KCB Bank of Uganda v Muhumuza (Civil Appeal 51 of 2021) [2023] UGCommC 242 (5 December 2023)

Full Case Text

### THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA IcoMMERCTAL DrVrSrONl

# CNTL APPEAL NO. 5T OF 2O2I (ARTSTNG FROM CrvIL SUIT NO. 1623 OF 2014) KCB BANK UGANDA ::::::::::::::::::::::::::::::::::::::::::::::::: APPELLANT VERSUS

# MUHUMUZA MUGIMBA MOSES: : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : RESPONDENT BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI JUDGMENT

#### INTRODUCTION

This is an appeal from the judgement and decree of Her Worship Nsaire Proscovia, Magistrate Grade One delivered on the 17th day of August202l at Mengo, in the absence ofboth parties and or their Counsel and delivered by email.

#### BACKGROUND OF THE APPEAL

The briefbackground to this appeal is that in April 2008, Safari Telecom made an initial public offer for subscription of shares and that Suntra Investment Bank was retained as the stockbroker to facilitate the sale of shares. Similarly, KCB Bank, the Appellant was also retained by Suntra Investment Bank as a receiving Bank in Uganda. That the Respondent applied for shares up to a tune of UGX 20,000,000 through the Appellant, but due to oversubscription, affected subscribers were to receive a refund of their investments so the Respondent received a refund of UGX 16,000,000/ leaving a balance of UGX 4,000,000/.

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Upon demanding for the refund in vain, the Respondent filed civil Suit No. 1623 of 2ol4 in the chief Magistrates' court of Kampala at Mengo seeking for special damages of UGX 4,000,000/, general damages, interest and costs of the suit. That at the close of the trial, the Trial Magistrate ruled in favour of the Respondent ordering for a refund of UGX 4,000,000/, general damages of UGX 10'000,000/=, interest of 80% per annum and costs of the suit. The Appellant being dissatisfied with the judgement and decree, filed this Appeal before this Court. During the hearing, the Respondent made no appearance on a date which was agreed upon by a consent adjournment, therefore, the matter proceeded exparte.

#### REPRESENTATION

During the hearings, the Appellant was represented by KMA Advocates whereas the Respondent was self-represented.

#### JUDGMENT

The Appeal raises three grounds to wit:

- The learned Trial Magistrate erred in law and fact when she found the Appellant liable to pay the Respondent the sum of UGX 4'000,000/. 1 - The learned Trial Magistrate erred in law and fact when she awarded exorbitant and high general damages in the sum of UGX 10'000'000/ and high interest on the monetary awards. 2 - The learned Trial Magistrate erred in law and fact when she failed to properly and exhaustively evaluate the evidence on record and hence arrived at a wrong conclusion. 3

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## Duty of the First APPellate Court

The duty of the First Appellate Court to evaluate evidence and arrive at its own decision has been discussed in several cases including the case of Fredrick Zaabwe v Orient Bank SCCA No, 4 of 2006 and Kifamunte Henry v Uganda Criminal Appeal No. t0 of 1997 where it was held that:

,,The first appellate court has a duty to review the evidence of the case and to reconsider the materials before the trial judge. The appellate court must then make its own mind not disregarding the iudgement appealed from but carefully weighing and considering it. "

### Grounds land 3

Counsel for the Appellant argued grounds 1 and 3 together. He submitted that the case was about the sale of shares by Safaricom Kenya and not the Appellant. That the two are separate entities and that the Appellant did not receive any money from the Respondent to warrant liability to pay back the Respondent. He added that the Respondent clearly stated that he instructed the Appellant to appropriate the money to an application he had made for the purchase of shares from Safaricom. He also cited that the retund of UGX 16,000,000/ was made by Safaricom through the Appellant, therefore, that the Appellant was only a receiving bank that received the money and remitted it to Safaricom.

Counsel cited that even if the Appellant had been labelled an agent as a stock broker by the Respondent in the lower Court, they cannot be sued where there is a known and disclosed principal. He added that the Trial Magistrate did not base on evidence but on speculation as there was no consideration to flow from the Appellant to the Respondent because the relationship enjoyed between them was only that of a banker-customer. That the case is not failure on the part of the

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Appellant to execute his instructions but that the Appellant executed his instructions in buying the shares however that the shares were not allocated to him. He concluded that KCB cannot be held liable.

