Ataco Freight Services Limited v Stanbic Bank (U) Limited (Civil Suit 471 of 2017) [2024] UGCommC 147 (16 January 2024)

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) CIVIL SUIT No. 471 OF 2017**

10 **ATACO FREIGHT SERVICES LIMITED ................ PLAINTIFF/COUNTER-DEFENDANT**

## **VERSUS**

**STANBIC BANK UGANDA LIMITED ................... DEFENDANT/COUNTER-CLAIMANT**

### **BEFORE: HON. LADY JUSTICE SUSAN ABINYO**

#### 15 **JUDGMENT**

#### Introduction

The Plaintiff is a Limited Liability Company incorporated under the Laws of Uganda, and offers global clearing, freight forwarding, and transport services. The Defendant is a Limited Liability Company, duly incorporated under the Laws of

20 Uganda, and licensed to offer financial, advisory, and banking services.

The Plaintiff brought this suit against the Defendant for breach of contract, and fiduciary relationship, seeking the following reliefs: - declarations that failure, and or refusal by the Defendant to execute the buy-back agreement was breach of the agreement; that the financing agreement was rendered untenable by 25 conduct of affairs between the Defendant, and her supplier company, Foton East Africa Uganda Limited, and that the Defendant breached her fiduciary relationship with the Plaintiff, orders for special, and general damages, interest, and costs of the suit.

Facts

- 30 The facts agreed upon during the scheduling proceedings are that: - i. The Plaintiff, and the Defendant executed a Vehicle Lease Agreement for 8 tractor trucks, and 8 flat bed semi-trailers (hereinafter called "the financed assets")

- 5 ii. The financed assets were at all times registered in the name of the Defendant Bank, in possession, and use of the Plaintiff company. - iii. The financed assets, which were purchased from Foton East Africa Uganda Limited (hereinafter referred to as "the supplier") were partly financed by the Defendant Bank. - 10 iv. The Plaintiff accepted, and utilised the facility as contained in the Lease Agreement with its specific terms, and conditions. - v. The Defendant Bank attached, and repossessed the financed assets from the Plaintiff company.

The brief facts giving rise to the Plaintiff's claim against the Defendant are that in 15 2012, the Plaintiff with a booming and profiteering business of hauling, clearing, and freight services was sought by the Defendant with an offer for vehicle, and asset finance facility, by which the former would require trucks, and trailers for her business. The Plaintiff was requested to apply for the trucks, and trailers, and a loan of US\$ 1,843,200 to purchase Twenty trucks, and semi-trailers from Sino truck 20 Import, and Export Co. Ltd.

That subsequent to the above, and at the commencement of the negotiations for the vehicle, and asset finance facility, the Plaintiff was advised by the Defendant to accept a lease of Eight trucks, and trailers acquired by the Defendant from Foton East Africa Uganda Limited (hereinafter referred to as "the

25 Supplier Company") with whom the latter would execute a buy-back agreement. That on the strength of the advice by the Defendant, and the continued advisory and transactional role by the Defendant, the Plaintiff accepted the offer.

That prior to the handover of the financed assets, the Plaintiff discovered the discrepancy between the marketed, and supplied assets, and notified the 30 Defendant accordingly. That the Plaintiff offered to reject the goods, which prompted an assurance by the Defendant's supplier company jointly with the Defendant on email, that the assets were of higher quality, and guaranteed performance.

That upon the poor, and non-performance of the financed assets, the Plaintiff 35 failed, and or had difficulties in performing her loan obligations, and raised all the failings with the supplier company but to no avail. That in total failure of the Defendant's role as a transactional advisor, and or lessor of the financed assets to the detriment of the Plaintiff, the latter suffered loss, and damages, for which the Defendant is liable.

5 The Defendant contended that the Plaintiff is not entitled to the reliefs sought in the plaint, and accordingly, the Plaintiff shall be put to strict proof thereof.

The Defendant averred that it deals in the provision of financial services, which was the arrangement entered into by the Defendant, and the Plaintiff; that the Defendant does not deal in, and or specialise in the supply, sale, or distribution of

10 the financed assets as indicated by the Plaintiff.

