Mulagwe v Lanex Forex Bureau Limited and 4 Others (HCT - 00 - CC - CS - 358 - 2006) [2011] UGCommC 2005 (10 January 2011)

Full Case Text

# **^^MPUBLIC OF UGANDA**

**IN TKE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION)**

### **HCT - 00 - CC - CS - 358 - 2006**

**::::: PLAINTIFF 5 °AMAS MULAGWE**

#### **VERSUS**

*j*

- **1. LANEX FOREX BUREAU LTD** - **2. STANHOPE FINANCE CO. LTD** - **3. NOORALI MANJI**

*I* **■'**

- **4. MOHAN DROLIA MANJI** - **5. DIAMOND DROLIA**

**:::: DEFENDANT**

**L**

**I** *0*

**j s**

**lo**

**L**

### **BEFORE: HON. JUSTICE GEOFFREY KIRYABWIRF**

# **■J I D (, M FM**

repay the s. Plaintiff that the The Plaintiff brought this suit against the Defendants jointly and severally for the refund of US\$160,000 being money deposited by him with the first Defendant. The Plaintiff further sought the recovery of interest on the said amount at the rate of US\$12,000 per month from October 2005 until payment in full. It Is the case of the Plaintiff that sometme .in the thp vpar y 2003 at the request of the first Defendant he made 't to them of US\$160,000 in consideration of a monthly interest of a finanCial P reduced into writing. However, upon demand to . !C.412 000 Which undertaking w the first Defendant has failed to do so. It is also the case for the nd second Defendants had common management, directorship

![](_page_0_Picture_14.jpeg)

and Shareholdin9- That being the case, the second, third, fourth and fifth Defendants y able with the first Defendant for the non payment of the said sums.

deny the allegations and in the particular the second to fifth aver that the claim discloses no cause of action against them. The first d second Defendants at the time of the suit were closed following statutory inten/ention by the Central Bank. The Defendants Defendants

At the pre trial scheduling conference, the following issues were agreed for trial;

- **1)** Whether the first Defendant could lawfully take deposits from the public? - **2)** 1 o US\$160,000 as alleged? Whether the Plaintiff did make a deposit with the first Defendant of - 3) If the Issue No. 2 above is answered in the affirmative, whether the Defendants or any of them is liable to pay the Plaintiff the said sum with interest as claimed?

Remedies. **4)**

Mr P Katamba and Mr. Wamukota appeared for the Plaintiff while Mr. K. Masembe appeared for the Defendants. The Plaintiff's called two witnesses namely; Mr. Roopesh Solanki (the former manager of the first Defendant as PW1) and the Plaintiff (as PW2) The Defendants called one witness Mr. Nandannan Kannapulakkal (the ^mer General Manager of both the 1\* and *2-* Defendants as DW1).

Court foun' turned out to be u c mv mind to the above issues, it is important to point out that the Before I address my d itself in quite a dilemma when the tapes used to record the proceedings counterfeit and the whole recorded proceedings were lost. It took a

d that the lawyers resolve this matter until all the parties agre Court's provide court with their hand written notes to guide the Court record. For , xuejr lawyers, this practical solution the Court thanks the parties an Secondly, ought to add an issue counsel for the Plaintiff in their written submissions so under order 15 rule 5 (1) of the Civil Procedure Rules (CPR) verV long time to

This issue is whether or not if the Plaintiff made the alleged deposit with the fir Defendant, such a transaction is enforceable in law?

to the parties. framed before court and both parties generally submitted therefore incorporate its detail within Issue No. 3 as no prejudice has been occasioned Counsel for the Defendants objected to this addition and did not address it dir ectly. That notwithstanding, I find that the added issue is really part of Issue No. 3 as on it and Court will

## **Whether the first Defendant could lawfully take deposits** Issue No. 1: from the public

**1) '5** This issue as I see it, addresses the legality of the whole deposit transaction Co *for the Plaintiff submitted that the deposit* was legal. He relied uoon o.j of the *Foreign Exchange* Act 2004 and definition of foreign exchange therein which provide

