Diamond Trust Bank Uganda Limited v Mashunju (Civil Suit 935 of 2017) [2023] UGCommC 236 (1 March 2023)

### THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA ICOMMERCIAL DIVISIONI

### CIVIL SUIT NO.935 OF 2017

## DIAMOND TRUST BANK UGANDA LIMITED:::::::::::: PLAINTIFF VERSUS

### NICKY SIMON MASHUNJU:::::::::::::::::::::::::::::::::::::::::: DEFENDANT

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

The Plaintiff brought this suit under Order 36 Rule 2 of the Civil Procedure Rules S.l 71-1 for payment of UGX 822,323,8641, interest at agreed commercial rate from filing date till payment in full and costs of the suit.

The brieffacts constituting the Plaintifls case are that during the year 2015, the Defendant applied for and obtained various credit facilities from the Plaintiff. That by facility letter dated l0th August 2015, the Defendant was granted a facility of UGX 565,000,000/ to be repaid within a period of 72 months in equal instalments of UGX 13,533,3471. That he was again granted UGX 605,000,000/ by a facility letter dated 8th January 2016,, repayable in 78 monthly instalments of UGX 15,009,690/. That the Defendant did not honour the repayment schedules despite several demands which prompted the Plaintiff to issue a Notice of sale and Notice of Default in accordance with the Mortgage Act.

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That a Security Realisation Agreement was entered into and the Defendant undertook to pay UGX 30,000,000/ by 31't May 2016, UGX 30,000,0001 by 29th June 2016 and to settle the whole loan by 30'h June 2016. That the Defendant did not make any payments and that efforts to dispose of property comprised in Kyadondo Block 273 Plot 2794 Katuuso were futile, as the Defendant refused to avail vacant possession in respect of the property; and the Plaintiff refunded UGX 720,000,000/ for the purchase of the property. That the Defendant remains indebted to the Plaintiff in the sum of UGX 822,323,8641, hence this suit.

Upon obtaining leave to appear and defend, the Defendant filed his Written Statement of Defence and Counterclaim wherein he avers that he obtained an overdraft facility of UGX 617,000,000/ from the Defendant secured by properties comprised in Block 294 Plot 2794 Katuuso and FRV Block I I PLOT 2 Rwampara Buhihi Mbarara on 25'h August 2014. The he faced difficulties in repayment so he was advised to liquidate one of the properties in Bunga, and was not mortgaged in order to reduce his loan exposure. That the Plaintiff informed him that they had found a buyer of the property at UGX 550,000,000/ and they agreed that UGX 350,000,000/ would be applied to reduce the loan and UGX 200,000,000/ left to him as his working capital.

That the Plaintiff never applied the money to reduce the loan and yet the money was debited off his account. That the Defendant's account was also debited of UGX 53,000,000/ which the Plaintiff claimed was transferred to a one Ashaba Aine Micheal, the purchaser of the land. That only UGX 150,000,000/ was credited on the Defendant's account and UGX 50,000,000/ remains unaccounted for. That the Plaintiff denied the Defendant the opportunity of ascertaining the exact outstanding loan balance and instead only invited the Plaintiff to sign another

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facility letter dated 1Oth August 2015, which converted the Defendant's overdraft into a term loan of UGX 565,000,000/.

That the Defendant then issued a cheque of UGX 50,000,000/, after which the Plaintiffadvised him to sign another credit facility letter dated 8th January 2016 of UGX 605,000,000/ which would be reduced from the proceeds of liquidated property and that he would easily redeem his titles. That the Plaintiff did not reduce the loan balance by UGX 350,000,000/ and continued to calculate interest, and yet the Defendant continued to make monthly deposits. The Defendant denies executing the Security Realisation Agreement and avers that he was invited to sign at the back page of the Mortgage Deed that he had forgotten to sign, so he complied and went and appended his signature.

That a few months after signing, he was called by the Plaintiff to go and meet their lawyers on grounds that they had found a buyer for the mortgaged property, yet his loan was still running and he had never been served with any notices. That the Defendant denied his request for the loan statement and proceeded to illegally sell his property without his knowledge. No report on the sale has been provided.

