Ham Enterprises Limited & 2 Others v Diamond Trust Bank (U) Limited & Another (Miscellaneous Application 654 of 2020)

Observed later treatment

Citator coverage is limited to judgments in the Wakilii corpus and source-matched treatment records. Absence of a signal is not an assertion that the case remains good law.

Holding

The court held that a foreign bank conducting financial institution business in Uganda through credit facilities and agency arrangements without prior authorization from the Bank of Uganda contravenes the Financial Institutions Act 2004 (as amended). The court struck out the defendants' written statement of defence as a perpetuation of illegality and entered judgment for the plaintiffs, declaring the credit facilities void ab initio and ordering recovery of monies unlawfully taken from the plaintiffs' accounts.

Outcome

Application granted; written statement of defence struck out; judgment entered for plaintiffs with recovery of monies, discharge of mortgages, and permanent injunction issued

Facts

The applicants filed Civil Suit No. 43 of 2020 against the respondents seeking recovery of monies allegedly unjustly and illegally obtained from the 1st applicant's bank accounts and for various breaches of contractual, fiduciary and statutory duties. The applicants alleged that the 2nd respondent, Diamond Trust Bank (Kenya) Ltd, a commercial bank licensed to operate in Kenya, conducted financial institution business in Uganda without a licence from the Bank of Uganda by issuing credit facilities to the applicants who are Ugandan residents and companies. The applicants further alleged that the 1st respondent, Diamond Trust Bank (Uganda) Ltd, acted as an agent of the 2nd respondent in facilitating these transactions without proper authorization. The respondents filed a joint written statement of defence admitting that the 2nd respondent was a Kenyan bank that offered credit facilities to the applicants in Kenya, and that the 1st respondent acted as a collection agent. The applicants then brought this application to strike out the written statement of defence on grounds that it perpetuated illegalities.

Issues

1. Whether Ms Allen Kagoya, an advocate, was authorized and competent to swear the affidavit in support of this application.
2. Whether the written statement of defence in HCCS No. 43 of 2020 is a perpetration of illegalities committed by the Respondents in illegally conducting financial institution business in Uganda without a licence and/or in contravention of the Financial Institutions Act 2004 (as amended).
3. Whether the Respondents' written statement of defence is frivolous, vexatious, evasive and constitutes general denials.
4. Whether the Applicant is entitled to judgment to be entered against the Respondents upon its claim in HCCS No. 43 of 2020.

Orders

• Application allowed with costs to the Applicants.
• The joint written statement of the Respondents filed in HCCS No. 43 of 2020 struck out as a perpetuation of illegalities.
• Judgment entered for the Plaintiffs as prayed for in their joint plaint.
• Declared that by their illegal actions the Respondents/Defendants breached the loan agreements entered into with the Applicants/Plaintiffs between 16th February 2011 to 16th November 2019.
• Declared that Credit Facilities between the Plaintiffs and the Defendants have been settled at law.
• Ordered recovery by the Applicants from the Respondents/Defendants jointly of UGX 34,295,951,553 and USD 23,467,670.61 being monies unlawfully taken from the Applicants/Plaintiffs' loan accounts.
• Declared that the alleged credit facilities offered by the 2nd Defendant to the first Plaintiff were illegal and void ab initio and consequently unenforceable.
• Declared that the appointment of the 1st Defendant by the 2nd Defendant as agent bank and security agent was illegal, unethical, unlawful, in breach of trust, in breach of fiduciary duty and in breach of the Financial Institutions Act 2004 (as amended).
• Ordered unconditional release/discharge of mortgages over the Plaintiffs' properties comprised in Kyadondo Block 248 Plot 328, FRV 1533 Folio 3 Plot 36-38 Victoria Crescent II Kyadondo, and LRV 3176 Folio 10 Plot 923 Block 9 Land at Makerere Hill Road and all corporate and personal guarantees.
• Vacated the order previously issued for the taking of an audit and account of all the Plaintiffs' loan accounts.
• Issued a permanent injunction restraining the Defendants from enforcing the mortgages over the Plaintiffs' properties.
• No general and punitive damages awarded.
• Interest on the recovery amount at the prevailing court rate of 8% per annum from the date of filing suit till payment in full.
• Costs of the application and the head suit awarded to the Applicants/Plaintiffs.
• Issued directives to Bank of Uganda to take necessary actions to ensure implementation of the Financial Institutions Act 2004 (as amended).

Rules and key headnotes

Legislation cited (16)

• Financial Institutions Act 2004 s.3
• Financial Institutions Act 2004 s.4(1)
• Financial Institutions Act 2004 s.117
• Financial Institutions Act 2004 s.119
• Financial Institutions Act 2004 s.126(3)
• Financial Institutions (Amendment) Act No. 2 of 2016 s.3(k)
• Financial Institutions (Amendment) Act No. 2 of 2016 s.3(l)
• Financial Institutions (Agent Banking) Regulations 2017 Regulation 5
• Civil Procedure Rules SI 71-1 Order 6 rule 8
• Civil Procedure Rules SI 71-1 Order 8 rule 3
• Civil Procedure Rules SI 71-1 Order 9 rules 6, 8, 10 and 30
• Civil Procedure Rules SI 71-1 Order 52 rules 1, 2 and 3
• Civil Procedure Act s.98
• Advocates (Professional Conduct) Regulations Regulation 9
• Banking Act of Kenya s.33(4)
• Bank of Uganda Consumer Protection Guidelines 2011

Cases cited (6)

• Makula International v His Eminence Cardinal Nsubuga and Another [1982] HCB 11
• Attorney General of the Republic of Burundi v Secretary General of the East African Community (Appeal No. 2 of 2019)
• Collin Kasule v Fina Bank and Another (Civil Revision No. 5 of 2015)
• Republic Vs. Malabanan
• Zacharia Okoth Obado v Edward Akong Oyugi & 2 Others (Election Petition No. 4 of 2013)
• Canada (Director of Investigations and Research) v Southern Inc [1997] 1 SCR 748

Cases citing this judgment (3)

How later Ugandan judgments in the Wakilii corpus have cited this case. Treatment labels come from Sequitur — Uganda’s citator — each backed by a verbatim span from the citing judgment, and are not an assertion that this case is, or is not, good law.

• Diamond Trust Bank (U) Limited and Another v Ham Enterprises Limited and 2 Others (Civil Appeal 242 of 2020)
• Bank of Uganda and Ors v Ham Enterprises Ltd (Civil Application No. 16 of 2021)
• Diamond Trust Bank Uganda Limited & Another v Ham Enterprises Limited & 2 Others (Miscellaneous Application No. 846 of 2020)

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