Wakilii

Barclays Bank of Uganda Ltd v Bakojja (Civil Suit No. 53 of 2011)

High Court · [2016] UGCOMMC 11 · 2016 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of outstanding loan debt secured by third party mortgage
Decision
Judgment entered for the plaintiff for recovery of the full outstanding loan amount with contractual interest and costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that the defendant breached the loan agreement by defaulting on monthly installments three months after the loan was disbursed. Where a contract provides that timely payment of each installment is of the essence, any failure to pay promptly constitutes breach going to the heart of the contract, entitling the creditor to terminate and demand immediate payment of the entire outstanding sum. The court awarded the plaintiff recovery of the full outstanding loan amount with contractual interest at 20% per annum from the date of suit until payment in full, rejecting the defendant's claim that the interest rate was unconscionable.

Outcome

Judgment entered for the plaintiff for recovery of the full outstanding loan amount with contractual interest and costs

Facts

The plaintiff bank loaned the defendant UGX 130,000,000 at 20% interest per annum, repayable in 60 monthly installments of UGX 3,444,205. The loan was secured by a third party mortgage of property registered in the name of Seruwu Richard Bakojja. The defendant made payments for the first three months only, then defaulted. The plaintiff issued a demand notice requiring payment of arrears but the defendant did not comply. When the plaintiff attempted to sell the mortgaged property, squatters on the land resisted the sale. At the time of filing suit, the outstanding amount was UGX 127,299,887. The defendant admitted defaulting but claimed the interest rate was unconscionable and argued the bank should have sold the security instead of filing suit.

Issues

  1. Whether there was breach of contract by the Defendant.
  2. Whether the Plaintiff is entitled to recover the sums claimed in the plaint.
  3. What remedies are available to the parties.

Orders

  • The Defendant to pay the Plaintiff the sum of Shs. 127,299,887/- as special damages.
  • Interest is awarded on the said amount at the rate of 20% per annum from the date of filing the suit until payment in full.
  • Costs of the suit are awarded to the Plaintiff.

Rules and key headnotes

Contract Law — Breach of Contract — Time of the Essence — Effect of Default on Installment Payment
Where a contract provides that the time for payment of each installment shall be of the essence, any failure to pay an installment promptly is a breach of contract going to the heart of the contract, giving the creditor the right to terminate the contract at law and demand immediate payment of the entire outstanding sum.
Banking & Finance — Loan Recovery — Concurrent Remedies — Creditor's Election Between Personal Action and Security
A mortgagor is not obliged to take steps to realize his security. Where a creditor has concurrent remedies against a debtor, a security and surety, it is a matter for the creditor which remedy to pursue, if indeed he pursues any at all. Giving security does not discharge the borrower from the duty to repay the loan.
Contract Law — Remedies for Breach — Compensation for Non-Payment of Debt
The only compensation for non-payment of a debt is payment of the debt. An innocent party is entitled to receive his full due, and no rule of equity can compel him to take a loss no matter how minute it may be. The contract breaker cannot escape his contractual liability or limit his liability by repudiating the contract and insisting that such repudiation be accepted by the innocent party.
Banking & Finance — Interest Rates — Unconscionable Interest — Commercial Transactions
Under section 26(2) of the Civil Procedure Act, where a court is of the opinion that an agreed interest rate is harsh and unconscionable, it may give judgment for payment of interest at such rate as it thinks fit. However, an agreed rate of 20% per annum charged in a commercial banking transaction is not harsh and unconscionable and is entitled to enforcement.
Contract Law — Penalty Clauses — Acceleration Clauses — Entitlement to Full Outstanding Sum Upon Default
Under section 62(1) of the Contracts Act, where a contract is breached and a sum is named in the contract as the amount to be paid in case of breach, or where a contract contains any stipulation by way of penalty, the party who complains of the breach is entitled, whether or not actual damage or loss is proved, to receive reasonable compensation not exceeding the amount named or the penalty stipulated. A clause providing that upon default a long-term loan becomes immediately payable in full does not constitute an unenforceable penalty.

Legislation cited (5)

Cases cited (5)

  • Taruis v Moy, Dacies Smith, Vanderrell & Co [1936] IKB 399
  • Lombard North Central PLC v Butterworth [1987] RB 527
  • Oresundsvarvet Aktiebalag v Marcos Diamantis Lemos (The Angelic Star) [1988] 1 Lloyd's Rep 122 (CA)
  • Altica Sea Carriers Corporation v Ferrostoal Poseidon Bank Reederei GMBH [1976] 1 Lloyd's Rep 250
  • China and South Sea Bank Ltd v Tansoon Gin [1990] 1 AC 536

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Barclays Bank of Uganda Ltd v Bakojja (Civil Suit No. 53 of 2011) [2016] UGCommC 11 (1 February 2016)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.