IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL DIVISION)
KUMASI - A.D 2016
DIABY COMPANY LIMITED - (Plaintiff)
AHAFO ANO PREMIER RURAL BANK LIMITED & ANOR - (Defendant)
DATE: 29TH JANUARY, 2016
SUIT NO: RPC/68/13
JUDGES: ANGELINA MENSAH-HOMIAH (MRS.) JUSTICE OF THE HIGH COURT
FRANK OTOO FOR PLAINTIFF
SARAH ARYEE FOR DEFENDANT
The Plaintiff, who describes itself as a Limited Liability Company which carries on the business of purchasing Cocoa Beans, brought the instant action against the Defendant Bank on 21/02/2013. On an application made to this court, the 2nd Defendant was joined to the suit. With leave of the Court, the Plaintiff filed an amended writ of summons and Statement of claim on 17/01/2014 claiming three reliefs jointly and severally, namely:
1. A recovery of cash sum of GH¢104,222.74 being the cash sum the Defendant negligently paid to one PETER NIMAKO without proper authorization, failure by the Defendant to credit the Plaintiff's account of the transfer cash sum by the Plaintiff's Head Office and other negligent acts by the Defendant which has culminated in the Plaintiff losing the said cash sum of GH¢104, 222.74.
2. Interest at the prevailing bank rate on the said GH¢104, 222.74 from 1st December, 2011 till the day of final payment.
3. Cost on indemnity basis.
The Plaintiff's case as contained in its 14-paragraphed amended statement of claim is quite straight forward. As a customer of the Defendant bank, the Plaintiff alleged that it instructed the Defendant in writing that two persons, namely Nana Yaw Adjei Frimpong and Mr. Peter Nimako were procedurally mandated to sign cheques to draw money from its account. The earlier mandate of Mr. Yeboah was withdrawn in writing. Irrespective of these mandates and directives, it is the Plaintiff's case that the 1st Defendant negligently transferred certain cash sums into the private account of Mr. Peter Nimako without the authorization, consent and concurrence of the Plaintiff Company. Further, the plaintiff averred that the 1st Defendant failed to credit its account with some monies which were transferred to it by its Head Office. Particulars of negligence were neatly set out in paragraph 10 of the amended statement of claim. It is also the Plaintiff's case that these acts of the Defendants have had adverse effects on its operations and it has incurred a huge loss as Ghana Cocoa Marketing Board has been charging interest on the said cash sum.
The 1st Defendant in its statement of defence filed on 20/03/2013 denied any acts of negligence, stating that the Plaintiff habitually changed the mandates to the account. It denied the Plaintiff's assertions on the concurrent signatories to the account at all times and also alleged that it had dealt with Mr. Peter Nimako as singularly representing the Plaintiff Company. Further in its defence, the 1st Defendant alleged that the Plaintiff had queried Mr, Nimako for his alleged actions, which he had denied and explained that part of the money was disbursed to the Plaintiff's purchasing clerks, and a chunk of it paid to a purchasing contractor to purchase cocoa beans for the Plaintiff. Yet, the Plaintiff took two vehicles belonging to Peter Nimako and his building situated in Kumasi to defray the debt. Prior to his employment, the 1st Defendant alleged that the Plaintiff took documents covering the 2nd Defendant's building as collateral in anticipation of losses he may incur. The 1st Defendant alleged fraud on the ground that the Plaintiff is trying to retrieve monies already paid to it by Mr. Peter Nimako from the Defendant Company.
