Agricultural Development Bank v D & K Everfresh Foods Ghana Ltd; Kofi Barnie; Benjamin Nikoi Kotey

On 19th May 2021, the Plaintiff sued the Defendants jointly and severally for the recovery of the following reliefs;

1. An order for the payment of GHS953, 881.27 being the total outstanding balance of the credit overdraft facility as at 12th April 2021, granted by the Plaintiff to the 1st Defendant, guaranteed by the 2nd Defendant and further secured by a Mortgage over two plots of land, noted as parcel Nos. 1041& 1042, Block 20 Section 114, La- Bawaleshie, East Legon upon Land Certificate GA 7220 Vol. 53 Folio 176.

2. Interest on the said amount of GHS953.881.27 at the agreed rate of 30.47% from the 13th of April 2021 up to the date of final payment.

3. Alternatively, an order for the judicial sale of two plots of land with buildings thereon noted as parcel Nos. 1041& 1042, Block 20 Section 114, La- Bawaleshie, East Legon, upon Land Certificate GA 7220 Vol. 53 Folio 176 the property of the 3rd Defendant.

4. Cost.

BRIEF FACTS

The Plaintiff is a Financial Institution licensed by the Bank of Ghana to engage in the business of banking and it offers a full range of banking products and services under the laws of Ghana. The 1st Defendant is a Company engaged in the production of high quality food products locally and internationally. The 2nd Defendant is the Managing Director of the 1st Defendant and a Guarantor of the facility extended to 1st Defendant by Plaintiff. The 3rd Defendant used his property comprising two plots of land with a building thereon, situate at La Bawaleshie, East Legon as Mortgage to secure the repayment of a loan facility. According to the Plaintiff, it initially granted a loan facility of GH¢100,000.00 to 1st Defendant on 19th November 2012 and this loan was secured by a Mortgage over the said two plots of land described as parcel Nos.1041 & 1042, Block 20 Section 114, La -Bawaleshie East

Legon, upon Land Certificate GA 7220 Vol. 53 Folio 176 and stamped as LVD 21751/2012.

This initial loan was repaid, but the security was however retained for another facility, an overdraft facility of GH¢75,000.00, which is the subject matter of this action now. In or around April 2013, the Plaintiff claims that, the 1st Defendant applied for a temporary overdraft facility of Seventy-Five Thousand Ghana Cedis (GH¢75,000.00) to enable them to pay customs duties. This overdraft facility was further secured by an unlimited shareholder guarantee executed by the 2nd Defendant and stamped as LVDN/9058/12, and the said overdraft facility was further secured by the above mentioned mortgaged properties of the 3rd Defendant.

The Plaintiff contends that, it disbursed the said amount to the 1st Defendant for a period of three (3) months at an agreed annual interest rate of 30.75%, which was subsequently varied to 30.47% on 18th April 2013 and the time scheduled for repayment had long lapsed, as the Defendants have breached same.

It is the further contention of the Plaintiff that, the Defendants have failed to pay the principal sum and outstanding interest though the time scheduled for repayment has long lapsed, and the total outstanding balance as at 12th April 2021 was Nine Hundred and Fifty Three Thousand, Eight Hundred and Eighty One Ghana Cedis, Twenty Seven Pesewas. (GH¢953,881.27).

The Plaintiff pleaded that, without a Court order, the Defendants would not pay what is due the Plaintiff, hence this action and the reliefs endorsed on the Writ.

1ST AND 2ND DEFENDANTS

The Writ of Summons and the accompanying Statement of Claim were served on the 1st and 2nd Defendants on 4th June 2021. An appearance to the action was entered on their joint behalf by their

Lawyer on 11th June 2021.The 1st and 2nd Defendants filed a joint 16 - paragraphed Statement of Defence on 13th December 2021, partly admitting the averments made by Plaintiff in its Statement of Claim and partly denying some.

The 2nd Defendant denied securing the said overdraft facility of GH¢75,000.00 by an unlimited shareholder guarantee with any document concerning a property stamped as LVDN/9058/12 as the 1st Defendant had already secured the said facility with a collateral which was previously used, to secure a higher amount of GHS100, 000.00, being two plots of land as parcel Nos. 1041 & 1042 Block 20, Section 11 La -Bawaleshie East Legon, with Land Certificate No. GA. 7220 Vol. 53, Folio 176 and stamped as LVD 21751/2012.

