation on which our Companies Act is grounded.


In the case of Appenteng & Others v. Bank of West Africa & Others (1961) GLR 199, the court held that a company was a separate legal personality quite apart from its members. The members, the court said, were not even collectively the company. The company was not an agent of either of its members. However the directors of the company were the company’s agents. Exhibit A is a Term Sheet and Investment Agreement between the Plaintiff and 1st Defendant which involves an amount of GH¢220,000.00. This amount was secured by the following:

1. Letter of undertaking from Architectural and Engineering Services Ltd (AESL) dated 7th September 2011 stating that all payments due the issuer shall be drawn in the joint names of Talkai Company Ltd and Ghana Growth Fund Ltd.

2. Personal guarantees from all the directors and shareholders of Talkai Ghana Ltd

3. Show evidence of an all risk insurance for the project. (See Exhibit A).

Exhibit B is a Term Sheet and Investment Agreement between the Plaintiff and 1st Defendant which involves an amount of GH¢80,000.00. Exhibit B indicates that this amount was secured by the following:

1. A letter of undertaking from A & QS, the project consultants dated 7th September 2011 stating that all payments due the issuer shall be drawn in the joint names of Talkai Company Ltd and Ghana Growth Fund Ltd.

2. Personal guarantees from all the directors and shareholders of Talkai Ghana Ltd

3. Show evidence of an all risk insurance for the project. (See Exhibit B).


The court finds from the evidence adduced at the trial that the 1st Defendant did receive a facility from the Plaintiff. In their defence, the Defendants have denied ever receiving any facility from the Plaintiff. They have also alluded to section 18 of the Borrowers and Lenders Act stating that the Plaintiff did not comply with same in disbursing the facility. This is an implied admission that the facility was indeed disbursed. Section 18 of the Borrowers and Lenders Act states as follows:

Section 18(1)

A lender shall not conclude a credit agreement with a prospective borrower unless the lender provides the prospective borrower with a pre-agreement statement and quotation in the form specified in the Schedule.

Section 18(2)

A pre-agreement statement shall specify

(a) The principal amount;

(b) The proposed disbursement schedule of the principal debt;

(c) The interest rate;

(d) Other credit costs;

(e) The total amount involved in the proposed agreement ;

(f) The proposed repayment schedule; and

(g) The basis of any cost that may be assessed if the borrower breaches the contract

Section 18(3)

A lender who contravenes this section is liable to an administrative sanction imposed by the Bank.

Section 18(4)

In furtherance of subsection (3), a borrower may sue a lender for damages for loss suffered as a result of the contravention.


I have looked at the schedule to the Act. Exhibit B does not comply with the schedule set out in the Act. However, the remedy for breach of the Act is an administrative sanction imposed by the Bank of Ghana. Furthermore, the borrower may sue for damages for loss suffered as a result of the lender’s failure to stick strictly to the schedule. The Plaintiff as lender did not follow the schedule. The 1st Defendant as borrower however did not sue and did not make a counterclaim on this point when it was itself sued. It is now too late in the day for the Defendants to be canvassing this failure as a defence! In Fibrosa Spolka Akeying v. Fairburn Lawson Combe Barbar Ltd (1943) AC 32 the court held:

It is clear that any civilized system of law is bound to provide remedies from cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from another which is against conscience that he should keep. Such remedies in English Law are generally different from remedies in contract or tort and are now recognized to fall within a second category of the Common Law which has been called quasi-contract or restitution. The principle of unjust enrichment requires:

1. That the Defendant has been enriched by the receipt of a benefit.

2. That this enrichment is at the expense of the Claimant.

3. That the retention of the enrichment be unjust.


The Act did not state that any agreement that was non-compliant was a nullity. The court finds the 1st Defendant liable to the Plaintiff in the sum of GH¢50,000.00. The 2nd to 6th Defendants have been sued as Directors and Shareholders of the 1st Defendant Company. As has already been stated, the 1st Defendant had a separate legal existence from its Directors. The 1st Defendant is a company limited by liability. This means that by incorporation, the 1st Defendant became a separate legal entity distinct from those who incorporated it. That is to say, the 1st Defendant was separate and distinct from the 2nd to 6th Defendants who were its directors. In the case of Salomon v. Salomon (1897) AC 22, the court was of the view the persons who controlled the company, the motives behind the formation of the company or the motives of the shareholders were all immaterial. Once duly incorporated, there was a figurative veil that separate and distinguished the body corporate from the persons who formed it. In the case of Worldwide Shipping and Agencies (Gh) Ltd v. Darko (2001- 2002) GLR 488 CA, the court found that though the appellants had said they acted on behalf of a limited liability company yet they had failed to disclose the whereabouts of the company. The court quoted with approval the views of Sanborn J in United States v. Milwaukee Refrigeration Transit C, 142 Fed 247 at 255 thus:

A corporation will be looked upon as a legal entity as a general rule … but when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.


