Kisembo & Another v The Cooperativve Bank in Liquidation (Civil Appeal 1 of 2018) [2019] UGSC 97 (26 September 2019)

Z .a i IN THE REPUBLIC OT'UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA Coram: Mwangusya, Mwondha, Tibatemwa - Ekirikubinza JJSC; Nshimye, Tumwesigye Ag. JJSC CIVIL APPEAL NO. 1 OF 2018 Between 1. . Christopher Kisembo 2. Provia Kisembo T/A Ishaka General Hardware ... Appcllants Versus The Cooperative Bank in Liquidation Respondent (Appeal against the decision of the Court of Appeal of Uganda at Kampala before Opio Aweri, Buteera, Egonda-Ntende, JJA Ciuil Appeal No 93 of 2O10) JUDGMENT OF MWONDHA JSC The appellants were dissatisficd with the judgment and decision of the Court of Appeal and appealed to this Court on the following grounds:- 1. The learned honourable Justices ofCourt of Appeal erred in law when they ruled that the appellants are indebted to the respondent. 2. The learned honourable Justices of Court of Appeal erred in law when they upheld the findings of the lower Court that the appellants obtained the loan facility from the respondent and defaulted. 3. The learned honourable Justices of Court of Appeal erred in law in holding that the respondent has a lien over the property of the appellants. The appellants prayed that the court makes the following ordcrs:- l. The appeal be allowed and judgment ofthe Court of Appeal set aside. 2. The appellant's immovablc propcrty in possession of the respondent or their claimants in the title be rcleascd to the appellants. 3. The appellants be awarded costs of the appeal and the Courts below. 1 t I Back ground The facts as found by the Court ofAppeal were that:- The appellants were the defendants in the High Court of Uganda where they were sued by the respondent, under summary procedure for recovery of Shs149, 263,069.00 with interest at the rate of 21"/o per annum from the 26m day July, 2OO1 until payment in full and costs of the suit. It was pleaded by the respondent that this was the outstanding sum of money on the appellants' consolidated accounts with the respondent which up to the time of filing of the suit the appellants had failed to pay. The appellants applied for leave to appear and defend, vide Misc. Appl. No. 52O of 2OO2. In the supporting affidavit to the application, sworn by the first appellant, he stated; That I am not indebted to the Respondent/Plaintiff in the aun of Shs149, 263,069.00 as alleged ln the plaint. That at the tlme the Respondent closed lts Bank Btanch of Ishaka Tosn where the cause of action arose; I was indebted to it to the tune of Ug. Shs. 82,(X)6,859 only. See Annexture A and B, Leave to appear and defend was granted. In their written statement of defence, the appellants denied they owed the respondent any sums of money as they had fully paid all outstanding sums of money well before the suit was brought. In the alternative, the appellants pleaded that at the time of the closure of the respondent Bank, the appellant's indebtedness to the respondent was not in the sums of money claimed in the plaint and the records show that the overdraft balance was Shs.23,15O,167 l= by the 30th September, 1998 and this had been substantially reduced by the date of the closure of the Bank on 19th May, 1999. In another suit, High Court suit No. 336 of 2006, which was consolidated with the instant one the appellants had claimed that the respondent had wrongfully withheld their various certilicates of Title they had provided to 2 I secure the overdraft and loan facilities from the respondent so demanded their return with damages. The respondent replied that they had a lien over the same until all outstanding sums of money had been paid by the appellants which they had not paid. The learned trial Judge after hearing the parties passed judgment in favour of the respondent with interest and costs. The learned trial Judge also found that the respondent had a lien over the certificates of Title that had been deposited with them by the appellants until all outstanding sums of money due to them has been paid. The learned trial Judge ordered the appellants to pay costs of the suit. The appellants, dissatisfied with the decision of the High Court, appealed to the Court of Appeal. The Court of Appeal dismissed the appeal and found in favour of the respondent hence this appeal. Representation: Mr Moses Adriko, Senior Counsel and Mr. Eriya Mikka both from MMAKS Advocates appeared for the respondent and Mr. Abaine Jonathan from M/s Abaine-Bureryeya & Co. Advocates appeared for the appellants. Appellants' submissions: Mr. Abaine, Counsel for the appellants submitted on grounds one and two together and ground three was argued separately. He argued that the appellants had been offered an overdraft facility and were required to make necessary documentation and agreements in order to access that overdraft facility of UGX40,0O0,O00/= but at the time of the closure of the respondent's Bank, they had not Iinished the process of documentation. 3 He submitted further that the respondent called one witness who was not an officer of the Bank but a liquidator. That the liquidator did not have the record but what he had, were Bank account statements and those ones were not enough. He further submitted that the statements of accounts were not certified by the officials who were in the Bank and the records did not refer to Shs. 149,OO0,0O0i = (Uganda shillings one hundred forty nine million) with interest as the debt owing to the appellants. He argued that there was no contract between the appellants and the respondent. The account statements were based on the Bank draft facility of UGX40, 000,000/= which was not agreed upon, so the interest had no basis in law, He argued further that it is possible that according to the respondent's internal processes, the overdraft was deposited on the appellants account but the appellants never accessed the money since by that time, the Bank was under closure. He submitted that the respondent failed to prove on a balance of probabilities that the appellants were indebted to the tune UGX149, 000,000, and the evidence shows that the appellants were indebted only to the tune of UGX 23,00O,OO0/=. Counsel for the appellants faulted the learned Justices of the Court of Appeal for relying on Bank Statements which were not supported by ofhcials from the Bank. He contended that there was no cogent evidence from the respondent Bank to actually prove the indebtedness of the appellants. In support of the 3.d ground, he argued that a lien on the certificate of title cannot arise because the appellants were not indebted to the respondent. 