The 1st and 2nd Defendants contended that, the Plaintiff had demonstrated that the 1st Defendant secured the overdraft facility with the previous mortgaged property, therefore there was no point in securing the same facility with another collateral when the amount was 15% less than the previous amount.

The 1st and 2nd Defendants admitted in part to the extent that, it is true the Plaintiff disbursed the facility of GH¢75,000 to the first Defendant, but denied owing to the tune of GH¢953,881.27 as purported by the Plaintiff, since in one breath, Plaintiff says it varied the annual rate from 30.75% to 30.47% but in actual fact, the Plaintiff’s calculation is based on the 30.75%.

They averred further that, they were making every effort to pay their just debt and that the Plaintiff should recalculate the outstanding debt on an annual rate of 30.47% to reflect the true indebtedness.

The 1st and 2nd Defendants denied that the Plaintiff was entitled to all its reliefs and urged on the Court to dismiss all reliefs endorsed on the Writ.

3RD Defendant

Initially, it was practically impossible to serve the Writ of Summons and Statement of Claim on the 3rd Defendant, so he was subsequently served with the Writ of Summons and Statement of Claim via substituted service on 1st February 2022. Counsel for the 1st and 2nd Defendants entered appearance on his behalf on 4th May 2022 and filed the 3rd Defendant’s Statement of Defence on 26th May 2022. The 3rd Defendant denied most of the averments of the Plaintiff’s statement of Claim in his statement of defence, and also said he would rely on the averments of 1st and 2nd Defendants in their Statement of Defence.

REPLY

The Plaintiff did not file a Reply to deny the averments made by the Defendants in their respective Statements of Defence.

PRETRIAL SETTLEMENT

The matter being Commercial in nature, the Plaintiff, 1st and 2nd Defendants went before the pretrial Judge for the mandatory pretrial settlement conference. However, they failed to settle their differences at the pretrial settlement conference, pushing the matter to trial. The following issues were set down for the between the Plaintiff and the 1stb and 2nd Defendants.

ISSUES

1. Whether or not 1st Defendant is indebted to Plaintiff to the tune and in excess of GH¢958,881, 27 as of 12th April 2021.

2. Whether or not the Plaintiff used an annual rate of 30.75% contrary to its varied rate of 30.47% in computing the interest on the principal sum.

3. Whether or not 1st Defendant having secured the overdraft facility of GH¢75,000.00 which is 15% less than its initial loan amount of GH¢100,000.00 and secured with the same collateral property, the 2nd Defendant ought to give unlimited shareholder guarantee in any form.

4. Whether or not the Plaintiff is entitled to the reliefs endorsed on the Writ of Summons against the Defendants.

5. Any other issues arising from the Pleadings.

It is pertinent to mention that, trial was to have commenced in respect of the 1st and 2nd Defendants. However, before trial would commence, the Plaintiff filed an application for summary judgment on 24th May 2022. Even though the application was opposed by the 1st and 2nd Defendants, the Court differently constituted granted the application for summary judgment against the 1st and 2nd Defendants on 27th June 2022.

Accordingly, Summary Judgment was awarded in favour of the Plaintiff against the 1st and 2nd Defendants to recover from the Defendants the amount of GH¢953,881.27 being the balance due on the overdraft facility granted the 1st Defendant.

Again, interest on the said amount was pegged at 30.47% per annum from the 12th of April 2021 to date of judgment, and thereafter, interest was to run at the prevailing commercial bank lending rate (GCB Bank Ltd) from the date of the judgment i.e. 27th June 2022 to date of final payment.

Cost was assessed at GH¢30,000.00 against the 1st and 2nd Defendants in favor of the Plaintiff.

The Plaintiff subsequently filed entry of judgment on the 18th of August 2022 to recover the amount of One Million, Four Hundred and Thirty- Four Thousand, Nine Hundred and Twenty-Nine Ghana Cedis, Eighty- Five pesewas. (GH¢1,434,929.85) against the 1st and 2nd Defendants.

