Translink (U) Limited v Nile Bank (U) Limited (CIVIL APPEAL NO.39 OF 2002) [2004] UGCA 46 (1 January 2004)

Full Case Text

#### THE REPTIBLIC OF T]GANDA

### IN THE COURT OF APEAL OF UGANDA AT KAMPALA

## CORAM: HON. JUSTICE L. E. M. MUKASA-KIKONYOGO, DCJ HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, JA HON. JUSTICE A. TWINOMTJJUNI,. IA

### CIVIL APPEAL NO.39 OF 2OO2

### TRANSLINK (U) LIMITED APPELLANT

# VERSUS

#### NILE BANK (U) LIMITED RE,SPONDE,NT'

I{r

l0 [Appcal fronr thc judgmcnt and Decree of the High Court at Kampala (Ntabgoba, I'. J) dated 29l8l21llll in H(lCS No.tl9 of 19971

# r5 Jt-IDGMENT OLTWINOMU.fUNI,.tA.

This is an appeal against the judgment of the High Court of Uganda at Kampala in which the appellant's suit to recover Ug.shs.20,000,000/: (Twenty million shillings) was dismissed with costs and the respondents counter-claim of Ug.shs. 11,472, 68ll= was allowed with costs of the counter-claim.

The background of the suit as was found by the learned trial judge is as follows:-

)

o "The plaintiff, as was customary, sent its employees to deposit on its bank account rvith defendant bank a sum of shs.30,000,000/=(thirty million shillings only.). Later on the plaintiff discovered that only shs.10,000,000/:(Ten million shillings only.) instead of the shs.30,000,000/:(Thirty million shillings only) had been deposited on its account with the defendant (see Exh. P.l I whichsa pay-in-slip).

> A dispute then arose between the plaintiffand the defendant as to whose employees were responsible for the ioss of shs.20,000,000/-(Twenty million shillings only). This Ied to the two parties entering into what is referred to as a deed of indemnity the subject matter of this suit. Under the Deed of Indemnity the defendant agreed to deposit thc nrissing sum of shs.20,000,000/=(Twenfy million shillings only) onto the plaintiff s account. The matter of the missing money was to be referred to the Police Invcstigations Fraud Squad. Should the Investigations exonerate the employees of the defendant, the latter would treat the sum of shs.20,000,000/-(Trvenfy million shillings onll') as an overdraft in favour of the plaintiff without charging in te rest.

> Mr. Ziwa, a witness of the defendant testified that they adopted that method becausc it was the time the defendant bank was being threatened with closure and possible privatization or sale by the Bank of Uganda. The defendant

)

was therefore wary of making scandals during that very difficult period.

On 5th September, 1996 Mr. Bemugisa B, D/AIP of the Fraud Squad wrote Exhibit P.lV to the Assistant Commissioner of Police, Crime stating that "a leposit slip (Exh. Pl) which showed that shs.30m had been deposited by the employees of the pltintiff' duly stamped and signed by purportedly the bank was taken back to the Compnny (i.e. plaintiff) by the Company workers confirming the deposit. It was found that instead of shs.3Om/=, Shs.l0m/= was credited on the account. D/AIP. Begumisa informed the Assistant Commissioner that:-

'FINDINGS:- The deposit slip from the Trunslittk (U) Lltl, lhe specimen sigtrtture of the suspectel bunk ofJiciul purported to have signed the deposit slip und the stomp samples lrom the htnk were luken lo the Handwriting Experl for comparison lo eslublish lhe autlror of the signoture. The Hantlw,ritiug Expert reporl n,as secured E.ronerating the bonk, thot is to sa1, the stump inrpression on lhe deposit slip (E.uhibit) n,os rlffirenl from the genuine slump impression of Nile Bonk ond the uulhor of lhe signotnre on the daposit slip wos nol llre some uuthor of the specinrcn sigtrulure of the suspected bank of/iciol. Thesetindings indicate thal the Translink workers bonked onl!, shs.10,000,000/:

l{)

)

a ond forged the stomp, signoture of the bank o.fficials, purporting that they banked shs.30,000,000/-(Thirty million shillings)'.

