Stanbic Bank (U) Limited v Royal Transit Limited & 2 Others (Civil Suit 514 of 2012; Civil Suit 515 of 2012) [2024] UGCommC 297 (19 April 2024) | Finance Lease Facility | Esheria

Stanbic Bank (U) Limited v Royal Transit Limited & 2 Others (Civil Suit 514 of 2012; Civil Suit 515 of 2012) [2024] UGCommC 297 (19 April 2024)

Full Case Text

**THE REPUBLIC OF UGANDA**

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

**(COMMERCIAL DIVISION)**

**CIVIL SUIT NO. 514 OF 2012**

**STANBIC BANK (U) LTD :::::::::::::::::::::::::: PLAINTIFF**

**VERSUS**

1. **ROYAL TRANSIT LIMITED** 2. **TADEO MUKONYEZI** 3. **MARUNGA MOLLY :::::::::::::::::::::::: DEFENDANTS**

**CONSOLIDATED WITH**

**CIVIL SUIT NO. 515 OF 2012**

**STANBIC BANK (U) LTD ::::::::::::::::::::::::::::::::: PLAINTIFF**

**VERSUS**

**TADEO MUKONYEZI :::::::::::::::::::::::::::::::: DEFENDANT**

**BEFORE: HON. LADY JUSTICE CORNELIA KAKOOZA SABIITI**

**CONSOILIDATED JUDGMENT**

1. **Introduction** 2. This is a consolidated judgment of two Civil Suits Nos. 514 and 515 of 2012 which were consolidated by a consent order of 2nd May 2016. The Plaintiff’s claim against the Defendants in Civil Suit No. 514 of 2012 was for recovery of Ug.shs. 370,606,486/= (Uganda Shillings Three Hundred Seventy Million Six Hundred Six Thousand Four Hundred Eighty Six) being unpaid sums accruing from a contract for financial lease facilities and interest thereon, general damages and costs of the suit. It was the Plaintiff’s case that by a finance lease facility agreement executed between the Plaintiff and the 1st Defendant on 24th February 2011, it extended a loan to the 1st Defendant of Ug.shs. 295,000,000/= (Uganda Shillings Two Hundred Ninety Five Million) and an insurance premium finance facility of Ug.shs. 5,700,000/= (Uganda Shillings Five Million Seven Hundred Thousand) to finance the takeover of a lease facility of four used TATA trucks. 3. Further that under the said agreement, the 1st Defendant was to repay the loan in full within 48 months and 10 months for the Insurance Premium facility with interest thereon at 5% per annum and the Uganda Shillings prime rate of 15% prevailing from time to time for both facilities. The 1st Defendant failed to perform the above obligations with an outstanding debt claimed by the Plaintiff. The claim against the 2nd and 3rd Defendants was that as directors of the 1st Defendant, they executed personal guarantees for repayment of the 1st Defendant’s loan to the Plaintiff, pursuant to which they are liable. 4. In their joint written statement of defence, the Defendants denied any liability to the Plaintiff and averred that the 1st Defendant challenged the sums computed by the Plaintiff as exaggerated and incorrect. Any obligation to the Plaintiff was already discharged through the sale of the trucks which were purchased by the loan. At the request of the Plaintiff, the 1st Defendant consented to the sale, proceeds from which would be used to repay the outstanding sums. In pursuance of that agreement, the 1st Defendant parked three of the trucks in the Plaintiff’s parking yard on Salama road, Makindye to facilitate the sale and recovery of the monies under the facility. The Plaintiff appointed Byarugaba Joseph as its representative in the sale of the trucks and the Defendants fully cooperated with him. The trucks were sold but the Plaintiff’s agents did not disclose the value of the trucks and proceeds from the sale. The return of the trucks and subsequent sale by the Plaintiff’s agents without any accountability extinguished any continued obligation on the Defendants and discharged their liability. 5. In Civil Suit No. 515 of 2012, the Plaintiff’s claim was recovery of Ug. Shs. 56,087,970 (Uganda Shillings Fifty Six Million Eighty even Thousand Nine Hundred Seventy) being unpaid sums outstanding from a contract for a lease facility and interest thereon, general damages and costs of the suit. The Plaintiff’ case was that on 16thApril 2009, the parties executed a finance lease facility agreement by which the Plaintiff loaned the Defendant USD 44,080 (United States Dollars Forty Four Thousand Eighty) and an insurance premium finance facility of Ug. shs. 10,959,390/=(Uganda Shillings Ten Million Nine Hundred Fifty Nine Thousand Three hundred Ninety) to finance the purchase of one brand new Tata Truck Model LPK 2516,20 by the Defendant. 6. The Plaintiff further claimed that under the agreement, the Defendant was to repay the full loan in sixty months and the insurance premium with interest thereon at the rate of 8.25% within 60 months, which the Defendant failed to honor. 7. In his written statement of defence, the Defendant denied any liability to the Plaintiff and averred that the Plaintiff had prior knowledge that the truck acquired by the Defendant was defective, not of standard quality, and could not serve its intended purpose yet the Plaintiff had an obligation to procure a truck that was fit for the disclosed purpose. Further that it was agreed that the Defendant would use the proceeds from the commercial use of the truck to discharge the facility or at least part thereof. Having been availed a defective truck, he could not raise the funds to discharge the credit. 8. In addition, the Defendant averred that the Plaintiff was notified of the defective truck and was asked to rectify the same to enable him use the truck to no avail. The Plaintiff did not exercise its right to claim under insurance to recover the value of the vehicle and although he offered to return the truck for re-evaluation and resale by the Defendant, this offer was not considered by the Plaintiff. The Plaintiff breached the contract through misrepresentation that the truck was fit for the commercial purpose disclosed to them by the Defendant and is therefore not entitled to any reliefs sought. In the alternative, the Defendant averred that the amount alleged as owed was exaggerated and miscomputed. 9. **Issues** 10. The following issues were agreed upon for determination under the joint scheduling memorandum: 1. Whether the 1st Defendant in Civil Suit No. 514 of 2012 is indebted to the Plaintiff in the sum claimed or at all. 2. Whether the 2nd and 3rd Defendants in Civil Suit No. 514 of 2012 are liable to the Plaintiff as guarantors or at all in respect of the loan advanced to the 1st Defendant. 3. Whether the Defendant in Civil Suit No. 515 of 2012 is indebted to the Plaintiff in the sum claimed or at all. 4. What remedies are available to the parties. 11. **Witnesses** 12. Hearing was by witness statements in lieu of examination in chief. The Plaintiff led evidence through Mr. Kyambadde Richard, its Officer Business Solutions & Recoveries as PW1 and Mr. Agaba Ambrose Mark, an Automotive Engineer/ machinery and Equipment Appraiser working with Automobile Association of Uganda at the material time as PW2. The Defendant’s witnesses were Mr. Ntende Moses Joseph, the Managing Partner of Ntende & Associates, affirm dealing in loss assessment and valuation of motor vehicles as DW1 and Mr. Tadeo Mukonyezi as DW2. 13. **Representation** 14. The Plaintiff was represented by M/s. S&L Advocates and the Defendants were represented by M/s. Magna Advocates.

