MANU AND ANOTHER v. GYAWU [1963] 2 GLR 440

DIVISION: IN THE HIGH COURT, KUMASI

DATE: 11TH NOVEMBER, 1963

BEFORE: APALOO J.

NATURE OF PROCEEDINGS

ACTION for a declaration that a loan transaction entered into by the plaintiffs with the defendant was void or in the alternative an order to reopen the transaction, on the ground that the interest was excessive and that the transaction was harsh and unconscionable, and was in contravention of the Moneylenders

Ordinance. The facts are fully set out in the judgment of the court.

COUNSEL

Amadu Sakyi for the plaintiffs.

D. S. Effah for the defendant.

JUDGMENT OF APALOO J.

The substance of the plaintiffs’ claim in this action, is a declaration that a loan transaction entered into between the plaintiffs of the one part and the defendant of the other part is void on the ground that such transaction offends against the provisions of the Moneylenders Ordinance1 or in the alternative an order re-opening the said transaction on the ground that the interest charged was harsh and unconscionable. The plaintiffs are brothers. The first plaintiff is the younger and more active of the two. About eighteen years ago, both plaintiffs jointly made a cocoa farm at a place called Ntabanu. The evidence shows that it was a fairly large farm. At a date prior to June 1960, the plaintiffs fell into debt and their farm was sold by public auction. Although there is no evidence as to whether the sale was ordered by a mortgagee exercising his power of sale, the first plaintiff’s evidence makes it likely that that was the case. A man whose name was given as Kwadwo Asawuram purchased it for the sum of £G1,200. The latter offered to resell it to the plaintiffs at the same price. The plaintiffs agreed to repurchase it, but were not in funds to meet payment. At that time, they also owed £G1,200 to one Baffuor Akoto. Either the plaintiffs were by nature improvident individuals or they must just have run into a bit of bad luck. They wanted £G2,400 rather badly. They mentioned this matter to one Kwadwo Bi. The latter offered to take them to a moneylender to whose niece he was married. This happened to be the defendant.

Bi took the first plaintiff to the defendant and he asked for a loan of £G2,400. He disclosed to the defendant the use to which the loan, if granted, was to be put. He offered to secure repayment of the loan with their farm. The defendant accordingly inspected the farm. He must have felt satisfied with it and agreed to grant the loan required.

[p.443] of [1963] 2 GLR 440

It was arranged that instead of handing the physical cash to the plaintiffs, the defendant should instead pay off their creditors. This was an eminently reasonable arrangement as it would ensure that the farm was freed and discharged from all incumbrances. The defendant obviously asked for interest on the loan. I am satisfied he asked for £G2,400 interest. This the first plaintiff agreed to pay. He could have had no choice in the matter. The repayment of the loan was to be made with the proceeds of the farm. It was agreed that two-thirds of the income of the farm should be appropriated towards the repayment of the principal and interest and the remaining one-third was to meet the cost of labour. It was also agreed that either side should provide two labourers to work in the farm and the one-third share reserved to meet the cost of labour, be shared equally among the four labourers. The plaintiffs offered to work in the farm themselves.After agreement was reached verbally on all these matters, it became necessary, as is customary, to have them reduced into writing. I prefer the evidence that the defendant suggested that the preparation of a document assuring title in the farm to himself by way of legal mortgage and incorporating the various matters be entrusted to a licensed letter writer by the name of Kyem. It was the defendant more than anyone else who needed the document. He in fact paid an enormous sum for it and was obviously entitled to and I am satisfied called the tune. I think Kyem must have been someone with whom the defendant was used to doing business. I accept the evidence of Kwadwo Bi that the defendant sent for and gave instructions to Kyem for the preparation of the mortgage deed. What instructions the defendant gave to Kyem seems to me to be extremely vital as it goes a long way to show whether or not the defendant for any sinister motive wished to misrepresent in the deed the true principal. The first plaintiff’s own evidence on this aspect of the case was extremely sketchy. He however called Kwadwo Bi. The latter struck me as a fair-minded witness and appeared to be someone who felt he must assist in the search for the truth. He said the defendant told Kyem that he had agreed to advance the plaintiffs a loan of £G2,400 and would charge £G2,400 interest. The reason for the apparently high interest was because the defendant said after he inspected the plaintiff’s farm, he felt satisfied that the income from the farm would not suffice to meet payment of the principal in a year. That evidence, I accept and coming as it did from the mouth of the plaintiffs’ witness, negatives any intention on the part of the defendant to misrepresent the principal in the mortgage deed.

