IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT(COMMERCIAL DIVISION)
ACCRA - A.D 2016
N.D.K FINANCIAL SERVICES LTD - (Plaintiff)
ANDRE KWAME GYENFIE - (Defendant)
DATE: 11TH NOVEMBER, 2016
SUIT NO: BFS/193/2015
JUDGES: HIS LORDSHIP ERIC KYEI BAFFOUR JUSTICE OF THE HIGH COURT
PLAINTIFF REPRESENTED BY EDEM MENKA
ANDREW APPAU OBENG, ESQ WITH NASH ADJEI FOR SAMMY CRABBE, ESQ FOR DEFENDANT
Plaintiff in a writ issued claims against the Defendant the following endorsement:
The sum of GHC 5,238,403.46 (Five Million Two Hundred and Thirty Eight Thousand Four Hundred and Three Ghana Cedi Nineteen Pesewas) being the outstanding debt in respect of the loans granted to the Defendant.
Interest at the monthly rate of 4.25 % per month from the 1st August 2015 till date of final payment.
The sum of GHC 130,960.08 (One Hundred and Thirty Thousand Nine Hundred and Sixty Ghana Cedis Eight Pesewas).
Cost and Attorney’s fees being 10% of the sum owed.
Judicial sale of the Defendant’s landed properties which are mortgaged and which properties are described in paragraphs 10 and 11 of the Statement of Claim
The basis for the demand of the reliefs endorsed on the writ is captured in the statement of claim that accompanied the writ. Plaintiff avers that the Defendant applied to it for a credit facility of US$800,000.00 to enable Defendant acquire a residential property at Airport Hills. Plaintiff states that it approved the application and granted to the Defendant an amount of GHC2,320,000 (Two Million Three Hundred And Twenty Thousand Ghana Cedi) being the Cedi equivalent of US$800,000 at the then prevailing rate of GHC2.90 to a dollar.
Plaintiff further avers that Defendant applied for an additional credit facility of GHC50,000 (Fifty Thousand Ghana Cedi) to enable the Defendant register his interest in a commercial property situate at Spintex Road. Plaintiff states that it approved the loan by granting the additional facility of GHC 50,000 to the Defendant.
Plaintiff further says that by a letter dated the 25th September, 2014 Defendant applied, for a third time, for an additional loan which the Plaintiff approved, and that pursuant to the approval the Plaintiff granted the amount of Ghc 660,000 (Six Hundred and Sixty Thousand Ghana Cedi).
Plaintiff asserts that all the loans were granted at a monthly interest rate of 4.25% and were to be repaid within three months of the grant of each facility. Plaintiff says that the loan agreements under which the loans were granted contained a term that upon default the Defendant would pay a flat penalty rate of 2.5% on the balance outstanding in addition to the agreed interest.
Plaintiff avers that the Defendant mortgaged two landed properties to it to secure the repayment of the loan; that by a letter dated the 25th day of April, 2014 Defendant executed a mortgage over No.510, Buena Vista Road Airport Hills, Accra, and also mortgaged House No.76 Spintex Road, Accra.
Plaintiff says that by a Power of Attorney dated the 10th day of October 2014, the Defendant constituted the Plaintiff as his attorney to deal with the Lands Commission and take delivery of title documents to the property until Defendant performed its financial obligations to the Plaintiff.
Plaintiff makes the case that despite persistent demands and notices to the Defendant, Defendant has failed to pay off the debt it owes to it and that in the circumstance the Plaintiff was entitled to the reliefs and also to sell the mortgaged properties.
Defendant has denied the averments of the Plaintiff which forms the basis of the claim. Defendant asserts vehemently that the agreement between him and the Plaintiff was that the Plaintiff would finance the purchase and cost of documentation of House No. 510, Buena Vista Airport Hills, Accra and that Plaintiff would be reimbursed after the sale of Defendant’s property situate at Plot No. 55 Spintex Road, Accra. Defendant states that the agreement reached was that the reimbursement of the Plaintiff would be subject to the sale of Plot No. 55 Spintex Road.
Defendant states that as a result, by a power of attorney, he gave power to the Plaintiff to collect title deeds on the Defendant’s property. Defendant contends that the sale of the house has delayed because the documentation has not been completed for the sale to be effected.
It is the Defendant’s case that the entire loan facility has been frustrated by the delay in the documentation process as the delay has stultified the sale of the property the proceeds of which, per their agreement, was to be used to reimburse the Plaintiff.