e**) The Law and analysis of Evidence**

1. The Plaintiff bears the burden to prove to the satisfaction of Court the averments made if it is to succeed as required under section 101 of the Evidence Act. This burden is on a balance of probabilities. 2. PW1’s witness statement was filed on 20th December 2017 and an amended supplementary witness statement on 10th January 2018. In his first statement, PW1 recounted the averments in the plaints as summarised above, maintained that the Defendants had breached the above agreements despite receiving ample notice and reminders of the breach. Further, PW1’s evidence was that by October 2011, the 1st Defendant had breached the credit facility and had asked for a restructure which was granted. In February 2012, the 1st Defendant had again breach the credit facility and again asked for a restructure. By this time, the 1st Defendant was indebted to a tune of Ug.shs. 458,956,211/= (Uganda Shillings Four Hundred Fifty Eight Million Nine Hundred Fifty Six Thousand Two Hundred Eleven). 3. The Plaintiff repossessed three of the trucks namely registration Nos. UAN 074U; UAN 542U; and UAN 732L as provided for under the lease finance agreement and instructed its auctioneers to value the trucks to ascertain the market value and the forced value. It was not true that the 1st Defendant gave consent to the sale and the three trucks were sold for a combined figure of Ug.shs. 94,000,000/= (Uganda Shilling Ninety Four Million). It was also not true that the Defendants were not indebted to the Plaintiff and they together with their lawyers had consistently reached out to the Plaintiff and its lawyers to settle the matter amicably. That having breached the credit facilities, the Defendants occasioned financial loss to the Plaintiff who should be paid general damages and costs of the suit. 4. In his amended supplementary statement, PW1 introduced account statements bearing a stamp of the Plaintiff of 9th January 2018 to explain and prove the Defendants’ indebtedness. The summary of the same showed Ug. Shs. 373,722, 142 (Uganda Shillings Three Hundred Seventy Three Million Seven Hundred Twenty Two Thousand One Hundred Forty Two) being the debt owed by the first Defendant vide account 900016108 and Ug.shs. 67,210,254/= (Uganda Shillings Sixty Seven Million Two Hundred Ten Thousand Two Hundred Fifty Four) as the debt owed by the Defendant in Civil Suit 515 of 2012 vide account No 900012498. He further gave evidence that the Defendants had in the past confirmed their indebtedness to the Plaintiff through their lawyers by making a formal proposal, which was accepted by the Plaintiff through its lawyers in a letter dated 8th November 2013. Thereafter, a draft consent judgment was drafted by the parties. 5. In cross examination, it was PWI evidence that he joined the Plaintiff in 2013 and was not there in 2009 and 2011. The 1st notice was on 21st February 2012 and pages 8, 25 and 27 of the trial bundle have other notices. The notice on page 27 indicated arrears and cancelled the agreement. The sale was by public auction but he was personally not involved and did not know much about the sales. The advert was not part of the evidence. The trucks were valued by Armstrong auctioneers and Agaba Mark did not work for Armstrong. There were no specific instructions asking Agaba to value the trucks. The letters on page 27 to page 29 say without prejudice. The Letter from Royal Transit Ltd also says without Prejudice. 6. It was his evidence in re-examination that on page 20, the Bank was permitted to take possession of the trucks and the Defendant breached clause 11.1.of the agreement. He did not pay and there was money outstanding to the bank. The outstanding was Ug.shs.373,722,142 on 1st Defendant and Ug.shs, 67,210,000 for the Defendant in civil suit No 515, and the interest was found in the statement at pages 25 and page 26. The breach amounted to cancellation and the bank instructed the valuer AAU. He did not understand the word “without prejudice” and the Defendant offered to settle the agreement. 7. For coherence, the evidence of both PW2 and DW1 who both authored the evaluation reports will be summarised and dealt with under issue one when evaluating the reports. I will now turn to the evidence of DW2. 8. DW2’s evidence was that he was the 2nd Defendant in HCCS No. 514 of 2012 and the attorney of the 3rd Defendant in the same suit pursuant to the powers of attorney marked DE2. He was also the Defendant in HCCS No. 515 of 2012. The 1st Defendant secured a finance lease facility from the Plaintiff which filed HCCS No. 514 of 2012 prematurely as the period within which to pay in the finance lease agreement had not expired. Under DE1, the 1st Defendant consented to the sale of the trucks at a figure approved and consented to by the 1st Defendant. To aid this process, the 1st Defendant parked three of the trucks at the Plaintiff’s parking yard on Salama Road, Makindye. However, without any notification to the Defendants, the Plaintiff proceeded to sale off the trucks basing on under valuation reports. The documents pertaining to the sale of the trucks were only availed at the time of filling the Plaintiff’s trial bundle. 9. Further that the Plaintiff did not follow the right legal procedures before selling off the trucks on top of disregarding the contents of DE1. Since it was a lease facility to finance the takeover of four used trucks from Mega Best Millers Ltd, the trucks were supposed to undergo an initial valuation which was not done by the Plaintiff. Therefore, the condition of the trucks was not assessed yet they always needed repairs which he caused on behalf of the 1st Defendant. Before authoring DE1, he sought a formal valuation of the trucks from Ntende & Associates for purposes of establishing the market value of the trucks and discussing the sale figure for each respective truck with the Plaintiff. 10. Comparing the values indicated in DE3 and the Plaintiff’s valuations, the trucks were undervalued yet the Plaintiff had a duty to get the best value of the trucks. The Plaintiff did not show how it came up with the claimed figure and no deduction was indicated even after the alleged sale of the trucks. Therefore the alleged liability on the 1st Defendant was unfounded and the amount claimed in the suit was not within the Defendants’ knowledge. Whatever the Plaintiff’s claim, it was all discharged through the sale of the trucks and any failure by the Plaintiff to recover was caused by it defaulting the legal procedure and having disregarded the 1st Defendant’s communication. 11. In respect to HCCS No. 515 of 2012, he testified that the finance lease facility was meant to enable him through the Plaintiff acquire a Taata truck model LPK 2516 which he duly acquired. The truck was defective and not of standard quality, a fact known to the Plaintiff and could not serve its envisaged purpose. The Plaintiff was well aware that the proceeds from the commercial use of the trucks would be used to discharge the facility or at least part of it but even after notification of the defect, the Plaintiff filed the suit against him. In any case, the truck had an insurance cover in favour of the Plaintiff which the Plaintiff had not utilised to recover the value of the vehicle. 12. His evidence in cross examination was that he was a still a director in Royal Transit Ltd which was still conducting business in and outside Uganda. The 3rd Defendant was his wife and also a director in the 1st Defendant. He was aware that the 3rd Defendant issued a personal guarantee for the loans in the Plaintiff bank and he as well issued a personal guarantee to the loans given to the 1st Defendant. The personal guarantee was to the extent of United States Dollars 101,850. The finance lease facility obtained by the 1st Defendant from the Plaintiff was PE3 for a limit of Ug.shs. 295,000,000/= which was signed by DW2 as the managing director and the 3rd Defendant as director. The facility also had an insurance premium facility. At the time of filing the suit, he had settled obligations under PE3. The combination of his payables together with the trucks that he put to sale comes to that evidence and the amount of money. 13. In addition, DW2 gave evidence that he did not have physical evidence to prove that he settled the obligations but when you go to their bank statements and the bank accounts department, you are able to see it. He was aware that it was incumbent upon him to prove that he settled the loan. He was the one that had signed on PE8, PE9, PE10 and PE11 which were referring to outstanding loan obligations dated 1st June 2021. In their agreement with the bank, any default or notices were supposed to be issued to him for 14 days though the loan period was still ongoing. He accepted that PE8 to PE11 were correct which were asking him to settle the outstanding loan obligation. He insisted that under DE1, he consented to the sale with clear terms and conditions. 14. Further that he was aware of the sale that was to take place but he was supposed to be involved. He was not an expert on valuation but his basis of concluding that the trucks were undervalued was the professional valuer who gave him condition assessment and the values of the stated trucks. He did not have a written request for documents pertaining the sale from the bank. He did not know all the right legal procedure to be followed when selling the truck. According to his finance department, the amount claimed by the Plaintiff was not correct and he paid back the loan he got from the Plaintiff, the subject of civil suit No. 515 of 2012 but he did not have any physical evidence. He signed PE27 dated 26th September 2013 under “without prejudice”. 15. DW2’s evidence in re-examination was that he was not served the 14 days’ notice nor any notice required under clause 11.1.2 on page 20 of the Plaintiff’s trial bundle. He was not given any information on the sale of the trucks until they filed the suit. He responded to PE8, PE9,PE10 and PE11 in a letter dated 30th August 2012 consenting to sale the trucks. 16. In answering questions from court on what the correct amount was, he replied that there were trucks that had been sold by the Plaintiffs and the valuation of these trucks was never disclosed to the Defendants. When court asked him to elaborate on the claim in his written statement of defence to civil suit No. 514 of the suit being filed prematurely and in bad faith, in summary his response was that the period within which to repay the loan had not lapsed. When court inquired about the why he did not act on PE8 to PE11, he replied that his action taken was consenting to sell the trucks.

