Ssekatawa & 3 Others v Mogo Loans SMC Limited (Civil Suit 503 of 2021) [2023] UGCommC 282 (12 April 2023)

### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION]

### **CIVIL SUIT NO. 503 OF 2021**

### 1. SSEKATAWA PATRICK

### 2. ASABA SEDRACK

### 3. CHIGAI MOSES

4. MUZORA HENRY::::::::::::::::::::::::::::::::::::

### **VERSUS**

# 1. MOGO LOANS SMC LIMITED:::::::::::::::::::::::::::::::::::: **BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI JUDGMENT**

## **PLAINTIFF'S CASE**

The defendant impounded the plaintiff's motor vehicles on various days which aggrieved the plaintiffs because this was done without court orders, and the defendant did not serve and register notices of default and enforcement with the Uganda Registration Services Bureau (URSB) and neither did it serve the plaintiffs with notices of sale nor register the same with URSB. Further that the loans provided for compound interest and for increasing interest rates on account of default.

The plaintiffs seek unconditional release of motor vehicles registration numbers UBF 956X, UBB 101R, UBF 394J and UBF 229U belonging to the respective plaintiffs or their respective monetary values which are Ugx 30,000,000/=, 29,570,000/=, 55,000,000/= and 24,000,000/=.

The plaintiffs also seek payments from the defendant in respect of lost income and money used to hire alternative means of transport, a declaration that the defendant is in violation of the provisions of the Tier 4 Microfinance Institutions and Money Lenders Act 2016 and a declaration that the renewal of the defendant's money

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lending license for the year 2021 was unlawful, general damages and costs of the suit.

## **DEFENDANT'S CASE**

The plaintiffs owned motor vehicles UBF 956F, UBB 101R, UBF 394J and UBF 229U respectively which were used to enter asset financing loan agreements with the defendant. The plaintiffs defaulted on their loans and the subject property lawfully sold to 3<sup>rd</sup> parties for recovery of their respective loans.

The defendant denies liability for the plaintiff's claims and avers that all her actions were lawful on account that the plaintiffs were in breach of the money lending agreements and that at the time of sale, the defendant was in possession of the aforesaid motor vehicles.

The defendant also avers that the alleged causes of action arose on different days and between different parties and a preliminary point of law would be raised for striking out the suit with costs.

During the hearing the first, third and fourth plaintiffs were witnesses to wit PW1, PW2 and PW3 respectively. The second plaintiff could not be traced and was struck off the plaint upon a prayer for the same by his counsel. The defendant presented one witness namely Annet Nabanoba (DW 1). Counsel for the parties agreed to file written submissions in respect of their clients' cases and the same have been considered in this Judgment.

## **REPRESENTATION**

The plaintiffs were represented by M/s Ayebazibwe, Makorogo & Co. Advocates while the defendant was represented by M/s Walusimbi & Co. Advocates.

## **JUDGMENT**

During the scheduling conference, the parties agreed on the following Issues:

- 1. Whether the plaintiffs have a cause of action against the defendant - 2. Whether the plaintiff's suit is barred by law - 3. Whether the loan agreements between the plaintiffs and the defendant comply with the provisions of the Tier 4Microfinance Institutions and Money Lenders Act 2016 and Security Interest in Movable Property Act 2019 - 4. Whether the loans agreements between the plaintiffs and defendant are enforceable

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- 5. Whether the defendant's act of impounding and the alleged selling of the plaintiffs' motor vehicles was lawful - 6. Whether the plaintiffs are entitled to the prayers sought for in the plaint.

### Issues 1 and 2:

Counsel for the defendant submitted that the plaintiffs have no cause of action against the defendant because the defendant is not mandated to enforce provisions of the Money Lender's Act, yet from the plaint alone, the plaintiffs seek prayers that the defendant is in violation of the provisions of the Money Lender's Act and that a declaration that the renewal of the defendant's money lender's license of the defendant was unlawful.

Counsel submitted that section 3(1) of the Security Interest in Movable Property Act states that the Act applies to a tangible asset in Uganda, among others; and that the remedies the plaintiffs seek are all within the ambits of the Tier 4 Microfinance Institutions and Money Lender's Act and not the Security Interest in Movable Property Act under which the suit transactions were made and are treated and not the said Tier 4 Microfinance Institutions and Money Lender's Act.

With regard to whether the plaintiff's suit is barred by law, counsel for the defendant submitted that the plaintiffs' respective transactions with the defendant are treatable under the Security Interest in Movable Property Act and not the Tier 4 Microfinance Institutions and Money Lender's Act. He submitted that the remedies applicable on default are provided for under sections 44, 45, 46, 47 and 48 of the Security Interest in Movable Property Act and more specifically section 46(2) which provides for remedies which include proceeding with respect of the goods covered by the document of title, in instances of default, even without a court order.