> *"Foreign exchange business means the business of buying, selling, borrowing or handling offoreign currency..."*

**5**

i o

It is the the transaction issued an dated 3rd case for the Plaintiffs that this is wide enough to co between the Plaintiff and the first Defendant. The first Defends acknowledgment Exh. P.l signed by Mr. Roopesh Solan i October, 2005 which reads;

### *Ref: \$160,000- Deposit*

**I!**

*This is to confirm that we have received the sum of \$160,000- (one hundred sixty thousand dollars) as fixed deposit from Mr. Damas Mulagwe at an interest rate of \$12,000- (twelve thousand dollars) per month for three months automatically renewable..."*

Counsel for the Defendants however it was submitted that the law regulating the **Id** activities of forex bureau is the Exchange Control (Forex Bureau) Order, S.l No. 7 of 1991. Regulation 3 thereof provides;

"... *Forex bureau means a business enterprise licensed under paragraph 8 of this order to carry on the business ofbuying and selling foreign currency... "*

Regulation 15 of the order further provides

*shall-*. *A forex bureau shall In carrying out the business ofa forex bureau, only sactions and in particular no officer or staff member engage in spot tran*

*cover an e) Issue any officialforex bureau receipt for a purpose other than to actualpurchase orsale offoreign exchange*... *"(emphasis mine)*

**/4**

**L**

**>**

**L**

Counsel for the Plaintiff in response to this submitted that the Foreign Exchange Act 2004 being the principal Act takes precedence over the Exchange Control (Forex Bureau) Order S. 1 No. 7 of 1991 as these are regulations. In particular he referred me to Section 21 of the Foreign Exchange Act 2004 which provides

"... This Act shall take precedence over all other existing legislation relating to foreign exchange and any contradiction in any law is modified to the extend of the contradiction ..."

I have addressed myself to the submissions of both counsel on this issue and the law. Section 20 (2) of the Foreign Exchange Act 2004 seems to resolve this whole issue. It provides

$\mathbb{R}$

"... the Exchange Control (Forex Bureau) Order 1991 shall continue in force until revoked or amended by regulations made under Section 18..."

I have not seen any revocation or amendment of that order. That being the case, counsel for the Defendants is correct in stating that; forex bureau's may not take deposits from the public. This is specifically prohibited and thus is illegal. That resolves Issues No. 1.

## Whether the Plaintiff did make a deposit with the first Issue No. 2: Defendant of US\$160,000- as alleged.

The position of the Plaintiff is straight forward that a deposit of US $$160,000-$ was made to the first Defendant and that this was acknowledged in Exh. P.1 (supra). This

![](_page_4_Picture_7.jpeg)

$\sqrt{5}$

$10$

$15$

$20$

The Plaintiff 9 ed for by one Solanki as manager of the first Defendant. Ied that the said deposit of US\$160,000- was accumulated over time starting US\$20,000- beginning 22nd December, 2003. The Plaintiff in support of this iied on counterfoil tabs from his cheque book to show when these payments were made (Exh. 13,14,15 and 16).

This upon. Counsel for the Defendants challenged Exh. P.l on the grounds that the wording showed that the deposit had been made at once whereas the testimony of the Plaintiff showed otherwise that the monies had been accumulated over time. submitted counsel for the Defendants was a modification of a written document which at the time) observing that he had made an admission that he forged several telegraphic transfers and was a convicted felon whose evidence should not be relied was not admissible under Sections 91 and 92 of The Evidence Act. Counsel for the Defendants attacked the credibility of Mr. Solanki (the manager of the. first Defendant

IjS before me. on the submissions of both counsel and the evidence I have addressed my mind

deposits license by Ban The resolution of this issue is really a finding of fact. I have already found that the it under the law was prohibited from taking deposits as a forex bureau, overwhelming evidence that the first defendant actually did take and this among other things led to the suspension of its Indeed counsel for the first Defendant wrote on the 21st first Defendant There is however from the public k of Uganda.

