Tropical Bank Limited v Bwenge Davis (Originating Summons No. 20 of 2024) [2025] UGCommC 203 (27 June 2025)

#### 5 THE REPUBLIC OF UGANDA

### IN THE HIGH COURT OF UGANDA AT KAMPALA

#### (COMMERCIAL DIVISION)

#### ORIGINATING SUMMONS NO. 0020 OF 2024

#### IN THE MATTER OF A CREDIT FACILITY AGREEMENT 10 EXECUTED BETWEEN TROPICAL BANK LIMITED AND BWENGYE DAVIS ON THE 11TH FEBRUARY 2019

#### AND

## IN THE MATTER OF RECOVERY OF UNPAID SUM OF UGX.64,154,850/- FROM THE DEFENDANT AND

### 15 IN THE MATTER OF AN APPLICATION FOR SALE OF MOTOR VEHICLE TATA UBE 082W

## BETWEEN

# TROPICAL BANK LIMITED ::::::::::::::::::::: PLAINTIFF/CREDITOR

# 20 VERSUS

BWENGYE DAVIS:::::::::::::::::::::::::::::::::::: DEFENDANT/DEBTOR

#### BEFORE: HON LADY JUSTICE SUSAN ODONGO

#### 25 JUDGEMENT

This suit was instituted by Originating Summons under Order 37 rule 4 of The Civil Procedure Rules for the following reliefs;

a) A declaration that the defendant is indebted to the plaintiff in the sum of UGX 63,700,360,


- 5 b) An order for the defendant to pay to the plaintiff the sum of UGX.63,700,360, - c) An order that the plaintiff takes possession of and sale Motor Vehicle Tata UBE 082W to recover the sum of UGX.63,700,360 or any part thereof, - d) An order that the defendant pays the costs of the suit to the plaintiff. - 10

# BACKGROUND

The Defendant applied for a credit facility of UGX 120,000,000 from the plaintiff on 22nd January, 2019 to purchase a new Tata Truck. The application was evaluated and the plaintiff offered the credit facility on 11th February, 2019.

- 15 The Defendant accepted the offer of the credit facility by signing the offer letter and subsequently, the plaintiff and the defendant executed a credit facility agreement on 11th February, 2019 of UGX 120,000,000. The credit facility was disbursed, and the defendant used the funds to purchase a Motor Vehicle, specifically a Tata with registration number UBE 082W, which served as 20 collateral to secure the credit facility. The defendant failed to make regular repayments on the credit facility, prompting the plaintiff to issue multiple demands for payment. When the plaintiff attempted to repossess the vehicle used as collateral, the defendant hid it and resorted to violence when confronted. Currently, the sum of UGX.64,154,850 is alleged to be due and owing from the - defendant to the plaintiff as at 7 25 th August 2023 and the same continues to accrue interest.

# APPLICATION AND AFFIDAVIT IN SUPPORT

The law under which this suit is commenced and the orders sought therein, have been stated at the preamble of this Ruling.


5 The application is substantiated by the supporting Affidavit sworn by Ms. Nansamba Stella, Head of the Recoveries Department the Applicant Bank.

Ms. Nansamba avers that the defendant applied for a credit facility of UGX 120,000,000 from the plaintiff on 22nd January, 2019 to purchase a new Tata Truck (paragraph 7 and copy of agreement attached). The application was evaluated and the plaintiff offered the credit facility on 11th 10 February, 2019. The Defendant accepted the offer of the credit facility which was repayable in a pwriod of 48 months by the respondent making bi annual payment of the principal amounts and monthly payment of the interest which was at rate of 25% per annum. The credit facility was disbursed, and the defendant used the funds 15 to purchase a Motor Vehicle, specifically a Tata with registration number UBE 082W, which served as collateral to secure the credit facility. The defendant failed to make regular repayments on the credit facility, prompting the plaintiff to issue multiple demands for payment. When the plaintiff attempted to repossess the vehicle used as collateral, the defendant hid it and resorted to 20 violence when confronted. Currently, the sum of UGX.64,154,850 is alleged to be due and owing from the defendant to the plaintiff as at 7th August 2023 and the same continues to accrue interest.

