[2020] UGCommC 147


| | THE REPUBLIC OF UGANDA | |----|------------------------------------------------| | | IN THE HIGH COURT OF UGANDA AT KAMPALA | | | (COMMERCIAL COURT DIVISION) | | 5 | CIVIL SUIT NO. 260 OF 2015 | | | PRICILLA LOPDRUP suing through | | | her attorney PEACE SYLIVIA<br>LUTAAYAPLAINTIFF | | | VS | | | 1.<br>MARGARET MIREMBE LUBWAMA | | 10 | 2.<br>KAJUBI LUBWAMA EDWARD | | | 3.<br>WALUSIMBI HERBERTDEFENDANTS |

## **BEFORE HON. MR. JUSTICE RICHARD WEJULI WABWIRE JUDGEMENT**

- 15 The Plaintiff filed a summary suit claiming Uganda shillings 80,000,000/= plus costs of the suit from the Defendants. The basis of the claim is that upon the 1st Defendant, an employee of Stanbic Bank at the time, promising that she would fix the Plaintiff's money on an account that enables the Plaintiff to get a better interest, the Plaintiff a customer to 20 Stanbic Bank transferred Ugshs. 100,000,000/= (One hundred million - shillings only) from her Stanbic Bank account No. 9030007087240 to the account of the 1st Defendant.

The 1st Defendant did not fix it as promised and also did not pay it back

25 to the Plaintiff.

The Plaintiff registered a Criminal complaint and on 30/1/2015 the 1st Defendant was arrested, upon which the Plaintiff entered an undertaking whereby the 1st Defendant acknowledged the debt and made part payment of UgShs. 20,000,000/= (Twenty million shillings only) and

30 promised to pay the balance of UgShs. 80,000,000/= (Eighty million shillings only) in three installments.

In making the undertaking, the 2nd and 3rd Defendant guaranteed her payment of the balance. The 1st Defendant partly paid a sum of Uganda shillings 20,000,000/= but refused to pay the balance of Uganda shillings 35 80,000,000/= which remained unpaid.

The 2nd and 3rd Defendants claim in defence is that they were coerced and they signed only to secure the release of the 1st Defendant from Police cells.

When the case was filed in Court on 27/11/2015, a default judgment was

- entered against all Defendants but the 2nd 40 and 3rd Defendants applied under Misc. Application No. 599 of 2015 for the judgment to be set aside. The judgment was set aside against the 2nd and 3rd Defendants only and they filed a defence, hence the instant trial. The judgment against the 1st Defendant remains and has never been set aside. - 45 The Plaintiff is represented by M/s Pearl Advocates and Solicitors while the 2nd and 3rd Defendants are represented by M/s Denis Kakeeto Advocates.

Counsel addressed the court in written submissions.

The issues for resolution as agreed by the parties in the joint scheduling 50 memorandum are;

1. Whether the undertaking dated 31/1/2015 is legal/valid and enforceable as against the 2nd and 3rd Defendants.

2. Whether the Plaintiff claim against the 2nd and 3rd Defendants is sustainable at law.

55 3. What remedies are available to the parties?

The Plaintiff presented three witnesses Peace namely; Sylvia Lutaaya (PW1), Isaac Twikirize (PW2) and Maxim Mutabingwa.

On the other hand, the Defendants presented two witnesses, the 2nd Defendant (DW1) and the 3rd Defendant (DW2) who filed witness 60 statements and were cross examined on them.

**ISSUE 1**

## **Whether the undertaking dated 31/1/2015 is legal, valid and enforceable as against the 2nd and 3rd Defendants.**

Counsel for the Plaintiff submitted that both Defendants admitted to

65 signing the undertaking. That all the Plaintiff's witnesses confirmed to Court that the 2nd and 3rd Defendants brought themselves to Police at Kibuli and none of them was under arrest.

