Wakilii

Cloth Link (U) Ltd v Africa Traders Investiments Fund Ltd & Anor (High Court Civil Suit No. 234 of 2010)

High Court · [2015] UGCOMMC 164 · 2015 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of money had and received
Decision
Judgment entered in favour of the Plaintiff with defendants ordered to refund loan processing fees plus general damages and costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that the First Defendant illegally presented itself as a bank in contravention of the Financial Institutions Act 2004 and entered into a loan agreement with the Plaintiff, receiving processing fees but failing to deliver the promised loan. The retention of money without providing the service constituted unjust enrichment and money had and received. The Second Defendant, as owner and director of the First Defendant, was jointly and severally liable. The Plaintiff was entitled to recovery of all monies paid plus general damages and interest.

Outcome

Judgment entered in favour of the Plaintiff with defendants ordered to refund loan processing fees plus general damages and costs

Facts

In 2008, Clothlink (U) Ltd applied to African Trade Investments Fund Ltd for a project loan of US$800,000. The application was processed through the Second Defendant, Dr. Emurugu Musonge Moses, who was owner and director of the First Defendant. The Plaintiff paid US$2,500 as project appraisal fees and an additional Ug. Shs 70,175,000/= as loan processing fees to the Second Defendant. The parties signed an Indicative Term Sheet in February 2009. The First Defendant changed its name to African Trade and Investment Bank in March 2009. Despite the Plaintiff fulfilling all requirements including providing land collateral and audited accounts, the loan never materialized. The Plaintiff later discovered through Bank of Uganda investigations that the First Defendant was never a registered bank but operated as a fund without authority to use the word 'bank' or conduct banking business. The Plaintiff sued for recovery of the processing fees. The Second Defendant did not file a defence and judgment was entered against him in September 2010. The suit proceeded to trial against the First Defendant.

Issues

  1. Whether the parties breached the terms specified in the Indicative Term Sheet for the proposed AT bank loan.
  2. Whether the actions of the 2nd Defendant are binding on the 1st Defendant.
  3. Whether the Plaintiff is entitled to any remedies.

Orders

  • The two Defendants are jointly and severally ordered to refund to the Plaintiff Uganda Shillings Seventy Million One Hundred Seventy Five Thousand Only (Ug. Shs 70,175,000/=) and United States Dollars Two Thousand Five Hundred Only (US$ 2,500) with interest at 21% and 8% per annum respectively from the date of filing this suit till payment in full.
  • The First Defendant is found vicariously liable for the actions of the Second Defendant and thus is ordered to pay to the Plaintiff general damages amounting to Uganda Shillings Fifty Million Only (Ug. Shs. 50,000,000/=) at the court interest rate of 6% per annum from the date of this judgment till payment in full.
  • The Plaintiff is also awarded the costs of this suit against both Defendants.

Rules and key headnotes

Banking & Finance — Illegal use of the word 'bank' — Financial Institutions Act requirements
It is illegal under section 7(1) of the Financial Institutions Act 2004 for any entity not licensed as a commercial bank, merchant bank, mortgage bank or post office savings bank to use the word 'bank' or any expression likely to create the impression that the entity is authorized to conduct banking business.
Contract Law — Formation of contract — Indicative term sheets — Whether binding offer
Where an indicative term sheet signed by parties states that the bank is prepared to proceed with detailed appraisal and refers to 'loan offer' and 'acceptance of the project', and the party thereafter pays processing fees and fulfills conditions, the term sheet constitutes evidence of an offer creating contractual obligations notwithstanding disclaimers that it does not represent a commitment.
Contract Law — Restitution — Money had and received — Unjust enrichment
The principle of unjust enrichment in an action for money had and received requires proof that the defendant has been enriched by receipt of a benefit, that this enrichment is at the expense of the plaintiff, and that retention of the enrichment is unjust. Where money is paid for a service that is never delivered, the recipient is obliged to refund it.
Commercial Law — Vicarious liability — Liability of company for acts of director and owner
Where a director is also the owner and shareholder of a company and acts in that capacity when entering into transactions on behalf of the company, the director is jointly and severally liable with the company for breaches of contractual obligations and fraudulent schemes to fleece the public.
Commercial Law — Agency — Proof of agency relationship — Burden of proof
Where a party claims to have acted merely as an agent or facilitator for another entity, contradicting evidence such as powers of attorney or an agency agreement must be produced. In the absence of such evidence, the party will be held to have acted on its own account and not as an agent.

Legislation cited (3)

Cases cited (4)

  • Moses v Macfarlane (1760) 2 Burr 10
  • Shenol & Another v Maximov [2005] EA 280
  • Kensheka v Uganda Development Bank (High Court Civil Suit No. 469 of 2011)
  • Jamba Soita Ali v David Salaam (High Court Civil Suit No. 400 of 2005)

Full judgment

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

Cloth Link (U) Ltd v Africa Traders Investiments Fund Ltd & Anor (High Court Civil Suit No. 234 of 2010) [2015] UGCommC 164 (2 November 2015)
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.