[2021] UGCommC 48

| $\mathbf{1}$ | | |----------------|-----------------------------------------------------------------------------------------------------| | $\mathcal{L}$ | THE REPUBLIC OF UGANDA | | 3 | IN THE HIGH COURT OF UGANDA AT KAMPALA | | $\overline{4}$ | (COMMERCIAL COURT DIVISION) | | 5 | CS No. 277 of 2013 | | 6 | <b>RAJNISH JAIN (ADMINISTRATOR OF</b> | | 7 | THE ESTATE OF THE LATE R. L JAIN):::::::::::::::::::::::PLAINTIFF | | 8 | <b>VERSUS</b> | | 9 | LOKII PETER ABRAHAM::::::::::::::::::::::::::::::::::: | | 10 | | | 11 | BEFORE HON. JUSTICE RICHARD WEJULI WABWIRE | | 12 | JUDGEMENT | | 13 | This suit was commenced by the Plaintiff against the Defendant for payment of a sum | | 14 | of Ushs. 66,445,000/ agreed interest at 10% per month from 29 ^th April 2013 and costs of | | 15 | the suit. | | 16 | At the hearing the Plaintiff was represented by M/s Mubiru-Musoke, Musisi & Co. | | 17 | Advocates while the Defendant was represented by M/s Alaka & Co. Advocates. | | 18 | Neither the Defendant nor their representatives appeared at the hearing despite being | | 19 | duly served as evidenced by the Affidavit of service on court record dated 24 ^th March | | 20 | 2021. As such on the Plaintiff's prayer, the court ordered that the suit proceed exparte. | | 21 | The Plaintiff filed a witness statement deponed by Rajnish Jain and also addressed the | | 22 | Court in written submissions. |

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The agreed facts of this case as presented in the parties' Joint case Scheduling 23 Conference Memorandum are that the Plaintiff is the administrator of the estate of the 24 late R. L Jain having been granted Letters of Administration. That the Defendant 25 applied for loans of Ugx. 15,000,000/ and Ugx. 10,000,000/ from the late Jain on 13th 26 May 2011 and 14^th January 2012. That the applications were granted and the parties 27 signed a loan agreement dated 14^th January 2012 for Ugx. 28,325,000/ combining the 28 two loans which were granted at an interest rate of 10% per month. That the loans 29 were disbursed to the Defendant and were repayable within one month. That the 30 Defendant defaulted in his payments and on 18^th April 2012 wrote to the Plaintiff 31 acknowledging that he owed Ugx. 31,730,000/ and promised to pay the sum owed by 32 33 25^th April 2015 but failed to do so. That on 1^st June 2012 the Defendant further requested the Plaintiff to hold or withdraw court proceedings relating to the said 34 obligation and acknowledged that he was indebted to the Plaintiff in the sum of Ugx. 35 36,900,000/. That the late R. L Jain had received a total of Ugx. 60,995,000/ from the 36 Defendant pending verification of further payments from parliament to him (late R. L. 37 Jain). That cheque No. 102166 and No. 102168 were given by the Defendant for 38 security purposes only. 39

40 Four issues were raised for determination in the Joint Case Scheduling Conference Memorandum as follows: 41

42 1. Whether the Defendant is indebted to the Plaintiff in the sum of UGX. 66,445,000/ 43 as at the time of filing this suit?

2. Whether interest of $10\%$ in the loan agreement dated $14/1/12$ is harsh, 44 45 unconscionable, excessive, and unlawful?

3. Whether the Plaintiff can charge interest beyond the agreement period? 46

47 4. What remedies are available to the parties?

I have carefully considered the issues raised for determination of this suit and will 48 resolve them as follows; 49

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## Issue 1 50

Whether the Defendant is indebted to the Plaintiff in the sum of UGX 66,445,000 as 51 at the time of filing this suit? 52

The Plaintiff's Counsel submitted that the Plaintiff applied for and was granted two 53 loans of UGX. 15,000,000/ and UGX. 10,000,000/ and a loan agreement executed for 54 both loans on 14^th January 2012. That the loans were secured with two postdated UBA 55 Cheques no. 102166 and 102168 dated 27/06/12. That the Plaintiff duly disbursed the 56 loans and receipt of which was duly acknowledged by the Defendant. That the 57 Defendant failed to pay the loan amount on or before the 14^th day of February 2012 as 58 agreed by the parties in the Loan Agreement. The loan agreement created an 59 obligation upon the Defendant to pay back the sum borrowed with accrued interest. 60 The Defendant's failure to honor his obligation renders him indebted to the Plaintiff 61 in a sum of UGX. 66,445,000/ at the time of filing this suit as shown in the statement of 62 account of the Defendant. 63

