Bank of Africa- Uganda Limited v Valley Technical Services Limited & 2 Others (Civil Suit 148 of 2020) [2024] UGCommC 232 (7 August 2024)

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION] CIVIL SUIT NO. 148 OF 2020**

10 **BANK OF AFRICA – UGANDA LIMITED ] PLAINTIFF**

#### **VERSUS**

#### **1. VALLEY TECHNICAL SERVICES LTD**

- 15 **2. AMON BAHUMWIRE** - **3. ALISON KATUSIIME ] DEFENDANTS**

## **Before: Hon. Justice Ocaya Thomas O. R**

# 20 **JUDGMENT**

# **Introduction:**

The Plaintiff, a limited liability company duly incorporated Company licensed to conduct the business of a commercial bank brought this claim against the Defendants jointly and severally is for recovery of UGX 262,634,233/= being outstanding principal arrears, default penalty fees and interest on a credit facility as at 10th February 2020 plus the costs of the 25 suit.

The brief facts are that by a credit facility letter dated 22nd February 2018 and duly executed by the parties on the 28th February 2018, the Plaintiff advanced to the 1st Defendant an Invoice Discount Facility (IDF) in the sum of UGX 200,000,000/= at an interest rate of 26%

- per annum against the security of the personal guarantees of the 2nd 30 and 3rd Defendants who were, at the time, Directors of the 1st Defendant Company. That according to clauses 3 and 4 of the Credit facility agreement respectively, the said loan was payable within a period of 12 months from the date of disbursement to the 1st Defendant's account and that the 1st Defendant's default in repayment of the said loan was agreed to attract a penalty of 5% per - 35 annum on the sums in arrears.

- 5 That subsequently the Plaintiff disbursed different sums onto the 1st Defendant's Account from 20th March 2018 up to 6th November 2018 when the Plaintiff disbursed the sum of UGX 200,000,000/= onto the 1st Defendant's Account which under clause 3(b) of the IDF letter, the sums disbursed had to be voluntarily repaid within a maximum period of sixty (60) days or the Plaintiff would recover the same in one bullet installment by automatic debit. That by - effect the 1st Defendant should have voluntarily repaid it not later than 6th 10 January 2019.

That the 1st Defendant defaulted on its obligation to the said IDF in January 2019 upon which the Plaintiff served the 1st Defendant with a demand notice dated 23rd May 2019 to make good its default but the same was ignored and that by a letter dated 21st February 2019, the 15 1st Defendant acknowledged her indebtedness to the Plaintiff and even promised to make a payment of UGX 10,000,000/= to cater for the outstanding interest and facility renewal

charges but the said payment was never made.

That as of 10th February 2020, the outstanding sums which were due and payable amounted

20 to UGX 262,634,233/= but the interest and penalty charges continue accumulating until full payment is done.

The Defendants in their joint defense deny the Plaintiff's claim for the alleged sums but averred that the 1st Defendant entered into a credit facility contract dated 22nd February 2018, which was performed until 3rd 25 January 2019 when the 1st Defendant terminated the contract and presented to the Plaintiff certified invoices for the month of December 2019 totaling to UGX 152,000,000/= to retire the outstanding sums due on the facility after receipt and retention of UGX 21,000,0000/=.

- That on the 5th 30 /11/2018, the Plaintiff received in the 1st Defendant's account UGX 266,334,800/= which was enough to retire the facility and the 1st Defendant subsequently on the same day 5th/11/2018 notified the Plaintiff of its intention to retire the facility and applied to renew it for the next 12 months which application was received by John Paul, the officer of the Plaintiff. - Further that on the same date of 5th 35 /11/2018 in six consecutive postings, the Plaintiff fully terminated the loan as per the 1st Defendant's request dated the same day. The 1st Defendant


- 5 denies the allegations of default and states that her request to renew the facility the next 12 months by the letter dated 5th/11/2018 was not formally replied to by way of executing a fresh credit facility agreement but on 6th/11/2018, the Plaintiff credited the 1st Defendant's account with a sum of UGX 200,000,000/= which would have been paid when the old facility would have long expired. - 10

That the 1st Defendant further reminded the Plaintiff to renew the credit facility on 3rd/01/2019 and even presented an additional certified invoice for the month of December 2019 but the Plaintiff did not execute a new credit facility contract thus leaving the 1st Defendant's underlying contract with Kampala Capital City Authority with no finance 15 backing and ended up being terminated thereby frustrating the 1st Defendant's project cash flows.