> Mr, Lwere, learned counsel for the plaintiff argues that Exhibit (P. IV i.e. D/AIP, Bemugisa's letter) was not the final finding of the Investigations of the Police Fraud Squad, envisaged in the deed of indemnity (Exh. P.tII) which states:-

> > 'Hereby covenont that in lhe event of lhe invesligotions currently being conducted by the Police Fraud Squad prove conclusively in writing thal the stitl umount of shs.20,000,000/:(shiilings twenty ntillion) w,as never deposited by Mh TRANSLINK (U) LrD n,ith the NILE BANK LTD then, the said amount shull be treuted as sn overdraft granted by the NILE BANK (U) LTD, ottracting no inlerest.'

Since the Nile Bank (U) Ltd, employees and the employees of the plaintiff were prosecuted, Mr, Lwere contends that Begumisa's letter of 5/9/96 (Exh. PIV) cannot have been conclusive finding by the Police Fraud Squad. He refers to Exhibit P. VI which is another letter of D/AIP, Bemugisa dated 9th January 1997 which he adtlressed to the Director CID as follows:- 20

)

'Reference is mode to the above subject malter ond my former report datetl 5'h September, 1996.

" I wish to inform you that four people, thot is to say two bonkers of Nile Bunk and two employees of Trunslink were chorged, laler one of lhe bankers (MWINE ENOCK) jumped Court bail, and this creoted a delsv in proceeding with the rest. The chorge sheel was loler smended lo e-,tcl ude Mwine snd we proceeded with the available suspects,

Currently, heoring is in odvonced stoges, three wilnesses having testified. The case is being prosecuted by the Resident Principol Stile Attorney, Betty Khiso. You will be informed offurther progress in due course.'

What is mind boggling is that neither the Police file nor the Court file, nor Miss BetQ Khisa werc availed to me to be able to know with what offence the accused persons were charged with and tried for, or to know the outcome of the trial. But Mr. Lwere for the plaintiff argues that in view of Exhibit P. V Exhibit P. IV cannot be said to be the conclusive report of the Police Fraud Squad. He argues that Exhibit P. IV was a progressive report. He seems to me to imply that the conclusive investigation report of the Police Fraud Squad would be the final decision of the Court."

O At the trial the following issues were agreed:-

- l. Whether or not the Police Report (Exhibit P.lV) amounted to the conclusive investigation in writing by the Police Fraud Squad. - 2. Whether or not the defendant was entitled to invoke the provisions of the deed of indemnity (Exhibit P. III) - 3. Whether the plaintiff is entitled to the relief sought in the plaint. - 4. Whether the defendant is entitled to the prayers in the Counter claim.

The learned trial judge resolved all the issues in favour of the respondent, disrnissed the appellant's suit and entered judgment on the counter-claim in favour of the respondent, hence this appeal. Five grounds of appeal were fiamed on behalf of the appellant as follows:-

- l. The learned trial judge misdirected himself in law and fact when he held that the report of the Police Fraud Squad amounted to a conclusive report envisaged in the Indemnity Deed signed between the appellant and the respondent. t5 - 2. The learned trial judge erred in law when he held that the respondent was entitled to invoke the provisions of the Deed of Indem nity. 20 - 3. The learned trial judge misdirected himself and thereby erred in law when he found as a fact that there was a Handwriting Expert Report and held that the respondent's employees had bcen exonerated by the said report. l5

- o 4. The learned trial judge misdirected himself in law when he held that the appellant could only operate{ and/or close its accounts with the respondent after clearing the alleged overd raft. - 5. The learned trial judge misdirected himself in fact when he held that the defendant was entitled to the counter-claim of 11,472,681 (Shillings Eleven million four hundred and seventy two thousand six hundred eighty one only) with interest at the commercial rate prevailing at the respondent from the date of filing the counter claim till payment in full, and the costs of the suit.(sic) l0

Counsel for both parties opted to submit written submissions on appeal. I have carefully studied both submissions. The submissions are lengthy and I will not in this judgment detail them or deal with the grounds of appeal separately as is the case in the written submissions. Suffice it to say that what follows takes into account all arguments made in respect of each ground ofappeal.

