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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-CS-0548 OF 2004
SHINE PAY (U) LTD ::::::::::::::::::::::::::::::::::
PLAINTIFF
VERSUS
1. SARAH KAGORO
2. LITTLE SISTERS CO. LTD
:::::::::::::::::::: DEFENDANTS
BEFORE: THE
HONOURABLE MR. JUSTICE YOROKAMU BAMWINE
J U D G M E N
T:
The Plaintiff, a money lending company, sued the Defendants,
jointly and severally, for a sum of US $20.765 and interest on it at
the rate of
15% per month effective 20/6/2004. The suit was filed under summary procedure,
0.33 r 2 of the Civil Procedure Rules.
The Plaintiff obtained Judgment in
default of defence. However, the same was set aside vide HCMA No.
0201/2005 and the defence filed a Written Statement of Defence in which they
denied the Plaintiff’s claim. There are two (2) agreed
facts in this
case:
1. That the Defendants borrowed money from the Plaintiff.
2. That
the Plaintiff is a registered money lender.
There are four (4) issues for
determination:
1. Whether the Defendants borrowed US $20.765 from the
Plaintiff.
2. Whether the Defendants have defaulted in the payments of the
said sum of money.
3. Whether the interest of 15% per month on any unpaid
instalment is excessive and unconscionable.
4. Whether the Plaintiff is
entitled to the remedies prayed for.
Counsel:
Mr. David
Innocent Nyote for Plaintiff.
Mr. Patrick Katende for
Defendants.
Before I delve into the assessment of evidence in this case,
I consider it necessary to state the law on some aspects of this case:
1. The
Burden of Proof:
In law, a fact is said to be proved when Court is satisfied
as to its truth. The general rule is that the burden of proof lies on
the party
who asserts the affirmative of the issue or question in dispute. When such
party adduces evidence sufficient to raise
a presumption that what he asserts is
true, he is said to shift the burden of proof: that is, his allegation is
presumed to be true,
unless his opponent adduces evidence to rebut the
presumption. The standard of proof is on a balance of probabilities. Relating
the above to this case, the Plaintiff has alleged that it advanced a loan of US
$20.765 to the Defendants. The burden rests on it
to prove that
allegation.
2. Parol Evidence Rule:
The parol evidence rule is to the
effect that evidence cannot be admitted (or even if admitted, it cannot be used)
to add to, vary
or contradict a written instrument. In relation to contracts,
it means that where a contract has been reduced to writing, neither
party can
rely on evidence of terms alleged to have been agreed, which is extrinsic
document, that is, not contained in it. Where,
however, there is a dispute as
to what transpired between the parties, as in the instant case, evidence can be
admitted to show that
a written contract has been varied or even rescinded.
S.92 (d) of the Evidence Act refers.
3. Doctrine of Non-est
factum:
This latin expression simply means “it is not his deed”.
It is an old common law defence which permitted a person who
had executed a
written document in ignorance of its character to plead that notwithstanding the
execution, “it is not his deed.”
The old position was that
the doctrine should not apply in favour of persons of full age and capacity.
However, this narrow view
of the doctrine has now been discarded such that every
case must now be decided on its own unique facts and circumstances.
I now
turn to the evidence as adduced by the parties.
As to whether the
Defendants borrowed US $20.765 from the Plaintiff, I have considered the
evidence of PW1 Eyasu Sirak. It is that
on 20/5/2004, through his company
(SHINE PAY (U) LTD), he lent the 2nd Defendant, through the
1st Defendant, its Managing Director, a sum of US $20.765. His
evidence is that the parties signed an agreement, P. Exh. 1. That such
an
agreement was executed by the Defendants is not denied by the 1st
Defendant. She admits borrowing money from the Plaintiff but disputes the form
of currency alleged by the Plaintiff. According
to her, the Plaintiff lent her
Shs.19m and the payment was by cheque, not cash. That the parties executed the
impugned loan agreement,
P. Exh. 1, is therefore not an issue but a fact. The
issue is whether money changed hands in the manner stated in the
agreement.
I must confess that the evidence presented to Court by the
parties has caused me considerable discomfort. On the face of it, one
party to
this case is a fraudster or both of them are.
I have considered the
Plaintiff’s side of the story. It is supported by the loan agreement
itself, P. Exh.1. There is also
the evidence of PW3 and PW4, people who were
present when it was being executed. The problem with the evidence of these so
called
independent witnesses is that they were all on the Plaintiff’s
side. None of them can be said to have witnessed the agreement
on the side of
the Defendants. To that extent, their evidence is highly suspect. DW1 Sarah
Kagoro stated in her evidence that she
just signed; that the document could as
well have been blank. The visual appearance of the document itself rules out
that possibility.