The second Defendant, Peter Nimako filed his statement of defence on 15/01/2014, and denied the Plaintiff's assertions in respect of the concurrent signatories, especially, that of Mr. Yeboah. Like the 1st Defendant, he also contended that cheques were always signed before they got to the bank and that the Bank had dealt with him in the past as singularly representing the Plaintiff Company. His defence was that as a trusted District Manager of the Plaintiff, it channeled monies meant for Sankore and Abuom districts through his district account for the 2010/2011 and 2011/2012 crop seasons. However, for the 2010/2011 main crop season, these two districts were unable to account for all the monies transferred to the districts, according to their area manager, Mr. Kwadwo Yeboah. Following this disclosure, a meeting was convened by Mr Kwadwo Yeboah and Mr. Richard Boakye , Area Manager for Anyinasuso, to discuss the problem. The 2nd Defendant alleged further that he was prevailed upon by Mr. Kwadwo Yeboah and the Deputy Operations Manager, Nana Yaw Agyei Frimpong to seek financial assistance from the 1st Defendant to help Plaintiff deal with the situation at hand which he did to the knowledge of Plaintiff's management team. Besides, the 2nd Defendant averred that Mr. Boakye, Area manager for Anyinasuso also took a loan of GH¢20,000.00 from the 1st Defendant to fill in the loss created by the Abuom District Manager. After the dismissal of the two managers, it is the 2nd Defendant's case that he and Mr. Boakye became personally liable for the facilities granted by the 1st Defendant. He further pleaded that a Ghanaian based in Ivory Coast defrauded him to the tune of GH¢ 71, 750.00 in the course of his cocoa purchasing business. Thus, he pledged his Opel saloon car and KIA truck pending the arrest of the fraudster by the Plaintiff. He also alleged fraud and gave particulars to that effect in his paragraph 28.
By way of Reply, the Plaintiff denied the assertions of both defendants and maintained its stance that even though it has been changing its signatories, two signatures are always required on any cheque issued by the Company. But, when it came to its knowledge that the 1st Defendant had honoured cheques signed by the 2nd Defendant alone, the latter was queried but there was no formal arrangement to take over his properties to defray the debt. The Plaintiff therefore denied the allegations of fraud made against it by the Defendants.
The issues for determination are stated below:
1. Whether or not the Defendants have been negligent in dealing with the Plaintiff Company?
2. Whether or not the monies have already been paid to the Plaintiff by the 2nd Defendant, Mr. Peter Nimako?
3. Whether or not the Plaintiff Company demands security from all prospective employees before they are employed?
4. Whether by asking the Defendants to pay the sum endorsed on the writ of summons Plaintiff is being fraudulent?
5. Whether or not before any cheque is honoured by the 1st Defendant bank there must be two concurrent signatories?
6. Whether or not Plaintiff is entitled to its claims?
The 1st and 5th issues which bother on negligence and the strict adherence to the mandate given by the Plaintiff to the 1st Defendant will be determined together.
On these issues, counsel for the Plaintiff in his closing submissions relied on exhibits F, F1 and G to substantiate the Plaintiff's oral evidence on unauthorized transfers made by the 1st Defendant in favour of the 2nd Defendant. He argued that the non-cash transfers made directly to the 2nd Defendant's account by the 1st Defendant on 13/10/2011; 17/10/2011; 20/10/2011 and 21/10/2011 were based on cheques solely signed by the 2nd Defendant. As such, the Plaintiff was not in a position to tender those cheques.
Referring to the 1st Defendant's representative's answers during cross-examination, Counsel for the Plaintiff disagreed with the 1st Defendant's evidence that the Mandate was adhered to at all times and that the 2nd Defendant's name appeared on the narrations because he presented those cheques for payment. He was emphatic that hitherto, the 1st Defendant had only made payments when there were two signatories according to the Plaintiff's mandate as demonstrated by the cheques tendered in evidence as exhibits B series and D.
On her part, Counsel for the Defendants submitted that the transfer of certain cash sums into the personal account of the 2nd Defendant, per se, does not amount to negligence on the part of the 1st Defendant. She argued that since the Plaintiff did not state how monies were to be disbursed after the mandate had been adhered to, the bearer of the cheque will receive payment. Thus, in the instances complained of, the monies were transferred to the 2nd Defendant as bearer of the cheque. In her view, the money was paid to the 2nd Defendant according to the dictates of the Bills of Exchange Act, and not because there was a sole signatory.