After filing the entry of judgment and serving same on the 1st and 2nd Defendants, the Plaintiff did not commence execution processes against the 1st and 2nd Defendants, but proceeded with the action against the 3rd Defendant herein, by applying to Court to place the action between it and the 3rd Defendant, before the pretrial Judge for a pretrial settlement conference. That was done by the Court differently constituted.

The Plaintiff and the 3rd Defendant failed to settle the matter at the pretrial settlement stage, again pushing the matter to trial.

The Court set down the following issues.

Issues to be determined between the Plaintiff and 3rd Defendant.

1. Whether or not the 3rd Defendant had breached the terms of the Mortgage executed with the Plaintiff by refusing to pay the amount advanced to the 1st Defendant when the latter defaulted in paying back the loan.

2. Whether or not the 3rd Defendant used his property known as parcel number 1041 and 1042, Block 20, Section 114 La – Bawaleshie, East Legon Accra as collateral to secure the repayment of the loan granted the 1st Defendant.

3. Any other issue(s) arising from the pleadings.

The suit was placed before a trial judge to commence trial in respect of the Plaintiff and the 3rd Defendant only, the Parties filed their respective witness statements and Checklists for the trial.

Witness Statements

The Plaintiff filed the witness statement of its witness and attached all documents it intended to rely on. It is significant to mention that, whereas the Plaintiff complied with the directives of the Court and filed the witness statement of its witness, attaching all documents it would rely on during the trial, and served same on the 3rd Defendant, the 3rd Defendant, however, filed his Witness Statement but did not file his checklist.

Despite several opportunities given the 3rd Defendant to file his checklist for a meaningful case management conference, he simply failed, refused and or neglected to file his Checklist. Since the Court could not wait in perpetuity for the 3rd Defendant to rise from his slumber to file his checklist, so the trial would not be stalled, the Court struck out the 3rd Defendant’s Statement of Defence filed on the 26th of May 2022 in accordance with Order 32 Rule 7A 3 (b) of C.I 47 as amended by C.I 87. Accordingly, the Defendant did not proffer any oral evidence at the trial.

The trial was therefore, one- sided, since it was only the Plaintiff’s witness who gave his evidence and was cross- examined by the 3rd Defendant’s Counsel.

That being the case, it is worth mentioning at the outset that, the fact that a Defendant does not appear to contest a case, does not mean that the Plaintiff would be granted all that he asks for by the Court. The rule in civil procedure cases is that, he who alleges must prove his or her claim on the balance of the probabilities and the burden is not lightened by the absence of the Defendant at the trial. Section 14 of the Evidence Act, Act 323.

The absence of the Defendant will aid the Plaintiff only, when he introduces sufficient evidence to establish a prima facie case of the entitlement to his claim. The case of Dr. R.S.D Tei and Another Vrs. Messrs CEIBA Intercontinental (2017-2018) 2 SCGLR 906 @ 919 or [2018] DLSC 3301 @ page 6 is apt in this regard.

The Supreme Court speaking through Pwamang JSC in that case held as follows;

“It must be remembered that, the fact that a Defendant does not appear to contest a case, does not mean that the Plaintiff would be granted all that he asks for by the Court. The rule in civil cases is that, he who alleges must prove on the balance of the probabilities and the burden is not lightened by the absence of the Defendant at the trial. The absence of the Defendant will aid the Plaintiff only where he introduces sufficient evidence to establish a prima facie case of entitlement to his claim”.

In the case of Agyekum V Amoah CAN J4/59/2014 dated 13th April 2016 unreported, it was held that, “in civil trials the standard of proof is that of balance of the probabilities”.

In the case of Ababio V Akwasi (1994-95) GBR 774 it was held that; “The general principle of law is that, it is the duty of a Plaintiff to prove his case i.e. he must prove what he alleges, in other words, it is the party who raises in his pleadings an issue essential to the success of his case who assumes the burden of proving it. The burden only shifts to the defence to lead sufficient evidence to tip the scale in his favour when on a particular issue, the Plaintiff leads some evidence to prove his claim .If the Defendant succeeds in doing this, he wins, if not, he loses on that particular issue”.

Trial was conducted for the Plaintiff to prove its claim.

