Division: IN THE COURT OF APPEAL
Date: 21ST DECEMBER, 1959.
Before: KORSAH C.J., VAN LARE J.A. AND GRANVILLE SHARP J.A.
COUNSEL
Gaisie for appellants (the Corporation). There is no evidence whatever on record that the Corporation agreed unreservedly to finance Duncan’s business. Whatever promise the Corporation made was in respect of specific loans or requests, after proper investigation and upon production of proper securities. The only written contract made was put in as Exh. “G.” The Corporation fulfilled its part of that contract, and they paid in full the sums named therein as loans, which Duncan has not repaid. The learned Judge failed to treat the individual sums as separate and distinct from each other. Duncan admits that when he asked for a further £3,000 the question of security was raised, and that he failed to produce the necessary security to enable the Corporation to fulfil its conditional promise. The learned Judge misdirected himself in holding that that conditional promise amounted to a binding contract.
Awoonor-Williams for respondent (Duncan). The Corporation is not a moneylender, but a Statutory Corporation, i.e. one operating under a Statute. It is established by sec. 3 of the Industrial Development Ordinance, which section sets out its functions, as sec. 5 lays down its status, and contractual powers. Exh. “G” is to be read in the light of that Ordinance, from which it cannot be divorced. Robert Klainer v. Abosso Gold Mining Co. (P.C. [1874-1928] 20).
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It is true that the Corporation wanted security before granting an additional loan of £3,000, but having regard to Duncan’s statement to the Corporation that he was penniless, and to the Corporation’s agreement to finance him, it was the duty of the Corporation to assist Duncan to perfect the required security.
Gaisie not called on to reply.
JUDGMENT OF GRANVILLE SHARP J.A.
Granville Sharp J.A. delivered the judgment of the Court:
The plaintiffs’ claim is for money lent by plaintiffs to defendant at his request, together with interest thereon and attendant expenses specified in the particulars, altogether amounting to £4.590. 14s. 2d.
The basis of the plaintiffs’ claim is an agreement in writing between the parties dated 25th August, 1952. Amongst other provisions the agreement stipulates specific dates upon which periodic repayments of the loan and interest should be made. It is not in dispute that at the date the writ was issued no repayment had been made, and by the date of the trial the whole sum was due and payable, as the last date for payment had passed.
The only defence to this claim is an averment on behalf of the defendant that the plaintiffs had committed a breach of their contract or agreement with the defendant to finance the defendant’s cassava business or project, and are not entitled to claim the said sum of £4,590: 14s: 2d, or any part thereof. This averment, as appears from the plea, was based upon a contention that in July 1949, or thereabout, the plaintiffs had agreed to give the defendant adequate financial assistance to enable him to establish his cassava project on a “commercial scale,” and that in reliance on this promise the defendant had expended moneys in connection with a factory and cassava plantation and the necessary staff of assistants, all of which moneys have been lost to him by reason of plaintiffs’ alleged breach of agreement. The defendant, therefore, by way of set-off or counter-claim sought to recover from the plaintiffs a sum of £13,614 as damages for breach of contract, and for the losses which he has suffered by reason of such breach. Defendant also alleged that when he applied to the plaintiffs for a further loan of £3,000 in about March, 1952, the plaintiffs declined to advance the said sum, although (as the defendant contended) the plaintiffs had promised to advance it.
No part of the agreement alleged by the defendant is evidenced by any document in writing, but the defendant explained that it was his contention that the plaintiffs operated on the authority of the Industrial Development Corporation Ordinance and that under that
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Ordinance they were obliged to finance his cassava project up to the stage at which it could be said to be a viable commercial project. Thus we understood the argument of Counsel for the defendant to be.
The relevant provision of the Industrial Development Ordinance is to be found in section 3, which is as follows:—
“3 (1) There shall be established in accordance with this Ordinance a body, to be called the
Ghana Industrial Development Corporation, charged with the duty of securing the investigation, formulation and carrying out of projects for developing industries in Ghana.
(2) The said Corporation shall have power for the purpose of the discharge of their duty under the preceding subsection—
“(a) to carry on all activities the carrying on whereof appears to them to be requisite, advantageous or convenient for or in connection with the discharge of the said duty including the marketing of industrial products;
“(b) to promote the carrying on of such activities by other bodies or persons and for that purpose to establish or expand, or promote the establishment or expansion of, other bodies to carry on any such activities either under the control or partial control of the Corporation or independently, and to give assistance to such bodies or to other bodies or persons appearing to the Corporation to have facilities for the carrying on of any such activities, including financial assistance, by the taking up of share or loan capital or by loan;
“(c) to carry on any such activities in association with other bodies or person (including Government authorities or Local Government authorities) or as managing agents or otherwise on their behalf.
