SUPREME COURT
ACCRA
26 MARCH 1997
CHARLES HAYFRON-BENJAMIN, KPEGAH, ACQUAH, ATUGUBA AND AKUFFO JJSC
CASES REFERRED TO
(1) Taylor v Caldwell (1863) 122 ER 309.
(2) Davis Contractor Ltd v Fareham UDC [1956] AC 696; [1956] 3 WLR 37; [1956] 2 All ER 115, HL.
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(3) Tatem Ltd v Gamboa [1939] 1 KB 132.
(4) F-A Tamplin SS Co Ltd v Anglo-Mexican Protroleum Products [1916] 2 AC 397.
(5) Hangkam Kwintong Woo v Liu Land Fong (alias Liu Ah Lan) [1951] AC 707; 1 All ER 567; [1951] 2 TLR 442, PC:
(6) Joseph Constantine SS Line v Imperial Smelting Corp Ltd [1942] AC 154.
(7) Jackson v Union Marine Insurance Co Ltd (1874) LR 10 CP 12.
(8) Bank Line Ltd v Arthur Capel & Co [1919] AC 435.
(9) Port Line Ltd v Ben Line Steamers Ltd [1958] 2 QB 146; [1958] 2 WLR 551; [1958] 1 All ER 787
(10) Hall v Wright (1858) EB & E 746.
(11) Horlock v Beal [1916] 1 AC 486.
(12) BP Exploration Co (Libya) v Hunt (No 2) [1982] 2 WLR 253; [1982] 1 All ER 925, HL.
(13) Krell v Henry [1903] 2 KB 740.
(14) Chandler v Webster [1904] 1 KB 493.
(15) Blakeley v Muller [1903] 2 KB 760.
(16) Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524, PC.
(17) Ocean Tramp Tankers Corp v V/O Sorfracht (The Eugenia) [1964] 2 QB 226; [1964] 2 WLR 114; [1964] 1 All ER 161, CA.
(18) The Super Servant Two (1990) 1 Lloyds Rep 1.
(19) Hammond v Odoi [1982-83] GLR 1215, SC.
(20) Denny Mott & Dickson Ltd v Frazer (James) & Co Ltd [1944] 1 All ER 678.
NATURE OF PROCEEDINGS
APPEAL against the majority decision of the Court of Appeal affirming the decision of the High Court, Tamale in an action by the plaintiff bank against the defendant customer for, inter alia, recovery of an outstanding loan for the purchase of two Mercedes Benz trucks. The facts are sufficiently stated in the judgment of Acquah JSC.
COUNSEL
T A Tagoe for the appellant bank.
Mohammed Mumuni for the respondent customer.
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JUDGMENT OF ACQUAH JSC
Acquah JSC delivered the first judgment at the invitation of Charles Hayfron-Benjamin JSC. This is an appeal against the majority decision of the Court of Appeal affirming, with some variations, the judgment of the High Court, Tamale in an action by the Barclays Bank (Ghana) Ltd. against the defendant for the sum of 021,663,153.59 together with 30 per cent interest from 10 August 1989 to the date of judgment or payment. The case of the bank is that at the request of the defendant, then a good customer of theirs, they extended loan facilities to him in 1981 and that as at 10 August 1989, the outstanding balance on the loan together with interest stood at:
Farm No A/C Loan A/C No 1
05,675,000.91
06,982,113.20
Food Supply A/C 09,006,039.48
They allege that after repeated demands the defendant had not settled these debts. Hence the writ.
In his amended statement of defence and counterclaim, the defendant admitted requesting and being granted the sum of 02,145,420 to purchase two Mercedes Benz trucks and spare parts to operate his business in September 1981. He pleaded that this money was disbursed through the following accounts:
(a) Transfer loan A/C 01,200,000; and (b) Farm Loan A/C 0945,420. He used the whole money to buy a Saurer tanker, but the tanker was seized by the government in February 1982 on the ground that Saurer vehicles are operated exclusively by the State and not individuals. He said the bank got to know of the seizure and even wrote to the authorities to secure its release. And that three years after the seizure, he heard nothing from the bank, and this silence, in his view, amounted to implied rescission of the contract. Furthermore, since he was to repay the loan from operations of the Saurer tanker, and same had been seized by the government, the seizure frustrated the contract and he was thereby discharged from his obligations under the contract. He also disputed the charging of penalties on the loan and contended that this was not part of the agreement. He then counterclaimed for:
“(a) A declaration that following the confiscation to the Government of Ghana of Saurer truck No NG 8408 the loan agreement concluded between the plaintiff and the
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defendant under loan account No 1 became frustrated as at February 1982.
