GHANA COMMERCIAL BANK v. ODOM [1975] 2 GLR 54

COURT OF APPEAL, ACCRA

Date:    11 JULY 1975

SOWAH ANIN AND FRANCOIS JJA

CASES REFERRED TO

(1)    Shaw v. Picton (1825) 4 B. & C. 715; 7 Dow. & Ry. K.B. 291; 107 E.R. 1226.

(2)    Calton v. Bragg (1812) 15 East 223; 104 E.R. 828.

(3)    Crosskill v. Bower (1863) 32 Beav. 86; 1 New Rep. 379; 32 L.J.Ch. 540; 8 L.T. 135; 9 Jur.    (N.S.) 267; 11 W.R. 411; 55 E.R. 34.

(4)    Gwyn v. Godby (1812) 4 Taunt. 346; 128 E.R. 363.

(5)    Fergusson v. Fyffe (1841) 8 C1. & Fin. 121; 8 E.R. 49, H.L.

(6)    Pappoe v. Bank of British West Africa (1933) 1 W.A.C.A. 287.

(7)    Inland Revenue Commissioners v. Holder [1931] 2 K.B. 81, 100 L.J.K.B. 439; 145 L.T. 193; 47 T.L.R. 330, C.A.

NATURE OF PROCEEDINGS

APPEAL against the rate and period of interest awarded on principal sum. The facts are fully set out in the judgment of Anin J.A.

COUNSEL

Osei for the appellants.

Abeyie (Gadzekpo with him) for the respondent.

JUDGMENT OF ANIN JA

In the court below the appellant bank recovered judgment for the sum of 11.831.95 plus five per cent simple interest on that sum for a period of seven and a half months and 300.00 costs. Being aggrieved by the quantum of interest awarded in its favour, the bank has appealed to this court seeking a variation in both the rate and period of interest to make them conform with the endorsement in the writ, to wit, “ten per cent interest from 25 September 1967 until the date of final payment.” It is first necessary to consider the pleadings.

The action was commenced by a specially endorsed writ sealed on 28 December 1967 and containing the following statement of claim:

“(1)    The plaintiffs’ claim is for the sum of eleven thousand, eight hundred and thirty one new cedis, ninety five new pesewas (11,831.95) being balance of overdraft facility granted by the plaintiffs to the defendant inclusive of interest as per statement of account annexed hereto and which balance is still due and owing.

(2)    Wherefore plaintiffs claim from the defendant the sum of 11,831.95 together with interest at the rate of ten per cent from 25 September 1967 up to and inclusive of date of final payment.”

The defendant-respondent duly entered appearance to the writ, but took no further part in the defence of the action even though he was duly served with all the pleadings. He filed neither a statement of defence nor an affidavit in opposition to the bank’s application for summary judgment; and he absented himself from the hearing of the said application. The bank relied on the following affidavit accompanying its application for judgment:

“AFFIDAVIT IN SUPPORT OF SUMMONS FOR LEAVE TO ENTER FINAL JUDGMENT

I, George Tawiah of Accra make oath and say as follows:

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(4) That the said defendant has since been served and has entered appearance but failed to file a defence herein.

(5)    That the defendant is justly and truly indebted to the plaintiffs in the sum of 11,831.95.

(6)    That there is no defence, legal or equitable, to this action on its merits.

(7)    That it is within my own knowledge that the said debt was incurred and is still    due    and owing as aforesaid.

(8)    I therefore make this affidavit in support of application to enter judgment herein.

Sworn at Accra this 5th day of March, 1968.

(Sgd.) George Tawiah

Deponent.”

No oral evidence was adduced by the bank at the hearing of the summons for judgment; and the learned trial judge entered judgment in its favour in the following concise terms:

“JUDGMENT

There is no proof before this court of any agreement between the parties fixing the rate of interest at ten per cent compound interest. Order 13, r. 3 of the Supreme [High] Court (Civil Procedure) Rules, 1954 (L.N. 140A), allows interest at the rate specified, or, if no rate be specified, at the rate of five per cent per annum to the date of judgment. I therefore give the plaintiff judgment for N011,831.95 plus interest on that sum for seven and a half months (i.e. from 25 September 1967 to 14 May 1968) at five per cent simple interest.

Costs to plaintiff fixed at 3OO.OO inclusive.

(Sgd.) S. Baidoo

Judge.”

The crucial question for determination in this appeal is whether or not the bank’s claim of ten per cent interest on the respondent’s outstanding overdraft for the period alleged was satisfactorily proved, having regard firstly to the pleadings and in particular to the contents of the bank’s affidavit in support of the summons for judgment; and secondly, to the law as to when interest may be awarded on money lent.