That the 2nd and 3rd Defendants personally first paid Ug. Shs. 15,200,000/= (Fifteen million two hundred thousand shillings only) and

70 also mobilized an additional Ug. Shs. 4,800,000/= (Four million eight hundred thousand shillings only) making it Ug. Shs. 20,000,000/= (Twenty million shillings only) by the time of signing the agreement. The Plaintiff's witnesses informed court that the undertaking was signed on 31/1/2015.

- That the 2nd 75 and 3rd Defendants are estopped from denying the undertaking dated 31/1/2018 by claiming it was signed on 2/2/2015. That the 2nd and 3rd Defendants never reported anywhere that they had been forced into signing an agreement whose contents they did not know or whose purpose they did not know but rather only raised the claim - 80 while before Court.

In reply Counsel for the defendants submitted that the undertaking was signed while the lst Defendant was in incarceration in Police custody at Kibuli, at the instance of the Plaintiff trying to enforce the loan agreement between her and the 1st Defendant. That the 1st Defendant was in Police

Custody and by extension, the 2nd 85 and 3rd Defendant suffered from the distress, intimidation, force and coercion alongside apparent authority of the Police.

That Section 92 of the Evidence Act guards against Oral evidence to the terms of a contract. That the 2nd and 3rd Defendant fall within the 90 exceptions under Section 92(a) of the evidence Act citing intimidation and illegality that was meted out to them in order to have the 1st Defendant released on Police Bond.

That the content of the undertaking was not brought to their attention. That they were told to sign in order to secure the release of the 1st Defendant from Police custody. That the 2nd 95 and 3rd Defendant were not represented. That the Police was used to enforce a debt in a Civil Agreement pursuant to an alleged commission of an offence of obtaining money by false pretense whilst the parties had a loan agreement leading to the undertaking that is subject to litigation now. That the undertaking

100 procured by force, intimidation and undue influence be vacated as against the 2nd and 3rd Defendants.

In rejoinder Counsel for the Plaintiff submitted that the 2nd and 3rd Defendants admitted while giving evidence before Court under cross examination that the undertaking dated 31/1/2015 was signed by them

- 105 and that at the time of signing none of them was under detention. That the 2nd and 3rd Defendants admitted before Court that they stood surety for the 1st Defendant and that she jumped bond and they never returned to Police to report. That it is PW3 Maxim Mutabingwa who told Court that it is the 2nd and 3rd Defendants that brought Ug. Shs. - 110 15,260,000/= (Fifteen million two hundred sixty thousand shillings only) that was acknowledged before the lawyers went to draft the undertaking and they also mobilized more money.

That the 2nd and 3rd Defendants sought through their answers in cross examination to distance themselves in the act of payment, yet they 115 testified that the 1st Defendant was in detention at the time of signing.

- That there was no distress, intimidation or force as none of the 2nd or 3rd Defendants was ever in Police custody. Counsel prayed that Court be pleased to enter judgment in favor of the Plaintiff against the 2nd and 3rd Defendants. - 120 I have carefully considered the parties' submissions, evidence and the authorities.

The undertaking in question dated 31/1/2015 which is Exhibit P3 is one in which the 2nd and 3rd Defendants signed as guarantors for the 1st Defendant. It's that undertaking that is subject of contention in this

Page **5** of **15** 125 particular case. It's the Plaintiff's submission that this undertaking was a valid contract of guarantee whereas the Defendants argue that it is unenforceable because it was procured under duress.

In the case of **Barclays Bank Of Uganda Ltd Vs Jing Hong And Another, Cs No. 35/2009**, Justice Christopher Madrama relied on Oxford 130 Dictionary of law at page 246 to define a guarantee as a secondary agreement in which a person, (the guarantor) is liable for the debt on default of another, (the principal debtor) who is the party primarily liable for the debt. The contract of the guarantor in the strict sense (surety ship) is a secondary or ancillary to the contract of the principal debtor.

