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Musinguzi & Another v Centenary Rural Development Bank Limited (Civil Suit 20 of 2021)

High Court · [2025] UGHC 76 · 2025 Judgment for Defendant on Counterclaim AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Civil suit for damages arising from alleged unlawful conduct by bank agents during debt recovery; main suit dismissed for non-appearance; counterclaim for loan recovery heard ex parte
Decision
Plaintiffs' main suit dismissed for non-appearance; judgment entered in favour of the bank on counterclaim for recovery of outstanding loan balance

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that the borrower defaulted on repayment of a UGX 30,000,000 loan secured by mortgage. Although the bank acted unjustly by issuing a notice of sale only seven days after recalling the loan and before expiry of the 45-day repayment period offered to the borrower, the court applied the principle that breach of banking codes does not set aside a valid loan agreement where compliance would not have altered the borrower's obligations. Judgment entered for the bank for the outstanding sum without interest.

Outcome

Plaintiffs' main suit dismissed for non-appearance; judgment entered in favour of the bank on counterclaim for recovery of outstanding loan balance

Facts

The first plaintiff obtained a loan of UGX 30,000,000 from the defendant bank on 9 August 2018, repayable within eighteen months at 25% interest per annum, secured by mortgage over unregistered land. The plaintiffs alleged that on 17 January 2020, three agents of the bank attacked the first plaintiff's home, assaulted the second plaintiff, vandalized the house, and destroyed property. The bank denied the allegations and counterclaimed for recovery of the outstanding loan balance. The plaintiffs alleged that 10 to 18 cows died of East Coast disease, causing three default payments, and requested loan rescheduling and reconciliation without response. The first plaintiff defaulted on the loan instalment due on 9 May 2019. The bank sent a reminder notice on 16 May 2019, recalled the loan on 23 May 2019 for UGX 25,840,000 payable within 45 working days, but issued a notice of sale of the security on 30 May 2019, only seven days after recalling the loan. The main suit was dismissed for non-appearance and the counterclaim proceeded ex parte.

Issues

  1. Whether the Counter-Claimant is entitled to recover the outstanding loan balance of UGX 35,225,112/= plus interest from the Counter-Defendant.
  2. Whether there are any remedies available to the parties.

Orders

  • The Counter-Defendant is ordered to pay UGX 35,225,112/= as claimed by the Counter-Claimant in their counterclaim.
  • No interest is awarded on the aforementioned sum.
  • The Counter-Defendant shall bear the costs of the counterclaim and suit.

Rules and key headnotes

Breach of Contract — Loan Default — Entitlement to Recovery
A borrower's default on repayment of a loan constitutes a breach of contract entitling the lender to recover the outstanding balance, notwithstanding the lender's breach of banking practice codes in the recovery process.
Banking Practice — Codes of Conduct — Effect of Breach
Where a bank breaches a code of banking practice, a court will not set aside a legal instrument such as a mortgage or loan agreement where it is clear on the facts that even if the code had been complied with, it would have made no difference to the customer's decision to enter into the transaction or their obligations under it.
Financial Consumer Protection — Bank of Uganda Guidelines — Standards
The relationship between a financial services provider and a consumer shall be guided by fairness, reliability and transparency, and a financial services provider shall not engage in unfair, deceptive or aggressive practices such as threatening, intimidating or being violent towards a consumer, pursuant to the Bank of Uganda Financial Consumer Protection Guidelines 2011.
Non-Appearance — Dismissal of Suit — Order 9 Rule 22
Where a plaintiff fails to appear when the suit is called for hearing, the court may proceed under Order 9 rule 22 of the Civil Procedure Rules to dismiss the suit.

Legislation cited (6)

Cases cited (6)

  • Besigye Kiiza v Museveni Yoweri and Another (Election Petition No. 1 of 2001)
  • Miller v Minister of Pensions [1972] 2 All ER 372
  • Charles Lwanga v Centenary Rural Development Bank (Civil Appeal No. 30 of 1999)
  • G.H. Treitel-Treitel on the Law of Contract-Sweet & Maxwell 13th at page 832
  • Atiku v Centenary Rural Development Bank [2022] UGCommC 146
  • Williams v Commonwealth Bank of Australia [2013] NSWSC 335

Full judgment

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

Musinguzi & Another v Centenary Rural Development Bank Limited (Civil Suit 20 of 2021) [2025] UGHC 76 (27 February 2025)
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.