Matama Hardware Ltd & Anor v Barclays Bank of Uganda Ltd (High Court Civil Suit No. 100 of 2008) [2008] UGCommC 52 (3 September 2008)

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7a00a6037f00a9038400ae038a00aa038d0088036800f0030000040000002d0104000400000006010100040000002d0101000500000009020000000004000000 04010d000c000000400949005a00000000000000e900e80000008803040000002d010500040000002701ffff04000000020101001c000000fb02dfff00000000 00009001000000000440001254696d6573204e657720526f6d616e0000000000000000000000000000000000040000002d010600050000000902000000020d000000320a1d001000010004001000ffff8204920420040f00040000002d010000030000000000}\par}}}{\insrsid134188 MA 100/2008 \par }}{\footer \pard\plain \s16\ql \li0\ri0\widctlpar\tqc\tx4320\tqr\tx8640\pvpara\phmrg\posxc\posy0\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid9722583 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\field{\*\fldinst { \cs17\insrsid134188 PAGE }}{\fldrslt {\cs17\lang1024\langfe1024\noproof\insrsid14495274 1}}}{\cs17\insrsid134188 \par }\pard \s16\ql \li0\ri0\widctlpar\tqc\tx4320\tqr\tx8640\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 {\insrsid134188 Commercial Court \par }}{\*\pnseclvl1\pnucrm\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl2\pnucltr\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl3\pndec\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl4\pnlcltr\pnstart1\pnindent720\pnhang {\pntxta )}} {\*\pnseclvl5\pndec\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl6\pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl7\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl8 \pnlcltr\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang {\pntxtb (}{\pntxta )}}\pard\plain \qc \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid11207998 \fs24\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\b\insrsid134188\charrsid11207998 THE REPUBLIC OF UGANDA \par \par IN THE HIGH COURT OF UGANDA AT KAMPALA \par COMMERCIAL COURT DIVISION \par \par }{\insrsid10813523\charrsid11207998 CASE NO HCT-00-CC-CS-0100-}{\insrsid134188\charrsid11207998 2008 \par }\pard \ql \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid11207998 {\insrsid134188\charrsid11207998 \par }{\b\insrsid134188\charrsid11207998 \par }{\b\insrsid14495274 MATAMA HARDWARE LTD & AN}{\b\insrsid134188\charrsid11207998 OTHER :::::::::::::::PLAINTIFFS \par }\pard \qc \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid11207998 {\b\i\insrsid134188\charrsid11207998 \par }{\b\insrsid134188\charrsid11207998 -Vs- \par \par BARCLAYS BANK OF UGANDA LTD:::::::::::::::::::::DEFENDANT \par \par \par }\pard \ql \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid11207998 {\b\insrsid134188\charrsid11207998 \par BEFORE:\~ }{\i\insrsid134188\charrsid11207998 HON MR. JUSTICE ANUP SINGH CHOUDRY \par }\pard \qc \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid11207998 {\insrsid134188\charrsid11207998 \par }\pard \qc \fi-1440\li1440\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin1440\itap0\pararsid11207998 {\b\insrsid134188\charrsid11207998 \par JUDGMENT \par \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid11207998 {\insrsid14515161\charrsid11207998 The Plaintiff is a property company and customer of the defendant bank. The Plaintiff allege}{ \insrsid134188\charrsid11207998 that the defendants Barclay Bank have acted unlawfully and in bad faith in attempting to enforce the securities by selling }{\insrsid14515161\charrsid11207998 the two properties known as Block 244 Plot 4740 }{ \insrsid134188\charrsid11207998 Kisugu and Block 28, Plot 1018 and Plot 1012 Makerere and they should be restrained from doing so while th}{\insrsid14515161\charrsid11207998 e properties can be disposed of}{\insrsid13514654\charrsid11207998 by themselves.}{\insrsid134188\charrsid11207998 \par \par They also seek declaration that the Bank\rquote s action are pre-mature and high handed and that the mortgage is void for}{\insrsid14515161\charrsid11207998 non-payment of stamp duty and}{\insrsid134188\charrsid11207998 they se}{ \insrsid14515161\charrsid11207998 ek specific performance against}{\insrsid134188\charrsid11207998 the bank }{\insrsid14515161\charrsid11207998 to honour its }{\insrsid134188\charrsid11207998 terms of the agreements which they allege the bank have breached. On the other han}{\insrsid14515161\charrsid11207998 d, the banks case is that }{\insrsid13514654\charrsid11207998 they have the right}{\insrsid134188\charrsid11207998 to proceed on their securities and seek declar}{\insrsid14515161\charrsid11207998 ation to enforce them.