Defendant contends that the Plaintiff instituted this action in bad faith as it is the Plaintiff who has breached their agreement. Defendant, therefore, counterclaims for the following reliefs:
A declaration that the Plaintiff has breached the agreement entered between the parties to govern the reimbursement of Plaintiff after the sale of Plot No.55 Spintex Road, Accra including the factory by the commencement of this action.
Damages for breach of oral agreement.
Damages for acting in bad faith.
Costs on full indemnity basis
Pre-trial settlement between the parties having broken down, the following issues were slated for trial:
Whether or not the parties agreed that the Plaintiff would finance the purchase and cost of documentation of the Plaintiff’s house.
Whether or not the parties agreed that the Defendant would reimburse the Plaintiff after the sale of the Defendant’s property on the Spintex Road.
Whether or not the parties agreed that the reimbursement for the sale of the Defendant’s airport property would be subject to the sale of the Defendant’s warehouse.
Whether or not the loan has been frustrated by the delay in the documentation that would lead to the sale of the Defendant’s property on the Spintex Road.
Whether or not the Defendant is entitled to his counterclaim.
Whether or not the Plaintiff is entitled to its claim.
Any other issues arising from the pleadings.
EVALUATION OF THE EVIDENCE AND APPLICATION OF THE LAW
As there is a claim and a counter claim both parties have obligations to prove their claims and counter claims on the balance of probabilities. The dictum of Brobbey JSC in the case of IN RE ASHALLEY BOTWE LANDS [2003 – 2004] SCGLR 420 is very instructive that:
“The effect of sections 11(1) and 14 and similar sections in the Evidence Decree 1975 may be described as follows: A litigant who is a defendant in a civil case does not need to prove anything. The plaintiff who took the defendant to court has to prove what he claims he is entitled to from the defendant. At the same time if the court has to make a determination of a fact or of an issue, and that determination depends on the evaluation of facts and evidence the defendant must realize that the determination cannot be made on nothing. If the defendant desires a determination to be made in his favour, then he has a duty to help his own cause or case by adducing before the court such facts or evidence that will induce the determination to be made in his favour…”
See also the following recent cases: HENRY DOE SAMLAFO V. GREDA &ANOR.  26 GMJ 94,
CA, MAC DAN V. GABRIEL GBORBLESHIE  85 GMJ 90 at 113; MARIAN OBENG MINTAH v. FRANCIS AMPENYIN, Civil Appeal No. J4/18/2013, dated 25th March 2015, SC (Unreported)
In respect of the counter claim it is to be viewed with the same scale of measurement as if defendant was the plaintiff. As far back as the case of AMON v BOBBETT (1889) 22 QBD 543 where Browne LJ noted that:
“a counter claim is to be viewed and to be treated for all purposes for which justice requires it to be so treated as an independent action”.
Dotse JSC came to the same conclusion on counter claim actions in the case of JASS CO. LTD v
APPAU  SCGLR 269 at 271 that:
‘whenever a defendant also files a counterclaim, then the same standard or burden of proof would be used in evaluating and assessing the case of the defendant just as it was used to evaluate and assess the case of the plaintiff against the defendant’
In the case of NII ODOI KWAO ASUMANG& 2 ORS. V. WILLIAM SOWAH CHARWAY& 14
ORS.  75 GMJ 108, CA at p. 135 held:
“It is trite law that a party who counterclaims becomes plaintiff as far as that counterclaim is concerned. The burden of persuasion shifts unto that defendant to establish that claim as if he was a plaintiff.”
Also, in NOTEY V. AFRICAN INSTITUTE OF JOURNALISM & COMMUNICATION  77
GMJ 1 at 40, it was held:
“Without any doubt a defendant who files a counterclaim assumes the same burden as the plaintiff in the substantive action if he/she is to succeed. This is because a counterclaim is distinct and separate claim on its own which must also be proved according to the same standard of proof prescribed by sections 11 and 14 of the Evidence Act (1975).”
Akamba JSC in J.K.KPOGO V. F.K. FIADZORGBE, Civil Appeal No. J4/9/2012, dated 6thMay, 2015 (Unreported) held:
“It is trite that a counterclaim is a separate action in which the counterclaimant assumes the burden to establish that his burden is true.”
See also: OPANIN KWASI ASAMOAH V. KWADWO APPEA [2003-04] SCGLR 226 at 246; FOSUHENE v. OWUSU  32 GMJ 163; JOSEPH AKONU BAFFOE v LAWRENCE BUAKU, SC
How did plaintiff prove its claim and the defendant its counterclaim?
