UNIBANK GHANA LIMITED VRS. B.N.O INTERNATIONAL COMPANY LIMITED AND ANOTHER (GJ/0700/2023) [2024] GHAHC 452 (12 December 2024)

IN IN THE SUPERIOR COURT OF JUDICATURE, IN THE HIGH COURT OF JUSTICE FINANCIAL & ECONOMIC CRIME DIVISION 1 SITTING IN GENERAL JURISDICTION 14 HELD IN ACCRA ON WEDNESDAY THE 12TH DAY OF DECEMBER, 2024 BEFORE HIS LORDSHIP JUSTICE DR. ERNEST OWUSU-DAPAA JA SITTING AS AN ADDITIONAL HIGH COURT JUDGE SUIT NO. GJ/0700/2023 Between UNIBANK GHANA LIMITED (IN RECEIVERSHIP) PLAINTIFF 4th Floor, Allied Heights Building Olusegun Obasanjo Highway Abelenkpe – Accra And B.N.O INTERNATIONAL COMPANY LIMITED 1ST DEFENDANT Forico Mall, Office No. 301-2 Mission Street Near Blue Gate Osu - Accra CHARLES MENSAH 2ND DEFENDANT Accra (Plaintiff shall direct service) __________________________________________________________________ 1 JUDGMENT __________________________________________________________________ 1. INTRODUCTION [ 1] . By an Amended Writ of Summons filed on 07/11/2023, the Plaintiff claimed against the Defendants jointly and severally as follows: a. A order for the recovery of One Million Three Hundred and Seventeen Thousand Five Hundred and Fifty-Eight Ghana Cedis and Eighty-Three Pesewas (GHS1,317,558.83) b. Interest on the above sum at the contractual rate of 30.45% per annum from October 1, 2022 till date of final payment c. Damages for breach of contract d. Cost inclusive of Solicitor’s Fees [ 2 ]. The Plaintiff’s case as told through its accompanying Amended Statement of Claim may be narrated as follows: The Plaintiff, a company incorporated under the relevant laws of Ghana and engaged in the banking business, operated until August 1, 2018. On that date, it was placed under the receivership of Nii Amanor Dodoo, the appointed receiver by the Bank of Ghana. 2 The first Defendant is identified as a limited liability company involved in the importation of general goods and road safety equipment. The second Defendant serves as the Managing Director of this first Defendant company. On June 15, 2011, the Plaintiff extended a Loan Facility of Two Hundred and Fifty Thousand Ghana Cedis (GHS 250,000.00) to the first Defendant company. This loan was offered at an interest rate of 30.95% per annum with an Annual Percentage Rate (APR) of 36.58%. According to the Loan Facility agreement, a penal interest rate of 40% was applicable on any account that became overdrawn or overdue without authorization. The primary purpose of this loan was to finance the execution of a contract for supplying branded triangular warning lights to the Driver and Vehicle Licensing Authority (DVLA). The terms of the Loan Facility required repayment in ten equal monthly principal installments of Twenty-Five Thousand Ghana Cedis (GHS 25,000) following the drawdown, with the loan expiring on June 30, 2012. To secure the Loan Facility, the Plaintiff required: An assignment of stocks and receivables; A legal mortgage over residential property located at House No. 7, 3rd Zoti Close, Laterbiokorshie, Accra, held in the name of the second Defendant; Joint and several guarantees from the directors of the first Defendant, specifically the second and third Defendants. The first Defendant company, represented by the second Defendant, accepted the Loan Facility and its terms on June 20, 2011. Subsequently, on August 13, 2012, the Plaintiff approved and granted a Consolidated Loan Facility amounting to Six Hundred and Thirty-Three Thousand Nine Hundred and Forty-Five Ghana Cedis and Forty-Two Pesewas (GHS 633,945.42) to the first Defendant company. This Consolidated Loan was offered at an interest rate of 28.45% per annum with an APR of 33.34%. The agreement stipulated that a penal rate would apply to any account that was overdrawn or overdue without authorization. The Consolidated Loan was to be repaid through a bullet 3 repayment of the principal plus interest by February 28, 2013, or upon receipt of contract proceeds, whichever occurred first. The Consolidated Loan was secured by: An assignment of receivables; A legal mortgage over the residential property at House No. 7, 3rd Zoti Close, Laterbiokorshie, Accra, in the name of the second Defendant; A legal mortgage over residential property situated in East Legon; Joint and several guarantees from the directors of the first Defendant, namely the second and third Defendants. The first Defendant company, through the second Defendant, accepted the Consolidated Loan Facility and its terms on August 13, 2012. On April 12, 2013, the Plaintiff issued another offer letter approving and granting a Loan Extension Facility of Four Hundred and Twenty-Two Thousand, Seven Hundred and Nine Ghana Cedis and Sixty-Two Pesewas (GHS 422,709.62) to the first Defendant company. This extension was provided at an interest rate of 30.45% per annum with an extension fee of 1%, intended to finance the execution of a contract between the first Defendant company and the DVLA. The Loan Extension Facility was contingent upon the terms and conditions outlined in the August 13, 2012 offer letter. The first Defendant company, acting through the second Defendant, accepted the Loan Extension Facility on April 17, 2013. Repayment of the Loan Extension Facility was to be made through a bullet repayment of the principal plus interest by October 31, 2013, or upon receipt of contract proceeds, whichever came first. The Plaintiff alleges that the first Defendant company refused, failed, and/or neglected to comply with the repayment terms outlined in the Loan Extension Facility. Consequently, on February 29, 2020, the Plaintiff issued a demand notice dated April 28, 2020, requiring the first Defendant company to settle its indebtedness of Four Hundred and Thirty-Three Thousand and Eighty-Six Ghana Cedis and Sixty-Eight Pesewas (GHS 433,086.68) within twenty-one (21) days of receiving the notice. In response, the first Defendant company made a partial payment of Twenty 4 Thousand Ghana Cedis (GHS 20,000.00) around October 26, 2020, which the Plaintiff considers paltry in comparison to the total debt. Despite the Plaintiff’s patience and magnanimity, the first Defendant company has continued to neglect, refuse, and/or fail to fully satisfy its indebtedness. On October 10, 2022, the Plaintiff issued a final demand for the first Defendant company to fully repay its outstanding debt of One Million Three Hundred and Seventeen Thousand Five Hundred and Fifty-Eight Ghana Cedis and Eighty-Three Pesewas (GHS 1,317,558.83) as of September 30, 2022. The Plaintiff further contends that the second and third Defendants, who provided guarantees for all sums owed by the first Defendant company, are jointly and severally liable for the outstanding debts. The Plaintiff asserts that the first Defendant company has breached its obligations by failing to adhere to the repayment terms and has demonstrated a clear intention to avoid liquidating its indebtedness unless compelled by the Honourable Court. Due to the Defendants' continuous defaults and blatant refusal to settle their liabilities, the Plaintiff has incurred costs related to legal advice and the initiation of this legal action. The Plaintiff seeks to recover these costs from the Defendants. In light of the foregoing, the Plaintiff claims against the Defendants jointly and severally for the following: a. An order for the recovery of One Million Three Hundred and Seventeen Thousand Five Hundred and Fifty-Eight Ghana Cedis and Eighty-Three Pesewas (GHS 1,317,558.83); b. Interest on the aforementioned sum at the contractual rate of 30.45% per annum from October 1, 2022, until the date of final payment; c. Damages for breach of contract; d. Costs, including Solicitor’s Fees. [ 3 ] . The 1st and 2nd Defendants entered Conditional Appearance to the Plaintiff’s action through their lawyer, Peter Zwennes, on 26/04/2023. 