Considering the legal position first, the general rule is that interest is recoverable as a debt in cases: (i) where it is payable under a contract, either express or implied; or (ii) where statute has fixed the rate at which it is payable. At common law, interest was not payable on ordinary debts unless by agreement or by mercantile usage; and damages in the nature of interest were not given for the payment of such debts: see per Abbot C.J. in Shaw v. Picton (1825) 107 E.R. 1226 at p. 1230:

“We are all of opinion that the plaintiff cannot substantiate any claim for interest. The general rule is, that interest is not due by law for money lent, unless from the general usage of trade or the dealings between the parties, a contract for interest is to be implied.”

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And in Calton v. Bragg (1812) 15 East 223, it was held that interest is not allowable by law upon money lent generally without a contract for it, expressed or to be implied from the usage of the trade, or from special circumstances or from written securities for the payment of principal money at a given time. By the universal custom of bankers, a banker has the right to charge simple interest at a reasonable rate on all overdrafts: see Crosskill v. Bower (1863) 32 L.J.Ch. 540 at p. 544 and Gwyn v. Godby (1812) 4 Taunt. 346. On the other hand, an unusual rate of interest, interest with periodical rests or compound interest can only be justified, in the absence of express agreement, where the customer is shown or must be taken to have acquiesced in the account being kept on that basis: see Fergusson v. Fyffe (1841) 8 C1. & Fin. 121, H.L. and Pappoe v. Bank of British West Africa (1933) 1 W.A.C.A. 287. In the tax case of Inland Revenue Commissioners v. Holder [1931] 2 K.B. 81, C.A. Lord Hanworth M.R. reviewed the earlier cases on the subject and stated the rule at pp. 93-94 thus:

“The decision of the Commissioners was based upon the judgment in Parr’s Banking Co. v. Yates ([1898] 2 Q.B. 460) . . .

The case is important, for it recognizes the system of bankers in turning interest into capital as usual and binding on the parties who have acquiesced in it. It seems to be a question in each case whether the customer did acquiesce in it . . .

The plan of capitalizing interest at the end of each half-year was adopted by bankers in order to enable them in effect to secure what is usually termed compound interest, which could not have otherwise been claimed by reason of the usury laws.”

Lord Hanworth’s dictum was quoted with approval and applied in Pappoe v. Bank of British West Africa (supra). That was an action brought by a customer against his bankers for an account to be taken of the moneys alleged to have been overpaid by him in respect of interest charged in his overdrawn current account. It was held by the West African Court of Appeal, affirming the trial Chief Justice:

(i)    that on the evidence there had been no overpayments by the customer to the bank;

(ii)    that the money paid by him to the bank to settle his overdrawn account was not paid by mistake;

(iii)    that the charge of ten per cent compound interest with monthly rests on his overdrawn account was fair and reasonable and in accordance with the well recognised custom of bankers in England and the Gold Coast;

(iv)    and that such custom had been proved to be well known to the customer who acquiesced in the rate of interest charged against him.

Pappoe v. Bank of British West Africa (supra), was decided on 12 June 1933 at a time when banking in the Gold Coast was the monopoly of two

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British banks. Nonetheless, the bankers’ custom of charging compound interest on overdraft facilities of their customers with prior agreement or acquiescence which was upheld in that case is part of our received common law. The actual rate of ten per cent compound interest awarded was due partly to the court’s acceptance of the expert evidence of two practising bankers who testified about the interest charges then in vogue for the transaction in question, and partly to the court’s finding that the alleged interest rate was fair and reasonable. The court in Pappoe’s case did not lay down an immutable rate of interest chargeable on overdraft accounts for all time. Unless the particular rate has been fixed by statute or delegated legislation by virtue of the Banking Act, 1970 (Act 339), the court must be assisted by evidence of the terms of the overdraft agreement of the parties; evidence of the current bank interest rate; and evidence of knowledge or acquiescence on the part of the customer in a system of the bank charging compound interest at an agreed or reasonable rate on his overdraft account.

It should be noted in this connection that the Banking Act, 1970 (Act 339), which came into force on 21 July 1970, some two years after the judgment appealed against, now empowers the Bank of Ghana to regulate, inter alia, the borrowing and lending rates, commissions and other charges of all banks. Under this Act, the Minister (Commissioner) for Finance is empowered to publish regulations, after consultation with the Bank of Ghana, for giving full effect to the provisions of the Act: see section 40. Under section 18 of the Banking Act, 1970 (Act 339), the Bank of Ghana is invested with “overall supervisory authority in all matters relating to the business of banking in Ghana”; see also Part III generally, and in particular, section 23 (1) (b) which empowers the Bank of Ghana to make rules with respect to “the borrowing and lending rates, commissions and other charges, of banks”; and section 23 (2) which imposes a duty on every bank to comply with rules made under subsection (1) of section 23.