Nothing shows that the document was tampered with after
execution or that it may have been blank when she signed it. I have therefore
ruled out such a possibility. In any case she would be careless to do that sort
of thing and carelessness of the signer excludes
the doctrine of non-est factum.
A person cannot invoke the doctrine if he/she carelessly signs a document
containing blanks which
are later filled in otherwise than in accordance with
his/her instructions. See: United Dominions Trust Ltd –Vs- Western
[1976] QB 513.
In my opinion, when the evidence is considered
together, it raises a number of possibilities, including that what the document
states
is not necessarily what the parties did subsequent to its execution. One
such possibility finds favour in the evidence of DW1 Sarah
Kagoro. She has
produced a copy of a cheque dated 20/5/2004. The cheque indicates the payee as
Little Sisters. Her evidence is
that she banked that cheque and she has
produced a bank statement showing, among other things, that a cheque dated
20/5/2004 was
on 25/5/2004 cleared in favour of Little Sisters. It was in the
sum of Shs.19,000,000-. It is a cheque drawn on an A/C of Eladam
Enterprises
Ltd, a sister company to the Plaintiff in which PW1 Eyasu Sirak by his own
admission owns majority shares. The Plaintiff
has not led evidence to show that
Eladam Enterprises Ltd had dealings with the Defendants in another capacity or
that the cheque
is a forgery. On the contrary, on seeing the signature,
Eyasu’s response was that it looks like his. He did not say that
it is
not his; or that he suspected the signature and/or the cheque to be a forgery;
or that Eladam Enterprises Ltd did not pay a
sum of Shs.19,000,000- indicated on
that cheque and on the bank statement of the Defendants.
In my view,
Court is entitled to draw an adverse inference on the basis of the
Plaintiff’s failure to lead evidence of the bank
on the matter. It is
evidence which shows that Shs.19m was paid to Little Sisters at the very time
when the Plaintiff alleges that
it paid them US $20.765. Court has come to this
conclusion in view PW1 Eyasu’s evidence that other than this transaction,
that is, the subject matter of this suit, the Defendants did not have any other
known dealings with him or with Eladam Enterprises
Ltd where he holds majority
shares and he was apparently the sole signatory to the company
account.
In the result, Court finds that the cheque dated 20/5/2004 and
the Bank Statement reflecting that Little Sisters A/C was credited
with a sum of
Shs.19m on 25/5/2004 on a cheque issued by a company where PW1 owns majority
shares, are strong pieces of circumstantial
evidence which corroborate the
1st Defendant’s evidence that although she signed a loan
agreement acknowledging receipt of US $20.765, she was actually not paid
in that
currency or that much but was paid a sum of Shs.19m Uganda money and by way of a
cheque. Accordingly, the loan agreement
could as well be telling a lie about
itself. It cannot be relied upon as evidence that excludes other evidence,
written or oral,
in this case oral. While the Plaintiff has adduced evidence
sufficient to raise a presumption that what it asserts is true, the
Defendants
have adduced more credible evidence to rebut that
presumption.
Accordingly, Court is not satisfied that the Defendants
borrowed US $20.765 from the Plaintiff. However, it is satisfied on a balance
of probabilities that they received Shs.19m from the Plaintiff’s sister
company, Eladam Enterprises Ltd, on a cheque signed
by the Plaintiff’s
Managing Director, PW1 Eyasu, notwithstanding the purported denial of that
transaction by him. I have not
found the first issue proved to the satisfaction
of Court or at all and I answer it in the negative.
As to whether the
Defendants have defaulted in the payments of the said sum of money, the answer
is No, as long as the alleged sum
of money relates to the Plaintiff’s
claim of US $20.765. Having said so, the Defendants evidence is that other than
the amount
realised from the sale of their sewing machines, they have not paid
anything more to the Plaintiff. Having found that the Defendants
received
Shs.19,000,000- from the Plaintiff, and in view of the undisputed evidence that
Shs.1,400,000- was realised from the sale
of the attached property, I hold that
subject to what I will be saying later in this Judgment, a sum of
Shs.17,600,000- is still
outstanding on the loan.
As to whether the
interest of 15% per month on any unpaid instalment is excessive and
unconscionable, in a sister case to this one,
Shine Pay (U) Ltd –Vs-
Kiyonga Francis HCCS No. 547/2004 (unreported), I had occasion to express an
opinion on a similar issue. The terms of the loan in that case were similar to
the instant
one. I stated in that case, and I so reiterate herein, that
interest, if it is not part of the contract terms is a discretionary
remedy.
The interest claimed by the Plaintiff in the instant case is not based on the
agreement. If anything, the agreement only
provided for payment of a penalty,
not interest, in the event of a default by the Defendants on the principal sum.
