July 31, 2014
SUPREME COURT
GHANA
CORAM
AI Generated Summary
NDK Financial Services Limited, a Ghanaian financial institution, extended credit facilities to Hansas Complex, Addicent Foods Limited, and related entities associated with Harold Ntorinkansah. As a condition for disbursement, NDK required credit guarantee bonds from Glico General Insurance Company Ltd. to secure repayment. The bonds specified guarantee amounts and contained operative language obliging Glico to pay "any sum that is due and owing" upon demand after default. When the borrowers defaulted, NDK sued; Glico denied responsibility, alleging fraud and statutory invalidity under section 44 of the Insurance Act, 2006 (Act 724). The High Court granted NDK’s claims and dismissed Glico’s counterclaims; the Court of Appeal allowed a ground premised on section 44, finding the bonds void for uncertain liability. On further appeal, the Supreme Court, per Atuguba JSC, adopted a purposive statutory approach, held that section 44(1) applies to all insurance contracts and that the bonds fit the Act’s definition of insurance business, but concluded the bonds met the certainty requirement when read with the underlying facility schedules and stated caps. The Court upheld enforceability; a minority would have voided the bonds.
ATUGUBA, JSC (FOR THE MAJORITY)
This is an appeal by only the 2nd Defendant/Appellant/Respondent against the judgment of the Court of Appeal dated the 15th day of November, 2012. The only part of the decision complained of as per the Notice of Appeal is “The part of the judgment allowing ground (a) of the grounds of appeal.” The grounds of appeal are per the said Notice of Appeal as follows:
“(a) the learned Justices of the Court of Appeal, erred in law when they held
that Sub-section (1) of Section 44 of the Insurance Act, Act 724 is not limited to contracts of insurance created under the Motor Vehicle (Third Party Insurance) Act but every contractor (sic) of insurance entered into by the insurer after the commencement of Insurance Act, Act 724
(b) The learned Justices of the Court of Appeal erred in law when they held that the credit guarantee bonds issued in favour of the plaintiff/Respondent by 2nd Defendant/Appellant were contracts of insurance.
(c) The learned Justices of the Court of Appeal erred in law when they held that the credit guarantee bonds issued by Glico to the 1st Defendant was silent on the specific sum that Glico would pay should the 1st Defendant default in paying credit to facilities granted it by NDK and therefore lacked certainty contrary to the provision under section 44(1) of the Insurance Act, Act 724.
(d) The learned Justices of the Court of Appeal erred in law when they failed to consider the fact that the guarantee bonds were issued by the 2nd Defendant/Appellant….”
Brief Facts
In this case the Plaintiff/Appellant (hereinafter called the Plaintiff) and the Second Defendant/Respondent (hereinafter called the defendant) are two financial institutions, which worked together to secure financing for two companies controlled in part by Harold Ntorinkansah, Hansas Complex and Addicent Foods Limited. The credit facilities extended to the companies called for a repayment schedule on a monthly basis, with insurance added to the total borrowed. The credit facility contracts mandated that in the event of a default, “the whole amount of the outstanding loan and all accrued interest and other amounts owing hereunder will become repayable forthwith and demand in writing made by NDK at any time.”
As a prerequisite for issuing these credit facilities, the plaintiff further required the companies to secure credit guarantee bonds from an insurance company in order to guarantee payment, which in this case was the Second Defendant. Upon