![](_page_5_Picture_4.jpeg)

*5*

**ii** 05 ^ee p-9) indicating that some claims would be paid while others which included that of the Plaintiff required further discussions. It is important te that, in that letter, counsel for the first Defendant noted that they wanted ... '*9 to have allpending claims settled once and for all..."*

transactions in exhibit D.6 are not spot transactions and can therefore be deemed to view of Exh. D.6 which is a table entitled *"claims considered for settlement* show a list of 37 claimants seeking refund from the first Defendant. Only claims number 36 for M/S Leo Impex (U) Ltd and 37 for the Plaintiff are deposits not linked to telegraphic transfers. Furthermore, it is only the deposit of the Plaintiff that has an interest component. In that regard, the transaction between the Plaintiff and the first Defendant is unique when compared to the rest of the cases. In any event all the be deposits from the public. That notwithstanding, there is evidence that about a year earlier on the 19th February, 2004 the Plaintiff in a similar manner deposited US\$60,000- at an interest rate of US\$4,500- per month (Exh. P.16).

**IS I** These are two documents namely; Exh. P. 1 and 16 seem to suggest a course of dealings between the Plaintiff and the first Defendant that is a relevant fact within the ing of Section 15 of The Evidence Act (Cap 6). That fact is that it is in 2004 and ■|ar transactions had occurred and were documented. Based on the evidence therefore I find that the Plaintiff did deposit the said US\$160,000- with the first Defendant.

**I1**

**/7**

**io**

**issue No. 3;**

# **^—the-Jssue No. 2 above is affirmative^-jwbgSbgL-^b^ ^fefldants or any of them is liable to paY the Plaintl£L£hg said sum with interest.**

ue is the same in substance as the additional issue raised by counsel for the aintiff as to whether such a transaction is enforceable in law.

Counsel for the Plaintiff submitted that; the money is indeed recoverable and therefore the transaction should be seen as enforceable.

He submitted that the duty to observe the law is on the person who asks for, solicits or receives the money but not on the person.-who submits to the demand and pays the money. In this regard, I was referred to the case of

#### **Kiriri Cotton Ltd V Ranchhoddas K. Dewani** [1960] E A 193.

He further submitted that even where a loan agreement was illegal, when the parties thereto are not in paridelicto, the Defendant should still repay the money as had and received. In this regard, counsel for the Plaintiff referred me to the case of

**goge^rketinq Boards V Kigezi Growers Cooperative Union** HCCS No. 437 of 1994

corporate I f r the Defendants in response submitted that if court found that the money d then only the first Defendant company should be liable and not the and directors fi.e. the other Defendants) based on the principle of Tf ,hpre was a fraud then it was perpetuated by an employee one liability. Ittnef

**&lt; O**

**'5**

**[**

**L**

or directors of the first Defendant. s°l«i and not ^shareholders Caseno fraud had been pleaded. However, in this

9 the findings in the earlier issues, this issue to my mind is straight forward. I Iready found on the evidence before court that the Plaintiff deposited the \$160,000 . The evidence also shows that even after closure by the Central Bank when the first Defendant found a genuine case of money deposited with it, then the claimant was settled. In other words, that money deposited with the first Defendant was treated as had and received. I see no reason to treat this case in a different way. The said deposit of US\$160,000- is money had and received and should be refunded. I so order that the first Defendant repay it. '

**J**

transaction. As to the interest of US\$12,000- per month also claimed by the Plaintiff, I find that this is not recoverable because it would go contrary to Regulation 15 of the Exchange Control (Forex Bureau) order 1991 which prohibits any business other than a spot

**I is my Mr.** that; notwithstanding I however agree with counsel for the Defendant that there is no liability that has been t bl'shed beyond the first Defendant that affects the second to fifth Defendants. 'n paragraph 9 his plaint only pleads common management, directorship . of the second, third, fourth and fifth Defendants. That in and shareholding in respect or tn . not sufficient to lift the corporate veil against them. I agree view without more is to have been behind this whole mess. - That Solanki apP^'s t0 other Defendants at best can be said to have exercised

![](0__page_8_Picture_4.jpeg)

**/9**

**io**

extremely poor corporate governance in the management of the had a collateral effect on what happened.

