[2023] UGIC 38


## **THE REPUBLIC OF UGANDA**

### **IN THE INDUSTRIAL COURT OF UGANDA AT KAMPALA**

### **LABOUR DISPUTE MISC. APPLN NO. 197 OF 2021**

### **⁵ ARISING FROM MISC. APPLN. No. 115 OF 2020**

## **ARISING FROM LABOUR DISPUTE REF. No. 121 OF 2017**

**ORIENT BANK LIMITED APPLICANT**

**VERSUS**

'¹⁰ **YUDAYA MUSISI RESPONDENT**

**BEFORE:**

*a*

**¹ k**

# **1. THE HON. HEAD JUDGE, LINDA LILLIAN TUMUSIIME MUGISHA PANELISTS**

**1. MS. ROSE GIDONGO**

15 **2. MS. ACIRO BEATRICE OKENY**

**3. MR. JACK RWOMUSHANA**

### **RULING**

**1**

This application was brought under Order 50 Rules 4 and 9 ofthe Civil **²⁰** Procedure Rules seeking orders:

- 1. That the ruling and consequent Orders ofthe Registrar sitting as an Execution Court delivered on 7/12/2021 be set aside. - 2. The costs incidental to this application be provided for.

# BACKGROUND

**25 30** That,the Respondent instituted **Yudaya Musisi** Vs **Orient Bank Limited Labour Dispute Ref: No. 121 of 2017, Labour Dispute Ref: No. 121 of 2017,** against the Applicant in this Court in June 2017. On 29/11/2019, an Award was entered in her favour. The Respondent extracted a Decree in the matter on 20/12/2019. According to the Applicant it proceeded to pay the Decretal Amount sometime in August 2020 to a Ugx. Bank Account details of the Applicant's Counsel at the time. Prior to the disbursement, the Applicant offset the sum of Ugx. 41,889,329/-.

The Applicant further paid the Decretal Amount without withholding income tax, owed to the Government of Uganda through Uganda Revenue Authority, amounting to Ugx. 36,676,631/-. On 18/11/2021, the Respondent applied for execution against the Respondent via Misc. Application No. 115 of 2020.

That the notice to show cause why execution should not issue extracted by the Respondent indicated that the sum of **Ugx.** 46,099,175/-, comprising interest on the outstanding amounts. On 7/12/2021, the Registerer delivered a ruling in favour ofthe Respondent, permitting the execution to issue for the sum of **Ugx. 60,221,591/-**

The grounds ofthe application are as follows:

**1. That the learned Registrar erred in law and in fact when she held that the Decretal Amount was not subject to statutory deductions payable to Uganda Revenue Authority under the income Tax Act,**

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- **2. That the Learned Registrar erred in law and in holding the Applicant liable for a foreign currency conversion loss which had not been provided before the Court,** - **3. That the Learned Registrar erred in law when she used the foreign currency conversion rate of United States Dollars to Uganda Shillings applicable in November 2021 in respect of a payment made in August 2020.** - **4. That the Learned Registrar erred in law when she relieved the Respondent of her loan obligation by holding that the Applicant's actions of offsetting the salary loan where unlawful.** - **5. That the Learned Registrar erred in law and in fact when she reviewed the figures ofthe notice to show cause and recomputed the entire decretal amount outstanding at 7/12/2021 thereby arriving at a misconceived outstanding amount of Ugx. 60,221,591/=**

#### **⁶⁰ The Applicant's case**

The Applicant's case as stated in the affidavit in support sworn by Natalie Kironde , the Legal Manager ofthe Applicant as follows:

- **1.** That the Applicant proceeded to pay the decretal amount in August 2020, to a Ugx. Bank account details ofthe Applicant's Counsel as shown in Annexture "C." - **2.** That prior to this disbursement the Respondent offset the sum of Ugx.41,889,329/- being the loan amount that was due to it from the Respondent. - **3.** That the remaining amount ofthe decretal amount was further paid without withholding income tax, owed to the Government ofUganda through the Uganda Revenue Authority, the sum of Shs.36,676, 631/=

