Wakilii

Ndyowayesu v Serubiri (Civil Appeal 15 of 2021)

High Court · [2024] UGHCCD 207 · 2024 Appeal Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Civil appeal from Nakawa Chief Magistrate's Court decision granting summary judgment for recovery of money
Decision
Appeal dismissed save for reduction of interest rate; appellant remains liable for debt of UGX 16,500,000/= plus interest at 15% per annum

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court dismissed the appeal and upheld the trial court's finding that the appellant was indebted to the respondent for UGX 16,500,000/= arising from two dishonoured cheques. The Court held that the cheques constituted prima facie evidence of debt under the Bills of Exchange Act and that the trial magistrate correctly rejected the appellant's defence that the cheques were issued as security for commission on land transactions. The Court reduced the interest rate from 22% to 15% per annum, finding the original rate excessive for a friendly loan transaction.

Outcome

Appeal dismissed save for reduction of interest rate; appellant remains liable for debt of UGX 16,500,000/= plus interest at 15% per annum

Facts

The respondent instituted a suit in the Chief Magistrate's Court to recover UGX 16,500,000/= arising from two cheques issued by the appellant. The respondent claimed he had lent money to the appellant on two occasions and received postdated cheques for UGX 10,500,000/= and UGX 6,000,000/=. When the cheques were presented to the bank in July 2017, they were dishonoured due to differing signatures. The appellant defended on the basis that the cheques were issued as security for commission on land brokerage transactions, not for loans. The appellant claimed that the cheques were postdated, incomplete, and filled in by the respondent. The trial court found in favour of the respondent and awarded the principal sum plus interest at 22% per annum. The appellant appealed.

Issues

  1. Whether the learned trial Magistrate erred in finding that the appellant was indebted to the respondent to the tune of UGX 16,500,000/=.
  2. Whether the cheques issued by the appellant were security for a land transaction or consideration for a loan.
  3. Whether the learned trial Magistrate erred in awarding interest at 22% per annum from the date of filing suit until full payment.

Orders

  • Appeal dismissed to a larger extent.
  • Judgment and decree of the lower court upheld.
  • Interest order varied from 22% to 15% per annum from date of filing suit until full payment.
  • Appellant to meet three-quarters (3/4) of the costs of the appeal.
  • Appellant to meet three-quarters (3/4) of the costs of the proceedings in the lower court.

Rules and key headnotes

Evidence — Pleadings — Party bound by pleadings — Prohibition on adducing evidence contradicting pleadings
A party is bound by their pleadings and it is not open to the court to base its decision on an unpleaded issue; where there is discordance between what is pleaded and the evidence or submissions, the cardinal rule that a party is bound by their pleadings still applies, as the defence would otherwise be denied an opportunity to reply to new allegations.
Banking & Finance — Bills of Exchange — Cheques as prima facie evidence of debt
A bill of exchange constitutes prima facie evidence of the sum of money printed on it and due to the person in whose favour it is drawn; such a debt is only discharged when the bill of exchange is honoured; when a cheque is dishonoured, the holder thereof is entitled to judgment unless exceptional grounds are shown.
Banking & Finance — Bills of Exchange — Cheques issued as security — Practice deprecated
The business practice of issuing cheques as security for payment with the intention that they should not be banked or negotiated should be strongly discouraged because it goes against the very nature of such instruments; courts will fault any person who issues a cheque for presentment to a bank by the holder thereof knowing or not caring whether it will be dishonoured.
Contract Law — Formalities — Writing requirement under Contracts Act — Construction as directory
Where all the elements of a valid contract are satisfied, the requirement under section 9(5) of the Contracts Act that a contract exceeding twenty-five currency points be in writing serves more of an evidential purpose than that of validity and should be construed as directory rather than mandatory; the absence of writing lessens proof of the actual terms but does not negate the existence of the agreement.
Banking & Finance — Money Lending — Friendly loans distinguished from commercial lending — Licensing requirement
Money lending upon mutual agreement with no levy of interest and not in conduct of commercial money lending does not require a money lending licence; a friendly loan between business colleagues does not fall within the licensing requirements applicable to commercial money lenders.
Contract Law — Interest — Award of interest in absence of agreement — Just and reasonable rate
Even where there is no express agreement between parties regarding payment of interest or a rate thereof, interest is payable as compensation for delay in paying a fixed sum or in assessing damages; in such cases the court awards interest that is just and reasonable, taking into account inflation, depreciation of currency, and whether the transaction was commercial or non-commercial in nature.
Contract Law — Interest — Determination of just and reasonable rate — Restitutio in integrum
In determining a just and reasonable interest rate, courts look not at the profit which the defendant wrongfully made but at the cost to the plaintiff of being deprived of the money which he should have had; in commercial cases the interest reflects the rate at which the plaintiff would have had to borrow money to supply the place of that withheld; in non-commercial friendly loan cases, the reasonable expectation is restoration without adverse effect from inflation or currency depreciation, which does not call for a commercial rate.

Legislation cited (8)

Cases cited (14)

  • Kifamunte Henry v Uganda (Criminal Appeal No. 10 of 1997)
  • Fredrick Zabwe v Orient Bank Ltd (Supreme Court Civil Appeal No. 4 of 2006)
  • Baguma Fred v Uganda (Supreme Court Criminal Appeal No. 7 of 2004)
  • Naris Byarugaba v Shivam M.K.D Ltd [1997] HCB 71
  • Luyimbazi Sulaimaman v Stanbic Bank (U) Ltd (Supreme Court Civil Appeal No. 2 of 2019)
  • Clessy Barya Kiiza v Jomo Robert Kashaija and 3 Others (High Court Civil Suit No. 894 of 2019)
  • Kotecha vs. Mohammad [2002] 1 EA 112
  • BIDCO (U) Ltd v Western Distributors Ltd (High Court Civil Suit No. 271 of 2008)
  • Maersk Uganda Ltd v First Merchant International Ltd (High Court Civil Suit No. 143 of 2019)
  • Spring Freight Logistics Ltd v Amoo Holding International Ltd (High Court Civil Suit No. 556 of 2019)
  • Premchandra Shenoi and Another v Maximov Oleg Petrovich (Supreme Court Civil Appeal No. 9 of 2003)
  • Harbutt's 'placticine' Ltd v Wayne tank & pump Co. Ltd [1970] QB 447
  • Kinyera v Management Committee of Laroo Building Primary School (High Court Civil Suit No. 99 of 2013)
  • Esero Kasule v Attorney General (High Court Miscellaneous Application No. 688 of 2014)

Full judgment

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Ndyowayesu v Serubiri (Civil Appeal 15 of 2021) [2024] UGHCCD 207 (19 December 2024)
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.