JUDGMENT OF BROBBEY J
Reff: Contracts Act, 1960(Act 25)
BROBBEY J. The facts which resulted in this case are as follows: The second defendant company offered to buy rice from the plaintiff company by presenting a post-dated cheque in payment thereof. The plaintiff company declined to sell the rice against that post-dated cheque. The second defendant represented the same cheque, but this time with a guarantee written at the back. On the basis of that guarantee, the cheque was accepted by the plaintiff’s and the rice valued at ¢5 million was supplied to the second defendant. The cheque was tendered as exhibit A. The exact words of the guarantee which induced the plaintiffs to accept the cheque were “payment guaranteed.” Below those words appeared the signature of one S.O. Addo, who signed in his capacity as the accountant
of the Tema branch of the National Savings and Credit Bank (hereafter referred to as the first defendants). The cheque did not merely bear the signature of the accountant but also had on it the official stamp of the accountant of the branch bank. The cheque was dated 25 October 1987. From the tenor of the evidence of the witnesses who testified on behalf of the plaintiffs, the rice was supplied after the cheque had been indorsed.
When the plaintiffs presented the cheque for payment, the bank whose accountant wrote the guarantee on the cheque, namely the first defendants, dishonoured it. The plaintiffs consequently issued a writ claiming:
“(a) ¢5 million accruing thereof;
(b) 33½ per cent interest from the period that the amount has been outstanding;
(c) ¢1 million special damages; and
(d) general damages.”
The first defendants refused to pay on the face of the cheque for four main reasons. First, they contended that the accountant who wrote the guarantee on the cheque had no mandate to commit the bank because he was a B signatory. Secondly, the guarantee written on the back of the cheque did not conform to the format in which guarantees were ordinarily given by the first defendant-bank. Thirdly, since the accountant knew that he had no mandate to commit the bank up to ¢5 million and further that his action was not in accordance with the written instructions in the bank, what he wrote was not merely unauthorised but also fraudulent and could not bind the bank. Finally, they contended that the plaintiffs had notice of the irregularity of the mandate and so the plaintiffs took a chance by not verifying from the manager himself before presenting the cheque for payment.
When pleadings closed, the summons for directions filed on behalf of the plaintiffs was a shallow one which glossed over a number of important issues. The sole issue filed was: “Whether the first defendants are obliged to pay ¢5 million on the basis of the guarantee indorsed on the second defendant’s cheque.” On behalf of the defendants were filed better and more comprehensive issues which were as follows:
“1 Whether or not the said officer of the bank had authority to give the alleged guarantee.
2. Whether or not the alleged guarantee of the said officer was regular having regard to the
regulations and practice of the bank.
3. Whether or not the plaintiffs had notice of the irregularities of
the mandate or alleged guarantee, and in spite of that presented the cheque for payment.
4. Any other issues raised on the pleadings.”
The second defendant, Agyaboo Enterprise, to whom the rice was supplied, was never served with any process in the case, never entered appearance and, of course, did not appear to contest the case. This judgment is on the trial of the case which involved the plaintiffs and the first defendants only.
Throughout the trial, no doubt arose as to the fact that the rice was supplied. That came out in the evidence of the first plaintiff witness, and he was not challenged on that. From the tenor of the evidence of the plaintiff witnesses, it would appear that but for the words “payment guaranteed” written at the back of the cheque, that cheque would not have been accepted in payment and no rice would have been supplied as it happened when the second defendant first attempted to purchase the rice. In other words, the plaintiffs relied on the guarantee before supplying the rice to the second defendant. There is also no dispute whatever that the guarantee was made by the officer of the first defendant-bank in his capacity as the branch accountant.
The first issue to consider is the nature of the guarantee or indorsement on the cheque, exhibit A. There is no doubt that exhibit A is a cheque. If the expression “payment guaranteed” written at the back is regarded as an endorsement on the cheque, it will at once invoke several legal issues such as the validity of exhibit A itself or the efficacy of the indorsement.
By their statement of claim, the plaintiffs expressly based their case on the fact that the first defendants had given a guarantee. I will consider their case as one arising out of a guarantee and not arising from payment with a cheque. Therefore, I do not deem it necessary to go into the issues and questions on the law of banking relating to indorsements of cheques.
In this country, the only requirements which a guarantee should conform to are that it should be in writing and signed by the guarantor or his agent. These are contained in section 14 of the Contracts Act, 1960 (Act 25) which provides:
“14. (1) Any agreement made before or after the commencement of this Act whereby a person (hereinafter in this Part called ‘the guarantor’) guarantees the due payment of a debt or the due performance of any other obligation by a third party shall be void unless it is in writing and is signed by the guarantor or his agent, or is entered into in a form recognised by customary law.