“(3) The Corporation shall have power to do anything and enter into any transaction (whether or not involving expenditure, borrowing in accordance with the provisions of this Ordinance in that behalf, the lending or investment of money, the acquisition of any property or rights or, subject to the provisions of section 15 of this Ordinance, the disposal of any property or right) which in their opinion is calculated to facilitate the proper discharge of their functions or is incidental or conducive thereto.”
It will be observed that, under section 3 (2) (b) of the said Ordinance, the assistance which may be given to bodies or persons appearing to have facilities for the carrying on of any industrial
activities includes financial assistance in three different forms: (1) taking up share capital, (2) taking up loan capital and (3) by simple loan. The facts of this case disclose that the agreement by which assistance was given to defendant was by a simple loan, which is to say that the transaction between the parties was a loan transaction.
The defendant could not deny, and did not seek to deny, that the agreement of 25th August, 1952 was an agreement between a lender (the plaintiffs) and a borrower (the defendant). The matter, indeed, is beyond argument.
What the defendant sought to do before the trial-Judge, where he was successful in his effort, was to evade his plain obligation to repay the money lent by the plaintiffs by setting up an alleged promise by the plaintiffs in July, 1949 which was oral and vague in its content. As we have already indicated, the learned trial-Judge felt himself convinced, and accepted the view that the plaintiffs were in breach of their obligations arising out of this alleged oral agreement, and of their obligation arising out of the preamble to the Ordinance to which he drew particular attention.
The preamble is as follows:
“An Ordinance to provide for the establishment of a Ghana Industrial Development Corporation charged with duties for securing the Development of Industry in Ghana and for matters concerned therewith.”
In our view this preamble does not impose upon the plaintiffs an obligation to advance moneys to any bodies or persons up to such time as their projects can be deemed to be viable, to enable them to pay the loans received.
The learned Judge was in our opinion in error when acting on the view which he took, namely, that the plaintiffs had “unreservedly promised and indeed had undertaken to finance the defendant to establish his cassava business on a commercial scale.” The simple issue actually before the learned Judge was an issue raised by a loan agreement in writing, and in our view the learned Judge further erred when he decided that it was the alleged oral agreement of 1949 which governed the rights between the parties, and breach of which by the plaintiffs in his view entitled the defendant to substantial damage.
The finding by the learned Judge that the plaintiffs had “unreservedly” agreed to finance the building up of the defendant’s project until it became a self-supporting commercial business, and was in a position to repay moneys borrowed, is wholly inconsistent with the words used in the written agreement of 25th August, 1952.
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It is, in our opinion, quite clear that the plaintiffs agreed to advance the sums sued for only upon the provision of approved security, and it is reasonable to suppose that if the defendant had carried out his part of the agreement, and had asked for further advances to assist his development, the plaintiffs for their part would have been willing to render such further assistance on being satisfied with the security offered by the defendant. By the 29th October, 1954, however, when the writ in this action was issued, the defendant was in breach of his agreement, and had so been from the very outset. This breach was in connection with his obligation to repay the sum of £4,300 with interest calculated upon the several sums comprising this total as from the dates upon which such sums had been advanced, by equal quarterly payments as from the 15th April, 1953 over a period of three years. The defendant made default in this respect, and had not during the eighteen months preceding the issue of the writ made any repayment whatever.
We find it difficult, in these circumstances, to understand the reasoning of the learned Judge when he said: “The plaintiffs by their own act disabled themselves from performing their promise and the
defendant is entitled to treat the agreement. . . as at an end, and to sue the plaintiffs for damages without further performing his part of the agreement;” unless it be, as it seems to be, the case that the learned Judge was misled into accepting an argument, fallacious in our view and nowhere supported by evidence, that the real agreement between the parties was one orally made in July, 1949, and that under this agreement the plaintiffs were obliged when so requested to make advances “unreservedly,” almost ad infinitum, until the defendant would be in a position to repay out of the success of his project. No doubt compassion might seem to dictate such a finding, but it would in our opinion be preposterous to accept it as being supported by any legal principle. If the plaintiffs had entered into any such agreement they would, according to our understanding of the Ordinance, have exceeded their powers, and we would on this ground alone, apart from other considerations, reject the view that they ever so contracted.