(b) The defendant claims from the plaintiff an account of sums paid to the plaintiff since the discharge of the loan agreement in loan account No 1 as money had and received to the use of the defendant.
(c) A declaration that the defendant is relieved of any further obligations under loan account No 1.
(d) A declaration that the loan agreements contained in the food supply account as well as the farm No 1 account are so tainted or vitiated by illegality or both that the same are void and unenforceable.
(e) In the alternative, the defendant claims from the plaintiff that he be credited with the amount of 07 million representing the total penalty levied on the accounts.”
Before evidence was led, the defendant applied and was granted an order “to inspect and take copies of all entries in the books of the Barclays Bank Ltd, Tamale relating to the defendant’s accounts therewith between September 1981 and 10 August 1989.” Mr Roy Dery inspected and took copies as ordered, and gave evidence as the first defendant witness.
At the trial, the plaintiff called three witnesses, including its representative, while the defendant testified and called two witnesses. These are the first defendant witness, a representative of his accountants, and the second defendant witness, a representative from the Bank of Ghana. From the evidence of the bank and its witnesses, it is clear that the defendant had been its long standing customer and that he had enjoyed other loan facilities before and after the 1981 loan, and that his default in the payment of these facilities had resulted in his alleged present indebtedness. The second defendant witness made it clear that it was improper for the bank to levy penalties on the defendant and that penalties are levied on the bank itself.
In his judgment, the High Court (Julius Ansah J) rejected the plaintiff s claim and held that the defendant does not owe the bank on two of the accounts, and that in respect of the third account, the loan agreement became frustrated by the seizure of the Saurer truck purchased with the loan. Indeed, in respect of the food
supply account he also held that it is the bank which rather owes the defendant in the sum of 0452,102.28.
The bank appealed to the Court of Appeal challenging the whole decision, and in particular the finding of frustration and the court’s approach to the assessment and analysis of the accounts. At the Court of Appeal, an interlocutory order was made which clearly acknowledged the errors in the High Court’s analysis and assessment of the accounts. The court ordered the team of accountants appointed at the High Court, to go back once more into the books of accounts to identify the figures which represent penalties and interest on penalties. The basis of this order, as explained, was: “ it is clear to us that without an expert we shall be repeating the mistake which the parties led the court to make on the accounts.” It is interesting to observe that it is not the parties who led the trial judge into error, but it is the fault of the trial judge himself who ignored the evidence of the first defendant witness, the defendant’s own accountant, and the report of the experts, and then embarked on an exercise into a subject in respect of which he, himself, confessed his shortcomings.
However, the Court of Appeal by a majority of two to one affirmed, subject to some variations, the decision of the High Court. The bank still undaunted, lodged the instant appeal to this court on two grounds:
“(i) Acting properly on the pleadings and the evidence the majority of the Court of Appeal should have held that the appellants were entitled to judgment for the full amount of their claims, subject only to deductions therefrom of such sums as are referable to penalties and erred in not so holding.
(ii) The majority of the Court of Appeal erred when it held that the contract for a loan of money given by the appellant got frustrated when a truck purchased with the money so lent was confiscated by the government.”
In their respective statements of case, elaborate submissions have been made on the issue of frustration, and the manner in which the trial court and the majority of the Court of Appeal
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approached the assessment of the evidence and exhibits. We shall begin with the issue of frustration.
The issue of frustration
The doctrine of frustration is one of the simplest concepts in the law of contract. But like any simple concept, its application is not as simple as it is understood. In Ghana the doctrine involves a mixture of common law rules and statute (ie the Contracts Act, 1960 (Act 25)). The common law rules determine when frustration can be said to have occurred, while Part One of Act 25 deals with the consequences of frustration. Briefly, frustration occurs where an external event of some kind, which is not the responsibility of either party, renders further performance of a contract impossible: see Taylor v Caldwell (1863) 122 ER 309, or radically different from what had been contracted for see: Davis Contractors v Fareham UDC [1956] 2 All ER 145, HL.
