Wakilii

Kabonero v African Kings Limited and Another (Civil Suit 685 of 2022)

High Court · [2023] UGCOMMC 120 · 2023 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of loan principal, interest, and damages
Decision
Judgment entered for the plaintiff; defendants ordered to pay principal sum, interest, general damages, and costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the defendants breached a loan agreement by failing to construct twelve houses as agreed and failing to repay the principal sum of UGX 1.4 billion. The court found that the loan was secured only by a personal guarantee, not by land titles, as those titles had already been transferred to the plaintiff under a separate earlier sale agreement executed before the loan agreement. The defendants are liable for the principal sum, interest, and general damages.

Outcome

Judgment entered for the plaintiff; defendants ordered to pay principal sum, interest, general damages, and costs

Facts

On 17 June 2021, the plaintiff advanced UGX 1.2 billion to the first defendant (a company) for construction of twelve houses, with the second defendant (a director) guaranteeing the loan. On 7 September 2021, the plaintiff advanced a further UGX 200 million under an addendum, also guaranteed by the second defendant. The loan was to be repaid within six months. The defendants failed to complete the houses or repay the loan despite extensions and undertakings. The defendants claimed the loan was secured by twelve land titles and that the plaintiff had recovered his money by selling the properties. The plaintiff adduced evidence that those twelve titles had already been transferred to him on 2 June 2021 under a separate sale agreement relating to an earlier loan for a road construction project in Arua, executed before the instant loan agreement.

Issues

  1. Whether the Defendants are indebted to the Plaintiff.
  2. What remedies are available to the parties?

Orders

  • Defendants to repay UGX 1,400,000,000 (principal loan amount).
  • Defendants to pay interest on the principal loan amount of UGX 1,080,000,000 (calculated up to 31 March 2022).
  • Plaintiff awarded UGX 50,000,000 as general damages.
  • Plaintiff awarded interest on UGX 1,400,000,000 at 20% per annum from 19 August 2022 (date of filing suit) until payment in full.
  • Costs of the suit awarded to the Plaintiff.

Rules and key headnotes

Breach of Contract — Failure to Perform Contractual Obligations
When a party to a contract fails to perform its obligations or performs defectively, that party commits a breach of contract, entitling the innocent party to a remedy including compensation for loss or damage caused by the breach.
Burden of Proof — Shifting of Evidential Burden
In civil trials, once a party adduces evidence proving the existence of a fact, the evidential burden shifts to the opposing party to disprove or counter that fact. The legal burden of proof, however, remains with the party who would fail if no evidence were given on either side.
Security for Loan — Nemo Dat Quod Non Habet
A party cannot give good title or use as security property which it does not possess. Where land titles had already been transferred to the plaintiff under a prior sale agreement before a loan agreement was executed, those titles could not validly secure the subsequent loan, rendering any purported security clause invalid and unenforceable.
Parol Evidence Rule — Explanation of Circumstances
The parol evidence rule precludes admission of external or oral evidence to vary or contradict a written contract. However, evidence explaining the circumstances surrounding related but separate transactions is admissible where necessary to respond to allegations by the opposing party, provided the evidence does not contradict the terms of the written contract in dispute.
Guarantee — Liability of Guarantor
Under the Contracts Act 2010 section 71, a guarantor is as liable as the principal debtor. Where a loan is guaranteed and the principal debtor fails to repay, the guarantor is jointly and severally liable for the debt.
General Damages — Assessment for Breach of Loan Agreement
General damages are awarded at the discretion of the court and are meant to put the injured party in the position they would have been in had the breach not occurred. Where defendants fail to repay a substantial loan over an extended period despite undertakings, the plaintiff is entitled to general damages for inconvenience and loss of use of the money.
Interest on Judgment Debt — Commercial Transactions
Where money is borrowed for a commercial transaction and not repaid, interest at the court rate is inappropriate. A higher rate reflecting commercial realities, such as 20% per annum, is more suitable to compensate the plaintiff for being deprived of the use of the money.

Legislation cited (9)

Cases cited (18)

  • Kasibante v Shell Uganda Ltd (High Court Civil Suit No. 542 of 2006)
  • Asha Kapoor V Sh. Hari Om Sharda (2010) 171 DLT 743
  • Greenboat Entertainment Ltd v City Council of Kampala (High Court Civil Suit No. 580 of 2003)
  • Makula International Ltd v His Eminence Nsubuga and Another (Court of Appeal Civil Appeal No. 4 of 1981)
  • Wakanyira George David v Ben Kavuya and 2 Others (Court of Appeal Civil Appeal No. 36 of 2010)
  • Kasozi v Dfcu Bank Ltd (High Court Civil Suit No. 1326 of 2000)
  • Nakana Trading Co. Ltd v Coffee Marketing Board (Civil Suit No. 137 of 1991)
  • Senkungu and Others v Mukasa (Supreme Court Civil Appeal No. 17 of 2014)
  • Kamo Enterprises Ltd v Krystalline Salt Ltd (Supreme Court Civil Appeal No. 008 of 2018)
  • Bishopgate Motor Finance Versus Transport Brakes (1949) ALL ER 37
  • Musisi Edward Versus Babihuga Hilda (2007) HCB 84
  • Strooms Versus Hutchinson (1905) AC 515
  • Ahmed El Termewy v Hassan Awdi and 3 Others (High Court Civil Suit No. 0095 of 2012)
  • Kampala District Land Board and George Mitala v Venasio Babwaya (Civil Appeal No. 0002 of 2007)
  • UCB Versus Deo Kigozi (2002) 1 EA 305
  • Kibimba Rice Ltd v Umar Salim (Supreme Court Civil Appeal No. 17 of 1992)
  • Premchandra Shenoi and Another v Maximov Oleg Petrovich (Supreme Court Civil Appeal No. 9 of 2003)
  • Sietco v Noble Builders (U) Ltd (Supreme Court Civil Appeal No. 31 of 1995)

Full judgment

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

Kabonero v African Kings Limited and Another (Civil Suit 685 of 2022) [2023] UGCommC 120 (12 December 2023)
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.