(2) Any promise or representation made after the commencement of this Act, relating to the character or credit of any third person with the intent that that third person may obtain credit, money or goods, from the person to whom the promise or representation is made, shall be void unless it is in writing and is signed by the party to be charged therewith or his agent.”
To the extent that exhibit A was in writing, and signed by an officer of the first defendant-bank in the person of the branch accountant, it satisfies the requirements to be a guarantee and that is the more reason why I will treat exhibit A as a guarantee and not a cheque with an indorsement.
It was part of the contention of the first defendants that within that bank, if a guarantee had to be given, it had to be signed by either the managing director or deputy managing director. Exhibit 5 was tendered to show the form of guarantee normally granted by the bank. It is significant to point out that the law does not presume any particular form that a guarantee should conform to beside what I have read from Act 25. No evidence was led by the first defendants that the format of guarantee employed by the first defendant-bank has been so publicised as to put on notice anyone accepting a guarantee from the first defendant-bank. In the absence of any such notice, the plaintiffs could not be bound by the peculiar form in which the first defendant-bank furnished guarantees to its customers. No notice or advertisement was exhibited by the first defendants to the effect that it has been published that only the managing director or deputy managing director can sign a guarantee. In the absence of evidence of such notice or advertisement, the first defendants cannot use exhibit 5 to vitiate exhibit A, merely because the latter is in a form different from the form adopted by the bank even though exhibit A itself equally conforms to the laws of the land as contained in section 14 of Act 25.
Evidence was led on behalf of the first defendants that the accountant, being a B signatory, was authorised to grant loans up to ¢1million only in respect of current accounts and ¢5 million in respect of savings accounts and even those had to be confirmed by the bank manager daily. It was therefore argued on behalf of the first defendants that the accountant knew he had no mandate to guarantee ¢5 million. The first defendant witness also testified that the plaintiffs were informed that the accountant had no mandate or that whatever mandate he purported to have was irregular. It is significant to remark here that none of those witnesses did specify that they pointed out the irregularity of the mandate to the plaintiffs’ officials before the rice was supplied. All the witnesses for the first defendants testified that they pointed out the irregularity
before the cheque was presented for payment. The witnesses for the plaintiffs were themselves not quite explicit on the precise day when the rice was supplied.
The evidence was to the effect that the cheque was issued and when presented it was first turned down. It was only after the guarantee had been written on the back of the cheque that it was accepted and instructions given for the rice to be supplied. The cheque itself was dated 25 October 1987. The first and second plaintiff witnesses said it was post-dated. The third plaintiff witness who handled the transaction said he made no inquiry himself because of the guarantee on it but merely presented it for payment through the National Investment Bank and the Agricultural Development Bank when it was due for payment.
Evidence from the defendants’ witnesses indicate quite clearly that the first time the cheque was received in the first defendant-bank was 24 December 1987 while the third defendant witness, Daniel Odartei, was handing over to the fourth defendant witness, Ben Berko. The first defendant witness, Robert Gyawu Mensah, who first gave orders for the cheque to be dishonoured told the court that the cheque was first sent to the National Investment Bank and later to the Agricultural Development Bank, and it was when the manager of the Agricultural Development Bank, Maxwell OkyereBoateng, who testified as the second defendant witness, contacted him that he pointed out the irregularities and ordered the cheque not to be honoured. According to the first defendant witness, the conversation between him and the second defendant witness took place between 20 and 30 December 1987. The evidence of the plaintiff that the cheque was post-dated and that it was presented when it was due for payment was not challenged by the defence. If the cheque was post-dated, and the plaintiffs’ accountant, the third plaintiff witness, madeinquiries only when it was due for payment, then the cheque could not have been paid on 25 October 1987 when it was issued. From the evidence of the plaintiff witnesses and that of the first and second defendant witnesses, I deduce that the cheque must have been presented for payment after the rice had been supplied.
All the plaintiff witnesses denied that they had notice of the irregular mandate before they presented the cheque for payment. The fact that the first or second or third defendant witnesses pointed out the irregularity does not mean that notice of the irregularity should be imputed to the plaintiffs when the witnesses for the first defendants do not aver or lead evidence to show that notice was given to the plaintiffs before the rice was supplied but rather that it was before the cheque was presented for payment.