Now, whether in any particular situation frustration has occurred or not, is a question for he[sic](2) court to determine. And since the event in question must render impossible or radically different, the performance of the contract, there can be no valid finding of frustration in any situation without construing the contract to determine the nature of the obligation created on the parties. For it is not just any event affecting any term of a contract that amounts to frustration. Some of the authorities, like Taylor
v Caldwell (supra) hold that it must affect the subject matter of the contract. Goddard J in Tatem Ltd v Gamboa [1939] 1 KB 132, based the doctrine of frustration on “the disappearance of the foundation of the contract.” And in Davis Contractors Ltd v Fareham UDC (supra), the House of Lords held that the proper test for frustration is: If the literal words of the contract were to be enforced in the changed circumstances, would this involve a fundamental or radical change from the obligation originally undertaken. Thus Lords Reid and Radcliffe emphasised in the Davis Contractors case (supra) that the first step in determining whether frustration has occurred is to construe the contract to discover the scope of the original obligation, then to examine the situation after the event to find out what would be the new obligation, and finally to compare the original with the new obligation to see whether it would be radically or fundamentally different. Another method of
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determining frustration is the implied term theory ably expounded by Lord Loreburn in F-A Tamplin SS Co Ltd v Anglo-Mexican Petroleum Products [1916] 2 AC 397, by which theory the court ought to examine the contract and the circumstances carefully to see whether the parties contemplated a particular thing or state to exist. If they did, then the term was implied.
Now, whatever theory one adopts, the basic duty of the court is to construe the contract to discover the obligation created therein—the obligation which if unfulfilled by a party would entitle the other to sue for a breach of it. In the instant appeal, the contract between the bank and the defendant, as admitted and further disclosed in the pleadings and evidence, is that the defendant requested the bank for a loan to purchase two Mercedes Benz trucks and spare parts from the Cocoa Marketing Board. And the trial judge rightly found so in the record of proceedings, thus: “I do not hesitate to find that the loan was given to the defendant to purchase two Mercedes Benz trucks and spare parts from the Cocoa Marketing Board.” The plaintiff alleges that the loan was 01,200,000 while the defendant claims it was for 02,145,420. Whatever be the actual sum of money, the defendant subsequently bought a Saurer tanker instead of the Mercedes Benz trucks and spare parts with that loan.
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.
Now, the trial judge found, on the basis of a letter, exhibit E, that the defendant was to operate the vehicle and repay the loan
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from its proceeds. He then argued that since the Saurer tanker bought in place of the Mercedes Benz trucks was seized with the result that it can no longer operate, the contract became frustrated. From what had been said already, it is evident that this reasoning is highly faulty. Because first, the trial judge failed to appreciate that the obligation of the defendant under the loan contract is the repayment of the loan; and secondly, he also failed to realise that the frustrated event must relate to the obligation owed by one party to the other under the contract. Going by the trial judge’s reasoning, it will mean that whenever someone goes for a loan to buy a vehicle and pay the loan from the earning of the vehicle and unfortunately the vehicle is involved in an accident or other mishap, the loan contract becomes frustrated. Certainly not! For, because the operation of the vehicle, though a term of the loan contract, is not the obligation of the borrower to the lender, the borrower can soon after buying the vehicle and before the expiry period, pay off the entire loan together with the agreed interest. And the lender cannot sue the borrower for a breach of the operation clause.
We concede that an accident or any misfortune like the seizure by the government, would undoubtedly cause serious inconvenience, hardship, financial loss, and even delay in the performance of the obligation to repay the loan. But such a factor is not sufficient to constitute frustration: see Davis Contractors Ltd v Fareham UDC (supra); and Hangkam Kwingtong Woo v Liu Lan Fong [1951] 1 All ER 567, PC. In the instant case, assuming that the vehicle was not seized by the government but by a gang of armed bandits, would it still have constituted frustration?
An examination of the cases in which frustration had been held to apply, show that the unexpected event affected the subject matter of the contract or the fundamental obligation created by the contract and not any term of the contract: see Taylor v Caldwell (supra); Joseph Constantine SS Line v Imperial Smelting Corp Ltd [1942] AC 154; Jackson v Union Marine Insurance Co Ltd (1874) LR 10 CP 12; Bank Line Ltd. v Arthur Capel & Co [1919] AC 435; FA Tamplin Steamship Co Ltd v Anglo-American Petroleum Products Ltd (supra); Port Line Ltd. v Ben Line Steamers Ltd [1958] 2 QB 146: Tatem v Gamboa (supra); Hall v Wright (1858) [p755] EB & E 746; Horlock v Beal [1916] 1 AC 486; and BP Exploration v Hunt (No 2) [1982] 1 All ER 925, HL.