5 [ 4 ] . Defendants pleaded their case through Amended Statement of Defence jointly filed by the Defendants on 05/12/2023 which may be narrated as follows: The Defendants admit the initial loan arrangements detailed by the Plaintiff, including the Loan Facility extended on June 15, 2011, and the subsequent Consolidated Loan Facility granted on August 13, 2012, as well as the Loan Extension Facility approved on April 12, 2013. They acknowledge the terms of these agreements, the interest rates applied, the security provided, and the acceptance of these facilities by the first Defendant through its Managing Director. However, the Defendants dispute the Plaintiff’s claim that the first Defendant failed to adhere to the repayment terms stipulated in the Loan Extension Facility. They attribute this alleged default to a series of unforeseen events beyond their control, which significantly impeded the flow of receivables from the Driver and Vehicle Licensing Authority (DVLA) to the first Defendant company. Specifically, the Defendants highlight the following circumstances: In February 2013, the first Defendant entered into a substantial contract valued at USD 580,314.00 with its principals and manufacturers in China to enhance its supply and delivery of Warning Triangles to the DVLA. In response, the Plaintiff granted the Loan Extension Facility to support this contract. However, in September 2013, the DVLA issued a directive halting the sale of Warning Triangles supplied by the first Defendant, severely disrupting its business operations. The first Defendant sought to address this issue by requesting the suspension of the sales halt through formal communications with the DVLA’s Solicitors in October 2013 and again in July 2014. Despite these efforts, the DVLA appointed Original Manufacturing Company Limited as the new distributor for Warning Triangles, effectively limiting the first Defendant’s ability to sell its products to selected centers outside the primary markets of Greater Accra and Ashanti Regions. This restriction resulted in an unsellable inventory of 18,450 pairs of Warning Triangles. 6 Furthermore, the Defendants initiated legal action against the DVLA (Suit Number OCC/22/15) seeking specific performance to compel the DVLA to honor its obligations. This suit was subsequently settled out of court, but the underlying issues remained unresolved. The DVLA’s continued refusal to approve the sale of Warning Triangles at its designated centers and to negotiate favorable terms for the first Defendant rendered it impossible for the latter to mitigate its losses by selling the products on the open market. As a result of these impediments, the Defendants argue that the contract between the Plaintiff and the first Defendant regarding the Loan Extension Facility was effectively frustrated from September 2013 to December 2017. This frustration was due to the DVLA’s actions, which directly impacted the first Defendant’s ability to generate the necessary receivables to meet its repayment obligations. Regarding the Plaintiff’s demand for repayment totaling One Million Three Hundred and Seventeen Thousand Five Hundred and Fifty-Eight Ghana Cedis and Eighty-Three Pesewas (GHS 1,317,558.83) as of September 30, 2022, the Defendants contest this amount. They reference a letter dated July 6, 2018, in which the first Defendant informed the Plaintiff of the challenges faced with the DVLA and requested a freeze on all penal interest on the outstanding loan balance. The Defendants assert that as of September 30, 2022, the first Defendant’s indebtedness to the Plaintiff did not exceed Four Hundred and Fifty-Two Thousand Ghana Cedis (GHS 452,000.00). The Defendants further deny the Plaintiff’s claims for damages and additional costs, maintaining that the alleged breaches were a direct result of circumstances beyond their control, specifically the DVLA’s directives and the resulting inability to sell the Warning Triangles. They emphasize that the Defendants made diligent efforts to resolve the issues with the DVLA and fulfill their obligations under the loan agreements but were hindered by the Authority’s actions. 7 In conclusion, the Defendants assert that the Plaintiff is not entitled to any of the reliefs sought in this action. They argue that the disruptions caused by the DVLA effectively nullified the contractual obligations, absolving the Defendants from the alleged defaults. Consequently, the Defendants respectfully request that the Court dismiss the Plaintiff’s claims in their entirety. [ 5 ] . The Plaintiff on 04/7/2023 at 11.05 am filed Notice of Discontinuance of the Suit against 3rd Defendant . At 11.15am on the same day Application for Directions was filed at the instance of the Plaintiff proposing following issues to be set down as the issues for trial and same were eventually adopted: a) Whether or not there is a subsisting agreement between the Plaintiff and the 1st Defendant for a freeze of all penal interest on the outstanding loan agreement. b) Whether or not the 1st Defendant’s indebtedness to the Plaintiff as at September 30, 2022 amounted to one Million Three Hundred and Seventeen Thousand, Five Hundred and Fifty-Eight Ghana Cedis and Eighty-Three Pesewas GHS 1,317,558.83) c) Whether or not the Plaintiff is entitled to interest on the aforementioned amount of GHS 1,317, 558.83 at a rate of 30.45% per annum from October 1, 2022 till date of final payment. d) Whether or not the loan agreement between the Plaintiff and the 1st Defendant was frustrated by the suspension/ termination of the 1st Defendant’s contract with the Driver and Vehicle Licensing Authority (DVLA) e) Whether or not the 2nd Defendant is jointly and severally liable for the indebtedness of the 1st Defendant company to the Plaintiff 8 f) Any other issues arising out of the pleadings or evidence in this matter. The Defendants