DFCU Bank Limited v Zhou Wu and Another (Civil Suit No. 224 of 2020) [2022] UGCommC 71 (16 August 2022)

Full Case Text

## THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

## (COMMERCIAL DIVISION)

### CIVIL SUIT NO. 224 OF 2020

**PLAINTIFF** DFCU BANK (U) LIMITED .................................... 10 . . . . . . . . . . . . . . . . . . . .

## **VERSUS**

### 1. ZHOU WU

- 2. CHINA CERAMIC CITY (UGANDA) LIMITED .................................... - 15

$5$

# BEFORE: HON. LADY JUSTICE SUSAN ABINYO

## JUDGMENT

## **Introduction**

The Plaintiff a limited liability company, and carrying on banking business under the laws of Uganda, brought this suit against the 1st Defendant the Managing Director of the 2nd Defendant, and the 2nd Defendant a company duly 20 incorporated in accordance with the laws of Uganda dealing in the ceramics business under the direct management of the 1st Defendant, jointly and severally seeking to recover USD 306,939 (United States Dollars Three Hundred Six Thousand Nine Hundred Thirty nine), interest, general damages, and costs of this suit arising out of default on their loan accounts with the Plaintiff. 25

## **Facts**

That between 2010 and 2013, the 1st Defendant applied for and obtained several commercial loan facilities from the Plaintiff including an overdraft facility. The said loan facilities, and the overdraft facility were secured by the 1st Defendant's personal guarantee, a floating, and fixed charge over the 2nd Defendant's

30 movable, and immovable assets, and a mortgage over property comprised in LRV 4123 Folio 18 Plot 4459 and 4122 kibuga Block 244 at Kisugu.

That the Defendants consistently defaulted in their respective loan repayment obligations, and in May, 2015, the 1st Defendant applied for extension of the

overdraft facility for period of 30 days to enable him regularize his accounts, and 35

- also requested for a restructure of the overdraft facility. That the Plaintiff granted $\mathsf{S}$ the extension pending the said restructure, and the Defendants were given several opportunities to regularize their loan accounts however, they continuously defaulted on their repayment obligation under their respective facility agreement, whereupon the Plaintiff recalled the entire outstanding facilities, and - issued the Statutory Notices of default, Demand and Notice of Sale in 10 accordance with the law.

That following the Plaintiff's demands, the Defendants made several commitments to repay the total outstanding debt but that they did not, the Plaintiff advertised the mortgaged property in the New Vision and Daily Monitor

- Newspaper on 12th March, 2017 and 23rd May, 2017 respectively. That the 15 Defendants did not redeem the mortgaged property, upon which the Plaintiff proceeded to sale the same on the 14th day of September, 2018, and realized a sum of UGX 640,000,000 (Uganda Shillings Six Hundred and Forty Million only), which was equivalent to USD 179,902.48(United States Dollars One Hundred - Seventy Nine Thousand Nine Hundred Two and Forty cents only), and was applied 20 to the 2nd Defendant's loan account leaving an outstanding debt of USD 56,101,92/United States Dollars Fifty Six Thousand One Hundred One and Ninety Two cents only), and USD 234,783.15 (United States Dollars Two Hundred Thirty Four Thousand Seven Hundred Eighty Three Fifteen cents only) on the 1st Defendant's - loan account respectively. 25

That following the sale of the mortgaged property, the total debt due from the Defendants to the Plaintiffs is USD 306,939) (United States Dollars Three Hundred Six Thousand Nine Hundred Thirty Nine only), and recovery costs. That the Defendants failed and, or neglected to meet their repayment obligations to the Plaintiff, and

that as a result the Plaintiff has been subjected to financial loss, and 30 inconvenience for which the Defendants are liable.

The Defendants were served with the court process however, they did not file their Written Statement of Defence, and the Plaintiff's application for an interlocutory judgment was entered against the Defendants on 24th February, 2021 by the

Registrar. The suit was set down for formal proof hence this Judgment. 35

## Representation

The Plaintiff was represented by Counsel Frank Twongyeirwe of Ligomarc Advocates. The Plaintiff's Counsel filed written submissions as directed by the Court.

#### Issues for determination $5$

The following issues were agreed upon for Court's determination.