On the other hand, if on the basis of the coronation cases—ie Krell v Henry [1903] 2 KB 740; Chandler v Webster [1904] 1 KB 493; and Blakeley v Multer [1903] 2 KB 760n—one argues that the operation of the vehicle is the obligation of the defendant, it must be appreciated that on a proper construction of the obligation created in each of those cases, it is evident that the happening of the event was, indeed, the subject matter of the contract. The coronation cases deal with special types of contracts wherein the parties enter into the contract with the mutual understanding that the event would happen. Thus if the event fails to happen, the very basis of the contract becomes eroded. Instances of the coronation type of contracts are those dealing with buying tickets to watch a football or boxing tournament. If the function is cancelled, the substratum of the contract vanishes. In loan contracts, the rationale underlying the need to disclose the purpose for which the loan is sought is to ensure that the loan is going to be utilised for a lawful and gainful object, which if prudent precautions are taken would enable the borrower to fulfill his obligation of repaying the loan with the requisite interest. The purpose for the loan is not the subject matter nor the fundamental obligation owed by the borrower to the lender.
But assuming without obviously admitting, that the purpose for the loan, in this case the operation of the vehicle, is the obligation of the defendant to the bank, same will still not avail the defendant as he purchased a vehicle other that[sic](3) what was agreed on in the contract. He purchased the Saurer tanker without the prior approval of the bank. And it is important to note that the vehicle was seized only a week after its purchase. The Saurer tanker was seized on the ground, as given by the defendant, that individuals were not allowed to use them. Only government institutions could. Obviously, if the defendant had bought the Mercedes Benz trucks, they might not have been seized. The position then is: The defendant having decided to buy a vehicle other than the contract one, can he claim the benefit of frustration, if his choice of vehicle had been seized?
In Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524, PC it was held that the essence of frustration is that it
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should not be due to the act or election of the party. In that case, the appellants who had the opportunity to licence the trawler they had chattered, elected not to do so, although they knew that a licence was required for the operation of that trawler. Later they claimed “that the agreement on the charter had been frustrated by the minister’s refusal of a licence for that trawler. The Privy Council in holding that they could not rely on frustration said at 531:
“In truth, it happened in consequence of their election. If it be assumed that the performance of the contract was dependent on a licence being granted, it was that election which prevented performance, and on that assumption it was the appellants’ own default which frustrated the adventure: the appellants cannot rely on their own default to excuse them from liability under the contract.”
This decision was approved by the House of Lords in Joseph Constantine SS Line Ltd v Imperial Smelting Corp Ltd (supra) and again by the Court of Appeal in Ocean Tramp Tankers Corp v V/O Sorfracht (The Eugenia) [1964] 1 All ER 161, CA.
In the instant appeal, although the records do not disclose whether the defendant knew beforehand the government’s ban on an individual’s use of the Saurer tanker, nevertheless he cannot on his own decide to go off the contract condition, and still hold the bank bound by his election. If the operation of the vehicle was necessary for the performance of his obligation to repay the loan, then he was in breach thereof by buying a vehicle totally different from what was contracted for. As Lord Denning said in the Ocean Tramp Tankers Corp’s case (supra) at 165:
“One thing that is obvious is that the charterers cannot rely on the fact that the Eugenia was trapped in the canal; for that was their own fault. They were in breach of the war clause in entering it. They cannot rely on a self-induced frustration.”
See also The Super Servant Two [1990] 1 Lloyd Rep 1
It is therefore clear that on the undisputed facts and the decided cases, it cannot be concluded that the seizure of the Saurer tanker frustrated the loan contract for the purchase of two
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Mercedes Benz trucks. For the operation of the vehicle was not the obligation of the defendant to the bank. Indeed, as the defendant admitted, he was not requested by the bank neither was it a term of the loan contract, that a specific sum of money should be paid each month from the operation of the vehicle to repay the loan. All what he was expected to do was to pay the whole amount within a certain time. The defendant was asked in cross-examination: “How much were you to pay each month?” And he answered: “I was just told to pay the money within one year eight months.” If so, how can the defendant now be permitted to give undue prominence to the operation of the vehicle as opposed to his contractual obligation of repaying the loan?