## AFFIDAVIT IN REPLY

25 The defendant, through the sworn affidavit of Bwengye Davis, contends that the plaintiff has not come with clean hands for the penalty interest charged by the plaintiff of Ugx 16,071,058.85 is exorbitant and unjustifiable. That he was not given ample time to study the loan facility agreement and there was no legal in put by defendant's counsel. The counsel who witnessed the agreement is


5 unknown to the defendant. The defendant denies that he has hidden the motor vehicle from the plaintiff. He further avers that he had serviced the loan however faced challenges due to the economic hardships caused by the COVID pandemic. The defendant disputes the outstanding amount claimed by the plaintiff because he has so far paid an amount of Ugx 160,000,000 leaving a 10 balance of Ugx 48,083,791.6 of the principal including interest. That he is willing

to pay this amount within a period of one year exclusive of the penalty interest of Ugx 16,071,058.85.

## AFFIDAVIT IN REJOINDER

15 The plaintiff asserts that the defendant has admitted being indebted to the plaintiff and is willing to pay Ugx 48,083,791.16/=. That the defendant having stated that he has not denied the plaintiff from accessing the motor vehicle should hand over the vehicle considering that it is the collateral for the laon. The Plaintiff objects to the averments of the defendant that he was not awre of the 20 terms of the agreement.

#### REPRESENTATION AND HEARING

On the dates when this matter came up for hearing, the Applicant was represented by Counsel Naikote Sarah. Neither the respondent nor his counsel 25 appeared in court. The court issued directives for the filing of the affidavit in reply, rejoinder and written submissions. The parties did not comply with the timelines set.


5 The respondent filed an affidavit of service, and the applicant made a rejoinder. The applicant filed written submissions but the respondent did not.

I have considered the evidence on the record and the submissions of the applicant including the authorities cited.

## SUBMISSIONS OF COUNSEL FOR THE PLAINTIFF

- 10 Before resolving issues, counsel addressed court on the procedural propriety of this matter and the suitability of the Originating Summons in resolving the disputes at hand. Counsel relied on Order 37 rule 4 of the Civil Procedure Rules which provides that any mortgagee, whether legal or equitable, or any person having a right to foreclose any mortgage, may take out as of course an 15 originating summons, returnable before a judge in chambers, for such relief of the nature or kind following as may be by the summons specified, and as the circumstances of the case may require; that is to say, sale, foreclosure, delivery of possession by the mortgagor, redemption, re-conveyance or delivery of possession by the Mortgagee. - 20 Counsel further relied on the decision of Hon Justice Stephen Mubiru in *Guaranty Trust Bank (U) Limited v Dokwals Uganda Limited and Another* (*Civil Suit Originating Summons 1 of 2021)* where he held that:

*Originating Summons (OS) is one of the two modes of commencing a civil suit. A suit is commenced by this mode where the dispute concerns matters of law, and* 25 *there is unlikely to be any substantial dispute of fact. The affidavits are the pleadings for the case. The affidavit filed in support serves as the plaint, while the affidavit in reply serves as the written statement of defence. This procedure exists in the interests of efficiency and cost. It provides a simple, informal, expeditious and*


5 *inexpensive method of obtaining a final judgment, where no oral evidence is required, and the proceedings can be determined by way of affidavit evidence. An originating summons is the appropriate procedure where the main point at issue is one of construction of a document or statute or is one of pure law. It is not appropriate where there is likely to be any substantial dispute of facts that the justice* 10 *of the case would demand the settling of pleadings.*

He further held that:

*The plaintiff should set out in the originating summons a concise statement of the questions which the plaintiff seeks the court to decide or answer or a statement of the relief or remedy claimed (where appropriate).*

- 15 On the merits of the case, Counsel contended that the defendant is indebted to the plaintiff to the tune of UGX.64,154,850 which is broken down pursuant to Annexure F of the supporting Affidavit as follows; - a) Principal amount: Ugx.41,580,366.50/- - b) Principal interest: Ugx.6,503,424.66/- - 20 c) Penalty interest: Ugx.16,071,058.85/-.

Counsel argued that the disputed penalty interest by the defendant is grounded in the agreement signed by the defendant. That therefore, the court should find that this amount is lawfully due and payable by the defendant to the plaintiff.

25 Counsel further submitted that under Article 9 of the credit facility agreement, the vehicle was pledged as collateral and this fact is not disputed by the defendant. The purpose of collateral is to serve as a security fall back for the creditor in the event of default. Given the defendant's admission of default and his offer to pay Ugx.48,083,791.16/-, which falls short of the outstanding


5 amount of Ugx.64,154,850/, the justification for the plaintiff's possession and potential sale of the collateral becomes apparent.