- 1. Whether the Defendants breached the loan agreements dated 2nd May, 2014, and 30th December, 2014 respectively? - 2. What remedies are available to the Plaintiff? - 10 Evidence

During the hearing on formal proof, the Plaintiff adduced the evidence of Daniel Mugerwa the Plaintiff's Special Assets Manager (hereinafter referred to as ""PW1). The witness statement of Daniel Mugerwa stated in paragraphs 1-25, dated 17th May, 2022, was adopted on record as his evidence in chief.

- PW1 reiterated the facts above, in his evidence in chief, and further contended 15 that the application for the renewal of the overdraft facility was marked as PE1; a copy of the 1st Defendant's loan account statement showing the disbursement was marked PE3; a copy of the Certificate of Title to the mortgaged property was marked PE7, the extension of the overdraft facility was marked PE8; the restructure - of the overdraft facility into a commercial facility was marked PE9; the Demand 20 notice dated 19th August, 2015 marked PE10; the 1st Defendant's letter to the Bank promising to pay marked PE11; the Notice of Default dated 8th December, 2015 marked PE12; the Notice of Sale marked PE15; the advertisements for the mortgaged property marked PE16(a), and PE16(b), and the sale agreement for - the mortgaged property marked PE17. 25

PE1 further stated that following the sale of the mortgaged property, the total debt due from the Defendants to the Plaintiff is USD 290,885 (United States Dollars Two Hundred Ninety Thousand, Eight Hundred Eighty Five only), being the outstanding debt on their loan obligations as at the time of the suit, with interest continuing to accrue.

Decision

I have taken into account the evidence adduced by the Plaintiff, and the submissions of Counsel for the Plaintiff to find as follows:

The proposition of law is that, whoever alleges a given fact, and wishes the Court to believe in the existence of any fact, has the burden to prove that fact unless, 35 it is provided by law that the proof of that fact shall lie on another person. (See sections 101-103 of the Evidence Act, Cap 6)

It is noteworthy that the Defendants failed to file their respective written $\mathsf{S}$ statements of defence.

I am persuaded by the decision in the case of Ewadra Emmanuel Vs Spencon Services Ltd H. C. C. S No. 0022 of 2015, where Mubiru. J held that:

"Despite the fact that the Defendant in this suit did not offer any evidence, the Plaintiff still bears the burden of proving his case on the balance of 10 probabilities even if the case was heard on formal proof only."

It's trite law that failure to file a defence raises a presumption or constructive admission of the claim made in the plaint and the Plaintiffs story must be accepted as the truth. (See United Building Services Limited Vs Yafesi Muzira T/A

#### Quickset Builders and Co. H. C. C. S No. 154 of 2005) 15

It is not disputed that the Defendants applied for, and obtained several commercial loan facilities from the Plaintiff including an overdraft facility. The Plaintiff adduced evidence to prove that the Defendants defaulted in their obligation to repay the loan facilities.

I am cognisant of the fact that a loan agreement is contractual in nature with 20 binding terms, and obligations on either party.

I am fully persuaded by the decisions in Stanbic Bank(U) Ltd vs Nakanyonyi Development Association (NADA) Ltd & Others H. C. C. S No. 137 of 2012, which cited with approval the Court of Appeal case of Behange Vs School Outfitters(U)

Ltd (2000) 1 E. A 20; Barclays Bank of Uganda Limited Vs Howard Bakojja H. C. C. S 25 No. 53 of 2011, and Nakawa Trading Co. Ltd Vs Coffee Marketing Board H. C. C. S No. 137 of 1991[1994] 11KALR 15, where the Courts have established that parties are bound by the terms of the contract that they execute; a breach occurs where that which is complained of is breach of duty arising out of the obligation undertaken under the contract, and that the role of the Court is to simply enforce 30 those terms.

This Court therefore, finds that the Plaintiff has discharged the evidential burden of proof to the required standard, and proved that the Defendants breached the loan agreements executed with the Plaintiff, when they failed to meet their obligations of repayments in accordance with the said agreements.

For reasons above, this issue is answered in the affirmative that the Defendants breached the loan agreements executed with the Plaintiff dated 2nd May, 2014, and 30th December, 2014 respectively.

# lssue No. 2: Whol re medies ore ovoiloble to the Ploinliff ?

This Court hoving found issue (l)obove in the offirmotive, finds further thot the Ploinliff is enlitled to the following remedies:

10 Orders for the recovery of USD 290,885(United Stoles Dollors Two Hundred Ninety Thousond Eight Hundred ond Eighty Five only), being the totol outstonding principol loon ogoinsi the Defendonts.