It is trite law that an appellate court, especially a second one like ours, cannot set aside findings of facts if the findings are based on the demeanour of witnesses. But where the findings are based on undisputed facts and documents as in the instant case, the appellate court is in decidedly the same position as the lower courts, and can examine those facts and materials to see whether the lower court’s findings are
justified in terms of the relevant legal decisions and principles. Having done so, we are satisfied that the seizure of the Saurer tanker did not frustrate the contract, and that the lower courts’ finding to the contrary is unjustified.
Assessment of the case
The next ground of appeal attacks the manner in which the lower courts approached the assessment and evaluation of the pleadings, evidence and exhibits. The complaint is that pleadings, material admissions and relevant exhibits were ignored.
The importance of pleadings in circumscribing the scope and nature of a party’s case cannot be underestimated. The function of pleadings is to give fair notice of the case which has to be met and to define the issues on which the court will have to adjudicate in order to determine the matters in dispute between the parties. For this reason, a party is not permitted to set up a case inconsistent with his pleadings. Neither is the court competent to decide the claims of the parties in a manner inconsistent with what the parties themselves have put forward in their pleadings. If the claims of the parties give rise to a pertinent issue not adverted to by the parties, it is the duty of the court to draw the parties attention to that issue
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and invite their reaction to it. Master I H Jacobs in his invaluable article titled: “The Present Importance of Pleadings” in Current Legal Problems (1960), pp 171-174 and 175-176, referred to in Hammond v Odoi [1982-83] GLR 1215 at 1234, states, inter alia:
“The court itself is as much bound by the pleadings of the parties as they are themselves. It is no part of the duty or function of the court to enter upon any inquiry into the case before it other than to adjudicate upon the specific matters in dispute which the parties themselves have raised by their pleadings. Indeed, the court would be acting contrary to its own character and nature if it were to pronounce upon any claim or defence not made by the parties. To do so would be to enter the realms of speculations … Moreover, in such event, the parties themselves, or at any rate one of them, might well feel aggrieved; for a decision given on a claim or defence not made, or raised, by or against a party is equivalent to not hearing him at all and may thus be a denial ofjustice.”
In the instant appeal, the lower courts held that the defendant does not owe on two accounts and that in respect of the third account, the contract is frustrated by the seizure of the vehicle. But as pointed in the minority opinion of the Court of Appeal, from his pleadings, evidence and exhibits, the defendant is not denying owing the bank. What he denies is the leving of penalties on the account. And this is borne out by paragraph (10) of the amended statement of defence and, indeed, exhibit 5, written by the defendant in April 1989.
What is also improper is the rejection of the first defendant witness’s evidence. He was the defendant’s accountant’s representative’ who earlier had the opportunity to inspect and take copies of the bank’s books of account in relation to the defendant’s accounts. The first defendant witness testified, inter alia:
“When I examined the books I made some observation. On the food supply account I observed that the initial amount granted to the defendant as overdraft was 0500,000. The plaintiff says as at 9 August 1989 the defendant’s indebt-
dness was 09,006,039.48. I observed that as at that date, the figure was correct.”
In this evidence the first defendant witness is confirming the bank’s statement of the defendant’s accounts. Yet, the trial judge held that in respect of this food supply account it is the bank which owes the defendant in the sum of 0452,102.28. We think the principle is well established that where the first defendant witness’s evidence on an issue supports that of the plaintiff s, and the defendant’s version stands unsupported, the court is bound to accept the corroborated version unless there are compelling reasons to the contrary. We have found no such reasons. The first defendant witness in fact testified on his observations of the other accounts, but no reference was made to the substance of his testimony.
On the penalties and interest on penalties, we observe that the bank’s lawyers conceded at the Court of Appeal that there was no justification for this. In the light of the evidence of the second defendant witness, we are in agreement with the stand taken by the learned counsel.
On the whole, the minority adequately demonstrated that going by the pleadings, evidence and exhibits, judgment ought to have been entered for the bank on its claim save the penalties as stated in exhibit X. We do not intend to go over the same points so ably made out. We agree with this analysis and reasoning and hereby affirm the conclusions.
Accordingly, we allow the appeal, set aside the judgments of the trial court and that of the majority at the Court of Appeal, and in their place, uphold and confirm the minority judgment of the Court of Appeal.