Counsel submitted that to this extent, the plaintiff's suit applies the Tier 4 Microfinance Institutions and Money Lender's Act to securities on movable property which is illegal and barred by law. Counsel concluded by citing the case of Makula International Ltd vs His Eminence Cardinal Nsubuga & Anor Civil Appeal 4 of 1981 where it was held that a court of law cannot sanction what is illegal, and illegality once brought to the attention of court overrides all questions of pleading, including any admission made thereon.

On the other hand, counsel for the plaintiff did not make any meaningful submissions regarding Issue 1 and with regard to Issue 2, he submitted that section $98(1)$ (a) of the Tier 4 Microfinance Institutions and Money Lender's Act that provides for transactions in which interest charges is not in excess of 9% per year, in the instant

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suit none of the plaintiffs was charged less than 50olo interest rate per year as clearly indicated in their respective loan agreements.

Counsel prayed that the preliminary objections raised by the defendant are dismissed for having no merits with costs to the plaintiffs.

In the case of rororo cement co. Ltd vs Frokina International Ltd c. A No.2 of 2001 court held that a cause of action means:

"everyfact which is material to be proved to enable the plaintiff to succeed or everyfact which if denied, the plaintiff must prove in order to obtain judgment"

In the case of Auto Garage vs Motokov (No.3) (1971) EA 514 the ingredients of a cause of action are: -

- t. The plaint must show that the plaintiffenjoyed a right - ii. That right has been violated and - iii. That the defendant is liable.

It is also a settled principle of law that in order to determine whether a plaint discloses a cause of action, only the plaint and any attachments thereto are to be perused with the assumption that the averments therein are true. (Jeraj Sharif v Fancy Stores 11960l EA 374; Sukuku Agaitano v Uganda HCCS 29g of 2012; Shumuk Springs Development Ltd & others v Joseph Sempebwa & others M. A. 502 of20l3).

In the present case, a close look at the plaint reveals that the plaint does not disclose any clear cause ofaction against the defendant. All the plaintiffs refer to are claims against the defendant for unconditional release of motor vehicles belonging to the plaintiffs and damages and then they proceed to highlight how their cause ofaction, which remained undisclosed, arose. The plaintiffs attach loan agreements to their plaint but do not indicate whether they are the basis of their action nor whether they were breached by the defendant and in which manner. Neither do the plaintiffs show

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the extent to which they carried out their obligations in order to be able to lay claim of rights allegedly violated by the defendant.

In the premises, this Court is unable to discern from the plaint the alleged right the plaintiffs enjoyed, that the alleged right was violated and that it was the defendant that was responsible for the violation.

Be that as it may, having carefully read the pleadings in this matter this Court observed that in paragraph 13 of the defendant's written statement of defence, it was contended that the plaintiffs' claim arose from different transactions with different terms and conditions and at the earliest opportune moment, the defendant shall raise a preliminary objection to the effect that the plaintiffs and their causes of action are wrongly joined and ought to be struck out.

Order 1 rule 1 of the Civil Procedure Rules provides:

"All persons may be joined in one suit as plaintiffs in whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions is alleged to exist, whether jointly, severally or in the alternative, where, if those persons brought separate suits, any common question of law or fact would arise."

In Yowana Kahere and Others v Lunyo Estates Limited [1959] 1 EA 319 where eight plaintiffs each of whom claimed to be a tenant of the defendant company but were not joint tenants of the same holding sued for alleged interference with their right to possession among other things, the Court held that:

- $(i)$ the causes of action set out in the plaint did not arise out of the same act or transaction or series of acts or transactions but out of wholly distinct and independent acts of dispossession or interference with the right of possession. - There was no question of law or fact common to the several plaintiffs and $(ii)$ there was misjoinder of plaintiffs and a misjoinder of causes of action.

Further, in G. G. Kanani v M. H. Desai and Another (1953) 7 ULR 135 in which a landlord claimed in one suit to eject two tenants from different portions of the same building Ainley J. held, inter alia, that:

"... No right of relief existed until there was defiance on the lawful will of the landlord. In this case there were two separate acts of defiance. These acts may have

been simultaneous, they may have been based on the same grounds, but for all that they were two separate and distinct acts each of which (on the assumption that the plaintiff's allegations are well founded) gave rise to a right of relief against separate *and distinct persons.*"

In this case, therefore, there is need to determine whether the reliefs sought by the $1^{st}$ , $3^{rd}$ and $4^{th}$ plaintiffs arise out of the same transaction or series of transactions or in the alternative whether there is a common question of law or fact. The term "series" was defined by Honourable Justice Hellen Obura in Turyamureeba vs Rugyegye & Another M. A. 518 of 2013, where she stated that according to the Cambridge International Dictionary of English 1<sup>st</sup> Edition, series means "*a number of similar or related events or things, one following another.*"