135 The last paragraph of the undertaking states as follows;

*"I have also presented two guarantors viz; Kajubi Lubwama Edward and Walusimbi Herbert who hereby unequivocally guarantee and undertake to personally pay the debt or any part/balance thereof to Priscilla Lopdrup in the event of my defaulting in payment of the debt or any part thereof."*

The above paragraph shows that the 2nd 140 and 3rd Defendants agreed to personally pay the debt to the Plaintiff in the event that the 1st Defendant defaulted in payment of the same. This paragraph was confirmed by the signatures of the 2nd and 3rd Defendants which they never denied in their testimonies.

Page **6** of **15** 145 This in my view is a promise to be liable for the debt of the 1st Defendant which makes the undertaking in question a contract of guarantee. The liability of a guarantor arises only upon the default of the principal debtor in his or her obligations as per **Halsbury's Laws of England 4th edition Vol. 20 at Para 193.** In this particular case, a default judgment 150 was entered against the 1st Defendant in MA No. 599/2015 and the same has never been set aside. This means that the 1st Defendant as the principal debtor is liable for the debt in question which would make the guarantors liable.

The guarantor's liability crystallizes upon default of the principal debtor.

155 Now the other question to be resolved is whether that contract of guarantee is legal and enforceable against the 2nd and 3rd Defendants. This can be resolved by establishing whether the contract of guarantee was properly executed.

Once the guarantee agreement is properly executed, the guarantor is 160 bound to pay in case the principal debtor defaults. In the case of **Stanbic Bank vs. Atyaba Agencies SCCA No. 2/2005**, it was held that the contract of Guarantee has to be construed strictly.

The 2nd and 3rd Defendants argue that the contract of guarantee was procured under duress. Duress is defined to include a threat of harm

165 made to compel a person to do something against their will or judgment; **Black's Law Dictionary 8th Edition Page 542**. In the case of **Pao On Vs Lau [1979] 3 ALL ER 65 at 78;** Lord Scarman held as follows;

*"Duress, whatever form it takes, is a coercion of the will so as to vitiate*

- 170 *consent…. There must be present some factor 'which could in law be regarded as a coercion of this will so as to vitiate consent.' In determining whether there was a coercion of will to negate true consent, it is material to inquire whether the person alleged to have been coerced did or did not protest; whether at the time he was allegedly coerced into* - Page **7** of **15** 175 *making the contract, he did or did not have an alternative course open to him such as an adequate legal remedy, whether he was independently advised; whether after entering he took steps to avoid it. All these matters*

*are, as was recognized in Maskell Vs Home [1915] 3KB 106, relevant in determining whether he acted voluntarily or not." Burton Vs Armstrong*

## 180 *[1976] AC 104 at 121".*

This suggests that the test to determine coercion is that a person must show that; he protested to the duress, that he did not have any other alternative course open to him such as an adequate legal remedy and he was not independently advised and whether the person took steps after

185 entering to vacate it.

From the facts before me, DW2 the 2nd Defendant in his testimony stated that at the time of signing the undertaking the 1st Defendant was in the cells and there were three people besides him. That one was Isaac who also gave him his phone number and instructed him to sign the

190 undertaking if he wanted to take his daughter and that there were other two gentlemen standing by.

That the said Isaac did not sign on the undertaking. That he was not around when the 3rd Defendant was signing the undertaking. The undertaking shows that it was signed by five people. If the 1st Defendant

195 was in the cells and the 3rd Defendant was not around, that would mean that the other two people who were around were the lawyer of the Plaintiff and that of the 1st Defendant.

In his testimony, DW2 testified that he signed on the undertaking on 2nd February 2015 not 31st January 2015 as reflected on the undertaking.

200 The Defendants' submission is an introduction of oral evidence to challenge evidence of a written document which is the undertaking dated 31/1/2015. **S. 92 of Evidence Act** provides that where the terms of any document have been reduced into writing and have been proved, then no oral evidence shall be admitted. Exhibit P3 is an agreed upon document.