The plaintiff during trial testified through its representative, Joy Edem Menka and consistent with its averments in the statement of claim tendered the following crucial exhibits before the court. Exhibits ‘B’ and ‘C’ that deals with the first loan of US$800.000.00. Exhibits ‘F’ and ‘G’ regarding the second facility of Ghc50.000. The third and final facility in the amount of Ghc660.000 is covered by Ex ‘J’ and ‘K’. The defendant on the other hand testified in person and also subpoed the CEO of plaintiff – Oko Nii Kwei Djanie. Defendant tendered Exhibits ‘1’ to ‘4’, which included, among others, valuation report of a property defendant intended to surrender and a power of attorney he executed in favour of the plaintiff institution.
From the evidence adduced at the trial, it seems to me that there are three loan contracts involved between the parties. The first is the 25th, April 2014 in the amount of US$800.000.00. The second is covered by Ex ‘E’ and ‘F’ and the amount involved is Ghc50.000. The third and final loan transaction is captured in Ex ‘J’ and ‘K’ with the loan advanced being Ghc660.000.00. All the three loans had an interest rate of 4.25% per month compound and calculated on a thirty day per month basis. All these material facts are not controverted at all by the defendant and in the cross examination of Joy Edem Menka by counsel for the defendant, there was no slightest attempt at all to deny this amount that is owed in the following:
“Q: Now by your writ of summons and statement of claim, you are claiming the sum of Ghc5,238,403.46 being outstanding debt in respect of the loan granted to the defendant. Is that correct?
A: That is correct as at the time of filing.
Q. Now as at 31st July, 2015 as contained in Exhibit ‘M’ the principal amount plus interest amounted to Ghc 5,238,403.54 is that correct?
A: That is correct”
I will find as a fact that these three loan transactions exist between the parties with a total amount of Ghc5,238,403. 46 (Five Million Two Hundred and Thirty Eight Thousand Four Hundred and Three Ghana cedis Nineteen Pesewas) and as the monies outstanding on the loans. If the amount owed on these three loans stands as at the time of filing of the writ to be Gh5,238.403.46 the question is has the defendant paid those monies?
A look at the loans shows that the three months duration period as the lifespan of the loans have long lapsed. Defendant makes a categorical admission in court that he had not paid the money when he was confronted in the following:
“Q: Please take a look at the exhibits, and you will know very well that at all material times you made contract with the plaintiff.
A: I agree My Lord.
Q. And in all these facilities you bound yourself to pay within three months.
A. Yes My Lord”
So there is no doubt from the evidence on record that defendant is indebted to the plaintiff in the amount to the tune of Ghc5, 238,403.46 and that the time for repayment has long elapsed. However, I could glean from the defence that defendant is putting up a defence of admission and avoidance. As he claims that indeed he took the loans but the repayment was agreed to be conditioned upon the sale of his property at Spintex known as Plot No 55, Accra. And as the sale of the Plot No 55 is not yet sold due to issues regarding documentation, the contract has been frustrated and he ought to be discharged from any further performance of his obligations under the contract.
This issue of frustration together with the third issue regarding whether the parties agreed that defendant was to repay the loans from the sale of Plot 55 on the Spintex Road appears to be the two germane issues that will determine the success or failure of this action by the plaintiff and also whether defendant would be entitled to his counterclaim.
It is clear, therefore, on the claim or allegation of frustration of the contract that defendant bears the burden of producing the evidence on that score. As it has been held in the case of ABABIO v AKWASI III [1994-95] GBR 774 the Supreme Court echoed the rules as follows:
“a party whose pleadings raised an issue essential to the success of his case assumed the burden of proving such issue. The burden only shifted to the Defendant when the Plaintiff has adduced evidence to establish the claim”
Sections 10 and 11 of the evidence Act, NRCD 323 is clear on the respective burden of proof and of persuasion that is borne by parties to a suit. Did the defendant prove the claim of the contract having been frustrated?
Defendant maintained the claim of the frustration of the contract in his witness statement and when the defendant came under cross examination he still stood his ground in the following exchanges:
Q. I further put it to you that your evidence that the loan contract had been frustrated by delay in the documentation process are also untrue
A: I disagree vehemently.