Further that such amounts of money as claimed by the Plaintiff were not due and nor payable as alleged as the renewed period is not specific not limited and any claim for repayment is 20 premature without the 1st Defendant obtaining revenues from the Kampala Capital City Authority dues under the underlying contract.

The 2nd and 3rd Defendants further stated that they are not liable under the contracts of guarantee dated 28th/02/2018 as their guarantee obligations were discharged when the 1st 25 Defendant terminated the credit facility guaranteed and the Plaintiff effected the termination by full settlement of the due and owing sums under the credit facility agreement dated 22nd/2/2018 and any such subsequent dealings between the Plaintiff and the 1st Defendant were out of the scope of the guarantees given by the 2nd and 3rd Defendants initially.

30 The Defendant contends and avers that the alleged arrears arise out of no agreed specific date of default and the alleged default penalty fees and interest calculated after 5th/11/2018 when the credit facility contract was terminated are illegal and unlawful and cannot be due and owing or at all and the claim is baseless.

The parties filed a joint scheduling memorandum on the 15th of August 2023 and the same

35 was adopted by the court and the only agreed facts are that the 1st Defendant is a private company limited by shares and so is the Plaintiff whereas the rest of the facts are disputed.

## 5 **Representation:**

The Plaintiff was represented by the law firm of M/s Janet and Faith Advocates and the Defendants were jointly represented by the law firm of M/s Semuyaba, Iga, and Co. Advocates.

## 10 **Issues:**

- 1. Whether the 1st Defendant is indebted to the Plaintiff as alleged in the Plaint or at all? - 2. Whether the 2nd and 3rd Defendants are liable to the Plaintiff on the basis of their personal guarantees or at all? - 3. What remedies are available to the parties?

#### 15

# **Evidence:**

The Plaintiff adduce one witness, Mr. Abubaker Kiberu, the Senior Manager -Domestic Operations in the Plaintiff company. He led his evidence in chief by way of witness statement which was admitted on court record as PW 1 and was cross-examined on the same. The Defendants also adduced one witness, Mr. Amon Bahumwire, the 2nd Defendant and the 1st 20

Defendant's Managing Director who also led his evidence in chief by way of witness statement and was cross-examined on the same.

The Plaintiff a filed a trial bundle on court record on the 30th September 2022 and adduced 25 the six documents namely, A copy of the Credit Facility Letter (PEX 1), A copy of the contract of guarantee with the 2nd Defendant (PEX 2), A copy of the contract of guarantee with the 3rd Defendant (PEX 3), Copies of the Account statement of the 1st Defendant (PEX 4), A copy of the final Demand notice (PEX 5) and a Letter dated 21st February 2019(PEX 6).

The Defendants also filed their trial bundle on court record on the 04th September 2023 and 30 adduced ten documents namely, the framework KCCA Agreement for Hire of Earthmoving

- Equipment for Kitezi Landfill (DEX 1), A credit facility letter dated 22nd February 2018(DEX 2), KCCA confirmation letter dated 23rd February 2018(DEX 3), Personal Guarantee by Amon Bahumwiire – the 2nd Defendant dated 2018(DEX 4), Personal Guarantee by Alison Katusiime dated 28th February 2018(DEX 5), Copies of Bank statement for the period - starting from 1st 35 January to 10th February 2020(DEX 6), 6 copies of Applications for


5 Certificate of discount(DEX 7), 1ST Defendant's letter to the Plaintiff dated 5th November, 2018(DEX 8), 1ST Defendant's letter to the Plaintiff dated 10th September 2018(DEX 9) and 1st Defendant's letter to the Plaintiff dated 21st February 2019(DEX 10).