The Defendant denied giving any advice, and or making any warranties and representations to the Plaintiff in regard to the condition, quality, fitness for purpose, and merchantability of the financed assets before the selection, and purchase of the same from the supplier company.

- 15 The Defendant further contended that its role in the purchase of the financed assets was restricted to financing the vehicles, pursuant to the terms of the loan agreement between the parties; that the Plaintiff personally, and expressly accepted the financed assets acquired through the Vehicle Asset Finance Facility (hereinafter referred to as "the VAF facility), and proceeded to advance - 20 part of the financing towards the acquisition of the same to the supplier company.

That the Defendant did not undertake to execute the buy-back Agreement as claimed by the Plaintiff, and that the agreement was never agreed upon, and or executed by the parties; the Defendant duly performed its obligations under the 25 VAF Facility Agreements entered into by the Plaintiff.

The Counterclaimant's claim against the Defendant by counterclaim, is for recovery of USD 438,855.40(United States Dollars Four Hundred Thirty Eight Thousand Eight Hundred Fifty Five, and Forty Cents) being the outstanding loan balance owed by the Counter-Defendant, interest thereon from the date of filing

30 this suit till payment in full, and costs of the counterclaim.

The Counter-Defendant did not file a reply to the counterclaim.

## Representation

The Plaintiff, and or Counter-Defendant was represented by Counsel Tonny Arinaitwe jointly with Counsel Justus Nuwamanya of M/S Arinaitwe Law

35 Advocates, while Counsel Andrew Munanura Kamuteera of M/S Sebalu & Lule Advocates appeared for the Defendant, and or Counterclaimant.

#### 5 Issues for determination

The issues agreed upon during the scheduling proceedings are that;

- 1. What was the nature of the transaction between the parties? - 2. What was the role of the parties in the transaction? - 3. What are the available remedies to the parties?

### 10 Evidence

The Plaintiff adduced the evidence of two witnesses namely: Agaba Larry Andrew, the Managing Director of the Plaintiff company (hereinafter referred to as "PW1"), and Hussein Gulam, the Credit controller at the Plaintiff company (hereinafter referred to as "PW2").

15 The Defendant adduced the evidence of a one Richard Kyambadde, the Manager, Business Development-Vehicle and Asset Finance at the Defendant Bank (hereinafter referred to as "DW1").

## The Plaintiff's, and or Counter-Defendant's evidence

It was the Plaintiff's evidence that the Defendant is their company banker but 20 their relationship is not good because of the vehicle facility taken by the Plaintiff in 2013. That the Defendant provided them with eight foton semi-trailers under the Vehicle Asset Facility however, the asset vehicles did not meet their performance expectations.

That the company made an application in writing for financing of 20 Sino semi-25 trailers but the bank instead provided eight foton semi-trailers. That they knew foton semi-trailers were new in the market, and had no guarantee that they would be able to perform like Sino-trucks, and other brands on the market, given the geographical terrain in their region.

That the bank through a one known as Nicholas Nabende, assured the company 30 that Foton was tested, fit, and reliable in performance, and committed to the Director that in guarantee of reliable performance, the bank would execute a Buy Back Agreement with Foton East Africa Limited. That on the date of delivery, the company had rejected the handover of Foton semi-trailers, and that the Managing Director communicated to both Foton East Africa Limited, and the

35 Bank however, upon the advice of the Bank team led by Nicholas Nabende, the company accepted the handover of eight Foton semi-trailers.

- 5 That the asset vehicles were received in October, 2013 but the company immediately started to suffer out of the ordinary expenses as a result of mechanical, and performance problems. That the mechanical breakdown of the asset vehicles became unbearable in 2016, when the company was obliged to repay monthly rentals at an approximate sum of USD 12,675, and majority of the - 10 vehicles that had broken down required colossal sums of money for repairs, while some of the vehicles were totally broken down, and unserviceable.

That Foton East Africa Limited could not repair, or maintain the asset vehicles, when they confirmed that they did not have spare parts, this made the Plaintiff to lose contracts, and other contracts were cancelled due to failures on delivery

15 time because of poor mechanical conditions of the vehicles. That the company faced with this challenge, sought that the asset vehicles are returned in consonance with the Buy-Back Agreement, which the Bank failed to enforce, and acted in breach of the agreement.

