KWABENA BOATENG vs MELBOND MICROFINANCE COMPANY LTD
  • IN THE SUPERIOR COURT OF JUDICATURE
    IN THE HIGH COURT (COMMERCIAL DIVISION)
    ACCRA - A.D 2018
KWABENA BOATENG - (Plaintiff)
MELBOND MICROFINANCE COMPANY LTD -(Defendant)

DATE:  18 TH MAY, 2018
CIVIL APPEAL NO:  CM/0772/2016
JUDGES:  SAMUEL K. A. ASIEDU JUSTICE OF THE HIGH COURT
LAWYERS:  ISAAC AKWANTE ESQ., FOR ANTWI ABUAKWA ESQ., FOR PLAINTIFF PRESENT
JOHN DAVID MERSON ESQ., FOR DEFENDANT
JUDGMENT

 

By a writ of summons issued on the 11th November 2016, the plaintiff claims against the defendant company.

a)    An order declaring that the act of the defendant in locking out plaintiff and ransacking his shop and carrying away his merchandise without any court order is unlawful and an affront to Plaintiff’s right to due process.

b)    A declaration that the unilateral takeover of Plaintiff’s houses without recourse to the courts is unlawful, void and of no effect.

c)    An order directed against the defendants to pay for the merchandise they carried from plaintiff shop and had kept all this while.

d)    An order directed against the defendant to pay for the sales of the one week that defendants locked out plaintiff and prevented him from working.

e)    An order declaring defendant’s acts as a breach of contract and compensation for the breach.

f)     Any other relief the court deem fit.

 

After the service of the writ and the accompanying statement of claim on the defendant and after the filing of appearance and a statement of defence by the defendant, the matter was set down for pre-trial settlement but when the parties could not settle at pre-trial, issues were set down and the case referred to trial.

 

From the pleadings filed by the parties the court finds that it is not in dispute that the plaintiff is a businessman and operates a store at Zongo Lane in Accra where he deals in musical instruments. It is also not in dispute that the defendant is a company incorporated under the laws of Ghana and operates as a non-bank financial institution. Again, from the evidence adduced before the court, the parties do not dispute that in December 2014, the defendant advanced the sum of GH30,000.00 to the plaintiff as a loan to expire at the end of six months as evidenced by exhibit 1 tendered by the defendant company herein. There is also pleading and evidence to the effect that the plaintiff also took another loan of GH3,200.00 from the defendant. The plaintiff has pleaded in paragraph 7 of his statement of claim that he has finished paying off the GH3,200.00 loan together with interest thereon. Nonetheless, the defendant has denied the plaintiff’s assertion of full re-payment of the loan in paragraph 4 of its statement of defence.

 

However, the defendant’s witnesses have admitted, as per the answer given by DW1, Isaac Boye, under cross examination on the 26th October 2017 that the plaintiff had paid off the loan of GH3, 200.00 which was subsequent to the first loan, advanced to him. Hence, the current dispute does not concern the loan of GH3,200.00. As part of the terms of the loan of GH30,000.00, the plaintiff was to pay a flat rate of interest of 5% per month for a period of six months which works up to GH9,000.00 and a penal rate of interest of 6% per month. It is worthy of note that the interest rate of 5% per month was stated in exhibit 1 as 7% per month. However, in the witness statements and evidence given under cross examination of DW1 Isaac Boye, the Loans Officer of the defendant company, as well as that of DW2 Henry Hodenti, the Branch Manager of the defendant company, they have admitted on behalf of the defendant that the rate of interest that was agreed upon in exhibit 1 was 5% and not 7% as stated therein and that therefore, the 7% captured on exhibit 1 was a mistake and a typing error. Indeed, the plaintiff has averred in paragraph 5 of his statement of claim that the total amount of interest on the loan of GH30,000.00 granted him comes to GH9,000.00. Although the plaintiff’s averment in paragraph 5 of his statement of claim was denied by the defendant company in paragraph 4 of its statement of defence, yet the witnesses of the defendant admitted under cross examination that the rate of interest actually worked up to the sum of GH9,000.00.