Concluding, Counsel for the Defendants submitted that the Plaintiff failed to prove its case that the sum of GH¢104,222.74 was negligently paid to the 2nd Defendant. And, having failed to do so, the Plaintiff is not entitled to the reliefs sought.
Negligence connotes the breach of a duty of care owed to another person as a result of which that person has suffered some damage, injury or any detriment. A bank's duty of care to its customers may result in negligence, where that duty has been breached. Generally, a bank has a duty to adhere strictly to its customer's mandate or instructions. In turn, the customer owes his bank the duty to issue clear and unambiguous instructions. Further, the customer owes a duty to issue his orders in a manner that does not facilitate their falsification.
When it comes to the issuance of a cheque by a customer, a contractual relationship which is governed by the law of agency arises. The Learned authors, Erlinger et.al. described the extent of the relationship so created in their book, Erlinger's Modern Banking Law (2006) 4th ed. At page 438, they described a cheque thus:
"as an instrument in which the customer, acting as principal, instructs the bank- his agent - to perform a specific act which is the payment of a definite sum of money to the order of the payee or to the bearer."
The Learned authors concluded that a bank owes its customer a duty to adhere strictly to the terms of its mandate as any deviation there from is a risk to the bank. In as much as a customer's mandate must be clear and unambiguous, it has been held that a bank is not entitled to give its own construction to the customer's instructions. See Thavorn v Bank of Credit and Commerce International SA (1985) 1 Lloyd's Rep. 259. In other words, the bank must go by the express instruction of the customer, and not what the bank thinks is the customer's instruction.
Ordinarily, where a bank honours a cheque without adhering strictly to the customer's mandate, the bank will be in breach of its duty to the customer as i have already stated. In those circumstances, the bank is not entitled to debit the customer's account with the amount involved. If it does, the consequences are obvious!
These notwithstanding, the common law defences which will avail an agent who disobeys his principal may apply in certain circumstances because of the existence of the Principal/Agent relationship between the customer and the bank. These include estoppel, ratification and the ambiguity of the mandate.
Apart from these Common- Law defences, the Bank may also rely on specific equitable defences, where applicable. For instance, where the unauthorized debit has had the effect of discharging a valid debt due by the customer to the payee, it will be inequitable to allow the customer to reap this benefit and at the same time challenge the unauthorized debit. ( See Erlinger's Modern Banking Law, supra at pages 439 to 442.)
The 1st Defendant's conduct will be measured against these basic banking principles, and if its actions are found to fall short of what a reasonable bank will do in the normal course of its business, the requisite remedies will apply.
Whilst giving evidence to substantiate the Plaintiff's assertions as regards the non-adherence to its mandate by the 1st Defendant, the Plaintiff's representative put in evidence a letter written to the 1st Defendant at the time of opening the account(s) - exhibit A; and a change of mandate letter- exhibit C, whose contents are very crucial to the resolution of the issues under consideration.
Exhibit A, dated 7/10/2010, is directed at the Tepa Branch Manager of the 1st Defendant Bank. It is signed by the Plaintiff's Managing Director and a person described as F& A Manager. It states:
OPENING OF ACCOUNTS - BRONG AHAFO
Diaby Limited is a Licensed cocoa buying company which operates in the above mentioned area.
Management has decided to open the following accounts with your bank:
1. COCOA ACCOUNT
Only Akuafo cheques will be used to draw on this account to pay for cocoa purchased from farmers.
2. OPERATIONAL ACCOUNT/EXPENSES ACCOUNT
Your bank is expected to issue to us the bank's own cheque books. This account will be used to pay expenses other than the purchase of cocoa (e.g. Handling Expenses, Primary evacuation cost etc.)
Please find below the names and specimen signatures of staff mandated to sign on behalf of Diaby Limited.
