Sembule Investment Bank Ltd v Lukwago Sam (Civil Suit No. 47 of 1997) [2000] UGHC 66 (13 March 2000)

Full Case Text

## THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

## CIVIL SUIT NO. 47B OF 1997

SEMBULE INVESTMENT BANK LTD PLAINTIFF

*f*

## VERSUS

LUKWAGO SAM DEFENDANT BEFORE THE HONOURABLE LADY JUSTICE C. A. OKELLO JUDGMENT

This suit was filed by the plaintiff against the defendant for the recovery of a loan and overdraft facilities, and interest **r** totalling shs. 33,281,795 which sum the defendant had failed to pay despite various demands made by the plaintiff. plaint, the plaintiff asked for interest on the principal sum at full, as well as costs of the suit. the rate of 17% from the date of filing the suit till payment in I In its

The defendant entered appearance (as was then required) and filed a defence in the suit. In its Written Statement of Defence, the defendant denied operating an account with the plaintiff. In fact, the defendant in paragraph 5 of the Written Statement of Defence denied that the plaintiff had a cause of action against him because the plaintiff's claim lacked particulars as regards loan amounts, ' when loan granted, the terms which governed the same and when the plaintiff's cause of action arose\*?

The suit was first listed before me for hearing on the 7th June 9, hearing notice upon counsel for the defendant. The suit was next before me on the 23/9/1999 when court ordered the suit to proceed n which occasion, it was adjourned for lack of service of to hearing under order 9 rule 17 (1)(a) of the Civil Procedure

Rules. The defence counsel had been served hearing notice but counsel and his client were absent from the court. The order for *5* hearing ex parte .was made on proper proof through the affidavit ^of a process server that the defence counsel had been served on the 10th September 1999.

Two issues were framed for determination:

- 1. Whether the defendant is indebted to the plaintiff in the IO sum claimed. - 2. prayed for. If so, whether the plaintiff is entitled to the remedies

The plaintiff called only one witness. one Norman Mukasa the plaintiff's Senior Banking Officer. Mr Mukasa's evidence was IS Senior Banking Officer in charge of recoveries in Allied Bank International, the plaintiff Bank. He testified that in the capacity of officer in charge of loan recoveries he handled the defendant's loan file and discovered that the defendant applied for a loan on the 1/10/1991 (Exhibit Pl) and the application was approved on the 6/10/1991, the defendant signed a letter of offer containing some terms such as interest [Exhibit P2]. Mr. Mukasa's further evidence was that the defendant . given further and addition loans between 1991 to the year 1995 as follows: that he is a was then an employee and was *:* rate, time for repayment.

i] On the 26/11/1991 shs. 300,000 was granted; •••

- -'ii] 16.3.1992 advance of shs. 300,000; - iii] 15.5.1992 a short term advance of shs. 600.000 to help the defendant with his wedding;

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iv] 4.8.1992 shs. 1.200.000; V] 17.1 1994 shs. 500,000;

vi] 10.1.1994 shs. 210,000.

Documents I related to the above loans were tendered in evidence **?** a bundle and marked exhibit P3. **n**

Mr. Mukasa testified that the defendant servicing his loan with the result that the loan amount and interest accumulated to the amount claimed in the suit. Consequently, Mr. Julian Laing one-time Chief Operations Officer in the plaintiff Bank wrote to the defendant informing him of his indebtedness, then in the amount of shs. 21,554,650; this was on the 30.10.1995. The said letter (exh P4) also proposed terms for repayment of the loan which terms the defendant accepted by signing Mr. Laing's letter. The defendant was dismissed on the 5.6.1996 because he was (as the witness put it) a long period which benefited him'to tune of shs. 9,000,000". The defendant's letter of dismissal was tendered and marked exh. P5. Mr. Mukasa stated that the defendant never paid back the money. M/S Makeera & Co. Advocates, then advocates for the plaintiff took up the matter Q5D of non payment on behalf of the plaintiff, and in this regard exchanged correspondences with the defendant including a demand letter from the' advocates dated 14.9.199.6 [exh P6] containing a demand for shs. 29,474,966 which the defendant replied to by his letter dated 20.9.1996 proposing payment of shs. 500.000 per month effective from December, 1996 [exh P7] . was not "manipulation of the treasury cash over a party to

Mr. Mukasa stated that up to the date of his testimony the defendant owed the plaintiff shs. 46,361,978 made up of the suit amount of shs. 33,281,795, the rest being costs, interest and

legal expenses. Finally, Mr. Mukasa's prayers were for judgment to be entered for the plaintiff for shs. 33,281,795 and interest at 37% per annum from date the suit was filed till payment in full and costs of the suit. Mr. Herbert Kiggundu counsel for the plaintiff applied to make written submissions on the evidence above. The application was granted.

