Wakilii

DCDM Advisory Services Limited v Solomon Kisubi and Another (Civil Suit No. 849 of 2015)

High Court · [2020] UGCOMMC 180 · 2020 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of funds allegedly diverted through fraudulent acts
Decision
Judgment entered for the Plaintiff. The 1st and 2nd Defendants held jointly liable for special damages of UGX 162,472,446 with interest at 17% per annum from 2014 until payment in full, plus costs.

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Holding

The High Court Commercial Division held that the 1st Defendant, a former employee and Class B signatory, fraudulently diverted UGX 162,472,446 from the Plaintiff company to Cavmont & Co (later KB Partners), a partnership in which he had an interest. The court found that the 1st Defendant breached his fiduciary duties by preparing false payment documents showing payments to URA for PAYE while actually diverting funds to Cavmont as rent payments. The 2nd Defendants dishonestly assisted in the fraud. The court rejected the 1st Defendant's claim that he acted under instructions from the Third Party (the Plaintiff's managing director), finding no proof on a balance of probability. The Third Party was found negligent but not complicit in the fraud.

Outcome

Judgment entered for the Plaintiff. The 1st and 2nd Defendants held jointly liable for special damages of UGX 162,472,446 with interest at 17% per annum from 2014 until payment in full, plus costs.

Facts

The Plaintiff, a business advisory services company specializing in tax management, employed the 1st Defendant as a tax officer and Class B signatory. Between April 2013 and January 2014, the 1st Defendant diverted UGX 162,472,446 meant for PAYE payments to URA on behalf of Coca-Cola employees. Instead of paying URA, he transferred the funds to Cavmont & Co (later KB Partners), a partnership in which he was a partner along with the 2nd Defendants. The 1st Defendant prepared dual sets of documents: official records filed with the Plaintiff showed payments to URA, while actual bank records showed payments to Cavmont as rent. The fraud was discovered in 2015 when URA refused to issue a tax clearance certificate due to outstanding arrears of UGX 174,070,723. The 1st Defendant claimed he acted under instructions from the Third Party (the Plaintiff's managing director) who allegedly needed a personal loan, but failed to produce supporting evidence as he claimed the incriminating emails had been deleted.

Issues

  1. Whether the 1st Defendant fraudulently and dishonestly diverted funds from the Plaintiff.
  2. Whether the 1st Defendant owed any fiduciary duties to the Plaintiff and if so, whether there was breach of those duties.
  3. Whether the 2nd Defendant dishonestly assisted or acted in knowing receipt in breach of duties of the 1st Defendant.
  4. Whether the 1st Defendant acted under the direction of the third party.
  5. Whether the third party is liable to indemnify the 1st Defendant and if so to what extent.
  6. What remedies are available to the parties.

Orders

  • The 1st Defendant and 2nd Defendant to pay UGX 162,472,446 as special damages.
  • Interest of 17% per annum on special damages from 2014 until payment in full.
  • The 1st Defendant and 2nd Defendant to pay costs to the Plaintiff.
  • The Third Party to bear his own costs.

Rules and key headnotes

Fraud — Proof of Fraud — Standard of Proof in Civil Cases
The standard of proof for fraud in civil cases is higher than the usual balance of probabilities but lighter than proof beyond reasonable doubt. Where fraud is alleged, something more than the mere balance of probabilities is required, particularly where something akin to a crime is alleged.
Documentary Evidence — Weight of Documentary Evidence in Commercial Disputes
In commercial disputes concerning events that occurred years before trial, documentary evidence carries greater weight than memory evidence. The best approach is to place little reliance on witness recollections of conversations and meetings, and instead base factual findings on inferences drawn from documentary evidence and known or probable facts.
Fiduciary Duty — Employees as Fiduciaries — Scope of Fiduciary Duty
Fiduciary duty to companies is not owed exclusively by directors and top management but extends to all employees who act on behalf of the company based on the principal-agent relationship. An employee appointed as a Class B signatory with authority to sign company accounts owes a fiduciary duty of loyalty to the company and must not divert company funds.
Fraud — Fraudulent Diversion of Funds — Dual Documentation
Where an employee with signatory authority prepares dual sets of payment documents — one set showing payments to the intended beneficiary filed with the company, and another set showing payments to a different beneficiary submitted to the bank — and the employee has an interest in the recipient entity, fraudulent diversion of funds is established.
Dishonest Assistance — Knowing Receipt — Partnership Liability
Where a partnership receives funds that were fraudulently diverted by one of its partners from his employer, and the transactions were initiated by that partner who had an interest in the receiving entity, the partnership is liable for dishonestly assisting in the fraudulent transaction.
Burden of Proof — Deleted Electronic Evidence — Failure to Preserve Evidence
Where a defendant claims to have acted under instructions from a third party but alleges that incriminating emails were deleted from his work laptop upon resignation, and fails to produce credible evidence of such instructions or explain why he did not preserve the allegedly exculpatory emails while preserving other emails, the defendant fails to discharge the burden of proof on a balance of probability.
Special Damages — Interest on Special Damages — Commercial Rate
Where special damages are proved by documentary evidence showing the exact amount diverted through fraudulent transactions, the court will award the full amount as special damages together with interest at the commercial rate of 17% per annum from the date of the loss until payment in full.

Legislation cited (2)

Cases cited (9)

  • G.D. Nokes, in An Introduction to EVIDENCE, Fourth Edition at page 489
  • Gestmin SGPS SA v Credit Suisse (UK) Ltd and Another [2013] EWHC 3560 (Comm)
  • Abdu Ngobi v Uganda (Supreme Court Criminal Appeal No. 10 of 1992)
  • Mbabazi Rovence Natukunda and Loyce Kahunda v Uganda (Criminal Application No. 47 of 2012)
  • Ojera Joseph v Labeja Pirimino (High Court Civil Appeal No. 20 of 2012)
  • Fredrick Zaabwe v Orient Bank and Others (Supreme Court Appeal No. 4 of 2006)
  • Baxter v Baxter [1948] AC 274
  • Robert Mugisha v Chartis (Uganda) (Formerly AIG (Uganda) Ltd) (Civil Suit No. 190 of 2009)
  • J.W.R. Kazzora v M/S Rukuba (Supreme Court Civil Appeal No. 13 of 1992)

Full judgment

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

DCDM Advisory Services Limited v Solomon Kisubi and Another (Civil Suit No. 849 of 2015) [2020] UGCommC 180 (23 August 2020)
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.