KWADWO YEBOAH AFARI .................(sgd.)
and either of the following:
PETER NIMAKO ................(sgd.)
RICHARD KWAME BOAKYE .................(sgd.)
The mangers, whose names and signatures appear above, will submit the list of names and signatures of all purchasing clerks who will be signing the Akuafo Cheques.
Please note that, the two undersigned persons can transfer money from the accounts so opened to any of our other operating districts.
Also note that, this mandate supersedes any mandate you may have previously received from us.
(sgd.) MICHAEL ASANTE AKUFFO MAVIS AGYEMAN
MANAGING DIRECTOR F & A MANAGER.
In exhibit C, dated 20/10/2011, the Plaintiff wrote to the Tepa Branch Manager of the 1st Defendant to change its Mandate. The letter reads:
CHANGE OF MANDATE
We wish to introduce Nana Yaw Adjei Frimpong and Mr. Peter Nimako, our Managers for the Brong Ahafo Area who are mandated to endorse Akuafo cheques and also to draw on the Operational Account.
Please note, this supersedes any mandate you may have previously received from us.
Find below the signature of the above named officers mandated to sign on behalf of Diaby Limited.
NANA YAW ADJEI FRIMPONG (sgd.)
PETER NIMAKO (sgd.)
The Managers, whose names and signatures appear above, may maintain or review the list of names and signatures of all purchasing clerks who will be signing the Akuafo Cheques and which is already deposited with your bank.
Please note, that the two undersigned persons can transfer money from the account to any of our operating districts.
(sgd.) MICHAEL ASANTE AKUFFO (sgd.) MAVIS AGYEMAN
MANAGING DIRECTOR F&A MANAGER.
The Plaintiff's representative also tendered the exhibits B series which are copies of signed Akuafo cheques in consonance with the mandate in exhibit A; and exhibit D, which also accords with the mandate in exhibit C.
The unauthorized cheque transaction and direct non-cash transfers which the Plaintiff complains of occurred on 13/10/2011;
17/10/2011; 20/10/2011 and 21/10/2011. As counsel for the Plaintiff rightly submitted, the 1st Defendant did not deny that these monies were transferred into the 2nd Defendant's personal account, but gave certain reasons- i.e. the monies were meant for cocoa purchase and because of the quantum, the 2nd defendant caused the money to be put into his personal account for later disbursement. The questions which arise at this point are whether I) the monies were transferred into the account of the 2nd Defendant in accordance with the mandate on the account? and ii) whether the SRF cheque which appeared on the narration of 13/10/2011 also satisfied the Plaintiff's mandate as in exhibit C?
In order to answer these questions, the word " AND" appearing on the mandate given in exhibit C, must be interpreted. I intend to give it the plain and ordinary meaning because that word is not ambiguous. According to the Oxford Advanced Learner's Dictionary , 8th ed., the word "and", is used to connect words or parts of sentences and it means " also"; "in addition to".
Therefore, on the face of exhibit C, the mandate given to the 1st defendant to the effect that NANA YAW ADJEI FRIMPONG and PETER NIMAKO are the new signatories can only mean "Nana Yaw Adjei Frimpong in addition to Peter Nimako". If the Plaintiff had intended that either Nana Yaw Adjei Frimpong or Peter Nimako could sign the cheques, that instruction would have been stated expressly. For instance, when one looks at exhibit A, it is stated: KWADWO YEBOAH AFARI and either of the following: PETER NIMAKO, RICHARD KWAME BOAKYE; meaning that in addition to Kwadwo Yeboah Afari, one of the two named persons must sign the cheque for the mandate to be complete.
Where a principal complains that an act done by its agent is unauthorized, it is for the agent to show that the said act was done within its scope of authority. In this case, there is an evidential burden on the 1st Defendant to proof that the cheque and direct transfers in issue were done strictly according to the Plaintiff's mandate.