 

The court has found, upon examination of exhibit J1 tendered by the plaintiff herein, that the total amount of interest that was charged by the defendant company was the sum of GH9,000.00 and that this amount of interest was debited to the plaintiff’s loan account, exhibit J1 herein, on the 28th November 2014. The plaintiff has alleged that the defendant deliberately hid the rate of interest by stating it as monthly rate instead of annual rate approved by the Bank of Ghana and by so doing the defendant charged an unconscionable rate of interest over and above the approved range by the Bank of Ghana. This averment is contained in paragraphs 8 and 9 of the statement of claim. The defendant has denied this allegation at paragraph 4 of its statement of defence and, that being so, it becomes the duty of the plaintiff to lead cogent evidence to prove this allegation if the plaintiff hopes to succeed on this claim as stated in sections 11(1) (4) and section 17 of the Evidence Act, 1975, NRCD 323 which provides that

11.  Burden of producing evidence defined

(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 on the issue against that party.

(4) In other circumstances the burden of producing evidence requires a party to produce sufficient evidence which on the totality of the evidence leads a reasonable mind to conclude that the existence of the fact was more probable than its non-existence.

17. Allocation of burden of producing evidence

Except as otherwise provided by law,

(a) the burden of producing evidence of a particular fact is on the party against whom a finding on that fact would be required in the absence of further proof;

(b) the burden of producing evidence of a particular fact is initially on the party with the burden of persuasion as to that fact.

 

It has been held in Takoradi Flour Mills vs. Samir Faris [2005-2006] SCGLR 882, the court explained the burden cast by law on a plaintiff such as in the instant case. The court pointed out that

“It is sufficient to state that this 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 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”

Further, in Ackah v Pergah Transport Ltd [2010] SCGLR 728 the court re-stated the point that:

It is a basic principle of the law on evidence that a party who bears the burden of proof is to produce the required evidence of the facts in issue that has the quality of credibility short of which his claim may fail. The method of producing evidence is varied and it includes the testimonies of the party and material witnesses, admissible hearsay, documentary and things (often described as real evidence), without which the party might not succeed to establish the requisite degree of credibility concerning a fact in the mind of the court or tribunal of fact such as a jury. It is trite law that matters that are capable of proof must be proved by producing sufficient evidence so that on all the evidence a reasonable mind could conclude that the existence of the fact is more reasonable than its non-existence. This is a requirement of the law on evidence under sections 10(1) and (2) and (11(2) and (4) of the Evidence Act, 1975, (NRCD 323).

 

On this claim the plaintiff has testified at paragraphs 15, 16 and 17 of his witness statement that:

15. The defendant deliberately hid the rate of interest by stating it per month. When they mentioned the interest rate as 5% I have the belief and understanding that it was five percent of the principal amount for the period of the loan not knowing it was more than that.

16. I was deceived by the interest rate which the defendant failed to quote as per the ranges allowed by the bank of Ghana.

17. The defendant thus charged rates of interest that were unconscionable.

 

The court has examined the evidence on record and the court cannot find evidence of any ‘range of interest’ allowed or approved by the Bank of Ghana as alleged by the plaintiff. Indeed, the plaintiff has not tendered in evidence any approved range of interest that the Bank of Ghana requires the defendant to charge on loans given by the defendant to borrowers like the plaintiff herein. Further, the plaintiff has not given any cogent evidence to substantiate the allegation of the defendant hiding the rate of interest by stating it per mensem. And, whatever belief that the plaintiff had about the interest rate was not brought upon the plaintiff by any misrepresentation made by the defendant.