draw the Court’s attention to the principle enunciated in Fattal v Wolley [2013-2014] 2 SCGLR 1070, where Wood CJ (as she then was) at page 1076 opined that: “Admittedly, it is, indeed, sound basic learning that courts are not tied down to only the issues identified and agreed upon by the parties at pre-trial. Thus, if in the course of the hearing, an agreed issue is clearly found to be irrelevant, moot, or even not germane to the action under trial, there is no duty cast upon the court to receive evidence and adjudicate upon it. The converse is equally true. If a crucial issue is left out, but emanates at the trial from the pleadings or the evidence, the court cannot refuse to address it on the ground that it is not included in the agreed issues.” In light of this, the Defendant further invites the Court to consider whether Plaintiff is entitled to impose penal interest on the outstanding loan. THE LAW ON BURDEN OF PROOF AND ITS ALLOCATION TO THE PARTIES [ 7 ] . A well-known principle of our civil justice system is that the Plaintiff bears the initial burden of producing evidence to substantiate its claim. This principle is firmly rooted in the Evidence Act, 1975 (NRCD 323). Section 10(2) of NRCD 323 provides that: “the burden of persuasion may require a party to raise a reasonable doubt concerning the existence or non-existence of a fact, or to establish the existence or non-existence of a fact by a preponderance of probabilities.” 9 Section 14 of NRCD 323 further states that: “unless and until 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 he is asserting.” Section 11(4) of NRCD 323 adds that: “the burden of producing evidence requires a party to produce sufficient evidence so that on all the evidence a reasonable mind could conclude that the existence of the fact was more probable than its non-existence.” [ 8 ]. It follows that the party bearing this burden must provide sufficient evidence to allow the Court, on the balance of the material before it, to make a finding in that party’s favour. This is the essence of the evidentiary requirements prescribed in Sections 10, 11, and 12 of NRCD 323. The English case of Abrath v NE Railway Co [1881-85] All ER 614, at p. 619 (per Bowen LJ), illustrates the shifting nature of the onus of proof: “Whenever there is an action to be tried generally the plaintiff begins. If he proves nothing he fails, if he proves his case and the other side proves nothing to answer to it, they fail. The test is, if no more evidence were given in addition to what has already been proved which side would win? But the onus does not rest forever on whom it is cast in the first instance. Where he gives evidence, which rebuts the evidence given against him he shifts the burden and it rests on his opponent. The question as to the onus of proof is only a mode of deciding who is to go further and how much he has to go.” [ 9 ]. The rule is further clarified by Lord Hoffman in Re B [2008] UKHL 3, where he explained the binary nature of fact-finding in litigation. In his view, a tribunal must decide if a fact did or did not occur, leaving no room for ambiguity. The law sets a “0 or 1” value on a fact's existence, making it clear that if a party fails to satisfy their burden of 10 proof, the fact is treated as if it did not happen. For the fear of diluting the wisdom of Lord Hoffman’s dictum in Re B, it is worth quoting his own words here: If a legal rule requires a fact to be proved (a fact in issue) a judge or jury must decide whether or not it happened. There is no room for a finding that it might have happened. The law operates a binary system in which the only values are O and 1. The fact either happened or it did not. If the tribunal is left in doubt, the doubt is resolved by a rule that one party or the other carried the burden of proof. If the party who bears the burden of proof fails to discharge it, a value of O is returned and the fact is treated as having not happened. If he does discharge it, a value of 1 is returned and the fact is treated as having happened.” [ 10 ] .Once it is established who bears the burden of proof, consideration must be given to the standard of proof applicable in civil cases. Section 12(1) of NRCD 323 directs that the standard to be met in civil proceedings is proof on the balance of probabilities. This standard was affirmed in African Mission Church v Seba Construction Ltd [2013] 59 GMJ 176 at 202, where Dordzie JA (as she then was) stated: “Proof in a civil case is based on the balance of probabilities…” Accordingly, the party bearing the burden need only demonstrate that its factual assertions are more likely than not to be true. If, after a careful assessment of the evidence, the Court is convinced that a fact is more probable than its non-existence, judgment should be entered in favour of the party who has satisfied this test. Conversely, if the evidence before the Court is in equipoise—if the competing versions are equally plausible—the party who bore the initial burden will have failed to discharge it. In Miller v Minister of Pensions [1974] 2 All ER 372 at 373, Denning J (as he then was) succinctly explained this point in respect of the civil standard: 11 “The degree of proof is well settled. It must carry a reasonable degree of probability. But not as high as in a criminal case if it is such that the tribunal can say ‘we think it is more probable than not’ the burden is discharged. But if the probabilities are equal, it is not.” [ 11 ]. In the case of Zambrama v. Segbedzi (1991) 2 GLR 221, CA, Kpegah JA ( as he then was), restated the law on proof in civil actions as follows: “I will therefore venture to state the position to be: a person who makes an averment or assertion, which is denied by his opponent, has the burden to establish that his averment or assertion is true. And, he does not discharge this burden unless he leads admissible and credible evidence from which the fact or facts he asserts can properly and safely be inferred. The nature of each averment or assertion determines the degree and nature of that burden.” See also Takoradi Flour Mills v. Samir Faris ( 2005-2006) SCGLR 883. Moreover, the Supreme Court of Ghana, in In re Ashalley Botwe Lands: Adjetey Agbosu v Kotey [2003-2004] 2 SCGLR 685, has emphasized that the evidential burden is not static; it may shift as the trial progresses: “It is trite learning that by the statutory provisions of the Evidence Decree, 1975 (NRCD 373), the burden of producing evidence in any given case is not fixed, but shifts from party to party at various stages of the trial, depending on the issues asserted and or denied.” THE TRIAL [ 12 ] . The trial in the present case formally commenced on 15 May 2024. On that date, the Plaintiff opened its case and presented its sole witness, PW1, Mr. Collins Kofi Agyapong. Once Mr. Agyapong had concluded