Generally, when a bank effects payment by cheque, it keeps the cheque as a voucher. Where there is a direct non-cash transfer, the authorized signatory or signatories to the account must sign a customer instruction form or document, however it is described, authorizing the Bank to effect the transfer, before any such transaction can be effected on the account. A copy is given to the customer's authorized signatory or signatories as per the mandate, whilst the Bank keeps the original. Direct transfers can never be effected based on oral instructions to the Bank!
Therefore, in the instant case, the 2nd Defendant, who is one of the authorized signatories, and the 1st Defendant bank, must be able to produce either the original or a copy of the customer's instruction document (or however the 1st defendant may describe it), to back their oral evidence that the transactions in issue were done strictly according to the Plaintiff customer's mandate as in exhibit C. Their failure to produce the said document(s) in this trial goes against them because their oral evidence which seek to deny the Plaintiff's version alone will not suffice.
A case in point is Hilodjie v George ( 2005/2006) SCGLR 974 at 995 where Woode JSC ( as she then was) noted thus:
In any action, cause or matter, a party who disputes an issue does not simply rest the case on formal denials either made in examination in chief or "put" or "suggested" to an opponent under cross-examination. If the opponent does not admit those suggestions, then he or she is deemed to have succeeded in establishing a prima facie case on the disputed fact, and the evidentiary burden then shifts onto that party to prove contrary facts, if he or she is desirous of avoiding a ruling against him or her on that issue."
So, clearly, in the case before me where the 1st Defendant failed to put in evidence the requisite vital documents to support its case, it cannot expect the court to rule on the issue(s) in its favour.
The provisions of sections 11(4) and 12 of the Evidence Act, 1975 NRCD 323 enjoin me to weigh the evidence of the parties by the preponderance of the probabilities, and the party whose case is more probable gets a favourable verdict. Indeed, in Takoradi Floor Mills v Samir Faris (2005/2006) SCGLR 882 (holding 5), the Supreme Court speaking through Ansah JSC re-emphasized this principle thus:
"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 (ACT), 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..."
Consequently, in the absence of any credible documentary proof by the 1st Defendant bank in respect of the direct transfers into the 2nd Defendant's personal account, I will give preference to the Plaintiff's version of the rival stories to the effect that those transfers, which are being claimed, were done without strict adherence to its mandate given to the bank.
I find that the 1st Defendant breached its duty to adhere to the Plaintiff customer's mandate at all times when those unauthorized transfers were made. Therefore, I conclude that the 1st Defendant was negligent as far as the unauthorized transfers are concerned.
When the Plaintiff drew the 1st Defendant's attention to these anomalies in a letter dated 28/02/2012, exhibit E, the Bank ought to have acted promptly to either reverse the transaction or to reimburse the
Plaintiff, and then proceed to recover the money from the 2nd Defendant. Neither of these happened. The other defence put up by the defendants is that the Plaintiff has already seized properties belonging to the 2nd Defendant as a set off, and it is therefore not entitled to any reimbursement of the monies complained of. In effect, the Defendants are relying on the equitable principle of fairness.
This can be considered under the 2nd issue - whether or not the monies have already been paid to the Plaintiff by Mr. Peter Nimako? Again, the evidential burden as well as the burden of persuasion of this issue rests on both Defendants.
The 2nd Defendant's pleaded case is that a chunk of the monies transferred to him was used to pay a cocoa purchase fraudster based in the Ivory Coast who had defrauded him to the tune of GH¢ 71, 750.00 and that he pledged his building, his Opel salon car and KIA truck to the Plaintiff pending the arrest of that fraudster. The 1st Defendant to a large extent repeated the above assertions in its statement of defence. These assertions were denied by the Plaintiff on the basis that there has never been any formal arrangement to take over the properties listed by the 2nd Defendant and that the latter is currently in actual possession of those properties.