That the Plaintiff company no longer has the said vehicles, as the Bank 20 repossessed the vehicles in question in 2016; that at the time of repossession of the eight trucks, the company had financial records in regard to the facility, copies of the invoices, and bank statements are attached in the trial bundle.

That at the time of repossession of the trucks by the Bank, they had paid a total sum of USD 665,561(United States Dollars Six Hundred Sixty Five Thousand Five

25 Hundred Sixty One), and from the records, the company is entitled to a refund of USD 1,179,916.50(United States Dollars One Million One Hundred Seventy Nine Thousand Nine Hundred Sixteen and Fifty cents), and Kshs 6,064,904(Kenya Shillings Six Million Sixty Four Thousand Nine Hundred Four Only)

The Defendant's, and or Counter-Claimant's evidence

- 30 That the Plaintiff has been the Defendant's customer for several years, and it is during this time that in 2012, it became interested in a finance leasing facility, which is one of the financing services provided by the Defendant to its customers. That the purpose of this financing facility was to provide a portion of the funds necessary to enable a customer to purchase assets either for personal or business - 35 use. That an application by the customer is not binding on the Bank, this is because it does not spell out the obligations of each party; that an application is merely a request by the customer or expression of intent by the customer to borrow money.

5 That while the Bank provides the much needed funds, the identification, selection, and use of the asset is the sole responsibility of the customer, since the Bank is neither a specialist in assets nor does it know the specific needs of the customer; the Defendant therefore relies on the customer to identify the assets it needs.

That the Bank ascertains the sums to be borrowed, by relying on the proforma 10 invoice that is sourced by the customer; after negotiations, a letter of offer is prepared for the customer to execute, which spells out the obligations of each party. That once signed, the letter of offer forms the agreement between the parties, unless the agreement is amended, and the terms, and conditions in the lease offer form the final agreement, and is binding on the parties.

- 15 That the standard security in such a transaction is retention of the ownership of the assets; in some instances, further security such as buy back agreement, debenture, land title, and or personal, and corporate guarantees are required, which has to be specifically provided for in the agreement. That any terms, conditions, and securities not included in the offer letter are incorporated through - 20 an addendum; once all the conditions precedent are fulfilled, then a local purchase order is issued by the Defendant to the supplier to supply the assets, and the same are inspected by the borrower, who when satisfied, takes possession of the assets after signing a release letter, and a delivery note.

That while the Bank is the legal owner of the assets, the risk is solely borne by the 25 customer; and that explains what exactly happened in this case. That the Plaintiff identified Foton East Africa Limited as the supplier, and provided the Defendant with a proforma invoice; the Defendant relied on the proforma invoice, which was negotiated, and supplied by the Plaintiff to determine the loan sums to be borrowed, and prepared the lease letter of offer. The Plaintiff was offered a lease 30 letter of offer with specific terms, and conditions, which it accepted on 24th May, 2013.

That like in all leasing facilities, the Plaintiff identified, and selected the assets, and even entered a purchase agreement with the supplier, Foton East Africa Uganda Limited. The sums to be financed by the Bank were 80%, and 20% of the full

35 purchase price was paid by the Plaintiff. That the Defendant did not participate in the identification, selection, and acceptance of the supplier, and assets, which was solely done by the Plaintiff, and that there is no agreement with the supplier.

That the Plaintiff fully utilised the facility, and acquired the assets from Foton East Africa Uganda Limited, and that the Buy- back option was a suggestion by the

40 Plaintiff, and not the Defendant. That despite the Plaintiff taking benefit of the

- 5 facility, it defaulted on the loan repayments. That in 2015, following default by, and on the request of the Plaintiff, the Defendant restructured the outstanding debt at the time amounting to USD 496,830.15 (United States Dollars Four Hundred Ninety Six Thousand, Eight Hundred Thirty, and Fifteen cents) to be paid in fifty monthly instalments. That despite the restructure, the Plaintiff defaulted on its - 10 payment obligations, and the said default was brought to its attention; several meetings were held with the Plaintiff but it failed to regularise the facility.