**3**

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- 4. That the Registrar erred in law and in fact when she relieved the Respondent of her loan obligation, by holding that the Applicant's actions of offsetting the salary loan was unlawful. - **75** 5. That the Registrar erred in law and in fact when she reviewed the figures in the notice to show cause and recomputed the entire decretal amount as at 7/12/2021, thereby arriving outstanding

The Respondent, Yudaya Musisi, opposed the application and stated in her sworn Affidavit in reply, as follows:

- **80** That, when she filed a memorandum of claim Labour Dispute Reference No. 121 of 2017, the Applicant did not make any response regarding her loan obligation and the issues for resolution were then framed as follows: - a) Whether the Applicant wrongfully and unfairly terminated her? - b) Whether she was entitled to any ofthe remedies sought? - **85** The issue whether she had a loan liability was not argued in court and no evidence was led establishing a loan liability and her claim was limited to prayers for - a) Payment of general damages - b) Payment in lieu ofnotice

**-**

- c) Payment ofseverance allowance and - **90** d) Interest rate on her salary loan remaining at 10%

That the Applicant filed a suit a under summary procedure against her, in Civil Suit No. 938 of 2019 in the Chief Magistrates Court of Mengo at Mengo, for the recovery ofthe unpaid loan. The matter has since been referred to the High Court, therefore the resolution ofthe loan recovery is still pending.

**95** Her lawyers Kinobe Mutyaba Advocates (now trading as MALDES Advocates) wrote several letters on 18/12/2019 and subsequently on various dates demanding ^payment of the Judgement date and initially they shared Account number

1044201123795 for USD, held with Equity Bank as the Account on to which the money should paid. Later on 16/01/2020, they wrote another demand letter in which they substituted Account No. 1044201123795for USD with Account No. 1044200979509 for UGX. On 6/08/2020 her lawyers Kinobe Mutyaba Advocates (now trading as MALDES Advocates) wrote to the Applicant notifying her about the error she made by paying the judgment -debt into the wrong Bank Account: Account No. 1044201123795 for USD instead of 1044200979509 for UGX, as a result ofwhich the Respondent suffered a shortfall arising from foreign currency conversion. The Applicant also notified her lawyers that it had offset Ugx.41,889,329/- as payment for loan, which her lawyers considered unlawful.

120 She then filed Misc. Appln. No. 115 of 2020, against the Applicant in this court, seeking recovery of the amounts outstanding on the decree, upon which the Applicant objected to the execution on grounds that, the Equity Bank forex rate which had the Registrar applied was unknown and her and she was entitled to offset the salary loan. This prompted the Applicant to seek a recalculation ofthe sum claimed by the Court's Accountant, which the Registrar granted. Her lawyers then sought further clarification from Equity Bank about the rate that was pertaining on 6/08/2020 and on 23/11/2021, Equity bank wrote to the Registrar and informed herthat, the forex rate on 6/08/2020, was USD 3755, which resulted in a credit ofUSD 18,616.13. On 6/12/2020, her Lawyers Emurwon and partners, also wrote to the Registrar restating the same information from Equity Bank regarding the forex rate and showing the shortfall of Ugx.5,957,165/- that was occasioned to the Respondent because of the error she made. Instead of the expected computation ofUgx. 69,903,571/- she only received Ugx. 63,946,406/- . On 7/12/2021, the Registrar delivered a ruling that ignored the information received from Equity Bank on 23/11/2021 and instead she applied the rate prevailing at that time.

125 She also found that, the Applicant was not entitled to offset the salary loan and on the Respondent's own request she recalculated the amount owing under the decree and arrived at a total ofUgx.60,221,591. This application was because of her demand for payment.