15% per month
translates to 180% per annum which by our standards is a rip off,
especially in a situation where the parties agree that it was an
interest free
loan, a friendly one so to say. There would be nothing friendly about interest
of 180% per annum when the Commercial
one currently stands at 25%. In my view,
while the penalty may have been intended to discourage willful defaults, it was
an indirect
and disguised charging of exhobitant interest. This Court has a
discretion to award interest at less than the contractual rate when
the rate is
manifestly excessive. See: Juma –Vs- Habib [1975] EA 103
(T).
From the evidence on record, Court is satisfied that the
Defendants have kept the Plaintiff out of its money. However, from the evidence
of DW1 Kagoro, the Defendants did not have peace with that money. First,
although they had 6 months within which to retire the loan,
as soon as they
defaulted on the initial instalment, the Plaintiff filed this suit. Secondly, a
person who had been given Shs.19m
was now asked to pay US $20.765, an amount
twice as much as the loan. I accept the defence evidence on this point. In
these circumstances,
interest would be awarded on the special damages at the
rate of 25% per annum from the date of Judgment till payment in full. I
so
order.
As to whether the Plaintiff is entitled to the remedies prayed
for, it is common ground that the Defendants’ sewing machines
were
attached in execution and sold. From the evidence, they were attached around
24/2/2005 and thereafter advertised for sale.
There is evidence that the said
attachment was done in the presence of the 1st Defendant. However,
nothing is on record to have been done by her to stop the sale of the attached
property until mid March 2005
when with the assistance of counsel they filed
HCMA No. 0201 of 2005 for an order to set aside the exparte Judgment. This
application
included a prayer for stay of execution. As fate would have it, the
same could not be heard till close to mid May 2005. There being
no order of
stay, which could easily have been made by the Registrar as an interim remedy
pending determination of the substantive
application, if any had been requested
for as is usual practice in matters of this nature, the Court Bailiff went ahead
and disposed
of the attached property before the application was heard. Given
that an application to set aside an exparte Judgment cannot of
itself be relied
upon to stay execution, I’m unable to fault the Bailiff’s action.
The Defendants should have known
better. For a person who claims that she had
not been served with the plaint and was therefore impliedly surprised by the
attachment,
it appears to me that the objection to the sale was designedly
delayed and therefore an after thought. It offended the proviso to
0.19 r 55 of
the Civil Procedure Rules. There will therefore be no order to reverse the
sale.
Be that as it may, I have considered the evidence that eight sewing
machines were sold. The bailiff talked of a Valuation Report
in his possession
but none is on record to guide Court on this issue. They are said to have been
industrial sewing machines of high
value but other than the evidence tendered by
the Defendants regarding the cost of these machines some years ago, Court has
not been
favoured with an independent report indicating their fair value before
the impugned sale. In all these circumstances, the possibility
that they were
under valued or sold at give away prices cannot be ruled out.
Taking into
account the circumstances of this case and the discredited nature of the
Plaintiff’s claim, Court has decided to
discount the balance due on the
loan, that is, Shs.17,600,000- by a factor of 30% and accordingly awarded the
Plaintiff a sum of
Shs.12,320,000- (twelve million three hundred twenty thousand
only) as special damages. I so order.
It has been suggested by the
Defendants that since they gave the Plaintiff land comprised in plot 608 Block
273, the Plaintiff should
sell the said security instead of suing them and they
would only be deemed to have defaulted after the security fails to sell.
I’m
unable to accept that proposal. The Defendants were given the
impugned land title by a one Busulwa. DW1 Kagoro did not know him
well or at
all. Busulwa was only introduced to her by PW3 Lule, an agent for the
Plaintiff. It is little wonder that they have
not cared to pay the money they
borrowed from the Plaintiff. They knew they would default and tell the
Plaintiff in the face to
go and realize the security or else whistle for the
money since none of them had any interest in the land. I accept the
Plaintiff’s
evidence that the security was bogus and cannot be realised.
I wonder how the Plaintiff could have accepted it as security for such
a hefty
sum of money without taking the necessary precautions of verifying its
authenticity or viability; a factor at the back of
my mind when in the course of
this Judgment I observed that one party to this case is a fraudster or both of
them are. In my view
none of them has come to Court with clean hands.
As
regards costs, the usual result is that the loser pays the winner’s costs.
However, this practice is discretionary so that
a winner may not be awarded his
costs, depending on the circumstances of the case. In the instant case, in view
of the Plaintiff’s
partial success and the dishonest manner in which the
parties sought to cheat each other, Court is of the considered opinion that
an
order that each party bears its own costs of this suit would meet the ends of
justice. I so order.
In the final result, Judgment is entered for the
Plaintiff against the Defendants jointly and severally and the following orders
made:
i. Special damages: Shs.12,320,000- (twelve million three hundred
twenty thousand only).
ii. Interest on (i) at the rate of 25% per annum from
the date of Judgment till payment in full.
iii. Each party shall bear its
own costs.
Yorokamu Bamwine
J U D G
E
26/04/2006
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