4 I He argued that the admission of indebtedness made by the lirst appellant in his affidavit was not an admission in law. The certificate of title had been deposited with the Bank in anticipation of overdraft which did not materialise. Respondent Bubnlssions: Mr. Adriko, Senior Counsel for the respondent submitted on grounds one and two together and ground three separately. He argued that the respondent in the consolidated suit and on appeal against the judgment relied on the evidence of PWI who testified that the appellants had opened two overdraft accounts and one loan account. That the appellants maintained two accounts in their names and the third account was solely operatcd by the first appellant. He argued that at the time the respondent Bank had been closed under statutory receivership on 1gth May, 1999, the appellants owed the respondent UGX101,356,303/=. As at February, 2OO8, when the consolidated suit came up for hearing in Court, the appellants owed the respondent UGX26I, 478,4901=. He submitted that PW I evidence was supported by the Bank statement produced by the witness marked Exhibit Pl. In addition, PWI testilied that the appellants prior to the closure of the respondent Bank had requested for overdraft facilities which were renewed by the respondent. He submitted further that in the 1st appellant's affidavit in support of an application for leave to appear and defend the summary suit (HCCS 398.2002) which was identified in the trial Court as Exhibit ID2 the appellants admitted to being indebted to the respondents in the sum of UGX82,6OO,859/= as at August 2002. In yet another afhdavit which was identified in Court as ID3 deponed by the appellants on 27s August, 2OO4 in support of an application to set aside an exparte judgment entered against the appellants the same appellants admitted owing the respondent a sum of UGX78 million shillings. He submitted that by a letter dated 22na August 2OO2 in response to a statutory notice to foreclosure and sell the properties mortgaged to the respondents to secure outstanding facilities, the I appellants promised to pay off part of their indebtedness before 16ft October, 20O2. Counsel supported the trial Court finding and submitted that the appellants were indebted to the respondent. He also supported the Court of Appeal hnding and submitted that the appellant's denial of indebtedness was evasive and untruthful. That it was incumbent upon the appellants to provide particular details of the moneys repaid as the burden of proof lay upon the appellants to prove on a balance of probabilities discharge of their indebtedness. In response to ground three, Counsel supported the trial Court and the Court of Appeal finding and submitted that defendants' titles were left with the respondent Bank as security in the event that the appellants failed to pay the money lent to them by the respondent. He argued that the respondent Bank was at liberty to retain the security as fall back and in that case, the Bank had a lien over the property as well as right of possession until the indebtedness is paid and or discharged. He prayed that the appeal be dismissed with costs and the decision of the Court of Appeal upheld. Appellants' written submissions in rejoinder: In his submissions in rejoinder, Counsel for the appellants reiterated his earlier submissions and added that the afl-rdavit was sworn under pressure because the respondent was trying to evict the hrst appellant from the house of residence. He further submitted that all documents concerning the appellants' accounts were in possession and custody of the respondent Bank and it is only the Bank which knew and was responsible for cntries on the Bank account. Counsel relied on the case of Stanbic Bank Uganda Limited Vs 6 Uganda Corcs Limited SCCA No 4 of 2OO4 for this proposition. Counscl neither availed this authority for thc Court nor pointed out which particular part of the Judgmcnt hc wishcd to rely on. Noncthelcss, wc had the liberty to look at the case and this is what thc Court statcd in rclation to the legal principlcs which govern thc reltrtionship bctwecn a bank and its customcr: Legal principles which govern the relationship between a bank and its custorner are well settled. The duty of a bank is to act in accordance with the lawful requests of its customers in normal operation of its customer's account consequently, a bauker who has paid a cheque drawn without authority in contravention of the customer's orders or negligently cannot debit the cugtomer's account with the anount. A banker is under a duty of care to its customer which may require him to question a payment. See Banex Ltd Vs Cold Trust Bank Civil Appeal No. 29 of 1995(SCUI (unreported!, Harsbrv's Laws of E ngland, 4tu Edition. volume 3 (11 paraeraph 175. If the banker pays and debits it's customers in reliance on signature being his customer's, which is not so, he cannot charge its customer with that payment, in paying cheques, a banker must not be negligent and cannot charge its customer with money lost through his negligence. See: Pagets Law of Banking 11th Edition by Mesrah. Butterworths . L966 at pase 365 and 269: Consultant Survevors & Planners vs, Standard Bank lul Ltd. 119841 HCB. where a red signal manifests itself the banker's duty may be even more stringent, See: Barclav's Bank PLC Vs. Ouin-acre Ltd & Another 1L9921 4 All.E.R 331 Needless to say, the above principlcs havc no bearing on the facts of thc instant case. He also relied on the case of Capltal and Counties Bank LTD Vs Gordon (19031 AC 24O at 249 whcrc it w'as held as follows: It must never be forgotten that the moment a bank places money to lts customerr credit the cuatomer is entitled to draw rnoney upon it, unless something occura to deprive him of that right. 1 He concluded by submitting that ordering the appellants to repay money they never accessed or withdrew from the respondent Bank would amount to unjust enrichment and this Court, as the highest Court in the land should not support it. Consideration of the Appeal This is a second appeal and the role of a second appellate Court was long settled in a host of cases by this Court and its predecessor, EACA. lts role is to determine whether a lirst appellate Court properly exercised its duty of re-evaluation of the evidence adduced before the trial Court by subjecting it to fresh scrutiny before reaching its independent decision (see Klfamunte Henry v. Uganda Criminal Appeal ItIo 19 of 1997, Pandya v, Republic 119s7) EA 336. This appeal had three grounds as shown in the memorandum of appeal already reproduced in this judgment. Grounds I & 2: On the first ground, the complaint was that the learned Justices of the Court of Appeal erred in law when they ruled that the appellants were indebted to the respondent Bank. The complaint in the second ground was linked to the first ground to the