 

The plaintiff has admitted, under cross examination, that he signed exhibit 1 the loan agreement. In the absence of evidence that there was any misrepresentation or fraud perpetrated by the defendant on the plaintiff which induced the plaintiff to sign exhibit 1, the court holds that the plaintiff is bound by the content of that document except the mistake as to the statement of the rate of interest and, therefore, the plaintiff cannot seek to avoid the terms of the loan by a unilateral belief which his reading of the agreement brought upon himself as stated in the case of Inusah vs. DHL [1992] 1 GLR 267 it was held that:

“the general rule was that when a document containing contractual terms was signed, then in the absence of fraud or misrepresentation, a party of full age and understanding was bound to the contract to which he appended his signature. In such a case it would be immaterial whether he read the document or not”.

See also L’Estrange vs. F Graucob Ltd [1934] 2 KB 394 which was cited with approval in the Inusah case.

 

The plaintiff concedes, in paragraph 11 of his witness statement, his inability to pay the loan of GH30,000.00 together with the interest thereon within the stipulated period of six months stated under the loan agreement. As a result, the plaintiff alleges that the defendant locked out the plaintiff’s business. In paragraph 7 of its statement of defence, the defendant has denied the plaintiff’s allegation of a lock out of his business premises by the defendant. However, at paragraph 9 of the evidence in chief of DW2, Hodenti Hosu, the said witness who is the Branch Manager of the defendant company testified on oath, as shown in his witness statement at paragraph 9, that:

To the best of my knowledge, our recovery team from head office embarked on a recovery exercise at the client shop which they had an amicable agreement that he Kwabena Boateng should give them a postdated cheques to cover the remaining balance since the repayment was long overdue in which he agreed and said he was not having his cheques and that he will give it to them the next day. When the Recovery Team visited the shop the following day, the client refused to give them the cheque so due to that they decided to lock the shop that when he presents the cheque they will open it for him. Under cross examination, the following answers were also given by DW2 to questions posed to him among others:

Q. You admitted in paragraph 9 of your witness statement that the defendant company locked out the plaintiff from his shop without a court order

A. Yes I was informed on Friday that an incident of that nature had happened so Monday when I got there the place was opened.

Q. The plaintiff secured the loan that he took with his landed property; the documents of which are in the custody of the defendant company, so why then did you decide to lock him out?

A. I think it was because of his default that is why the company took that action.

 

In the opinion of the court, the evidence of DW2 quoted above corroborates the plaintiff’s allegation of a lock out of his business premises by agents of the defendant company and also constitutes admission of the plaintiff’s allegation. The law has been amply stated in the case of OSEI YAW AND ANOTHER v. DOMFEH [1965] GLR 418 that where the evidence of one party on an issue in a suit is corroborated by witnesses of his opponent, whilst that of his opponent on the same issue stands uncorroborated even by his own witnesses, a court ought not to accept the uncorroborated version in preference to the corroborated one, unless for some good reason (which must appear on the face of the judgment) the court finds the corroborated version incredible or impossible.

In ASANTE v. BOGYABI AND OTHERS [1966] GLR 232 the court stated clearly that Where admissions relevant to matters in issue between parties to a case are made by one side, supporting the other, as appears to be so in the instant case on appeal, then it seems to me right to say that that side in whose favour the admissions are made, is entitled to succeed and not the other, unless there is good reason apparent on the record for holding the contrary view. As already pointed out the evidence of Hodenti Hosu, a witness for the defendant corroborates and supports the plaintiff’s allegation that the plaintiff’s business premises was locked out by the defendant company acting through its agents. The court therefore finds that as a fact.

 

A critical examination of the terms and the conditions governing the loan agreement, as stated in exhibit 1, shows that a lock out of the business premises of the plaintiff is not part of the rights given to the defendant under the contract. Indeed, this position was clearly admitted by the defendant’s witness when he answered the following questions put to him under cross examination

Q. Was it part of the terms of the agreement that you had with the plaintiff that when he defaults you will close-down his shop?

A. No it wasn’t part.

Q. Did you compensate him in any way for stopping him from working for the period?

A. He was not compensated. The information I had was that the recovery team went there and they asked him to issue a cheque to cover his debt that he is owing so that they will not come to his place again and he said he was not having a cheque by then so they should come that very Friday so upon his refusal to give them the cheque on the Friday which he promised, the action was taken. So on the Monday when I heard the information I decided to go there I was told he reported to the police and the shop was opened.