Decision:

10 **Issue 1: Whether the 1st Defendant is indebted to the Plaintiff as alleged in the Plaint or at all?**

In civil proceedings, the burden of proof lies upon the party that alleges and must prove his or her case on a balance of probabilities if he is to obtain the remedies sought. see *Lord Denning in Miller versus Minister of Pensions (1947)2 ALL ER 372 on page 373*. *See Section 101 and Section 103 of the Evidence Act*. When a plaintiff has led evidence establishing his or her claim, he/she is said to have executed the legal burden. The evidential burden thus shifts to the defendant to rebut the plaintiff's claims.

Plaintiff witness Abubaker Kiberu who testified as PW 1 in paragraph 6 of his written statement stated that by the Credit Facility letter PEX 1, the Plaintiff advanced to the 1st 15 Defendant an IDF limit for UGX 200,000,000/= at an interest rate of 26% per annum to finance its working capital requirements. That the said loan was secured by the personal guarantees of the 2nd and 3rd Defendants as Directors of the 1st Defendant as exhibited in PEX 2 and PEX 3 respectively as the subject credit facility limit was valid for 12 months effective 20th March 2018 to 20th March 2019.

PW 1 further stated in paragraph 9 that during the subsistence of the credit facility, the limit was to be utilized by the 1st Defendant when it presented invoices for discounting and that indeed, the 1st Defendant subsequently utilized the limit by presenting invoices for discounting upon which the Plaintiff disbursed funds onto the 1st Defendant's account.

In paragraphs 10 and 11 PW 1 stated that whenever money was disbursed by the Plaintiff to the 1st Defendant, the narration reflected on the 1st Defendant's account was entered as "UNBLOCKING LOAN" and whenever the Plaintiff recovered money in payment of the loan from the 1st Defendant, the narration was reflected as "REP LOAN REF". In case of any early


5 repayment, the narration reflected as "LOAN TERMINATION". Further that the 1st Defendant failed to honor the loan repayment of UGX 200,000,000/= deposited on 6th November 2018 when it fell due and in paragraph 12 PW 1 stated that by a letter dated 21st February 2019, the 1st Defendant acknowledged her indebtedness to the Plaintiff through DW 1 who was and is still the 1st Defendant's agent, Amon Bahumwire, who also doubles as the 2nd

10 Defendant.

Counsel for the Plaintiff cited Mahdvani International S. A V. Attorney General CACA No. 48 of 2004 the lead judgment of Byamugisha J. A(as he then was) where he held that an acknowledgment is an admission which must be clear, distinct, unequivocal, and intentional. 15 That there should be no doubt that the debt is being admitted although the amount does not have to be stated. It was further held that such acknowledgment must be made by the person

liable to pay or his agent and can be made to the agent of the creditor.

Counsel submitted that PEX 6 is a typical acknowledgment on behalf of the 1st Defendant that 20 she had breached her obligation to service the IDF and purported to be depositing UGX 10,000,000/= to cater for the outstanding interest and the facility charges. In PEX 6, the 1st Defendant requested for renewal of the IDF for three months to enable her to remedy the breach. Further that DW1 admitted in cross-examination that the Plaintiff deposited UGX 200,000,000/= on the 1st Defendant's account and the 1st Defendant utilized it but has never 25 repaid it.

The Defendants submitted in reply that it is DW1's evidence that he was informed by Plaintiff's branch manager Stella that his account was flagged so he could not access any credit facility latitude of UGX 200,000,000/= as agreed and that the said termination

30 happened on 1st October 2018 as per paragraph 7 of his evidence in chief and at crossexamination. That he thereafter wrote to the Plaintiff requesting access of the said credit facility as per a letter dated 21st February 2019 marked DEX 10. Which stated that: - "*The purpose of writing to you therefore is to request that you renew this facility for the next 3 months to enable us retire it in our cash flow management problems"*

5 That the said letter was never responded to by the Plaintiff as required under the Bank of Uganda Financial Consumer Protection Guidelines,2011; part III, guideline 9 which sets out the Complaints Handling Consumer Recourse.

Further that the Plaintiff unilaterally terminated the credit facility agreement by 1st October 10 2018 and by the time it deposited the UGX 200,000,000/= on the 1st Defendant's account, the latter had lost business with KCCA and money never served the purpose. So, the 1st Defendant cannot be liable under the agreement that was non-existent at the time.