I am convinced from the evidence as a whole that the irregularity
was pointed out after the goods had been supplied and on presentation of the cheque for payment. If, asthe first defendant witness seemed to have pointed out, the irregularity was pointed out when the cheque was presented for payment, that belated notice cannot absolve the first defendants from liability flowing from the representation made some days or weeks earlier which induced the plaintiffs to supply the rice. Notice capable of absolving the first defendants should have been given before or during the time when the rice was being supplied but not long after the rice had been supplied. Therefore, the contention of the defendants that the plaintiffs were given notice of the irregularity of the mandate and yet they proceeded to present the cheque for payment is irrelevant and in no way touches on the issue of liability for the plaintiffs’ claim. It would have been different if the defendants had given the plaintiffs notice before the goods were supplied and that is precisely what the defence have led no evidence in proof thereof.
The evidence led on behalf of the first defendants was quite definite on the issue of fraud. They testified that the limits that an accountant could grant in respect of loans are ¢5 million for savings accounts and ¢1 million for current accounts. In addition to these, evidence was led to the effect that the accountantknew that he was a B signatory within the bank and therefore he was aware that he could not commit the bank to the tune of ¢5 million. When the accountant signed “payment guaranteed”, on the reverse side of exhibit A in respect of ¢5 million he knew perfectly well that he was perpetuating fraud on his employers.
There is no controversy at all about the status of S. D. Addo. He was the accountant of the branch and therefore an officer of the first defendants. The question to be resolved is whether or not the action of the accountant culminating in the guarantee was binding on the first defendant-bank.
The general rule was stated in Salmond on Torts (15th ed.) at pp. 620-621 as follows:
“A master is not responsible for a wrongful act done by his servant unless it is done in the course of his employment. It is deemed to be so done if it is either (1) a wrongful act authorised by the master, or (2) a wrongful and unauthorised mode of doing some act authorised by the master. It is clear that the master is responsible for acts actually authorised by him: for liability would exist in this case, even if the relation between the parties was merely one of agency, and not one of service at all. But a master, as opposed to the employer of an independent contractor, is liable even for acts which he has not authorised, provided they are so connected with acts which he has authorised that they may rightly
be regarded as modes—although improper modes—of doing them. In other words, a master is responsible not merely for what he authorises his servant to do, but also for the way in which he does it. If a servant does negligently that which he was authorised to do carefully, or if he does fraudulently that which he was authorised to do honestly, or if he does mistakenly that which he was authorised to do correctly, his master will answer for that negligence, fraud or mistake.”
In the instant case, witnesses for the first defendants led evidence to the effect that the accountant’s duties included assisting the manager in the day to day administration of the bank. As part of his duties, he is the one person who has more contacts with members of the public or the customers of the bank and he, in his discretion, decides when to deal finally with a customer or when to refer a customer to the branch manager. In addition to this piece of evidence, the book of specimen signature, exhibit 1, showed that Stephen Douglas Addo, the accountant in question, had his name and signature publicised by the bank as one of the specimen signatures of the officials who are authorised to indorse and transfer promissory notes, stock receipts, stock debentures, shares, securities and documents of title to goods standing in the name of the bank, and to draw, accept and indorse bills of exchange and letters of credit in the current and authorised business of the bank. Of course, exhibit 1 specifies that the accountant was a signatory.
In other words, by the evidence of the witnesses for the first defendants and exhibit 1, the accountant has been held out conspicuously by the first defendants as a high ranking officer with authority to deal with members of the public on all banking matters. The question is this: was the presentation of the cheque by the second defendant or whoever took it to the accountant part of the banking business which the accountant has been authorised by the bank to perform? I have no doubt that it is.
The first defendants argued however, that even if the accountant was authorised to act on behalf of the bank, as a B signatory, he had a limit which the plaintiffs could have verified if it had contacted the branch manager. In support of the contention, the defence tendered exhibits 3 and 4 as notices which the bank had given to the whole world that business of the bank should be done through the branch manager.
Exhibits 3 and 4 were notices on the opening of new branches of the first defendant-bank. There is nothing on any of them which indicates that those who wanted to have any business with the bank had to see only the branch manager or that in matters of guarantees for bank loans for a colossal amount like ¢5 million the customer was to deal with the branch
manager. The two exhibits merely gave the addresses of the new branches of the bank. Even exhibit 3which granted “contact address” as the manager in no way directed customers to see the manager. It was therefore totally wrong to have attributed to them what, on the face of them, they never in any way imported or implied. As it came out in the evidence, especially from the evidence of the fifth defendant witness, Mr. Egbert Isaac Faibille, customers who call on the bank to do business are allowed to see the manager only where, after calling on the accountant, the accountant decides that they should see the manager. In the instant case, there is no evidence that the accountant sent the customer to see the manager. The manager himself, the third defendant witness, Daniel Odartei, never told the court that any customer was sent to see him on the material day in connection with the cheque. The impression one forms from the evidence is that the accountant dealt with the issue when the cheque was presented to him by writing at the back of the cheque “payment guaranteed” signing it, appending his stamp to the cheque and despatching the bearer or presenter of the cheque. As the fifth defendant witness further pointed out, customers who present cheques under such circumstances were not permitted to follow the internal movement of the cheque as it was being processed within the bank.