I propose to deal with the first three grounds of appeal together because I think they are closely related. They raise a single issue namely whether, the decision of the respondent to confiscate moneys on the appellant's accounts in the respondent's bank was in accordance with Clause 2 of the Deed of Indemnity signed by the parties onthe 191411995. l0

For ease of reference I reproduce the Deed of Indernnity herebelow:- 25 ## o "THE REPUBLIC OF UGANDA

#### DEED OF INDEMINITY

THIS DEED OF INDEMNITY made this l8th day of April 1995 by M/S TRANSLINK (U) LTD of P. O. Box 12034 Kampala.

To: Nile Bank Ltd P. O. Box 2834 Plot22,Jinja Road

Kampala

- l. WHEREAS We TRANSLINK (U) LTD claim to have deposited on 23lll/94 with NILE BANK LTD the amount of Ug.shs.30,000,000i-(Shillings thirty million) of which only Ug.shs.10,000,000/-(Shillings ten million) is acknowledge by M/s NILE BANK LTD; AND - 2. WHREAS M/sNILE BANK LTD has agreed to credit the account of M/s TRANSLINK (U) LTD immediately with the disputed amount of Ug.shs.20,000,000/=(Shillings twenty million) AND - 3. WHEREAS investigations concerning the receipt of the deposits at shs.30 million made by M/s TRANSLINK (U) LTD with the Bank on ZltlOl are being carrietl out by the Police Fraud Squad:

# o NOW We, TRANSLINK (U) LTD:

- l. Do HEREBY apply that you immediately credit our account with the disputed amount of shs.20,000,0067=(Sh illings twenty million). - 2. HEREBY CONVENANT that in thc event of the investigations currently being conducted by the Police Fraud Squad prove conclusively in writing that the said amount of shs.20,000,000/- (Shillings twenty million) was never deposited by M/S TRANSLINK (U) with NILE BANK LTD then, the said amount shall be treated as an overdraft granted by the NILE BANK LTD to M/S TRANSLINK (U) LTD, attracting no interest."

Following this agreement, the rnatter was reported to the C.l. D. Headquarters for investigation. On 5th September 1996 D/AIP Begumisa B. who was apparently in charge of the investigations wrote an internal memo to his boss ACP/Crime which has already been reproduced above in the outline of the background to this suit. I believe its contents are selfexplanatory. He suggested that a copy of the report be sent to the Management of NILE BANK "for information and update". It is not clear why no copy was sent to Translink (U) Limited which had reported the matter to the police in the first place. In the covering letter forwarding the report to the General Manager Nile Bank, the Director of C.l. D. On l319l1996 stated:-

o "I am enclosing for your information a progress rerrort on the above case. Trial of the accused persons is on going." IEmphasis mine]

Clearly, as of this date, the director of C.l. D. regarded the contents of D/AIP Begumisa's repoft of 51911996 as a progress report and not a conclusive report as envisaged in Clause 2 of the Deed of Indemnity. On l9l9l1996 the Legal Officer of Nile Bank wrote to M/s Translink (u) Ltd the following letter: l

#### "Dear Sirs,

### RE: YOUR DEED OF INDEMNITY WITH NILE BANK LIMITED

Reference is made to the above deed, which was executed on the lSth April, 1995, and your instructions to close your accounts with the bank.

TAKE NOTICE, that under the terms of the deed of indemnity, you undertook to indemnify the bank in the sum of Ug.shs.20,000,000/=, which was credited on your account upon your claim that you through your employee deposited on the 23'd day of November 1994, shs.30,000,000/=, in the event the criminal investigations prove otherwise. A copy of the said deed of indemnity is hereto attachcd for ease of your reference marked "A".

1,5

o Upon your instructions to close your accounts, the bank rekindled its internal investigation and established that it never received the said amount. We went further to request the Criminal Investigations Department - Fraud Squad, to give us their report touching upon the same matter. The said report was in conformity with the bank's findings. A copy of the said report is attached hereto marked "8" for you r reference.