**Issue one- Whether the 1st Defendant in Civil Suit No. 514 of 2012 is indebted to the Plaintiff in the sum claimed or at all.**

1. Before determining the merits of this issue, I will first address the preliminary point raised by the Defendants in their submissions. On page three of their submissions, the Defendants observed that the Plaintiff sued them in HCCS No. 514 of 2012 to recover Ug.shs. 370,606, 486/= as the unpaid sums. However, there was no amendment of the Plaintiff’s claim to increase the sum to Ug.shs. 373, 722, 143/= claimed in its submissions as required by Order 6 rule 7 of the Civil Procedure Rules. In reply, the Plaintiff submitted that the amount of Ug.shs. 373,722,143 was stated in PW1’s supplementary witness statement and the distinction in the amount claimed in the plaint and that set out in the evidence was accounted for by the application of interest provided in the facility until the loan was eventually written off. Therefore there was no requirement for amendment of pleadings and order 6 rule 7 did not apply. 2. As rightly submitted by the Defendants, a change in the principal amount sought is a departure from the Plaintiff’s pleadings. However, the explanation for the change is plausible. In **Kitaka Peter & 12 Others v. Mohamood Thoban**, **Civil Appeal No. 20 of 202,** the court held that “there is some jurisprudence to the effect that where a departure from pleadings is revealed in the course of the trial and both parties submit on un pleaded points, then it is proper to deal with such an irregularity while dealing with one of the issues framed.” 3. **In Lukyamuzi versus House & Tenants Agencies Ltd (1983) HCB 74,** the court held that “where there is a departure in one’s pleadings one of the possible remedies is to apply to the court to have the offending part of the pleading struck out either before or at the hearing, this can be done especially where the inconsistency is contained in a reply before the pleadings are closed. The position is, however, a little bit different where the inconsistency is revealed in the course of the hearing of the case as it was in the instant case. In the present situation, it would have been impractical to adopt the above procedure because striking out the offending part of the pleading would have meant striking out the evidence of the only witness called by the defence. In such a case, it would be proper to deal with such irregularity while dealing with one of the issues framed by the parties.” See also **Ajok Agnes versus Centenary Rural Development Bank Ltd HCCS No. 722 of 2014**. 4. Adopting the principle in the above case, since the distinction arose during the evidence of a singular witness of the Plaintiff on the liability of the Defendants, and the all the parties had the opportunity to consider this evidence and reply to the same, I am of the considered view that it is better to weigh the same in resolving this issue of the indebtedness of the 1st Defendant to the Plaintiff. I will therefore overrule this objection. 5. The Plaintiff claimed that the 1st Defendant was indebted to a tune of Ug. Shs. 373, 7222, 142/= arising from a finance lease facility while the Defendants denied any liability. In summary, the Defendant’s case was that any obligation was extinguished by their handover of the three trucks to the Plaintiff for sale, proceeds from which were to settle the 1st Defendant’s indebtedness in addition to the other deposits made. Though the Defendants claimed that the suit was filed prematurely, under the lease facility, repayments were to be made on a monthly basis, breach of which entitled the Plaintiff to cancel the facility and take action to recover against the 1st Defendant. Under this issue, there are sub issues including the valuation of the trucks, sale of the trucks, the sale agreements and the liability of the 1st Defendant if any which should be addressed separately for effective resolution. To this end, I will address each sub issue on its own.

