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The High Court's Commercial Division in Accra has ruled against Prudential Bank Limited for unlawfully calling in a customer's loan and debiting its account without first issuing the statutory notice required under Ghana's Borrowers and Lenders Act, 2020.
In REYNOLDS & ASSOCIATES LIMITED v. PRUDENTIAL BANK LIMITED [TLP-HC-2026-23], the fairly experienced judge in commercial law actions, Justice Sedinam Agbemava held that although the borrower had not adhered strictly to the agreed repayment schedule, the bank breached both the loan agreement and statutory requirements when it prematurely recovered the outstanding balance without prior notice to the Plaintiff.
Background of the Dispute
The dispute arose after Reynolds & Associates Limited requested that its overdraft facility of GH¢404,970.06 be converted into a 24-month loan. Prudential Bank approved the request, and the parties executed a Heads of Agreement on 29 October 2021 requiring the loan to be repaid through equal monthly instalments.
However, on 17 May 2023, the bank debited the company's account by GH¢187,536.69, representing the outstanding balance on the facility. Reynolds & Associates challenged the deduction, arguing that the bank had acted unilaterally and without notice while the agreed loan period had not yet expired. The company sought reversal of the debit, interest, damages for breach of contract, compensation of GH¢1 million for alleged financial losses, and legal costs.
Prudential Bank denied liability, maintaining that the borrower had defaulted on the agreed repayment schedule. It argued that the loan agreement entitled it to exercise a right of set-off over monies standing to the customer's account and that the plaintiff's proposal to settle the outstanding balance with GH¢120,000 amounted to an admission that it had failed to honour its repayment obligations.
Court Rejects Bank's Default Argument
The court acknowledged that Reynolds & Associates had not made repayments in accordance with the agreed monthly instalment schedule. Instead, the payments were irregular and ad hoc. However, Justice Agbemava observed that throughout this period the bank accepted the irregular payments without raising any complaint or formally declaring the borrower to be in default.
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The judge pointed to correspondence dated 11 May 2023, in which the bank merely encouraged the customer to continue servicing the loan and maintain its business relationship, making no reference to any alleged default or intention to call in the facility. The court concluded that Prudential Bank had effectively acquiesced to the altered pattern of repayments and could not subsequently rely on those same irregular payments to justify an immediate foreclosure.
Failure to Give Notice Violated the Law
A central issue in the case was whether the bank complied with Section 60 of the Borrowers and Lenders Act, 2020 (Act 1052) before exercising its right to recover the outstanding debt.
The judge held that the bank failed to issue the mandatory written notice requiring the borrower to remedy any default within 30 days before enforcing its security interest.
The court also noted that the loan tenure had not yet expired when the bank recovered the entire outstanding balance. Instead, the facility was called in approximately seven months before its agreed maturity date.
Justice Agbemava described the bank's action as a "knee-jerk response" to the customer's request for a negotiated settlement and ruled that the lender had acted in breach of both the statute and its contractual obligations.
Claims for Financial Loss Dismissed
Although the court found that Prudential Bank acted unlawfully, it rejected Reynolds & Associates' claims for substantial financial losses. The company had argued that the money withdrawn belonged to one of its clients and was intended for the clearing of imported goods. However, the court found that the plaintiff failed to identify the alleged customer or produce evidence linking the deposited funds to that transaction.
Justice Agbemava further observed that no documentary evidence or witness testimony established the alleged losses or proved that the company had been forced to obtain replacement funds after the bank's deduction.
Consequently, the claims for GH¢1 million in compensation and other special damages were dismissed for lack of proof.
Damages Awarded for Breach of Contract
Despite dismissing the plaintiff's claims for specific financial losses, the court held that Prudential Bank's unlawful foreclosure amounted to a breach of contract that entitled Reynolds & Associates to general damages.
Relying on established Supreme Court authority that general damages arise naturally from the infringement of a legal right, Justice Agbemava awarded the company GH¢100,000 in general damages together with GH¢35,000 in legal costs.
The court dismissed all remaining claims as unproven.
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