130 135 That the Industrial Court delivered an award, the judgment debt principle was Ugx.105,465,000/- and the daily interest rate was Ugx.28,894/-. The applicant made payment on 6/08/2020, after 251 days had elapsed, therefore the amount owing to her at that time in interest was Ugx. 7,252,394/ plus the principle of Ugx.105,465,000/- amounting to Ugx.l 12,717,394/-. The Applicant paid Ugx.63,946,406 through her lawyers and Ugx. 4,023,250 into her NSSF Account totaling to Ugx. 67,969,656/-. The amount that remained outstanding on 07/08/2020, was Ugx.44,747,738/-which attracted interest of 10% per annum until payment in full and the daily interest was Ugx. 12,259/=.

By the time the Registrar made her ruling on 7/12/2021, 487 days had elapsed therefore interest of Ugx. 5,970,000/- had accrued plus the principle of 44,747,738 totaling to Ugx. 50,717,871/=

145 That the Applicant's written representation that, she incurred a tax liability on the terms indicated in the award acts as an estopple preventing her from claiming a refund of any taxes paid. According to her lawyers Emurwon& Partners, under the Uganda tax law, having paid her on 6/08/2020, without withholding tax, the tax liability shifted from her to the Applicant. That the tax liability to Uganda Revenue Authority was extinguished when the Applicant made payment to the commissioner and the Applicant's statutory remedy is to file a separate suit to recover the amount paid, wherein she would have the opportunity to dispute both her liability and the amount repayable.

150 That General damages and severance allowance are judicial and statutory . cdmpensatory orders and are not subject to taxation. She was advised that, the

ly item under the Court's decree that, attracted tax was the award of 2 months as payment in lieu of notice, her gross salaiy being Ugx. 11,495,000/-, a monthly PAYE of Ugx. 3,371,000/-, the tax owing would total to Ugx.6,742,000/-.

# 155 She prayed that:

- a) the Applicant is not entitled to offset the salary loan, because it is subject to litigation still pending before the High Court of Uganda. - b) The Applicant is obligated to make good the forex loss occasioned to her by its payment into the wrong Bank Account - c) The Applicant is obligated to settle the full amount arising from the decree of this court which now comprises an outstanding principal of Ugx. 44, 747,738/- earning interest of 10% until payment in full, which interest was accruing at the daily rate ofUgx.l2,259/=.

### **RESOLUTION OF THE APPLICATION**

165 170 We shall resolve the Preliminary Objection raised by Counsel for the Respondent to the effect that, it is incurably defective, because it contravenes Order 19 Rule 3 of the Civil Procedure Rules, for being grossly argumentative, therefore it should be struck out. He contended that whereas an Affidavit is meant to adduce evidence by stating factual matters and not argue the case, the Applicant's affidavit in rejoinder argues the case. He cited *Male Mabirizi vs Ag SCMA No. 7/2018,* in support of his argument that the deponent in this case was liable to pay costs.

In reply Counsel for the Applicant insisted that the Affidavit in rejoinder stated facts known to the deponent given her position as the Applicant's legal Manager.

She argued that, Section 101 required anyone who alleges to prove and in this case the Respondent had the onus to point out to Court which paragraphs were argumentative, rather than make a broad statement that, the entire affidavit was argumentative. She identified paragraphs 8, 9, 10, 11 and 12 as stating facts and

180 185 cited *Ktiza Besigye ^v Museveni & Anor (Election Petition No. ¹ pf2001(2001] UGSC 4* whose holding is to the effect that where court comes to the finding that such paragraphs within the affidavit which offend the provision of the Civil Piocedure Rules may be severed and the remaining paragraphs be left to stand. She further argued that although the Supreme Court in **Mabirizi,** held that a deponent who filed an argumentative affidavit should be penalized in costs, the Respondent's sweeping statement that the Affidavit was argumentative should be disregarded.