That in July, 2017, the facilities charged off, and in accordance with Bank of Uganda Regulations, the principle debt of USD 438,855(United States Dollars Four Hundred Thirty Eight Thousand, Eight Hundred and Fifty Five) was written off, which

15 continues to accrue interest, as agreed in the facility letter until payment in full.

That in September, 2017, the Defendant impounded, and sold off 10 of the assets, and recovered UGX 416,000,000(Uganda Shillings Four Hundred Sixteen Million) which sums were applied to legal fees, valuation costs, and advert costs amounting to UGX 55,213,983(Uganda Shillings Fifty Five Million, Two Hundred and 20 Thirteen Thousand, Nine Hundred Eighty Three only), leaving a balance of UGX 1,051,788,630(Uganda Shillings One Billion Fifty One Million, Seven Hundred and Eighty Eight Thousand Six Hundred and Thirty only)as the sums due, and owing from the facility it utilised, and continues to accrue interest, as agreed in the facility letter until payment in full.

25 Resolution of issues

Issue No.1: What was the nature of the transaction between the parties?

#### Submissions of Counsel for the Plaintiff, and or Counter-Defendant

It was submitted for the Plaintiff that they are in agreement with the submission of Counsel for Defendant on the proposition that the nature of the transaction 30 between the parties can only be discerned from the agreements executed between the parties however, they contend that the nature of the transaction in the present case exceeded the context of the lease offer, as the evidence adduced by the Plaintiff in PE5, shows that prior to acceptance of the delivery of vehicles, the Plaintiff on the one hand, and the Defendant together with the

35 supplier–Foton, made negotiations, and exchanged guarantees.

Counsel relied on the decision in *Mohamed Roshan t/a Mohamed Roshan & Company Vs Santa Singh [1959]1 E. A 717,* to submit that the existence of any distinct subsequent oral agreement to rescind, or modify any such contract, is an exception to the rule in the case of *William Kasozi Vs DFCU Bank Ltd, H. C. C. S* 5 *No.1326 of 2000,* on the proposition that when a document containing contractual terms is signed, then in the absence of fraud, or misrepresentation, the party signing it is bound by its terms, which was cited by Counsel for the Defendant.

Submissions in reply by Counsel for the Defendant, and or Counterclaimant

- 10 It was submitted for the Defendant that the law is that when a document containing contractual terms is signed, then in the absence of fraud, or misrepresentation, the party signing it is bound by its terms; that the Plaintiff's case is neither premised on fraud or misrepresentation nor were the same specifically pleaded, and that in the circumstances, the Plaintiff is bound by the terms - 15 contained in the lease offer.

Counsel relied on the cases of *William Kasozi Vs DFCU Bank* Ltd(supra), and *Golf View Inn (U) Limited Vs Barclays Bank (U) Limited, H. C. C. S No. 358 of 2009*, in support of his submission.

## Decision

20 It's trite law that whoever alleges a given fact, and desires the Court to give judgment on any legal right or liability dependent on the existence of any fact, has the burden to prove that fact unless, it is provided by law that the proof of that fact shall lie on another person. *(See sections 101, and 103 of the Evidence Act, Cap 6*, and *Jovelyn Barugahare Vs Attorney General, S. C. C. A No. 28 of* 25 *1993[1994] KALR 190)*

In the instant case, it is the contention of the Plaintiff, and or Counter-Defendant that the lease offer was followed by further oral negotiations, emails, and written communication, which altered the terms of the lease offer; that the climax of the said negotiations, and intention of the parties is the Buy-Back Agreement, and

30 that these subsequent negotiations, and undertakings were done prior to payment for the vehicles, as seen in the Plaintiff's loan statement(DE17).