Pursuant to Clause 2 of the Deed of Indemnity, the bank is therefore entitled to be indemnified on the basis of the said conclusive report in writing from the Fraud Squad. The said amount to be treated as an overdraft granted to the com pany attracting no interest.

> In the circumstances therefore, the bank cannot comply with your resolution to close your accounts dated 1418196, instead, we suggest that we consolidnte both accounts and set-off as pa rt of you r repayment obligation.

The current balance on both your accounts is as indicated below:-

- Account No.0101060001 shs.1,355,805/-CR - Account No.0101060051 Us\$6,702.35 CR

o Thus the total amount to be realised by the bank is shs.8,527,3191-. By this letter, you are hereby requested to make arrangements for the settlement of the outstanding balance of Ug.shs.l 1,472,681/-." IEmphasis mine]

At this point, the only police report the respondent had was the intemal memo forwarded to them by the Director of C.l. D. and referred to as a progress report. The above decision to confiscate the appellant's account was based on that report. Can that report be said to have been the conclusive report required under the Deed of Indemnity close? Definitions of the word "conclusive" in various dictionaries include:

- Settles a question. - Final and decisive. - Shutting out all further evidence. - Putting an end to an inquiry. - Beyond question or beyond dispute, etc.

Can D/AIP Begumisa's intemal memo of 5tr' Septernber be described in these terms? In holding that the merno was conclusive report of the police, the leamed trial judge stated:-

> "The Indemnity bond must be interpreted strictly in accordance with the golden rule of interpretation. The provision in the bond about the Police Fraud Squad is not ambiguous or vague so that we go behind it to find out whether by'the conclusive reporl'mc:rnt the final finding of the court, In my opinion, after the handrvriting expert had

a given his report the Police Fraud Squad was within its powers to issue its conclusive report pursuant to the Deed of Indemnity.

> My finding on the first issue is in the affirmative. Exhibit P. IV was the Police Squad conclusive report envisaged in the indemnity deed."

With the greatest respect, I am unable to agree that what is being referred to r0 as Exhibit P.lV (the intemal memo of 5/9196) was a conclusive report. The Director of C.l. D. called it a progress report. Even D/AIP Begumisa himself did not believe that he had made a conclusive report. He recommended that it be forwarded to the respondent merely "for information and update". In fact on 9th January 1997, he wrote another intemal memo on the same r5 matter to his boss. It is entitled:

### ''THEFT AND RELATED OFFENCES; A PROGRESS REPORT'' IUnderlining mine]

The contents of this memo have already been reproduced above in the outline of the background to this suit. It is significant to note that in this report, he stated:- 20

> "I wish to inform you that four people, that is to say two bankers of Nile Bank and two employees of Translink were charged, later one of the bankers (MWINE ENOCK) jumped bail, and this created a delay in proceedings with the rest."

o Though the first memo claimed that the Handwriting Expert had exonerated Nile Bank, the latter memo reveals that further investigations had taken place which led into two employees of Nile Bank to be charged with the subject matter of the investigation.

> I have already remarked that although this case was repofted to the police by Translink (U) Limited, the Police have never sent to him any report "conclusive, progress" or otherwise.

There is another disturbing aspect of the Deed of Indemnity. I do not think it would have been possible for the police to issue a "conclusive" report on the case unless there was no evidence to prosecute anyone. Once they took a decision to prosecute two employees of Nile Bank and two Translink, it was impossible for the police to issue a conclusive report unless the prosecution was concluded in court. In this case,, there was a prosecution, which from the evidence on record, is not yet concluded. We cannot speculate as to what the problem may be. What is true is that the police has no final verdict of the courl and therefore it is stilt enable to issue a conclusive report on the matter. Until that happens, the respondent has no cause or right to act as they purported to do in their letter to the appellant dated 1919196 reproduced above in this judgrnent. In short, it was premature to invoke the Deed Indemnity at that stage. t0 l5 20 +

The appeal on grounds one, two and three of the Memorandum of Appeal should succeed.