 

In the light of the evidence therefore that the plaintiff never agreed with the defendant and that the defendant had no right, under the contract, to close down the business premises of the plaintiff in the event of default in the payment of the loan, the action undertaken by the defendant company in that regard is totally wrongful in law.

The plaintiff has prayed in relief (d) indorsed on his writ of summons for “an order directed against the defendant to pay for the sales of the one week that the defendant locked out plaintiff and prevented him from working.” The plaintiff has given evidence, in support of this claim, that his shop was locked out by the defendant for a period of over one week. According to him he lost customers and suffered goodwill and reputation damage as a businessman. The plaintiff says even after the Police had instructed the defendant to re-open the shop, the defendant refused till the Police from the Regional C.I.D accompanied him to break open the padlock with which the defendant locked up the premises. Although in their evidence in chief the defendant’s witnesses did not state the number of days that the plaintiff’s shop was under lock, in his answers to questions under cross examination, DW2 stated that the shop was locked from Friday and that when he visited the shop the following Monday, the shop was opened.

 

The court is of the view nonetheless, that whatever the period of the lock out, the actions of the defendant company constituted unlawful trespass and hence makes the defendant liable to the plaintiff for damages as a result. The plaintiff says he incurred all sorts of expenses as a result of the lock out and that he also lost sales of about GH40,000.00. It appears that it is this alleged loss of sales that the plaintiff prays the court for an order to recover same from the defendant. The court finds in this regard that the plaintiff has not produced evidence to support his allegation of the loss of sales to the tune of GH40,000.00 and, indeed, if the plaintiff could make as much sales as he alleges in a period of one week, then, how come that he defaulted in the payment of the loan which he took from the defendant company? The court will hold that much as the plaintiff is entitled to damages for the trespass caused to his premises by the defendant’s lock out, the plaintiff is not entitled to his claim of GH40,000.00 loss of sales from the defendant since that claim is in the nature of special damages which, by law, ought to be strictly proved. See Norgbey and Another v. Asante and Another [1992] 1 GLR 506; Ghana Highway Authority v Mensah [1999-2000] 2 GLR 237.

 

The court will, in the circumstances, award nominal damages of GH10,000.00 to the plaintiff for the trespass committed on his business premises by the defendant company. Next, the plaintiff seeks an order that the carrying away of his merchandise without a court order and also that the unilateral takeover of the plaintiff’s houses without recourse to the courts is unlawful, void and of no effect. The plaintiff therefore prays for an order against the defendant to pay for the merchandise they carried from the plaintiff’s shop. It is clear from exhibit 1 that the plaintiff secured the loan facility with his Operating Stock, Household Movables and immovable assets made up of two plots of land situate at Amasaman with a building thereon. The defendant does not deny that when the plaintiff defaulted in the re-payment of the loan in accordance with the terms of the agreement, the defendant caused the operating stock of the plaintiff to be evacuated from the plaintiff’s shop. The quantity of goods carried away by the agents of the defendant is inventorised in exhibit E tendered by the plaintiff and admitted by the defendant in the evidence of its witnesses. The plaintiff insists that the evacuation of the stocks from his shop by the defendant was made without a court order and due process and it is, thus, unlawful. On this issue the defendant’s contention is that they have the right in law to evacuate the stocks which the plaintiff has used as security for the loan given to him by the defendant.

 

It seems to the court that the plaintiff himself gave authorization to the defendant, in the event of his default under the loan agreement, to possess, not only the goods which were evacuated but moreso, all the assets which the plaintiff used to secure the repayment of the loan without the need, first, by the defendant to seek a court order so to do. The plaintiff’s authorization is found in exhibit 1 under a heading security and it reads as follows:

I KWABENA BOATENG (borrower) in the event of failure to settle (repay) a single installment, as per the payment schedule, and /or commits any act of default HAVE authorized MELBOND or her assigned representatives to take possession of any and , or, all assets (movable or immovable) pledged as collateral/security (see Appendix1 ) for this loan without recourse to the law court, and to auction such asset(s) to defray the loan amount outstanding (principal, interest, penalties and default charges).