By the description of the accountant’s responsibilities given by Odartei, Gyawu Mensah and Faibille, it would seem that the bank held out the accountant as a prominent person within the branch bank with authority to transact banking business on behalf of the bank. If a customer is made to deal with such an officer in the position of the accountant and the accountant makes the customer believe that there is no necessity to see the manager and he proceeds to dispose of the customer without reference to the manager as he is allowed to do in the exercise of his discretion, can it seriously be said that for not going beyond the accountant to see the manager, the customer was taking a risk or had himself to blame or that it washis fault as the witnesses of the first defendants asserted? The answer is obviously in the negative. In the absence of any notice, express or constructive that there was something wrong with the authority of the accountant to commit the bank, the customer will be entitled to assume that all was in order. This is the law as enumerated in the case of Royal British Bank v. Turquard (1856) 119 E.R. 886. Simply stated, that rule is to the effect that an outsider dealing with a company is entitled to assume that its internal regulations have been complied with. This rule has been given statutory backing in the Companies Code,
1963 (Act 179), s 142(b) which provided:
“(b) that every person described in the particulars filed with the Registrar pursuant to sections 27 and 197 of this Code as a
director, managing director or secretary of the company, or represented by the company, acting through its members in general meeting, board of directors, or managing director, as an officer or agent of the company, has been duly appointed and has authority to exercise the powers and perform the duties customarily exercised or performed by a director, managing director, or secretary of a company carrying on business of the type carried on by the company or customarily exercised or performed by an officer or agent of the type concerned.”
See also Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd.  2 Q.B. 480, C.A.
Even the precise stand of the first defendants on this crucial issue was quite ambiguous. While Odartei and Gyawu Mensah maintained that the cheque was dishonoured because the mandate was irregular and in addition did not conform to the practice of the bank in the granting of guarantees, Faibille conceded that if the accountant had guaranteed accounts within his limit of ¢5 million for savings account and ¢1million for current accounts the guarantee would have been in order.
If what Faibille said was accurate, it may further be arguable that the accountant was authorised to act only if he confined himself to his limits. The moment he exceeded his limits, he will be deemed to have acted without authority and therefore, the employer will not be bound by his unauthorised actions. To further buttress this point, it may possibly be argued that his actions were not merely unauthorised, but went contrary to laid down express instructions as contained in exhibit 5, the book of instructions of the first defendant-bank, in addition to being fraudulent as already found in this judgment. But, with respect to Mr. Okwabi, who appeared for the first defendants, that argument is not borne out by the law. The law was stated in Halsbury’s Laws of England (3rd ed.), Vol. 25, pp. 536-537 as follows:
“The relation of master and servant amounts to a representation by the master that the servant hasauthority to perform the duties which he is employed to perform, and to do such acts as are incidental totheir performance. Where, therefore, a tort committed by the servant falls within the scope of the authority to be implied from his employment, the master cannot escape liability on the ground that he gave his servant no authority to commit torts, or even on the ground that he had expressly prohibited the servant from committing the tort in question.”
To my mind the best criteria for determining vicarious liability was enumerated by Diplock J. (as he then was) in the case of Hilton v. Thomas Burton (Rhodes) Ltd.  1 All E.R. 74 at 77 when he said: “Was he (the employee) doing something that he was employed to do?” I have no doubt that on the facts of the instant case, the accountant was clearly doing something he was employed to do. It is not enough to say that the employers had expressly forbidden the employee from doing that job. As was stated in Street on Tort (2nd ed.), at p. 441:
“If that were so, any employer could disclaim liability for the acts of its workers by merely saying that it will not be liable for the acts of its servant. That would be grossly undesirable, if not irresponsible on the part of employers.”
If an employer like the first defendants employs a person like the accountant herein and the accountant would not obey the instructions of the employer but the employer retains the services of the employee and puts him forward ostensibly and conspicuously as having authority to act for the employer, why should a third party without notice be damnified for dealing with that employee?