The Defendants also submitted on the difference in dates of termination in the written statement of defense that is 3rd 15 January 2019 and 5th November 2018. That the dates can be harmonized because DW 1 depended on the information from the Plaintiff's employees as he could not access the loan facility and there was no formal communication from the Plaintiff. So, by the time of filing his defense, he stated two different dates. It was a mix-up but the right date at the time was 5th November 2018 before the UGX 200,000,000/= was credited 20 to his account and at the time of giving his evidence in chief he had been made to know that

the right date of termination by the Plaintiff was 1st October 2018; and that this was not assailed at cross-examination.

Further the Plaintiff is trying to shift her case by seeking to rely on a non-existent admission 25 in relying on PEX 6/DEX 10 but the content of the same did not amount to an admission because it is a request to renew the loan facility, if the same had existed at the time, the Plaintiff ought to have responded to it yet it seeks to rely on the same. That therefore the Plaintiff does not have clean hands and seeks to benefit from its mistakes.

The Defendants' counsel finished by submitting that the Plaintiff failed to prove to the Court 30 that at the time of depositing UGX 200,000,000/=, the credit facility agreement was still operational. That the Plaintiff seeks to rely on alleged admission which does not meet the standards set out in Madhvani International S. A V. Attorney General CACA No. 48 of 2014.

The Plaintiff in rejoinder submitted that the allegations by the Defendants that on page 4 of their submissions they were informed by the Plaintiff's Branch Manager Stella that the 1st 35 Defendant's account had been flagged and that he complained to the Plaintiff to no avail was


5 never pleaded by the Defendants in their Defense and should be disregarded by Court in line with the cited case of Interfreight Forwarders (U) Ltd V. East African Development Bank SCCA No. 33 of 1992.

Further that the letter dated 21st February 2019 DEX 10 which the Defendants are referring 10 to as the complaint that they lodged after the 1st Defendant's account had allegedly been flagged is titled *"PROPOSAL FOR RENEWAL OF INVOICE DISCOUNTING FACILITY"*. That from its title and content, the said letter is not a complaint about the alleged flagging of the 1st Defendant's Account but a request for the renewal of the IDF.

- That the subject credit facility limit was valid for 12 months effective 20th March 2018 to 20th 15 March 2019(paragraphs 7 & 8 of PW 1's Witness Statement) and by the date of the alleged complaint letter (21st February 2019), the facility was still valid and the Plaintiff could not have renewed a facility that had not yet expired. - 20 From the foregoing, the subject of dispute as I gather is not whether the loan facility was credited to the 1st Defendant, this is settled as evidenced by the bank statement of the 1st Defendant as adduced by the parties respectively. What seems to be the subject of contention is whether the loan facility is still owed by the Defendants to the Plaintiff and at what point it become due.

It is trite law that where the terms of any transaction are guided by a specific document, first recourse to understanding the nature of the transaction should be had in understanding and interpreting the terms of the documents. In this instant case, clause 2 of the Credit Facility Letter provides for the Disbursement, that the facility shall be disbursed by debit of an 30 invoice discounting account to be created by the Bank and credit to the customer's current account. Confirmed invoices will be discounted up to 70% of the face value of the invoices from Kampala City Authority presented by the Customer for discounting. Invoices to be discounted will be at the discretion of the Bank and the amount to be availed shall not exceed the limit advised in the Amount and purpose clause.

- 5 In clause 3(a) on Term and Repayment, that the facility will be made available for a period of twelve (12) months from the date of disbursement onto the Customer's current account. The Plaintiff adduced the 1st Defendant's account statement from 1st January 2018 to 10th February 2020 as PEX 4 and the Defendant's adduced the same as DEX 6. In the statements, the loan facility of UGX 200,000,000/= was advanced to the Account No. 02091060009, in - 10 the names of the 1st Defendant on the 6th November, 2018.

The twelve (12) months in clause 3(a) under term and repayment starts running from the date of 6th November, 2018 to 6th November 2019. This herein is the correct calculation of the 12 months under clause 3(a) of the Credit facility letter and I am of the view that neither 15 of the parties have given a correct calculation of the 12 months' period envisaged under the credit facility letter.