### DECISION

Order 19 rule 3 provides that: *(1) Affidavits must be confined to suchfact as the deponent is able ofhis or her own knowledge to prove, except on interlocutory applications, on which statements ofhis or her beliefmay be admittedprovided the grounds thereofare stated.*

*(2) The costs of every affidavit which shall unnecessarily set forth matters of hearsay or argumentative matter or copies ofthe extractsfrom documents shall, unless the court otherwise directs, be paid by the partyfiling the affidavit. "*

195 200 Although Court may at its discretion, chose to severe those parts of an affidavit it may find offend the provisions ofthe CPR, we respectfully do not agree with Counsel for the Respondent that, this was applicable to the Respondent's affidavit in rejoinder, because the affidavit in its entirety, was drafted in form of a plaint thus rendering it impossible to decipher paragraph's that could be saved. It is a settled matter that, an affidavit is a written document containing material and relevant facts or statements relating to questions or issues sworn and affirmed and signed by the deponent, including stating the place and date on which it is sworn or affirmed. (See section 5 and 6 of the Oaths Cap 19). Therefore, the affidavit in rejoinder in the instant case, having been drafted in form of a plaint, is

**r**

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205 its entirety for being argumentative. It is therefore struck incurably defective in out.

We now resolve the application as follows:

- 1. **Whether the Applicant is entitled to recover money paid to Uganda Revenue Authority?**

(

210 **2. Whether the Applicant is entitled to set off Ugx. 41,889,329 from the decretal amount as a purported loan recovery?**

> 3. **Whether the Applicant is liable for the foreign exchange loss it caused by paying money into the wrong Account.**

# **LWhether the Applicant is entitled to recover money paid to Uganda Revenue Authority?**

220 225 230 It was the submission of the Applicant that when she disbursed the decretal amount to the Respondent, she inadvertently omitted to offset the tax liability, in the sum of Ugx. 36,676, 632= as computed under annexture "A" on the record. According to Counsel the section 4 of the Income Taxi, provides that a tax is imposed on any person with a chargeable income for the year ofincome. Section 15 ofthe same Act defines chargeable income ofthe person ofthe year, less total deductions allowed under the Act and gross income includes Employment income. She further cited section 19(1) of the Income Tax Act which provides that, employment income includes: *Amounts derived as compensation for termination ofemployment contracts* and Section 19(6) ofthe same Act, which is to the effect that, an amount or benefit is derived in respect of employment if, it is provided in respect of past, present or prospective employment. She cited *Uganda RevenueAuthority vs Siraje Hassan Kajara CivilAppealNo. 9 of2015,* whose holding is to the effect that, terminal dues are taxable. She argued that, general damages and severance allowance are not taxable because this is not supported by any statute orjudicial decision cited by the Respondent. According

235 240 to her, the Supreme Court having stated in URA Vs Siraje(supra), that Compensation which is defined by the Oxford dictionary to mean, money paid to someone in exchange for something that has been lost or damaged or for some problem or something that makes you feel better when you have suffered something bad and having stated that; Section 19(1) ofthe Income Tax Act, was very clear and unambiguous and it literally meant any amount given to an employee as compensation for the termination of his or her contract of employment whether stipulated in the terms of contract or not, amounts to employment income which is taxable. Therefore, terminal benefits which are a golden handshake and therefore a gratuity is compensation from a terminated contract and is taxable under section 19(1) of the ITA. According to Counsel, there was no tax exemption on tax liability on the decretal amount arising from LD. No. 121 of 2017.