effect that the Justices of the Court of Appeal erred in law when they upheld the finding of the lower Court that the appellants obtained a loan facility from the respondent and they defaulted on payment, These two grounds were argued together at the hearing of the appeal and I will also consider them likewise. The law as provided under Ss. l0l & 103 of the Evidence Act Cap 6. Laws of Uganda 2000. The above sections provide as follows: 8 (1f lllhoever 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 that those facts exist, (21 lVhen a person is bound to prove the existence ofany fact, it is said that the burden ofprooflies on that person, s.103. The burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence, unless it is provided by any law that the proofofthat fact shall lie on any particular person. The issue which arose in those two grounds was whether the appellants had discharged their burden before the trial Court in order to be entitled to the prayers sought. The Court of Appeal, in the analysis of the trial Court record reviewed afresh the evidence therein. It found that the appellants' case was based mainly on oral evidence if not cntirely on oral evidence given by the appellant No. I while the respondent case was substantially based on contemporary records made during the relevant period in the relationship between the parties. The Court of Appeal relied also on the words of Leggat J. in the case of Gestmis SGPEI. SA v. Credlt sulse (UKf Limited and Another [2()13] EWHC 356O which they considered particularly instructive as to how a Court should evaluate evidence especially in commercial matters like the trial Court did. s. 101. Burden of Proof Burden ofproofas to particular fact. The learned Justiccs of thc Court of Appcal quoted extensively the words of Leggat J. as follows: An obvlous dilliculty which affects allegations and oral evidence based ou, recollection of events which occurred several year ago is the unreliability of human memory....memory is especially unreliable wheu it comes to recalling past beliefs. Our memories of passed beliefs are revised to make them more consistent with our 9 present beliefs. Studies have also shown that memory is vulnerable to interference and alteration when a peraon is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.... After the review of the evidence, the Court of Appeal found that the respondent according to PWl's evidence and the documentary evidence adduced, showed that the appellants were indebted to the respondent in the sums claimed. The appellants had two overdraft facilities as well as loan accounts which when combined led to the sum claimed with interest i.e. shs 149,O00,0OO/=. Exhibit Pl, a statement of the Bank account which the respondent maintained for the appellants detailed all the transactions as they occurred at the time. It reflected that all the three accounts were maintained and there was an outstanding balance of Shs. 101, 456,303.00 as at 31st May 1999 just after closure of the Bank. Exhibit P2 - P6 were produced to support the case for the respondent that the appellant owed the respondent the money claimed. The appellant No. I had made an application for leave to appear and defend in which he deponed an afhdavit in support of the application. He admitted owing the respondent Shs.82, 000,000/ =. The application for leave to appear and defend was indeed granted. The appellant was then able to file a written statement of defence after setting aside the exparte judgment in a summary suit filed by the respondent Bank. The appellant was insisting that he had paid all outstanding sums of money and he denied having deponed the affidavit. The Justices of the Court of Appeal stated that denying that he deponed the affidavit in support of the application for leave to appear and defend left the appellant No. I credibility in tatters. It was on record that appellant No. one admitted having made another aflidavit in which he admitted to be indebted to the respondent to the tune of shs78,OO0,O0O/ =. The Court of Appeal noted that appellant No. one was 10 unable to explain why he was claiming that he did not owe the respondent any money inspite of those admissions. According to the record of appeal, the appellant relied only on his oral testimony to prove on a balance of probabilities that he owed the respondent nothing. The only contemporary record the appellant relied on to support his version of the events was Ex Dl. This was a letter from the external auditors of the respondent that had suggested that the appellants were indebted to the respondent in a sum of approximately Shs23, 000,O00i =. The auditors were seeking the appellants to confirm or deny that this was not the case. The appellants never responded to that letter. The Court of Appeal Justices rightly observed that EX Dl actually showed or proved that the appellants were indebted to the respondent but to a lesser magnitude than claimed. The learned Justices also during the review of the lower Court record found that the WSD of the appellants set up a defence in the alternative that should the appellants be indebted to the respondent it was for substantiality lesser sums of the money than claimed. They said in the judgmcnt: It would have been incumbent on the appellants to show which sums of money they admitted to owlng rather than provide an evasive reaponae to the claim. They referred to the case of Joshi v. Uganda Sugar Factory Ltd (19691 EA 57O (spry JA at page 572) where Order 6 rule 8 of the CPR which requires inter alia that a denial of a fact has to be specific. The learned Justices went further and stated that the appellants having been defcndants, they ought to have stated the particular sums that it paid to discharge the liability and ought to have stated how much le ss in specific figures. 