Q. I further put it to you that the failure to dispose off your property does not in any take away your obligation to pay the plaintiff the amount you owe
A. I do not agree with that statement. I told My Lord that we were happy to settle this debt, we have three proposals which he has rejected. And if we are strictly to go by the terms of the agreement and the spirit of the agreement, he has to wait for the property to be disposed off. And I don’t see why he came to court, My Lord”
The terms of the agreement that defendant refers to are Ex ‘B’, page 3 captioned ‘Source of Repayment’. It states that “proceeds from the sale of property located at Spintex Road”, in Ex “C” at page 2 under clause 11.2 the source of repayment is repeated as proceeds from the sale of property located at Spintex Road. Again in Ex ‘F’, ‘G’, ‘J’ and ‘K’ the same source of repayment is repeated. As a matter of fact the sale of the property has not materialised because of the non-completion of the registration process at the Lands Commission. Does that amount to frustration of the three loan contracts entered between the parties as to discharge defendant from any performance of his obligations under the contracts?
A party in contract is bound by the terms of the contract that he has voluntarily entered into unless there are vitiating factors to the contract. A contract that has validly been entered into may be discharged by a number of factors including frustration. Any unforeseen contingency that occurs after the contract had been entered into that makes the performance of the contract physically impossible or radically change the nature of the obligations of the parties can be said to be frustration. So in the case of TAYLOR v CALDWELL  3 B&S 826 which involved a contract for the hiring of a music hall for performance but before the contract could be performed, the hall was burnt down. The court held that the performance of the contract had become impossible as the parties did not anticipate the occurrence of such an event. Any occurrence that seems to fundamentally alter the obligations of the parties to the contract will suffice. A better definition was given in the case of DAVIES CONTRACTORS v FAREHAM U.D.C  A.C. 696 as follows:
“frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract…”.
It has been noted that hardship, inconvenience or material or financial loss cannot be relied upon as having called into operation frustration of a contract. The frustrated event must affect the subject matter of the contract or the fundamental obligation created by it and the event must render the contractual obligation radically different from what was originally undertaken. See DAVIES
CONTRACTORS supra. MARITME NATIONAL FISH LTD v OCEAN TRAWLERS LTD  A.C 524; JOSEPH CONSTANTINE STEAMSHIP v IMPERIAL SMELTING CORPORATION  A.C. 154.
Acquah JSC (as he then was) in the case of BARCLAYS BANK LTD v SAKARI [1996-97] SCGLR 639 emphasised the common principle as follows:
“under the common law frustration occurred where an external event of some kind which was not the responsibility of either party rendered further performance of a contract impossible or radically different from what had been contracted for. No valid finding of frustration could therefore be made without the court construing the contract to determine the nature of the obligation created on the parties—the obligation if unfulfilled by a party would entitle the other to sue for a breach of it—because on the authorities the unexpected event should affect the subject matter of the contract or the fundamental obligation created by the contract and not just any term of the contract”.
The consequences of a frustrated contract has been spelt out in sections 1-3 of the Contracts Act, 1960, Act 25. That when a contract is frustrated the parties are discharged from further performance of their obligations under the contract.
Having exhaustively set out the law on frustration the question is whether the claim of defendant that the non-sale of his property on the Spintex Road due to the lack of perfection of his title will constitute frustration. A careful reading of the Ex ‘B’, ‘C’, ‘E’, ‘F’ ‘G’, ‘J’ and ‘K’ that states that the source of repayment of the loans was the sale of the property at Spintex Road will show that the contracts did not state that the sale of property No 55 Spintex Road was to be a condition precedent for the performance of the obligations of the defendant. Ex ‘4’ which is the power of attorney that defendant granted to plaintiff attest to this fact. In clause 2 it states among others that:
“The said NDK Financial Services is hereby empowered to exercise and act for and in my name in all the following acts and things, that is to say:
2. To keep and processed title deeds or documents until all my financial obligations towards NDK Financial Services have been fulfilled”.
From the above quoted portion of Ex ‘4’, the title to the property was to be kept until all the financial obligations of defendant had been fully discharged. This position is reinforced by the default clauses in all the agreements which included diversion or misapplication of all or part of the facility granted, non-payment of the principal and/or interest charges, commission and fees, dishonouring of a cheque, breach of a term or condition of the agreement etc. The sale of the Plot 55 Spintex Road property and its application to the service the loans, I find as a matter of fact and law, was only to ensure a preclusion of the proceeds of the sale being used for any other purpose other than to service the loans. And it does not mean that defendant was not to look for other sources of funds in the event of not getting a buyer to buy his property not to repay the loans he took from plaintiff.
The claim, therefore, by defendant of the contracts having been frustrated or any other event that has made performance of his obligation under the contracts impossible is completely untrue and I dismiss such allegation as weak, unconvincing, namby-pamby and unproven.