245 250 ^h 255 She arg used that, whereas the Respondent did not subject General damages to tax, the rest of the award was liable for payment of statutory deductions. She further contested the argument by Counsel for the Respondent that, the Applicant having not withheld the tax deduction when it paid the Respondent on 6/08/2020, she was estopped from demanding the same because, the decree arising from the award, made no references to the Applicant being condemned to meeting the tax burdens ofthe Respondent and this liability fell squarely on the person receiving the income and it is not transferable as averred by the Respondent. She further argued that Section 116 of the Income Tax Act places every employer in the position of a withholding agent for payment of tax arising from employment income and section 124 ofthe Income Tax Act provides that, a withholding agent is entitled to recover the amount which was not withheld from the payee. According to her, it was an established principle ofthe law discussed in multiple authorities including *Maritime Electric Company Limited vs General Dairies .. 1937 AC,* that, estoppel cannot bar a statutory obligation. She stated that the - 260 pi inciple derived from this case is that: *estoppel is only a rule ofevidence which under special circumstances can be invoked by a party to an action. It cannot avail to release the plaintifffrom an obligation to escape a statutory obligation. It is immaterial whether the obligation is onerous or otherwise to the party suing. The duty ofeach party is to obey the law. "* - 265 270 She contended that, considering this holding, the law creates a statutory duty on all persons earning chargeable income to pay taxes and the language ofthe decree did not shift the onus ofthis statutory duty to the Applicant because in fact eh court was alive to the requirement for all persons to obey the law. In any case section 126, ofthe ITA provides for a remedy for employers who (where the taxes were not withheld) to a statutory right to recover from the payee. She contended that, under Order ¹ rule ¹ ofthe Civil Procedure Rules, which provides for the joinder ofsuits where the reliefs sought in respect ofthe same act or transaction or series of transactions alleged to exist and where if those persons brought separate suits any question of law or fact would arise and *Centenary Rural* - 275 280 *Development Bank v Richard Ivan uhangi trading as Survessis CS No. 116 Of 2018,* which is to the effect that, joinder of causes of action is intended to avoid a multiplicity ofsuits and to expedite the dispensation ofjustice, she argued that, to allow the Respondent to retain the amount which she is statutorily obligated to pay because would amount to unjust enrichment, therefore she should be ordered to refund the money obtained.

In reply, Counsel for the Respondent argued that, firstly, it was important to note that, there is no longer any tax obligation, because all taxes due to the Uganda Revenue Authority were paid by the Applicant, therefore, the statutory obligation arising under the decree in his view was met. According to him, the principle in

285 the *Electric Company Limited vs General Diaries Limited(supra)* relied on by the Applicant for the argument that, estoppel cannot be used to bar a statutory obligation is inapplicable in the instant case, because the statutory obligation

290 stands discharged. Pie insisted that, the Applicant declared that it included the tax liability arising from the judgment-debt and through it's legal Counsel communicated this undertaking to the Respondent in writing as stated under paragraph 24 of the Respondents affidavit in reply. That the Respondent relied on this declaration, therefore the Applicant is estopped from reneging. According to him, Section 114 ofthe evidence acts provides that:

*"when one person has, by his or her declaration, act, or omission intentionally caused or permitted another person to believe a thing to be true and to act upon that belief, neither he or she or his or her representative shall be allowed in any suit or proceeding between himself or herselfand that person or his or her representative, to deny the truth of that thing.*

300 305 310 315 He further argued that, the tax that was due arose only from Payment in Lieu of Notice given that the Respondent's salary was Ugx.l 1,495,000 so the decreed as payment in lieu of notice which represented 2 months' salary was Ugx.22,990,000. Therefore, given that the Respondent's monthly capital PAYE was Ugx.3,171,000, two-months' salary amounted to the tax bill of only UGX 6,742,000/-. Therefore, the Applicant's inflated claim ofUgx. 36,676,631 tax bill is not justified. He contended that, the sum of Ugx.57,475,000/- as severance is not taxable because severance is a statutory remedy for injury suffered and not a contractual benefit for services rendered. Pie argued that the Authority of**Uganda Revenue Authority vs Siraj Hassan Kajara** relied on by the Applicant is distinguishable because in that case the court was dealing with the question of whether terminal benefits for services rendered (such as gratuity, long service award, transport, housing, resettlement allowance, and payment in lieu ofnotice) were taxable. In his view, severance is not a payment in recognition of employment services rendered under section 87 (a) of the Employment Act. Severance is a statutory remedy for the injury suffered from an unfair dismissal.