11 It is very clear in my view that the record of appeal according to the the contemporary records by both the appellants and respondent showed that the appellants were indebted to the respondent and the appellants were aware of their indebtedness to the respondent in a substantial amount of money. Ex P I which detailed the transactions on the appellant's Bank accounts rvith the respondent from the relevant period of their relationship was not shaken by the appellants' evidence at all. FIX P4, a letter titled RENEWAL OF OVERDRAI'T FACILITY OFSHS4OM PETROL STATIONS A/C and EX P5 titled "RE CONSTRUCTING OF FACILITY OF SHS4OM/= ptU TRADING A/C MERCHANDISE both dated l9th April 1999 addresscd to appcllant No. 1 trading as Ishaka Gen. Hardware informing the appellants about thc approval of their request for a further loan and the handu,rittcn letter to the rcspondent's advocates confirmed that the appellants knew thcy were indebted to the respondent. It was written by Mrs Provia Kisembo and Mr. Christopher Kisembo, concerning the Statutory notice dated lllO6l2OOO in regard to the loan repayment. The appellants assured the advocates of the respondent that they will settle some amount before l6th Octobcr 2OO2 without fail, Ex P6. t2 It goes without saying that it was an admission that the appellants knew that they were indebted to the respondent. The appellants, like the trial Judge found, never adduced any credible evidence not even a Bank Account Statement or pay in slips to support their ve rsion of the story. The appellants had secured an overdraft which the respondent's witness clarified that, it was restructured into an instalment loan of Shs20,00O,000/: to run for a period of fifteen months and an overdraft limit of Shs20,0O0,OO0/= to run for a period of 12 months with interest rate of 2lo/o p.a. The security was to be land and property on Plot lO3O Block 39 lgara Bushenyi, Plot 122 C Block 39 lgara, Plot 1036 Block 39 lgara, Plot 36 LRV 1519 Folio 12 Bushenyi, Plot lO22 Block 39 Igara, Plot 1036 Block 39 Igara Ankole and Motor vehicle Reg. No. 214 UCS Mitsubishi Fuso. It is also on record that prior to thc respondent restructuring of the overdraft into loan payment, thc appcllant No.1 had requcsted the Bank for an overdraft as exhibited in Ex P3, appellant No.1 had written to the respondent Bank about his ailing financial position in business vide the EX P3, a letter dated 20th January 1999. The Court of Appeal quoted part of the letter and I find it not necessary to quote it. I noted that the appellant No. 1 at page 105 of the rccord of appeal where he appeared as DWl, he said, "since I was uslng their overdraft in bueiness....and when the lorry had an accident I knew that I will get stuck in ruuning the bueinese and I would use the overdraft in business and I had to inform the Bank before their term limit would end..." When the trial Judge asked him what he was asking specifically, he answered that he was asking the Bank to assist in stepping up his overdraft at the time whcn his existing overdraft would come to an end on the 31st March, 1999. It was appellant No. one's evidence that he got the letter from the Bank informing him of the decision of the loan Committee Approval of the renewal of an overdraft on shs40/=. That as he was going to consult at the head oflice the Bank was closed on the 19ft May 1999 and he did not get the money. The denial at that time could not work in light of the evidence already on record showing the indcbtedness. The question is what is the indebtedness? 13 In that letter dated 20th January, 1999 (EX P3) the appellant No t had told the respondent among things that he was hoping to work hard and Exhibits P4 and P5 show that the rcqucst of the appellants was affirmatively considered and the loan/overdraft was grantcd. Both the High Court and the Court of Appeal awarded a sum of shs 149.263,069/ = with interest at a rate of 2lVo per annum from 26t1, July, 2001 until payment in full. My analysis of the evidence shows that the appellants indebtedness to the respondent was Shs1Ol,456,303/= and not Shs149,263,069 l= as shown below. During the trial, the respondent called only one witness, Mr. Benedict Sekabira (PWl) a Bank of Uganda coordinator for the liquidation of the respondent Bank. In his testimony he stated that the total indebtedness was Shs.101,456,303/= arising out of the overdraft accounts and one loan account. The trial Judge Hon .Justicc Gcoffrcy Kiryabwire was alivc to thc fact as evident in his narration of Bcnedict Sekabira's evidencc as follows:- "He further testified that at the time of closure of the bank on 19th May 1999 the three (3) accounts being operated by the defendants had outstanding loan obligations as per exhibit Pl. 1. Account No. 879 had an outstanding balance UgShs.41,369,1O5/= Forty million three hundred ninety six thousand fifty four Uganda shillings . 2. AccouDt No. OO3 has en outstanding balance of Ugshs4O,61O,75,4l = (forty million six hundred ten thousand seven hundred filty four Uganda shillingsf. ),4 The respondent in his Amended plaint Iiled at the trial Court claimed for the sum of 149,263,069 l= with interest at the rate of 2lVo per annum from 26th July, 2001 until payment in full. The above two accounta were overdraft accounts which allowed the borrower to draw funds in excess of the credit balance on his account or over and above what he deposited on the account. 3. Account No. NFl2 had an outstanding balance of UgShs19,449 ,4441= (Nineteen million four hundred forty nine thousand four hundred and forty four Uganda shillings) and was an instalment loan account. All the accounts together has a total of UgShslOl,456,3O3/= (one hundred one million four hundred fifty six thousand three hundred three Uganda shillings),... Mr. Benedict Sekabira furthet testilied that at the date of closure of the bank, the defendants were indebted to it and that as at 29th February 2OO8, a total sum of Ug.Shs261,847,49O1= inclusive of interest, other charges and costs was still owed by the defendants to the plaintiff." The trial Judge on evaluation of evidencc furthcr madc thc same finding that:- "The burden in this instance thus rests on the plaintiff to prove that at the time of closure of the bank that the defendant a haa not completed the payment of their loan. The evidence on record that is the bauk statement Exhtbit P,l which clearly shows that as at 21it May 1999 a combination of all three accounts had an outstanding balance of UgShs.1Ol,456,303/= (one hundred million four hundred fifty thousand three hundred Uganda Shillings)... apart from admitting to Court on oath that his aflidavit dated 27th August 2OO4 showing that he was indebted to the bank was a falsehood, Mr. Kisembo presented nothing not even a copy of his own bank statements to show that he had paid all his pre-existing indebtedness to the bank before it was closed on the 19th May 1999, This is significant as the bank has shown Court a statement showing the defendants indebtedness at UgShs.1O1,456,3O3/= There is nothing to show that this amount was cleared before the bank was actually closed..,." 15 However, with the above Iinding that the respondent had proved that the appellants owed to them Ugshs. 101,456,303/= at the time of closure, the trial Judge awarded Ugshs. 