 

Under cross examination the plaintiff admitted to signing exhibit 1 which authorized the possession by the defendant of the properties used to secure the loan. In this wise, the plaintiff is bound by the terms of exhibit 1 which, among others, authorised the defendant to possess and auction the secured properties. It is therefore the view of the court that the defendant did no wrong by possessing the said properties as alleged by the plaintiff.

It has remotely been submitted on behalf of the plaintiff that the agreement authorizing the defendant to take possession of the properties used as security and auction them without the intervention of the court, sought to take away the jurisdiction of the court and was therefore unlawful. However, section 34 (1) of the Borrowers and Lenders Act, 2008 Act 773 seems to authorize such actions. It provides that:

34.  Lender’s right to possession

(1) In the exercise of right of possession of property that is subject to a charge to secure a borrower’s obligations under a credit agreement, a lender is not obliged to initiate proceedings in court to enforce the right of possession.

 

Indeed, pursuant to sub-section 2 of section 34 of Act 773, a lender in the position of the defendant may secure an order of the court to take possession of secured property with assistance of the police if he is unable to take possession in a peaceful manner. There is evidence on record that the defendant company, in contemplation of its inability to take peaceful possession of the plaintiff’s stocks used to secure the loan of GH30,000 obtained an order for police assistance tendered as exhibit 5 to enable them evacuate the goods in question. The court is therefore satisfied that in possessing the plaintiff’s stocks which were used in securing the loan granted to the plaintiff, the defendant did not infringe the law and committed no breach of the plaintiff’s rights whatsoever. The plaintiff’s claim, therefore, for an order to declare, as unlawful, the possession of the goods in question and the immovable properties used in securing the loan by the defendant will be dismissed. Under section 32(1) of Act 773 where a borrower fails to make payment on the 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 thirty days.

 

It is only after the expiry of the thirty days’ notice given under section 32(1) and the borrower continues to default in the re-payment of the loan that a right accrues to the lender to possess the properties used to secure the loan. The plaintiff in this matter has alleged that the defendant did not serve him with a demand notice as required by law. DW1 has given evidence to the effect that when he sent a demand notice to the plaintiff, the plaintiff refused to sign it and so he reported the plaintiff’s behaviour to the Recovery Manager. There is evidence on record given by DW2 that after the plaintiff had refused to sign and collect the demand notice, he personally took the said notice to the plaintiff and after explaining the procedure to the plaintiff he signed the said demand notice which was tendered in evidence as exhibit In respect of the demand notice, the plaintiff gave the following answers to questions put to him under cross examination:

Q: I want you to take a look at Exhibit 2 attached to the witness statement of DW3 and tell this court what it is.

A: It is a demand notice. It was brought to my shop and they said they were coming to serve someone with it. I did not know who they were coming to serve. I am not the one who appended the signature on it. The paper brought to me I did not sign. They did not bring me any demand notice.

Q: I am suggesting to you that the defendant company served on you a demand notice.

A: That is not correct. I was not served with any demand notice

Q: The demand notice has your signature on it.

A: It is my signature but it was generated from another document in their custody.

 

From the answers given by the plaintiff herein the court finds that a demand notice was taken by the defendant to the office of the plaintiff and that the plaintiff saw the notice and that is why he was able to testify to the said notice. Section 32(1) only says that the “lender shall give notice of default to the borrower in writing and request the borrower to pay the amount due within thirty days”. Hence, once the plaintiff has seen the notice of default in writing in his office the requirement of the section has been duly complied with by the defendant. If the plaintiff decided not to receive the said notice, the fact of his refusal to accept same does not take away the fact that he has been given notice of his default by the defendant within the meaning of section 32(1) of Act 773.