t1 a In ground four of the appeal, the appellant complains that the learned trial judge misdirected himself in law when he held that the appellant could only operate and or close its accounts with the respondent after clearing the alleged overdralt. The dispute over the confiscation of the appellant's two accounts with the respondent bank was partly triggered as follows:- On l4th August 1996, the appellant wrote to the respondent the following letter:-

> "To The Manger Nile Bank Ltd Plot No.22 Jinja Road Kampala - Uganda

Dear Sir,

)

In a meeting held by the Managing Director on l2'r'August 1996 at TRANSLINK (U) LTD Head Office at PLOT l/3 NASSER ROAD KAMPALA. It was resolved to close the following Bank Accounts held in NILE BANK LTD. ACCOUNT NO.0101060001 shs. ACCOUNT NO.0101060051 US. Dollars.

In view of the above please do the needful and issue us the drafts closing our two Accounts above mentioned. From the Dollar Account, the Draft should be issued in the name of LINCOLN INTERNATIONAL SCHOOL, KAMPALA. We take this opportunity to thank the Management and Staff for the sen'ices rendered to TRANSLINK (U) LTD." l0 25

On 30'h August 1996 the respondent replied as lollows:-

"Dear Sir,

# RE: RESOLUTION TO CLOSE YOUR ACCOUNT WITH NILE BANK

We are in receipt of your letter dated l4th August 1996 and resolution therein to close your accounts with the bank.

It is our considered opinion that the immediate closure of your accounts may prejudice the rights of the Bank under the indemnity executed between the bank and 1'ourselves dated lSth April 1995, a copy of which is attached hereto for ease of your reference, in respect of the disputed shs.20,000,000/:.

Results of our preliminary investigation show that it is more likely, than not, that the said m isappropriation was occasioned by your employee, whereupon the Bank would be entitled to a full refund of shs.20,000,000/= as per the indemnity. It would therefore be unequitable for thc Bank to pay your entire balance in light of the above. l5 t0

> In the circumstances therefore, we request that you give a few days within which the bank will conclude its investigations, results of which will be furnished to you. The decision whether to close and remit to you your balance or the Bank to set off and claim the balance lbrnr vou, lvill be communicated to you accordingly."

> > l6

On l3tl'september, Nile Bank received the copy of D/AIP Begumisa's Internal Memo dated 5'h September 1996 from the Director of C.l. D. This in tum triggered the respondent's letter of 1919196 (supra) confiscating the appellant's two accounts purportedly on the basis of a "conclusive report" from police.

ln resolving this issue, the leamed trial judge held:-

"lf, as I have decided, the defendant was entitled to invoke the provisions of the indemnity deed, then the defendant was entitled to treat the sum of shs.20,000,000/: (Twenty million shillings) as an overdraft earning no intercst. lt is in evidence that the plaintiff wrote to the defendant seeking to close its (plaintiff s) two Accounts with the defendant, namely, Account No.0101060001 (local Currency) and Account No. O101060051 (US. Dollar Account). No where in the request did the plaintiff indicate how it was going to pay the overdraft money of shs.20,000,000/=(Twenty million shillings). I find it unreasonable that the plaintiff wanted to close its accounts without providing for the repayment of the interest free overdraft amount. I will rel'ert to this in the 4th issue. As far as the declaration sought by the plaintiff, I see no reason why the plaintiff should not be free to operate its accounts wit the defendant bank, provicled, of course it (the plaintif{) has cleared the overdraft and it tloes not seek, as it did, to close its accounts. All in all, it would bc not diligent for the defendant to agree to closc the

It)

# plaintiff s account before its overdraft loan has been cleared.tt

- I would agree with leamed trial judge that the attempt by the appellant to close his accounts at this point in time was strange and highly suspicious. [t cannot have been in good faith. I think that the appellant's undertaking under the Deed of Indemnity included keeping his accounts with the respondent open and operating them in the nomal way until the police issued the conclusive report. I think the respondent as a prudent banker was entitled to resist the closure or even to freeze the operation of the accounts until assured of how it would be paid if the awaited conclusive report turned out to be in its favour. The respondent, however, was not entitled to confiscate the accounts or to pay itself before the police report. If I had agreed with the trial judges holding on grounds one, two and three, I would have agreed entirely with his above holding on this ground. Since we do not agree on the first three grounds, this ground would only partly succeed to the extent that the respondent was not entitled to confiscate or pay itself from the appellant's accounts. It was a premature act. 5 t0 l5 - Ground five of appeal is on the counter-claim. From what I have held above, it follows that the counter-claim does not arise. The event which could have allowed the respondent to make the counter-claim, i.e. the conclusive report from the police, has not yet occurred. The counter-claim must fail and this ground ofappeal must succeed. l0