JUDGMENT OF CHARLES HAYFRON-BENJAMIN JSC
I have had the privilege of reading beforehand the opinion of my learned and respected brother Acquah JSC in this appeal and I fully concur in his reasoning and conclusions. I feel, however, impelled to make a short contribution, more for emphasis, than for any forensic contribution to the doctrine of frustration of contracts; that latter matter having been well treated by my said learned and respected brother.
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On 24 July 1990 counsel for the respondent, then the defendant in the case, elicited certain answers from a Mr Charles Tettey Adu Nartey—a witness for the appellants and a former employee—which in combination with other material on record demonstrated clearly that there had in fact been no frustration of the agreement with respect to the Saurer truck or any truck. As to whether the appellants agreed that a Saurer truck was the subject of the agreement for the loan, the witness stated:
“Q To your knowledge did the bank have any objection to the purchase of the Saurer truck?
A [After objection to that question had been overruled].
The customer will make a claim and the bank will object when the claim is not viable. Here, no discussion[sic](4) was taken on the Saurer truck until February 1982 when evidence was shown that a Saurer truck was bought. The bank raised an objection, for it was for the purchase of Mercedes Benz articulated truck.
Q How did the bank raise the objection?
A By expressing disagreement.
Q How did the bank raise expressions of disagreement?
A I, the managing director, and the other contestants told the defendant in Accra that the facility was not for the purchase of a Saurer truck.
Q What was the date?
A Around February 1982.
Q I put it to you that in February 1982, the defendant was in exile and not in Ghana?
A Then the meeting would have been in March 1982.
Q I suggest to you the defendant returned to Ghana in 1984?
A He removed to go to Lome and came back, our meeting was in March 1982.
Q What is the name of the managing director who was present when you told the defendant of the
disagreement?
A The managing director was Mr Duchett and his deputy was Mr Ranking.
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Q Do you know as a fact that the Saurer truck was registered in the joint names of the bank and the defendant?
A No, I did not.
Q I suggest to you, soon after the purchase of the Saurer truck it was registered in the name of the bank and the defendant.
A If you say so I cannot object. But there was a messenger from the PNDC Office saying that this[sic](5) trucks and tractors which were seized during the revolution should be returned to the defendant.”
It is clear from the above piece of cross-examination, that the learned counsel went on a “fishing” expedition and in the process revealed the hollowness of his client’s defences. Of course, a party is bound by adverse evidence which he elicits in cross-examination. It is also clear from the above evidence that the defendant was in exile for two years and the witness was aware that the defendant had so gone into exile in Lome. Yet again, the witness’s memory was good in respect of the March 1982 meeting. An exhibit on record shows that the defendant and his goods were taken into custody and possession by the PNDC in the aftermath of the revolution and they were released in February 1982. The message read:
“IT IS DIRECTED THAT ALHAJI SUMANI SHOULD BE RELEASED IMMEDIATELY (.) HIS TANKER CMM TRUCKS CM TRACTORS AND OTHER VEHICLES ALSO TO BE RELEASED (.) DETAIL ONE SNR NCO AND TWO TO SUPERVISE HIM TO CONTINUE HIS FARMING IMMEDIATELY.”
Learned counsel’s assertion that in February 1982 the defendant was in exile cannot be correct, for it is patent that in February 1982 he was in military custody from which he was released. The defendant was more interested in securing his personal safety and freedom than in protecting his goods which had been released to him. In March 1982 therefore there was a meeting with his bankers—the plaintiff—and thereafter the
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defendant proceeded into exile. Considering that the Revolution began on 31 December 1981 and the defendant having been informed of the plaintiff s objection to the purchase of the Saurer truck, it can hardly be asserted by the defendant that by the seizure of the Saurer truck, there had arisen a supervening factor which had rendered the repayment of the loan impossible. In my respectful opinion, the foundation for the loan agreement was not the purchase of the Saurer truck. It was rather for the purchase of two Mercedes Benz articulated trucks. The fact, therefore, that the Saurer truck which had been bought in contravention of the agreement was seized did not absolve the defendant from his obligation to repay the loan.