It's seltled low thol interesl is o worded ot the discretion of the Court. This Court hos token into occount the foct thol the Defendonts hove withheld the Ploiniitl's money since 2014, which money would hove been put to beiier use by the

Plointiff . 15

> ln the result, I flnd thot on oword of interesl ol the rote ol 20% per onnum on the principol sum obove, is sufficieni from the dole of filing this suil until poyment in full.

Generol domoges ore lhe direct nolurol or proboble consequence of the wrongtul oct comploined of, ond includes domoges for poin, suffering, inconvenience ond onticipoted future loss. (See Slorms Vs Hulchinson Il905I A. C st s) 20

It is settled low thot generol domoges os on equitoble remedy is gronled ot the discretion of the Courl. (See Crown Beveroges tld Vs Sendu Edward S. C Civil

Appeol No. I ol 2005)

tn llgondd Commerciol Bonk Vs Kigozi 120021 I EA 305. ihe foclors to be considered by the Courts when ossessing the quontum of generol domoges were discussed os follows: ihe volue of the sub.lecl motter, the economic inconvenience thot the Plointiff moy hove been put through, ond the noture ond

extenl of the injury suffered. 30

> ln the given circumstonces of this cose, the Plointiff hos odduced evidence to prove ihol the Defendonls hove foiled lo repoy lhe oulstonding loon omount of USD 290,885(United Stoles Dollors Two Hundred Ninety Thousond Eight Hundred ond Eighty Five only) up to dote, ond thot the Defendonts' foilure hos coused loss,

ond inconvenience to the Plointifl. 35

> Following the decision in Ugondo Commerciol Eonk Vs Kigoil(supto), this Court finds thot the Plointiff hos proved on o bolonce of probobililies thot it hos suffered

5 economic loss. ond inconvenience. for which the Defendonts ore held lioble in generol domoges.

ln the result, I find thot the Plointiff is entitled to generol domoges. I hove loken into considerotion oll the circumstonces of lhis cose, ond find thot on oword of USD 50,000(United Stoies Dollors Fifty Thousond only) is oppropriote in generol

domoges, 10

With regord to inlerest on the generol domoges oworded obove, I om inclined to gront inlerest of 6% per onnum from ihe dote of lhe judgment until poyment in full.

As regords costs, section 27(11 oI ihe Civil Procedure Act, Cop 7l provides os follows:

"subject to such conditions ond limitolions os moy be prescribed, ond to the provisions of ony low for the time being in force. the costs of ond incident to oll suits sholl be in the discrelion of the Court or Judge, ond the Court or Judge sholl hove full power to delermine by whom ond out of whot property ond to whot

extent lhose costs ore to be poid, ond lo give oll necessory directions for the purposes oforesoid." 20

Toking into considerotion the obove provision on cosls, ond thot costs follow lhe event unless for justified reosons lhe Court olherwise orders, ond ihe decision in llgondo Developmenl Eonk Vs Mugonga Conslruclion Co. Ltd (1981) H. C. B 35 where Justice Monyindo (os he then wos) held lhot:

"A successfu/ porly con only be denied costs if ils proved, thot, but for his or her conduct, the oction would not hove been brought, the costs wil/ fotlow lhe event where the porly succeeds in lhe moin purpose of the suil. "

Ifind no justifioble reoson to deny the Ploiniiff cosls of this suit, os costs follow the event. /See section 27 (2) ot the Civil Procedure Act, Cop 7l) 30

Judgment is entered for the Plointiff ogoinsi the Defendonls in the following terms:

- I. An order for recovery of USD 290,885(United Stotes Dollors Two Hundred Ninety Thousond Eighl Hundred ond Eighty Five only) from the Defendonls. - 2. lnteresi on the principol sum of the rote of 20% per onnum from lhe dote of filing this suii uniil poyment in full. - 3. Generol domoges of USD 50,000(United Stoles Dollors Fifty Thousond only).

- 4. Interest on (3) above, at the rate of 6% per annum from the date of $\mathsf{S}$ judgment until payment in full. - 5. Costs of this suit are granted to the Plaintiff.

Dated, signed and delivered electronically this 16th day of August, 2022.

$10$

SUSAN ABINYO **JUDGE** 16/08/2022