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320 325 330 335 kin to statutory damages and in any case, the Applicant concedes that, damages aie not taxable. Therefore, based on the doctrine of estoppel, and consideiing that, the actual tax bill was Ugx. 6,742,000/ the applicant is not entitled to recover Ugx. 36,676,631 from the Respondent as money paid to the Uganda Revenue Authority. The learned Registrar found that the facts in, Uganda **Revenue Authority** vs **Siraje** Hassan(supra) were distinguishable with the instant case. Whereas in the supreme court made a finding in that case, that, retrenchment packages fall under section 19( ¹ )(d) as compensation and therefore they amount to employment income, in the instant case the Respondent's termination from the Applicant's employment was found to be wrongful, unfair, and unlawful, therefore, the Court awarded her general damages severance allowance and payment in lieu of notice, and the total award would accrue 10% interest per annum. We agree with the Registrar's decision that, the award of damages arising out of the Court proceedings was a remedy in respect of the Respondent's unlawful and wrongful termination as a penalty against the Applicant for its failure to follow due process of the law therefore it was not income arising out of employment as envisaged under section 19 ofthe Income Tax Act. Counsel for the Applicant conceded that, General damages were not taxed, but she contended that other awards arising from the decision ofthis court were taxable and having not withheld the tax, this court should ord.er the Respondent to refund what she already remitted to URA.

## **RULING**

The issue in contention as we understood it, is not whether employment income is taxable but rather whether the Applicant was entitled to a refund of tax she omitted to withhold from the Respondent, and remitted to URA?

It seemed to us that, the Counsel for the Respondent had does not seem to oppose the fact that, employment income is taxable save that in his considered view damages and Severance pay are not considered as such. What we understood from,

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345 350 355 360 365 his ai gument however is that the Applicant having undertaken to incur the tax liability as shown in the breakdown of the sums to be paid to the Respondent which when it shared with the Respondent as evidenced under paragraph 24, of her Affidavit in reply, to that extent, the Applicant is estopped from reneging. We had an opportunity to consider the letter, from the Applicant to the Respondent dated 6/08/2019, in which was appended to the Affidavit in reply as annexture "J", showing the breakdown ofthe status ofthe different awards at the time, and found that, the Applicant had tabulated the deductions which she made at that date including, deduction of PAYE of Ugx. 33,019,160/=. The letter contained another table which showed the outstanding awards and the the attendant interest accrued on each. The table listed the following as items which had not been subjected to tax: General damages, payment in lieu of leave and Severance and she went further to state that, she had incurred the tax liability on the other items indicated in the award. Given the content ofthis letter, It was clear that, general damages and Severance pay were not taxed. However the letter seemed to indicate that the Applicant had actually undertaken to incur the tax liability because the letter stated that *"...note that the Bank incurred the tax liability on the items indicated in the award".* Literally, this statement meant that the Applicant undertook to bear the tax liability on the items stated. Therefore, to this extent, we had no reason to disagree with the argument by Counsel for the Respondent that, the Applicant caused the Respondent to believe that the tax burden had been discharged. In the circumstances as provided under Section 114 ofthe Evidence Act, the Applicant is estopped from reneging. Although section 19(1)(d) which provides that:

> *"...any amount derived as compensation for the termination ofany contract of employment, -whether or not provision is made in the contract for the payment of such compensation, or any amount*

> > **J**

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•"

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## *derived which is in commutation ofamounts due under any contract ofemployment...*

imposes a statutory duty on all persons earning a chargeable income to pay taxes, in the instant application the Respondent does not dispute the statutory obligation to pay tax but rather that, the Applicant undertook and did discharge this statutory burden when she indicated in her letter of 6/08/2020, that she had incurred the tax on the items on the award and she had actually paid the same to the URA.