# o CONCLI]SION:

In light of the above findings and in order to do justice to both parlies I would order a return to the status quo that existed on l3'r' August 1996, a day

before the appellant applied to close the accounts with the respondent. I think,, however, that the respondent is entitled to prevent the operation of the account until the police issues a conclusive report. The account will be deemed to have remained open with the balances that were on them on lgth September 1996. Any interest that was due will be deemed to have continued to accrue till this matter is concluded in accordance r.l'ith the Deed of lndemnity. Because of the holding that it was the ill tirned demand of the appellant to close his accounts that triggered the confiscation of his accounts and therefore this suit. I would order that each party bears its own costs here and in the High Court. l0

| t5 | Dated at Karnpala | n>k | this dav | 2004. | |----|-------------------|-----|----------|-------| | | | | | |

lLu nofluJ Llnl / lo Hon. Just .,USTI OFA EAL.

2-i

#### THE REPUBLIC OF UGANDA

#### IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

#### CORAM: HON. JUSTICE L. E. M. MUKASA-KIKONYOGO, DCJ HON. JUSTICE A. E. N. MPANGI-BAHIGEINE, JA HON. JUSTICE A. TWINOMUJUNI, JA

#### CIVIL APPEAL NO. 39 OF 2002

## TRANSLINK (U) LTD:::::::::::::::::::::::::::::::::::: **VERSUS**

NILE BANK (U) LTD ::::::::::::::::::::::::::::::::::: (Arising out of High Court Civil Suit No. 89 of 1997)

#### JUDGEMENT OF JUSTICE L. E. M. MUKASA-KIKONYOGO, DCJ

On perusal of the judgement in draft prepared by Hon. Justice A. Twinomujuni, J. A I agree that the appeal must succeed. Since Hon. Justice A. E. N. Mpagi Bahigeine, J. A supports that view, this appeal is allowed with the orders proposed by Hon. Justice A. Twinomujuni, J. A.

| | Dated at Kampala this- $-2$ $2$ $\frac{2}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ | | | |--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--| | | | | |

L. E. M. Mukasa-Kikonyogo Hon. Deputy Chief Justice

## THE REPUBLIC OF UGANDA

### IN THE COURT OF APPEAL OF UGANDA

### **AT KAMPALA**

#### CORAM: HON. JUSTICE L. E. M. MUKASA-KIKONYOGO, DCJ HON. JUSTICE A. E. N. MPAGI-BAHIGEINE, J. A. HON. JUSTICE A. TWINOMUJUNI, JA

#### CIVIL APPEAL NO.39 OF 2002

#### **TRANSLINK (U) LIMITED :::::::::::::::::::::::::::::::::::: APPELLANT**

#### **VERSUS**

#### **NILE BANK (U) LIMITED ::::::::::::::::::::::::::::::::::::** RESPONDENT

(Appeal from the Judgment and Decree of the High Court of at Kampala (Ntabgoba J) dated 29/8/2001 in HCCS No.89 of 1997)

## **JUDGMENT OF A. E. N. MPAGI-BAHIGEINE, JA.**

I have read the judgment of Twinomujuni JA and the orders therein.

I agree that there was no conclusive report from the police on which the parties and the court could have acted nor was the criminal trial ever concluded which could have greatly assisted the civil court in reaching its findings. The police should therefore conclude its inquiries while the status quo remains preserved as suggested in the lead judgement.

Dated at Kampala this $\frac{2}{2}$ day of $\frac{1}{2}$ . .....2004 **A. E. MPAGI-BAHIGEINE** JUSTICE OF APPEAL