The proper Defendants in an action on contract such as in the instant suit would be the person or persons who made the promise and then proceeded to breach the said promise necessitating the suit. Since the 2nd to 6th Defendants had been sued jointly and severally with the 1st Defendant, they would be proper parties if the Plaintiff could establish their personal liability in the breach of the contract between the parties. Also if the veil of incorporation were to be lifted the Defendants could be held personally liable for any breaches the Plaintiff had complained of. In the instant case, the 6th Defendant, a director of the 1st Defendant Company signed Exhibit B. If the Plaintiff wished to sue on the transaction, it would be the legal entity which would be liable and not the individuals i.e. 2nd to 6th Defendants unless the Plaintiff could prove that the 2nd to 6th Defendants were personally liable for the breach which had brought about this suit. From Exhibit B, it was obvious that the Investment Agreement was between the Plaintiff and 1st Defendant. The 2nd to 6th Defendants were sued because they were the registered directors of the Defendant Company which is a limited liability company and because they were said to have executed personal guarantees on behalf of 1st Defendant. I have seen personal guarantees tendered in evidence as Exhibits D (signed by 2nd Defendant), E (signed by 3rd Defendant), F (signed by 4th Defendant), G (signed by 5th Defendant) and H (signed by 6th Defendant). These personal guarantees were however signed in respect of the loan amount of GH¢220,000.00 and not the amount of GH¢50,000.00 the later facility taken by 1st Defendant.


In paragraphs 4, 5 and 6 of its Statement of Claim, the Plaintiff states as follows:

4. Plaintiff says that upon an application by the 1st Defendant through the 2nd, 3rd, 4th, 5th and 6th Defendants various facilities were granted to the 1st Defendant for various construction projects.

5. Plaintiff says that the first application was granted for the renovation of a Dormitory Block at Bawku Technical Institute which has been duly paid off by the Defendants.

6. Plaintiff says that another facility of GH¢50,000.00 was granted on 10th October, 2011 for the construction of a 6 unit classroom block and other ancillary facilities at Adabia Primary School.


The personal guarantees currently in evidence were dated 14th September 2011 and were in respect of the amount of Gh¢220,000.00 the loan amount previously taken by the 1st Defendant. This, the Plaintiff has admitted in its pleadings has been repaid. The second facility of GH¢80,000.00 dated 10th October, 2011 out of which GH¢50,000.00 was disbursed and which is the subject matter of this suit had no such corresponding guarantees. If the parties had intended the personal guarantees previously entered into on 7th September 2011 in respect of the amount of GH¢220,000.00 to be a continuing one, it should have been expressly stated in Exhibit B. It was not. The court cannot now hold that the personal guarantees entered into in respect of the GH¢220,000.00, covered by Exhibit A and which has already been paid off should be employed to cover the GH¢50,000.00 taken thereafter in the absence of express terms to that effect.


Although Exhibit B has outlined the security/collateral for the facility, no evidence has been attached showing that the parties had complied with their own agreement. The security/collateral was stated as being:

1. A letter of undertaking from A&QS, the project consultants dated 7th September, 2011 stating that all payments due the issuer shall be drawn in the joint names of Talkai Company Ltd and Ghana Growth Fund Ltd.

2. Personal Guarantees from all the directors and shareholders of Talkai Company Ltd

3. Show evidence of an all risk insurance for the project


None of the above documents were shown to the court as evidence of the Plaintiff’s contentions.  In the book The Law of Guarantees (3rd edition) authored by Geraldine Mary Andrews and Richard Millett at p. 3, the definition of a contract of guarantee is given as:

“A contract of guarantee, in the true sense, is a contract whereby the surety (or guarantor) promises the creditor to be responsible, in addition to the principal, for the due performance by the principal of his existing or future obligations to the creditor, if the principal fails to perform these obligations.”


The authors also referred to the case of Wardens and Commonalty of the Mystery of Mercers of the City of London v. New Hampshire Insurance Company (1991) J.I.B.F.L. 144 where the court quoting with approval Halsbury’s Laws of England (4th edition) at paragraph 101 said:

A guarantee is an accessory contract by which the promisor undertakes to be answerable to the promise for the debt, default or miscarriage of another person whose primary liability to the promisee must exist or be contemplated.”


There being no contract of guarantee in this transaction, coupled with the absence of anything in the agreement to suggest that in the event of breach, the directors were to be held jointly and severally liable together with the Business Entity, the court finds that the 2nd to 6th Defendants were not proper parties to the instant suit. In the case of Owusu v. R. N. Thorne Ltd & anor (1966) GLR 90 the court held that though the theory of legal personality of corporations had its own practical problems it was clear that a limited company or corporation had a legal existence apart from the directors and members, and it was in a few recognized exceptions that the law would lift the "corporate veil," to find who was behind the company. In view of this the 2nd to 6th Defendants would ordinarily not be proper parties to this suit. It would be the business entity, which entered into the contract with the Plaintiff and therefore any liability arising would be the business entity’s i.e. 1st Defendant and not the 2nd to 6th Defendants.