I have looked at PE4, the Lease Letter of offer dated 24th May, 2013, which reads in part as follows: -

"2) PURPOSE:

35 2:1 The Lease Facility is sanctioned to finance the purchase of eight (08) units of brand new Foton Auman 6X4 Tractor Trucks and eight (08) units of brand new Flat Bed Semi Trailers herein after referred to as the "financed assets" 5 2:2 The IPF Facility is sanctioned to finance insurance premium for the financed assets. (This will be a revolving facility to ensure that the financed assets are insured during the tenure of the Lease).

3) PERIOD

3:1 Lease: 60 (sixty) months.

10 3:2 IPF: 10(ten) months."

I have also looked at DE5, the Proforma invoice issued to the Plaintiff dated 4th April, 2013, by Foton East Africa in respect of 8(eight) Foton Auman 6x4 Tractor Trucks, each at a cost of USD 77,100, and the total cost being USD 616,800, and (8) eight Flat Bed Semi-Trailers, each at a cost of USD 33,900, and the total cost

15 being USD 271,200; the sub total cost is USD 888,000(United States Dollars Eight Hundred Eighty Eight Thousand only).

It is notable that DE5 was not signed by the buyer or seller however, it was an agreed document filed by Counsel for the parties herein, in their Joint Trial Bundle dated 28th June, 2022.

The sale agreement DE6, dated 6th 20 June, 2013, refers to Foton East Africa(U) Ltd, as "the seller", and Ataco Freight Services Limited, as "the buyer"; paragraph 6 thereof reads in part as follows:

"6. PURCHASE TERMS:

6:1 The purchase price to be paid by the Buyer to the Seller for the acquired 25 vehicles is USD 888,000(United States Dollars Eight Hundred Eighty Eight Thousand only).

6:2 Terms of Payment: 20% deposit on confirmation of order, 80% before delivery.

6:3 Payment Details: The buyer shall deposit 10% of the purchase price upon signing of this agreement for which the seller shall acknowledge receipt. The Bank

30 shall then open an irrevocable letter of credit, payable at sight for 80% of the purchase price and the buyer shall pay the remaining 10% before delivery…"

From the above documents, this Court finds that the intention, and or transaction between the parties herein, was for the Plaintiff to secure a Finance Lease Facility from the Defendant, for the purchase of 8(eight) Foton Auman 6x4 Tractor Trucks,

35 and (8) eight Flat Bed Semi-Trailers, from Foton East Africa(U) Ltd, the supplier.

5 The procedure of obtaining the Finance Lease Facility was given by DW1, and this was not disputed by the Plaintiff however, the latter contends that the lease offer marked the beginning of further negotiations, as seen in PE5, an email correspondence from the Plaintiff to Foton East Africa(U) Ltd, the supplier.

I have looked at PE5, and find that the content of the email does not relate 10 specifically to the above contention by the Plaintiff.

It is my understanding that once the Plaintiff signed, and or paid 10% of the purchase price, in accordance with the sale agreement, then the Plaintiff had accepted the order of the vehicles, since confirmation of the order was a prerequisite to the terms of payment.

15 Section 91 of the Evidence Act, Cap 6, provides that:

## "91. **Evidence of terms of contracts, grants and other dispositions of property reduced to form of document.**

When the terms of a contract or of a grant, or of any other disposition of property, 20 have been reduced to the form of a document, and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence, except as mentioned in section 79, shall be given in proof of the terms of that contract, grant or other disposition of property, or of such matter except the document itself, or secondary evidence of its contents in cases in which 25 secondary evidence is admissible under the provisions hereinbefore contained."

Section 92 of the Evidence Act, Cap 6, provides that:

## **"92. Exclusion of evidence of oral agreement**

When the terms of any such contract, grant or other disposition of property, or 30 any matter required by law to be reduced to the form of a document, have been proved according to section 91, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying, adding to or subtracting from its terms; but—

35 (a) any fact may be proved which would invalidate any document, or which would entitle any person to any decree or order relating thereto, such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want or failure of consideration or mistake in fact or law;" [Emphasis is mine]

- 5 It is my considered opinion that the above two sections when read together, implies that oral evidence is admissible, where proof of a fact would invalidate the content of a document, when the document in question was obtained under circumstances such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want or failure of consideration or mistake - 10 in fact or law.