149,263,069 l= which was claimed in plaint but was not proved at all in evidence. The trial Judge in awarding the same relied on the principle of unjust enrichment. He stated that:- 'In light of my findinge under issue number one that the defendants are indebted to the plaintiff, I also find that the defendant has been unjustly enriched at the expense of plaintiff and the law therefore required that restitution be made to plaintiff. I therefore award the plaintlff the sum of Ugshs.149,263,O69l= (one hundred forth nine million two hundred and sixty nine thousand sixty nine Uganda shillingsf which is the total amount of money that the defendants were indebted to the plaintiff as at 26th July 2OO1" The Court of Appeal after re-evaluation of evidence as the first appellate Court reached the same finding as the trial Court that at the closure of the respondent bank, the appellants were indebted to respondent bank in the sum 101,456,303/= as they stated that:- "On a fresh review of the evidence on record it was the case for the respondent, in light of the testimony of PW1, and the documentary evidence adduced in case that the appellants were indebted to the respondeut in the sums claimed. The appellants had 2 overdraft facilities as well as a loan account which combine, led to the sum claimed with interest. Exhibit Pl was produced which was a statement of account that the respondent maintained for the appellants' accounta with it. It detailed all transactions as they occurred at the time. It reflected that all three accounts were combined and there was an outstanding balance of Shs1O1,456,3O3/= as the 31"t May 1999, just after the closure of the respondent bank. In addition to exhibit Pl, exhibite P2 to P6 were produced to support the case for the respondent 16 I that the appellants owed the respondent they noney claimed ln this sult.' Needless to say that the Court of Appeal did not demonstrate how the trial Court arrived at the sum of Ug.Shs. 149,263,069 l= which was upheld. There was a suggestion that the ligure included interest but if this was the case the only witness brought by the respondent should have testified as to how the interest was arrived at. I believe the award of Ugshs. 149.263,069 l= was erroneous and should be substituted with the sum of Ug.Shs. 101,456,303/= as found by both Courts. In the result; (1) the appeal would substantially fail and I would dismiss it with costs of this Court and Courts below save, for the decretal sum adjusted (Shs. 1O 1,456,303) as discussed in this judgment as the sum owed by the appellants to the respondent. (2)lnterest of 87o per annum awarded to the respondent from the date of delivery of this judgment till payment in full. 1et+k orq Dated at Kampala this .dav of MWONDHA JUSTICE OF THE SUPREME COURT t7 IN THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT I{AMPALA CIVIL APPEAL NO. 1 OF 2018 ICORAU: MWANGUSYA, MWONDHA, TIBATEMWA- EKIRI KUBI NZA, JJSC; NSHIMYE, TUMWESIGYE Ag. JJSCI Between I . Christopher Kisembo 2. Provia Kisembo T/A Ishaka General Hardware Appellant And The Cooperative Bank in Liquidation Respondent lAppeal against the decision of the Court of Appeal of Uganda at Kampala before Opio-Auteri, Buteera, Egond.a-Ntende; JJA) Ciuil Appeal No. 93 of 20101 JUDGMENT OF MWANGUSYA, JSC I have had the opportunity of reading in draft the judgment of my sister Mwondha Faith, Justice of the Supreme Court. I agree with her conclusion and the orders proposed. Since all the other Justices are in agreement, the appeal is dismissed with costs in this Court and Courts below. sya E air tdad v Mwa OF THE SUPREME COURT 1 2 THE REPUBLIC OT UGANDA IN THE SUPREME COURT OF UGA,NDA A,T KAMPAI,A (CORAM: MWANGUSYA, MWONDHA, TIBATEMWA-EKIRIKUBINZA, JJSC; NSHIMYE, TUMWESIGYE, AG. JJSC ClVlt APPEAL NO: 01 OF 2018 BETWEEN CHRISTOPHER KISEMBO , PROVIA KISEMBO AND THE COOPERATIVE BANK IN LIQUIDATION RESPONDENT [Appeal from the iudgment of the Court of Appeal (Oplo-Awerl, Buteera and Egonda- Ntende J|CA) at lfa'npala, Civil Appeal No. 93 of 2010 dated 21n May, 20151 AC, rF Eu 2011 d f Joth e e AG. JUSTICE OF THE SUPREME COURT ::::: APPELLANTS IUpGMENT OF TUMWESTGYE. AG.ISC I have had the benefit of reading in draft the judgment of my learned sister, Hon. fustice Faith Mwondha, fSC, and I agree with her judgment and the orders she has proposed. Dated at Kampala this THE REPUBTIC OF UGANDA IN THE SUPREME COURT OT UGANDA AT KAMPAIA CIVIL APPEAT NO.OI OF 2OI8 BETWEEN I. CHRISTOPHER KISEMBO 2. PROVIA KISEMBO I/A ISHAKA GENEAT HARDWARE AND APPELTANTS THE COOPERATIVE BANK IN T]QUIDATION RESPONDENT [Appeal against the decision of the Court of Appeal of Ugand a at Kampdla before Opio Artei, Buteera, Engonda Ntende, JJA Ciuil Appeal NO.i3 of 20101 JUDGMENT OF A.S. NS I have had the bene{it of reading in draft the lead jud.gment of my sister Justice Faith Mwondha JSC. I agree with her consideration of the grounds of appeal, reasoning and conclusion that the entire appeal lacks merit and ought to be dismissed with costs. Dated at Kampala, this 201tr day of- .s. YE A.G JUSTICE OF SUPREME COURT (CORAM: MWANGUSYA, MWONDHA, TTBATEMWA- EK|R|KUBINZA JJSC, NSHIMYE, TUMWESIGYE, A.G JJSC) 20t9. THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA CIVIL APPEAL NO. 1 OF 2018 (CORAM: MWANGUSYA; MWONDHA; TIBATEMWA-EKIRIKUBINZA, JJSC; NSHIMYE, TUMWESIGYE, Ag.JJSC.) BETWEEN 1. CHRISTOPHER XISEMBO 2. PROVIA KISEMBO lT/A Ishaka General Hardwaret:::::::::::::::::::::::::::t:::::::: APPELLANTS AND THE COOPERATIVE BANK IN LIQUIDATIOI{ : I:: :: :: ::: :: : :: :: RESPONDENT [Appeal from the judgment of the Court of Appeal at Kampala before (Opio-Aweri, Buteera, Egonda-Ntende, JJA) Ciuil Appeal No. 93 of 2O10, dated 2lst MaA 201s.1 JUDGMENT OF PROF. TIBATEMWA.EKIRIKUB INZA. JSC. It is clear from the facts of the case that are articulated in the judgment of Hon. Justice Mwondha that there was a banker- customer relationship between the appellants and the respondent bank before it went into liquidation. The appellants operated three accounts with the respondent balk two of which were overdraft facilities and one was an installment loan account. The respondent bank sued the appellants for defaulting to pay back the aggregate loan sum of Ushs.149, 263,069.00 /= on the three accounts together with interest. The appellants denied being 10 15 20 30 5 1 5 indebted to the respondent in the said sum. The appellants argued that they had in fact cleared the loan and were not indebted to the respondent at all. In support of the claim for the loan sum, the respondent bank adduced documentar5r evidence (exhibits Pl, P3, P4, P5 and P6). Exhibit P1 is a summary bank statement showing a history of transactions from 3ls May 1999 to 29th February 2OO4 on the three combined accounts that were operated by the appellants with the respondent bank. Exhibit P3 is a letter dated 20th January 1999 written by the lst appellant requesting for renewal of an overdraft facility from the respondent in the sum of 4O million shillings to improve his petrol station business. Exhibit P4 is a letter dated 19tt' April 1999 in response to the appellants' request for