**Valuation of the trucks**

1. The Parties adduced independent valuation reports. The Plaintiff adduced PE14 dated 15th October 2012 for UAN 074U valued at Ug.shs. 30,000,000/= (Uganda Shillings Thirty Million) as open market value and forced sale value of Ug.shs. 21,000,000/=; PE15 dated 17th October 2012 for UAN 542U at Ug.shs. 45,000,000/= as open market value and forced sale value of Ug.shs. 30,000,000/=; and PE16 dated 17th October 2012 for UAN 732L at Ug.shs. 45,000,000/= as open market value and forced sale value of Ug.shs. 30,000,000/= at pages 35 to 46 of the Plaintiff’s trial bundle which were authored by PW2. The Defendants also adduced DE3 dated 28th June 2012 valuing UAN 732L at Ug. Shs. 93,000,000/=, UAN 542U at Ug.shs.89,000,000/= and UAN 074U at Ug.shs. 98,000,000/= giving a grand total of Ug.shs. 280,000,000/=. DE3 is at pages 5 to 14 of the Defendant’s trial bundle and was authored by DW1. 2. Since both PW2 and DW1 are central characters to this sub issue of valuation, I will reproduce their evidence hereunder. PW2’s evidence was that he possessed a Bachelors degree in Automotive and Power Engineering with a bias in automotive design, a certificate in machinery and equipment valuation, a certificate in emissions control, was member of the Uganda Engineering Valuers and Loss Assessors Association and had eight years’ experience in machinery and equipment valuation. Automobile Association of Uganda which was his firm at the time was instructed by the Plaintiff’s officials to value trucks registration Nos. UAN 074U, UAN 542U, and UAN 732L to ascertain their market value and forced sale value. As a qualified machinery and equipment appraiser, he was aware that valuations have to have a basis and methodology that helps ascertain the value of an asset. 3. He observed that UAN 074U’s cabin wear and tear was high, the engine had a significant leakage, the diesel pump which is a critical element of the engine was not conveniently attached to the engine showing signs of poor restoration, the rear propeller shaft was missing’ the suspension system was worn out; the differential unit on the 3rd axle was also missing and all the truck’s tyres were worn out. Due to the undesirable state of the truck, he assessed his economic life to be five years. Economic life/useful life of heavy engineering trucks is readily available in marshal and swift depreciation tables machinery and equipment. 4. The truck was first registered in July 2010 and was inspected and valued in October 2012. To arrive at the yearly rate of depreciation, he used the formula 2.3 (years) 5(years) x 100% to arrive at 46% (its effective age divided by useful life). To determine the rate of depreciation in the first year after registration, he applied the 46% to the value of the truck at registration, which is Ug.shs. 130,000,000 and arrived at Ug.shs. 60,000,000/= (rounded off from Ug.shs. 59,800,000/=), meaning that in July 2011, the truck had depreciated to Ug.shs. 70,000,000 (130,000,000- 60,000,000). 5. In addition, PW2’s evidence was that to determine the rate of depreciation in the 2nd year after registration, he applied the 46% to the new depreciated value of the truck (70,000,000) and arrived at Ug.shs. 32,000,000 (rounded off from ug.shs. 32,200,000), meaning that in July 2012, the truck had depreciated to 38, 000,0000/= (70,000,000-32,000,000). 6. To determine the rate of depreciation between July 2012 and October 2012, he applied the formula (3 x 46% at Ug. shs. 38,000,000 and arrived at Ug.shs. 4,000,000. This means that in October 2012, the truck had depreciated to Ug.shs. 34,000,000 (38,000,000 - 4,000,000). He valued the truck at Ug.shs.30,000,000/= with the Ug.shs, 4,000,000/= accounting for repairs to be done to the truck referred to as “curable depreciation”. He noted that the actual curable depreciation inclusive of labor costs could reach the tune of not less than Ug.shs. 15,000,000/=. He stated the forced market value at Ug.shs. 21,000,000/= usually approximately 70% of the fair market value of the motor vehicle. 7. For truck registration No. UAN 542U, he made observations that the suspension system was worn out, all the tyres were worn out and the transmission axles needed major restorations. He assessed its economic life as six years. He followed the above formula and substituted the number of years with six instead of five. He valued this truck at Ug.shs. 45,000,000/= as a fair market value. The forced sale value was Ug.shs, 35,000,000/=, approximately 70% of the fair market value. He noted that the curable depreciation to a tune of Ug.shs. 10, 000,000/= was not deducted. 8. For truck registration No. UAN 732L, he observed that the suspension system needed some repairs, all the tyres were worn out and the transmission axles needed major restorations. He assessed the truck’s economic life as seven years and used the formula mentioned above substituting the number of years with seven. He stated its market value as Ug.shs. 45,000,000/= and the forced sale value at Ug.shs. 30,000,000/=, approximately 70% of the fair market value. He equally noted that the curable depreciation to a tune of Ug.shs. 10,000,000/= was not deducted. 9. During cross examination, PW2’s testimony was that he had similar experience in motor vehicle inspection and valuation as machine evaluation though he did not state it anywhere in his statement. It was the lawyers that approached him but made the report for the benefit of the Plaintiff. His firm was instructed in 2012 and it was the bank which instructed them. His manager at the time Mr. Ondongkara Felix gave him the assignment to value the trucks which were parked at Salaama Road, Munyonyo road block 62626 plot 1094/95. Although he knew Armstrong Auctioneers, he never worked with them and they did not instruct him. 10. Further PW2’s evidence was that in his report admitted in evidence as PE14, in paragraph 2.8, he indicated that he observed that the engine had minor leakages which does not mean the same thing as significant leakages as stated in his statement. Errors in the report were not intentional. Errors can impact on the valuation of a vehicle and the values can be affected just a little. At the time he made the valuation report, he had two years’ experience and he had not completed his course in in machinery and equipment. The explanation contained in paragraphs 2.8.3 to paragraphs 2.8.6 of the formula used to establish the value of UAN 074U are not in his report and they are no annextures to the report containing this explanation. 11. PW2 also gave evidence that when valuing a vehicle, the dealership price is the baseline depreciation and it is the amount of money you start depreciating from. The dealer’s price of a new vehicle is what you depreciate from. When computing depreciation against the Defendants, he did not consider the value at the time they received the trucks. The explanation of the formula used to establish the value of UAN 732L was not in the report. The report was made on 17th October 2012 and signed on 23rd October 2012. The course he was studying at the time was online which he completed in 2013. They were two valuers though the report and the witness statement do not indicate any other valuer than himself. 12. In re-examination, PW2’s testimony was that prior to the instructions from the Plaintiff, he had two years’ experience in vehicle valuation. Previously, he was a mechanic at Cooper Motors for three years dealing solely with Ford and Land Rovers. He made a report to the Plaintiff and he was made aware by the lawyers that they represent the Plaintiff. The valuation was carried out around 15th October 2012 with a purpose to determine the current value of the trucks. The instructions from the Plaintiff were written and on file at Auto Mobile Association. He denied having any working relationship with Armstrong Auctioneers and maintained that he signed the report on 23rd October the day he handed it in and there was nothing false in his report. 13. Further that the depreciation rates were derived from Mashal and Swift as a standard practice in respect of vehicles and it was readily available on the internet. As a practice and professional standards of all valuers, you have to mention the amount of money you are depreciating from which should be consistent with market rates. He maintained that his report was fair, it was normal for such a report to have errors but they were not intentional and did not cause material changes. 14. It was DW1’s evidence that he holds a Bachelor’s degree in Mechanical Engineering, he was a member of the Uganda Institution of Professional Engineers under Membership No. PE/758, a member of the Uganda Association of Engineering Valuers and Loss Association under Membership No. 029 and had been in the field of valuation for a period of 10 years. He was the managing partner of M/s. Ntende & Associates dealing in loss assessment and valuation of motor vehicles by establishing their market value. As a firm, they received instructions from M/s. Royal Transit in June 2012 to make a condition assessment of three trucks vide UAN 732L, UAN 542U and UAN 074U to establish their open market value. 15. Upon receipt of the said instructions, himself and DW2 went to Nkoma, Kumi Road in Mbale district on 28th June 2012 where the vehicles had parked for inspection. The three vehicles were inspected and the market value for the same established as a total of Ug.shs. 280,000,000/= (Uganda Shillings Two Hundred Eighty million). TaTa No. UAN-732L was valued at Ug.shs. 93,000,000/=, UAN 542 was valued at 89,000,000/= and UAN-074U was valued at Ug.shs. 98,000,000/=. In carrying out the inspections and the valuation, the body condition, interior condition, engine transmission system, wheels and tyres, electrical system and accessories of each vehicle were looked at and the results indicated on pages 5-10 of exhibit DE3. 16. In cross examination, DW1’s testimony was that he had no qualification or training as a loss or valuation assessor. The focus of the report he made was a conditional assessment. There were conditions which would otherwise make the report invalid and if those conditions are found not to have been complied with, the report was invalid. The information in DE3 pertaining to the particulars of the trucks were obtained from the log books which he got from his clients and he relied on it to make the report. While the report indicated that relevant data was sought from relevant sources, those sources were not named in the report. 