In his Counterclaim, the Defendant prays for dismissal of the suit, special damages, general damages, costs of the suit and interest. He avers that the Plaintiff illegally sold his property without due process under the Mortgage Act, failed to account for UGX 50,000,000/, wrongfully transferred UGX 53,000,000/ to a one Ashaba Aine Micheal and entered wrongful charges and entries in the loan statement as well as failing to account for proceeds of the sale. He adds that the he was caused to sign documents believing them to be the Mortgage Deed, and that they caused him financial loss.

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In reply to the Written Statement of Defence and Counterclaim, the Plaintiff contends that the Defendant mortgaged his property in Rwampara for UGX 350,000,000/ by an overdraft facility letter dated lgth December 2011, and that he signed on each and every page. That by facility letter dated l4th May 2012, the overdraft facility was enhanced to UGX 500,000,000/, and several other facilities were given over time. That the Defendant applied to convert his overdraft facilities of UGX 617,000,000/ into aterm loan of six years, and by facility letter dated 25th August 2014 it was done.

That shortly thereafter, out of his own will, the Defendant sold off one of the properties which had not been mortgaged to Ashaba Aine Micheal, and that the purchaser initially paid UGX 350,000,000 on 4'h March 2015, and UGX 150,000,000/ on 131h March 2015. That the said monies were used to clear arrears on the account and the said UGX 53,000,000/ which was refunded to the purchaser had been paid in error. That the UGX 500,000,000/ was fully utilised and that the Defendant then applied for additional working capital of UGX 250,000,000/ by his letter dated 14th July 2015. A top up was given and the Defendant later applied for another top up which was also given and he duly signed on all documents. He defaulted in repayment which prompted the Plaintiff to issue a notice of default and notice of sale. It was upon this that the Security Realisation Agreement was signed. The Plaintiff prayed that the Counterclaim be dismissed.

During the hearing, the Plaintiff presented one witness namely: Abubaker Bagalana (PWl) while the defendant, Nicky Simon Mashanju, was DWl.

The Court also relied on the evidence of David Raphael Milimo of M/s Ernst & Young (CWl) who presented an audit report that indicated the sums of money found to be due and owing from the Defendant to the Plaintiff.

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#### REPRESENTATION

The Plaintiff was represented by M/s MMAKS Advocates and the Defendant was represented by M/s MACB Advocates.

### JUDGMENT

The following issues were agreed upon in the Joint Scheduling Memorandum for determination by the Court:

- l. Whether the Defendant is indebted to the Plaintiff Bank, and if so in what sum? - 2. Whether the Plaintiff is indebted to the Defendant/Counterclaimant and if so in what sum? - 3. What remedies are available to the parties?

## Issue One: Whether the Defendant is indebted to the Plaintiff Bank, and if so in what sum?

As to whether the Defendant is indebted to the Plaintiff, Counsel for the Plaintiff relied on the Auditor's report and submitted that the Defendant is indebted to the Plaintiff in the sum of UGX 810,329,7081, and that during the hearing Counsel for the Defendant did not cross examine the witness. He added that from PWI's evidence, the Defendant had been given several overdraft facilities that were converted into a loan facility by facility letter dated 25rh August 2014,for a sum of UGX 617,000,000/ secured by two properties.

He added that PWl had given accountability of the UGX 500,000,000/ received for the purchase of the land, and that it was duly utilised leaving a balance of UGX 190,139,3251. He added that the Defendant has not adduced any evidence to

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confirrn that the purchase money deposited was UGX 55,000,000/ and not UGX 50,000,000/. That because the Defendant needed working capital so more money was disbursed to him three tranches, and that the Defendant did not dispute it, and neither did he adduce any evidence that he deposited the said monies. That the Defendant then applied for other credit facilities and the monies were credited to his account, and that upon being granted a top up loan facility, and all existing credit facilities were merged into one facility of UGX 605,000,000/.

That when the Defendant defaulted on repayment, notices were issued and upon the Defendant's failure to pay again after admitting and undertaking to pay, the Ptaintiff sold the main security but the sale was reversed for lack of spousal consent. The Plaintiffhad to pay the purchaser UGX 721,000,000/ including costs. That this has left the Defendant indebted to a sum of UGX 810,329,7081.

