IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL DIVISION)
KUMASI - A.D 2016
FIRST ATLANTIC BANK LIMITED - (Plaintiff)
LOGWOOD INDUSTRIES LIMITED & ANOR - (Defendant)
DATE: 29TH JANUARY, 2016
SUIT NO: BFS/150/13
JUDGES: ANGELINA MENSAH-HOMIAH (MRS.) JUSTICE OF THE HIGH COURT
KAMIL MOHAMMED IDDRISU FOR PLAINTIFF
E. N. POKU FOR DEFENDANT
First Atlantic Bank Limited, formerly known as First Atlantic Merchant Bank Limited, instituted the instant action against Logwood Industries Ltd and K.N. Poku, its Managing Director, claiming an amount of three hundred and thirteen thousand, ninety-six Ghana Cedis and eighty -three pesewas ( GH¢ 313, 096.83). Per the endorsement on its amended writ of summons and statement of claim filed on 18/11/2014, the Plaintiff sought to recover this amount plus interest at the bank's prevailing lending rate from 2nd February, 2013 to the date of full and final payment. It is the Plaintiff's case that it granted an overdraft facility in the sum of Seventy thousand Ghana Cedis (GH¢70,000.00) ,previously seven hundred million Cedis (¢700,000,000.00), to the 1st Defendant by a facility letter dated 31st May, 2005. The 1st Defendant run into excesses which the Plaintiff agreed to operate as additional facilities on the same terms as the principal facility. The facility was to be repaid in May, 2006 and was secured by a Negotiable Certificate of Deposit of GH¢ 50,000.00 standing in the name of the 2nd Defendant as well as fixed charge over a caterpillar 528 Skidder worth GH¢ 80,000.00. The 1st Defendant defaulted in repayment and after a demand notice had been served on the Company, it agreed to settle its indebtedness in monthly installment payments but again defaulted after making three payments. The accumulated interests have swelled up the Defendants indebtedness as claimed.
The Defendants case is encapsulated in a 11-paragraphed amended statement of defence filed on 09/12/12 wherein they admitted that the 1st Defendant took an overdraft facility of GH¢70,000.00 as claimed by the Plaintiff and which the 2nd Defendant Secured with a 90 day fixed deposit investment of GH¢50,000.00. The Defendants' alleged that there were negotiations with the 1st Defendant to settle the matter, but the Plaintiff rejected the same. Nevertheless, the 1st Defendant cleared the outstanding sum by sending cheques to the Plaintiff for payment. The Defendants further denied the additional facilities said to have been taken by the 1st Defendant and alleged that the 90 day fixed deposit which attracted interest of 28% is still with the Plaintiff. Since the Debt arose over six years ago, the Defendants averred that the same is statute barred.
Therefore, the 2nd Defendant counterclaimed against the Plaintiff for the sum of GH¢693,300.91 and interest thereon at the Bank's prevailing lending rate from 1st November, 2014 to date of payment. The 2nd Defendant also sought an order for the release of the said monies to the 2nd Defendant.
In its Reply and Defence to counterclaim, the Plaintiff maintained that the said investment of the 2nd Defendant which was first booked in April, 2005 attracted interest at the rate of 13.7%and re-invested at prevailing rates every 90 days but in October, 2006, the same was liquidated into the account of the
1st Defendant to defray part of its indebtedness since it had failed to honour its payment obligations.
Hence, the 2nd Defendant's counterclaim has no merit.
In answer to the allegation that the action is statute barred, the Plaintiff stated that in view of the acknowledgments and settlement offers made between the parties, any perceived right under the Limitations Act has been overtaken by those events.
The issues set down for determination and other issues arising from the pleadings are:
1. Whether or not the Plaintiff is entitled to its claim?
2. Whether or not the action of the Plaintiff is statute barred?
3. Whether or not the 2nd Defendant is a proper party to this suit?
4. Whether or not the 2nd Defendant is entitled to his counterclaim?
A debt recovery manager of the Plaintiff Bank gave evidence on its behalf and tendered the application by the 1st Defendant acting through the second Defendant for an Overdraft facility (O/D), the facility letter, statement of account detailing the excesses taken by the 1st Defendant as well as demand notices sent to the Defendants following their default. All these documents were admitted as credible proof of the Plaintiff's case. The O/D facility was secured by a GH¢50,000.00 Negotiable Certificate of Deposit ( NCD) in the name of the 2nd Defendant as well as a charge over a Skidder. Other details of his testimony will be discussed in due course as i determine the issues set down for trial.