his testimony and been duly cross- examined, the Plaintiff formally rested its case. On 18 July 2024, the Defence initiated its 12 presentation of evidence. The 2nd Defendant, Mr. Charles Mensah, took the stand as the Defence’s first and only witness. At the close of Mr. Mensah’s testimony on the same day, the trial proceedings were brought to an end. SUMMARY OF PLAINTIFF’S TESTIMONY [ 13 ] . The evidence in chief of Plaintiff as per the Witness Statement may be summarised as follows. The Plaintiff, Unibank Ghana Limited (in receivership), represented by Collins Kofi Agyapong, an Accounts Manager, testified that on June 15, 2011, the Plaintiff approved and granted a loan facility of GHS 250,000.00 to the 1st Defendant, BNO International Company Limited. This loan, offered at an interest rate of 30.95% per annum with an Annual Percentage Rate (APR) of 36.58%, was intended to finance the supply of branded triangular warning lights to the Driver and Vehicle Licensing Authority (DVLA). The loan facility agreement (Exhibit A) specified a penal rate of 40% on any account that was overdrawn or overdue without authorization. Repayment terms required ten equal monthly installments of GHS 25,000.00, commencing one month after drawdown, with the facility expiring on June 30, 2012. [ 14 ] Plaintiff testified that as security, the Plaintiff obtained an assignment over receivables, a legal mortgage over a residential property situated at House No. 7, 3rd Zoti Close, Laterbiokorshie, Accra, belonging to the 2nd Defendant, Charles Mensah, and joint and several guarantees from the directors of the 1st Defendant, including the 2nd Defendant and one Mr. Adolf Djirakor (Exhibit B). On August 13, 2012, the Plaintiff approved and granted the 1st Defendant a Consolidated Loan Facility amounting to GHS 633,945.42 at an interest rate of 28.45% per annum and an APR of 33.34% (Exhibit C). This facility was to be repaid by a bullet payment of principal and interest by February 28, 2013, or upon receipt of contract proceeds, whichever came first. The securities for this 13 facility included an assignment over receivables, legal mortgages over residential properties at Laterbiokorshie and East Legon, and guarantees from the directors of the 1st Defendant, including the 2nd Defendant and Mr. Adolf Djirakor. [ 15 ] . The Plaintiff further testified that on April 12, 2013, an additional loan extension of GHS 422,709.62 was granted to the 1st Defendant to finance the execution of another contract. This extension carried an interest rate of 30.45% per annum and an extension fee of 1%. On each occasion, the terms of the loan facilities and the extension were duly accepted by the 1st Defendant through the 2nd Defendant, Charles Mensah. The Plaintiff provided supporting documents, including the offer letters for the various facilities and agreements, as evidence of the terms and securities agreed upon. However, the 1st Defendant is said to have defaulted in repaying the loans, despite the explicit terms and securities outlined in the agreements. This default led to the initiation of this legal action to recover the outstanding amounts. Through this testimony and the referenced exhibits, the Plaintiff clearly demonstrated the contractual arrangements between the parties, the securities provided, and the defaults that necessitated this suit. SUMMARY OF DEFENDANT’S TESTIMONY [ 16 ] . Charles Mensah, the 2nd Defendant and Managing Director of the 1st Defendant, BNO International Company Limited, testified on behalf of himself and the company. According to Mr Mensah, the 1st Defendant, a limited liability company engaged in the importation of general goods and road safety equipment, entered into a contract with the Driver and Vehicle Licensing Authority (DVLA) in April 2008 to supply warning triangles for motorists. To execute this contract, the 1st Defendant secured a loan facility of GHS 250,000.00 from the Plaintiff, Unibank Ghana Limited, as documented in an offer letter dated June 15, 2011 (Exhibit 1). Additional facilities were later obtained, including 14 a Consolidated Loan of GHS 633,945.42 on August 13, 2012 (Exhibit 2) and a Loan Extension Facility of GHS 422,709.62 on April 12, 2013 (Exhibit 4). [ 17 ] .The Defendants stated that they serviced the loans as expected until unforeseen events impeded their ability to generate receivables from the DVLA. A directive from the DVLA, dated September 26, 2013 (Exhibit 5), halted the sale of the warning triangles, affecting the 1st Defendant's operations. Attempts to resolve the issue through correspondence and legal action (Exhibits 6-9) culminated in an out-of-court settlement of a suit brought by the 1st Defendant against the DVLA. Despite these efforts, the DVLA's refusal to approve key requests, including an upward price review and the reallocation of sales centers (Exhibits 10-12), continued to undermine the Defendants' ability to fulfill their financial obligations. The Defendants claim the loan contract was frustrated by the DVLA's actions, which prevented the sale of 18,450 pairs of warning triangles remaining in stock. They argue that the Plaintiff failed to account for these exceptional circumstances. [ 18 ] . The Defendants dispute the Plaintiff's assertion that the 1st Defendant owed GHS 1,317,558.83 as of September 30, 2022, and contends instead that the actual indebtedness was no more than GHS 452,000.00. They further highlighted a July 6, 2018, letter (Exhibit 13) which requested a freeze on penal interest due to the challenges faced. The Defendants pray the court to dismiss the Plaintiff's reliefs and order an account reconciliation to determine the actual indebtedness. An Overview of Relevant Substantive law 15 [ 19 ] Under our law, the doctrine of frustration is governed by both the common law and section 1 of the Contracts Act, 1960 (Act 25). The common law principles determine when a contract is deemed frustrated, while Act 25 deals with its legal consequences. In applying this doctrine, the first step is to identify the precise obligation created by the contract. The Supreme Court in Barclays Bank (Ghana) Ltd v Sakari [1997-98] 1 GLR 746 provides a clear statement of the law. “Now, what is the obligation created under this loan contract, a breach of which would entitle the other to sue? The obligation of the bank was to advance the money, which it did, and that of the defendant was to repay the loan together with interest, if any. This is the obligation of the parties under this loan contract, and indeed, almost all loan contracts. When a bank lends money to its customer, the obligation of the customer is to repay the loan. If the loan is sought for, lets say, a business venture, and the business flops resulting in massive financial loss to the customer, this misfortune, though may be due to no fault of this customer, does