an overdraft facility. The respondent bank informed the appellant (Christopher Kisembo) of the approved renewal of overdraft facility in the sum of 40 million shillings for a period of 12 months. Exhibit P5 is a letter dated 19th April 1999, written by the respondent bank informing the appellants that the loan facility of 40 million was restructured. The 40 million was split into two as follows: an instalment loan of 2Omillion shillings available for 15 months and an overdraft limit of 20 million shillings available for a period of 12 months. The letter indicated that the offer was valid for 30 days only. Exhibit P6 is a letter dated l1th June 2008 written by Provia and Christopher Kisembo (the appellants) addressed to the respondent bank's lawyers- Adriko & Karugaba Co. Advocates. In this letter, the appellants acknowledge receipt of a statutory notice on 22"d October 2OO2 regarding repayment of a loan. The appellants 10 15 20 25 30 7 2 5 indicated that pa-rt of the loan amount would be settled before 16th October 2002. 1 Supreme Court Civil Appeal No.4 of 2OO4 ' On the other hand, the appellants contend that whereas on 19th April 1999 the respondent bank had offered them a renewal of an overdraft facility in the sum of forty million, the bank was closed 10 shortly thereafter on 19th May 1999. Consequently, the appellants contended that they did not access the facility. Furthermore, the appellants contended that the respondent bank did not adduce any evidence showing withdrawal of funds from the approved overdraft facility. In addition, the appellants submitted ls that by the time of applying for the overdraft facility, they had completed payment of the previous loans. Therefore, they were not indebted to the respondent. In support of the claim that the loan sum had been paid, the appellants did not present any documentary evidence. They only zo relied on oral evidence to the effect that although they had applied for an enhancement of the overdraft facilities from the bank, the credit was not accessed because the bank went into liquidation. Furthermore, the appellants argued that it was the bank's duty to avail evidence of the transactions on the accounts that they 2s operated with the respondent bank. That this was because the bank was in possession of the account bank statements and privy to the information on the accounts. For this argument, the appellants' counsel relied on the authority of Stanblc Bank Uganda Ltd vs. Uganda Crocs Ltd. 1 30 The respondent on the other hand contends that the appellants are still indebted and adduced evidence of bank statements, correspondence arld affidavits. I will in the course of the judgment discuss the evidential value of what the bank adduced to support its case. 35 s Analysls of Court I must from the outset discuss the applicability of the authority of Stanblc Bank Uganda Ltd vs. Uganda Crocs Ltd (supra) relied upon by the appellants'counsel. In that case, the respondent company operated two bank accounts 10 with the appellant bank. The bank mandate by the company was two signatures of the company directors. The second director's signature was forged and the bank paid sums of money from the respondent's account. The respondent company sued the bank for acting irregularly and negligently in the operation of the company's 15 accounts. On appeal to the Supreme Court, the respondent's counsel argued that the forged documents upon which money was drawn from the account were in the exclusive possession of the bank and the company had no knowledge of the sanne. The Court agreed with counsel's argument and held that, it would be going too zo far to attribute knowledge of the fraud to PWl [the Company director] the documents relating to which uere in the exclusiue possession of the bank. In the instant case, the appellants contend that they paid the loan sum and the evidence supporting this claim was in the exclusive zs possession ofthe bank. In my opinion, the authority of Stanbic Bank Uganda (supra) is distinguishable from the present facts. Whereas in the Stanbic bank case the company had no knowledge of the forged documents which were in the exclusive possession of the bank, the same cannot be 30 said in the present matter. It is expected that the appellants had knowledge of how much money they had paid to the bank to clear the loan sum. Therefore, the appellants could not raise the defence that the evidence of payment was in the exclusive possession of the bank. 4 I 5 (1) Whoever desires any Court to give Judgment as to any legal right or liability dependent on the exlstence of facts which he or she asserts must prove that those facts exist. (2f When a peraon ls bound to prove the existence of any fact, it is sald that the burden of proof lies on that Peraon. Sectiou 1O2 emphasizes this dutlr more succinctly by providing as follows: "The burden of proof in a suit or proceedings lles on that person who would fail tf no evidence at all were given on either side." In the present case, it would therefore follow that the respondent bank which alleged that the appellant owed it money had the burden of proving that assertion to the satisfaction of the Court. It is settled law that in civil disputes for the party to prove a fact, the evidence must be substantial and dependable so that it will create on a balance of probabilities, a judicial conviction that what a party alleged was more likely than not. This means that the Court must be satisfied that the fact, as alleged by the respondent was more likely than not. The trial Judge in this case found that the respondent Bank proved its case that the appellants owed it money to the required degree. The Court of Appeal having re-evaluated the evidence on record upheld the finding of the trial Judge. 10 15 20 30 5 In considering the merits of the present appeal, I am guided by one of the fundamental principles of the law of evidence which is that a party who asserts a particular fact must prove it. This is clearly provided for under Sections 1O1 and 1O2 of the Evldence Act as follows: 25 a 5 The case is now before this Court as a second appeal. In Rachhobhai Shivabhal Patel Ltd & Anor vs. Henry Wambuga & Anor,2 Mueamba. JSC restated the duty of a second appellate Court as follows: "It is now trite laut that on a second appeal, the 2"d appellate Court is precluded from questioning the findings of the trial Court, prouided thot there was euidence to support those findings, though, it mag think it possible, or euen probable, that it would not haue come to the same conclusion. It can onlu interfere tahere it considers that there was no euide nce to 10 15 20 25 support the findina of fact, this bei nq a question of law...As a consequence of that pinciple, the Supreme Court is generallg not required to re-eualuate the euidence in the same manner as a first appellate Court since doing so would create unnecessary uncertaintg... " (My emphasis) In my view, a review of the record vis-A-vis the judgments of the two lower Courts shows that it is necessary to re-evaluate the evidence on record and determine whether the findings of the lower Courts were premised on the evidence presented. With the above in mind, I shall now proceed to consider the grounds of appeal which are: 1. The learned honourable Justices of Court of Appeal erred in law when they ruled that the appellants are indebted to the respondent. 