The 2nd Defendant who is the Managing Director (MD) of the 1st Defendant Company gave evidence on its behalf. He conceded that the 1st Defendant obtained the initial O/D of GH¢70,000.00 as claimed by the Plaintiff but denied that the excess facilities attributed to the 1st Defendant even in the face of the detailed statement of account detailing these transactions and which the Plaintiff tendered. Concluding, the 2nd Defendant told the Court that the 1st Defendant has duly paid off its debt and is not in any way indebted to the Plaintiff Company. He prayed the Court to order the Plaintiff to release what he termed his outstanding Negotiable Certificate of Deposit and all accrued interests as per his Counter claim.
WHETHER OR NOT THE ACTION OF THE PLAINTIFF IS STATUTE BARRED?
The timely resolution of this issue is very crucial. Hence, I will determine it first. The burden of proof of this issue rests on the Defendants who seek to rely on the Limitations Act.
SUBMISSIONS BY COUNSEL FOR THE DEFENDANTS.
For the Defendants, Counsel in his closing submissions maintained that the instant action is for the recovery of a sum of money granted 1st Defendant by Plaintiff by virtue of a facility offer letter dated 31/05/05 which 1st Defendant accepted. In his view, the transaction which has culminated in the instant suit falls under section 4 (1) (b) of the Limitations Act, 1972 NRCD 54 i.e. an action founded on a simple contract.
Counsel argued that the overdraft facility (O/D) granted the 1st Defendant for a 12 month duration expired on 31/05/06. Therefore, the Plaintiff's cause of action arose on 01/06/06. Hence, the instant writ of summons issued on 24/07/13, seven years after the cause of action had accrued, makes the action statute barred.
In response to the Plaintiff's representative's reliance on the intervening events to justify the institution of this action, especially the 1st Defendant's acknowledgement of its indebtedness, and subsequent installment payments, Counsel for the Defendants argued further that in the absence of the Plaintiff's acceptance of the proposals made by the 1st Defendant, there was no acknowledgment of indebtedness on its part. And, in the absence of any such express agreement, any subsequent payment by the 1 st Defendant could not be taken as an acknowledgment of its indebtedness, exhibit F notwithstanding. Therefore, the Plaintiff cannot rely on the provisions of Sections 17(1) (a) and 19 (1)
(a) of NRCD 54 to sustain the instant action.
SUBMISSIONS BY COUNSEL FOR THE PLAINTIFF.
Counsel for the Plaintiff held a contrary view on the issue under consideration. Quoting and relying on sections 17 (1) (a) and 19 (1) (a) of NRCD 54, he argued that on 01/08/2007, the 2nd Defendant wrote exhibit F, acknowledging the 1st Defendant's indebtedness. Subsequently, the 1st Defendant made a total payment of GH¢ 9,000.00 with the last payment made on 28/12/2007.
Since the present action was commenced on 24/07/2013, the same was within time. He stressed that Counsel for the Defendants' reliance on section 19(3) of NRCD 54 in response to his Limitation argument is flawed.
ANALYSIS OF THE EVIDENCE ON RECORD
It is not in doubt from the evidence adduced by the Plaintiff's representative and the 2nd Defendant that the 1st Defendant was granted an O/D facility of ¢700,000,000.00 ( now GH¢ 70,000.00). From the Plaintiff's exhibit A, the effective date was 31/05/2005 and the facility was to be repaid by May, 2006.
It is also not in dispute from the totality of the evidence that the 1st Defendant defaulted in repaying the O/D granted it. The Plaintiff's representative in his evidence-in-chief and under cross-examination maintained that several demand notices were sent to the 1st Defendant's MD, the 2nd Defendant herein, and tendered exhibit E as one of such notices. Subsequent to exhibit E, the evidence on record shows that there were correspondences between the parties on the 1st Defendant's indebtedness. Of particular importance is exhibit F . This was written by the MD of the 1st Defendant and addressed to the Kumasi Branch Manager of the Plaintiff Bank. It is dated 01/08/2007. For the sake of emphasis, I will reproduce the contents below:
RE: FINAL DEMAND NOTICE
We wish to refer to our letter dated 10th October, 2006 on the above subject matter.
