Cairo Bank Uganda v Nuwabiine & 4 Others (Civil Suit 854 of 2022) [2024] UGCommC 257 (20 August 2024)

Full Case Text

#### IN THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION]

#### **CIVIL SUIT NO. 0854 OF 2022**

CAIRO BANK UGANDA :::::::::::::::::::::::::::::::::::

#### **VERSUS**

1. BRUHAN NUWABIINE

2. CHRISTINE BALIMPOLEZA

3. ELITE REALTY LTD

**:::::::::::DEFENDANTS**

4. FUTURES PROPERTIES CONSULTANTS

5. COMMISSIONER, LAND REGISTRATION

### **BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI** JUDGMENT

The Plaintiff filed this suit by way of ordinary Plaint against the Defendants jointly and severally for recovery of UGX 1,110,119,534/= arising out of the 1st and 2nd Defendant's breach of the terms of the loan facility and mortgage deed; and for fraudulently obtaining money from the Plaintiff and as against the 3rd and 4th Defendants for professional negligence for failing to advise the Plaintiff that the certificates of the Title presented by the 1st and 2nd Defendants to the Plaintiff were forged and the suit lands did not belong to the 1st and 2nd Defendants, and as against the 5th Defendant for professional negligence and for purporting to register a mortgage on a fictitious certificate of title that caused the Plaintiff to incur financial loss. The Plaintiff also seeks for interest on the suit sums from 1st August at a rate of 26% per annum, general damages and costs of the suit.

The brief facts constituting the Plaintiff's case are that the 1st Defendant applied for a loan facility of UGX 1,000,000,000/ from the Plaintiff and offered security of land and buildings comprised in Kyaggwe Block 530 Plot 16A, land at Gulu and Nasuti, Mukono, Kyaggwe. That the Plaintiff instructed the 3rd Defendant to survey and value the land, it was done and a Valuation Report submitted to the Plaintiff. Upon demanding for more security, the 1st and 2nd Defendants submitted two Certificates of Title to the Plaintiff for land comprised in Makindye Division. That the Plaintiff instructed the 4th Defendant to survey and value the properties. hence the same was done and a Valuation Report submitted to the Plaintiff; and the mortgage deeds were signed by the 5th Defendant for a loan facility of UGX 1,000,000,000/ granted on 3rd October 2019. That on 26th September 2019, the Plaintiff and 1st Defendant signed a mortgage deed, and later on 30th October 2019, signed a variation of the mortgage deed.

That the 1st Defendant undertook to repay the loan facility in 24 equal monthly instalments of UGX 51,385,650/ at an interest of 20% per annum and a further default interest of 6% per annum, in the event of default. They further agreed that if the 1st Defendant defaulted on any instalment, the Plaintiff would demand the full amount plus interest or exercise its right of sale of the mortgaged property. That as at $1^{st}$ August 2022, the $1^{st}$ and $2^{nd}$ Defendants failed to repay the amounts of the loan and further breached the terms of the loan facility by failing to provide genuine security. In addition, that the $1st$ and $2nd$ Defendants committed fraud by presenting forged Certificates of Title purporting it to be for lands comprised in Makindye Division and Kyaggwe in the names of the 2nd Defendant and 1st Defendant respectively, whereas not.

That the Plaintiff relied on the 3rd and 4th Defendants Survey and Valuation Reports due to the $3rd$ , $4th$ and $5th$ Defendants' professional negligence of failing to

$\mathbf{2}$

Pub

find out the genuine owners and failure to do due diligence; upon which the Plaintiff extended the loan facility to the 1st and 2nd Defendants causing financial loss to the Plaintiff. The Plaintiff suffered financial loss hence the suit.

The 1st, 2nd and 4th Defendants were served by substituted service, the rest were served by the usual service, only the 4th Defendant filed their Written Statement of Defence, and therefore the case proceeded exparte against the rest of the Defendants. In their defence, the 4th Defendant admitted being instructed by the Plaintiff to survey and value the properties comprised in annexures C and D. The 4th Defendant avers that it conducted valuation of the properties and made a report on the 18th day of October 2019, after the loan/mortgage had been granted to the 1st and 2nd Defendants on the 3rd October 2019. Therefore, that the Plaintiff cannot claim to have relied on the 4th Defendant's Valuation Report.

