Wakilii

Lobo v Baganda Butchers, Limited and Others (Civil Appeal No. 6 of 1947)

East African Court of Appeal · [1947] EACA 3 · 1947 Appeal Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from decision of H.M. High Court of Uganda on claim for money on a promissory note
Decision
Appeal dismissed; judgment of the High Court affirmed reducing interest rate to 24% per annum

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Court of Appeal held that section 26(1) of the Civil Procedure Ordinance vests discretion in the court to determine what rate of interest is harsh and unconscionable, irrespective of prevailing money-lending practices. The trial court properly exercised its discretion in finding that interest at 96% per annum (later reduced to 48% per annum) was harsh and unconscionable, and that 24% per annum was a reasonable rate. The appeal was dismissed.

Outcome

Appeal dismissed; judgment of the High Court affirmed reducing interest rate to 24% per annum

Facts

The appellant lent Sh. 5,000 to the first respondent on two promissory notes, one of which was for Sh. 2,500. Interest was initially charged at 96% per annum (8% per month), later reduced to 48% per annum (4% per month). Over ten months, the appellant received Sh. 3,200 in interest on the Sh. 5,000 loan, representing 64% of the capital. The appellant sued on the dishonoured promissory note. The first respondent pleaded that the interest rate was harsh and unconscionable under section 26(1) of the Civil Procedure Ordinance. The High Court found for the respondent, reducing the interest rate to 24% per annum and giving judgment for Sh. 1,400 (the principal less the difference between interest actually paid and interest at the reasonable rate).

Issues

  1. Whether the trial court properly exercised its discretion under section 26(1) of the Civil Procedure Ordinance in reducing the interest rate from 48% per annum to 24% per annum on the ground that the agreed rate was harsh and unconscionable.

Orders

  • Appeal dismissed.
  • Costs awarded to the respondents (one set of costs).

Rules and key headnotes

Interest — Harsh and Unconscionable Rates — Judicial Discretion
Section 26(1) of the Civil Procedure Ordinance vests discretion in the court to determine what rate of interest is harsh and unconscionable and ought not to be enforced by legal process, irrespective of the prevailing practice of money-lenders in the country.
Civil Procedure Ordinance s.26(1) — Scope and Application
Section 26(1) of the Civil Procedure Ordinance gives the court an equitable jurisdiction to reduce interest rates found to be harsh and unconscionable, and once that opinion is formed, the court has unrestricted discretion to reduce the interest to such rate as it thinks just.
Interest — Excessive Rates — Appellate Interference
An appellate court will not interfere with a trial court's discretionary decision under section 26(1) of the Civil Procedure Ordinance as to what constitutes a harsh and unconscionable rate of interest and what rate is just, absent evidence that the discretion was wrongly exercised.
Civil Procedure Ordinance s.26(1) — Relationship to Indian Contract Act
Section 26(1) of the Civil Procedure Ordinance is not to be read with section 16 of the Indian Contract Act (which deals with undue influence); rather, it gives the court a new or extended equitable power analogous to that conferred by the English Money-Lenders Act, 1900.
Interest — Harsh and Unconscionable — Rate Alone Sufficient
Under section 26(1) of the Civil Procedure Ordinance, the court may exercise its equitable jurisdiction on forming the opinion that the interest rate alone is unconscionably excessive, without requiring that the entire transaction be harsh and unconscionable.

Legislation cited (5)

  • Civil Procedure Ordinance (Uganda) s.26(1)
  • Civil Procedure (Amendment) Ordinance, 1940 s.6
  • Indian Contract Act s.16
  • Money-Lenders Act, 1900 s.1
  • Money-Lenders Act, 1927 s.10

Cases cited (4)

  • Jacob Bros v Joicey (1919) 35 TLR 362
  • Reading Trust Ltd v Spero [1930] 1 KB 503
  • Samuel v Newbold [1906] AC 470
  • C K Patel v J K Nkata (1930) IV Uganda LR 18

Full judgment

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

Lobo v Baganda Butchers, Limited and Others (Civil Appeal No. 6 of 1947) [1947] EACA 3 (1 January 1947)
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.