After further discussions with your Branch Manager, we propose the following arrangement for the settlement of our outstanding indebted to you.
By this arrangement, we shall pay Three Thousand New Ghana Cedis – GH¢3,000.00 (¢30,000,000.00) every month to settle our debt. With effect from the end of August through December 2007, we shall issue monthly post dated cheques in our settlement.
This arrangement will continue from January 2008 ending until we pay off our debt.
We hope this arrangement will be accepted to you.
Attach please, are the post dated cheques for your perusal.
Cheque No. 353774
It is abundantly clear from the contents of exhibit F quoted above, that the 1st Defendant acknowledged its indebtedness to the Plaintiff on 01/08/2007 and proceeded to make payments. Irrespective of the suggested repayment mode in exhibit F, exhibit C indicates that the 1st Defendant actually made some cash deposits of GH¢3,000 each on 28/08/2007 and 26/09/2007. On the face of exhibit C, the cheques meant for clearance in those months were not presented for payment. It is highly probable that this was because of the cash payments made on behalf of the 1st Defendant. Similarly, on 29/10/2007, a cash deposit of GH¢ 3000 was made as per exhibit C even though a chunk of it was applied towards some sort of interest per the narration on 31/10/2007. Again, per the narrations on exhibit C, the GCB Ahensan Cheque- 353777 meant for the November payment was returned. However, a payment of GH¢ 3,000.00 was made on the account on 28/12/2007.
As rightly argued by Counsel for the Plaintiff, this was the last payment made by the 1st Defendant after which he continued to default. Even though there was no express acceptance of the repayment schedule by the Plaintiff Bank, it can be reasonably inferred from its conduct in exhibit C that the bank was not opposed to those terms. Thus, the Bank could only take steps to recover the debt when the GH¢3000 payment was not forthcoming at the end of January, 2008. From the working arrangement between the Plaintiff and the 1st Defendant, the right to sue accrued one month after the 28/12/2007 payment.
I find that following the 1st Defendant's acknowledgment of its indebtedness on 01/08/2007and subsequent repayments up to 28/12/2007, the Plaintiff's cause of action accrued in January, 2008. I will accept the line of argument of Counsel for the Plaintiff and hold that the instant action filed on 24/07/2013 is not statute barred within the ordinary meaning of sections 17 (1) (a), 19 (1) (a) and 19 (3) of NRCD 54 because there was a fresh accrual and subsequent payments.
Whether or not the 2nd Defendant is a proper party to this suit?
SUBMISSIONS OF COUNSEL FOR THE DEFENDANTS
Counsel argued that by the Plaintiff's pleadings, its cause of action against the 2nd Defendant is by virtue of the fact that he is the MD of the 1st Defendant Company and that his Negotiable Certificate of Deposit (NCD) was used as security for the facility. He argued further that the fact that the 2nd Defendant is a majority shareholder of the 1st Defendant Company and sole signatory to the account does not give rise to a cause of action against him personally.
To buttress this position, Counsel relied on section 139 of the Companies Act, Act 179 and Morkor v Kuma (1998/99) SCGLR 620 which deal with the liability of a company for its actions and its separate legal existence. Relating these authorities to the present case, Counsel pointed out that the 2nd Defendant did not execute any joint and several guarantee so as to make him personally liable for the debt of the 1st Defendant. More so, his NCD was also utilized to reduce the 1st Defendant's indebtedness without his consent.
On these grounds, he submitted that the Plaintiff has no reasonable cause of action against the 2nd Defendant.
SUBMISSIONS OF COUNSEL FOR THE PLAINTIFF.
For the Plaintiff, counsel did not comment on the separate legal existence of companies and the fact that the 2nd Defendant did not execute a joint and several guarantee in respect of the O/D facilities extended to the 1st Defendant. Instead, he dwelt on the fact that the 2nd Defendant used his NCD as security for the O/D for which reason the Plaintiff lawfully liquidated the same to reduce the 1st Defendant's indebtedness.
The evidential burden as well as the burden of persuasion of this issue rests on the Plaintiff who has instituted this action against the 2nd Defendant. Consequently, the Plaintiff has a duty to adduce evidence to satisfy the court that indeed it has a reasonable cause of action against the 2nd Defendant so as to make him a proper party to the suit.