Despite the above positive assertion by the 1st Defendant, its representative denied knowledge of the same whilst under cross-examination by Counsel for the Plaintiff. He did not also mention in his evidence -in-chief that the Plaintiff ever took the listed properties belonging to the 2nd Defendant to pay off the monies negligently transferred to him. The 2nd Defendant's evidence -in-chief was also silent on this issue. However, under cross-examination, the 2nd Defendant indicated that when somebody absconded with the Plaintiff's money which had been given to him to purchase cocoa, he handed over these properties as security so that he could work and raise money to pay off that debt.
From the foregoing, it stands undisputed that it was the 2nd Defendant who brought about the idea of surrendering his properties to the Plaintiff as security. The 2nd Defendant could not discredit the Plaintiff's case that these properties are still in his possession and that he is using the same. On the balance of probabilities, I find that the Defendants have been unable to prove that the Plaintiff has taken over a building and two vehicles belonging to the 2nd Defendant to settle the debt arising from monies negligently transferred to him. Since the 2nd Defendant has not taken steps to refund the monies to the Plaintiff, the 1st Defendant cannot put up that equitable defence.
Has the Plaintiff suffered any loss or detriment as a result of the negligent acts of the 1st Defendant? Apart from testifying that Cocobod charges them interest on the sum of money negligently transferred to the 2nd Defendant as if the same had been used to purchase cocoa, the Plaintiff's representative did not specify that it has suffered any other pecuniary loss by virtue of the breach. The quantum of the interests paid was also not pleaded. That said, if the Plaintiff had put the money to use, it would have reaped the benefits there from. In the circumstance, substantial justice will be done if the Defendants are ordered to pay interest on the sum of GH¢104, 222.74. The award of interest will make up for any loss suffered by the Plaintiff.
Another issue set down for trial is whether or not the Plaintiff Company demands security from all prospective employees before they are employed. That to me is no longer in dispute because the Plaintiff's representative admitted in cross-examination that per their Regulations, District Managers are supposed to submit title documents of properties as collateral when they are being employed. But, the 2nd Defendant did not have a lease and the incident happened whilst he was regularizing his property documents. The 2nd Defendant also failed to introduce any evidence to the contrary. Hence, he cannot succeed on that issue.
Finally, I will move to the issue of fraud. Again, this can be disposed of in a few lines. Why is it so? The particulars of fraud set out by the 1st Defendant are: (i) Blaming the Defendant for an act that was through no fault of the Defendant Company; (ii) Trying to retrieve monies already paid to it by Mr. Peter Nimako from the defendant Company. When Peter Nimako was joined to the suit as the 2nd Defendant, he also gave the following particulars of fraud: (a) The Plaintiff has taken all his properties and is still blaming the 1st Defendant for an act that was through no fault of theirs; (b) Trying to retrieve monies already paid for from the 1st Defendant.
After analyzing all the evidence on record, I came to a conclusion that the monies which the 1st Defendant negligently transferred to the 2nd Defendant have not been refunded to the Plaintiff. Where lies the fraud on the part of the Plaintiff if the monies are yet to be paid? On the totality of the evidence on record, I find that the allegations of fraud have no basis at all.
I notice from exhibit E that the Plaintiff did not make any formal demand on the 1st Defendant until
28/02/2012. The Plaintiff ought to have been vigilant so as to minimize its losses. The 2nd Defendant who personally benefitted from the money has also not refunded the same to the Plaintiff. Accordingly, I enter Judgment against the Defendants jointly and severally in the sum of GH¢104, 222.74 and interest thereon at the prevailing bank rate from March, 2012 till date of delivery of judgment. I also award post judgment interest on the said sum at the prevailing bank rate from the date of delivery of judgment till date of final payment. For the avoidance of doubt, the Bank of Ghana 91- day Treasury Bill rate is to be used as the prevailing bank rate.
Taking into consideration the provisions of order 74 of C.I 47 on the award of cost, I hereby award cost of GH¢10,000.00 against the Defendants in favour of the Plaintiff.