Preliminary objection

Trial commenced on 12th July 2024, and the Plaintiff’s witness, Benjamin Afful Idun, who described himself as the Head of Recoveries of the Plaintiff, gave his evidence. He relied on his witness statement filed on 26th January 2024 which was not different from the pleadings and his Exhibits numbered A- G as his evidence in chief.

However, before the Court could adopt the witness statement of the Plaintiff’s witness as his evidence in chief, Counsel for the 3rd Defendant objected to the adoption of same, on the ground that, the witness had himself said that he had resigned from the Plaintiff and so if he was giving evidence as a retired staff of the Plaintiff, he did not qualify as a competent witness to testify on behalf of the Plaintiff.

The Court found merit in this objection and adjourned matters for the witness to satisfy the Court that, he was indeed competent enough to testify on behalf of the Plaintiff.

On 23rd July 2024, the Court received a letter of authority from Mrs. Sylvia Nyante, General Manageress for Recoveries of the Plaintiff, informing the Court that, even though the witness had retired, he was in charge of non - performing portfolio at the time, and so had ample information on the matter and therefore could testify on behalf of the Plaintiff.

The Court having received the green light in respect of the competency of the Plaintiff’s witness to testify on its behalf, adopted his witness statement together with his Exhibits “A-G” as his evidence in chief. Counsel for 3rd Defendant cross- examined the Plaintiff’s witness.

Courts Analysis of the Issues and Opinion

Before determining the issues, I wish to reiterate the fact that, summary Judgment has already been awarded the Plaintiff against the 1st and 2nd Defendants on 27th June 2022. This instant judgment therefore, is in respect of the trial conducted between the Plaintiff and the 3rd Defendant.

Having laid the background and given the evidential burden on the Plaintiff to prove its claim, I shall determine this matter based on the issues set down by the Court as stated above in no particular order. I will first analyse the 2nd issue, which in my view, I believe ought to be determined first before the 1st issue.

ISSUE 2

Whether or not the 3rd Defendant used his property known as Parcel Nos. 1041 and 1042, Block 20 Section 114, La Bawaleshie East – Legon,

Accra as collateral to secure the repayment of the loan granted the 1st Defendant.

Plaintiff’s evidence

In his evidence before this Court, the Plaintiff’s witness testified that, the 1st Defendant repaid the initial loan facility of GH¢100,000.00 granted it by the Plaintiff and again applied for an overdraft facility of GH¢75,000.00 from the Plaintiff in or around April 2013, to enable it pay its customs duties. The overdraft facility was granted to the 1st Defendant for a period of three months only, and the 3rd Defendant mortgaged his properties above mentioned to secure the said facility.

To support its claim that the Plaintiff advanced an overdraft facility to the 1st Defendant in the sum of Seventy-Five Thousand Ghana Cedis (GH¢75,000.00) to 1st Defendant, the Plaintiff’s witness tendered in evidence Exhibit “D”, headed, “Temporary Overdraft”, which is the overdraft facility letter by the Plaintiff to 1st Defendant.

The witness again testified that, the overdraft facility was secured with the 3rd Defendant’s mortgaged property and an unlimited shareholder’s guarantee executed by the 2nd Defendant. This assertion was denied by both the 2nd and 3rd Defendants. Being the onus bearer, the Plaintiff tendered in evidence Exhibit “B” which is a Mortgage Agreement executed by the Plaintiff and the 3rd Defendant in 2012 in respect of the Loan of GH¢100,000.00 and Exhibit “E” which is the Shareholders guarantee executed by the 2nd Defendant.

The Court notes that, aside the initial Mortgage agreement, duly executed by the 3rd Defendant which is Exhibit “B”, there is no new Mortgage Agreement executed by the 3rd Defendant, specifically in respect of the overdraft facility of GH¢75,000, 00. It is easy to decipher that, the Plaintiff relied on the 1st Mortgage Agreement executed in 2012 by the 3rd Defendant for the initial loan facility of GH¢100,000.00, for the overdraft facility of GH¢75,000.00 granted in 2013.

A perusal of Exhibit “D” shows that, on the 26th of March 2013, the Plaintiff, in a letter, agreed to grant the 2nd Defendant the overdraft facility of GHS75, 000.00 for a tenure of three (3) months at an interest rate of 9.25% per annum, above the Plaintiff’s base rate prevailing from time to time, which was currently 21.50% per annum.