The court in Morkor v. Kuma (supra) at p. 632 however went on to say:

The corporate barrier between the company and the persons who constitute or run it may be breached only under certain circumstances. These circumstances may be generally characterized as those situations where, in the light of the evidence, the dictates of justice, public policy or the Companies Act itself so requires. It is impossible to formulate an exhaustive list of the circumstances that will justify a lifting of the corporate veil. However the authorities indicate that such circumstances include where it is shown that the company was established to further fraudulent activities or to avoid contractual liability.


The court referred to Halsbury’s Laws of England Volume 7(1) and gave instances where the court will pierce the corporate veil in order to enable it to do justice by treating a particular company for the purpose of litigation before it, as identical with the person or persons who control that company such as fraud or improper conduct, deliberate attempts at evasion of legal obligations or willful misdeeds. The Plaintiff has contended that the Defendants collectively connived with the persons who were to pay on the certificates to take the money meant to be in the Plaintiff and 1st Defendant’s joint names. How was this carried out? The Plaintiff did not say. The court in the case of Atta & Another v. Adu (1987/88) GLR 233 @ 243 was of the considered view that fraud must be specifically pleaded with the particulars that constitute it fully set out and strictly proven. The court held further that a general allegation of fraud has never been held sufficient to invite serious consideration of it. In the case of The Republic v. High Court Accra: Ex parte Aryeetey (Ankrah Interested Party) (2003/2004) SCGLR 398 the court at p. 407 quoted with approval Davy v. Garrett (1877) 7 Ch.D 473 @ 489 thus:

“In the Common Law Courts no rule was more clearly settled than that fraud must be distinctly alleged and as distinctly proved, and that it was not allowable to leave fraud to be inferred from the facts.”


See also the case of Boateng (No. 2) v. Manu (No. 2) (2007/2008) SCGLR 1117 @ 1126 where it was held that a finding of fraud is not to be made without clear and cogent evidence upon the subject. Could fraud be concluded when no evidence had been led on the subject? I did not find any evidence to warrant such a finding. I also found no evidence of fraud especially when there was no evidence to show the letter of undertaking from A&QS, the project consultants dated 7th September, 2011 stating that all payments due the issuer shall be drawn in the joint names of Talkai Company Ltd and Ghana Growth Fund Ltd. The only letter of undertaking tendered in evidence as Exhibit C is in respect of the Renovation of the Dormitory Block for Bawku Technical Institute and was written by AESL Ltd on 7th September 2011. It has nothing to do with the construction of a 6 unit classroom block and was therefore of no utility in this transaction. The Plaintiff although it pleaded and particularized fraud, failed to prove fraud. The obligation on parties invoking the jurisdiction of the court is neatly captured in Sections 10(1), 11(1) and 11(4) of the Evidence Act (1975) NRCD 323:

Section 10(1)

For the purposes of this Act, the burden of persuasion means the obligation of a party to establish a requisite degree of belief concerning a fact in the mind of the tribunal of fact or the court.

Section 11(1)

For the purposes of this Act, the burden of producing evidence means the obligation of a party to introduce sufficient evidence to avoid a ruling against him on the issue.

Section 11(4)

In other circumstances the burden of producing evidence requires a party to produce sufficient evidence so that on all the evidence a reasonable mind could conclude that the existence of the fact was more probable than its non-existence.”

In the case of Takoradi Flour Mills v. Samir Faris (2005/2006) SCGLR 882 at 900 the court said:

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.

And as Adade JSC put it succinctly in Nartey v. Mechanical Lloyd Assembly Plant Ltd (1987/88) 2

GLR 314 at 344:

“A person who comes to court no matter what the claim is must be able to make a case for the court to consider otherwise he fails.”


The Plaintiff’s case fails against the 2nd to 6th Defendants for lack of evidence.

In view of the above, the court finds the 1st Defendant Company alone, liable to the Plaintiff in the sum of GH¢50,000.00. From Exhibit B, the facility agreement the Plaintiff signed with 1st Defendant pegged the interest rate at 4% a month compounded daily. The Plaintiff has sued for interest on the sum owed together with interest from 24th March 2015. The Court Award of Interest and Post Judgment Interest Rules (2005) CI 52 provides for the award of interest on judgment debts. It states at Rule 1 as follows:

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.


The court will therefore order the repayment of GH¢50,000.00 being the debt owed by the 1st Defendant to the Plaintiff together with interest of 4% per month compounded daily as detailed out in Exhibit B from 24th March 2015 up to and inclusive of the date of final payment.

Costs of GH¢10,000.00 is awarded against 1st Defendant.