Ghana High Court Orders Prudential Bank to Pay GH¢135,000 for Unlawful Loan Recovery
- The High Court's Commercial Division in Accra ruled against Prudential Bank for debiting a customer's account without issuing the statutory 30-day notice required by law
- Justice Sedinam Agbemava found that the bank called in the loan roughly seven months before its agreed maturity date
- Reynolds & Associates Limited had sought GH¢1 million in compensation, but the court's final award and the claims it dismissed tell a more complex story
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Ghana's High Court Commercial Division has ordered Prudential Bank Limited to pay GH¢135,000 in damages and legal costs after finding the lender unlawfully recovered an outstanding loan balance from a customer's account without providing the legally required prior notice.
Justice Sedinam Agbemava delivered the ruling in the case of Reynolds & Associates Limited v. Prudential Bank Limited, finding that the bank breached both the loan contract and the Borrowers and Lenders Act, 2020 (Act 1052) when it debited the company's account on 17 May 2023.
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The Law Platform reported that Reynolds & Associates Limited had originally held an overdraft facility worth GH¢404,970.06, which it subsequently requested be restructured into a 24-month loan.
Prudential Bank agreed, and both parties signed a Heads of Agreement on 29 October 2021 setting out equal monthly instalments as the repayment structure.
The company did not keep to the scheduled instalments, making payments on an irregular basis instead.
When Reynolds & Associates later approached the bank to negotiate a settlement of GH¢120,000, the bank responded by debiting its account for the full outstanding balance of GH¢187,536.69, approximately seven months before the loan was due to mature.
The company went to court seeking a reversal of the debit, interest, damages for breach of contract, GH¢1 million in compensation for alleged financial losses, and legal costs.
Bank's Conduct Found to Contradict Its Own Correspondence
Prudential Bank maintained that its customer had defaulted on the agreed schedule, entitling it to exercise a right of set-off over funds in the account.
The court, however, noted that the bank had continued accepting the irregular payments throughout the loan period without formally declaring the borrower in default or raising any objection.
Justice Agbemava pointed to a letter dated 11 May 2023, just days before the contested debit, in which the bank encouraged Reynolds & Associates to keep servicing the loan and maintain the business relationship.
No mention of default or any intention to call in the facility appeared in that communication.
The court held that by accepting the altered repayment pattern without complaint, the bank had effectively acquiesced to it and could not later use those same payments as grounds for immediate foreclosure.
Statutory Notice Requirement Ignored
Central to the ruling was the bank's failure to comply with Section 60 of Act 1052, which requires a lender to issue a written notice giving a borrower 30 days to remedy any default before enforcing a security interest. No such notice was issued.
While the court ruled in Reynolds & Associates' favour on the core breach, it dismissed the GH¢1 million compensation claim.
The company argued the debited funds belonged to a client and were earmarked for clearing imported goods, but produced no documentary evidence, named no such client, and called no witness to substantiate the alleged financial losses. All remaining special damages claims were dismissed on the same basis.
The court ultimately awarded Reynolds & Associates GH¢100,000 in general damages and GH¢35,000 in legal costs.
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Source: YEN.com.gh
