Mugarura Citezen v Post Bank (u) Ltd (Civil Appeal No. 43 of 2012)

The full judgment

Read the complete, verbatim text of this judgment.

Holding

The Court of Appeal dismissed the appeal, holding that the respondent bank's summary suit was premised on the standalone mortgage agreement (and guarantee), not on the loan offer letter, so the manner in which the loan was disbursed or used was no defence to a claim for money had and received. As the parties had admitted all material facts in the joint scheduling memorandum, no triable issues remained and the trial Judge was justified in entering judgment on admission. The counterclaim remained a separate suit but disclosed no cause of action against the bank. Section 6 of the Civil Procedure Act did not apply where there was no trial, and the Mbarara suits were a vexatious abuse of process.

Facts

Booma High School Ltd obtained a loan of UGX 50,000,000 from Postbank Uganda Ltd for construction of laboratory and computer rooms, repayable over 24 months at 25% interest. The loan was secured by a legal mortgage over land at Plots 38 and 40 Katate Close, Mbarara, registered in the appellant's name, who had granted the school a power of attorney over the property. The appellant and other directors also executed personal guarantees. The funds were disbursed but the school defaulted. The bank's attempt to sell the mortgaged property was blocked by suits filed by the appellant and his wife in Mbarara, so the bank filed a summary suit in the Commercial Court to recover UGX 60,757,645 plus interest and costs. The parties were granted leave to defend and filed a joint scheduling memorandum admitting the loan, mortgage, default and recall. The trial Judge found no triable issues and entered judgment on admission for the bank, without pronouncing on the appellant's counterclaim.

Issues

1. Whether the trial Judge erred in entering judgment on admission against the appellant guarantor/mortgagor without hearing the suit on its merits, despite the alleged breach of the loan agreement by the respondent bank.
2. Whether the appellant was released from liability under the guarantee on account of the bank's alleged failure to ensure the loan funds were used for the agreed purpose.
3. Whether the trial Judge erred in entering judgment in the main suit without pronouncing on the appellant's counterclaim.
4. Whether the suit should have been stayed under section 6 of the Civil Procedure Act on account of two earlier suits pending in the High Court at Mbarara concerning the same subject matter.

Orders

• Appeal dismissed with costs at the Court of Appeal and at the Court below.
• The appellant's counterclaim rejected under Order 7 Rule 11 for non-disclosure of a cause of action.
• The Registrar directed to forward a copy of the file to the Director of Public Prosecutions and the Secretary to the Law Council for investigation of any breach of law or advocates' professional code of conduct.

Key headnotes

Legislation cited (9)

• Civil Procedure Act s.6
• Civil Procedure Rules Order 36 Rule 2
• Civil Procedure Rules Order 6 Rule 30
• Civil Procedure Rules Order 7 Rule 11
• Civil Procedure Rules Order 15 Rule 1
• Evidence Act s.22
• Mortgage Act Cap 229
• Constitution of Uganda Article 126(2)(c)
• Court of Appeal Rules Rule 30(1)(a)

Cases cited (11)

• Fredrick Zaabwe v Orient Bank and 5 Others (Civil Appeal No. 4 of 2006)
• Amon vs Bobbett [1889] 22 QBD 543
• Fr. Narcensio Begumisa and Others v Eric Tibebaaga (Civil Appeal No. 17 of 2002)
• Coghlan vs, Cumberland (1898) 1 Ch. 704
• Pandya vs. R (1957) EA 336
• Bogere Moses v Uganda (Criminal Appeal No. 1 of 1997)
• Kifamunte Henry v Uganda (Criminal Appeal No. 10 of 1997)
• John Peter Nazareth vs Barclays Bank International Ltd., E.A.C.A. 39 of 1976 (UR)
• Mohamed B.M. Dhanji v. Lulu & Co. [1960] E.A. 541
• Tororo Cement Co. Ltd v Frokina International Ltd (Civil Appeal No. 2 of 2001)
• Stanbic Bank (U) Ltd v Uganda Cros Ltd (Civil Appeal No. 4 of 2004)