}{\insrsid134188\charrsid11207998 \par \par The facts of this case are that the Plaintiffs, Matama Hardware limited applied to the bank }{\insrsid14515161\charrsid11207998 for facilities to purchase two}{\insrsid134188\charrsid11207998 properties or}{\insrsid14515161\charrsid11207998 parcels of}{ \insrsid13514654\charrsid11207998 land and to }{\insrsid134188\charrsid11207998 develop them into a Hostel and Apartments. \par \par When the Plaintiff\rquote s came to the bank, }{\insrsid14515161\charrsid11207998 they }{\insrsid134188\charrsid11207998 brought with them a apex loan which was re-mortgaged to the bank in the sum of 895 million shillings. The bank also granted 1.5 billion as a further loan p ending grant of apex iv loan which the plaintiffs had applied for. In consideration of the facilities}{\insrsid10897053\charrsid11207998 , as mentioned in the facility letter}{\insrsid134188\charrsid11207998 dated 28}{ \super\insrsid134188\charrsid11207998 th}{\insrsid134188\charrsid11207998 July 2006, the bank made further advances in the sum of 334}{\insrsid14515161\charrsid11207998 ,000,000 }{\insrsid134188\charrsid11207998 million shilling with respect of ordin ary loan and 2}{\insrsid14515161\charrsid11207998 ,000,000 }{\insrsid134188\charrsid11207998 million shilling with respect to overdraft facility; the sum total of }{\insrsid14515161\charrsid11207998 approximately 2.9 billion shillings.}{ \insrsid134188\charrsid11207998 \par \par All the borrowings were secured on the two properties and there was a back up by way of debentures, gua}{\insrsid14515161\charrsid11207998 rantees and day to day cash}{\insrsid134188\charrsid11207998 in the hardware shop which was to be banked into the } {\insrsid14515161\charrsid11207998 current }{\insrsid134188\charrsid11207998 account. The security wa}{\insrsid14515161\charrsid11207998 s to cover the advance}{\insrsid134188\charrsid11207998 for working capital. \par \par }{\insrsid14515161\charrsid11207998 However, by the time the apex iv loan in}{\insrsid134188\charrsid11207998 the sum of 1.5 billion was to be advanced the plaintiffs were already in defaul t of the agreements as they failed to pay the loan account interest as well as the overdraft account interest. \par \par Furthermore, construction was i}{\insrsid14515161\charrsid11207998 ncomplete despite disbursement }{\insrsid134188\charrsid11207998 of the funds because they were not applied towards the project. \par \par And thirdly, proceeds of sale from the hardware shop were not deposited into the overdraft account. The time scale for the completion of the project was 1 \'bd years but that did not materialize. \par At the time when the loan was advanced, the total valuation of the}{\insrsid14515161\charrsid11207998 two properties was in the sum }{\insrsid134188\charrsid11207998 1.2 billion}{\insrsid14515161\charrsid11207998 shillings}{ \insrsid134188\charrsid11207998 , but a}{\insrsid14515161\charrsid11207998 }{\insrsid3874034\charrsid11207998 total sum}{\insrsid14515161\charrsid11207998 of 2.9 billion shillings }{\insrsid134188\charrsid11207998 was advanced }{ \insrsid10897053\charrsid11207998 to cover}{\insrsid14515161\charrsid11207998 the proposed }{\insrsid134188\charrsid11207998 development in the hope that when the project was completed, it would be worth around 4 billion}{ \insrsid14515161\charrsid11207998 shillings}{\insrsid134188\charrsid11207998 . This development loan was also secured by guarantees. \par \par In May this year the parties mutually co}{\insrsid14515161\charrsid11207998 nsented to an injunction as the defendants}{\insrsid134188\charrsid11207998 were expecting to sell one of the proper}{\insrsid14515161\charrsid11207998 ties to a prospective purchaser.}{\insrsid134188\charrsid11207998 }{\insrsid14515161\charrsid11207998 This}{\insrsid134188\charrsid11207998 did not happen and the banks we}{\insrsid14515161\charrsid11207998 r}{\insrsid134188\charrsid11207998 e further obstructed }{\insrsid5127450\charrsid11207998 when they found}{\insrsid134188\charrsid11207998 suitable purchasers, }{\insrsid5127450\charrsid11207998 because of }{\insrsid13514654\charrsid11207998 the injunction although it }{ \insrsid134188\charrsid11207998 was procured by consent in good faith; it should have never have been granted. This matter has come to the court which should not have been brought here. The courts can not stop the bank from exer cising its legal rights unless there is fundamental irregularity and they have several ways of enforcing their security either through the mortgage, debentures or guarantees. As I have stated the injun}{\insrsid5127450\charrsid11207998 ction granted in May should}{\insrsid134188\charrsid11207998 not }{\insrsid5127450\charrsid11207998 have }{\insrsid134188\charrsid11207998 been granted, but the plaintiffs were lucky to get away with it. \par \par Nor is it the role of the court to act as a mediator between creditor and debtor if the debtor is in}{\insrsid5127450\charrsid11207998 financial difficulties or }{\insrsid134188\charrsid11207998 in default of its agreements. \par \par Banks are seeking declaration to enforce the securities. They do not need this declaration because they are free to act within their legal rights as per the documents of}{\insrsid5127450\charrsid11207998 securities. The court has enquired into}{ \insrsid134188\charrsid11207998 this matter to see if there is any room for resolution in order to help t}{\insrsid10897053\charrsid11207998 he plaintiff. The court }{\insrsid5127450\charrsid11207998 heard}{\insrsid134188\charrsid11207998 evidence of Mr. Stephen Magimbi Corporate Manager in the Recovery Department of the Barclay\rquote s bank who was also party to the meeting when }{\insrsid5127450\charrsid11207998 the}{\insrsid134188\charrsid11207998 advance was being negotiated. He was very helpful in explaining how the transaction had transpired and the root it }{\insrsid5127450\charrsid11207998 had taken. The position as it }{\insrsid10813523\charrsid11207998 stands shows that}{ \insrsid134188\charrsid11207998 the market value of the two properties}{\insrsid5127450\charrsid11207998 or forced sale value}{\insrsid134188\charrsid11207998 would not exceed 1.}{\insrsid5127450\charrsid11207998 2 billion shillings}{ \insrsid134188\charrsid11207998 . The bank}{\insrsid15535037\charrsid11207998 s have total debt of 2.9}{\insrsid5127450\charrsid11207998 billion shillings}{\insrsid15535037\charrsid11207998 in principal}{\insrsid134188\charrsid11207998 plus interest of 1 billion}{\insrsid5127450\charrsid11207998 shillings making a total of 3.9}{\insrsid134188\charrsid11207998 billion}{\insrsid5127450\charrsid11207998 shillings}{\insrsid134188\charrsid11207998 . It is most unlikely that the bank is going to recover its monies}{\insrsid5127450\charrsid11207998 on the securities of }{\insrsid15535037\charrsid11207998 assets and}{\insrsid134188\charrsid11207998 it is most unlikely that the plaintiffs will be a}{ \insrsid5127450\charrsid11207998 ble to clear the debt}{\insrsid10813523\charrsid11207998 , even if th}{\insrsid13514654\charrsid11207998 ey found the purchaser thus plun}{\insrsid10813523\charrsid11207998 ging themselves}{\insrsid134188\charrsid11207998 into deeper and deeper problems. \par \par Not to make life difficult f}{\insrsid5127450\charrsid11207998 or the plaintiffs, the court invited them}{\insrsid134188\charrsid11207998 to clear the arrears if they wish the bank not to take any further actions. In the circumstances}{ \insrsid5127450\charrsid11207998 it is o}{\insrsid10813523\charrsid11207998 r}{\insrsid5127450\charrsid11207998 dered:}{\insrsid134188\charrsid11207998 \par {\listtext\pard\plain\lang1033\langfe1033\langnp1033\langfenp1033\insrsid134188\charrsid11207998 \hich\af0\dbch\af0\loch\f0 i)\tab}}\pard \qj \fi-720\li1080\ri0\sl360\slmult1\widctlpar \jclisttab\tx1080\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin1080\itap0\pararsid11207998 {\insrsid134188\charrsid11207998 That the injunction be discharged to enable the bank to facilitate sale of the properties. \par {\listtext\pard\plain\lang1033\langfe1033\langnp1033\langfenp1033\insrsid134188\charrsid11207998 \hich\af0\dbch\af0\loch\f0 ii)\tab}The Banks are free to enforce their securities unless the plaintiffs pay a s}{\insrsid13514654\charrsid11207998 um of one } {\insrsid5127450\charrsid11207998 billion shillings to}{\insrsid134188\charrsid11207998 the bank to clear the arrears on the capital amount within two weeks from the da}{\insrsid5127450\charrsid11207998 te of this order, and if the said}{ \insrsid134188\charrsid11207998 sum is paid, the banks will be stopped from taking any further action to enable the plaintiffs to restructure}{\insrsid5127450\charrsid11207998 their}{\insrsid134188\charrsid11207998 programme and }{ \insrsid5127450\charrsid11207998 financial }{\insrsid134188\charrsid11207998 arrangements. \par {\listtext\pard\plain\lang1033\langfe1033\langnp1033\langfenp1033\insrsid5127450\charrsid11207998 \hich\af0\dbch\af0\loch\f0 iii)\tab}}{\insrsid5127450\charrsid11207998 The Plaintiff\rquote s case be}{\insrsid134188\charrsid11207998 dismissed with costs.

\par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid11207998 {\insrsid134188\charrsid11207998 \par }\pard \qj \li360\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin360\itap0\pararsid11207998 {\insrsid134188\charrsid11207998 \par }{\b\insrsid134188\charrsid11207998 Signed:\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 \par Hon . Justice Anup Singh Choudry \par }{\b\insrsid8397804\charrsid11207998 4}{\b\super\insrsid8397804\charrsid11207998 th}{\b\insrsid8397804\charrsid11207998 }{\b\insrsid134188\charrsid11207998 September, 2008 \par }\pard \qj \li0\ri0\sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid11207998 {\insrsid134188\charrsid11207998 \par }}