It can be gleaned from the evidence of the Plaintiff's representative that apart from being the majority shareholder and a sole signatory to the 1st Defendant's account, the 2nd defendant only secured the facility with his NCD. I am in agreement with the position taken by counsel for the Defendant that the 2nd Defendant did not do any acts that make him personally liable for the debt incurred by the 1st Defendant. What is the basis for this?
First, I will comment on the facility letter, exhibit B. Although Companies have their own legal existence, they act through natural persons and it is therefore not out of place that exhibit B was addressed to the MD of the 1st Defendant. On the face of exhibit B, the securities to be obtained for the O/D included: I) FAMBL NCD of ¢500million ( GH¢ 50,000) for K.N. Poku the Managing Director of the Company and ii) Fixed charge over caterpillar 528 skidder worth ¢800m. These securities apart, the Plaintiff required Directors' Joint and Several Guarantee for ¢700 million. Indeed, the Plaintiff indicated that four (4) Guarantee Forms had been enclosed for due execution by the directors of the 1st Defendant Company. Another essential term for the grant of the facility can be found in clause 9 of exhibit B where the Company was to execute a legal Mortgage over a building property in the name of the MD located at Atasomanso in Kumasi valued at ¢ 650 million as security for the facility. The MD of the 1st Defendant executed exhibit B, an indication of the 1st Defendant's acceptance of the terms therein. Were all the requisite securities provided?
Strangely enough, nowhere in the Plaintiff's pleadings was it averred that any joint and several guarantee was executed by the directors of the 1st Defendant Company. The Plaintiff's case was also silent on the Legal Mortgage which was to be executed. It was therefore not surprising that no documents to that effect were put in evidence by the Plaintiff. The requirement for the execution of a joint and several guarantee presupposes that the Plaintiff Bank has always been fully aware of the separate legal existence of a company. If it were not so, that condition would not have been imposed on the directors of the 1st Defendant Company. So the million dollar question is, where are those joint and several guarantees which were a pre-condition for draw down? Put differently, were the forms actually executed by the Directors of the 1st Defendant Company? Answers to these questions were suppressed by the Plaintiff's representative who tendered exhibit B and was in a position to prove the contents therein.
On the totality of the evidence adduced by the Plaintiff's representative, I find that the Plaintiff Bank failed in its duty to ensure that the joint and several guarantee forms were duly completed by the directors of the 1st Defendant Company. In the absence of these guarantees, can the 2nd Defendant be personally liable for the indebtedness of the 1st Defendant Company?
I will say that Counsel for the Defendants' reliance on section 139 of Act 179 and the case of Morkor v Kuma perfectly fit into the puzzle. Section 139 of Act 179 states:
Acts of the company
(1) An act of the members in general meeting, the board of directors, or a managing director while carrying on in the usual way the business of the company shall be treated as he act of the company itself; and accordingly the company shall be criminally and civilly liable for that act to the same extent as if it were a natural person.
It is on record that a resolution was passed by the members of 1st Defendant Company authorizing it to apply for the credit facility. From exhibit B also, the purpose of the facility was to support the 1st Defendant Company's working capital requirements. This was confirmed by the Plaintiff's representative in his evidence-in-chief where he indicated that the money was used to process timber for export. Continuing, the Plaintiff's representative testified that the 1st Defendant acknowledged its indebtedness to the Plaintiff and even went ahead to make three installment payments totaling GH¢ 9000.00. The Defendant has always maintained that the 1st Defendant utilized the facility for its operations.
From the foregoing, the only irresistible conclusion is that the 2nd Defendant, acting as an officer of the 1st Defendant Company did not take the O/D facility for his personal benefit. At all times material, he acted for and on behalf of the 1st Defendant Company to the knowledge of the Plaintiff.
As such, all liabilities arising from the grant of the O/D must be placed on the 1st Defendant within the meaning of section 139 of Act 179.
