Housing Finance Bank Limited v Gurindwa & Another (Civil Suit 634 of 2021) [2024] UGCommC 193 (12 June 2024)

Full Case Text

## THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA

## (COMMERCIAL DIVISION)

## HIGH COURT CIVIL SUIT NO. 634 OF 2021

## HOUSING FINANCE BANK LIMITED::::::::::::::::::::::::::::::::::::

#### VERSUS

#### $\mathbf{1}$ **GURINDWA PAUL**

$2.$ JULIAN ATUHAIRE::::::::::::::::::::::::::::::::::::

# Before: Hon. Lady Justice Patricia Kahigi Asiimwe

## Judgment

## Introduction:

The Plaintiff sued the Defendants jointly and severally for $1.$ recovery of UGX. 241,593,522 being the total outstanding amount on a loan advanced to the 1st Defendant under a loan facility agreement.

The Plaintiff's case:

- $2.$ The 1st Defendant applied to the Plaintiff for a loan facility of 160,000,000 to facilitate the purchase of land UGX. comprised in Kyadondo Block 216 plot 1934 land at Buye. As a condition, the 1st Defendant pledged the suit land as security for the loan. - 3. Prior to approval of the loan, the Plaintiff wrote to the $2nd$ Defendant informing her of the 1st Defendant's intention to obtain a loan facility from the Plaintiff using the suit land as security for the said facility. The 1st Defendant further informed the $2nd$ Defendant that he intended to use the loan obtained from the facility to purchase the suit land.

- In a letter dated 23rd April 2009, the 2nd Defendant confirmed 4. that she was the proprietor of the suit land and that she had entered into an agreement to sell the suit land to the 1st Defendant in a sale agreement dated 23rd January 2009. The 2nd Defendant also availed the certificate of title of the suit land and the transfer forms purportedly signed by her to the bank. - 5. On 23rd April 2009, the 1st Defendant authorized the Plaintiff to deposit the agreed loan amount on the $2nd$ Defendant's account and the Plaintiff did so. - 6. The Plaintiff attempted to effect the transfer of title at the land registry but failed because the Registrar advised that the signature on the transfer forms presented by the $2^{nd}$ Defendant did not tally with her signature at the land registry. The $2nd$ Defendant refused to rectify the anomaly despite the numerous calls and requests from the Plaintiff's officials. - The 1st Defendant defaulted on his monthly loan payment $7.$ and the outstanding sums as of 2021 is UGX. 241,593,522.

#### The $1^{st}$ Defendant's case

- The 1st Defendant received a loan from the Plaintiff to 8. complete the purchase of the property comprised in Kyadondo Block 216, Plot 1934 at Buye and that the land once fully paid for was to be transferred into his names by the Plaintiff. - 9. He faced difficulties in servicing the loan and proposed that an arrangement to enable him to clear the outstanding loan be made but the Plaintiff unreasonably resisted his proposal. That as of 9th December 2015, the Plaintiff's claim was that the loan was in arrears of UGX. 8,000,000 which the 1st Defendant paid on that day pursuant to a consent arrived at

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between the Plaintiff and Ntinda Hospital Limited, a company owned and operated by the 1st Defendant. It was also agreed under the consent to freeze all the interest on the sum due.

The 2nd Defendant availed to the Plaintiff all the documents $10.$ she was obligated to provide and there was nothing wrong with the documents.

#### Representation:

$11.$ The Plaintiff was represented by Amos Matsiko and Solomon Sadam of M/S Ortus Advocates. The $1^{st}$ Defendant was represented by Dr. Benson Tusasirwe of M/S Tusasirwe & Co. Advocates. The 2nd Defendant did not make an appearance and the matter proceeded ex parte against her.

#### Issues:

- 12. The issues for resolution are as follows: - Whether the $1^{st}$ Defendant is in default of his loan $\mathbf{I}$ . obligations; - Whether the Defendants committed fraud against the $\Pi$ . Plaintiff: and - What remedies are available to the parties? $\mathop{\rm III.}\nolimits$

# Evidence

- 13. At the hearing, the Plaintiff called one witness, John Tusiime Bagambi (PW) the business support and recovery officer of the Plaintiff. He testified that on 18th February 2009, the Plaintiff applied for a loan facility to facilitate the purchase of land comprised in Kyadondo Block 216 plot 1934 land at Buye. - $14.$ The 1st Defendant authorised the Plaintiff to deposit the agreed loan amount of UGX. 160,000,000 on the 2nd Defendant's account. The Plaintiff started the process of transferring the suit land into the $1^{st}$ Defendant's names in

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order to register a mortgage but the process failed because the signature on the transfer forms did not tally with the $2nd$ Defendant's signature at the land registry. He adduced a copy of the transfer form with the Registrar's comment that the $2^{nd}$ Defendant appears to verify her signature (PE 15).