In the instant case, I find that the Plaintiff has not pleaded any of the above circumstances, and cannot rely on any oral negotiations subsequent to the lease offer to form part of the transaction from which, the Plaintiff wants this Court to 15 believe that the intention of the parties, and or nature of the transaction between the parties can be deduced.

The proposition of law is that Courts will not make contracts for parties but Courts will give effect to the clear intentions of the parties *(See Shariff Osman Vs Haji* 20 *Haruna Mulangwa, S. C. C. A No. 38 of 1995[1996] KALR 238 at 246)*, cited by Counsel for the Defendant.

I am fully persuaded by the decision in *Golf View Inn (U) Limited Vs Barclays Bank (U) Limited, H. C. C. S No. 358 of 2009*, cited by Counsel for the Defendant on the 25 proposition that once parties have executed agreements, they are bound by them, and evidence of terms of the agreement should be obtained from the agreement itself, and no extrinsic evidence shall be admitted, or if admitted, shall be relied on to contradict, add to, vary, subtract from the terms of the contract, except where there is fraud, duress, illegality, lack of consideration, lack of 30 capacity to execute the contract or mistake.

For the forementioned reasons, I find that the above contention by the Plaintiff is not supported by any evidence.

Accordingly, I find that the nature of the transaction between the parties herein, 35 deduced from PE4, the Lease Letter of offer dated 24th May, 2013, is that of a Finance Leasing Facility by the Defendant to the Plaintiff.

I am fortified in the above finding by the decision in *Stanbic Bank (U) Ltd Vs Kalule Deo, C. A. C. A No. 278 of 2016*, in which, the case of *Nassolo Farida Vs DFCU Leasing Company Ltd, H. C. C. S No. 536 of 2006*, was cited with approval, where 40 Lameck Mukasa. J (as he then was), quoted *Chitty on Contracts, 27th Edition,*

*Vol.7*, on the definition of Finance Leasing as follows:

- 5 "Finance Leasing- a form of long term finance has developed known as finance leasing. In Finance lease, the lessee selects the equipment to be supplied by a manufacturer or dealer but the lessor (a finance company) provides funds, acquires title to the equipment, and allows the lessee to use it for all (or most) of its expected useful life. During the lease period, the usual risk and rewards of - 10 ownership are transferred to the lessee, who bears the risk of loss, destructions and depreciation of the leased equipment (fair wear, and tear only expected) and of its obsolescence or malfunctions. The lessee also bears the costs of maintenance, repairs, and insurance. The regular rental payments during the rental period are calculated to enable the lessor amortise its capital outlay and - 15 to make a profit from its finance charges. At the end of the primary leasing period, there will frequently be a secondary leasing period during which the lessee may opt to continue to lease at a nominal rental or the equipment may be sold and a proportion of the sale proceeds returned to the lessee as a rebate of rentals. The lessee thus acquires any residual value in the equipment after the lessor has - 20 recouped its investment and charges… the bailment which underlines finance leasing is therefore only a device to provide the finance company with a security interest (reversionary interest)"

It is noteworthy that the decision in *Mohamed Roshan t/a Mohamed Roshan & Company Vs Santa Singh(supra),* cited by Counsel for the Plaintiff, is not binding

25 on this court, and distinguishable on facts from the instant case however, this Court will not delve into the distinctions here.

### Issue No.2: What was the role of the parties in the transaction?

Following the guidance in *Stanbic Bank (U) Ltd Vs Kalule Deo*(supra), in which Madrama. JA in the lead judgment stated that the *Unidroit Convention on* 30 *International Financial Leasing,* describes Finance Leasing under Article 2, as a transaction that entails:

- (a)The lessee specifies the equipment and selects the supplier without relying primarily on the skill and judgment of the lessor; - (b)The equipment is acquired by the lessor in connection with a leasing 35 agreement which, to the knowledge of the supplier, either has been made or is to be made between the lessor and the lessee; and - (c) The rentals payable under the leasing agreement are calculated so as to take into account in particular the amortisation of the whole or a substantial part of the cost of the equipment.