17. Further that his client did not tell him of his indebtedness to the Plaintiff, and did not provide information regarding the terms and conditions of vehicles relating to maintenance and repair of the motor vehicles that he assessed. He was not sure as to whether the report was binding on the Plaintiff. If DE3 was used in conjunction with the Plaintiff’s report on values, DW1’s values may be incorrect. His valuation could not be said to be conclusive and he found defects on the vehicles inspected. As a condition in his report, it is only valid if it was in its original form without alterations, signed and sealed. The report before court was not in original form but there was an original. 18. At page 7 of the Defendant’s trial bundle, the report states that the inspection was at a parking yard in Nkoma, Kumi road Mbale district on June 28th 2012. It was not possible to be in both Nkoma and Salaama road at the same time. Three trucks were inspected but the report does not provide a methodology of how the values assigned to the vehicles were reached. It also does not disclose what was inspected and did not contain pictures. It was good practice in valuation to at least annex photos of what you are inspecting and he did not establish the forced sale value. The report did not indicate that the depreciation value and the wear and tear were considered. 19. In re-examination, DW1’s evidence was that following instructions from his client, he needed copies of the log books, the exact location of the trucks and at an opinion of the purchased prices. For a 3rd party like court to benefit from the report, it was dependent upon an understanding with DW1. He confirmed that he travelled together with his client to Mbale along Kumi road in a parking yard to carry out the valuation. It was not a must to include the methodology used and photographs in the assessment and valuation, as it was dependent on the wishes of a client. There were no instructions to him to include a forced market value. 20. In answering questions from the court, he stated that he did not know why his client wanted the report and the contents of the report were based on an understanding with the client and what they want because the report could be used in another process other than court. That is the reason why some information was not included in the report and remained on the file but he had all the information. 21. The parties questioned the reliability of the report adduced by the other party. For the Plaintiff, its points of contention were that DW1 conceded not having any qualification of training as a loss assessor, conceded that his report was only an assessment of the condition of the trucks and was not a valuation of the trucks, conceded that his report was a conditional report and was therefore not conclusive, further that his report was not based on any scientific data or relevant source, did not provide a methodology of how he arrived at the values, did not establish a forced value, and conceded that there is a possibility that his entire report may be incorrect when compared with that of PW2 among others. 22. On the other hand, the Defendants fault PE14 to PE16 on grounds that PW2 did not have the stated qualifications at all. He did not have a personal official stamp showing that he is registered by the Engineers Registration Board or the Surveyor’s Registration Board as a valuer/assessor. His incompetence to render professional assessment was demonstrated by not having much experience in motor vehicles, had no prior experience and had not yet completed his studies. Through his testimony because he could not confirm whether it was the Plaintiff or its lawyers who gave him the instructions. He conceded that the contents of paragraph 2.8.1 of his witness statement relating to the condition of truck No. UAN 074U which he sought to portray was having been in a poorer condition were inconsistent with the findings of PE14 at page 36 of the Plaintiff’s trial bundle. He conceded that an analysis of how he made his findings and valued the trucks were not in his report. 23. The credentials of both PW2 and DW1 in terms of qualifications and experience in vehicle valuation were not the strongest. Be that as it may, the issue of who instructed PW2 can be answered by the person to whom the reports were addressed. In my view, the recipient of the report is important because it the person who was primarily meant to consume the contents of the report. Exhibits PE14 to PE16 were addressed to the Plaintiff, which in my view points who instructed PW2. The contradictions between the valuation report and PW2’s evidence regarding the condition of UAN 074U were minor because did not concern the value of the trucks and how they were assigned, which is the crux of any valuation report. It can therefore be the basis to not rely on PW2’s evidence. 24. A critical comparison of the reports shows that basing on the dates, the valuation in DE3 was carried out in June 2012 while the valuation in PE14 to PE16 was done in October 2012. As pointed out by the Plaintiff, the title of DE3 was “Condition Assessment report as instructed by Ms. Royal Transit Ltd.” Under the terms of reference, it was stated that “we received instructions from M/s. Royal Transit Ltd to undertake a condition assessment inspection with a view of ascertaining the market value of 3No. trucks. We have carried out all the necessary inspections of the said trucks, considered all the relevant data available from the client or sought from relevant sources and have the pleasure to submit our report and valuation as hereunder” 25. DE3 has limiting conditions listed on page 6 of the trial bundle including Condition 4 which stated that “….the values assessed should not be used in conjunction with any other assessment as may prove incorrect if so used.” Condition 6 provided that “where market values are assessed, they reflect the full contract value and no account is taken of any liability to taxation on sale or of the costs involved in effecting the sale.” Condition 7 provided that “the report is only valid if it is in its original form without alteration and signed and sealed by us. We will not guarantee the validity or authenticity of any copies that may be presented to any person, organization or entity as being made from the original.” 26. In addition, under background information, it was stated that “we were reliably informed by the client that these trucks were to be handed over to the bank while in proper mechanical and operation order. They had been in use by M/s Royal Transit Ltd for a period of about one year having received them also in a used state.” The inspection premises are stated as a parking yard located in Nkoma, Kumi road Mbale district on June 28th 2012. Thereafter, the report lists the market value of the trucks but no basis was given for the figures stated. The report also lists the particulars of each vehicle as obtained from their logbooks, the body, interior, engine, transmission system, wheels and tyres, electrical system and accessories conditions of the car. It also states a summary report of each vehicle. 27. PE14 to PE16 have a limiting condition stating that “ whilst due diligence has been taken to note any significant defects in the course of inspection, no guarantee is given in respect of defects not exposed to our engineers especially in the interior systems. Nothing in the valuation report shall be taken as a warranting or guaranteeing that the equipment will remain in the condition as stated as wear and tear, material failure and misuse may occur after inspection.” The reports have particulars of the vehicles, the open market value and the forced sale value, dates of inspection and the place of inspection as Salaama- Munyonyo road, Block 6262, PloT 109495. PW2 as the inspector, stated that the mode of inspection was visual inspection of the vehicle unit components, followed by photography, the conditions of the cabin shell, chasis frame, rear body/lorry, engine, transmission, braking system, steering system, suspension, wheels and tyres, electrical system, valuation concept, basis, conclusion and photos of the individual vehicles. Under basis, an approximate acquisition from dealers of new TATA lorries was stated, and depreciation, cost of repairs and other market considerations for a length of time stated was considered before stating the market value and the forced sale value. 28. It must be noted that DE3 adduced before court was not an original as admitted by DW1. Basing on limiting condition 7, the copy of the report produced in court was not valid. In addition, except for assigning figures as open market value for the trucks, DW1 did not offer any formula or explanation on how these figures were arrived at either in the report or his evidence. He did also not establish a forced sale value which was necessary for used trucks that were to be sold. He also did not provide any detail regarding the condition of the vehicle except for stating general remarks. While DW1 informed court that he did not know why his client wanted the report, under background information, the report stated that his client had informed him that the trucks were to be handed over to the bank while in a proper mechanical and operational order. This statement implies that DW1 was well aware of the fact that his client was going to hand over the trucks to the Plaintiff and knew why he needed the valuation report. This in my view weakens the credibility of DW1. 29. In comparison, PE14 to PE16 contain details regarding the condition of the vehicles and PW2 offered a detailed explanation and formula as to how each figure was assigned. He also assigned a forced sale value for each truck, all material facts which lacked in DE3. Noteworthy is the fact that DE3 was authored in June 2018 with a caveat that the assessment and opinion in value was limited to the condition the trucks were in as at 28th June 2018. On the other hand, PE14 to PE16 state the date of inspection as 12th October 2012 over 3 months after DE3 was authored. It is inconceivable that the trucks were in the same state in October as were in June given the fact that on 30th August 2012, the 2nd Defendant authored DE1 stating that the trucks were stuck in Karamoja due to a broken bridge and would be handed over to the Plaintiff upon their return for sale. 30. It is therefore possible that as at the time of inspection in October 2012, the condition of the trucks had deteriorated thereby affecting their value. For the above reasons and the fact that PE14 to 16 authored more than three months after DE3, I am therefore more inclined to accept PE14 to PE16 as a honest and reasonable assessment and valuation of the trucks.

