Wakilii

Musinguzi Willy Turirukwa v Ndema Thomas (Civil Suit No. 792 of 2022)

High Court · [2023] UGCOMMC 309 · 2023 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for refund of monies advanced under Memorandum of Understanding and enforcement of contractual interest rate
Decision
Principal sum of UGX 17,200,000 admitted by Defendant. Interest rate reduced from 36% to 24% per annum. Judgment for Plaintiff with costs.

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Holding

Court held that the contractually agreed interest rate of 36% per annum on a loan advanced under a Memorandum of Understanding was harsh and unconscionable. Exercising its discretion under Section 26(1) of the Civil Procedure Act, the Court reduced the interest rate to 24% per annum, taking into account prevailing commercial rates and inflation. The Plaintiff was awarded costs as the successful party.

Outcome

Principal sum of UGX 17,200,000 admitted by Defendant. Interest rate reduced from 36% to 24% per annum. Judgment for Plaintiff with costs.

Facts

On 30 November 2013, the Plaintiff advanced UGX 15,000,000 to the Defendant under a Memorandum of Understanding at 36% interest per annum. The loan was to enable the Defendant to purchase an estate through a court-guided process, with the Plaintiff receiving first right to purchase a plot from the estate. A postdated cheque was deposited as security. The Defendant subsequently requested and received an additional UGX 2,200,000. When the postdated cheque matured, the Defendant advised the Plaintiff not to cash it, claiming the court process was near conclusion. The Defendant failed to refund the total sum of UGX 17,200,000, prompting the Plaintiff to file suit. At hearing on 27 October 2023, the Defendant admitted owing the principal sum but contested the 36% interest rate. Parties failed to reach agreement on interest, and the matter proceeded solely on the interest rate and costs.

Issues

  1. Whether the interest rate of 36% per annum stipulated in the Memorandum of Understanding between the parties is unconscionable and harsh.
  2. Whether the Plaintiff is entitled to costs of the suit.

Orders

  • The interest rate stipulated in the Memorandum of Understanding between the Plaintiff and Defendant of 36% per annum is harsh and unconscionable.
  • An interest rate of 24% per annum is hereby awarded to the Plaintiff in respect of the transaction between the Plaintiff and Defendant.
  • Costs of the suit are awarded to the Plaintiff.

Rules and key headnotes

Contract Law — Interest on Loans — Court's Discretion to Reduce Harsh and Unconscionable Rates
Where parties to a contract agree on an interest rate, but the Court is of the opinion that the rate is harsh and unconscionable, the Court may exercise its discretion under Section 26(1) of the Civil Procedure Act to give judgment for payment of interest at such rate as it thinks just, notwithstanding the agreement between the parties.
Commercial Law — Money Lending — Principles for Award of Interest
The general principle for the award of interest is premised on the fact that the defendant has taken and used the plaintiff's money and ought to compensate the plaintiff for that use. In determining the appropriate interest rate, the Court should consider the prevailing economic value of money, inflation, and commercial interest rates.
Civil Procedure — Costs — Award of Costs to Successful Party
Under Section 27(2) of the Civil Procedure Act, costs follow the event unless otherwise ordered by Court. A successful party can only be denied costs if it is proved that but for their conduct, the action would not have been brought. Where a party succeeds in the main purpose of the suit, costs will follow the event.

Legislation cited (3)

Cases cited (7)

  • Premchandra Shenoi & Anor v Maximov Oleg Petrvich (Supreme Court Civil Appeal No. 9 of 2003)
  • Olara Denis Micheal v Omony Stephen Khesmodel (High Court Miscellaneous Application No. 1 of 2022)
  • Dembe Trading Enterprises Ltd v Welcome Impex Uganda Ltd (High Court Civil Suit No. 246 of 2006)
  • Juma Vs Habiba (1975) E.A 108
  • Alice Okiror and Michael Okiror v Global Capital Save 2004 Ltd & Anor (High Court Civil Suit No. 149 of 2010)
  • Sietco v Noble Builders (Supreme Court Civil Appeal No. 31 of 1995)
  • Uganda Development Bank Vs Muganga Construction Co. Ltd (1981) H.C.B 35

Full judgment

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

Musinguzi Willy Turirukwa v Ndema Thomas (Civil Suit No. 792 of 2022) [2023] UGCommC 309 (14 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.