Wakilii

Diamond Trust Bank Limited v Haii Ahmad Kawoooya (Miscellaneous Application No. 825 of 2017)

High Court · [2017] UGCOMMC 262 · 2017 Preliminary Objection Upheld AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Preliminary objection in Miscellaneous Application arising from High Court Civil Suit No. 832 of 2014
Decision
Suit against the 2nd defendant (Diamond Trust Bank Limited) dismissed on preliminary objection for failure to disclose a cause of action

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

A preliminary objection that a plaint does not disclose a cause of action succeeds where the plaintiff was not party to the agreement forming the basis of the claim against the defendant. Where a plaintiff sued a bank for breach of contract and unlawful possession of his certificate of title, but the bank was not party to the sale agreement between the plaintiff and a purchaser and had only advanced a loan facility to the purchaser secured by the property, the plaint disclosed no cause of action against the bank.

Outcome

Suit against the 2nd defendant (Diamond Trust Bank Limited) dismissed on preliminary objection for failure to disclose a cause of action

Facts

The respondent/plaintiff brought suit against Diamond Trust Bank (applicant/2nd defendant) and Capital Ventures International Ltd (1st defendant) for breach of contract and unlawful possession of his certificate of title for property comprised in FRV 653 Folio 19 Plot 3 Commercial Road, Kampala. The respondent had entered a sale agreement dated 26 November 2014 with the 1st defendant to sell the property for an initial payment of UGX 55,000,000. The 1st defendant applied for and obtained a loan facility of UGX 2,000,000,000 from the applicant bank to finance the balance of the purchase price. The loan was secured by a mortgage over the suit property. The respondent signed transfer forms in favour of the 1st defendant and handed them to the applicant for purposes of effecting the transfer and registering the mortgage. The 1st defendant contended it had paid UGX 1,500,000,000 to the respondent's bank account but discovered structural defects in the building and refused to pay the balance. The applicant raised a preliminary objection that the plaint disclosed no cause of action against it.

Issues

  1. Whether the plaint discloses a cause of action against the applicant (2nd defendant).

Orders

  • Preliminary point of law upheld.
  • Claim/suit against the 2nd defendant (applicant) dismissed.
  • Costs awarded to the applicant.

Rules and key headnotes

Civil Procedure — Preliminary Objections — Cause of Action — Test for Disclosure
A cause of action means every fact which is material to be proved to enable the plaintiff to succeed or every fact which, if denied, the plaintiff must prove in order to obtain judgment. The ingredients of a cause of action are: (i) the plaint must show that the plaintiff enjoyed a right; (ii) that right has been violated; and (iii) the defendant is liable.
Civil Procedure — Preliminary Objections — Determination — Consideration of Pleadings Only
In determining whether a plaint discloses a cause of action, only the plaint and any attachments thereto are to be perused with the assumption that the averments therein are true.
Contract Law — Privity of Contract — No Cause of Action Against Non-Party
A plaintiff has no cause of action against a defendant who was not party to the contract forming the basis of the plaintiff's claim. Where a bank advanced a loan facility to a purchaser secured by the plaintiff's property, but was not party to the sale agreement between the plaintiff and the purchaser, the plaintiff has no cause of action against the bank for breach of the sale agreement.
Banking & Finance — Loan Facilities — Security — Rights of Lender Where Borrower Defaults on Separate Transaction
Where a bank advances a loan facility to a borrower and the borrower's vendor provides property as security and signs transfer forms to facilitate registration of the mortgage, the loan facility is an independent transaction to which the vendor is not a party. The vendor's remedy for non-payment of the purchase price lies against the borrower, not the lending bank.

Cases cited (6)

  • Tororo Cement Co. Ltd v Frokina International Ltd (Court of Appeal Civil Appeal No. 2 of 2001)
  • Auto Garage v Motokov (No.3) (1971) EA 514
  • Teraj Sharif v Fancy Stores [1960] EA 374
  • Sukuku Agaitano v Uganda (High Court Civil Suit No. 298 of 2012)
  • Shumuk Springs Development Ltd & Others v Joseph Sempebwa & Others (Miscellaneous Application No. 502 of 2013)
  • Narottam Bhatia & Another v Boutique Shazim Ltd (Supreme Court Civil Appeal No. 16 of 2009)

Full judgment

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

Diamond Trust Bank Limited v Haii Ahmad Kawoooya (Miscellaneous Application No. 825 of 2017) [2017] UGCommC 262 (11 September 2017)
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.