**Sale of the Trucks**

1. The main contention that the Defendants had with the sale of the trucks was their exclusion to the determination of the value of the trucks which according to them led to the devaluation of the trucks and the failure to give them notice of 14 days’ notice as required under the facility. PE3, the lease facility at page 20 of the Plaintiff’s trial bundle offers clarity on the processes to be undertaken upon default of the 1st Defendant. 2. Clause 11.1 of terms and conditions of the facility provided that “the Lessee will be in breach of this agreement if the Lessee:- * 1. does not pay when any money that is payable to the Lessor: or 2. does not obey any term of this agreement, or any other agreement which exists between the Lessee and the Lessor (all of which are agreed to be material) ;or 3. commits an act of bankruptcy as outlined in the Bankruptcy Act, Cap 67 of the Laws of Uganda or is adjudged bankrupt by a court of competent jurisdiction; or 4. has a court judgement against the Lessee and the Lessee does not pay the amount of the judgement within seven (7) days, unless the lessee is seeking and has sufficient grounds to apply to court to remove the judgement; or 5. other than in the ordinary course of its business shall sell, transfer, lease or otherwise dispose of the whole or any substantial part of its undertaking or assets; 6. is in breach of any loan repayment obligation with any of its creditors 7. compromises ( i.e. asks or agrees with a creditor to delay any payment or pays less than is due) or delays any payments owing by the Lessee to any of its creditors; or 8. there is a change in the Lessee’s shareholders or members; or 9. is provisionally or finally liquidated or sequestrated or placed under judicial management; or 10. generally does anything which may harm the Lessor’s rights or cause the Lessor to suffer any loss or if the Lessor’s rights under any security given are lessened, lost or harmed in any way, 1. should any of the above events happen or should the goods be lost destroyed or damages, the Lessor may, if it chooses and without harming any of the other rights it may have exercise any of the following options; 1. In the event of breaches 11.1.1 and 11.1.2, cancel the agreement and take possession of the goods upon giving 14 days written notice to the Lessee and in the event of breaches 11.1.13 to 11.1.10 immediately cancel this agreement and take possession of the goods. The Lessor shall thereafter be entitled to dispose of the goods in any manner.” 3. I have reproduced the above provisions for context and ease of reference. My understanding of clause 11.2.1 is that in case the 1st Defendant did not pay any money that was due to the Plaintiff or did not obey any term of the lease facility or any other agreement between the parties which was agreed to be material, the Plaintiff could cancel the facility and take possession of the trucks upon giving 14 days’ notice to the 1st Defendant. In case of any other breach, the Plaintiff had the right to immediately cancel the facility and take possession of the trucks. After possession, the Plaintiff could dispose of the goods in whatever manner it chose. 4. Under clause 7 of the facility, repayments were to be made by debit order on a monthly basis from the 1st Defendant’s account No. 0140071814801. Exhibits PE5, PE6, PE8, PE9, PE10 an PE11 all discuss the 1st and 2nd Defendant’s indebtedness to the Plaintiff including arrears due to non-payment of instalments. This was in breach of clause 11.1.1 of the terms and conditions of the facility which entitled the Plaintiff to cancel the facility and take possession of the trucks after 14 days’ notice. 5. In PE8 at page 25 of the Plaintiff’s trial bundle is a letter dated 1st June 2012 addressed to the director of the 1st Defendant. In that letter, it was stated that the 1st Defendant had an outstanding balance of Ug.shs. 430,026,474/= and arrears of Ug.shs, 88,962,319/=. It was further stated that “we have fully reviewed your request and we would like to advise that you are to pay UGX 60,000,000/= (Shillings Sixty million only) today or latest 4th June, 2012, UGX 47,000,000/= (Shillings Forty-seven million only) by 30th June, 2012 and the account must be up to date by 31st July, 2012. Please note that if you default on the arrangement at any stage, you will be required to hand over all our assets to the bank or its appointed agents to avoid repossession costs. You are further advised that by 31st July 2012, we need new valuation reports for all the trucks to ascertain the current state of the vehicles after repair.” 6. A reading of this letter points to the fact that the 1st Defendant had defaulted on its obligations under the facility and a restructure had been granted by the Plaintiff. By this letter, the 1st Defendant was informed that any breach of the arrangement would lead to the handover of the assets. The 2nd Defendant accepted the terms therein by writing on the same letter on the same day the following “It is agreeable and on Monday I will send an official communication and I will have made the payment.” He thereafter signed, stated his name and date of 1st June 2012. 7. DE1 at pages 1 to 2 of the Defendant’s trial bundle is a letter dated 30th August 2012 from the 1st Defendant signed by 2nd Defendant as its Managing Director to the Head Rehabilitation & Recoveries of the Plaintiff. It was stated in that letter that “….. this has greatly affected our cash flows inclining us to fail to meet our financial obligation and commitments with you on time in respect of our facility. We are therefore requesting that once our trucks get out of Karamoja where they are stuck due to a broken bridge, we shall bring those in a moving condition to your parking yard and hand them over to you officially and give you consent to sale them off. We further request that any price given be approved or consented to by both parties as we are also looking for potential buyers…” 8. Having handed over the trucks, there was no need for the notice to the Defendants prior to possession. After receiving the trucks, the Plaintiff as at liberty to dispose of the trucks as it saw fit pursuant to clause 11.2.1 of the terms and conditions of the facility. The request by the Defendants to approve or consent to a price was not binding on the Plaintiff and only remained a request which could be either granted or not. I therefore find no basis to fault the Plaintiff in any way on this issue.

**Sale Agreements**

1. It was the Defendants’ submission on page 8 that the Plaintiff presented to court concocted agreements of sale to lay credence to its claim of sale. The subject matter of PE20 at pages 52 to 53 of the Plaintiff’s trial bundle was a dumper registration No. UAN 254U model 2010 sold for Ug.shs. 40,000,000/= to Phoebe Ambasiize, which is not one of the trucks returned by the Defendants as the three trucks returned were UAN 074U, UAN 542U and UAN 732L. Further that clause (a) in the agreement tendered as PE21 at page 55 of the Plaintiff’s trial bundle, UAN 732Lwas represented as a 2008 model yet its logbook exhibit 23 at page 58 of the Plaintiff’s trial bundle states its date of manufacture as 2009. That misrepresentation devalued the price of the vehicle. In addition, the Defendant’s took issue with PE23 for not bearing the signature of the vendor and also submitted that while PW2 claimed that the sale was by public auction, he could not produce any copy of the newspaper advert for the sale of the trucks, did not know where the sale took place and could not produce any copy of the newspaper advert for the sale. 2. In its submissions in rejoinder, the Plaintiff submitted on page 5 of its submissions that the Defendants were at all material times involved in the sale of the trucks. DW2 admitted in cross examination that in failing to honor their loan obligations, the Defendants were in breach of clause 11.1.6 of the terms and conditions of the lease facility agreements. Under clause 11.2.1, there is no requirement for notification or consent from the Defendants where breach is pursuant to clause 11.1.6. The Plaintiff sold the assets under both agreements in pursuance to its rights under the terms and conditions of the facility agreement and under clause 3, the ownership of the assets was vested with the Plaintiff. 3. Clause 11.1.6 of the terms and conditions of the facility provided that there would be breach if the Lessee (1st Defendant) was in breach of any loan repayment with any of its creditors. In my view, this clause only applied to other third parties that the 1st Defendant may be indebted to and not the Plaintiff because the first paragraph of the facility described the Plaintiff as “the Lessor” not a creditor. I am aware that while applying the ordinary meaning of the word the Plaintiff can qualify as a creditor to the 1st Defendant, However, going by the definition of the Plaintiff in the facility, it was a lessor. To that end, clause 11.1.6 does not apply to the Plaintiff. 4. The sale agreements in issue were admitted in evidence as PE17 for UAN 074U sold on 5th March 2013 at Ug.shs. 27,000,000/= to Kyoyeta Emmanuel. The agreement also stated that the vehicle was advertised in the New Vision newspaper on 29th November 2012 and thereafter sold by public auction to the highest bidder. It was signed by both parties and witnessed by Counsel Mpiima Jamir Ssenoga for the vendor and Lilian Nangobi for the purchaser. Under PE20 UAN 254U was sold on 10th April 2013 at Ug.shs. 40,000,000/= to Phoebe Ambasiize. This agreement stated that the vehicle was advertised in the New Vision newspaper on 29th November 2012 and thereafter sold by public auction to the highest bidder. Both parties signed the agreement which was witnessed by Counsel Mpiima Jamir Ssenoga for the vendor and Twinomugisha Patience. 5. Under PE21, UAN 732L was sold on 30th April 2013 at Ug.shs. 27,000,000/= to Karahukayo Wilber. It was stated in the agreement that the vehicle was advertised in the Daily Monitor of 7th March 2013 and thereafter sold by public auction to the highest bidder. Both parties signed the agreements and were witnessed by Counsel Mpiima Jamir Ssenoga for the vendor and Twinomugisha Patience. It must be stated that while Patience wrote only one name on PE21, a comparison of the handwritings and signatures with those on PE20 indicate that it was the same person. These agreements are at pages 47 to 49, 52 to 54, and 55 to 56 of the Plaintiff’s trial bundle respectively. 6. As clearly stated above, the agreements indicate the particulars of the vehicle, the parties, the consideration, the witnesses and the fact that the sale was resulting from the Plaintiff’s exercise of its rights under the facility pursuant to the default of the 1st Defendant in its obligations. The agreements further indicate the dates of the advertisements of the vehicles, the newspaper in which the advert run and the fact that the sale was by public auction. The Defendants did not lead nay evidence to the contrary. 7. The fact that in PE20, the vehicle was listed as UAN 254U instead of the correct number plate of UAN 542U does not in itself invalidate the agreement. This is because, I believe that it was simply an error in writing the number plate. Similarly, stating UAN 732L as a 2008 instead of a 2009 model was an error that was not fatal. The allegation that it led to a devaluation of the vehicle by the Defendants was an unproved submission from the bar and it is rejected. I am fortified in my reasoning because PE16, the valuation report of UAN 732L shows its year of manufacture as 2009. I have therefore found no basis to reject the sale agreements produced by the Plaintiff.

