[2025] UGHC 76

# THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT MBARARA HCT-05-CV-CS-0020-2021

## 1. MUSINGUZI ROBERT

## 2. MUSINGUZI ODREK :::::::::::::::::::::::::::::::::::: VERSUS

### CENTENARY RURAL DEVELOPMENT

#### BANK LIMITED !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

**BEFORE:** Hon Lady Justice Joyce Kavuma

#### **JUDGMENT**

#### Introduction.

$\overline{11}$ Musinguzi Robert and Musinguzi Odrek (hereinafter referred to as the Plaintiffs) brought the instant suit against Centenary Bank (U) Limited (hereinafter referred to as the Defendant) for a declaration that the action of the Defendant's agents breaking into and ransacking the 1^st Plaintiff's home and property was unlawful and unjustifiable, a declaration that the 2^nd Plaintiff was assaulted by the agents of the Defendant, a declaration that the agents of the Defendant unlawfully entered the home of the 1^st Plaintiff, Special damages, punitive damages and general damages.

#### Background.

$[2]$ The background of this suit as can be deduced from the pleadings was as follows:

The 1^st Plaintiff undertook a bank loan from the Ibanda Branch of the Defendant for a period of two years from 9^th November 2018 to 9^th

February 2020 and has been servicing it. that he undertook a bank loan from the Kiruhura branch of the Defendant for a period of two years from 9^th November 2018 to 9^th February 2020 and has been servicing it and was currently UGX 12,300,000/=. That 10 to 18 cows of his died of East Coast disease resulting in three default payments of the loan a fact which was communicated to the Defendant. That he requested for a rescheduling of his loan and for a loan reconciliation from the Defendant but got no response from the Defendant. That on 17^th January 2020 three agents from the Defendant bank attacked the Plaintiff in his home where they found and assaulted the 2^nd Plaintiff, vandalized his house, broke doors, destroyed the tiles and broke glass windows of the house.

[3] The Defendant denied every allegation as set up above. They denied the alleged acts and it was their case that they had a legal charge or lien over the suit land which was created to secure the payment of an existing debt owed by the Plaintiff who is the mortgagor. That the Plaintiff obtained a loan from the Defendant amounting to UGX 30,000,000/ $=$ repayable within eighteen months and pledged his land comprised in a kibanja at Nkungu Central, Kazo, Kiruhura District.

That the Plaintiff defaulted on repayment of the loan which prompted the Defendant to issue notices in order to recover the outstanding amount. That when the Plaintiff did not adhere to the notices, the Defendant appointed recovery agents to liquidate the security and recover the outstanding sum. That the said agents did not cause any harm to the $2^{nd}$ Plaintiff.

The Defendant set up a counterclaim against the 1st Plaintiff in $[4]$ which they sought for an order that he pays the outstanding amount of UGX 35,225,112/= which they owed him as at $9^{\text{th}}$ March 2021 and costs of the counterclaim.

According to the court record, this matter came up for hearing on $[5]$ 3^rd April 2024 in the presence of counsel for the Defendant and in absence of the Plaintiffs or their legal counsel. Counsel for the Defendant prayed that the Plaintiffs' suit be dismissed. This court, proceeding under Order 9 rule 22 of the Civil Procedure Rules, granted the prayer and accordingly dismissed the suit and set down the counterclaim for hearing. When the counterclaim came up for hearing on 20^th August 2024, the Counter-Defendant (the 1^st Plaintiff) was not in court and neither was his counsel. Counsel for the Counter-Claimant prayed for the matter to proceed ex parte. This court adjourned the matter to 21^st August 2024 on which date the court proceeded ex parte the Counter-Defendant.

## Representation.

**[6]** The Counter-Claimant was represented by Mr. Arinaitwe Bright Bujara, learned counsel. Counsel filed written submissions in the matter which I have considered in the making of this judgment.

#### The issues for determination.

$[7]$ In his final submissions to this court, counsel for the Counter-Claimant raised the following issues for determination by this court;

- 1. Whether the Counter-Claimant is entitled to recover the outstanding loan balance of UGX 35,225,112/ $=$ plus interest from the Counter-Defendant. - 2. Whether there are any remedies available to the parties.

## The burden and standard of proof.

[8] It is a settled principle of evidence that whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he or she asserts, must prove those facts exist. (See Section 101 of the Evidence Act). It is said that this person has the burden of proof. This is the person whose suit or proceeding would fail if no evidence at all were given on either side. (See Section 102 of the Evidence Act and Besigye Kiiza vs Museveni Yoweri Kaguta and Anor Supreme Court Election Petition no. 1 of 2001).

The standard of proof in cases like the instant one is on a balance of probabilities. (See Miller vs Minister of Pensions [1972] 2 All ER 372).

It is an elementary principle of law that the counterclaimant as it is the case here has the duty to prove their claim in the counterclaim on the aforementioned burden and standard. (See Charles Lwanga vs Centenary Rural Development Bank (Court of Appeal Civil Appeal No. 30 of 1999).

Issue 1: Whether the Counter-Claimant is entitled to recover the outstanding loan balance of UGX 35,225,112/= plus interest from the Counter-Defendant.

To prove to this court that they were entitled to recover from the [8] Counter-Defendant UGX 35,225,112/=, the Counter-Claimant called one witness Lukumbuka Rogers.