2. The learned honourable Justices of Court of Appeal erred in law when they upheld the findings of the lower court that the appellants obtained the loan facility from the respondent and defaulted. 6 2 Supreme Court CivilAppeal No. 06 of 2017 30 3. The learned honourable Justices of Court of Appeal erred in law in holding that the respondent has a lien over the property of the appellants. Grounds 1 and 2 I will consider grounds 1 and 2 in the Memorandum of Appeal together. Issues arising out ofthe two grounds ofappeal: The main issue for determination in the two grounds of appeal is whether the learned Justices of Appeal erred in law in holding that the appellants were indebted to the respondent Bank. Three sub- issues arise therefrom as follows: 2. Did the appellants have other debts with the respondent Bank apart from the contested overdraft facility of 40 million shillings? 3. In the event that issue 2 is answered in the affirmative, what is the amount owed by the appellants to the respondent Bank? Resolution of Issue 1 Did the appellants access the approued ouerdrafi facilitg of 40 million shillings? I have found it pertinent to first discuss briefly the relationship between a bank and its customer generally and the overdraft facility granted to the appellants as the bank's customers. 10 15 20 25 7 5 1, Did the appellants access the approved overdraft facility of 40 million shillings? The relationship between a customer and bank is contractual in nature. Paget's Law of Bankings, states that: "The relationship of banker to cttstomer is one of contract...The relationship consists of a general contract which is basic to all transactions, together with special contracts (such as the contract of bonowing and lending)... " The transaction in the present case involves an overdraft facility. With regard to an overdraft, Paget (supra) at page 132 states as follows: "An ouerdra ft is moneu lent: 'A oaument bu a bank under an 10 1s arranqement bu which the customer h as an ouerdraft is o lendinq bu 20 25 30 the bank to the customer of the moneu.' A banker is not obliged to let his anstomer ouer drau.t unless he has agreed to do so or such agreement can be infened from course of business; borrouinq and lendinq are a matter o f contract not necessaril g pre-meditated but, possiblg, spontarueous, as where a customer, without preuious arrangement, dranus a cheque, paAment of ulhich ouerdranas his account." (My Emphasis). Thus, from the above it is clear that the transaction involving an overdraft facility between a banker and customer is contractual in nature. What law governs contracts in Uganda? Statutorily, it is the Contracts Act of 20 10. I however note that at the time the suit from which the present appeal arose was filed, the Contracts Act of 2010 had not yet been enacted. What we had was the now repealed Contracts Act, Cap 73 Laws of Uganda. Section 2 of the repealed Contracts Act provided for the application in Uganda of the common law of England relating to contracts. Under common law, there was no specific requirement regulating 5 t 8th Edn. Page 69 9 s. what form a contract would take unlike in the current Contracts Act of 20 1O where there are statutory requirements. Thus, . contracts could be made formally or informally (for example, a contract could be inferred from conduct of parties). Under the common law, Courts would infer that a contract between parties 10 was proved if the basic essential elements of a valid contract existed. These are: (a) offer; (b) acceptance; (c) consideration (something of value which is given for a promise and is required in order to make the promise enforceable as a contract) and (d) contractual intention (parties must intend their agreement to be 1s legally binding); In the present case, can it be said that all the essential ingredients for a contract existed with regard to the overdraft facility of 4O million shillings? The respondent Bank relied on the 19th April 1999 letter marked zo exhibit P4 to assert that the appellants owed it 40 million shillings. The appellants on the other hand contend that the 40 million overdraft facility was never availed by the respondent Bank. A closer examination of the letter relied on by the Bank shows the following: 2s (a) The respondent bank informed the appellants that its loan's committee approved a renewal of an overdraft facility of 4O million shillings in the appellants' favour. (b) The Bank qualified this offer of renewal by stating that: (il 'the funds will not be released until afier completion of all legal 30 requirements qnd aduised so bg the Head Office. (ii) if gou accept our terms and conditions of offer, please proceed to the Bank's Legal Department for the necessary doanmentation.' It is not clear from the record what this 'necessary doanmentation' was. However, one can assume that this documentation was to be the basis of the overdraft loan detailing the terms of the facility. agreement between the parties In my view, the signing of this 'necessary documentation'was a condition precedent to the release of the funds. Without the signing of this document, there could be no release of the funds as stated in the letter of offer. The respondent Bank has not adduced in evidence, such signed agreement. I therefore conclude that whereas the Bank proved the existence of an offer, it failed to prove that the offer had been accepted. Consequently, the agreement cannot be said to have ensued. I further note that in the 19th April 1999 letter, the Bank notified the appellants that the overdraft facility would be availed in two instalments of 20million each. However, the bank statement tendered in evidence by the Bank does not at any one time after 19th April 1999 indicate a figure of either 20 million (twice) or 40 million being credited to the appellants'account. In the absence of the overdraft agreement and a bank statement showing that the respondent Bank either credited the appellants' account with a lump sum of 4O million shillings or two instalments of 20 million each, it is my view that the evidence on record does not show that the appellants accessed the 4O million shillings over draft facility. I therefore hold that the appellants are not indebted to the Bank in respect to the overdraft facility of 40 million shillings. I shall now proceed to consider issue 2: 30 Resolution of Issue 2 15 20 25 10 5 Whether the appellants had other debts with the respondent Bank apart from the contested 4O million shillings? 