In his written submissions the learned Mr. Kiggundu for the plaintiff argued that the plaintiff first lent the defendant shs. 1,000,000 on terms contained in the plaintiff's letter of offer dated 4/10/1991 [exh P2] and that there were further loans on 24.11.1991 shs. 300,000; the 10th March 1992; shs. 300,000; 15th May 1992 shs. 630,000, 4th August 1992 shs. 1,200,000; 10th January 1994 shs. 210,000 and 17th January 1994 shs. 500,000. Counsel argued that all the loans bore 41% interest, a term accepted by the defendant. He argued that the loans were not serviced by the defendant, but the defendant acknowledged his indebtedness to the plaintiff on two separate occasions [exh P4 and exh P7]. It was argued that the defendant was dismissed in June 1996 on account of his fraudulent activities through which he benefited to the tune of Shs.7,449,231= which fraudulent benefits were debited to his account. That the defendant owed the plaintiff shs.33,281,795 at the time the suit was filed in January 1997, that the defendant should be found indebted in that. sum when determining the first issue namely: whether the defendant is indebted to the plaintiff in the sum claimed. $\ensuremath{\mathrm{I}}$ now turn to consideration of the issues framed starting with the first issue.

A closer examination of the evidence before the court is called

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for to find out what is due to the plaintiff, if anything. The evidence before the court, both documentary and Mr. Mukasa's, is that in October 1991, the defendant applied for a loan of shs. $1,000,000$ (exh P1), the application was granted by the plaintiff in a letter dated 4th Oct. 1991 from the General manager addressed to the defendant (exh P2). The said letter set out terms to govern the loan as follows:

Loan amount: shs.1,000,000

Interest rate: 41% and at such rates of interest as shall be fixed by M/S Sembule Investment Finance Ltd from time to time.

Repayment: 6 months from the date of acceptance of the offer.

Commission to be charged at 1% on total loan granted, commission to be payable on acceptance of loan. Security - to be land title of Plot No.33 Block 326 at Samalia and Motor vehicle Toyota corolla.

Loan was to be utilized for construction.

The defendant was to meet all legal costs pertaining to the preparation and registration of security documents. The : defendant was further to execute a legal mortgage and any legal documents the plaintiff was to deem fit. The defendant accepted the terms contained in the said letter on the 4/10/1991. There was no specific evidence adduced to show that the loan was disbursed but a letter from the defendant to the plaintiff's General Manager dated 26.11.1991 (exh P3) shows that the loan was In the said letter, the defendant applied for a disbursed. further loan which he described as "short term"; it was for the

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sum of shs. 300,000. The defendant asked that this loan was to be in addition to an existing loan of shs. 1,000,000. The additional loan was approved by an official of the plaintiff through an endorsement in red ink at the foot of the letter where he wrote: " Loan officer

Mr. Lukwago (staff) was granted a commercial loan for construction of house (1,000,000) on the security of land title. Please grant an additional loan of 300,000= to him to be recovered in 1 weeks time for him to buy more materials.

This second loan was therefore to be governed by the same terms that governed the first one. The loan application from the defendant was made on the 16.3.1992. This application was addressed to the plaintiff's Task Manager for a loan of shs. 300,000 to be used to buy building materials for the defendant's house. In this application, the defendant made reference to the earlier two loans which is contrary to claims made by Mr. Mukasa. In paragraph 2 of the application, the defendant wrote:

"I have got a small balance on my loan account which I cleared prematurely. This amount and the balance on the loan account will be paid in six months. The security is still with you....."