On the matter of costs of the suit, Counsel argued that it is evident that the suit was precipitated solely by the defendant's conduct and actions, notably his default on the credit facility and failure to surrender the collateral to the plaintiff 10 despite demand. In light of this, it is only fair and just that the defendant bears the costs of this suit, as their breach of the credit agreement and subsequent

actions have necessitated the plaintiff's recourse to the courts to enforce her rights.

#### ISSUES FOR DETERMINATION

- 15 Under the Originating Summons, the plaintiff proposed a total of three issues to be addressed. Having reviewed them within the context of the parties' pleadings, I find that they are sufficiently casted but one more issue as relates to the commencement of the suit by Originating summons should be included. The plaintiff did address the court on the propriety of the procedure 20 in regard to his claim. According to Order 15 rule 3 of The Civil Procedure Rules, the court may frame issues from all or any of the following materials; - (a) allegations made on oath by the parties, or by any persons present on their behalf, or made by the advocates of the parties; (b) allegations made in the pleadings or in answers to interrogatories delivered in the suit; and (c) the 25 contents of documents produced by either party. The court may at any time before passing a decree amend the issues or frame additional issues on such - terms as it thinks fit, and all such amendments or additional issues as may be necessary for determining the matters in controversy between the parties shall


- 5 be so made or framed (see Order 15 rule 5 of The Civil Procedure Rules). The following therefore are the issues for determination. - 1. Whether Originating Summons is the appropriate procedure for the dispute? - 2. Whether the defendant should pay to the plaintiff the sum of UGX.64,154,850 being the outstanding amount due and owing as at 7th 10 August, 2023 pursuant to the Credit Facility Agreement dated 11th February, 2019? - 3. Whether the plaintiff is entitled to take possession and sale Motor Vehicle Tata UBE 082W to recover the sum of UGX 64,154,850/- or any part 15 thereof? - 4. Whether the plaintiff should be granted costs of the suit?

# DETERMINATION BY THE COURT

# ISSUE 1: Whether Originating Summons is the appropriate procedure for the

# 20 dispute?

It was counsel for the plaintiff's argument that this suit is properly placed before this court by originating summons and I agree with that position.

O. 37 r. 4 of the Civil Procedure Rules S. I 71-1 provides;

*Any mortgagee or mortgagor, whether legal or equitable, or any person entitled to* 25 *or having property subject to a legal or equitable charge, or any person having the right to foreclose or redeem any mortgage, whether legal or equitable, may take out as of course an originating summons, returnable before a judge in chambers, for such relief of the nature or kind following as may be by the summons specified, and as the circumstances of the case may require; that is to say, sale, foreclosure, delivery*

 5 *of possession by the mortgagor, redemption, reconveyance or delivery of possession by the mortgagee.*

The plaintiff and the defendant in this case executed a chattel mortgage in between them as is evidenced by Annexture B to the Originating Summons. At 10 the time of execution of the Credit facility agreement between the parties, the law governing chattel mortgages was the Chattels Securities Act, 2014 which was repealed on 31st May 2019 by the current Security Interest in Movable Property Act, Cap. 293 (SIMPO).

15 According to the Chattels Securities Act, 2014 a chattel means any moveable property that can be completely transferred by delivery, and includes machinery, book debts, stock and the natural increase of stock, crops, wool or property in respect of which a valid document of title exists. A chattel paper means one or more documents that evidence a monetary obligation and a security interest in 20 a lease of specific goods; or a lease of specific goods. Similarly a security interest means a right that is enforceable against persons generally, arising out of an interest in a chattel paper, a document of title, goods, an intangible, money, or a negotiable instrument and includes an interest created or provided for by a chattel mortgage.