5 Justice Madrama explained further that:

*"The contract in this case was specifically indicated under clause 1 of the Lease letter of offer as a "Finance Lease Facility". The Terms and conditions of the contract in issue all bear the characteristics of a Finance Lease. "[Emphasis is mine]*

- 10 From the document marked PE4 considered above, this Court finds that under clause 2:1 thereof, the purpose of the Lease Letter of offer is very clear, and unambiguous. The Lease Facility was sanctioned to finance the purchase of eight (08) units of brand new Foton Auman 6X4 Tractor Trucks and eight (08) units of brand new Flat Bed Semi Trailers (the "financed assets") - 15 In the result, this Court finds that the roles of the parties herein are as follows; - i. The Plaintiff made an application for the facility to the Defendant, *marked PE1*, dated 25th September, 2012. - ii. The proforma invoice *marked DE5*, dated 4th April, 2013, was issued by Foton East Africa(U) Limited, the supplier of the financed assets. - 20 iii. An offer letter was made by the Financing Institution, which is the Bank, *marked PE4*, dated 24th May, 2013, on the basis of the proforma invoice. - iv. A sale Agreement *marked DE6*, was executed between Foton East Africa(U) Limited ("the seller"), and Ataco Freight Services Limited ("the buyer"), dated 6th June, 2013. - 25 v. The Plaintiff undertook to pay the facility in 50 (Fifty) equal monthly rentals of USD 12,675(United States Dollars Twelve Thousand Six Hundred Seventy Five), upon the restructured Lease Letter of offer dated 22nd June, 2015 *marked PE2*.

The contention by the Plaintiff that it did not seek independent advice, in that the 30 supplier on one hand, and Nicholas Nabende, and the Bank on the other hand, made negotiations, and exchanged guarantees, is not supported by any evidence, since the said guarantee was not adduced by the Plaintiff.

In addition, the quality of the assets is solely the duty of the customer, which is the Plaintiff herein, to inspect, and confirm that the assets match the quality before

35 execution of the sale agreement. The fact that the Plaintiff executed the sale agreement with Foton East Africa(U) Ltd, the supplier, implies that the Plaintiff was satisfied with the quality of the assets; email correspondences with the supplier marked PE3, and PE13 confirms this position.

5 It is notable that the application adduced by the Plaintiff *marked PE1*, is inconsistent with the proforma invoice in regard to the supplier however, the Lease Letter of offer, and the sale agreement confirms it all.

In conclusion, this Court finds that the Plaintiff failed to adduce evidence of a proforma invoice for Sino Truck supplier, which is a document that initiates the

- 10 process of a Finance Leasing Facility; what was adduced is a proforma invoice issued by Foton East Africa(U) Ltd, the supplier, from which a Finance Lease Agreement was executed between the Plaintiff, and the Bank, to provide financing to the Plaintiff to purchase assets from the said supplier; the Plaintiff's obligation was therefore, to pay the rentals on the Lease facility in accordance - 15 with the terms, and conditions of the Lease Agreement, which it did not fulfil.

#### Issue No.3: What are the available remedies to the parties?

This Court having found issue (1) as above, further makes orders that the suit is dismissed against the Defendant with costs.

The submission of Counsel for the Plaintiff that this Court makes a negative 20 inference on the Defendant's failure, and or refusal to invite Nicholas Nabende, and any member of his team to give evidence, where there were subsequent discussions, and agreements over the lease offer, as seen in copies of exhibits marked PE4, and PE6, is untenable on grounds that the legal burden of proof lies with the Plaintiff, and does not shift, unlike the evidential burden of proof, which 25 keeps shifting; this Court will consider whether the Counterclaimant discharged

this burden in regard to the counterclaim hereunder.*(See Kamo Enterprises Limited Vs Krystalline Salt Limited, S. C. C. A No.8 of 2018)*

With regard to the counterclaim, it was the evidence of the Counterclaimant that the Counter-Defendant was aware that there was an outstanding balance, and 30 that the evidence of DW1, that there was default is specifically pleaded, and proven in DE7, DE8, DE9, DE11, and DE17. The loan statement(DE17) of the Counter-Defendant for the Vehicle Asset Facility, indicates that on 17th October, 2013, the principal amount of USD 65,338.98 was debited by the Counterclaimant into Account No.940001985, in the name of Ataco Freight Services Limited, in

35 respect of Eight Foton Auman Tractor (Financed Assets).