- PW also stated that on 17th September 2010, the Plaintiff 15. notified the Defendants of the discrepancy in the signature on the transfer forms and requested them to rectify it but they did not and the mortgage could not be registered. - 16. The 1st Defendant defaulted on his monthly loan payments and as of 17th March 2014, he had arrears of UGX. 7,374,496.55 with the loan outstanding at UGX. $155.013.760.30$ . The 1st Defendant requested for a loan reschedule but the Plaintiff could not restructure the loan because the Plaintiff had defaulted for a long time and had not given sufficient cause for a restructure. At the time of filing the suit the outstanding sums the $1^{st}$ Defendant owed the Plaintiff was UGX. 241,593,522. - The 1st Defendant Paul Gurindwa (DW), testified that upon 17. extension of the facility, the Plaintiff refused to surrender a copy of the agreement to him and he was not aware of the terms of the relationship including the terms of the loan, the applicable rate of interest and the basis for computing penalties. - 18. DW stated that his efforts to service the debt were hampered by the Plaintiff's unreasonable conduct when it unjustifiably froze the account held with it by Ntinda Hospital Limited, a company owned and operated by the $1st$ Defendant. As of $9th$ December 2015, the Plaintiff's claim was that the loan was in arrears of only UGX. 8,000,000. The said arrears were cleared by consent arising from HCCS No. 962 of 2015 entered to freeze all the interest on the sum due. The debt could not

have accumulated to UGX. 188,459,644 within one year as claimed by the Plaintiff.

## Locus in quo visit

19. On 31st May 2024, court carried out a locus in quo visit to the suit land. The parties present were the Plaintiff represented by Africano Bigirwaruhanga, and the $1st$ Defendant. Both parties' counsels were also present. The suit land is situated at Kyadondo Block 216 Plot 1934, Buye, Ntinda. It was noted that there is a hospital on the suit land and the hospital sits on 2 other plots owned by the 1st Defendant.

## Resolution:

Issue 1: Whether the 1st Defendant is in default of his loan obligations

- 20. It is not in dispute that the Defendant borrowed UGX. 160,000,000 from the Plaintiff and that the parties entered an agreement to that effect. It is also not in dispute that the purpose of the loan was to enable the 1st Defendant to purchase the suit property from the $2nd$ Defendant. - Section 10(1) of the Contracts Act 2010 defines a contract as; 21. "An agreement made with free consent of parties with the capacity to contract, for a lawful object, with the intention to be bound". - In the case of **William Kasozi versus DFCU Bank Ltd High** 22. Court Civil Suit No.1326 of 2000, it was held that "Once a contract is valid, it creates reciprocal rights and obligations between the parties to it. It is the law 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".

- The Plaintiff adduced in evidence a mortgage deed marked $23.$ Exhibit PE 14 which was signed by both parties on 23rd April 2009. The Plaintiff also adduced in evidence a copy of the loan application form marked Exhibit PE 1 and a copy of the loan acceptance form marked Exhibit PE2. The 1st Defendant in his Written Statement of Defence under paragraph 5(e) admits that a loan was duly extended to him and the sum was directly transferred by the Plaintiff to the 2nd Defendant. It is therefore not in dispute that the parties entered into a contract creating rights and obligations for both parties. - 24. Under the agreement, the loan was to be paid in 20 years which would end in 2029 and the 1st Defendant was required to pay UGX. 2,469,298 per month. Under PE 19, the last time the 1st Defendant made a payment was on 13th September 2016 and he paid UGX. 100,000. The 1st Defendant is therefore in default of his obligations under the contract. The issue therefore is answered in the affirmative.

Issue 2: Whether the Defendants committed fraud against the Plaintiff

- $25.$ The Plaintiff's case is that the $2^{nd}$ Defendant acted fraudulently by presenting to the plaintiff transfer forms with a signature not conforming with the signature at the land registry. She refused to rectify the discrepancy on her transfer forms. - 26. Under section 15 of the Contracts Act 2010 it is provided as follows:

$(1)$ Consent is induced by fraud where any of the following acts is committed by a party to a contract, or with the connivance of that party, or by the agents of that party, with intent of deceiving the other party to the contract or the agent of the other party, or to induce *the other party to enter into the Contract*—

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(a) a suggestion to a fact which is not true, made by a *person who does not believe it to be true;*

(b) the concealment of a fact by a person having *knowledge or belief of the fact;*

(c) a promise made without any intention of performing it; (d) any act intended to deceive the other party or any $\frac{d}{dx}$ other person; or

(e) any act or omission declared fraudulent by any law. (2) For the purposes of this Act, mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, it is the duty of the person keeping silence to speak, or unless the silence is, in itself, equivalent to speech.