The Defendant did not file their written submissions therefore I will proceed to evaluation of the evidence on record and the decision. PWl, in paragraphs I to 6 of his witness statement, said the Defendant was granted several overdraft facilities of different amounts of money. In paragraph 7, the overdraft facility which stood at UGX 617,000,000/ was converted into a term loan of six years which came to UGX 637,720,,9491 together with accrued interest and loan processing fees. DWl, in paragraph 1 of his witness statement, confirms that the Defendant extended to him an overdraft facility of UGX 617,000,000/ on 25rh August 2014, and that he secured the same with two of his properties; and he goes on to admit failure to repay upon experiencing some difficulties.

The Defendant's letter on page 79 of the Plaintifls Trial Bundle confirms the debt of UGX 617,000,000/ and therefore it is not disputed. The main issue arises from the proceeds realised from the sale of the Defendant's property in Bunga as the

\$,\*.\ Defendant claims that the money was not used to reduce his indebtedness. Firstly, there is a dispute as to the amount that was paid. Whereas the Defendant claims that it was UGX 550,000,000/, PWl avers in paragraph l0 of his witness statement that Ashaba Aine Micheal the purchaser initially paid UGX 350,000,000/ on 4th March 2015 and later on UGX 150,000,000/ which makes a total of UGX 500,000,000/.

He continued to say UGX 40,821,512/ was used to clear arrears on the Defendant's account on 4th March 2015 leaving a balance of UGX 309,178,488/, UGX 53,000,000/ commitment fees initially paid to the Defendant was refunded to the purchase leaving a balance of UGX 256,178,0001 which was used to partly reduce the facility of UGX 617,000,000/ to UGX 336,466,7261, and UGX 150,000,000/ was applied to reduce the loan leaving a balance of UGX 190,139,318/=. All these added up make it UGX 499,999,5 12l which was fully utilised by the Defendant and the allegations both in the reply to the plaint and the counterclaim are with no basis whatsoever.

Looking at the bank statement at page 68 of the Defendant's Trial Bundle, it is confirmed that the said UGX 53,000,000/ was deposited on the Defendant's account on 28'h February 2015 as down payment for purchase of the Defendant's property. The rest of the transactions also reflect that on 12s March 2015 after reducing to UGX 256,178,000/ from the balance of UGX 606,178,4881, there was a balance of UGX 350,000,488/. On 13'h March 2015, the debt reduced to UGX 190,139,3251 after UGX 150,000,000/ was deposited on the Defendant's account.

Since the Defendant needed working capital, in his letters dated 14th July 2015 and 2l't November 2015 on pages 80 and 89 of the Defendant's Trial Bundle respectively, he requested for top up loans. The bank statement on pages 69, 70

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and 71 reflect the three tranches on 13'h March 2015,l4th April 2015 and 27s July 2015 respectively. Going by facility letter dated 10th August 2015 on page 81 of the Defendant's Trial Bundle, another top up loan facility of UGX 175,000,000/ was granted to the Defendant and it also merged all existing facilities into one facility of UGX 565,000,000/. According to the statement of account on page 71, on 20th August 2015, the UGX 565,000,000/ was credited on the Defendant's account reducing his debit balance of 392,826,669l to UGX 172,173,3311. By facility letter dated Sth January 2016 on page 90 of the Defendant's Trial Bundle, another top up facility of UGX 40,000,000/ was granted to the Defendant merging existing facilities to UGX 605,000,000/. On page 73 of the same Trial Bundle, the statement shows that on 3Oth January 2016, UGX 42,374,0001 was credited on the Defendant's account reducing his debt from UGX 61,373,4191 to UGX 18,999,4191.

According to the Plaintiff, the Defendant defaulted on repaying the loan, and from the notices issued on pages 98 and 100 of the Defendant's Trial Bundle, the Defendant was claiming for UGX 724,729,851/. The Defendant did not make any payments therefore the Plaintiff sold the property at Rwampara but after the sale was challenged for lack ofspousal consent, in light ofthe Court Order on page 106 of the said Trial Bundle, UGX 720,000,000/ was refunded to the purchaser. Counsel for the Plaintiff submitted that at the time of filing the suit, the Defendant was indebted to the Plaintiff in the sum of UGX 810,329,708/.