It is the correct position that, under section 166 of the ITA every employer is obligated to act as a withholding agent for payment of tax arising from employment income and section 124, ofthe same Act provides that a withholding agent is entitled to recover the amount which has been withheld from the payee. This notwithstanding, the Applicant in this case, undertook discharge this burden when she undertook to incur the tax and went further to pay it to URA. Therefore, she cannot turn around now seek its recovery from the Respondent.

385 390 395 However, having conceded that damages and under section which are remedies to the Respondent for the Applicant's failure to follow the correct procedure, before terminating her from employment, are not taxable, the same cannot be considered employment income as envisaged under section 19(l)(d). It is our considered view that, Damages and Severance are awarded by Court as penalties and therefore they cannot be compensation as construed under section 19(1 )(d). We believe that URA vs **Siraje Kajura**(supra), defined compensation was given in exchange for the loss of their jobs and it was considered as payment accrued from their past employment, but in our considered opinion damages and severance are penalties against an employer, for wrongfully and unlawfully terminating ones employment, therefore they are not compensation within the meaning ofsection 19( ¹ )(d0 ofthe ITA.

**I**

**2. Whether the Applicant is entitled to set off Ugx. 41,889,329 form the decretal amount as purported loan recovery?**

400 According to Counsel for the Respondent, the learned Registrar erred in law and fact when she relieved the Respondent ofher loan by holding that, the Applicant's actions of offsetting the salary loan was unlawful.

Order 8 rule 2 provides for set off and counter claim as follows:

- *1. A defendant in any action may set off, or set up by way ofcounterclaim against the claims ofthe plaintiff any right or claim, whether the set offor counterclaim sounds in damages or not, and the set of all counterclaim shall have the same effect as cross action, so as to enable the court to pronounce afinaljudgment in the same action, both on the original and on the cross claim. (Emphasis ours). But, the court may on the application ofthe plaintiff before the trial, ifin the opinion ofthe court the setoffor counterclaim cannot be conveniently disposed ofin the pending action, or ought not to be allowed, refusepermission to the defendant to avail himself or herselfofit.* - *2. Where are defendant includes a counterclaim in the defense, the defendant shall accompany it with a briefsummary ofevidence to be adduced, a list ofwitnesses, a list ofdocuments and a list ofauthorities to be relied on.*

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420 We had an opportunity to revisit the Applicant's, defence in the main claim and established that, the Applicant, as rightly submitted by Counsel for the Respondent did not plead the specific amount claimed and the distinct facts giving rise to set off nor did she adduce any evidence regarding the terms ofthe loan agreement. Having struck out the Affidavit in rejoinder for being entirely defective, we are not satisfied that, the Applicant, satisfied that, the requirements ofOrder 8 rule (2). Even ifin the main claim, the Court did not hold the Applicant responsible for the Respondent's loan obligation, and it also did not relieve her ofthe same. Clearly, the Applicant did not plead any counter claim or set off and 425 *\** therefore it did not pronounce itself on, anything to do the loan or whether it

would be entitled to set offthe loan amount at the time of execution. In any case no evidence was adduced as a basis for this Court to validate any set off.

Counsel for the Applicant did not deny that, evidence was adduced before the execution court, regarding the matter to prevent the loan liability, which she filed before, the Chief Magistrate's Court of Mengo and escalated to the High Court. |She submitted that, the execution Court could only determine strictly the reliefs granted and arising from **LDR No. 122 of 2017,** therefore, it should disregard the proceedings before the Chief Magistrate's Court which she considered, as a peripheral matter.

