Court orders GT Bank to refund ‘disappeared blocked-funds’ to MET Capital Group

A High Court Commercial Division has ordered Guaranteed Trust (GT) Bank, Ghana Limited to refund within ten (10) days from the ruling, a sum of US$ 550,000 to Asset Management Company, MET Capital Group Limited allegedly blocked in the bank’s own pledged-account.

The ruling was to given on 5th December 2018 by the court presided over by Justice Jennifer Abena Dadzie (Mrs). This was after the bank filed an application for stay of execution of an earlier judgement delivered by the same court in favour of the MET capital on 15th October 2018.

The move, Counsel for the applicant, GT Bank, Mr. Emmanuel Bright Atokoh argued was to enable the appellate court first go into the merits of the court decision to forestall the possible hardship the bank might suffer. Counsel for the respondent, Mr Edward Sam Crabbe, on the other hand, opposed the application on same grounds as the applicant and argued that his client will suffer greater hardship if the instant application is stayed by the court. According to him, the respondent’s operating license would not have been suspended by the Securities and Exchange Commission (SEC) if the bank had returned the blocked funds to its account in February 2016 as per the terms agreed by parties.

Background

The suit commenced in 2016 against GT Bank (Ghana) Limited and another customer of the bank, Linksfield Ridge Realty Limited.

The court heard that the bank agreed to issue three (3) bank guarantees on behalf of Linksfield to support a commodity trade - at a meeting held on 7th January, 2016 at the bank’s head office. The plaintiff, MET Capital Group Limited alleged that the bank requested it to provide cash collateral of US$ 550,000 which was to be blocked by the bank in a pledge-account. The bank is also said to have requested written instructions from the plaintiff based on initial discussions towards commencement of the transaction.

The court noted from the bank witnesses that discussions held at the kick-off meeting of which parties were all present were reduced into writing as minutes and referred to as call-memo. During the trial, the bank witnesses told the court that all the three (3) bank guarantees expired in 30 days after issuance without performance on the part of the suppliers.

The court also heard that the cash collateral provided by the plaintiff and lodged at the bank in a pledge-account could not be given back to the plaintiff on grounds that the facility period had been extended. The plaintiff alleged it was surprising as that was contrary to the agreed terms. Again, the bank failed to release the blocked funds to the plaintiff even upon expiry of this new facility term period - making the plaintiff suspicious.

The court noted that all three witnesses put forward by the bank failed to tell the where-about of the blocked funds kept by the bank. Also, when the court ordered the bank to produce statements on the pledge-account, it was revealed the bank allowed its customer, Linksfield to withdraw the funds over the counter and in bits over a period of six (6) months. It also emerged that the funds meant to be blocked in the bank’s pledge-account was withdrawn ahead of the scheduled date - raising doubts the three (3) bank-guarantees were established in the first place.

Particulars of Loss and Damages

Listing the particulars of loss and damages, the plaintiff alleged that it had not only lost direct and indirect income from the transaction but was also embarrassed for its inability to pay its clients - culminating in the suspension of its Operating License by its regulator, SEC.

The plaintiff also alleged that the bank’s refusal to pay back the blocked funds led to unwarranted legal suits (both civil and criminal) against the company and its directors due to its inability to pay back its clients.

The court again was told that directors had to sell personal properties to defray part of the debt owed some exasperated clients. The plaintiff thus prayed the court to award a total of GH¢ 170 million in special and general damages, recovery of blocked funds and interest as well as costs.

GT Bank denies

In its statement of defence, GT Bank challenged the plaintiff’s allegations insisting it acted in accordance with best banking practices by providing options at the kick-off meeting to protect the plaintiff that rather just failed to take advantage.

The bank further alleged that though there were minutes to cover resolutions reached the kick-off meeting, they were not signed by parties to the transaction - adding that they were just for the bank’s own internal consumption and not binding on the bank.

The bank added that the plaintiff’s written instructions issued to cover the transaction could not constitute a binding contract while the clause that sought to return the blocked funds back to plaintiff’s account was ultra-vires.

The initial verdict

In a two-hour-long judgement, Justice Jennifer Abena Dadzie noted that for the bank to have accepted to carry out those instructions yet failing to do so as expected only implies serious breaches of duty of care and skill imposed upon it by virtue of its relationship with the plaintiff as its customer”.

The judge continued that the bank disregarded the written instructions of the plaintiff and rather carried out its own instructions thereby undermining its duty to exercise reasonable care and skill in handling the plaintiff’s financial transactions. The court held that given how the bank allowed the 2nd defendant, Linksfield to withdraw the funds meant to be blocked in a pledged account, it was clear the bank was in bed with the real estate company.

Justice Jennifer Abena Dadzie then likened the actions of the bank in the case to the popular “Tom and Jerry” cartoon concluding that the bank’s conduct was unacceptable as its refusal to transfer the cash collateral back into the plaintiff’s account upon expiry of the facility as agreed was deliberate.

In assessing damages, Justice Abena Dadzie admitted the actual losses of profits incurred per the plaintiff’s evidence could be attributed to the bank’s breach of duty of care and that, the 1st defendant, GT Bank needs to compensate it by way of general damages for the loss of the chance to make a profit occasioned by the bank’s negligent actions or inactions.

The court, however, ruled that the plaintiff could not claim all of such losses and ordered for a refund of US$ 550,000 against the defendants jointly and severally as well as interest on the said blocked funds. The court also settled on GH¢ 5 million as general damages against the bank for breach of duty of care and GH¢ 120 thousand cost in favour of the plaintiff against the defendants. It, however, refused the special damages and general damages for defamation of GH¢ 40 million and GH¢ 30 million respectively as prayed by the plaintiff.

This judgement was hailed by the counsel of 1st defendant as an excellent judgment and commended the judge for the industry input. Justice Jennifer Abena Dadzie also lauded the lawyers for the great work done in their written submissions.

Revised ruling

In a sharp twist, the counsel for the 1st defendant however subsequently filed an application for stay of execution - a move counsel for the plaintiff, in turn, prayed the court to dismiss to enable it to settle its indebtedness with its clients and also get its Operating License back.

He made it known to the court that his client needs funds urgently to curb the frequent police arrests and detention of directors for non-payment of clients’ funds while averting possible conviction of these directors who are currently facing criminal charges at the courts for allegedly defrauding clients.

The court upon hearing both counsels gave a bench ruling and granted the application on terms. Justice Abena Dadzie (Mrs) made consequential orders for the bank to refund the blocked funds of US$ 550,000 and also pay costs of GH¢ 120 thousand to MET Capital Group Limited. The court however, left the general damages and other reliefs it awarded earlier to be dealt with at the Court of Appeal. Meanwhile, a source close to the bank has hinted that the bank is again dissatisfied with this decision and wants to take the matter possibly to the Supreme Court for redress.