not change the nature of the obligation of the customer to repay the loan he had contracted for. He will still be obliged to fulfill his obligation. Thus, the obligation of a borrower in a loan contract as opposed to other types of contracts, is to repay the loan and not the performance of the purpose for which the loan was sought.” Thus, the Supreme Court is teaching us that frustration cannot be inferred merely because the purpose of obtaining the loan cannot be realized. In a loan agreement, the primary obligation of the borrower is to repay the principal and interest, regardless of whether the intended purpose of the loan fails due to unforeseen circumstances. Consequently, even if a business venture funded by the loan collapses through no fault of the borrower, this does not relieve the borrower from the fundamental obligation to 16 repay. Thus, the contract is not frustrated by the mere impossibility of fulfilling the purpose for which the loan was sought. [ 20 ]. The case of Barclays Bank (Ghana) Limited (supra) was cited with approval in HAJAARA FARMS LIMITED VRS SOCIETE GENERALE – SOCIAL SECURITY BANK [2012] 1 SCGLR 1 by Dr. Date-Bah JSC as follows: “In my view, the above case applies mutatis mutandis to the issue of the appellant’s counterclaim which had been dismissed by the Court of Appeal to the effect that the seizure of the respondent’s tractors by the appellant bank did not release the respondent company of its primary obligation under the loan contract. In this case, the respondent owed the appellant an obligation to repay the loan, whether or not there was a breach occasioned by the appellant. The primary obligation to repay the loan had not changed and its obligation was not dependent on the performance of the purpose of the loan or a breach of contract by the appellant bank.” [ 21 ]. Learned Counsel for Plaintiff correctly stated the law which governs award of interest. The basis for the award of interest by the courts is that a person has been deprived of the use of his/her/its money for a period. The Supreme Court explained the principle for the award of interest in the case of AKOTO V. GYAMFI ADDO (2005-2006) SCGLR 1018, (holding 1) as follows: “The general principle for the award of interest to a party was that such a party had been unjustifiably kept out of money due him pr her for the relevant period.” 17 Furthermore, the Supreme Court in the case of KAMA HEALTH SERVICES LTD V. UNILEVER GHANA LTD (2013-2014) 2 SCGLR 861explained the underlying principle for the payment of interest and cited with approval the statement of Edusei J (as he then was) in the case of HOLLAND WEST AFRICA & ANOR V. PAN AFRICAN TRADING COMPANY & ANOR. (1976) 2 GLR 179, (holding 3) that: “If a breach of contract had deprived a plaintiff of the use of a sum of money or other capital asset, the defendant must be presumed to have agreed to pay interest for the period between the date when the cause of action arose and the date of the judgment”. [ 22 ] . The COURT (AWARD OF INTEREST AND POST JUDGEMENT INTEREST) RULES, 2005 (CI 52) details how interest, when awarded, ought to be calculated. Rules 1 and 2 of CI 52 provide as follows: Rule 1 - Order for payment of interest 1. If the court in a civil cause or matter decides to make an order for the payment of interest on a sum of money due to a party in the action, that interest shall be calculated (a) At the bank rate prevailing at the time the order is made, and (b) At simple interest But where an enactment, instrument or agreement between the parties specifies a rate of interest which is to be calculated in a particular manner the court shall award that rate of interest calculated in that manner. Rule 2-Post Judgement interest 18 2. (1) Subject to subrule (2) each judgement debt shall bear interest at the statutory interest rate from the date of delivery of the judgement up to the date of final payment. (2) Where the transaction which results in the judgement debt (a) Contained in an instrument, (b) Evidenced in writing, or (c) Admitted by the parties and the parties specify in the instrument, writing or admission the rate of interest which is chargeable on the debt and which is to run to the date of final payment, then that rate of interest shall be payable until the final payment In essence, interest serves as compensation for the time-value of money wrongfully withheld. Where an agreement prescribes a particular method or rate of calculation, the courts will enforce it. Otherwise, a statutory or bank rate may apply to ensure that the successful party is made whole for the delay in receiving payment. [ 23 ]. Regarding joint and several gurantees, it is the law that a guarantee must be in writing and signed by the guarantor or their agent to be valid. See section 14(1) of the Contracts Act, 1960 (Act 25). In Boohene Food Ltd v National Savings and Credit Bank & Anor [1992] 1 GLR 175, it was held that these statutory requirements are essential to the enforceability of any guarantee. A guarantee is generally considered a secondary obligation. As described WAPIC INSURANCE (GH) LTD VRS DPS COMPANY LTD AND MESUMA DELIMAN OSMAN (SUIT NO. RPC/211/13) delivered on February 29, 2016 by Dodoo J (as she then was) , High Court (Commercial Division), Accra), citing Paget’s Law of Banking (13th ed), a guarantee “is a promise to be liable for the debt or failure to perform some other legal obligations of another.” The guarantor’s liability runs 19 parallel and is co-extensive with that of the principal debtor. Thus, if the principal debtor defaults, the guarantor becomes directly liable for the fulfillment of the debtor’s obligation. ANALYSIS AND DECISION OF THE COURT [ 24 ] The issues for determination are as follows: (a) Whether or not the loan agreement between the Plaintiff and the 1st Defendant was frustrated by the suspension/termination of the 1st Defendant’s contract with the DVLA. (b) Whether or not there is a subsisting agreement between the Plaintiff and the 1st Defendant for a freeze of all penal interest on the outstanding loan amount. (c) Whether or not the 1st Defendant’s indebtedness to the Plaintiff as at 30 September 2022 amounted to GHS 1,317,558.83. (d) Whether or not the Plaintiff is entitled to interest on the aforementioned amount at the contractual rate of 30.45% per annum from 1 October 2022 until the date of final payment. (e) Whether or not the 2nd Defendant is jointly and severally liable for the indebtedness of the 1st Defendant company. (f) Whether or not the Plaintiff is entitled to damages for breach of contract in addition to interest. Issue(a): Whether or not the loan agreement between the Plaintiff and the 1st Defendant was frustrated by the suspension/termination of the 1st Defendant’s contract with the DVLA. 20 [ 24 ]. The Defendants argued that the contract with the DVLA to supply