That in the instant case, the Defendant adduced no evidence and Court would have 64 no reason to doubt the Plaintiff's account of events. That the Defendant admitted that 65 by 1^st June 2012, he was indebted to the Plaintiff in the sum of UGX. 36,900,000/ and 66 judgment on admission was entered against the Defendant on the 22^nd day of April 67 2021 in the said sum. That from June 2012 to the time of filing this suit the Defendant's 68 debt had accumulated to the sum of UGX. 66,445,000/. That despite promises by the 69 Defendant and the Demand Notices, the Defendant was not able to pay the 70 outstanding loan obligations. That court find that the Defendant was indebted to the 71 72 Plaintiff in the sum of UGX. 66,445,000/ (Sixty-six million, four hundred forty-five thousand shillings) as at the time of filing this suit and this has not been challenged 73 by the Defendant by adducing any contrary evidence. 74

**Resolution** 75

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Upon perusal of the Plaintiff's submissions and the evidence adduced, court has 76 established that according to PEX4 and PEX6 on 13^th May 2011 and 14^th January 2012 77 the Defendant applied for a loan of UGX. 15,000,000/ and UGX. 10,000,000/ 78 respectively from the Plaintiff. 79

PEX5 which is an acknowledgement of receipt shows that the loan of UGX. 15,000,000/ 80 was disbursed to the Defendant in two installments of UGX. 10,000,000/ disbursed on 81 $13^{\text{th}}$ May 2011 and UGX 5,000,000/ disbursed on $14^{\text{th}}$ May 2011. 82

83 PEX9 which is also an acknowledgement of receipt shows that the loan of UGX 84 10,000,000 was disbursed to the Defendant in two installments of UGX. 9,000,000/ 85 disbursed on 14^th January 2012 and UGX 1,000,000/ disbursed on 28^th January 2012.

Pursuant to the said loan applications, a loan agreement was executed for both loans 86 on 14^th January 2012 indicating a sum of UGX. 28,325,000/ which was the two loans 87 plus their interest accrued as exhibited in PEX10. According to the loan agreement, 88 the loans were secured with two postdated UBA Cheques no. 102166 and 102168 dated 89 27/06/12. The agreement expressly stated that the sum in the loan agreement was to 90 be paid in full by 14^th February 2012. According to the statement of account marked as 91 PEX22 as at 29^th April 2013, the total outstanding loan balance was a sum of UGX. 92 93 66,445,000/.

In paragraph 17 of the Plaintiff's witness statement he confirmed that at the time of 94 filing the suit the Defendant was indebted to the Plaintiff in that sum. The Defendant 95 did not adduce any evidence to dispute any of the Plaintiff's submissions or evidence 96 presented. In that regard, judgment on admission was entered against the Defendant 97 on the 22^nd day of April 2021 in the sum of UGX. 36,900,000/ leaving a balance of UGX. 98 29,545,000/. 99

100 In the case of Kimanywenda Boniface v Brukam Limited CS No. 21 of 2015, Justice Oyuko Anthony Ojok held that; 101

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"It is therefore taken that the Defendant's failure to cross examine the Plaintiff on his witness 102 *statement is taken that the Defendant fully accepts what was stated by the Plaintiff therein and* 103 has no contest whatsoever. In the case of Wilson Nuwemugizi versus National Water and 104 Sewerage Corporation, Civil Appeal No. 26 of 1993 cited in the case of Tom Mukalazi versus 105 Davis Kisule (1995) KALR 860 in which it was held that where there is no evidence for the 106 defence, the Plaintiff's account of what happened has to be accepted." 107

In agreement with the above case, considering that the Defendant neither adduced 108 evidence to support their case nor disputed the Plaintiff's evidence, it is an indication 109 that the Defendant accepted what was stated by the Plaintiff therein and has no contest 110 whatsoever. It is therefore the court's finding that the Defendant is indebted to the 111 Plaintiff in the sum of UGX. 66,445,000/ part of which judgment Was entered ON 112 admission in respect thereof. 113

Issue 2 and 3 115

Whether interest of 10% in the loan agreement dated 14/1/12 is harsh, 116 unconscionable, excessive, and unlawful? 117

118 And

119 Whether the Plaintiff can charge interest beyond the agreement period?

120 Issue 2 and 3 will be dealt with jointly since they are closely related.

121 In respect of these issues the Plaintiff's Counsel submitted that the Defendant entered 122 into a commercial transaction with the Plaintiff for loans of UGX. 15,000,000/ and 123 UGX. 10,000,000/ with full knowledge of the terms and conditions of the contract 124 including the interest. That the Defendant fully appreciated the terms of the 125 Agreement before appending his signature and does not contest this. That this 126 agreement is subject to the basic principles of the law of contract explained by Sir 127 George Jessel in Printing and numerical Registering Co. vs Sampson [1985] LD 19

128 **EQ 462.** That having signed this agreement, the Defendant is bound by its terms and therefore the 10% interest is not harsh, unconscionable, excessive, and unlawful as the 129 parties duly exercised their freedom of contract and the Defendant accepted the terms 130 of repayment as stipulated in the loan agreement. That no interest has been charged 131 beyond the agreement period. 132

Interest in respect to money lending transactions is provided for under S.12 of the 133 Money Lenders' Act Cap. 273 which provides as follows; 134

