Wakilii

Damas Mulagwe v Lanex Forex Bureau Ltd & 4 Ors (HCT-00-CC-CS 358 of 2006)

High Court · [2011] UGCOMMC 1 · 2011 Judgment for Plaintiff — Principal Only AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for refund of deposit made with forex bureau
Decision
First defendant ordered to refund the principal deposit. Plaintiff's claims for interest and general damages dismissed. Case against second to fifth defendants dismissed.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that forex bureaux are prohibited from taking deposits from the public under Exchange Control (Forex Bureau) Order 1991. The plaintiff deposited US$160,000 with the first defendant forex bureau. The deposit is recoverable as money had and received where the parties are not in pari delicto, but contractual interest is not recoverable as the transaction was illegal. Corporate veil not lifted against directors and shareholders based solely on common management and shareholding.

Outcome

First defendant ordered to refund the principal deposit. Plaintiff's claims for interest and general damages dismissed. Case against second to fifth defendants dismissed.

Facts

In 2003 the first defendant, a forex bureau, requested the plaintiff to make a financial deposit. The plaintiff deposited US$160,000 accumulated over time from December 2003, with a monthly interest agreement of US$12,000. The first defendant issued written acknowledgment dated 3 October 2005 confirming receipt of the deposit as a fixed deposit at US$12,000 interest per month for three months automatically renewable. The first defendant failed to repay the deposit upon demand. The first and second defendants were subsequently closed by Central Bank statutory intervention. The plaintiff sued all five defendants jointly and severally for refund of the principal plus interest. Evidence showed the first defendant had taken deposits from multiple members of the public, leading to license suspension by Bank of Uganda.

Issues

  1. Whether the first Defendant could lawfully take deposits from the public?
  2. Whether the Plaintiff did make a deposit with the first Defendant of US$160,000 as alleged?
  3. If the Issue No. 2 above is answered in the affirmative, whether the Defendants or any of them is liable to pay the Plaintiff the said sum with interest as claimed?
  4. Whether the deposit transaction is enforceable in law?
  5. Remedies

Orders

  • First defendant to refund US$160,000 to the plaintiff.
  • Claim for interest of US$12,000 per month dismissed.
  • Claim for general damages dismissed.
  • Case dismissed against second, third, fourth and fifth defendants.
  • Each party to bear their own costs.

Rules and key headnotes

Banking & Finance — Forex Bureaux — Prohibited Transactions — Taking Deposits from the Public
Under the Exchange Control (Forex Bureau) Order 1991 regulation 15, a forex bureau is limited to spot transactions and is prohibited from taking deposits from the public, notwithstanding broader language in the principal Foreign Exchange Act 2004.
Statutory Interpretation — Principal Act and Subsidiary Legislation — Continuance of Existing Orders
Where a principal Act provides that existing subsidiary legislation shall continue in force until revoked or amended by new regulations, the subsidiary legislation remains operative and enforceable despite apparently contradictory provisions in the principal Act, absent actual revocation or amendment.
Evidence — Course of Dealing — Relevance of Similar Prior Transactions
Where two similar transactions occurred within a year of each other and were documented in like manner, such course of dealing is a relevant fact under Evidence Act section 15 supporting the existence of the second transaction.
Contract Law — Illegal Contracts — Recovery of Money — Parties Not in Pari Delicto
Where a transaction is prohibited by law and the duty to observe the law is on the person who solicits or receives the money but not on the person who pays, the parties are not in pari delicto and the payer may recover the principal amount deposited as money had and received, though not contractual interest arising from the illegal transaction.
Company Law — Lifting the Corporate Veil — Common Management and Shareholding Insufficient
Common management, directorship and shareholding in two companies, without more, is not sufficient grounds to lift the corporate veil and impose liability on one company or on individual directors and shareholders for the debts of another company. Poor corporate governance alone does not justify piercing the corporate veil.
Civil Procedure — Costs — Poor Corporate Governance — Discretion to Deny Costs to Successful Party
Where a party's poor corporate governance contributed to the dispute, the court may in its discretion deny costs to that party even though successful. A party involved in a prohibited transaction may likewise be denied costs.

Legislation cited (9)

Cases cited (3)

  • Kiriri Cotton Ltd v Ranchhoddas K. Dewani [1960] EA 193
  • Coffee Marketing Board v Kigezi Growers Cooperative Union (HCCS No. 437 of 1994)
  • Wamala Nanseera v North Bukedi Cotton Company Ltd (HCCS No. 755 of 2005)

Full judgment

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

Damas Mulagwe v Lanex Forex Bureau Ltd & 4 Ors (HCT-00-CC-CS 358 of 2006) [2011] UGCommC 1 (9 January 2011)
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.