This position is further supported by the decision in Morkor v Kuma, referred to, supra. In that case, Sophia Akuffo JSC reiterated the position that a company is a legal entity, with a capacity, separate, independent and distinct from the persons constituting it or employed by it. Salomon v Salomon & Co (1897) AC 22, cited with approval. Her Ladyship was quick to point out that the corporate veil could be pierced in certain situations so as to fix liability on the actual persons operating behind the company. At page 632 of the report, she observed as follows:
"The Corporate barrier between a company and the persons who constitute or run it may be breached only under certain circumstances. These circumstances may be characterized as those situations where, in the light of the evidence, the dictates of justice, public policy or the Companies Code itself so requires. It is impossible to formulate an exhaustive list of the circumstances that would justify the 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.
In the instant case, the Plaintiff has not demonstrated that the 1st Defendant Company was used as a smokescreen in furtherance of any illegal activities of the 2nd Defendant, or that the 2nd Defendant in any manner used the Company to avoid his contractual liabilities. The evidence adduced by the Plaintiff's representative point to the undisputable fact that the Plaintiff had supported the log processing and export business of the 1st Defendant. He even went on to say that there were times that the Bank permitted the 1st Defendant to exceed its agreed O/D limit so that proceeds from the export of the processed timber will be used to pay off the overdrawn amount.
By clause 13 of exhibit B, the 1st Defendant Company was to furnish the Plaintiff Bank with its audited accounts not later than six (6) months after the close of its financial year, and any other financial/relevant information that the Bank may request from time to time. Did the Plaintiff Bank insist on this right? If the Plaintiff bank had acted diligently and insisted on obtaining audited accounts of the 1st Defendant Company as agreed upon, it would have known the financial position of the Company from time to time. It does not appear from the evidence on record that the 1st Defendant's financial progress was in any way monitored by the Plaintiff Bank and all that the bank was interested in was to stand and wait for re-payment.
In my view, the circumstances of this case do not warrant the piercing of the corporate veil so as to make the 2nd Defendant personally liable for the financial liabilities of the 1st Defendant, except for the GH¢ 50,000.00 NCD used as security for the O/D facility. The Plaintiff's representative did testify that the said amount plus the accrued interest was liquidated to reduce the 1st Defendant's indebtedness. He tendered the Corporate accounts of the 1st Defendant as exhibit C, and it shows that on 16/10/2006, the NCD 906269002/PRINCIPAL in the sum of GH¢ 59, 627.67 was liquidated, and interest of GH¢ 277.72 were applied to reduce its indebtedness.
Furthermore, the Plaintiff's representative tendered the NCD investment statement account as exhibit D and I accept the entries therein as authentic and reliable. In fact, the 2nd Defendant did feign ignorance of the use of his NCD as security but turned round to admit the same in cross-examination. This goes against the credibility of his testimony on the applicable interest rate, among others. Therefore, I prefer the Plaintiff's oral and documentary evidence on the NCD as well as the applicable interest to the bare denial of the 2nd Defendant.
Having liquidated the 2nd Defendant's NCD of GH¢ 50,000.00 plus the accrued interest as of 16/10/2006 to settle part of the 1st Defendant's indebtedness to the Plaintiff Bank, where lies the cause of action against the 2nd Defendant? None! The 2nd Defendant's personal liability did not go beyond the security he provided. The security has been utilized by the Plaintiff and it is unacceptable for the Plaintiff to turn round to sue the 2nd Defendant personally! I find that the Plaintiff had no cause of action against the 2nd Defendant at the time he was sued. Hence, he is not a proper person to this suit and I so find.
WHETHER OR NOT THE PLAINTIFF IS ENTITLED TO ITS CLAIM?
On the one hand, counsel for the Plaintiff in his closing submissions pointed out that on the strength of exhibit C, the 1st Defendant after fully utilizing the agreed GH¢70,00.00 O/D, took excess or additional facilities on the same terms. And, having defaulted in repaying the monies, the Defendants are liable to pay the outstanding debit balance.
On the other hand, Counsel for the Defendants argued that the 1st Defendant issued cheques and made cash payments in full and final satisfaction of its indebtedness. He also submitted that the
Plaintiff debited the 1st Defendant's account with illegal charges which it is not liable to pay.
The Plaintiff's representative tendered exhibit C to demonstrate how the 1st Defendant operated its account in respect of the O/D and additional facilities.