warning triangles was halted by a directive from the DVLA. They say this event, occurring without their fault, prevented them from generating revenue to repay the loan, thereby frustrating the loan agreement. The Plaintiff relied on Barclays Bank (Ghana) Ltd v Sakari [1997-98] 1 GLR 746, where the Supreme Court held that the fundamental obligation of a borrower under a loan contract is to repay the loan with interest, irrespective of the success or failure of the underlying purpose for which the loan was obtained. The Court in Sakari stated: “When a bank lends money to its customer, the obligation of the customer is to repay the loan. If the loan is sought for a business venture and the business flops resulting in massive financial loss to the customer, this misfortune...does not change the obligation of the customer to repay the loan he had contracted.” (at 752) This principle is dispositive. [ 25 ] . The 1st Defendant’s inability to sell the warning triangles due to the DVLA’s actions, while unfortunate, does not alter or discharge the obligation to repay the sums advanced. The loan agreement herein did not make the repayment contingent upon the successful performance of the DVLA contract. Rather, the Defendants bear the unconditional duty to repay. Accordingly, the loan agreement was not frustrated. The inability to perform the ancillary or intended purpose of the loan (i.e., selling warning triangles to DVLA) does not relieve the Defendants of their primary repayment obligation. The cross examination of Plaintiff Witness by Counsel for Defendants exposed the falsehood in the Defendants assertion that loan repayment was contingent upon sale of DVLA warning triangles. This is what transpired: 21 Q: You are aware that as part of reasons for 1st Defendant advanced and support of its request for the freeze on the penal interest was the fact that the D.V.L.A. had terminated a contract for the 1st Defendant to supply the warning triangles are you not? A: My Lord 2nd Defendant did make that claim but did not provide any official document to support it. In any case the initial loan was advanced eight years prior to the said letter and I am not sure if that can be a valid excuse. Q: I suggest to you that the 1st Defendant did make available to the Plaintiff enough information related to the suspension or termination of the contract between the D.V.L.A. and 1st Defendant. A: My Lord I don’t have those documents. Q: Are you aware that the 1st Defendant instituted an action against the D.V.L.A. and another in the High Court in order that its contract with the D.V.L.A. would be reinstated so that it could honour its obligations to the Plaintiff amongst others? A: No, my Lord I am not aware. Q: I suggest to you that that information related to the said action against D.V.L.A. in suit number OCC/22/15 was made available to the Plaintiff. A: My Lord I don’t recall seeing a Statement of Claim or Statement of Defence or Judgment in any such case. Issue (b): Whether or not there is a subsisting agreement between the Plaintiff and the 1st Defendant for a freeze of all penal interest on the outstanding loan amount. [ 26 ]. The Defendants contend that a letter dated 6 July 2018 requested a freeze of all 22 penal interest and that the Plaintiff’s silence or conduct thereafter created an agreement. However, as the Supreme Court emphasized in NTHC v Antwi [2009] SCGLR 117, a contract variation requires offer and acceptance. Mere silence cannot constitute acceptance. Under cross-examination, the Defendant’s witness was asked whether there was any acceptance of the freeze request: “Q: You mentioned that you wrote to the Plaintiff to freeze penal interest is that not so? A (2nd Defendant): Yes, my Lord that is so. Q: And you will agree with me that the Plaintiff did not agree to your request? A: ...We did not receive any response from them.” This exchange confirms that no acceptance was communicated by the Plaintiff. In the absence of acceptance, no binding variation to freeze penal interest arose. The request remained exactly that—a request—and never attained the status of a binding contractual modification. Issue (c): Whether or not the 1st Defendant’s indebtedness to the Plaintiff as at 30 September 2022 amounted to GHS 1,317,558.83. [ 27 ]. The Plaintiff claims the sum of GHS 1,317,558.83 as at 30 September 2022. The Defendants insist that the amount should not exceed GHS 452,000.00. However, they provided no evidence of consistent repayments or reconciliations to substantiate their figure. During cross-examination by Counsel for Plaintiff, the 2nd Defendant admitted the paucity of evidence: 23 Q: As far back as October 10, 2022 the Plaintiff wrote to you again demanding payment of the 1st Defendant’s debt which stood at GH¢1,317,558.83 as at September 30, 2022 (Exhibit G) is that not so? A: My Lord that is so but I think that I have indicated my Witness Statement that I do not deny the fact that we owe the receiver but we have explained that in as much as we owe, the dispute or the contention is on the figure that we owe and we made that clear in my Witness Statement. Q: Did you ever write to the Plaintiff bank to dispute the amount owed after the Plaintiff bank wrote to you? A: I don’t remember writing to the bank disputing the figures simply because we thought that we could settle the amount owed which was as at September, the date he mentioned which amount was about 422 because we were on the neck of the DVLA to have some arrangement relative to this situation we have in the bank. So the money amounting to 422,000 plus could be settled. Q: I am suggesting to you that you never wrote to dispute the amount because you were very much aware that the amount was correct and accurate. A: My Lord that is not correct. Q: How much did you owe the Defendant( Sic: Plaintiff) as at October 10, 2022? A: As at October 2022, we owed the bank GH¢452,000 plus I can’t tell exactly that was how much we knew we owed as at that time. Q: Can you tell this court how you arrived at that figure? A: My Lord from the inception of the transaction, we have been servicing the loan and we have records and so per the records of payment we owed the bank GH¢452,000 plus. Q: Let us go back to your own Exhibit 4 the loan amount which you have already admitted to is GH¢422,709.62 as at April 12, 2013. You have also told 24 this court that since then you have paid only GH¢20,000.00. Mr. Mensah per that Facility Agreement what is the interest rate? A: My Lord as captured clearly here is 30.45% per annum. Q: And from 2013 to 2022 would be nine years is that not so? A: Yes, my lord that is so but as I earlier indicated in the Witness Statement, we have clearly spelled out the reason why we were not able to retire the Facility. But my Lord from Counsel’s question, yes per our calculations the answer that I have for