In addition, it was the Counterclaimant's evidence that the buy back agreement was an initiative of the Counter-Defendant, and not the Counterclaimant, and that the said agreement was neither agreed upon nor executed by the parties herein.

- 5 That in 2015, following default by, and on the request of the Counter-Defendant, the Counterclaimant restructured the outstanding debt at the time amounting to USD 496,830.15 (United States Dollars Four Hundred Ninety Six Thousand, Eight Hundred Thirty, and Fifteen cents) to be paid in fifty monthly instalments. That despite the restructure, the Counter-Defendant defaulted on its payment - 10 obligations, and the said default was brought to its attention; several meetings were held with the Counter-Defendant but it failed to regularise the facility.

That in July, 2017, the facilities charged off, and in accordance with Bank of Uganda Regulations, the principle debt of USD 438,855(United States Dollars Four Hundred Thirty Eight Thousand, Eight Hundred and Fifty Five) was written off, which

15 continues to accrue interest, as agreed in the facility letter until payment in full.

That in September, 2017, the Defendant, and or Counterclaimant impounded, and sold off 10 of the assets, and recovered UGX 416,000,000(Uganda Shillings Four Hundred Sixteen Million) which sums were applied to legal fees, valuation costs, and advert costs amounting to UGX 55,213,983(Uganda Shillings Fifty Five

- 20 Million, Two Hundred and Thirteen Thousand, Nine Hundred Eighty Three only), leaving a balance of UGX 1,051,788,630(Uganda Shillings One Billion Fifty One Million, Seven Hundred and Eighty Eight Thousand Six Hundred and Thirty only)as the sums due, and owing from the facility it utilised, and continues to accrue interest, as agreed in the facility letter until payment in full. - 25 The Plaintiff, and or Counter-Defendant neither filed a reply to the defence, and counterclaim nor contested the evidence above. Therefore, the Counter-Defendant cannot be seen to approbate, and reprobate, when it obtained the Lease facility from the Counterclaimant.

Accordingly, this Court finds that the Counterclaimant has discharged the 30 evidential burden of proof to the required standard, which is on a balance of probabilities, that the Defendant by counterclaim failed to fulfil its repayment obligations on the VAF Facility.

For the foregoing reason, I find that there is merit in the counterclaim.

With regard to interest, this Court has considered all the circumstances of this 35 case, and finds that an award of interest at the rate of 8% per annum on the principal sum is sufficient, from the date of filing this suit till payment in full.

5 Section 27(1) of the Civil Procedure Act, Cap 71 provides on costs as follows:

**"**subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and incident to all suits shall be in the discretion of the Court or Judge, and the Court or Judge shall have full power to determine by whom and out of what property and to what

10 extent those costs are to be paid, and to give all necessary directions for the purposes aforesaid."

I have taken into consideration the above provision on costs, and that costs follow the event unless for justified reasons the Court otherwise orders *(See section 27(2) of the Civil Procedure Act, Cap 71)*, and the decision in *Uganda Development*

15 *Bank Vs Muganga Construction Co. Ltd (1981) H. C. B 35* where Justice Manyindo (as he then was) held that:

> *"A successful party can only be denied costs if its proved, that, but for his or her conduct, the action would not have been brought, the costs will follow the event where the party succeeds in the main purpose of the suit."*

20 Accordingly, I find that the Counterclaimant is entitled to costs.

In the final result, judgment is entered against the Counter-Defendant, and Court makes orders that:

- 1. The Counterclaimant is entitled to UGX 1,051,788,630(Uganda Shillings One Billion Fifty One Million, Seven Hundred and Eighty Eight Thousand Six 25 Hundred and Thirty only). - 2. Interest in (1) above at the rate of 8% per annum from the date of filing this suit until payment in full. - 3. Costs of the Counterclaim.

Dated and delivered electronically this 16th day of January, 2024.

# SUSAN ABINYO **JUDGE 16/01/2024**

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