- The Black's Law Dictionary, 8th Edition defines fraud as a 27. knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment. A misrepresentation made recklessly without belief in its truth to induce another person to act. A tort arising from a knowing misrepresentation, concealment of material fact, or reckless misrepresentation made to induce another to act to his or her detriment. - 28. From the above to prove fraud one must adduce evidence that a misrepresentation of the truth was made which the person seeking to prove fraud acted upon to his or her detriment. The person claiming fraud should have believed that the misrepresentation was true and thus acted on the information. - 29. In the case of Fredrick Zaabwe Vs Orient Bank Ltd & 5 Others SCCS No. 04 of 2006 which was cited by counsel for the 1st Defendant fraud was defined as "an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable belonging to him or surrender a legal right. A false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations or by concealment of that which deceives and is intended to deceive another so that he shall act upon it to his legal injury".

- In Kampala Bottlers Limited Versus Domanico (U) Ltd, $30.$ Civil Appeal No. 22 of 1992, the supreme court held that for one to succeed in a case of fraud, the Plaintiff must prove that there are acts of dishonesty, attributed to the Defendant or that the Defendant knew of such acts and took advantage of them. - 31. In the Plaint, the particulars of fraud pleaded by the Plaintiff in respect to the $2nd$ Defendant are that she presented transfer forms with a signature that was different from the one in the lands registry. While the Plaintiff adduced in evidence the signed transfer forms in issue, the Plaintiff did not adduce in evidence the signature that would have enabled court to assess how drastically different the two signatures are. In the absence of such evidence, I find that the Plaintiff has not proved that the $2^{nd}$ Defendant knew that the signature on the transfer forms was different from the one in the Registry. - The other particular pleaded is that the 2nd Defendant refused 32. to rectify the discrepancy on the transfer forms and assist the Plaintiff to transfer the property. The Plaintiff submitted in evidence a letter addressed to the 1st Defendant requiring him to avail the $2nd$ Defendant to verify her signature. The Plaintiff did not adduce any evidence to prove that they informed the $2nd$ Defendant of her need to rectify the discrepancy. I find that this particular has not been proven. - The Plaintiff prayed for an order that the Defendants acted 33. fraudulently by obstructing the transfer of the suit property into the 1st Defendant's name. The 1st Defendant testified that he informed the Plaintiff's officials that the 2nd Defendant

lives in Canada. The 1st Defendant further testified that he requested for the transfer forms and the land title so that he could follow up on the transfer however the Plaintiff declined to avail the information. In the submissions, counsel the Plaintiff argued that the document could not be passed on to the 1st Defendant since the money had already been advanced and the property was the security for the loan.

34. I find that the $1^{st}$ Defendant was willing to assist in resolving the issue and therefore the Plaintiff has not proved that the actions of the 1st Defendant were fraudulent. This issue is, therefore, answered in the negative.

Issue 3: What remedies are available to the parties?

*a) Recovery of a sum of UGX. 241,593,522*

- 35. The Plaintiff's claim against the 1st Defendant is for the recovery of UGX. 241,593,522 being the total outstanding amount on the loan. The 1st Defendant admitted under crossexamination that he owes the Plaintiff UGX. 68,000,000. - 36. The $1^{st}$ Defendant testified that initially his efforts to service the loan were affected when the Plaintiff froze the account of Ntinda Hospital Limited, a company which he owns and operates. The company sued the Plaintiff in Civil Suit No. 962 of 2015. On 15th December 2015, the parties entered into a consent and the position was that the outstanding arrears were UGX. 8,000,000 which was duly paid as agreed in a consent. He further testified that the consent froze all interest on the outstanding loan and that, therefore, the debt could not have accumulated to UGX. 241,593,522 as claimed by the Plaintiff. The Defendant adduced in evidence the court proceedings which were marked DE 3. - Under the proceedings dated 8th December 2015, in the said 37. case, counsel for Housing Finance Bank Ltd stated that "We have agreed that the Defendant has waived off interest on the

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principal outstanding loan of U. Shs. 68,827,150 against the third party Paul Gurindwa and that the said third party shall endeavor to clear the outstanding principal loan balance with the Defendant as stated above." The consent was endorsed by the court the following day.