435 440 445 sum. Indeed, as rightly stated by Counsel the Learned Registrar was expected to only determine reliefs direct granted and arising from the decision handed down by this court and setoff ofthe indebtedness arising out ofthe salary loan. Therefore, given that, there is a pending matter before the High Court to prevent liability of the loan, and there is no evidence that, she applied for setoff in the main claim, the Applicant is not entitled to set-offUgx. 41,889,329/ from the decretal amount, as part ofthe loan recovery because it was not one ofthe reliefs. It is the correct position that, the court did not relieve the Respondent of her loan liability but rather maintained its repayment at 10% instead ofthe commercial rate. However, the court did not order that the Applicant should set it set off from the decretal

> In the circumstances, the Registrar was correct to relieve the Respondent ofthe set offof **Ugx. 41,889,329/-,** as her outstanding loan from the decretal sum. The Applicant should continue its pursuit of a remedy which is pending before the High Court, under the pending **Civil Revision No. 24 of 2020.**

450 **3. Whether the Applicant is liable for the foreign exchange loss it caused by paying money into the wrong Account.**

^jK^j

The Learned Registrar established that the Respondent in its letter to the Applicant dated 16/02/2021, provided the Ugx. Bank details in which the Applicant was supposed to deposit the Judgment debt, including clarification that, \*5

the one she had shared previously was a Dollar Account which should be disregarded. It was her finding that, there was no reason why the Applicant still paid into the Dollar account and directed the Applicant to bear the burden arising out ofthe application ofthe charges/rates incidental thereto. The Respondent at the time of execution demanded payment ofUgx. 2,498,815/- as loss outstanding as a result ofthe use ofthe Ugx,. Account. But the said amount kept increasing. Counsel for the Applicant contested and rejected the continuous increase on grounds that it was unjustifiable. She contended that, whereas the money was deposited as USD18.616.13, the evidence fell short ofshowing what exchange rate that was applied by the Bank to convert it back into Ugx. hence the claim for a shortfall at which it was computed, was not agreed.

According to Counsel for the Respondent, the learned Registrar converted the USD into Ugx. at exchange rate of USD 3565 pertaining on the date she made her execution ruling, which rates were lower than what the Respondent acquired from Equity Bank as the rates that were prevailing at the time the said money was deposited into the dollar account.

Having admitted that she deposited the money into the wrong account that is the USD Account instead ofthe UGX. Account, the Applicant we were inclined to agree with the Registrar that, she was liable for the loss occasioned by the foreign currency conversion rates.

475 We however do not subscribe to the argument by Counsel for the Respondent that the applicable rate should have been the rate which Equity Bank stated was the rate pertaining on the on 6/08/2020, because this information was only brought to court at the point during submission therefore, the Applicant did not have the opportunity to rebut it. We believe that, it was the correct position for the Learned

- 480 Registrar to exercise her discretion to apply the rate pertaining on the day of execution at USD 3565, amounting to Ugx,.66,366,503/-. Therefore, Applicant having paid the Respondent Ugx. 63,946, 406/-, it is ordered to make good the shortfall together with accrued interest at 10% per annum from 6/08/2020 until payment in full. - In conclusion, the learned Registrar's orders are confirmed as follows: 485 - 1. The Applicant is estopped from reneging on its written undertaking to incur tax arising under the decree. - 2. The Applicant is not entitled to offset Ugx 41,889, 329/= as loan recovery, it should be paid back to the Respondent. - 3. The Applicant is liable to make good the loss occasioned because ofpaying money into the wrong account with interest at 10% from 6/08/2020 until payment in full. - 4. The Applicant is obligated to pay the Respondent the outstanding principal and interest thereon at 10% per annum from 6/08/2020 until payment in full. - 5. Execution should issue to enforce the payment ofthe outstanding decree.

Delivered and signed by:

## **2. THE HON. HEAD JUDGE, LINDA LILLIAN TUMUSIIME HA**

⁵⁰⁰ **PANELISTS**

**1. MS. ROSE GIDONGO**

**2. MS. ACIRO BEATRICE OKENY**

**3. MR. JACK RWOMUSHANA**

**DATE: 9/05/2023**