- The 2nd 205 and 3rd Defendants were involved in the agreement leading to the drafting of the terms and were not under arrest at all. There was no agreement signed by parties on 2/2/2015 as alleged by the Defendants. At signing the undertaking, neither DW2 nor DW3 protested the signing. - Both DW1 and DW2 submitted that at the time of signing, the 1st 210 Defendant was in Police custody and by extension the 2nd and 3rd Defendants suffered from the distress, intimidation, force and coercion alongside apparent authority of the Police. No evidence of coercion that was exerted by Isaac or anyone present at the signing of the undertaking - 215 was adduced.

In his testimony PW1 confirmed that when the 2nd and 3rd Defendants were signing on the undertaking for payment of the balance of Ugx 80,000,000/= they were not under detention by Police. That P3, which is the undertaking, was made by both the Plaintiff's and 1st Defendant's

- 220 lawyers and that all parties involved in it read through before signing. In my view, DW1 and DW2 were not truthful in their testimonies because they alleged that the 1st Defendant who is their daughter and sister respectively introduced her man and even got married legally but only knew one name of the said son in law and husband to their daughter, they - Page **9** of **15** 225 did not know where he comes from, not even his clan yet they claim to have introduced under Baganda culture. Under paragraph 6 of his witness statement DW2 stated that he was told to stand surety for the release of the 1st Defendant who had agreed to pay

the Plaintiff's loan. But when asked about whether 1st Defendant had 230 agreed to pay the debt he stated that he wasn't aware of the loan.

It is evident that the Defendants are hiding the truth. In signing the undertaking, the 2nd and 3rd Defendants were acting on behalf of the 1st Defendant. The 1st Defendant's lawyer was therefore also the representative of the 2nd and 3rd Defendant in this undertaking.

- 235 Having taken no steps to avoid what they had entered into, leads to the conclusion that they regarded the transaction closed and had no intention to repudiate the agreements. Therefore, the fact that the 2nd Defendant was promised that the 1st Defendant would be released if he signs the undertaking cannot be said to be unlawful pressure and the - 240 Defendants cannot be said to have been coerced into signing the undertaking by the promise of having 1st Defendant set free. This does not constitute duress.

The Defendants therefore failed to prove duress and are in consequence bound by the undertaking they signed. As such the exceptions provided

245 for under **S. 92 (a) of Evidence Act** do not exist in this case.

In the result issue one is answered in the affirmative.

#### **ISSUE 2**

# **Whether the Plaintiff claim against the 2nd and 3rd Defendants is sustainable at law.**

Counsel for the Plaintiff submitted that it was not compulsory that the 2nd 250 and 3rd Defendants, being father and brother to the 1st Defendant respectively, had to guarantee the 1st Defendant. That if there was to be any allegation of force, duress or undue influence, it ought to have been

raised by the 1st Defendant who never challenged the judgment against 255 her.

In reply Counsel for the defendants submitted that the Plaintiffs' claim is not sustainable against the 2nd and 3rd Defendants. That the charge against the 1st Defendant while at Police was obtaining money by false pretense not a loan agreement. That the said security of a plot of land was

260 also part of the initial loan agreement, the Lawyers and the Plaintiff ought to have done due diligence, which they ignored.

As established under issue 1, the 2nd and 3rd Defendants signed the undertaking when they were not under detention. They willfully chose to guarantee and undertook that they would pay the balance of Ug. Shs.

265 80,000,000/= (Eighty million shillings only) or any part thereof personally in case of default by the 1st Defendant. The 1st Defendant defaulted and judgment was entered against her in the sum of Ug. Shs. 80,000,000/= (Eighty million shillings only).

In his evidence PW2 (Isaac Twikirize) who is a Court Bailiff testified that 270 in executing the judgment through Exhibit P7, he discovered that the land comprised in Kyadondo, Block 207, Plot 1862 land at Kanyanya which had been given by the 1st Defendant as security in the undertaking had a caveat lodged on it by G7 Trading Company Ltd Exhibit P8 claiming that the 1st Defendant had sold off the land to them but had refused to transfer

275 the same.