10 5 I note that the appellants contend that at the time of the respondent Bank's closure, they did not have any outstanding debt with it. I am aware that since it was the respondent Bank alleging that the appellants were indebted to it; it had the duty to prove this assertion. I have already discussed above this duty and the degree. According to the record, the respondent Bank was closed by the Central Bank on 19th May 1999. Subsequently, the Central Bank appointed a liquidator to manage it on its behalf. It is trite that in the course of managing the Bank, the liquidator had a duty of tracking the debts that the Bank's Customers owed to it for purposes of recovering them. In order to prove that the appellants owed the respondent Bank money, the liquidator inter a/ia adduced evidence in form of Bank Statements, letters and two affidavits deponed by Christopher Kisembo. The two affidavits are not on record but feature prominently in the two judgments of the lower Courts. The letter in respect of the 40 million shillings has been dealt with in my resolution of issue one. Be that as it may, I find two pieces of evidence on record which make me believe the respondent bank's assertion that the appellants were still indebted to it. The flrst plece of evldence is a letter adduced in evidence by the Bank marked exhibit P6. It was authored by the appellants and addressed to the Bank's lawyers on 11th June 2OO2 (3 years after the respondent Bank went into liquidation). A review of the record indeed shows that the appellants admitted writing this letter. From the letter, it appears that the appellants had been served with a statutory demand notice by the bank's lawyers. In the body of the 10 r.5 20 30 11 25 5 'Regarding the loan repagment notice ue shall settle some amount before 76th October 2OO2 without fail.' If the appellants had no debt with the respondent bank at the time of its closure, what amount then were they planning to settle as stated in their response to the demand notice? In my view, the excerpt clearly shows that the appellants were still indebted to the respondent bank at the time of its closure. It further shows that the appellants were aware of their indebtedness. I note that in their written statement of defence filed in the High Court, the appellants, in respect of the above amount stated as follows: "..,the defendqnts'indebtedness to the plaintiffs Bank was not to the htne of SIls 149,263,069/= as claimed for the records indicate that bg 3Ah Sept 1998, the ouerdrafi account balance was at Shs. 23, 15O, 167/= which was substantiallA reduced bg the date of the closure of the bank on 7 th Mag 1999." 10 15 20 25 12 ' ,: letter, the appellants responded to the statutory demand notice as follows: The second piece of evidence incriminating the appellants was a letter written by the respondent bank's external auditors requesting the appellants to confirm loans and overdraft balances as at 30th September 1998. According to the letter, the balances were totalling to 23,15O ,L67 I :. To my mind, 'substantiallg reduced' does not imply completely settled. In the absence of evidence to the contrary, it cannot be contended by the appellants that they had no debt with the respondent bank. 30 { tta 5 2. That I am not indebted to the Respondent/ Plaintiff in the sum o/Shs. 149, 263, 069.00 as alleged in the plaint. 3. That at the time respondent/ applicqnt closed its banking brqnch of Ishaka Town where the cause of action arose, i was indebted to it to the tune of Ug.shs. 82,006,859 onlg. See Annentre A and B. In my view, this affidavit gives credence to the respondent bank's assertion that the appellants were still indebted to it. In light of the above evidence, I am of the view that the appellants are still indebted to the respondent bank. Issue 2 is therefore answered in the affirmative. Resolutlon of lssue 3 What amount of money is owed to the respondent Bank bg the appellants? A look at the bank Statements on record adduced by the respondent bank shows that the combined outstanding debt as at 21"t May 1999 was Shs.1O1,456,3O31=. Indeed the High Court judge stated in his judgment that the outstanding amount as at 2l"t May 1999, before the bank was closed, was Shs. 101,456,303/=. There is no evidence on record showing that the appellants ever cleared this balance. I further note that the appellants did not specifically challenge this statement adduced by the respondent 10 20 25 30 1J The thlrd piece of evldence which in my view incriminates the appellants is captured in the judgment of the Court of Appeal where it is indicated that in their application for leave to appear and defend the summar5r suit at the High Court, the first appellant deponed in Paragraphs 2 and 3 of the affidavit in support of his application as follows: 15 bank. All they did was to make a general denial that they were not indebted to the Bank. Consequently, I hold that a sum of Shs. 101,456,3O3 l= was owed to the bank. Ground 3 Ground 3 of the appeal deals with whether the Bank is legally empowered to hold the property of the appellants as securit5r for a loan. A banker can exercise general powers ofa lien in respect ofproperty deposited by the debtor to secure a loan. A lien is a right of a creditor to retain another person's property until the debt is paid. The lien is a protection against loss on a loan.a "A banker ... Eay, in the abseuce of a coutract to the contrary, retain ae a security for a general balance of account, any goods bailed to him or her." Applying the above provision of law to the facts of the case, it is clear that the respondent bank being a creditor is entitled to exercise the right of a lien over the appellants' securities. The securities cannot be released until the loan sum is settled. Conclusion and order In conclusion, I hold that the evidence on record shows that the appellants are still indebted to the Bank in respect of previous 10 15 20 30 ' Paget's Law of Banking, Srh edition, page 498 1,4 ),' 5 Section 1O9 of the Contracts Act, 2O1O provides for a banker's lien as follows: 25 / 1 5 loans. Arising from my analysis and resolution of grounds 1 and 2, it follows that I would order the appellant to pay the sum of Shs. 1O 1,456,3O31=. k 10 Dated at Kampala this L6 a"y orfu 019. i u\- c -(€-"v1u.\- . ..:... ... PROF. LILLIAN TIBATEMWA-EKIRIKUBINZA JUSTICE OF THE SUPREME COURT. 15 15