Clause 3 (b) of the Credit facility letter under Term and repayment provides that repayment of the invoice discounting facility will be from proceeds of the invoice under the facility. The 20 invoice will be discounted for a maximum of sixty (60) days, after which period, the total sums advanced thereunder will be recovered in one (1) bullet installment by automatic debit of the Customer's current account without further notice to the Customer.

It is important to discern at this point if any recoveries were done from the invoices 25 deposited in the 1st Defendant's accounts within the twelve (12) months period stipulated. I have analyzed the testimonies of both parties and the bank statement evidence adduced; and on the 12th December 2018, a deposit of UGX 21,238,143/= was made into the 1st Defendant's company, and on the 04th January 2019 a debit of UGX 20,982,702/= was made from the account under the tag of "REP LOAN" which as pleaded by the Plaintiff is the indication of 30 any recovery made from the 1st Defendant's account. It is apparent that other than that

- specific recovery, no other recovery was done notwithstanding the Plaintiff's claim of admittance of non-service of the loan facility by the 1st Defendant in PEX 6 and the Defendants' denial of the same or the reasons advanced by the Defendant's for non-service of the loan facility which DW 1 attributed to the Plaintiff's failure to grant the Defendants' 35 request in the letter in PEX 6. - Page **9** of **16**

- 5 The letter PEX 6 is dated 21st February 2019 headed "Proposal for renewal of invoice discounting facility", and it refers to the letter in PEX 5 which is a final demand for payment of full outstanding balance of UGX 209,119,045/= by the Plaintiff to the Directors of the 1st Defendant company. - 10 It is also important to note that the loan facility duration of the 12 months starts running from the date of deposit of the loan sum as per clause 3(a) of the credit facility letter which in the bank statement is reflected as 06th November 2018 and the expiration per my calculation is expected to be the date of 06thNovember 2019. This is pertinent to the question of the timeline of the loan facility expiration and the subsequent actions thereafter.

I have noticed some inconsistency in this transaction for instance, I find it odd that the Plaintiff would write a letter of final demand notice when the loan facility is still running and I equally find it odd that the 1st Defendant will equally ask for renewal of the facility while it is still running whilst not servicing the same.

Further the Demand notice PEX 5 is dated 23rd May 2019 under reference: CRT/2019/05/209106 and the 1st Defendant's letter DEX 10/PEX 6 requesting for renewal and references the demand letter is dated 21st February, 2019. It is odd that a response to a correspondence is dated before the correspondence itself, but that might be a typography

25 error.

Nonetheless from the foregoing it is clear that the loan facility was prematurely cancelled by the Plaintiff when the facility period of twelve months had not expired yet. That however is not an excuse for the 1st Defendant to not service the facility despite the Plaintiff's demand

30 notice and even within the periods after the actual expiration date and the period before and even during the time of the litigation because that is the 1st Defendant's obligation. Therefore, I find no merit in the Defendants' argument of the premature cancellation of the loan facility, however wrong it was, it did not stop the Defendants from fulfilling their obligation to return the money borrowed.

5 The only contention the Defendants could raise is on the default/penalty charges after the premature cancellation of the facility and that would be a valid cause.

In my view the only admission the Defendants are liable for are that for the premium of UGX 200,000,000/= and of the actual interest on the premium minus the default/penalty charges.

Admission of an acknowledgement of debt as defined in the cited case of *Madhvani International S. A V. Attorney General* (supra) that: -

*"An acknowledgement is an admission which must be clear, distinct, unequivocal and intentional. That there should be no doubt that the debt is being admitted although the amount*

15 *does not have to be stated and such acknowledgement must be made by the person liable to pay or his agent and can be made to the agent of the creditor".*

Further in cross-examination of DW1, the 2nd Defendant admitted to the loan facility of UGX 200,000,000/= being deposited in the 1st Defendant's account, the same being utilized, and 20 that the loan facility period had expired hence the letter requesting for its renewal.

*Section 16* of the *Evidence Act* defines admission to be a statement, oral or documentary which suggests any inference as to any fact in issue or relevant fact, and which is made by any persons – as listed in Section 17; Admission by party to proceeding or his or her agent 25 in subsection (1) to which DW1 falls under being both, a party to the suit and a director with authority, signatory of the loan facility, knowledge of the circumstances of the loan facility and ongoings in the 1st Defendant company.