How does an O/D operate? Simply put, a customer is permitted by the bank or creditor to make withdrawals on its current account up to an agreed limit. Erlinger et. al. adequately discussed the prevailing practice in their book, Erlinger's Modern Banking Law, 4th ed. page 689 thus:
"Where a customer who maintains a current account with his bank requires financial accommodation, the branch manager, or other authorized lending officer, considers the possibility of granting him an overdraft. In such a facility, the bank authorizes the customer to draw cheques on his account, or to make withdrawals or payments from the account by other authorized means
for example, by debit card or through internet access to the account), up to a ceiling which may not be exceeded at any one time. As amounts are paid to the credit of the account, the available balance of the overdraft increases. As cheques are drawn by the customer and paid by the bank, or funds are transferred out of the account by other authorized means, the balance decreases ..."
The burden of proving the outstanding liability of the 1st Defendant rests on the Plaintiff, based on the pleadings. In the evidence-in-chief of the Plaintiff's representative, he told the court that the 1st Defendant was granted an initial O/D of C 700 million for a 12 month period to expire by May, 2006 at an interest rate of 28% per annum when the account is regular, and an additional 3.5% interest p.a. when the account is in excess or irregular. He added that there were other excess facilities which were approved by the Plaintiff in that the 1st Defendant was allowed to exceed its ¢700 million limit, as demonstrated by the statement of account, exhibit C. Continuing, the witness said these excesses were to run concurrently with the principal facility and on the same terms.
I have perused the Plaintiff's exhibit C and it actually shows that as at 18/07/2005, the 1st defendant had utilized GH¢ 62,231.33 of the available O/D limit of GH¢70,000.00. Then, on 20/07/2005, an SSB Akim Oda Branch Cheque of GH¢15,000.00 was drawn on the account, bringing the debit balance to GH¢ 77, 231.33. Here, the O/D limit of GH¢70,000.00 had been exceeded. There were other legitimate Bank charges and interests debited to the account thereafter.
Further in exhibit C, page 9, the 1st Defendant caused a cash withdrawal of GHS¢ 4,000.00 to be made on the account. Since no payments had been credited into the account since 16/07/2005, the debit balance shot up to GH¢83,076.04. Then, on 16/12/2005, page 10 of exhibit C, an amount of GH¢18, 231.48 was transferred at the instance of K.N. Poku. This resulted in an overdrawn position of GH¢114, 557.93. The account continued to be in red , and on 16/10/2006, the 2nd Defendant's NCD which had then increased to GH¢59,627.67 plus GH¢277.72 interest was liquidated to reduce the outstanding indebtedness.
As demonstrated clearly in exhibit C, the 1st Defendant withdrew or caused monies to be withdrawn or transferred over and above the GH¢ 70,000.00 O/D limit. The general position in banking is that where there are insufficient funds credited to a customer's account to cover the full amount of the customer's payment order, the Bank may choose to ignore the order completely. Alternatively, the bank may treat it as an offer to extend credit to the customer on the bank's usual terms as to interest and other charges. The bank is at liberty to accept or reject this offer. It will be deemed to have accepted the customer's offer where it executes the customer's payment order. For instance, by honouring the customer's cheques. See Erlinger's Modern Banking Law, referred to supra at page 690.
Applying these basic banking principles to the facts and the evidence before me, I find that the Plaintiff has succeeded in proving that the Bank permitted the 1st Defendant to make withdrawals and transfers beyond the GFHS 70,000.00 O/D limit. The Defendants' bare denial of these assertions cannot offset the credible evidence adduced by the Plaintiff's representative. The contrary argument canvassed by, and on behalf of the 1st by Counsel Defendant is thus untenable.
At what interest rate was the initial GH¢70,000.00 O/D given to the 1st Defendant? Clauses 3 and 4 of exhibit B give credence to the Plaintiff's representative's testimony that the interest rate was 28% per annum plus a penal interest of 3.5% per annum on an irregular account.
From exhibit C, the 1st Defendant's account became irregular from 20/07/2005 and has remained so to date. The 1st Defendant's MD in response to a final demand notice served on the Company, wrote exhibit F, dated 01/08/2007. Basically, exhibit F gives a re-payment proposal effective August 2007 through December 2007, and from January, 2008 till final payment. Pursuant to exhibit E, payments were made on the account and the last of them occurred on 28/12/2007. As pointed out earlier, cash payments were made in lieu of the post dated cheques issued, except in one instance on 28/12/2007. This is not unusual in everyday banking. But, it is expected that the "unpresented" or "uncleared" cheques are to be returned to the drawer. Yet, that did not happen in the instant case. That notwithstanding, the 1st Defendant has not suffered any loss because those cheques were not debited to the 1st Defendant's account as per exhibit C.