I have looked at the submissions of the Appellant Counsel and the evidence on record and find as follows:

From paragraph 5 of the Plaint, the Plaintiff made it clear that it was Safari Telecom that made a public offer to the public for subscription of shares and that it retained Suntra Investment Bank as a stockbroker to facilitate the sale ofthe shares and specifically in paragraph 5 (c) thereof, that the Appellant was in retum retained by Suntra as a receiving bank in Uganda. Whereas, PWI claimed in paragraphs 2 and 3 of his witness statement before the Trial Court, that the Appellant had been retained as the stock broker in Uganda and that it was the Appellant which advertised for the sale of the shares on major television stations, no evidence of the same was produced before the Court.

I also find the above contradictory to and departing from the pleadings because in paragraph 5 (c) of the Plaint as stated above, the Plaintiff/Respondent stated that the Appellant was retained as a receiving ba\*.'A receiving bank' simply means a financial institution where a receiving party maintains its account.

From the evidence on record specifically in paragraph 3 of PWI's wirness statement, he stated that it was upon the Appellant's advice that he opened an account on which he deposited the money, and that the money was deducted by the Appellant towards the shares. whereas the instruction by the Respondent for the Appellant to apply the money towards the purchase of the shares was not produced, the Appellant affirms that they acted upon the instructions of their client

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in fulfilment of the banker-customer relationship they had when they deducted the money and forwarded it to the rightful beneficiary, Safaricom.

with the above evidence and due to the fact that both parties do not dispute that the shares were the property of Safaricom and that Suntra was retained as a stock broker and the Appellant's role was that of a receiving bank, I find that the Appellant could not have been liable to refund the UGX 4,000,000/.

In addition, I agree with Counsel for the Appellant that even if the Respondent had argued that the Appellant had been an agent of Safaricom, they would still not be liable because an agent cannot be liable for acts of a known principal because under Contract Law, unlike in Torts, an agent is not a party to the contract he makes on behalf of the principal.

The same principle is seen in Phenehas Agaba V Swift Freight International Ltd HCCS No 143 of 2000 where the Court found the suit against the Defendant who was an agent unsustainable, and held that where an agent, makes a contract on behalf of the principal, the contract is that of the principal, not that of the agent, and Prima Facie at Common Law the only person who can sue or be sued is the principal.

I find no need to dwell on the discussion ofagency because the Appellant's role in this instant case was limited to that of a receiving bank; which does not make him liable in any way. Their role was to receive the money and forward it to the rightful party and even upon refund, they only received that which was refunded and remitted it to the Respondent's account.

It is the considered view of this Court that the rightful parties to sue would have been Safari Telecom and maybe Suntra which was actually sued but never filed a

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defence so it appears the suit proceeded exparte against them but the Trial Court did not make any orders against them.

In the premises, I find that the leamed Trial Magistrate erred in law and in fact when she found the Appellant liable to pay refund the UGX 4,000,000/. Consequently, she did not properly and exhaustively evaluate the evidence on record and arrived at the wrong conclusions.

Therefore, I find that the Appeal has merit and therefore succeeds on both grounds I and 3.

#### Ground 2

It was submitted for the Appellant that the deprivation of the Respondent's money was not the Appellant's fault, and therefore that the award of general damages is not sustainable as even the Respondent admitted that the shares were for Safari Telecom and that there was an oversubscription.

Since the Appeal succeeds on ground l, it follows therefore that the award of general damages and interest on the refund and also interest on the general damages against the Appellant was not right, as the Appellant was not liable to refund the money in the first place.

Therefore, I will not go into the discussions on the law of award of general damages and that of interest to determine whether or not the interest rates awarded were exorbitant because the Appellant was not liable to refund the said money.

In the premises, I find that the trial Magistrate erred in law and fact when she made the award of general damages of UGX 10,000,000/: and interest against the Appellant. This ground has merit and therefore succeeds too.

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I find merit in the Appeal and it is therefore allowed.

The judgement and orders of the Trial Magistrate are set side. Costs of the Appeal awarded to the Appellant.

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### HON. LADY JUSTICE ANNA B. MUGENYI

DATED: 5/12/2023