From the foregoing case authority and law, I find that the Plaintiff has on a balance of 30 probability through DW1's admission and PEX 6 proved their case and it is highly likely than not that the 1st Defendant is indebted to the Plaintiff albeit to the tune of the premium facility sum of UGX 200,000,000/= and the premium interests minus the default/penalty interests.

For clarity, the premium loan facility was UGX 200,000,000/= at an interest rate of 26% per 35 annum (the duration of the facility). This makes the interest to be UGX 52,000,000/=. Therefore, the total amount to be refunded should have been UGX 252,000,000/= of which, 5 UGX 20,982,702/= was debited by the Plaintiff in service of the facility which brings the outstanding amount to UGX 231,017,298/=.

In the premises, I find the 1st Defendant indebted to the Plaintiff in the amount of UGX 231,017,298/=.

# **Issue 2: Whether the 2nd and 3rd Defendants are liable to the Plaintiff on the basis of their personal guarantees or at all.**

PW 1 in paragraphs 4, 7 and 8 of his witness statement testified that the 2nd and 3rd Defendants as directors of the 1st Defendant guaranteed the IDF advanced by the Plaintiff

- 15 Bank to the 1st Defendant which is the subject of this suit. That the said loan facility was secured by the personal guarantees of the 2nd and 3rd Defendants as Directors of the 1st Defendant and he adduced PEX 2 and PEX 3 which is the Contract of guarantee with the 2nd and 3rd Defendants respectively. - 20 In paragraph 8, PW1 further testified that the loan facility was valid for a duration of 12 months, which as Court has established runs from 6th November 2018 to 5th November 2019. It is not in contention that the 2nd and 3rd Defendants executed personal guarantees for the 1st Defendant's loan facility with the Plaintiff. The contention is that the Plaintiff did not write to the guarantors informing and advising them of the quantum (the facility amount of UGX - 25 200,000,000/=) nor advise them to seek independent legal counsel as required by part II Obligations of the financial institution guideline 6(5) of the Bank of Uganda Financial Consumer Protection Guidelines, 2011.

Counsel for the Defendants argued that this is an illegality and as such the guarantees are 30 void for non-compliance and cited the case of Mukula International Ltd V. His Eminence Cardinal Nsubuga & Another, SCCA No. 4 of 1981, where it was cited that a Court of law cannot sanction what is illegal, an illegality once brought to the attention of the court, overrides all questions of pleadings including any admission made thereon.

35 An undertaking of guarantee in law is one where the guarantor promises the lender to be responsible, in addition to the principal borrower, for the due performance by the principal


- 5 of his existing or future obligations to the lender, if the principal fails to perform those obligations. Under the contract of guarantee, the guarantor undertakes that he or she will be personally liable for the debt, default or miscarriage of the principal. The guarantor's liability for the non-performance of the principal's obligation is co-extensive with that of the principal as such, the guarantor's liability arises upon the principal's failure to perform its - 10 obligation. See *Moschi V. Lep Air Services and Others [1973] AC 345 and Paul Kasagga and Another V. Barclays Bank (U) Ltd HCMA No. 0113 of 2008*. *Section 71(1) and 71(2)* of the Contracts Act 2010.

In the present case, having established that the loan facility was not paid by the 1st Defendant, the 2nd 15 and 3rd Defendants' argument of lack of advise by the Plaintiff holds no water because the credit facility letter in PEX 1/DEX 2 on page 5 paragraph 5 states that the Bank recommends that the customer seeks or the customer's authorized representatives seek independent advice on the terms of the credit facility letter to help them fully understand what the facility involves and the potential consequences and implications of agreeing to 20 its/their terms.

I find this is sufficient advice to the Defendants within the meaning of Bank of Uganda Financial Consumer Protection Guidelines, 2011.

- Further, I find it rather disingenuous that the 2nd 25 and 3rd Defendants being the directors and brains of the 1st Defendant company and the signatories of the loan facility on behalf of the 1st Defendant did not know the quantum and implications of the loan facility in the course of their dealings on behalf of the 1st Defendant company. Without prejudice to the evidence in PEX 1/DEX 2, it would have been a different scenario had it been a guarantee by an individual - 30 not being a director or not having inner knowledge of the affairs of the 1st Defendant, then in the absence of the clause in the facility letter; maybe then Court would entertain such an argument which however, is still not practical in loan facility application by corporates as financial institutions prefer company members as guarantors of loan facilities for the sole reason of their knowledge and interest in the companies.