"... where the interest rate on a loan exceeds 24% per annum, such a loan will be deemed 135 *excessive and unconscionable..."* 136

When such interest as provided for in the law is reduced to a monthly rate, the $24\%$ 137 per annum translates to 2% per month. Clause 2 of the Loan Agreement states that 138 upon lapse of the loan period, the loan will be subject to interest at 10% per month till 139 the amount is fully paid. In the case of Hamwe Investments Ltd vs Babigumira 140 Andrew Ahabwe, CS No. 24/2012 Justice Henry Peter Adonyo in dealing with a 141 142 similar issue held that;

"Though it was argued by the Plaintiff company that its rate of 1% per month was below the 143 statutory rate, the fact that the agreement contained the rate of 5% per month upon default 144 after the first five months clearly placed it outside the law for that would make the total rate 145 146 payable in a year to be 40% making the said transaction not comply with the relevant provisions of the law and hence was unconscionable." 147

I am inclined to agree with the finding of my learned Judge brother in the forgoing 148 149 case. Relating his finding to the suit at hand, it is clear that the rate of 10% per month 150 upon lapse of the loan period put this transaction outside the law because it would 151 make the total rate payable in a year exceeds the 24% per annum stipulated under the 152 law. The Plaintiff's Counsel cited the case of **Printing and numerical Registering Co.** 153 vs Sampson [1985] LD 19 EQ 462 and submitted that the parties duly exercised their freedom of contract and the Defendant accepted the terms of repayment as stipulated 154

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in the loan agreement. Much as parties are bound by their own contract, S.26 of the 155 CPA Cap. 71 permits the court to strike down any contracted interest for being harsh 156 and unconscionable. 157

It is my finding therefore that the interest of 10% per month in the loan agreement 158 dated 14/1/12 is unconscionable and excessive. 159

**ISSUE 4** 160

## What are the available remedies? 161

In respect of the Plaintiff's prayer for payment of UGX. 36,900,000/ based on 162 paragraph k under the agreed facts of the Joint Case Scheduling Conference 163 Memorandum, this court entered judgement on admission in the said sum. Upon 164 entering judgment on admission in the sum of UGX. 36,900,000/, the Plaintiff 165 remained with a claim of UGX. 29,545,000/ for which they seek judgment. The Plaintiff 166 was able to prove that the said amount is still outstanding. 167

The Plaintiff's counsel also prayed for interest on the above sums at a rate of 10% per 168 month from the date of filing this suit until payment in full. Section 26 (1) of the Civil 169 **Procedure Act** provides as follows; 170

"Where an agreement for the payment of interest is sought to be enforced, and the court is of 171 the opinion that the rate agreed to be paid is harsh and unconscionable and ought not to be 172 enforced by legal process, the court may give judgement for payment of interest at such rate as 173 it may think just." 174

As established in issue 2 the interest of 10% per month in the loan agreement dated 175 14/1/12 is unconscionable and excessive. That being the case, court has power under 176 S.11 of the Money Lenders' Act Cap. 273 to reopen the transaction or any account 177 already taken between the parties and relieve a party from the payment of any sum in 178 excess of the sum adjudged by the court to be fairly due in respect of the principal, 179 interest and charges. 180

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181 The loan agreement entered between the parties on 14^th January 2012 indicates that 182 the Plaintiff advanced a sum of Ushs. 28,325,000/ to the Defendant to be repaid by 14^th February 2012. It is thereafter when it was agreed that an interest of 10% per month 183 would be applied till payment in full. Having found 10% to be unconscionable, an 184 interest rate of 2% per month from the date of first default on the loan will be applied 185 on the principal sum till payment in full. This is to be applied to the sum of UGX. 186 29,545,000/ which the Plaintiff was able to prove as the amount not admitted but still 187 outstanding. 188

189 The Plaintiff also prayed for General damages. He cited the case of **Kimanywenda Boniface v Brukam Limited (supra),** where court stated that; 190

191 "The object of damages is to compensate a party for the damage, loss or injury suffered. They can be pecuniary or non-pecuniary, the former comprising of all financial and material loss of 192 business profit and income, and the latter representing inroad upon a person's financial or 193 material assets such as physical pain or injury to feelings, as was held in Robber Coussens 194 versus Attorney General SCCA 8/1999". 195

PEX3 shows that the Plaintiff is a licenced money lender, which means that they are 196 in the business of lending money. It has been proved that the Plaintiff defaulted on his 197 loan obligations on 14^th February 2012 and has not paid up to date. The Defendant has 198 therefore denied the Plaintiff access to his money for almost 10 years. Being a money 199 lending business, this is money that could have been lent out to or reinvested to 200 201 generate revenue or run the business. The Defendant has therefore subjected the Plaintiff to financial loss and mental anguish. 202

It is my finding that the Plaintiff is entitled to the general damages sought. The 203 Plaintiff prayed for an award of general damages in the region of UGX. 50,000,000/. 204 205 However, in my view, the sum of UGX. 50,000,000/ is excessive considering the sums that the Defendant is liable to pay in this matter already and the fact that the 206


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