But, even more importantly, the plaintiff has admitted that the signature on exhibit 2 is his signature but that the said signature was “generated from another document in their custody”. The court is of the opinion that the admission that the signature on exhibit 2 is his (plaintiff’s) signature makes the content of exhibit 2 binding on the plaintiff whiles at the same time discharges the defendant of the burden to prove that they in fact gave notice of the default to the plaintiff as required by Act 773. The burden then shifted to the plaintiff to lead evidence to prove the allegation that his signature on exhibit 2 “was generated from another document in their custody” as alleged by the plaintiff. For, section 14. Of NRCD 323 provides in no uncertain terms that:

Except as otherwise provided by law, unless it is shifted a party has the burden of persuasion as to each fact the existence or non-existence of which is essential to the claim or defence that party is asserting.

 

And according to section 17 of NRCD 323

17. Allocation of burden of producing evidence Except as otherwise provided by law,

(a) the burden of producing evidence of a particular fact is on the party against whom a finding on that fact would be required in the absence of further proof;

(b) the burden of producing evidence of a particular fact is initially on the party with the burden of persuasion as to that fact.

Thus, once the plaintiff admits that the signature on exhibit 2 is his signature but that that signature “was generated from another document in the custody of the defendant” it became the responsibility of the plaintiff, under the Evidence Act, to lead admissible evidence to prove that allegation. See Ghana Commercial Bank Ltd v Naos Holdings Ltd [1999-2000] 1 GLR 485. In Bank of West Africa Ltd. v. Ackun [1963] 1 GLR 176, the Supreme Court pointed out that:

The onus of proof in civil cases depends upon the pleadings. The party who in his pleadings raises an issue essential to the success of his case assumes the burden of proof. In the instant case the defendants accepted substantially the plaintiff’s claim but raised an additional or separate issue. The trial judge was right in placing the onus of proving this additional issue on them.

 

In like manner, therefore, this court holds that the onus of proving that the defendant generated the plaintiff’s signature on exhibit 2 from another document in their custody rest with the plaintiff since the plaintiff is the person raising this allegation. The court is satisfied that the plaintiff has not given any concrete evidence to buttress this allegation. The plaintiff cannot therefore succeed on this issue. The court will hold consequently that the defendant in this matter duly complied with section 32(1) of Act 773 and that the plaintiff was served with a notice of default by the defendant in this case. One other issue for the court to determine is the manner in which the defendant realized the properties which they possessed from the plaintiff’s shop. The defendant has admitted that it took inventory of the stock of goods it carried away from the plaintiff’s shop. The inventory was admitted as exhibit E. In respect of the goods evacuated from the plaintiff’s shop by the defendant, the following answers were given by DW3 on behalf of the defendant under cross examination:

Q. So the goods that you have evacuated from the shop where are they and what did you do with it?

A. The goods have been disposed of and whatever amount realized is paid directly into the customer’s account.

Q. Did you notify the plaintiff of any such thing of the amount that was realized from the sales?

A: No.

QUESTIONS BY COURT:

Q: The stock collected from plaintiffs shop did you value them before selling them?

A: We took an invoice of each of the items and then we disposed of the goods

Q: What kind of invoice?

A: We went to the market and then we asked of the prices of those items

Q: And you sold them?

A: Yes. As at now we are not able to sell everything. We still have some of the goods there.

 

From the above answers, the court finds that after the defendant had taken possession of the goods from the plaintiff’s shop, the defendant failed to cause the goods to be valued. Again the defendant failed to notify the plaintiff of the place and date of the auctioning of the goods and even after the defendant had unilaterally sold the goods at its own price, the defendant did not see it fit to inform the plaintiff of the proceeds from the sales and that, up to date, the plaintiff is not aware of how much his goods were sold for. The conduct of the defendant in this regard is most despicable and the court roundly condemns the defendant whose behaviour is as though it resides in a country which has no laws. Section 33 (b) of the Borrowers and Lenders Act 2008, Act 773 makes it mandatory for the defendant to notify the plaintiff of the steps taken to realise the security. The section provides that:

33.  Remedies of lender on default

Where a borrower fails to pay an amount secured by a charge under this Act, the lender may

(a) sue the borrower on any covenant to perform under the credit agreement, or

(b) realise the security in the property charged on notice to the person in possession of the property.