The defendant takes issue with the plaintiff on the issue of accounts. True, the defendant, had counterclaimed for an account—”of all sums paid to the plaintiff since the discharge of the loan agreement in loan account No 1 as money had and received to the use of the defendant.” But it will be realised that the defendant was limiting his claim to the account on the basis that the loan account No 1 had become frustrated and that the plaintiff having still maintained the account and charged interest and raised penalties thereon, it was liable to account. Such a proposition implies that there will be evidence which satisfies the court that there is an existing contract which had become frustrated by reason of a supervening factor or incident which makes continued fulfilment of the contract impossible. This is a question of fact for resolution by the court—or judge. It seems to me therefore that an order for account will be dependent on a finding of the factum of frustration. Such a finding would have been unwarranted by the evidence on the record. Adjabeng JA (as he then was) in his dissenting opinion put it well when he wrote:
“As regards the issue of frustration raised by the defence, it is clear from the evidence adduced that the defendant failed to adduce evidence to support it. The evidence, of the plaintiff s witnesses had established clearly that the loan given for the purchase of the two Benz trucks by the defendant was a temporary loan, an overdraft … “
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In the matter of debate over the proper place of the doctrine of frustration in English law, it seems the modern and realistic view is “that the court imposes upon the parties the just and reasonable solution that the new situation demands.” I subscribe to this approach as it then reduces the resolution of the conflicting stands of the parties to the view which the judge takes of the facts. In the English case of Denny, Mott & Dickson Ltd v Frazer (James) & Co Ltd [1944] 1 All ER 678 at 683, HL Lord Wright stated:
“Where as generally happens, and actually happened in the present case, one party claims that there has been frustration and the other party contest it, the court decides the issue and decides it ex post facto on the actual circumstances of the case. The data for decision are, on the one hand the terms and construction of the contract, read in the light of the surrounding circumstances, and, on the other hand the events which have occurred. It is the court which has to decide what is the true position between the parties.”
(The emphasis is mine.)
The actual circumstances of the case are that the plaintiff granted the defendant a “temporary” loan or overdraft facility for the purchase of ‘two Mercedes Benz trucks. The contention that there was an express agreement in respect of the method for the repayment of the facility was rejected by the dissenting opinion, and I agree with the learned judge. With all due respect to their lordships in the Court of Appeal, the majority view on the frustration of the contract cannot be maintained. It was the defendant who immediately upon his release from military custody went into a two year exile out of this country even though at the time of his release his vehicles were also released to him “to continue his farming immediately.” Clearly, the defendant was given the facility in the normal course of banking business. By its statement of claim the plaintiff averred in paragraph (4) thereof that “The defendant covenanted to pay to the plaintiffs on demand any such amount of money as may be due and owing from time to time on any of his accounts…” To which the defendant by his amended statement of defence, paragraph (2) thereof averred: “Save that
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the defendant covenanted with the plaintiff to repay the loan paragraph (4) is denied.”
In the face of such a clear admission by the defendant, it does not lie in his mouth to claim that the seizure of the truck conduced to his inability to repay the loan. I am further satisfied that the event of his incarceration in military custody and the temporary seizure of his goods was not of such a magnitude as to remove or affect the very foundation of the defendant’s obligation to repay the loan on demand by the plaintiff.
In my respectful opinion, the method by which a court or judge might decide the true position of the parties vis-a-vis the contract was further exemplified in the Denny Mott & Dickson Ltd case (supra) by Lord Wright at 683-684 of the report thus:
“The event is something which happens in the world of fact, and has to be found as a fact by the judge. Its effect on the contract depends on the meaning of the contract, which is matter of law. Whether there is frustration or not in any case depends on the view taken of the events and of its relation to the express contract by ‘informed and experienced minds.”’
It is therefore to the view of the trial judge that an appellate court must look in determining the circumstances surrounding the contract which have conduced to its becoming frustrated. In the present appeal, the learned trial judge made certain findings of fact which should have compelled him to give judgment for the plaintiff. The learned trial judge found that:
“the loan was granted on 14 September 1981 to be repaid by the 31 December 1981 . . . It is unfortunate that no documentation of the terms of the loan transaction was made when it was entered into. That would have made a finding of the terms much easier than it is … That incumbent manager was Mr. Charles Tettey Adu Nartey, the third plaintiff witness. He stated there was no term to the effect that the vehicle was to be used and the proceeds used to repay the loan.”
[p.765] of [1997-98] 1 GLR 746
After reproducing part of the evidence under cross-examination of Mr Charles TA Nartey, the third plaintiff witness, the learned judge concluded that:
“I am satisfied that the loan was to be used to buy Mercedes Benz trucks and I find from the above excerpts in the evidence of the third plaintiff witness that the trucks were to be bought from the loan and the defendant was to use it to run his transport business.”