- In the premises and in the absence of any evidence led by the 2nd 5 and 3rd Defendants to show that they performed their duties as guarantors to the loan facility undertaken by the 1st Defendant company, they are personally and severally indebted to the Plaintiff to the extent of the 1st Defendant's indebtedness of UGX 231,017,298/=. - 10 I find issue 2 in the affirmative.

### **Issue 3: What remedies are available to the Parties?**

In the plaint, the Plaintiff prayed for the refund of UGX 262,634,233/=, interest thereon at the rate of 26% per annum from 10th February 2020 until payment in full, Default penalty 15 charges on the principal at the rate of 5% from 10th February 2020 until payment in full, costs of the suit and interest on the costs of the suit.

The Plaintiff however did not pray for damages in their pleadings, as it is trite law, general damages are awarded at the discretion of the court and the purpose is to restore the 20 aggrieved person to the position they would have been in had the breach or wrong not occurred. *See Hadley v. Baxendale (1894) 9 Exch 341;* and *Kibimba Rice Ltd v. Umar Salim, S. C. Civil Appeal No. 17 of 1992. See* **Section 46 Contracts Act, 2010.**

In light of my fining on the premature expiration of the loan facility, I do not see the Plaintiff 25 being entitled to damages and as such, court shall exercise its discretion not to grant one even if they had prayed for it.

#### *Interest:*

**Section 26(2)** of the Civil Procedure Act provides for the awarding of interests by Court at 30 its discretion.

Bart Katurabe [Chief Justice Emeritus] in Principles Guiding awarding of Damages(supra) quoted a passage of Oder, JSC in **Premchandra Shenoi & Anor v. Maximov Oleg Petrovich**, **Supreme Court Civil Appeal No. 9 of 2003**

**"***In considering what rate of interest the respondent should have been awarded in the instant*

35 *case, I agree that the principle applied by this Court in* SIETCO v. NOBLE BULDERS (U) Ltd Supreme Court Civil Appeal No. 31 of 1995 *to the effect that it is a matter of the Court's*


5 *discretion is applicable. The basis of awards of interest is that the defendant has taken and used the plaintiff's money and benefited***.**

In the instant case, DW 1 who is also the 2nd Defendant admitted that the 1st Defendant obtained the loan facility and used it which as the Court has established, did not refund the same and benefited from it.

As such, I award the Plaintiff interest of 26% on the outstanding amount of UGX 231,017,298/= from 21st February 2020, the date of filing this suit until payment in full.

## *Default penalty charges.*

15 Having already found as I did, I find it unjust to award it default penalty charges. This prayer is denied.

#### *Costs:*

**Section 27 of the Civil Procedure Act** provides that costs follow the suit unless there is a

20 strong reason to suggest the contrary and are awarded at the court's discretion. See, *Anglo-Cyprian Trade Agencies Ltd v. Paphos Wine Industries Ltd, [1951] 1 All ER 873.* In the instant case, I find that had it not been for the Defendants' default in paying the outstanding amount, this matter would not have been brought to court and as such I award

In the same vein, the Plaintiff's prayer for interest on costs is denied in the exercise of the court's discretion for having no basis in law.

## **In Conclusion:**

30 I accordingly make the following orders,

the Plaintiff costs of the suit.

- a) The 1st Defendant is indebted to the Plaintiff to the amount of UGX 231,017,298/= being the loan facility premium plus the interest thereon. - b) The 2nd and 3rd Defendants are liable jointly and severally to the Plaintiff on the basis of their personal guarantee for the 1st Defendant's loan facility.

- 5 c) The Plaintiff is awarded interest of 26% on the outstanding amount of UGX 231,017,298/= from 21st February 2020, the date of filing this suit until payment in full. - d) The Plaintiff is awarded the costs of the suit.

10 I so order.

**Dated** this\_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_2024, delivered electronically and uploaded on **ECCMIS.** 7th August