his question in terms of how much we owed, for us as a company, that is how much we believe we owe the bank as at that time. Q: A 30% interest rate computation on GH¢400,000.00 for a year would be a GH¢120,000.00 is that not so? A: My Lord I am not an Accountant. Q: I am therefore suggesting to you that you owed over 1.3 million Ghana Cedis as at September 30, 2022 and not GH¢452,000.00. A: My Lord that is not correct and my Lord I wish to add that I would plead for a reconciliation of the figures if that is allowed by the court and the Plaintiff. [ 28 ]. From the above responses of 2nd Defendant during cross examination one would have expected that he would have produced the records defendants had that support his insistence that they owed only GH¢452,000.00and not the amount claimed by Plaintiff. Strangely the Defendants never produced these records. Also, Defendant stated that Defendants did not dispute owing Plaintiff but disputed the quantum and would have reconciliation done. It is pertinent to note that where a party requires a particular order such as appointment of court expert such as independent accountant or auditor such party had the duty to make such prayer before the court. In the instant case no such request was made to the court and no accountant was called by the Defendants to undertake reconciliation in support of their theory of defence. In the circumstances I 25 make a finding that Defendants insistence that they owed Plaintiff only GH¢452,000.00 is baseless and same is rejected by this court. [ 29 ] .Moreover, the Plaintiff’s letter dated 10 October 2022 demanded GHS 1,317,558.83. The 2nd Defendant admitted under cross-examination that he did not dispute the amount at the time: “Q: Did you ever write to the Plaintiff bank to dispute the amount owed after the Plaintiff bank wrote to you? A (2nd Defendant): I don’t remember writing to the bank disputing the figures…” This silence in the face of such a specific demand strongly suggests acquiescence or at least a lack of any contrary evidence on the Defendants’ part. Given the interest rates, the long period of default, and the minimal repayments (only GHS 20,000.00 paid in partial satisfaction after a demand), the Plaintiff’s figure is more plausible. The Court therefore accepts the Plaintiff’s calculation of GHS 1,317,558.83 as at 30 September 2022. Issue (d) Whether or not the Plaintiff is entitled to interest on the aforementioned amount at the contractual rate of 30.45% per annum from 1 October 2022 until the date of final payment. [ 27 ]. As earlier noted in this rendition in Akoto v Gyamfi Addo (2005-2006) SCGLR 1018, the Supreme Court explained that interest serves to compensate a party for being kept out of funds due. Here, the contract sets an interest rate of 30.45% per annum. Courts are generally reluctant to interfere with freely negotiated interest rates unless unconscionable or illegal. The Defendants have not shown any legal basis to vary the agreed interest. 26 They requested a freeze, but it was never accepted. As such, the Plaintiff is entitled to interest at the contractual rate from 1 October 2022 until final payment. Before leaving this segment of my rendition the court will comment on additional issue that Counsel for Defendants has invited the court to determine despite its non-inclusion in earlier filed triable issues. The issue is Whether or not the Plaintiff is entitled to apply penal interest on the outstanding loan. [ 28 ] The Defendants, in their submissions, argue that the imposition of penal interest in the present case is both inequitable and unwarranted. While acknowledging the persistence of principal loan obligations, they contend that the application of penal interest is inappropriate under the circumstances. Central to their argument is the principle that a party must explicitly plead any material fact it intends to rely upon. Citing the Supreme Court case Dahabieh v. S.A. Tarqui & Brothers [2001-2002] 1 GLR 171, the Defendants emphasize that non-compliance with procedural requirements, such as notice under NRCD 175, must be specifically pleaded. They further reference Dam v. J.K. Addo & Brothers [1962] 2 GLR 200, highlighting that pleadings must provide fair notice of the case to allow the opposing party to address the issues raised. [ 29 ] The Defendants assert that, although the issue of penal interest was not expressly pleaded, their comprehensive pleadings, evidence, and consistent stance throughout the trial unequivocally refute the applicability of any penal rate from July 6, 2018, onwards. They argue that their defense has consistently challenged the Plaintiff’s entitlement to penal interest, particularly given the exceptional circumstances surrounding the loan agreement. Referencing In Re Okine (Dec’d); Dodoo and Another v. Okine and Others [2003-2005] 1 GLR 630, the Defendants reiterate that a judge must adhere strictly to the 27 pleadings. They further support their position with the Court of Appeal's decision in Bisi and Others v. Tabiri Alias Asare [1984-86] 2 GLR 282-301, which underscores that new arguments not previously pleaded cannot be considered by the court. [ 30 ] The Defendants maintain that their pleadings implicitly reject the fairness and applicability of penal interest. By disputing the quantum of the outstanding loan, the calculation of interest, and the circumstances of the alleged default, they argue that penal interest constitutes an unjust and punitive measure rather than a legitimate commercial interest. They draw on authoritative cases such as Oppong v. Anarfi [2011] SCGLR 556, Kwabena Boateng v. Melbond Microfinance Company Ltd [2018] DLHC 3342, and Unibank Ghana Ltd v. Asona Gold Mining Co. Ltd and Others [2017] DLHC 3843 to illustrate that courts are reluctant to enforce penalty clauses that impose punitive measures on borrowers in commercial transactions. [ 31 ] Further supporting their stance, the Defendants cite Dunlop Pneumatic Tyre Co. Ltd. v. New Garage and Motor Co. [1915] AC 79 and Adjei v. Oteng Alias Ama [1997-98] 1 GLR 725, which establish that penalty clauses are unenforceable as they do not represent genuine pre-estimates of loss but rather serve as punitive measures. These cases reinforce the principle that damages should compensate for actual losses rather than punish the breaching party. In sum, the Defendants argue that the penal interest charged by the Plaintiff is tantamount to a penalty and lacks a basis in compensatory damages. They assert that the penal interest clause undermines the compensatory nature of damages and should therefore not be enforced. [32 ] The Court does not agree with Submissions by learned counsel for Defendants. It is essential to recognize that the authorities cited by the Defendants do not categorically prohibit the inclusion of penal interest in contractual agreements. 