These and other findings in the judgment of the High Court judge satisfy me that there was no frustration of the agreement. The nature of the contract at law was amply set out by the learned High Court judge when he wrote that:
“even if it required the consent of the defendant for compound interest to be debited against his account, I find that in exhibit G dated 13 August 1980, the defendant as mortgagor covenanted to pay interest on the balance of the current or loan account or both and on all money whatsoever at any time owing to the bank at the rate of eighteen per cent per annum payable monthly or at such other rate and at such other times as the bank may from time to time determine. The point is therefore clear that by the universal practice (sic) of bankers, the plaintiff could charge interest against the defendant’s accounts.”
(The emphasis is mine.)
The two letters, exhibit A dated 28 June 1985 and exhibit B dated 18 August 1988 and written at the request of the defendant to the Regional Administration, Tamale were upon a close examination the same letter copied on different dates. It is significant to note that by those two letters, the plaintiff was not interceding on behalf of the defendant for the release of his vehicles—which had in fact been released to the defendant in February 1982. In my respectful opinion, these two letters were irrelevant to the determination of the issue whether the agreement had been frustrated by the incidents of February 1982.
Lord Wright’s apparent reference to “informed and experienced minds” must necessarily refer to a judge who is learned in the
[p.766] of [1997-98] 1 GLR 746
law and is sufficiently knowledgeable of the affairs of the world. I think the learned High Court judge passed this test, but his conclusions were wrong. The doctrine of frustration of contracts will operate to discharge performance of such contracts “if after its formation events occur making its performance impossible, illegal or radically different from that which was contemplated at the time it was entered into.” (The emphasis mine.)
As I have already stated, once the defendant pleaded in his defence that there was frustration of the agreement, the issue whether the defendant was entitled to an account, would for its hearing, be dependent on a positive finding in favour of the defendant. It must, in this appeal be noted that the defence of frustration was in respect of the No 1 account.
True again, the defendant by counterclaim pleaded that “the loan agreements contained in the food supply account as well as the farm No 1 account were so tainted or vitiated by illegality or both that the same are void and unenforceable.” Such a pleading cannot stand in vacuo. The party pleading illegality must demonstrate by his pleading all matters which will go to prove the “action or counterclaim not to be maintainable, or that the transaction is either void or voidable in point of law … see Order 19, r 16 of the High Court (Civil Procedure) Rules, 1954 (LN 140A). The defendant did not comply with this rule of pleading and the court could take no notice of it.
With all due respect to the majority of their lordships in the Court of Appeal, I think they misconceived the import of the essential issue in the case. Their lordships purported to substitute their own issues for the issues agreed upon by the parties when they wrote that:
“In any case, the real issues which arose from both the pleadings and the evidence … were:
(a) How much money was given to the defendant and how much was repaid?
(b) Were penalties and interests on penalties charged to the loans, and if so, how much?
(c) Were the loan agreements discharged by operation of law, ie by frustration?”
[p.767] of [1997-98] 1 GLR 746
For the purpose of resolving these issues, particularly, issues (a) and (b) it was necessary to take accounts between the parties.”
The issue of the penalties and the interest thereon was dealt with by the learned trial judge and the amount so found in favour of the defendant was conceded by the plaintiff to be correct. What seemed to have eluded their lordships of the Court of Appeal was the import of the consequences of their finding on issue (c). In my respectful opinion, in embarking upon the exhaustive examination of the accounts, therefore, their lordships had concluded that there was frustration, when the learned trial judge had made positive findings of facts which demonstrated that the doctrine of frustration could not be applied to the instant contractual arrangements. Any reconciliation of accounts between the parties was an internal matter and their lordships ought not to have assumed the posture of auditors.
JUDGMENT OF KPEGAH JSC.
I have also had the privilege of reading both the lead opinion of my brother Acquah JSC and the supporting opinion read by Charles Hayfron-Benjamin JSC. I agree with the views expressed therein and the conclusions reached by them. There is nothing useful for me to add. I agree that the appeal be allowed and the majority decision of the Court of Appeal be set aside.
JUDGMENT OF ATUGUBA JSC.
I also agree that the appeal be allowed.
JUDGMENT OF AKUFFO JSC.
I also agree that the appeal be allowed.
DECISION
Appeal allowed.