The excerpt of the defendant's application above, shows that as of the 16.3.1992 the defendant had cleared a substantial part of the first two loans totalling shs. 1,300,000 a small debit balance was to be carried forward and to form part of the new loan of shs. 300,000 applied for on the 16.3.1992. In the absence of evidence from the plaintiff that the claim the defendant made then was rejected by the plaintiff, I accept the contents of the letter that the defendant had, as of that date,

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3c substantially cleared the debt he owed the plaintiff. As regards what was carried forward, the duty of the plaintiff to prove the amount then outstanding. This, the plaintiff failed /to do, I shall therefore take it that the amount due then was insubstantial. it was

appears from two endorsements at the foot of the said application that the loan was granted. "Entries passed (signature) 17/3/92." The endorsements read: "Process;" and To return to the defendant's application of the 16.3.1992, it

There is no evidence before the court concerning the terms agreed upon by the parties, to govern the said loan. IX?

The next loan application made by the defendant was dated 15.5.1992 addressed to the General Manager of the plaintiff Bank. This application was for the sum of shs. 630,000 to be used bythe defendant for his wedding obligations. Security for the loan was to be security already in the plaintiff. Endorsements on the application show that land title was taken the plaintiff and loan entries passed. No terms to govern the loan were spelt out. as security by an official of the hands of

On the 4.8.1992, there was yet another application for a loan of shs. 1.200.000 from the defendant. The application was addressed to the Manager of the plaintiff Bank through the Managing Director. The Managing Director signed, the application on 5/8/1992. It is not clear however, whether the loan was granted. and if so on what terms.

There were two other applications from the defendant, dated 10/1/1994 for temporary overdraft of shs. 210.000 secured by a dollar cheque which was to mature on the 30.1.1993. The

application was endorsed with words "LOANS"

This is okay. Allow shs. 210.000 against draft of \$200. Please present on due date. signed $10/1/$

The last of the applications was dated 17.1.1994 addressed to the Manager of the plaintiff Bank. It was an application for a 10 temporary loan of shs. 500.000 repayable in one month. This application was approved. It was to carry "c/fees" and some other charges which is illegible.

I went through a rather detailed examination of the loan applications received by the plaintiff from the defendant in an $15$ effort to show that other than the first loan and possibly the second loan, the rest of the loans were granted to the defendant without the governing terms being spelt out. In fact, it appears from the contents of the various documents making up exh P3 that no terms were agreed up by the parties. In view of the vaqueness 20 of the terms to govern these subsequent five loans, I find that the plaintiff did not intend to charge the defendant any interest for the loans, nor did the parties agree that the defendant should bear the burden of any other charges other than the obligation to pay back the money within the time specified by the defendant in the various applications. In this regard, I reject the evidence adduced that the plaintiff undertook to pay interest on all the loans at 41% per annum. That interest rate applied to the first loan of shs. 1.000.000 and by implication to the second loan of shs. 300.000 [granted on 26.11.1999]. 30 These five loans were for shs. 2.840.000. Although it was argued

for the plaintiff that as of the 30.10.1995 the defendant owed the plaintiff shs. 20.544.650 on his loan account in addition to

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another shs. evidence adduced in court to show that the defendant engaged in In fact, exh P5 from the plaintiff's Chief Operations Officer to the defendant, is full of contradictions as regards what was due to the plaintiff from the defendant on account of the latter's alleged fraud. fraudulent activities with the plaintiff's money resulting in his / benefit to the tune of shs. 7.449.231 [exh P5] . Nor was 1.000.000 salary advance, no evidence was adduced in court to show how the figures were arrived at.

In paragraph (1) of the said letter, the Chief Operations Officer stated that the amount was about shs. 9 million. In the second paragraph, the figure was variously mentioned as shs. 7.450.000 and shs. 7.449.231. At any rate, the letter is clear about this sum, it was not a loan negotiated between the parties herein, but a debt alleged to have resulted from the criminal activities of the defendant. In the absence of evidence that both parties in this suit agreed to treat the fraudulent acts of the defendant as a legitimate loan transaction, I reject the argument that the unascertained sum subject of the alleged fraud should be treated as a loan to the defendant.