That the 4th Defendant was not privy to the alleged fraud, as it executed its duties professionally; and they further deny the allegations of acting with negligence and reiterate that the Plaintiff was not influenced by the survey and valuation report which was done on instructions given after execution and grant of the loan. The 4th Defendant avers that the suit against that was in bad faith and prayed that it be dismissed with costs.

During the hearing, the Plaintiff presented one witness Peter Olal (PW1) while the defendant presented Rebecca Kimani Njeri (DW1).

#### **REPRESENTATION**

The Plaintiff was represented by M/S Tumusiime, Kabega & Company Advocates whereas the 4th Defendant was represented by M/S Ayigihugu & Company Advocates & Solicitors.

$\overline{3}$

#### JUDGMENT

During the scheduling conference, the following issues were agreed upon for resolution by this Court:

- 1. Whether the 4th Defendant was negligent in the execution of its duties to the Plaintiff? - 2. What reliefs are available to the Plaintiff as against all the Defendants?

Issue 1

# Whether the 4th Defendant was negligent in the execution of its duties to the **Plaintiff?**

I have carefully considered the pleadings, evidence as a whole and submissions in reaching the following decision.

First it should be noted that the relationship between the 4th Defendant and the Plaintiff is that of a professional and a layman. In Hedley Byrne & Co Ltd V Heller & Partners Ltd [1964] AC 465, professional care was explained to mean:

"I consider that it follows and that it should now be regarded as settled that if someone possessing special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference.

Furthermore, if in a sphere in which a person is so placed that others could rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or

advice to be passed onto another person, who, as he knows or should know, will *place reliance upon it, then a duty of care will arise.*"

Further, in the same case, the House of Lords ruled that someone to be liable for economic loss, the following four conditions must be met:

"(a) a fiduciary relationship of trust & confidence arises/exists between the parties;

(b) the party preparing the advice/information has voluntarily assumed the risk:

(*d*) such reliance was reasonable in the circumstances."

In this instant case therefore, in order to determine whether or not the 4th Defendant was negligent, I will consider the above conditions starting with the first one. Fiduciary duty was defined by the Black's Law Dictionary 7th Edition at page 523 as;

"a duty of utmost good faith, trust, confidence and condor owed by a fiduciary to the beneficiary. A duty to act with the highest degree of honesty and loyalty toward another person and in the best interest of the other person."

In this instant case, the Plaintiff is the beneficiary whereas the 4th Defendant, having been tasked to survey and value the property is the fiduciary, who owed the Plaintiff the duty of utmost good faith, trust, and confidence, because it is upon his report that the Plaintiff makes a decision. Therefore, this first condition is met.

Secondly, it must be proved that the party preparing the information or advice has assumed the risk. It is not in dispute as admitted by DW1, that upon receiving instructions to value the property by way of letter dated 22nd October 2019

(Annexure A to the 4th Defendant's witness statement), DW1 in paragraph 5 said that the field inspection and boundary opening was carried out on 18th October 2019 and that the valuation and survey report (Annexure B) was submitted to the Plaintiff on 25th October 2019.

In addition, specifically in relation to ownership, whereas the 4th Defendant argues that their instructions were only to value the property, I have looked at Annexure A to the 4th Defendant's witness statement and I am inclined to agree with the Plaintiff's Counsel that paragraph 3 (b) on page 1 of the 4th Defendant's Trial Bundle required the 4th Defendant to confirm ownership; which the 4th Defendant did in Clause 2.0 of the Report (Annexure B on page 19 of the Trial Bundle).

However, it should be noted that despite the above confirmation, the 4th Defendant not only informed the Plaintiff by email (Annexure C) that they were unable to obtain the title searches from the Lands Office at KCCA but also included the same information immediately after confirming the ownership in the report on page 20 of the Trial Bundle. Therefore, the Plaintiff ought to have exercised either caution or patience to wait for the search results, before relying on the report. That notwithstanding, I find that by preparing the report and submitting it to the Plaintiff, the 4th Defendant assumed the risk being the party with a special skill. In the premises, I find that the second condition is equally proved.

As to whether the other party relied on the information or advice, the Plaintiff has stated that they relied on the report to extend the loan to the $1^{st}$ and $2^{nd}$ Defendants. The 4th Defendant disputes the Plaintiff's reliance on the report and avers that the loan was granted and executed before the 4th Defendant's report had been submitted. Looking at the loan agreement dated 24th September 2019 (Annexure F to the Plaint), it is apparent that the Plaintiff had already accepted to extend to the

$6$

1st and 2nd Defendants the loan, even before the 4th Defendant had submitted their Valuation Report which was received by the Plaintiff on the 25th day of October 2019. In addition, even Annexure H to the Plaint, the Variation of the Mortgage Deed appears to have been executed on 20th September 2019, before the 4th Defendant submitted its report.