Mr. Lukumbuka Rogers testified in chief that he was employed as a loans officer by the Counter-Claimant and he worked in their Ibanda branch for over five years and was now in the Ishaka branch. That his involvement in the instant matter was when he accompanied the agents of the Counter-Claimant to recover money from the Counter-Defendant. That the Counter-Defendant had on 9^th August 2018 obtained a loan from the Counter-Claimant repayable within eighteen months at an interest rate of 25% per annum and a penalty fee of 0.5% per day on instalments overdue. That the loan was to be repaid in quarterly instalments of UGX 6,148,881.97/=. That the Counter-Defendant had declared to the Counter-Claimant the purpose of the loan was for working capital for cattle fattening. That the Counter-Defendant pledged his land comprised in a kibanja at Nkungu Central, Kazo, Kiruhura as security for the loan and a mortgage agreement was executed. That the Counter-Defendant defaulted on repayment and the loan was recalled at UGX 25,840,000/=. That the bank proceeded to recover the said money by way of sale of the Counter-Defendant's property which he had pledged as security by appointing recovery agents. $\psi$

#### Submissions.

Counsel for the Counter-Claimant submitted that the Counter-**[9]** Claimant was entitled to recover the outstanding loan balance from the Counter-Defendant. That both the Counter-Claimant and Counter-Defendant were contractually bound by the loan agreement PE1 in which the Counter-Defendant applied for and obtained a commercial loan of UGX 30,000,000/ $=$ on terms that included repayment of the said loan within a period of eighteen months subject to principal interest rate of 25% per annum and a penal interest of 0.5% per day on the instalments due. It was counsel's conclusion that the Counter-Defendant breached the above terms and therefore the Counter-Claimant was desirous of recovering the outstanding amount of UGX 35,225,112/ $=$ .

#### Resolution.

Not every failure to perform amounts to a breach of contract. **[101** A breach of contract is committed when a party, without lawful excuse fails or refuses to perform what is due from them under a contract, or performs defectively or incapacitates themselves from performing. (See G. H. Treitel-Treitel on the Law of Contract-Sweet & Maxwell (2003) at page 832).

In the instant case, there is evidence before the court from the testimony of Lukumbuka Rogers that the Counter-Defendant entered into a micro and small loan agreement PEXH 1 with the Counter-Claimant on 9th August 2018 in which the Counter-Claimant lent to the Counter-Defendant UGX 30,000,000/= at an interest rate of 25% per annum repayable in 18 months quarter instalments of UGX 6,148,881.97/ $=$ . As security for the loan, the Counter-Defendant surrendered land purchase agreements for his unregistered land located at Nkungu Central, Kazo, Kiruhura for which a mortgage agreement was executed in form of PEXH 4.

There is further evidence on the court record in form of PEXH 5 (the Counter-Defendant's demand deposit statement) showing that the aforementioned sum of UGX 30,000,000/= with adjustments was deposited on the Counter-Defendant's account on 9^th August 2018. According to PEXH 6 the Counter-Claimant wrote to the Counter-Defendant on 16^th May 2019 a notice reminding him that he had defaulted on payment of a loan instalment that was due on 9^th May 2019 warning him that should he fail to pay the sum within seven days, the Counter-Claimant was to recall the whole loan. In PEXH 7 written to the Counter-Defendant on 23^rd May 2019, the Counter-Claimant recalled the loan which was then standing at UGX 25,840,000/ $=$ which the Counter-Defendant was to pay within 45 working days from that date.

It transpired however that seven days later, on 30^th May 2019 before the 45 working days referred to above could expire, the Counter-Claimant issued a notice of sale of the Counter-Defendant's land or security.

[11] The above actions of the Counter-Claimant from 23^rd May 2019 to 30^th May 2019 in view of this court were underhand, dishonest and unjust to the Counter-Defendant who was denied the full exhaustion of the opportunity to repay the amount due within the days that the Counter-Claimant had offered.

The relationship between a financial services provider who in the instant matter is the Counter-Claimant and a consumer who instantly is the Counter-Defendant is one that shall be guided by three key principles

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which are fairness, reliability and transparency and a financial services provider shall not engage in unfair, deceptive or aggressive practices such as threatening, intimidating, being violent towards, abusing, or humiliating a consumer. (See Guidelines 5 and 6 of the Bank of Uganda Financial Consumer Protection Guidelines, 2011).

These guidelines were made by the Regulator for the purpose of promoting fair and equitable financial services practices by setting minimum standards for financial services providers in dealing with consumers; increasing transparency in order to inform and empower consumers of financial services; fostering confidence in the financial services sector; and providing efficient and effective mechanisms for handling consumer complaints relating to the provision of financial products and services. (See Guideline 4 of the Bank of Uganda Financial Consumer Protection Guidelines. 2011).

The Counter-Claimant as a financial services provider was expected to act on the strict codes of banking as enunciated above or face repercussions from the Regulator Bank of Uganda.

[12] The above notwithstanding, it is now trite that where a bank breaches a code of banking practice, a court will not necessarily set aside a legal instrument, such as a mortgage, guarantee or loan agreement where it is clear on the facts that even if the code had been complied with, it would have made no difference to the customer's decision to enter into the transaction or their obligations under it. (See Atiku vs Centenary Rural Development Bank [2022 UGCOMMC 146] and Williams vs Commonwealth Bank of Australia [2013] NSWSC 335).

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Consequently, at the backdrop of the Counter-Claimant's unjust actions above, this court is persuaded on a balance of probabilities by the uncontested evidence before it, that indeed the Counter-Defendant defaulted on repayment of the loan sum of UGX 30,000,000/ $=$ that was advanced to him by the Counter-Claimant on 9^th August 2018 and therefore judgment is entered in favour of the Counter-Claimant. I hereby therefore make the following final orders;

- 1. The Counter-Defendant is ordered to pay UGX $35,225,112/$ as claimed by the Counter-Claimant in their counterclaim. $\psi$ - No interest is awarded on the aforementioned sum. - 3. The Counter-Defendant shall bear the costs of the counterclaim and suit.

I so order.

Dated, delivered and signed at Mbarara this ....................................

Joyce Kavuma Judge

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