Contrary to the submissions of the learned counsel . for the plaintiff there is no evidence before the court that the defendant admitted the allegations of f-raud contained in exh P5. As P7, I evidentiary value in the two documents. The statement of account mentioned in exh P6 from M/S Makeera and Co. Advocates to the defendant, does not show how the advocates arrived at the figure of shs. 29,474,966 mentioned in the letter. The statement of find no regards exh P6 read together with exhibit

account which apparently accompanied that letter was not availed to the court. Exh P7 in which the defendant is alleged to have admitted the debt of shs. 29.474.966 has no evidentiary value Z because it is not signed by the author unlike all other correspondences from the defendant to the plaintiff [exh Pl, P3] and documents executed or signed by both parties [exhibits P2, and P4]. are the following: In the end, my brief findings on issue number one

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a] The defendant borrowed shs. 1.000.000 from the plaintiff on terms specified in exh P2. substantial portion of that money to the plaintiff by the 16.3.1992 [Exh P3]. He paid back a

The balance outstanding on that loan plus a further loan granted on the 26/11/1991 (exh P3) were not proved in court by evidence. The court cannot therefore make any orders concerning the sum outstanding on the insufficient evidence before the court.

b] further shs. 2,840,000 [letters dated 16.3.1992; 153.1992; and 4.8.1992]. The defendant borrowed a sum of 10.1.1994; 17.1.1994;

were granted- •The statement of accounts (exh P8 and annextures to exh P4) are of no help to the plaintiff's claims because these claim. the suit was filed. The clear evidence is of a debt of shs. 2,840,000 only due from the defendant to the plaintiff. The answer to the first issue is that the defendant is not indebted documents present only the'tail end or part of the plaintiff's The documents do not contain evidence of the various transactions in this action from the start to January 1997 when Q—ST There was no evidence of the terms on which these later loans

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to the plaintiff in the account claimed. The defendant*' s* indebtedness is for the sum of shs. 2,840,000 only. The second issue is whether the plaintiff is entitled to the remedies prayed for.

The plaintiff has proved part of its claim and is therefore entitled to the following remedies:

- a] Judgment against the defendant for the sum of shs. IO 2.840.000. - b] Interest on the above sum at 37% from the date of filing the suit [16.1.1997] till payment in full. - c] Costs of the suit to be paid to the plaintiff by the defendant.

C. A. OKELLO

*n*

JUDGE. 13/3/2000.

13/3/2000

Mr. Bagaye for plaintiff.

Counsel:

We were served by the clerk of the defendant firm. So they are aware.

Court:

Judgment read in chambers.

A. RUHINDA D/REGISTRAR.

## **THE REPUBLIC OF UGANDA**

### **IN THE HIGH COURT OF UGANDA AT KAMPALA**

## **CIVIL SUIT NO. 47 OF 1997**

#### **PLAINTIFF ALLIED BANK INTERNATIONAL FORMER** - **SEMBULE INVESTMENT BANK LTD**

# **VERSUS**

# **LUKWAGOSAM DEFENDANT**

## **DECREE IN ORIGINAL SUIT (Under Order 18 r 6 and 7)**

**13 THIS SUIT** coming for final disposal on the ...!.?........... Day of .3...2000 Before 1 lor Lordship C. A. Okcllo in the presence of Mr. Andrew Bagaayi for the Plaintiff and non-appearance by the Defendant, it is HEREBY ordered and decreed that:

- **i.** The Defendant pays the Plaintiff Ug. Shs. 2,840,000/= (Two million eight hundred forty thousand shillings only). - **2.** The Defendant pays interest on the above at 37% from the date of filing till payment in full. - **2.** The Defendant pays the costs ofthe suit.

#### **PARTICULARS:-**

- **1.** Principal to the PlaintiffUg. Shs. 2,840,000/= (Two million eight hundred forty thousand shillings only). - **2.** Interest on the principal at 37% from date of filing till payment in full. - 3. Costs ofthe suit.

GIVEN under my hand and the Seal ofthis court this^.'T. Day of3..2000.

**REGISTRAR/** ^pUty registrar

*EXTRACTED BY:- Kasirye, Byanihanga & Co. Advocates & Solicitors, Plot 33 Clement Hill Road P. O. Box 10946 Kampala.*