**Liability of the 1st Defendant to the Plaintiff**

1. PW1 testified that as at 10th January 2018 when his amended supplementary witness statement was filed, the 1st Defendant was liable to the Plaintiff to a tune of Ug.shs. 373,722,142/= as the amount outstanding. He relied on PE25, an account statement of account No. 900016108 in the names of the 1st Defendant bearing the stamp of verification of the Plaintiff dated 9th January 2018; PE27, a letter written “ without Prejudice” from M/s. Kyazze & Co. Advocates to M/s. Sebalu & Lule Advocates in which a proposed settlement of the claims in civil suits No. 514 & 515 of 2012 was made, with an attachment of a letter from the 1st Defendant “without prejudice” signed by the 2nd Defendant proposing loan repayment for both the 1st Defendant and himself; a reply thereto dated 8th November 2013 from M/s. Sebalu & Lule Advocates to M/s. Kyazze & Co. advocates written “without prejudice” communicating the Plaintiff’s acceptance of the proposal with amendments in dates admitted as PE28; and PE29 a draft consent judgement between the parties which was neither signed by the parties nor sealed by court. 2. As far as PE29, the draft consent judgment is concerned, it is settled law that a consent judgment is only binding when signed by parties and endorsed by court. Therefore PE29 which was neither signed by the parties or their counsel and was also not endorsed by court cannot constitute a basis to find liability of the 1st Defendant. 3. Similarly PE27 and PE28 written “without prejudice” though admitted in evidence cannot be relied on by court as evidence of the 1st Defendant’s liability. I am fortified in this reasoning by the decision of the Supreme Court in the case **of 2008 Katumba Ronald v. Kenya Airways Ltd Civil Appeal No. 09** where the court held that “to my mind, when a letter is written “ WITHOUT PREJUDICE” it implies that the writer is reserving whatever other course of action or defence as may be available to him. When such letter is admitted among the documents admitted at the trial, it goes together with the words “WITHOUT PREJUDICE.” It would not preclude the writer from relying on any other defences available to him. Its contents must be regarded without prejudice, and the court would not necessarily take its contents as truth.” 4. The Plaintiff on page 5 of its submissions filed on 31st May 2023 contended that the correspondences written ‘without prejudice” in this case were admissible by way of exception because the negotiations between the parties were successful and resulted in a draft consent judgement which was a binding contract. In my view, this assertion is not only wrong but is also not founded on the law. This is because, as earlier found, PE29 which was neither signed by the parties nor endorsed by court cannot be a binding contract on the parties. 5. Be that as it may, when you add the sub totals of the balance outstanding of Ug.shs. 50,969,892.51 under deal 0001; Ug.shs. 62,060,795.18 under deal 0002; Ug.shs. 67,036,469.33 under deal 0003; Ug.shs. 69,492,890.32 under deal 0004; Ug.shs. 67,856,397.54 under deal 009; and Ug.shs. 56,305,697.10 under deal 0010 as indicated in PE25, you get a grand total of Ug.shs. 373,722,142/= as the balance outstanding. However upon close scrutiny of the evidence of PE25 and PE7, also a statement of account of the 1st Defendant, It is deducible that the Plaintiff did not account for the proceeds of the sale of the trucks. Put differently, the Plaintiff did not adduce any iota of evidence to prove that the said proceeds were applied to offsetting the indebtedness of the 1st Defendant. 6. It must be also noted that although the 2nd Defendant testified that he had paid off all the liability, no evidence to prove this was adduced. To this end, I will offset the total of Ug.shs. 94,000,000/= from Ug.shs. 373,722,142/=to get a total of Ug.shs. 279,722,142/= (Uganda Shillings Two Hundred Seventy Nine Thousand Seven Hundred Twenty Two Thousand One Hundred Forty Two) as the total indebtedness of the 1st Defendant to the Plaintiff. This issue is resolved in the affirmative.

**Issue two -Whether the 2nd and 3rd Defendants in civil suit No. 514 of 2012 are liable to the Plaintiff as guarantors or at all in respect to the loan advanced to the 1st Defendant**

1. DW2 admitted that himself and the 3rd Defendant were guarantors to the facility extended by the Plaintiff to the 1st Defendant. These guarantees were admitted in evidence as PE12 and PE13 at pages 29 to 34 of the Plaintiff’s trial bundle. These guarantees are the same and they provide that in consideration of the Plaintiff granting or continuing advances or otherwise giving credit or affording banking facilities to the 1st Defendant, the 2nd and 3rd Defendants guaranteed payment and satisfaction to the Plaintiff on demand of all and every sum and sums of money which shall at any time be owing to the Plaintiff from the 1st Defendant provided that the total liability enforceable against them did not exceed the sum of shillings equivalent to USD 101, 850 for each. 2. Pursuant to these guarantees and section 71 of the Contracts Act, the Plaintiff contended that the 2nd and 3rd Defendants are jointly and severally liable in regard to the credit facilities to which they are bound, the 1st Defendant having failed to pay. The Defendants contested this liability and submitted that the sale of the three trucks and the failure to account for the proceeds discharged the 1st Defendant from any further liability. Further that the 2nd and 3rd Defendants cannot be liable as directors of the 1st Defendant because no circumstances warranting the lifting of the veil were pleaded and the evidence showed that the 1st Defendant varied the terms of the facility by returning the three trucks for sale to raise funds to settle liability yet no evidence was adduced to prove that as guarantors, they consented to this variation. In rejoinder, the Plaintiff submitted that the concept of lifting the veil did not raise in this case and the guarantor’s liability for the non-performance of the principal debtor’s obligation is co-extensive. The Plaintiff denied any variation of the terms of the facility and insisted that the language of the guarantee was that they would be bound by any future existing obligations of the 1st Defendant. 3. It is settled law that a guarantor undertakes to repay the creditor in case of default by the principal debtor. In the case of **Mian Aqeel Ashraf & Anor v. Exim Bank**, **Misc. Application No. 497 of 2017,** it was held that where default is established on part of the principal debtor, guarantors are immediately liable to the full extent of the obligation and it does not matter whether or not there has been any notice to them or even other options explored by the creditor in a bid to recover the debt. For as long as there is money due and owing to the creditor, the guarantors are automatically liable and prone to any proceedings or measures whatsoever employed by the creditor to recover the monies legally, this may be done jointly against both the guarantors and the principal debtor or separately in different kinds of proceedings. 4. It would therefore be inconsequential that the 2nd and 3rd Defendants were not served by any demand notices. The proceeds realised from the sale were insufficient to entirely clear the 1st Defendant’s liability as earlier discussed under issue one. Therefore the argument by the Defendants that the sale extinguished their liability is unfounded. In addition, the facts in **Ganafa Peter Kisawuzi v. DFCU Bank Ltd Civil Suit No. 465 of 2014** are distinguishable from the instant case because DFCU advanced additional monies to the borrowers without the knowledge and the consent of the Plaintiff as their guarantor, which the court found to have been a material alteration among others. It is therefore inapplicable to the instant case. 5. In my view, the return of the trucks was not an alteration of the facility but was rather a measure employed to recover the monies owing from the 1st Defendant. It follows therefore that the principle of discharge of a guarantor by alteration is inapplicable. Furthermore, the guarantees provided that ‘ hereby guarantee to you the payment and satisfaction to you on demand of all and every sum and sums of money which are now or shall at any time be owing to you anywhere on any account whatsoever and all and every the liabilities (certain or contingent) incurred to you …… this guarantee is to be in addition and without prejudice to any other securities or guarantees which you may now or hereafter hold from or on account of the debtor and is to be binding on the undersigned as a continuing security notwithstanding any settlement of account….” Construed literally, the guarantees were meant to still be enforceable even when there was any repayments made. Therefore, I have found no basis to discharge the 2nd and 3rd Defendants from their liability as guarantors. Issue two is resolved in the affirmative