In addition, even if it had been found that the Plaintiff relied on the report, the 4th Defendant had pointed out that the absence of the search results from the Lands Office, therefore, the reliance would have been unreasonable. However, in this case, the Plaintiff cannot claim reliance on the 4th Defendant's report to extend the facility to the $1^{st}$ and $2^{nd}$ Defendants. I therefore find that this condition fails.

Finally, as to whether the reliance was reasonable, it follows therefore that since it has been found that the Plaintiff did not rely on the 4th Defendant's report, there is no need to consider this issue.

Issue 1 is accordingly resolved in the negative.

#### Issue 2

#### What reliefs are available to the Plaintiff as against all the Defendants?

It was submitted for the Plaintiff that since the 1st, 2nd, 3rd, and 5th Defendants chose not to file their written statements of defence upon being served, he prayed that judgment be entered against the Defendants jointly and severally in the sum of UGX 1,110,119,534/, plus interest at 26% per annum from 1st August 2022 until payment in full as stated on page 2 of the Mortgage Deed at paragraph 4, item 2.

Under Order 9 rule 7 of the Civil Procedure Rules, judgment upon liquidated demand against several defendants is provided for. It states:

$\overline{7}$

"Where the plaint is drawn claiming a liquidated demand and there are several defendants of whom one or more files a defence on or before the day fixed in the summons, and another or others of them fail to file a defence, the court may, subject to rule 5 of this Order, pass judgment as in rule 6 of this Order against such as have not filed a defence, and execution may issue upon such judgment and decree without prejudice to the plaintiff's right to proceed with the action against such as have filed a defence."

#### **Rule 6** thereof provides:

"Where the plaint is drawn claiming a liquidated demand and the defendant fails to file a defence, the court may, subject to rule 5 of this Order, pass judgment for any sum not exceeding the sum claimed in the plaint together with interest at the rate specified, if any, or if no rate is specified, at the rate of 8 percent per year to *the date of judgment and costs.*"

It follows therefore that since the 1st, 2nd, 3rd and 5th Defendants did not file written statements of defence, pursuant to Order 9 Rules 6 and 7 of the Civil Procedure Rules, judgment upon liquidated demand is hereby entered against them for the sum of UGX 1,110,119,534/, plus interest at 26% per annum from 1st August 2022 until payment in full.

The Plaintiff also prayed for general and punitive damages for the inconveniences suffered and serious business disruption. The law on general damages is that the damages are awarded at the discretion of the Court, and that the purpose is to restore the aggrieved person to the position they would have been in had the breach or wrong not occurred. In the assessment of general damages, the court should be guided by the value of the subject matter, the economic inconvenience that the

plaintiff may have been put through and the nature and extent of the injury suffered. (See *Uganda Commercial bank v. Kigozi [2002]1 EA 305*).

Therefore, whereas Counsel for the Plaintiff had prayed for general damages of UGX 500,000,000/, I find it sufficient to make an award for general damages of UGX 50,000,000/ to be paid to the Plaintiff for the inconvenience caused to them, by the $1^{st}$ , $2^{nd}$ , $3^{rd}$ , and $5^{th}$ Defendants.

Punitive damages are awardable to punish, deter, express outrage of court at the defendant's egregious, highhanded, malicious, vindictive, oppressive and/or malicious conduct. In addition, they are also awardable for the improper interference by public officials with the rights of ordinary subjects. Unlike general and aggravated damages, punitive damages focus on the defendant's misconduct and not the injury or loss suffered by the plaintiff. They may also be awarded to prevent unjust enrichment. They are awardable with restraint and in exceptional cases, because punishment, ought, as much as possible, to be confined to criminal law and not the civil law of tort and contract. I find an award of punitive damages of UGX $40,000,000$ / sufficient.

I also make an award for costs of the suit to the Plaintiff.

Ambitatie

HON. LADY JUSTICE ANNA B. MUGENYI DATED...................................

28/8/029 11/80 pm

Kyptek 1van - GM Merent

1 tungo - 9 M meret

farties asset

Agets agent

Affi We are ready to receive the Indoment

$CI$

Ragement pronoun ad