The Commercial Division of the High Court in Accra has ruled that Prudential Bank Limited acted unlawfully when it recovered the outstanding balance of a customer’s loan without first issuing the mandatory notice required under Ghana’s Borrowers and Lenders Act. The court awarded the customer GH¢100,000 in damages for breach of contract but dismissed claims for GH¢1 million in alleged financial losses due to lack of evidence.
Justice Sedinam Agbemava delivered the judgment in the case of Reynolds & Associates Limited v. Prudential Bank Limited, holding that although the company failed to follow the agreed repayment schedule, the bank breached both the loan agreement and the law by prematurely calling in the facility without giving the statutory notice.
The dispute stemmed from an overdraft facility of GH¢404,970.06, which Reynolds & Associates requested to convert into a 24-month loan. Prudential Bank approved the request, and both parties signed a Heads of Agreement on 29 October 2021, under which the loan was to be repaid in equal monthly instalments.
However, on 17 May 2023, the bank debited GH¢187,536.69 from the company’s account, representing the outstanding balance on the loan. Reynolds & Associates challenged the deduction, arguing that the bank acted unilaterally while the agreed loan period had not expired.
The company asked the court to reverse the debit, award interest, damages for breach of contract, GH¢1 million in compensation for alleged financial losses and legal costs.
Prudential Bank argued that the borrower had defaulted by failing to make repayments according to the agreed schedule. It maintained that the loan agreement entitled it to exercise a right of set-off against money held in the customer’s account and pointed to the company’s proposal to settle the debt with GH¢120,000 as evidence that it had failed to meet its repayment obligations.
The court acknowledged that Reynolds & Associates had not consistently paid the agreed monthly instalments. Instead, repayments were made irregularly.
However, Justice Agbemava noted that the bank continued accepting those payments without raising any formal complaint or declaring the company to be in default.
The judge referred to a letter dated 11th May 2023 in which the bank encouraged the customer to continue servicing the loan and maintain its business relationship. The letter made no mention of any default or intention to demand immediate repayment.
The court concluded that Prudential Bank had accepted the altered repayment pattern and could not later rely on those same irregular payments to justify recovering the outstanding balance before the loan matured.
A key issue before the court was whether the bank complied with Section 60 of the Borrowers and Lenders Act, 2020 (Act 1052).
Justice Agbemava ruled that Prudential Bank failed to issue the mandatory written notice giving the borrower 30 days to remedy any default before enforcing its rights.
The court also found that the bank recovered the outstanding balance about seven months before the loan was due to expire.
Describing the bank’s action as a “knee-jerk response” to the company’s request for a negotiated settlement, the judge held that the lender had breached both the law and its contractual obligations.
Although the court found in favour of Reynolds & Associates on the issue of unlawful loan recovery, it rejected the company’s claim that the deduction caused GH¢1 million in financial losses.
The company had argued that the money taken from its account belonged to one of its clients and was meant to clear imported goods. However, the court said it failed to identify the client or produce evidence linking the funds to the alleged transaction.
Justice Agbemava also found no documentary evidence or witness testimony proving that the company suffered the claimed losses or had to obtain replacement funds after the bank withdrew the money.
As a result, the court dismissed the claims for special damages and compensation.
Despite that, the judge held that Prudential Bank’s actions amounted to a breach of contract and awarded Reynolds & Associates GH¢100,000 in general damages, together with GH¢35,000 in legal costs. All remaining claims were dismissed for lack of proof.