 

This includes, in the opinion of the court, the need to obtain a fair valuation of the properties taken into possession and also the importance of notifying the plaintiff of the date and place where the property was to be sold. Whereas under the Act the decision to realise the security in the property charged is at the discretion of the lender, nevertheless, once the lender decides to exercise his discretion to realise the security, he can only lawfully do so on notice to the person in possession of the said property. Hence, it was wrongful and unlawful for the defendant herein to sell or dispose of the property used as security in this case without notifying the plaintiff who was the owner and the person in possession of the properties. It is completely unacceptable for the defendant to act unilaterally as though it were a law unto itself and sell the plaintiff’s property without notice to the plaintiff whatsoever. It has been the position of the common law for a person in the situation of the defendant to act fairly towards the plaintiff. Thus, in Matthie vs. Edwards (1864) 63 ER 817 the court pointed out that the mortgagee or in this case the defendant must:

‘act in a prudent and business-like manner, with a view to obtain as large a price as may fairly and reasonably, with due diligence and attention, be under the circumstances obtainable’ .

 

To make matters worse, the defendant after unilaterally disposing of the plaintiff’s properties failed to inform the plaintiff of the proceeds realized from the sale of the properties. The following answers to questions put to the defendant’s witness under cross examination lend ample support to this finding:

Q. So the goods that you have evacuated from the shop where are they and what did you do with it?

A. The goods have been disposed of and whatever amount realized is paid directly into the customer’s account.

Q. Did you notify the plaintiff of any such thing of the amount that was realized from the sales?

A: No.

Q: And the items that you evacuated did you pay the balance to the plaintiff after settling yourself. What did you do with the balance?

A: Whatever sales have been made was paid into the customer’s account and if my memory serves me right as at now his debt is about Ghc18, 000. Till we finish disposing off everything we can’t close the account.

 

One question that arises naturally from the conduct of the defendant under discussion is that since the defendant refused to inform the plaintiff of the date and time for the sale of the secured properties as well as the proceeds from the sales, how is the plaintiff expected to know how much was realized from the sale of his properties and how is the plaintiff expected to know how much was paid into his accounts and whether the debt has been completely paid off and whether there is any surplus money left for him?There is also evidence to the effect that the defendant company failed to credit the loan account of the plaintiff with the full amount of money that it deducted from the plaintiff’s current account meant to defray the plaintiff’s loan. For instance, during cross examination of the 3rd witness for the defendant herein on the 30th October 2017, DW3 admitted that on the 2nd March 2015 an amount of GH2,062.68 was transferred by the defendant from the current account of the plaintiff as shown by exhibit J herein. However, out of the said transfer, only the sum of GH2,041.87 was credited to the plaintiff’s loan account on the 3rd March 2015 as evidenced by exhibit J1. The difference of GH20.81has as yet to be accounted for by the defendant. Counsel therefore asked the witness under cross examination thus:

Q. Where did the difference go? The difference was a credit in favour of the plaintiff.

A. These are system deductions if I am behind the PC I may try to go into the account and see where the deduction went to.

Q. You will agree with me that in accounting even if 1 pesewa is missing the books will not balance.

A. Yes that is the case.

Q. So if that difference existed then it means your books were not balancing.

A. I can’t stand here and say that the books did not balance. It means that you have to go into the accounts sitting beside the PC.