28 The critical consideration lies not in the terminology used—whether it is labeled as a "penalty"—but rather in the substance of the clause. Specifically, the Court must determine whether the sum designated as penal interest constitutes a genuine pre-estimate of the loss that the Plaintiff would suffer in the event of a default by the Defendants. [ 33 ] If the general interest adequately addresses the Plaintiff’s anticipated losses, the imposition of an additional penal interest may be deemed inappropriate and unenforceable. In the present case, the evidence on record indicates that the Defendants did not contest the incorporation of the penal interest clause into the contract on the grounds that it was imposed without their voluntary and informed consent. Instead, the Defendants initially sought a waiver or freeze of the penal interest due to unforeseen circumstances surrounding the cancellation of the contract with the Driver and Vehicle Licensing Authority (DVLA). Subsequently, the Defendants attempt to invalidate the penal interest clause, despite having previously requested its suspension. This contradictory stance undermines their position, as one cannot both seek relief from and subsequently deny the validity of the penal interest clause in a consistent and coherent manner. Under cross-examination of Plaintiff’s Witness on 15/05/2024 the following unfolded; (Page 6 of Record of Proceedings) “…Q: I put it to you that the 1st Defendant per a letter dated 6th July 2018 wrote to the Plaintiff and requested for a freeze of all penal interest and this letter was received by the Plaintiff. A: My Lord, I will not dispute that fact. All I know is that it was a request that the Plaintiff did not accept. 29 Q: When you say “a request that the Plaintiff did not accept”. Did the Plaintiff communicate this to the 1st Defendant? A: Yes, my Lord through various meetings and various correspondence sent to the Defendants clearly conveying the balance, had interest accrued post the 2018 date. So even the mere implication of our Demand Lette will show that Plaintiff did not accept the request. However, we had been open to a waiver of part of the interest accrued. Q: You are aware that as part of the reasons for 1st Defendant advanced and support of its request for the freeze on the penal interest was the fact that the D.V.L.A had terminated a contract for the 1st Defendant to supply the warning triangles are you not. A: My Lord, 2nd Defendant did make that claim but did not provide any official document to support it. In any case the initial loan was advance eight years prior to the said letter and I am not sure if that can be a valid excuse.” [34 ] Furthermore, the Court observes that the Defendants’ flawed understanding of the contract's frustration due to the DVLA's actions does not provide a sufficient basis to challenge the enforceability of the penal interest clause. The Court maintains that the Defendants cannot benefit from their initial request for a waiver or freeze of penal interest and later repudiate the clause’s validity. It is my humble view that the penal interest clause, as stipulated in the contract, does not constitute an unenforceable penalty. 30 Issue (e): Whether or not the 2nd Defendant is jointly and severally liable for the indebtedness of the 1st Defendant company. [ 28 ]. The 2nd Defendant executed a guarantee in writing. The 2nd Defendant executed the directors’ guarantee (Exhibit B ) to “irrevocably and unconditionally guarantee payment of and agree to satisfy to the Bank upon demand, all sums which now are or at any time or times hereafter may become due or owing or may be accruing or becoming due to the Bank by the Customer alone or jointly with any other person or persons, company or companies on any account in respect of any liability whatsoever whether actual or contingent and whether in the character of principal debtor or guarantor or surety or otherwise together within all cases, interest and all other banking charges and all legal charges and costs (on a full indemnity basis) incurred in relation to this or any other security held by the Bank for the same indebtedness or the enforcement of any such security. “ Section 14 of the Contracts Act, 1960 (Act 25) renders a guarantee void unless in writing and signed by the guarantor. Here, the guarantee is valid and enforceable. The 2nd Defendant’s liability crystallized upon the 1st Defendant’s default. As the Court in Booheme Food Ltd v National Savings and Credit Bank & Anor [1992] 1 GLR 175 affirmed, a guarantor is liable co-extensively with the principal debtor once default occurs. The 2nd Defendant must therefore answer for the 1st Defendant’s indebtedness. Issue (f): Whether or not the Plaintiff is entitled to damages for breach of contract in addition to interest. 31 [ 29 ]. The Plaintiff also claims damages for breach in addition to interest. However, interest itself compensates the Plaintiff for the time-value of money withheld. Awarding further damages for breach of a pure loan agreement risks double compensation. The essence of a loan contract is the repayment of principal and interest. Once interest is awarded at the agreed contractual rate, the Plaintiff is adequately compensated for delay and has no further loss warranting separate damages. This Court therefore declines to award separate damages for breach. The contractual interest fully addresses the Plaintiff’s financial loss occasioned by the Defendants’ default. in accordance rule 2 of CI 52, the Plaintiff is entitled to interest on the amount of GHS1,317,558.83 from October 1, 2022 till date of final payment at the agreed interest rate of 30.45% per annum. Conclusion and Final Orders [ 30 ]. Having considered all the evidence and submissions, this Court concludes that: (a) The contract was not frustrated by the DVLA’s suspension or termination of the warning triangles contract. (b) No valid agreement to freeze penal interest was reached. (c) The 1st Defendant’s indebtedness as at 30 September 2022 stands at GHS 1,317,558.83. (d) The Plaintiff is entitled to interest at the contractual rate of 30.45% per annum from 1 October 2022 until final payment. (e) The 2nd Defendant, as guarantor, is jointly and severally liable for the 1st Defendant’s indebtedness. (f) The Plaintiff is not entitled to separate damages for breach beyond the interest already compensating for the delay. IT IS HEREBY ORDERED AS FOLLOWS: 32 1. Judgment is entered in favour of the Plaintiff for the sum of GHS 1,317,558.83 against the Defendants jointly and severally. 2. The Defendants shall pay interest on the amount of GHS 1,317,558.83 at the rate of 30.45% per annum from 1 October 2022 until the date of final payment. 3. No additional damages for breach of contract are awarded. 4. The Defendants shall pay costs of GHC30, 000 to the Plaintiff. 33