The error of this finding resulted in further error, because the view expressed by the learned Judge, which amounted to a finding that the plaintiffs were in breach of this agreement alleged by the defendant, was based upon his acceptance of the defendant’s further contention that when, at a date much later than the 25th August, 1952 he (the defendant) asked for a further advance of £3,000, which was approved by the plaintiffs “subject to adequate and suitable security,” the plaintiffs were under obligation to grant this loan
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notwithstanding that the security offered was not acceptable to the plaintiffs, who acted upon the advice of their solicitors after they had carefully investigated its sufficiency.
The learned Judge seems to have been fortified in his view by a misunderstanding of the evidence as to a sum of £300—part, as he said, of the sum of £3,000 requested by the defendant. His finding as to this is as follows:
“Turning to the counter-claim, the irresistible inference is that the defendant believed that he was entitled to the loan of £3,000 approved by the plaintiffs, who advanced him £300 therefrom. His claim, which is honest and binding, is founded on good and valid consideration.”
On the evidence it is clear that the £300 in question was part of the sum of £4,300, subject matter of the agreement on which the plaintiffs’ claim is based, and was advanced to the defendant at a time much before any discussion took place in connection with a further loan of £3,000. It cannot be said, therefore, that the plaintiffs in acknowledgement of an obligation to advance £3,000 made part-payment of £300 “therefrom,” which appears to be the learned Judge’s reasoning.
It was further argued by Counsel for the defendant, with regard to the imperfect security proffered by him in connection with the request for a further loan of £3,000, that the plaintiffs were under an obligation financially to assist him in curing the imperfections of his security, and that their failure to do this was a further breach of their agreement. We can find nothing in the evidence which supports this contention, and to approve it would introduce a dangerous novelty into the law of contract. We therefore reject this contention.
Even if an oral agreement was made (such as is alleged by the defendant) in July, 1949, it was an agreement in anticipation of the later agreement in writing of the 25th August, 1952. In these circumstances it seems to us that the case falls to be considered in the light of the judgment of Wills J. in the case of Greswolde Williams v. Barneby (17 T.L.R. 110). In that case Wills J. accepted the argument, supported by a volume of authority, that “where an agreement for purchase and sale was followed by a conveyance the terms of the original agreement were merged in those of the conveyance, and could not afterwards be relied upon by either party except for the purpose of interpreting the language of the conveyance, unless there were grounds for rescinding the conveyance because of fraud or for altering it because of mistake.”
This reasoning appears to have been followed in the most recent case in the English Court of Appeal (Light & others v. Inter-Tours Ltd.; see “The Times” 27th November, 1959). In that case the simple facts were that the defendants, in a brochure advertising travel facilities, had announced that on arrival at any point on their journey travellers would be “diligently and carefully escorted by the defendants’ couriers.” The plaintiff in the case alleged a breach of contract in that the defendants had “negligently caused and permitted the plaintiffs to be parted from the courier escorting them.” The booking form relied on by the plaintiffs contained no obligation to provide couriers, but it was contended on behalf of the plaintiffs that this was to be implied from what had been said or advertised on behalf of the defendants in their brochure. This contention was rejected by the Court on the ground that, although the terms of the brochure did suggest that travellers would be escorted by couriers, unless it had become part of the bargain by incorporation into the contract it was difficult to see how such a term could be implied.
So in the present case, assuming that there was an agreement or undertaking by the plaintiffs in July, 1949 to finance the defendant, as the Judge found, this was merged in the later writing which superseded it. It was not incorporated in the written agreement so as to form any part of it, and no reliance can be placed upon it in the absence of any suggestion of fraud or mistake. We cannot, therefore, accept the argument by which the learned Judge seems to have been persuaded, although Counsel for the respondent urged that we should do so on the grounds of the established principle that all terms must be implied that are necessary for the achievement of the purposes of the contract. As we have said, the contract in this case is a simple agreement by the plaintiffs to lend money at interest and on security to the defendant. Nowhere in the written agreement can there be found any term which obliges the plaintiffs “unreservedly” to assist the defendant to the point of putting his business upon a “commercial scale,” or to await the achievement of this object before seeking repayment of the money lent.
In our view, there being no denial on the part of the defendant that he received the loans as claimed, and he not having denied liability for expenses attendant upon the loans, there was no defence to the claim. The counter-claim for damages is ill-founded, because there was no contract between the parties in respect of which the plaintiffs could be said to be in breach.
For these reasons we allowed the appeal, set aside the judgment of the Court below both on the claim and counterclaim, together
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with the order as to costs, and we entered judgment for the plaintiffs for £4,590: 14s: 2d, with costs fixed at £75: 11s: 0d. in this Court; the costs awarded by the Court below, if already paid by the appellants, to be refunded. Appellants to have the costs in the Court below, by consent assessed at 250 guineas (£262: 10s: 0).
DECISION
Court below to carry out.