Page **11** of **15** According to the evidence of Maxim Mutabingwa when he presented the title given by the 1st Defendant on signing the undertaking for caveat registration, it was retained by Lands that it was a forgery. Following PW2's advert for sale of the suit land, Rapid Advisory Services wrote to

- 280 the Registrar of lands through Exhibit P9 stating that they had the certificate of title for Kyadondo, Block 207, Plot 1862 land at Kanyanya yet the 1st Defendant had given a certificate of title over the same property to the Plaintiff's lawyer which title was confiscated as forgery. The above evidence shows that the 1st Defendant gave the Plaintiff a - 285 worthless security and had also disappeared since her guarantors claimed not to know her whereabouts. This means that the sum of Ug. Shs. 80,000,000/= (Eighty million shillings only) as decreed in the judgment is still due and unpaid.

**S.71 of the Contracts Act** provides as follows;

290 *"(1) the liability of a guarantor shall be to the extent to which a principal debtor is liable, unless otherwise provided by a contract.*

*(2) For the purpose of this section the liability of a guarantor takes effect upon default by the principal debtor."*

The implications of section 71 Contracts Act to the facts and 295 circumstances in this case, in which the 1st Defendant who is the principal debtor defaulted on her payments, is that the 2nd and 3rd Defendants are liable for her debt.

The Plaintiff's claim against the 2nd and 3rd Defendants is sustainable at law. Issue no.2 is answered in the affirmative.

300 **ISSUE 3**

### **REMEDIES**

The Plaintiff prayed for an order for payment of Ug. Shs. 80,000,000/= (Eighty million shillings only) by all Defendants jointly and severally, payment of interest at a rate of 24% per annum from January 2015 until

305 payment in full and costs of the suit.

Counsel for the 2nd and 3rd Defendants prayed that the case be dismissed due to illegalities, undue influence and intimations meted to them.

Premised on the fact that the 2nd and 3rd Defendants guaranteed the sum of Ug. Shs. 80,000,000/= (Eighty million shillings only) in the

undertaking signed on 31/1/2015 and that principal debtor (the 1st 310 Defendant) defaulted on her debt obligation of the said Ug. Shs. 80,000,000/= (Eighty million shillings only), the 2nd and 3rd Defendants are jointly and severally liable for her debt.

#### **Interest**

- 315 Counsel for the Plaintiff submitted that the Plaintiff's money has remained unpaid since the month of January 2015 despite the undertaking by the 2nd and 3rd Defendants to pay the same. That money depreciates in value and as such court be pleased to order payment of interest as prayed for in the Plaint. Counsel to the 2nd and 3rd Defendants 320 prayed that no interest be awarded. - Under the provisions of **S. 26 (2) of the Civil Procedure Act, Cap 71**, where Court makes a Decree for payment of money, it has discretion to order for payment of interest. The intention of the transaction was for the money to be fixed on an interest earning account. This was not done and - 325 the money therefore did not grow as had been promised by the Defendant to the Plaintiff. The Defendants are liable for this missed opportunity.

**Costs.**

Counsel for the Plaintiff submitted that the case has dragged on for years since 2015, all leading into incurring costs yet on an agreement the 2nd 330 and 3rd Defendant signed willfully on 31/1/2015. He prayed that court

Page **13** of **15** award costs to the Plaintiff. Counsel to the 2nd and 3rd Defendants prayed that upon dismissal of the Suit, court be pleased to award costs to the 2nd and 3rd Defendants.

**S. 27 Civil Procedure Act, Cap 71** gives court discretion to award costs 335 to a successful party.

## **Final orders.**

- I. The Defendants are jointly and severally ordered to pay to the Plaintiff Ugshs 80,000,000/= (eighty million). - II. The above amount shall attract interest at the rate of 8% per 340 annum from filing this case until payment in full. - III. Costs are awarded to the Plaintiff.

Delivered at Kampala by email to Counsel for the respective parties and signed copies for the parties placed on file this 22nd 345 day of December, 2020.

………………………………………………………

# **RICHARD WEJULI WABWIRE JUDGE**

350