The essence of the procedure of originating summons is to enable simple matters to be settled by the court without the expense of bringing an action in the usual way, not to enable court to determine matters which involve a serious question. They are intended to dispose of simple and non-contentious matters in a speedy 30 manner. *(See: Mayanja Bosco V Kasikururu Lois Okumu and another OS No. 005 of*

5 *2008, Nesta Petroleum (U) Ltd V Silcon Oil (U) Ltd & Anor Originating Summons No. 0003 of 2022)*

This procedure for Originating Summons entails the interpretation of documents, wills, deeds, enactments, or any other written instrument. It also

- 10 involves the determination of any question of construction arising under the instrument and for a declaration of rights of persons interested. *(See: Jas Ventures International Ltd V Okello Carlos Orach Originating Summon No. 0008 of 2023, Guaranty Trust Bank Uganda Limited V Dokwals Uganda Limited & Anor Civil Suit No. 0001 of 2021 (OS))* - 15 The plaintiff in her Originating Summons raised the following questions for the determination of this Court; - 1. Whether the Defendant/Debtor should pay to the Plaintiff/Creditor the sum of UGX.64,154,850/- being the outstanding amount due and owing as at 7th August 2023, pursuant to the Credit Facility Agreement dated 11th 20 February 2019. - 2. Whether the Plaintiff/Creditor is entitled to take possession and sale Motor Vehicle Tata UBE 082W to recover the sum of Ugx.63,700,360/ or any part thereof. - 3. Whether the Plaintiff/Creditor should be granted costs of the suit

This matter is rightly brought by way of originating summons because;

- a) The parties in this case executed a chattel mortgage pursuant to the Chattels Securities Act, 2014 (Currently this law is Security Interest in Movable Property Act, Cap. 293 (SIMPO)). - 30 b) There is unlikely to be any substantial dispute of fact as the defendant in


- 5 his affidavit in reply in particular paragraph 20 admits to being indebted to the plaintiff. He only disputes the penalty interest which is found in Article 6 of the loan facility agreement signed between the parties. - c) The main point at issue is one of construction of the facility agreement. - d) The questions raised in the Originating Summons are not complex. - 10

## ISSUE 2: Whether the defendant should pay to the plaintiff the sum of UGX.64,154,850 being the outstanding amount due and owing as at 7th August, 2023 pursuant to the Credit Facility Agreement dated 11th February, 2019?

- 15 In all civil litigation, the burden of proof requires the plaintiff, who is the claimant, to prove to court on a balance of probability, the plaintiff's entitlement to the relief being sought. The plaintiff must prove each element of its claim, or cause of action, in order to recover. In other words, the initial burden of proof is on the plaintiff to show the court why the defendant is liable - 20 for the relief claimed. Generally, the plaintiff in the instant suit must show: (i) the existence of a contract and its essential terms; (ii) a breach of a duty imposed by the contract; and (iii) resultant damages.

Counsel contended that the defendant is indebted to the plaintiff to the tune of UGX.64,154,850 which is broken down pursuant Annexure F of the

- 25 supporting Affidavit as follows; - a) Principal amount: Ugx.41,580,366.50/- - b) Principal interest: Ugx.6,503,424.66/- - c) Penalty interest: Ugx.16,071,058.85/-.

Counsel argued that the disputed penalty interest by the defendant is grounded

- 5 in the agreement signed by the defendant. In paragraph 20 of the defendant's affidavit in reply he admits to the Principal amount together with the principal interest as alleged by the plaintiff. He only disputes the penalty interest which is found in Article 6 of the loan facility agreement signed between the parties, he claims it is exorbitant. Article 6 (c) of the Credit facility agreement provides that - 10 in case of default a borrower shall pay a lender 12% interest per annum above the lender's prime lending rate from the due date to payment in full.

In *Foster V Mackinnon* (1869) L. R. 4 C. P. 704 it was held that *it is essential to the creation of a contract that both parties agree to the same thing in the same sense. When* 15 *two or more persons agree upon the same thing in the same sense, they are said to consent.*

In the instant case at the time of executing the credit facility agreement, the defendant consented to the impugned default penalty interest as is evidenced on both Annextures A & B (Offer Letter and Credit facility agreement respectively).

20 The defendant signed on both documents and his intention was to be bound by the terms therein. The Offer Letter and the Credit Facility Agreement were signed on 11th February, 2019.