Under Clause 4 of the letter which has the heading; “Security Held”, it has been stated as follows;

4.1 -First ranking legal Mortgage in favor of ADB over property situate at Parcel Number 1041, Block 20, Section 114-La- Bawaleshie, Greater Accra Region, with land title Certificate Number, Land Certificate Number GA 7220.

4. 2-First ranking legal Mortgage in favour of ADB over property situate at Parcel Number 1042, Block 20, Section 114, La Bawaleshie Greater Accra Region, with land title Certificate, Number, Land Certificate Number GA 7220.

Per Exhibit “D”, which is the letter granting the overdraft facility of GH¢75,000.00, to the 1st Defendant, the letter was signed by both the Plaintiff’s representative and 2nd Defendant, but without the 3rd Defendant on 26th March 2013, to enable 1st Defendant pay for customs duties. From the said Exhibit “D”, it can be seen that, the said overdraft facility which was to be repaid within three months, was secured with the 3rd Defendant’s properties.

Observably, the Court notes that there was no new Mortgage agreement executed by the 3rd Defendant in conformity with Section 5 of the Mortgages Act, (1972) NRCD 96.

Section 5 of the Mortgages Act, supra indeed addresses the issue of using a Mortgage Agreement as security for a loan, without the knowledge or consent of the Guarantor. This Section has the prohibition on further charge and as well protects a guarantor’s interest, as a guarantor’s interest is taken care of, by protecting a guarantor to ensure that, he or she is aware of any additional loans secured by the mortgage, so as to prevent the guarantor from being unknowingly exposed to further liability.

As indicated earlier, the Plaintiff bore the onus of proving that the 3rd Defendant had indeed used his two properties heretobefore mentioned, as collateral security for the repayment of the overdraft facility of GH¢75,000.00 to merit a ruling in its favor.

The Court is not told whether the 3rd Defendant signed a second Mortgage Agreement to use the same properties to secure the overdraft facility of GH¢75,000.00, but the Plaintiff still went ahead to grant the overdraft facility, presumably relying on the earlier Mortgage Agreement executed in 2012 by the 3rd Defendant. This sins against Section 5 of the Mortgages Act, supra.

So, per Exhibit “D”, the same properties that were used to secure the initial loan of GH¢100,000.00 were used to secure the overdraft facility of GH¢75,000.00 granted the 1st Defendant.

The inference drawn here is that, even though there was no evidence proving that the 3rd Defendant executed a new Mortgage Agreement to use his properties again as security for the overdraft facility, the loan was disbursed to the 1st Defendant all the same. This does not conform to Section 5 of the Mortgages Act, 1972 (NRCD 96).

S.5 states that; “Unless a contrary intention appears expressly, a mortgage is security only for the performance of the act provided in the mortgage and not for a performance promised in a past or future contract.”

The Mortgages Act provides that, a mortgage serves as security only for the specific obligation detailed in the Mortgage Agreement, unless explicitly stated otherwise. This means that, once the original debt is settled, the mortgage should not be used to secure a new loan facility without the property owner's knowledge and explicit consent.

From the evidence adduced therefore, it can be seen that, the Plaintiff did not execute a new Mortgage Agreement with the 3rd Defendant but went ahead to grant the overdraft facility of GH¢75,000.00 relying on the earlier Mortgage Agreement executed for the initial loan of GH¢100,000.00. As stated above, per the law, if a mortgage was granted for a specific loan, the Lender cannot extend its use to another facility without fresh consent from the Mortgagor.

Following from the above, I have no hesitation in holding that, the 3rd Defendant did not use his properties to secure the overdraft facility of GH¢75,000.00 for 1st Defendant in 2013. The Plaintiff merely relied on the earlier Mortgage Agreement to disburse the overdraft facility to the 1st Defendant which sins against the Mortgages Act, supra..

Issue 1

I shall now turn my attention to the 1st issue which is, whether or not the 3rd Defendant had breached the terms of the Mortgage Deed executed with the Plaintiff, by refusing to pay the amount advanced to the 1st Defendant when the latter defaulted in paying back the loan. The question begging for an answer is which Mortgage Deed is being referred to here?