In Lloyd v. Grace Smith & Co.  A.C. 716, H.L. a firm of solicitors was held bound by the fraudulent act of its managing clerk, who by fraudulent misrepresentation, induced the firm’s client, Mrs. Lloyd, to transfer to him a mortgage which he proceeded to sell and converted the sale proceeds.
In that case, the House of Lords held that so long as a servant acts within the scope of the employment entrusted to him, his employer is vicariously liable for all frauds committed by that servant, whether for the benefit of the employer or for his own benefit. Applying that authority to the instant case, it is obvious that the fact that the accountant acted fraudulently or that the first defendant-bank did not profit by the fraud of his accountant, cannot absolve them from vicarious liability for the accountant’s actions. I do not see any good reason why the employer who represented to the world that that employee has his authority to act for that employer should escape liability.
In what was patently a well prepared written address, Mr. Okwabi raised four exceptions to the general rule on vicarious liability relating to knowledge that internal management had not been complied with, forgery, when the person dealing with the company had been put on inquiry and constructive as well as actual notice.
On the facts and evidence so far led in the case, I find that no notice whatsoever, be it express or constructive, was given by the bank to its customers that the branch accountant had a limit in his dealings with the
business of the bank or that the manager had to be contacted in transactions beyond certain amounts. The law permits the customer to proceed, in the absence of notice, that the internal regulations of the company have been complied with. I hold the view that the bank held out the accountant as an officer with authority to act on behalf of the bank. If the accountant exceeded his limit, or mandate, or acted fraudulently, or without authority as he did in the instant case, he still acted on behalf of the first defendant-bank. Logically, it is only fair to hold, as I do hold, that the bank which placed him where he was working in the bank as the bank’s branch accountant should bear responsibility for the actions of its own employees. I certainly would have held otherwise if there were evidence that notice—even constructive or implied notice—was given to the customer by the bank. In the absence of such notice, the bank cannot escape liability for the actions of its employees on grounds of mistake, fraud or express prohibition.
If there is any business which is organised and thrives on trust and confidence, it is banking. A bank like the first defendants is under a duty to ensure that not merely competent but also honest and trustworthy personnel are employed to conduct its operations. In the instant case, the bank employed an officer in the person of the branch accountant, S. D. Addo, who the bank itself found to be dishonest and fraudulent, so much so that even when he vacated his post or offered his resignation from the bank as per exhibit 9, the bank wrote to decline the resignation as per exhibit 10. Instead, the bank proceeded to dismiss him on the express ground, as per exhibit 11, of dishonesty in respect of the guarantee of the ¢5 million for the second defendant.
I find it particularly intriguing that the bank which employed a person as its official and put him forward as such, clothed him with authority to act for it in its normal business, did permit him to act for it in its operations can proceed to dismiss the official when the bank finds that official dishonest in respect of a specific transaction but muster the moral conviction to turn round and attempt to saddle someone else with responsibility for that dishonesty. One can presume that a bank will probe the background of itsofficers before putting them in responsible positions like branch accountants to act for it and if it turns outthat the bank erred in the evaluation of the integrity of its employees, it is the bank and no one else who should accept liability for that misplaced trust or selection. It cannot be right that the bank can simply rid itself of the services of the employee whose status was created by it and expect others, like the bank’s customers, to take responsibility for its mistakes, trust or errors of judgment in the selection of its employees or misplaced confidence or trust in its own workers.
Banking is a risky business and the risk pertains not only to the honour of its customers but also to the integrity of its own workers as well. This is a situation too hackneyed and too well-known to bankers to demand detailed expatiation.
From the foregoing, I find that the accountant’s guarantee which induced the plaintiffs to part with goods to the value of ¢5 million was binding on his employers, the first defendants. They are therefore, liable to pay the ¢5 million apparent on the guarantee, exhibit A. In terms of the Courts (Award of Interest ) Instrument, 1984 (L.I. 1295), the plaintiffs are entitled to interest on the ¢5 million from 24 December 1987 when the amount became due up to the date of final payment at the prevailing bank rate at all relevant times. Judgment is consequently entered for the plaintiffs against the first defendants in the sum of ¢5 million plus interest at the said prevailing bank rate from 24 December 1987 to the date of final payment. Interest should be calculated at simple interest, but not at the rate of 33½ per cent claimed by the plaintiffs.
No evidence was led by the plaintiffs’ witnesses on the special and general damages. These last two claims of the plaintiffs are consequently dismissed as unproved.
There will be costs of ¢500,000 for the plaintiffs against the defendants.