Does the fact that the defendant who is indisputably illiterate accepted from Kyem a document which did not truly represent his instructions make him guilty of a criminal offence? Unless I am constrained by authority binding on me, I should not so hold. I was at one time considerably disturbed in my mind by the fact that when the document was read back to the parties that the loan was £G4,800 and was without interest, the defendant did not seek to correct it. I have however come to the conclusion that that fact alone is insufficient to convict the defendant

[p.444] of [1963] 2 GLR 440 of an offence against section 26 (1) of the Moneylenders Ordinance. The art and intricacies of drafting were complete Greek to him. He may well have thought that the best way of putting their agreement into writing was not to differentiate between principal and interest and that all that mattered was the insertion in the document of the aggregate sum which the plaintiffs were under an obligation to pay. The obvious object of section 26 of the Moneylenders Ordinance is to impose severe penalties on lenders who intending to take unfair advantage over helpless borrowers either wilfully mis-state the principal or leave it blank. When I recall to mind the fact that the defendant is himself unlettered and correctly, on the plaintiffs’ witness’ showing told the draftsman the principal sum lent, I feel satisfied that I ought not to hold the defendant guilty of an infringement of section 26 (1) of the Ordinance in question. If that view is right, then there is no occasion to invoke section 26 (2) of the Ordinance and invalidate the mortgage deed. It follows that I find against the contention of the plaintiffs that the mortgage deed is void and unenforceable.

That naturally takes me to the second question debated in this case, namely, whether the loan transaction was harsh and unconscionable and ought therefore to be re-opened under the Loans Recovery Ordinance2 Save for the interest which the plaintiffs claim was excessive, there is nothing in the bargain itself which makes it unfair from the point of view of the plaintiffs. The defendant will have his money in driblets depending upon a lot of unforeseeable risks, namely, good harvest, good price, the joint honesty of the plaintiffs and his labourers and a lot more others. The plaintiffs for their part feel secure in retrieving their lost farm on the only condition that they render an honest and true account of the proceeds of the farm and pay over to the defendant two-thirds. As long as they do this, they can rest content that the farm will be theirs, no matter how long it takes to repay the principal and interest. I should not say in these circumstances that the plaintiffs have made out a case of a harsh or unconscionable transaction. Is it any different because of the interest charged? In my judgment, an interest can only be excessive if it is related to the period when there is an obligation to repay the principal. In this case, the plaintiffs are under no obligation to repay either principal or interest on a named and certain future date. If therefore through vis major or other cause not attributable to any default on the part of the plaintiffs, there was crop failure for a number of years and the farm did not produce more than £G200, it would take more than ten years to repay the principal sum itself. Section 13 (1) of the Moneylenders Ordinance prescribes the maximum interest that can lawfully be charged on secured and unsecured loans. That maximum is always fixed by reference to a year. In my judgment, there is nothing in this contract which provides me with any justification for holding that the loan transaction was harsh and unconscionable. I think the plaintiffs must be held to their bargain. It follows that the alternative limb of the claim also fails. [p.445] of [1963] 2 GLR 440

The two findings which I have made are sufficient to conclude this case in favour of the defendant, but there is outstanding one issue of fact which I must resolve as it might become material hereafter. That question is: have the plaintiffs committed any breach of the mortgage contract as would entitle the defendant to treat the contract at an end and thus realise his security? The defendant asserts the positive, the plaintiffs the negative of this proposition. According to the pleadings, the breach of contract which the plaintiffs committed consists of their selling secretly a portion of the cocoa from the farm in dispute and in driving away the defendant’s caretakers. I am satisfied the defendant has not succeeded in establishing either of these allegations. It was not suggested to the first plaintiff in a detailed cross-examination by experienced counsel, that he either by himself or acting jointly with the second plaintiff surreptitiously sold any of the cocoa in the absence of the defendant’s representatives. These allegations began only after the first plaintiff left the witness-box. With regard to the driving away, I am satisfied of nothing beyond the fact that there have been verbal differences between the plaintiffs and Bamoro Watara one of the defendant’s labourers. I think these differences were due to their individual susceptibilities. Bamoro is a Moslem and a teeto-taller while the plaintiffs are persons who relish in the bottle. I reject the evidence that the plaintiffs suggested to Bamoro that they should enter into a conspiracy to sell some of the cocoa and enjoy the proceeds by themselves. I hold therefore that the plaintiffs committed no breach of the loan agreement and that therefore the defendant is not entitled to foreclose the mortgage or exercise his power of sale. The plaintiffs are therefore entitled to an injunction to restrain the defendant from selling, the farm in dispute.

I have asked myself the question whether I can properly grant the plaintiffs this equitable relief although they did not specifically ask for it. I have come to the conclusion that I can and ought to. Every suit implies an offer to do equity and in any case, points about form are out of fashion nowadays. I therefore make an order of injunction restraining the defendant from selling the farm the subject-matter of this action, but this order is without prejudice to any breaches of contract that they (plaintiffs) may commit in the future. Subject to that, the action fails and ought to be and is dismissed.

I hereby discharge the order of interim injunction made by this court on the 29th October, 1962, and similarly revoke the appointment of receiver and manager. Since the record shows that one-third of the proceeds of the farms have been paid to the receiver’s caretakers, all the rest of the sums now in the hands of the receiver and manager shall be paid to the defendant in further part payment of the principal and interest.

With regard to costs, the plaintiffs have succeeded in stopping the sale of their farms, at least for the present and the defendant has failed to make good his contention that the plaintiffs were in breach of contract, on the other hand the defendant has succeeded and the plaintiffs have [p.446] of [1963] 2 GLR 440 failed to show that the loan transaction was avoided by the Moneylenders Ordinance or that it was a fit case to invoke the provisions of the Loans Recovery Ordinance. In these circumstances, it seems to me just that each party should bear his own costs. And to that effect I order.

DECISION

Action dismissed.

K. T.