In the present case, the 1<sup>st</sup> plaintiff on 1<sup>st</sup> October 2019 obtained a loan facility from the defendant company amounting to Ugx 21,000,000/= payable with interest of 5.5% per month on terms and conditions agreed upon by the parties as per the agreement marked as DE1 in the defendant's trial bundle. The said loan facility was for a period of 24 months and was to be repaid on a monthly basis at Ugx 1,426,037 per 5<sup>th</sup> of each successive month effective 5<sup>th</sup> November 2020 to 5<sup>th</sup> October 2022. The said loan was secured by the 1<sup>st</sup> plaintiff's motor vehicle registration number UBF 956X Toyota Premio and the defendant company caveated its logbook as a lien for its interest. The 1<sup>st</sup> plaintiff signed a chattel mortgage agreement with the defendant company which among other things allows the lender the right to recover and repossess the mortgaged asset in event of default of payment.

The 3<sup>rd</sup> plaintiff on 25<sup>th</sup> February 2020 obtained a loan facility from the defendant company amounting to Ugx 26,400,000/= payable with interest of 2.85% per month on terms and conditions agreed upon by the parties as per the agreement marked as DE3 in the defendant's trial bundle. The said loan facility was for a period of 36 months and was to be repaid on a monthly basis at Ugx 1,751,757/= per the $20^{th}$ of each successive month effective 20<sup>th</sup> March 2020 to 20<sup>th</sup> February 2023. The said loan was secured by the 3<sup>rd</sup> plaintiff's motor vehicle registration number UBF 394J Super Custom and the defendant company caveated its logbook as a lien for its interest. The 3rd plaintiff signed a chattel mortgage agreement with the defendant company which among other things allows the lender the right to recover and repossess the mortgaged asset in event of default of payment.

The 4<sup>th</sup> plaintiff on 23<sup>rd</sup> December 2019 obtained a loan facility from the defendant company amounting to Ugx 19,500,000/ $=$ payable with interest of 5.5% per month

on terrns and conditions agreed upon by the parties as per the agreement marked as DE4 in the defendant's trial bundle. The said loan facility was for a period of 24 months and was to be repaid on a monthly basis at lJgx 1,564,247/:per the 5th of each successive month effective 5th February 2020 to 5tr'January 2022. The said loan was secured by the 4th plaintiffs motor vehicle registration number IJBF 229 tJ Subaru Forester and the defendant company caveated its logbook as a lien for its interest. The 4th plaintiff signed a chattel mortgage agreement with the defendant company which among other things allows the lender the right to recover and repossess the mortgaged asset in event of default of payment.

The ptaintiffs appear to have defaulted on their loan obligations resulting into the alteged impounding and subsequent sale of the pledged securities to recover monies due to the defendant and for which they seek right to retiefs sought in the plaint. The reliefs sought by the plaintiffs include unconditional release of their motor vehicles and payment ofdamages by the defendant.

It is clear from the fore going that the three transactions above involved independent loan obligations taken out by each plaintiff with the defendant company on different dates and all with different terms and conditions that regulated the operation of the said transactions. The individual loan transactions, although based on similar terms and conditions and simultaneous acts of the parties, were not related events having been entered into independently and, therefore, could not have arisen from the same transaction or series of transactions, one following the other. Neither do questions of law or fact common to all the plaintiffs arise from the said separate and distinct transactions.

Further, the 3'd plaintiff according to the pleadings seeks a declaration that the defendant company is in violation of provisions of the Tier 4 Microfinance Institutions and Money Lender's Act and a declaration that the renewal of the defendant's money lending license for the calendar year 2021 was unlawful. It is the considered opinion of this court that the 3'd ptaintiff s action against the defendant in this regard, raises different questions of law and fact in respect of the violation of the law cited therein which woutd entail a separate suit against the entity responsible for implementation / management of the said law.

From the fore going, I find that there was a misjoinder of plaintiffs in this matter and the present suit is improperly before this Court.

The above notwithstanding, this court observed further that the money lending agreements and chattel mortgages entered into by the plaintiffs and the defendant

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were all executed under a law that was repealed and was replaced by the Securities Interest in Movable Property Act which commenced in September 2019. The effect of such actions renders the transactions irregular and raises questions regarding the seriousness of the parties in this matter.

For all the reasons above and being a Court that does not condone/ entertain illegalities, the present suit is dismissed accordingly.

I do not find it necessary to address my mind to the rest of the Issues raised by the parties at this point.

Given the circumstances of this case, each party will bear their own costs of the suit.

Amb fature

HON. LADY JUSTICE ANNA B. MUGENYI DATED...................................