October 19, 2022
COURT OF APPEAL
GHANA
CORAM
AI Generated Summary
The Court of Appeal (Aryene JA, with Ofoe JA and Wood JA concurring) reviewed a dispute involving Merchant Bank Limited, ABI Capital Limited, and the Banks former Managing Director over a US$33 million LC facility granted in favour of VRA and a GH2349,593.75 fee paid for due diligence/consultancy. The High Court had enforced the consultancy agreement, found the LC breach illegal but denied restitution due to benefits taken, and declared the termination of the Managing Director wrongful, awarding damages. On appeal, the court rejected the appellants estoppel claim, applied the Turquand rule to bind the bank to the consultancy agreement absent proof of the 1st respondents actual knowledge of irregularity, and held that breach of section 42 of the Banking Act was voidable, not void. However, it reversed the wrongful termination finding, holding the Managing Director breached the Credit Policy and was lawfully dismissed, awarding GH20,000 damages to the bank and otherwise upholding the trial court in part.
NOVISI ARYENE JA:
This is an appeal against the judgment of the High Court delivered on 11th May 2015, by which the plaintiff’s action was dismissed and judgment was entered in favour of 2nd respondent on his Counterclaim. In this judgment, the plaintiff will be referred to as appellant and the defendant as respondent.
FACTS AS PRESENTED BY APPELLANT
Appellant’s case is that VRA has been its customer since 1972, and it had enjoyed numerous credit facilities from the Appellant Bank, including Letters of Credit (LC) of $10 million, approved by the Board of Appellant. Appellant contends that per its Credit Policy, the Credit Committee of the Bank which was chaired by 2nd respondent, could only grant credit up to $250,000.00. And that the Board, being the highest decision making body of the Bank, can only approve credit requests in excess of $5 million and up to 25% of its net worth. Appellant further contends that by virtue of section 42 of the Banking Act, 2004 (Act 673), and considering the net worth of appellant bank (which was $40 million), the limit the Bank could lawfully grant was $10 million.
The thrust of appellant’s case is that without authorization by appellant bank, 2nd respondent (its Managing Director) granted three facilities in the form of revolving letters of credit in the sum of $33 million each, to suppliers of VRA for the purchase of light crude oil for the generation of electric power. It was contended that the L.C granted by 2nd respondent was far in excess of the $10 million statutory limit of the Bank as per Act 673, and was also clearly ultra vires the authority of 2nd respondent.
Appellant further averred that 2nd respondent entered into an unauthorized Agreement with 1st respondent when the latter was engaged to undertake financial due diligence on VRA in respect of the impugned LC, and was paid an amount of GH¢349,593.75, (being the Cedi equivalent of $247,500). Appellant contended that the amount was paid out of the account of Volta River Authority for services described variously as marketing or brokerage services and financial due diligence. Appellant contended that the said payment was not supported by any prior Agreement, consent or authorization from VRA. Accordingly on demand by VRA, the said payment was reversed and absorbed by appellant and refund was demanded from the respondents.
Appellant contended further that contrary to the assertions of 2nd respondent, nowhere in the invoice submitted for payment by 1st respo