From the evidence on record the first loan was secured by the plaintiff with a mortgaged property. That is a property situate at No 510 Buena Vista Road – Airport, Accra. That is captured in Ex ‘D’, which is a mortgage agreement between the parties wherein parcel No 510 at Airport Hills Residential Area was used as security for the repayment of the amount of US$800.000.00. There is no evidence that the subsequent loans of Ghc50.000 and the last loan of Ghc660.000 charged any immovable property for the repayment of the last two loans. And Ex ‘D’ cannot be extended to cover the last two loans.
Plaintiff in relief e seeks an order of judicial sale of the property under Ex ‘D’ which was used as security for the due repayment of the loans. Indeed section 18 of the Mortgages Act, NRCD 98, a mortgagee may upon the failure of performance of an act secured by the mortgage property may apply to the court for judicial sale of the mortgage property. The court will, however, allow the sale of the mortgage property based upon satisfaction as to the existence of the ground for the grant of such an application. The question is has the plaintiff satisfied the necessary pre-condition for the grant of an application for the judicial sale of the property?
To answer this question must necessitate an appreciation of the preconditions that must be satisfied.
Section 3 of NRCD 98 states as follows:
“Section 3—Mortgages Evidenced by Writing.
(1) No mortgage shall be enforceable unless—
(a) it is evidenced by a writing signed by the mortgagor or by his agent authorised in writing to sign on his behalf; or
(b) it is excused from the necessity of a writing by the operation of the rules of equity including the rules relating to fraud, duress, hardship, unconscionability and part performance; or
(c) it is excused from the necessity of a writing by any enactment, in the case of a customary law transaction.
(2) Every writing evidencing a mortgage shall be deemed to be an instrument which may be registered in accordance with the Land Registry Act, 1962 (Act 122).
Exhibit ‘D’ is a mortgage instrument and satisfy the requirement of writing. The section 3 also calls for registration of a mortgage instrument under the Lands Registry Act, Act 122 particularly section 24(1) in order to make such an instrument enforceable. The need for such registration has been emphasised in a number of cases. Beginning with the case of ASARE v BROBBEY  2 GLR 331 which held in a case where the mortgage deed was not registered that, that the document was ineffective and invalid to confer the rights and obligations stipulated in the mortgage deed. Similar conclusion reached in the case of AMEFINU v ODAMETEY  2 GLR 135 that by virtue of section 24(1) of Act 122, an unregistered instrument had no validity or legal effect. See also NTEM v ANKWANDAH  2 GLR ; AMUZU v OKLIKAH [1997-98] 1 GLR 141; AYITEY v MANTEY [1984-86] GLR 552; USSHER v DARKO  1 GLR 476.
On the face of Ex ‘D’ it appears not to be stamped in accordance with the Stamp Act let alone having been registered under Act 122. I will accordingly hold that the mortgage deed is invalid and ineffective for now for the court to order judicial sale of the property which was the subject of the mortgage agreement. If registration is done at a later date then that will be a different story.
Plaintiff seems to have made a case to entitled to its reliefs a, b, c and d except e which the court finds that plaintiff is not entitled to. On the other hand defendant did not prove his entitlement to any of the reliefs he seeks in his counterclaim. I find no breach of any agreement on the part of plaintiff that defendant alludes to in his first relief of his counterclaim. Defendant also ask for damages for a breach of an oral agreement. The oral agreement he claimed he entered into with the plaintiff is one for plaintiff to reimburse itself after the sale of his property to defray the loans.
It is trite learning regarding parol evidence rule that generally once parties to an agreement have reduced their contract into a written form, the parties will be debarred from adducing extrinsic evidence to contradict what they have written. The exceptions to the parol evidence rule is where the written document was not intended to contain the whole of the agreement between the parties as seen in the case of ALLEN v PINK  4 M&W 140; two, circumstance where oral evidence may be adduced to prove the existence of a custom as it was in the case of GILLESPIE BROTHERS v CHENEY EGGAR & CO  2 QBD 59; three, where there is evidence to show that a contract is invalid due to misrepresentation, mistake, fraud or non est factum as it was in the case of CAMPBELL DISCOUNT v GALL  QBD 431and four, where a party is calling for rectification of the written document as in the case of MANN v NUNN  30 LT 526.
Defendant could not prove any parol agreement entered into with plaintiff that varied the terms of the written contracts between and neither them could defendant bring its claim within any of the exceptions to the parol evidence rule. The counterclaim of defendant is dismissed in its entirety.
I will exercise my discretion and award cost of eight percent of the claim of the plaintiff.