I have noted that despite claiming in paragraph 12 of his witness statement that he continued making payments, the Defendant has not furnished evidence of how much he paid and how much remains unpaid.

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On the other hand, the Cout witness (CWl) confirmed to Court that upon completing of their assignment, they found that the money owed to the Plaintiff by the Defendant was UGX 810,329,7981 which is the same amount claimed by the Plaintiff. Although the report is not binding on the Court, being that the evidence is from an expert point of view and it was not challenged, I am persuaded to adopt it to guide the Court in resolving the issue. Under Section 26 of the Judicalure Act Cap 13, where the High Court has referred a matter to an official or special referee for inquiry, the report may be adopted wholly or partly; and that if it is adopted it may be enforced as a judgment or order of the Court. In addition, in Cross & Tapper on evidence, Butterworth 1995 |th Edition, al poge 557it was stated that generally, an expert evidence carries more weight than an ordinary witness and that the real value of his evidence lies in the logical inference which he draws from what he himself observed and not merely what he summarizes or has been told by others. Therefore, in this instance, the evidence of CW I is important in assisting court reach a decision.

However, I am mindful of the fact that such evidence is mostly to guide Court, and it is not binding. In the case of Simba Telecom Lltl v Karuhanga & Anor HCCS 242 of 201I it was held:

"As far as section 27 of the Judicature Act is concerned, the court is not bound by the audit report. The audit report is meant for guiding and helping the court to arrive at a just decision after taking into account the evidence adduced in court and any other relevant facts. To hold otherwise would curtail the independence and original jurisdiction of the court. "

Since the evidence of the Court witness is in sync with that of the Plaintiff and also with the other evidence on record, and the Defendant has not produced any

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contrary evidence, I find that the Defendant is indebted to the Plaintiff in the sum of UGX 810,329,7981 as at the time of filing of the suit.

## Issue Two: Whether the Plaintiff is indebted to the Defendant/Counterclaimant and if so in what sum?

As to whether the Plaintiff is indebted to the Defendant, Counsel for the Plaintiff submitted that the Defendant did not produce any proofregarding repayment ofthe various credit facilities and that the UGX 500,000,000/ received from the sale of the Bunga property was fully utilised to settle the Defendant's exposure. He added that the Defendant again obtained top up facilities which he also failed to settle. He concluded by saying that the Plaintiffis not indebted to the Defendant.

CWl confirmed during cross examination by Counsel for the Plaintiff that the Plaintiff is not indebted to the Defendant. As earlier stated, no submissions were filed for the Defendant but in paragraphs 6 to 8 of DWl's witness statement, he said that the UGX 350,000,000/ from the sale proceeds of the Bunga land was never applied to reduce his loan exposure, and also that the Plaintiff had debited his account of UGX 53,000,000/ without his consent, and finally that only UGX 150,000,000/ was deposited on his account leaving out UGX 50,000,000/ unaccounted for.

I find that accountability of for the UGX 500,000,000/ was ably given by PWI both in his witness statement and during cross examination. The Bank statement of the Defendant on pages 69,70 and 71 of the Defendant's Trial Bundle shows how the money was spent. The Defendant has not produced any evidence to controvert his indebtedness towards the Plaintiff, but instead he admitted the same in some of his letters requesting for top up facilities. With the above evidence and the evidence of CW 1 , I find that the Defendant is not indebted to the Plaintiff.

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## Issue three: What remedies are available to the parties?

The Plaintiff prayed that judgement be entered in their favour and that interest be paid at Commercial rate from the filing date till payment in full. The Plaintiff proved their case on a balance of probabilities as is the standard of proof in civil matters, therefore, judgment is entered in favour of the Plaintiff with the following orders:

- I The Defendant pays the Plaintiff the sum of UGX 810,329,708/ being the amount defaulted on from the various facilities. - 2 The Defendant pays interest on the above sum at commercial rate from the date of filing of the suit until payment in full. - 3 Costs of the suit to be paid to the Plaintiff by the Defendant.

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## HON. LADY JUSTICE ANNA B. MUGENYI

DATED .t.3 I 1-3.2,.5......