I accordingly dismiss the case against the second, third, fourth and fifth Defendants.

## **Issue** No, 4; Remedies

*I*

dingly find that the claim for US\$160,000- has been proved as money had and received and should be paid without interest as this was a prohibited transaction. The prayer for general damages is equally denied for the same reason given above.

denied costs. benefit from costs. In line with my holding in Wamala Nanseefa **V North Bukedi Cotton Company Ltd.** High Court Civil Suit No. 755 of 2005; where a party exercises poor corporate governance which contributed to the dispute that party though successful should be denied costs. For that reason, the second, third fourth and fifty Defendants are The Plaintiff was involved in a prohibited transaction and shall also not Each party shall therefore bear their or its own costs.

Justice Geoffrey Kiryabwire

**JUDGE '5**

**Date:**A;

**/io**

I O

#### 10/01/2011

11:37 a.m.

### **Judgment read and signed in open Court in the presenc z**

- Kalibala h/b for Masembe for Defendant - Plaintiff - Ruth Naisamula Court Clerk

**(^ffr^Kiryabwire**

**JUDGE**

**Date: 10/01/2011**

**/11**

| IN THE HIGH COURT OF UGANDA AT KAMPALA | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | CIVIL SUIT No.358 OF 2006 DAMAS MULAGWE $\mathbb{A}^{\frac{m}{1-\frac{m}{2}}\frac{m}{2}}$ | | 22 FFE 2011 1. LANEX FOREX BUREAU LIMITED VERSUS 2. STANHOPE FINANCE COMPANY LTD 3. NOORALI MANJI $\exists\, \mathbf{1}\nabla\,\mathsf{H}\, \mathbf{1})$ 4. MOHAN DROLIYA MANJI 5. DIAMOND DROLIA P. O. BOX 7166, KAMPALA | | DECREE IN ORIGINAL SUIT | | THIS SUIT coming up this 10 th -day of January 2011 for final disposal before His Lordship Honourable Justice Geoffrey Kiryabwire of the High court (Commercial Division) in the presence of the Plaintiff and in the presence of counsel Bwogi Kalibbala holding brief for Mr. Masembe Kanyerezi, counsel for the Defendants; |

#### IT IS HEREBY ORDERED and DECREED that;

- 1. The 1st Defendant pays to the Plaintiff U\$ 160,000 (United States Dollars One hundred sixty thousand only) being the total sum had and received by the 1st Defendant from the Plaintiff. - 2. The Plaintiff's case against the $2^{nd}$ , $3^{rd}$ , $4^{th}$ and $5^{th}$ Defendants is hereby dismissed. - 3. IT IS FURTHER ORDERED and DECREED that each party to the suit herein bears his/its own costs of the Suit.

**WE APPROVE:** $cond0$ M/S. KATAMBA & CO. ADVOCATES M/S. MASEMBE, MAKUBUYA, ADRIKO ARUGABA & SSEKATAWA (MMAKS) (Counsel for the Plaintiff) **ADVOCATES** (Counsel for the Defendants)

GIVEN under my hand and the Seal of this Honourable court this .1.2... day of $\begin{array}{c}\n\text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text{---} \\ \text$

$D/R$

REGISTRAR (COMMERCIAL DIVISION)

Extracted by: M/s. Katamba & Co. Advocates Plot 4 Wilson Road, Ivory Plaza 2nd Floor-Suite 14, P. O. Box 70801, Kampala.