- Under the consent judgment (PE 21), it was agreed that 38. Ntinda Hospital Limited shall issue a cheque of UGX. 8,000,000 in favour of Housing Finance Bank Ltd to settle the mortgage arrears in a mortgage contract between Housing Finance Bank Ltd and Paul Gurindwa (the 1st Defendant). The consent does not provide for freezing of the interest on the outstanding amount. - The 1st Defendant relies on the proceedings to prove that the 39. outstanding arrears at the time of the consent were UGX. 8,000,000 which were paid and the loan balance was UGX. $68,827,150$ and further that the interest was frozen. - 40. It is the testimony of the Plaintiff's witness on the other hand that at the time of the consent the arrears were UGX. 10,541,891.21 and that the purpose of paying UGX. 8,000,000 was to avoid the bank having to provide for the loan. He further testified that the consent did not settle the entire loan agreement and that the Plaintiff never agreed to waive the interest. - While the 1st Defendant seeks to rely on court proceedings to $41.$ prove the loan balance and that the interest was waived, it should be noted that court proceedings are not binding on the parties. When parties agree in court on certain terms those terms have to be reduced in writing, signed by both parties and formally endorsed by a Judicial officer. The consent judgment endorsed by court does not include the term that the interest be waived.

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- Under PE 19 the outstanding balance as at the time of filing $42.$ the suit was UGX. 241,593,522, and therefore the Plaintiff is entitled to recover UGX. 241,593,522. - *b) A declaration that the Plaintiff sells the mortgaged property* - In this case, the Plaintiff could not register a mortgage on the 43. suit property and therefore this remedy is not applicable. - c) Order for eviction of the $1$ st Defendant from the suit property. - 44. At the locus in quo visit the 1st Defendant informed court that the hospital sits on 3 plots of land including the suit property. Two of these plots are owned by the 1st Defendant. The 1st Defendant also owns the plot that is adjacent to the Hospital. The 1st Defendant further informed court that at the time of purchasing the suit property, (plot 34), there were 3 semidetached rental houses which he converted into a hospital. He then modified the houses. The modifications extended the houses to the adjacent plot of land (plot 33) which is owned by the 1st Defendant. The 1st Defendant constructed a double-storeyed building that is also attached to the original building. The hospital building sits on 2 plots of land, the suit property plot 34 and the next plot No. 33. Therefore, the remedy of eviction of the 1st Defendant from the property would not be practicable in the circumstances because eviction cannot be carried out on part of the building. Secondly, it would not be possible to dispose of only part of the building.

## d) General damages

The Plaintiff prayed for general damages of UGX. 50,000,000 45. to compensate for the inconvenience as a result of the Defendants' actions. Counsel for the Plaintiff submitted that as a banking institution that lends out money to its customers the 1st Defendant's failure to pay the loan reduced

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the amount of money available for lending to other customers.

The law on general damages was summarized in the case 46. cited by Counsel for the Plaintiff Adonia Tumusiime & 318 Ors v. Bushenyi District Local Government & Anor HCCS No.32 of 2012 thus:

> The position of the law is that the award of general damages is at the discretion of the court, and always as the law will presume to be the natural consequence of the defendant's act or omission. See James Fredrick *Nsubuga v. Attorney General, H. C. C. S No. 13 of 1993.* Secondly, in the assessment of the quantum of damages, courts are mainly guided, inter alia, by the value of the subject matter, the economic inconvenience that a partu *may have been put through, and the nature and extent of* the breach. See Uganda Commercial Bank v. Kigozi [2002] 1 EA. 305. A plaintiff who suffers damage due to the wrongful act of the defendant must be put in the position he or she would have been in had she or he not suffered the wrong. See Charles Acire v. Myaana Engola, H. C. C. S No. 143 of 1993; Kibimba Rice Ltd. v. Umar Salim, S. C. Civ. Appeal No.17 of 1992."

47. In the case of **Maruri Venkata Bhaskar Reddy Versus Bank** of India (Uganda) Ltd [Civil Suit No. 804 of 2014] Wamala J held that:

> *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.

The 1st Defendant last loan payment installment was made 48. on 13th September 2016. The Plaintiff has therefore been deprived of the money since 2016. In the circumstances, I find that the Plaintiff is entitled to general damages. The Plaintiff is awarded general damages of UGX. 30,000,000.

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- In conclusion therefore judgment is entered for the Plaintiff 49. against the $1$ st Defendant and it is ordered as follows: - a) That the Plaintiff is entitled to recover UGX. 241,593,522 from the 1st Defendant; - b) The Plaintiff is granted General damages of UGX. 30,000,000 and interest of 15% from the date of this judgment until payment in full; and - c) The Plaintiff is also awarded the costs of the suit.

## Dated this 12th day of June 2024

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Patricia Kahigi Asiimwe

Judge

Delivered on ECCMIS