The 1st Defendant has complained about illegal charges. This is indeed unfounded, to say the least. Banks do not operate to make losses. They are business entities that seek to maximize profit. For this reason, it made its terms clear to the 1st Defendant who, acting through its MD accepted the same. For instance, apart from the interest and penal interest charges, a 1.5% facility fee was payable upfront. It also required an insurance over the Company's charged asset. So long as the 1st Defendant transacted its businesses through the Plaintiff bank, it was entitled to charge commission on turn over as well as any other legally mandated fees. For instance, various payments made to the Forestry Commission.
Indeed, throughout the period, the 1st Defendant never raised a finger over any of the charges and fees until the company was sued because the Company knew that it had irrevocably and unconditionally authorized the bank to debit its account from time to time. Having scrutinized exhibit C, I find that the Plaintiff did not debit any illegal charges/fees to the 1st Defendant's corporate account which is in issue. The accumulated interest, Bank Charges and other legally mandated fees which the 1st Defendant was required to pay have resulted in its current indebtedness as per exhibit C. The entries therein were not conjured by the Bank.
I am mindful of the fact that in every loan transaction, the customer is under an obligation to repay the principal amount together with the agreed interest. But, in the instant case, it is my considered opinion that the Plaintiff Bank acted rather recklessly. When no payments were forthcoming effective January, 2008, what prevented the Bank from seeking redress within a reasonable time? From exhibit C, the Bank slept on its rights and merely allowed its Flex cube system to calculate and compound interest on the account for close to five years before taking steps to recover the money. This gives the bank an unfair advantage to exact more than its reasonable pound of flesh. Besides, it is not a sound business practice - it is highly unethical. That lackadaisical attitude is strongly condemned!
That notwithstanding, the 1st defendant also had a duty to liquidate its indebtedness fully. Yet, it also played a "cold turkey" and could not be bothered by the heat of the ever increasing indebtedness which stood at GH¢ 313, 096.83 as of 11/-02/2013. This was the amount endorsed on the writ of summons. And, more than 75% of it is accumulated interest.
It saddens my heart that the inaction of the Plaintiff Bank over the years and the carelessness of the 1st Defendant has brought about this debit balance which is seemingly a disincentive to business. But i have no alternative than to enter judgment for the Plaintiff in the sum of GH¢313,096.83 and order the 1st Defendant to pay the same.
This is a court of law as well as equity! Equity does not aid the indolent. The Plaintiff who slept on its legal rights for so many years, narrowly escaped the statute of limitation and has had so much interests accrued in its favour should be content with it.
For the reasons stated in the foregoing paragraphs, I will not award post judgment interest in favour of the Plaintiff Bank. It is my hope that this will be a wake- up call to financial institutions who sleep on their rights with the aim of making a fortune out of accumulated interests!
And, to the Plaintiff Bank, it is recommended that experienced and detail- oriented staff be put in charge of loan processing because in the instant case, all the required joint and several securities which ought to have been executed by the directors of the 1st Defendant were not executed. A legal mortgage over a building property in the name of the Managing Director located at Atasomanso in Kumasi valued at ¢ 650 million (GH¢65,000.00) was to be executed as security for the credit facility.
This did not also happen. It remains a mystery as to why the 1st Defendant was allowed to draw on the facility when its directors had not met these requirements! So, by the Bank's own recklessness, the 2nd Defendant has escaped liability.
Judgment entered for the Plaintiff against the 1st Defendant in the sum of GH¢313,096.83. The 2nd Defendant’s counterclaim is dismissed as being without merit.
I have taken into consideration the submissions of counsel for the 2nd Defendant/Counter claimant and counsel for the Plaintiff on the award of cost. I have also carefully looked at the provisions of order 74 of C.I. 47, heavily relied on by counsel for the Plaintiff.
Taking into consideration the circumstances of this case, I award minimal cost of GH¢10,000.00 against the 1st Defendant in favour of the Plaintiff.
The 2nd Defendant is to bear his own legal expenses.