It is pedestrian knowledge that, a Mortgage is a kind of property right fashioned to serve as a financial protection for a Lender or a person, to whom an obligation is owed, in the event that the obligation voluntarily assumed is not satisfied. It is worth mentioning that, a mortgage of land can be used as security for a loan.

As has been held by this Court, the 3rd Defendant did not execute a new Mortgage Agreement in respect of the overdraft facility of GH¢75,000.00, so in the view of the Court, if there was no new Mortgage Agreement regarding the overdraft facility taken by the 1st Defendant in 2013, there being no evidence of a Mortgage Agreement duly executed by the 3rd Defendant, he cannot be held to have breached the terms of a Mortgage deed executed with the Plaintiff when the said Mortgage Deed relied on by the Plaintiff was in respect of the earlier Mortgage Deed for the loan of GH¢100,000.00 which has been fully discharged.

That being the case, how then, can the 3rd Defendant be held to have breached the terms of the Mortgage deed for the overdraft facility of GH¢75,000.00? In this regard, the question I pose is, which terms of a Mortgage Deed specifically has the 3rd Defendant breached?

Certainly, it cannot be the earlier Mortgage deed executed in respect of the loan facility of GH¢100,000.00 which has been discharged, neither can it be the overdraft facility of GH¢75,000.00 when there is no evidence that the 3rd Defendant had knowledge or consented to his properties being used again to secure the overdraft facility.

Instead of discharging the said two properties of the 3rd Defendant from the security hold on it by the Plaintiff, the Plaintiff allowed the 1st Defendant to sign for the overdraft facility of GH¢75,000.00, using the 3rd Defendant’s properties again which had been used to secure the initial loan of GH¢100,000.00 without the knowledge and consent of the 3rd Defendant.

From the evidence adduced, it does appear that, the Court’s earlier summary judgment dated 27th June, 2022, awarded in favour of the Plaintiff to recover the outstanding amount of GH¢1,434,929.85 from the 1st and 2nd Defendants has been executed.

From the above, it is the respectful view of the Court that, the 3rd Defendant cannot be held to have breached the terms of the Mortgage Agreement of an earlier loan which has been paid off, in respect of an overdraft facility of GH¢75,000.00 which he had been tied to, without his knowledge, consent and agreement. It therefore stands to reason to hold that, the 3rd Defendant cannot be in breach of a non- existent Mortgage Agreement for the overdraft facility of GH¢75,000.00.

Again, I have no hesitation in holding that, the 3rd Defendant cannot be held liable to use his two properties afore mentioned to pay the outstanding debt by reason of not having breached any terms of a Mortgage agreement.

If the 1st and 2nd Defendants have not retired the judgment debt, the Plaintiff should go after them because there is no evidence before this Court that, the 3rd Defendant used his two properties heretobefore described, to secure the overdraft facility of GH¢75,000.00.

If the 1st and 2nd Defendants owed the Plaintiff at the time and have failed, refused and or neglected to repay the judgment debt, then the 3rd Defendant’s mortgaged properties used as collateral, cannot be used to repay the overdraft facility of GH¢75,000.00.

Having so held that the 3rd Defendant did not use his properties as security for the overdraft facility of GH¢75,000.00 and is not in breach of any Mortgage Agreement, the supplemental question then is, is the Plaintiff entitled to its claim against the 3rd Defendant?

Counsel for the Plaintiff in his written address opined that, the Plaintiff has been able to show that the 1st and 2nd Defendants still owed the Plaintiff and the 3rd Defendant executed the Mortgage deed to secure the repayment of the facility for the 1st Defendant, so in effect the Plaintiff has been able to establish a default in the repayment of the overdraft facility taken by the 1st Defendant, and the 3rd Defendant who guaranteed the facility has also failed to pay the amount owed. I disagree with the submissions of Counsel for the Plaintiff regarding the indebtedness of the 3rd Defendant.

CONCLUSION

All matters considered, and from the evidence adduced by the Court, the Plaintiff has not been able to establish its claim on the balance of the probabilities that the 3rd Defendant’s properties were mortgaged to secure the repayment of the overdraft facility of GH¢75,000.00.

I am unable to order for the judicial sale of the 3rd Defendant’s properties above described to satisfy the judgment debt.

Cost follows event, but in this case, I shall make no order as to cost. Each party is to bear their own cost.

According ordered.