**Issue three- Whether the Defendant in Civil Suit No. 515 of 2012 is indebted to the Plaintiff in the sum claimed or at all**

1. It was PW1’s evidence that pursuant to PE1, the Defendant was indebted to the Plaintiff to a tune of Ug.shs. 67,210, 254 (Uganda Shillings sixty seven million two hundred ten thousand two hundred fifty four) as proved by PE26, a provisional statement of his statement bearing the Plaintiff’s stamp of 9th January 2018. The Defendant disputed the liability on grounds that while the parties had an undertaking that the facility would be serviced with proceeds from the use of the vehicle, the Plaintiff delivered a car that was defective and not fit for purpose and the Defendant could not perform his obligations under the facility. Though he made an offer to return the truck, the same was declined by the Plaintiff. 2. Further that there was an insurance cover for both facilities which was to provide alternative recourse in the event of any performance eventualities of parties’ obligations including default in payment. I must point out that the insurance policies in issue were never adduced in evidence. As such, I am not privy to their terms and have no basis to determine whether they were meant to even cover default in repayment of the facilities. 3. While the Defendant admits getting the facility from the Defendant in his pleadings, evidence and submissions, no iota of evidence was adduced to prove that there was misrepresentation by the Plaintiff’s employees during acquisition of the truck, the truck was defective and not fit for purpose and that there was an agreement that the proceeds from the use of the truck would be used to service the facility. They remained unproved allegations and are accordingly rejected. On the other hand, PE8 to PE12 and PE26 prove that the Defendant was indebted to the Plaintiff. 4. Therefore pursuant to PE26, it is my finding that the Plaintiff has proved that the Defendant is indebted to a tune of Ug.shs. 67,210,253/=. The same is accordingly awarded to the Plaintiff. This issue is resolved in the affirmative.

**Issue four- Remedies available**

1. The Plaintiff prayed for recovery of the sums outstanding on the facilities in both suits with interest as fixed by the contracts from the year 2012 when the Defendant began defaulting, general damages of Ug. shs. 250,000,000/=, interest on general damages and costs. 2. Having found that the Defendants are liable to the Plaintiff in both suits, the sums of Ug.shs. 279,722, 142/= (Uganda Shillings Two Hundred Seventy Nine Thousand Seven Hundred Twenty Two Thousand One Hundred Forty Two) in civil suit No. 514 of 2012 and Ug.shs. 67,210,253/= in civil suit No. 515 of 2012 are awarded to the Plaintiff. Pursuant to clause 2 of the terms and conditions of the facilities, the Plaintiff could charge interest on delayed payments. However, it was the Plaintiff’ submission that the loan had been written off and therefore interest stopped accruing. Because of that reason, I will not award interest on the decretal sums. 3. In **Stanbic Bank Uganda Limited v. Haji Yahaya Sekalega T/A Sekalega Enterprises High Court Civil Suit No. 185 of 2009,** the court heldas rightly pointed out by Counsel for the Plaintiff, it is trite law that “measurement of the quantum of damages is a matter for the discretion of the individual Judge which of course has to be exercised judicially with the general conditions prevailing in the country and prior decisions that are relevant to the case in question”. This Court is also aware that “in assessment of the quantum of damages, courts are mainly guided by the value of the subject matter, the economic inconvenience that a party may have been put through and the nature and extent of the breach or injury suffered”. And that “a plaintiff who suffers damage due to the wrongful act of the Defendant must be put in the position he or she would have been if she or he had not suffered the wrong”. Section 61 (1) of the Contracts Act is also borne in mind. The section empowers court “to award compensation for any loss or damage caused to one party due to another’s breach of contract”. And in estimating the loss “court has to consider the means of remedying the inconvenience caused by the non-performance of the contract that exist at the time”. 4. In the facts before court, the Defendants breached the contracts they had by failing to repay the loans advanced to them by the Plaintiff. As a result, the Plaintiff has been deprived of the use of this money since 2012 yet as a financial institution, it derives business from lending such monies. To this end, the Plaintiff is entitled to general damages and I will award Ug.shs. 30,000,000/= (Uganda Shillings Thirty million) as the general damages. 5. In **Stanbic Bank Uganda Limited v. Haji Yahaya Sekalega T/A Sekalega Enterprises (supra),** thecourt further held that awarding interest on general damages this Court takes into account the principle that “interest on general damages is compensatory in nature against the person in breach of the contract”. Because the Plaintiff operates a business venture, it is my considered opinion that interest on the general damages ought to be added to mitigate the losses incurred. I am therefore a warding an interest rate of 5% on the general damages from the date of this judgment till payment in full. The Plaintiff is also awarded costs of both suits. 6. The Plaintiff’s suits succeed with the following orders and declaration: 7. The Defendants in both Civil Suits Nos. 514 and 515 of 2012 are indebted to the Plaintiff. 8. The Defendants in Plaintiff in Civil Suit No. 514 of 2012 are liable to the Plaintiff to a tune of Ug.shs. 279,722, 142/= (Uganda Shillings Two Hundred Seventy Nine Thousand Seven Hundred Twenty Two Thousand One Hundred Forty Two) being the decretal sum. 9. The Defendant in Civil Suit No. 515 of 2012 is liable to the Plaintiff to tune of Ug.shs. 67,210,253/= (Uganda Shillings Sixty Seven Million Two Hundred Ten Thousand Two Hundred Fifty Three) as the decretal sum. 10. The Plaintiff is awarded general damages of Ug.shs 30,000,000/= (Uganda Shillings Thirty million). 11. Interest of 5% p.a on (iv) above is awarded from the date of this judgment till payment in full. 12. The Plaintiff is awarded costs of the suit.

It is so ordered.

**CORNELIA KAKOOZA SABIITI**

**JUDGE**

**Date: 19th April 2024**