 

The court finds therefore that the defendant was not transparent in its dealings with the plaintiff. No wonder therefore that the defendant failed to furnish the plaintiff, regularly, with a statement of his accounts and yet even after selling the plaintiff’s goods without accounting for the sale, DW3 was bold to say under cross examination that the plaintiff was still indebted to the defendant in the sum of GH18,000.00 whiles the same witness had earlier admitted that at the time the defendant went and possessed the plaintiff’s stocks the indebtedness of the plaintiff to the defendant stood at GH18,443.76 as shown by exhibit 6. The lack of transparency is just too clear. ***

Yet there is the issue of penal charges imposed on the plaintiff by the defendant. The defendant has given evidence to the effect that the plaintiff has always resisted the payment of the penalty interest. DW2 testified to this effect when he stated in paragraphs 10 and 11 of his witness statement that: (quote from DW2 witness statement:

10 We have never had any agenda to collapse his business, I will always advised the plaintiff to come so that we negotiate on the penalty but he never tend up, all he kept saying was that once he complete the payment of the principal and interest he is done. I kept reminding him of the agreement we signed which included penalty charges of 6% per month.

11. The debt plaintiff (Kwabena Boateng) claims is not artificial but real, only that he just decided that, the portion of the agreement that talked about penalty charges he will not adhere to that. I advised him countless times on this but he will never listen because he never thought it could get to this far.

 

It is true that the plaintiff agreed under the loan agreement to pay penalty interest of 6% per month and that is what the defendant sought to enforce against the plaintiff. A close scrutiny of the loan account of the plaintiff exhibit J1 and exhibit 6 show that most of the debit balances therein are penalty interest and clearly, that is what swirled the plaintiff’s indebtedness to the defendant. Penalty interest is penal in nature and by its terminology meant to serve as punishment against the borrower. A court of law should not lend support to punishment of borrowers by their lenders in an otherwise civil commercial transaction. Interest may be exigible as return on investment for the use of one’s money but to exact penal interest is akin to imposing punishment on borrowers in an otherwise commercial activity. Penal clauses in contracts are generally unenforceable. In his book Carriage of Goods by Sea (7th edition), John F. Wilson, published by Pearson Education Limited, England, UK (2010), the learned author had stated at page 362 that

“Damages may be fixed at a figure higher than any loss which can reasonably be expected, as a threat to secure the performance of the contract. This sum is termed a ‘penalty’ and will not be enforced by the courts since it will undermine the compensatory nature of damages. The law considers that the promisee is adequately compensated by recovering his actual loss”

In McGregor on Damages (18th edition), Harvey McGregor, published by Thomson Reuters (Legal) Limited, England, UK (2009) the learned author also states at page 490 paragraph 13-014 that

“a stipulated sum has, however, been classed as a penalty where it is in the nature of a threat fixed in terrorem of the other party … the intention behind such a provision is generally to prevent a breach of the contract by establishing a greater incentive for its performance”.

At paragraph 13-025 the learned author remarked that “the courts refuse to implement the intention of the parties in the case of a penalty”

 

In Dunlop Pneumatic Tyre Co. Ltd. vs. New Garage and Motor Co [1915] AC 79 the court refused to enforce a penalty contained in the contract. See also the case of Lansat Shipping Co. Ltd vs. Glencore

Grain BV (The Paragon) [2009] 1 Lloyd’s Report 658 HC, [2009] 2 Lloyd’s Report 688 C.A

In applying the principle as laid down in the Dunlop case, the court in Adjei vs. Oteng alias Ama [1997-1998] 1 GLR 725 held that

“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…. 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”.

 

In the light of the court’s finding in respect of the sale of the plaintiff’s properties which were possessed by the defendant as indicated above, and in the light of the finding that not all the amounts deducted from the plaintiff’s current account were truly and faithfully credited by the defendant to the plaintiff’s loan account in addition to the fact that the defendant unlawfully debited the plaintiff’s account with penalty interest which this court has found to be illegally and unlawfully imposed on the plaintiff by the defendant, the court hereby directs the defendant, to engage an independent auditor at the defendant’s own expense to conduct investigations into and ascertain the penalty interest, together with the total proceeds from the sale of the plaintiff’s properties taken in execution by the defendant as well as the total shortfalls in the transfer from the plaintiff’s current account into the business account and determine the surplus payments or overcharge and the true state of the plaintiff’s current account and business account and report to the court within thirty days from the date of this judgment.The court will award cost of GH8,000.00 to the plaintiff against the defendant.