In *Felthouse V Bindley* (1862) 11 C. B. (N. S.) 869 it was held that for there to be a valid offer and acceptance in a contract;

25 *a) the offer must be communicated to the offeree, and*

*b) the acceptance must be communicated to the offeror.*

In the instant case an offer of contract was made to the defendant which he accepted by signing on the offer letter and the contract itself and the intention was to be bound. Among the grounds that can invalidate a contract are coercion 30 (see: *Chikkam Ammiraju V Chikkam Seshamma* (1917) 41 Mad. 33), Undue


5 influence (see: *Inche Noriah V Shaik Allie Bin Omar* (1929) A. C. 127), Fraud (see: *Ward V Hobbs* (1878) A. C. 13), Misrepresentation (see: *Collen V Wright* (1857) E. and B. 647), Mistake as is in the instant case where the defendant alleges that he did not intend to enter a contract with a default penalty interest which I disagree with (see: *Foster V Mackinnon* (1869) L. R. 4 C. P. 704.

All through the loan period, the defendant did not raise any complaint in regards to default penalty interest but only remembers to complain upon being in default and before this Court. In my opinion the defendant does not raise any grounds that can invalidate the loan agreement. He is hence liable to pay the sum of 15 UGX.64,154,850 as prayed for by the plaintiff because he is under contract.

## ISSUE 3: Whether the plaintiff is entitled to take possession and sale Motor Vehicle Tata UBE 082W to recover the sum of UGX 64,154,850/ or any part thereof?

20 Counsel for the plaintiff argued that under Article 9 of the credit facility agreement, the vehicle was pledged as collateral and this fact is not disputed by the defendant. The purpose of collateral is to serve as a security fall back for the creditor in the event of default. Given the defendant's admission of default and his offer to pay Ugx.48,083,791.16/-, which falls short of the outstanding 25 amount of Ugx.64,154,850/, the justification for the plaintiff's possession and potential sale of the collateral becomes apparent. I agree with this position.

According to section 82 of Chattels Securities Act, 2014 a secured party may apply to court for an order to foreclose the right of a debtor to redeem the collateral. In *Nesta Petroleum (U) Ltd V Silcon Oil (U) Ltd & Anor Originating*


- 5 *Summons No. 0003 of 2022* Hon. Lady Justice Harriet Grace Magala cited *General Parts (U) Ltd and another Versus Non-Performing Assets Recovery Trust SCCA No. 9 of 2005* with approval and observed that the proper mode for a mortgagee to institute foreclosure proceedings was through originating summons - 10 In *Jas Ventures International Ltd V Okello Carlos Orach Originating Summon No. 0008 of 2023* Hon. Justice Thomas Ocaya O. R held that what is to be considered in any application for foreclosure is completion of the following steps: - *a) The completion of a loan agreement (whichever the form it takes).* - *b) The disbursement of the loan amounts.* - 15 *c) The occurrence of default, and the failure to rectify the same entitling the mortgagee to enforced recovery.*

In the instant suit, a loan agreement was executed as is witnessed by Annexture B to the Originating Summons, the disbursement of the loan amounts was done as is not disputed by the defendant and the occurrence of default, and failure to 20 rectify the same entitling the mortgagee to enforce recovery is admitted by the defendant in his affidavit in reply in particular paragraph 20. In the circumstances the plaintiff is entitled to foreclose the security to realise the amount that is owing.

## 25 ISSUE 4: Whether the plaintiff should be granted costs of the suit?

Counsel argued that it is evident that the suit was precipitated solely by the defendant's conduct and actions, notably his default on the credit facility and failure to surrender the collateral to the plaintiff despite demand. That it is only fair and just that the defendant bears the costs of this suit, as their breach of the


5 credit agreement and subsequent actions have necessitated the plaintiff's recourse to the courts to enforce her rights.

*Section 27 (1), (2) & (3) of the civil procedure Act, Cap. 282* provide that the Court has discretion to determine costs and against whom, out of what property, to what extent those costs are to be paid and court may give interest on costs at any 10 rate not exceeding 6% per annum and the interest shall be added to the costs and

shall be recoverable as such.

In the premises, the plaintiff is entitled to the Costs prayed for together with interest of 6% per annum.

Having made the above findings I consequently make the following orders:

- a) The defendant should pay to the plaintiff, within a period of 14 days, the sum of UGX.64,154,850 being the outstanding amount due and owing as at 7th August, 2023 pursuant to the Credit Facility Agreement dated 11th February, 2019. - 20 b) In default of the orders in a) the plaintiff is entitled to take possession of Motor Vehicle Tata UBE 082W to recover the sum of UGX 64,154,850/ or any part thereof. - c) Costs of this suit are awarded to the plaintiff at an interest rate of 6% per annum. - 25 I so find

Dated, signed and delivered electronically this 27 th day of June, 2025.