Turning now to the question whether the interest claimed could be awarded under statute, it is clear that, at the time of the hearing of this case, the court below, acting under the High Court (Civil Procedure) Rules, 1954 (L.N. 140A), Order 14, had no statutory power to award interest on the principal debt. Order 13, r. 3 of L.N. 140A, which empowers a court in one eventuality to award five per cent interest on liquidated debts endorsed in a writ is only applicable to cases of default of appearance by the defendant. In this case, the defendant duly entered appearance; and the application for judgment was rightly made under Order 14, r. 1, which does not confer a like power on the court to award live per cent interest on the principal sum found due and owing. In the circumstances, the learned judge erred by invoking Order 13, r. 3 in favour of the bank. Section 3 of the English Law Reform (Miscellaneous Provisions) Act, 1934 (24 & 25 Geo. 5, c. 41), which confers discretionary power on an English court of record to order such interest as it thinks fit in any proceedings

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for the recovery of any debt or damages is not a statute of general application in Ghana; and it cannot avail the bank. It was obviously to cure this lacuna in our statutory law that section 98 of the recent Courts Act, 1971 (Act 372), was enacted. This important section provides that:

“A Court shall have power to award interest at such rate as the Chief Justice may, after consultation with the Minister responsible for Justice, by legislative instrument determine on any sum claimed and found by the Court to be due, and such interest shall, unless the Court otherwise directs, be calculated from the date on which the claim arose.”

Up to date, no legislative instrument has been published giving practical effect to this new enactment. We would respectfully draw attention to this important enactment and to the urgent need for follow-up action to be taken in order to bring it into force. Until this is done, successful plaintiffs like the present appellants are denied the statutory right to interest on sums found due to them in applications for judgments not falling under Order 13, r. 3.

From our earlier review of the pleadings in the case, it is clear that the learned judge’s finding that “there is no proof before this court of any agreement between the parties fixing the rate of interest at ten per cent compound interest” is correct and unassailable. The bank’s affidavit omitted any reference to the claim to ten per cent interest for the period stated. The bank furthermore failed to verify its claim to interest as it was bound to do under Order 14, r. 1 of L.N. 140A. The annexed statement of account did not even disclose the amount of the overdraft facility granted to the customer; nor the rate of compound interest agreed upon; nor the facts justifying their claim to ten per cent interest. The customers agreement to, or acquiescence in any scheme proposed by the bank to charge ten per cent compound interest on his overdraft account was neither alleged in the pleadings nor deposed to in the bank’s affidavit. Admittedly, the statement of accounts gave particulars of fifteen monthly sum imposed on the customer’s fluctuating debit balances and described therein as “Interest on OD” (i.e. overdraft). These simple interest charges totalling 01,582.98 were added to the customer’s outstanding credit and debit balances to swell his total debt to 011,831.95, for which sum judgment was recovered in the court below. The respondent has not cross- appealed against this award of this principal debt claimed in the writ and duly verified in the bank’s affidavit. That part of the judgment is clearly unassailabe.

Learned counsel for the appellant bank has however failed to demonstrate the learned judge’s alleged error in holding that there was no proof before him of any agreement between the parties fixing the rate of interest at ten per cent compound interest. The bank’s failure to recover compound interest in this undefended action must be blamed squarely on their defective pleadings and the inept advocacy of their counsel. Assuming knowledge on the part of the bank’s counsel of the law as to when compound interest is payable on money lent, then learned counsel’s failure to plead or lead either affidavit or oral evidence on such material facts as agreement of the parties to the terms and size of the overdraft facility; the rate of compound interest chargeable; the prevailing bank interest rate on overdrafts; and the customer’s knowledge or acquiescence in the rate of compound interest claimed, must be deplored. And it was unfair, to say the least, for learned counsel for the appellants in arguing this appeal to have laid the blame for his client’s failure to recover ten per cent compound interest at the door of the learned judge, who could not surely be expected to discern non-existent averments in the bank’s bare and unsubstantiated affidavit. Learned counsel for the appellant bank failed to show any error in the primary finding of the learned trial judge that there was no proof of any agreement between the parties fixing the rate of interest at ten per cent compound interest. We entirely uphold that finding as correct and a self-evident truth apparent on the face of the record of proceedings. There is no merit in this appeal, which is accordingly dismissed.

Acting under rule 32 of the Court of Appeal Rules, 1962 (L.I. 218), I would vary the judgment appealed from by deleting the order awarding to the bank five per cent simple interest on the sum of 11,831.95 for seven and a half months. In the result, there would be judgment for the plaintiff-appellants for the sum of

011,831.95 claimed together with 0300.00 costs in the court below. Each party must bear his costs incurred in this appeal.

JUDGMENT OF SOWAH J.A.

I agree.

JUDGMENT OF FRANCOIS J.A.

I also agree.

DECISION

Appeal dismissed.

L. F. A.