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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF
UGANDA AT KAMPALA
(COMMERCIAL COURT
DIVISION)
HCT-00-CC-CS-0400-2005
JAMBA SOITA ALI ::::::::::::::::::::::::::::::::::::
PLAINTIFF
VERSUS
DAVID SALAAM :::::::::::::::::::::::::::::::::::
DEFENDANT
BEFORE: THE HONOURABLE MR. JUSTICE YOROKAMU
BAMWINE
J U D G M E N T:
The
plaintiff’s case against the defendant is for money had and received. It
is his case that he advanced a loan to the defendant
which he failed to pay
back. The defendant does not deny receipt of some money from the plaintiff.
However, he contends that it
was Shs.1,850,000- and not Shs.9,000,000- as
claimed by the plaintiff; and that he paid it back to him and even
more.
At the hearing both parties agreed that:
1. The plaintiff lent
money to the defendant.
2. The defendant issued three undated cheques to the
plaintiff.
3. The defendant was charged and acquitted in the Chief
Magistrate’s Court at Buganda Road for issuing false cheques.
There
are two issues for determination:
1. Whether the plaintiff advanced to the
defendant the sum of Shs.9,000,000- as claimed in the plaint.
2. Whether the
plaintiff is entitled to the reliefs claimed or at
all.
Counsel:
Mr. Sebanja for the plaintiff.
Mr. Semugera
for the defendant.
Before I consider the evidence adduced by the parties
in support of their respective claims, let me state the law on some aspects
of
this case.
Firstly, 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 principle to this case, the
plaintiff has alleged that the defendant is indebted to him in the sum of
Shs.9,000,000-.
The burden lies on him to prove that
allegation.
Secondly, money had and received.
Money which is paid to
one person which rightfully belongs to the other, as where money is paid by A to
B on a consideration which
has wholly failed or by mistake is said to be money
had and received by B to the use of A. The paying of A to B, according to the
learned author of A Concise Law Dictionary by P.G. Osborn, 5th Edn at
p. 212, becomes a quasi-contract, an obligation not created by law, but similar
to that created by contract, and is independent
of the consent of the person
bound. The cause of action is rooted on quasi – contract on the footing
of an implied promise
to re-pay. Besides, liability is based on unjust
enrichment, that is, the action is applicable where the defendant has received
money which, in justice and equity, belongs to the plaintiff under circumstances
which render the receipt of it by the defendant
a receipt to the use of the
plaintiff. For the plaintiff to succeed, there must be evidence of the payment
sought to be recovered.
In the instant case, it is an admitted fact that
the plaintiff lent money to the defendant. This created lender/borrower
relationship,
a contractual obligation. It was not money paid by the plaintiff
to the defendant on a consideration which failed in the end nor
was it a payment
by mistake. In these circumstances, the cause of action cannot be money had and
received, a quasi-contract, but
one based on a contract of lending and
borrowing.
Be that as it may, it has been submitted by learned counsel
for the defendant that the transaction between the parties was a loan
agreement;
that the principal sum attracted an interest of 25% per month; and, that in view
of the Money Lenders Act which prohibits
lending of money with an interest by a
person other than a registered money lender, the transaction between the parties
contravened
the law and was therefore illegal.
Counsel for the plaintiff
does not agree.
I have directed my mind to this argument. The law on
this point was considered in Naks Ltd –Vs- Kyobe Senyange [1982] HCB
52. It was held in that case that since the plaintiff had no money
lending licence, any agreement or contract so made in default was
illegal and
could not be enforced by the Courts on the basis of the maxim ex turpi
causa.
This latin phrase, a contraction of a much longer phrase ex turpi
causa non oritur actio simply means that ‘no claim arises
from a base
cause’. The policy was well summarized by Lord Mansfield, C.J in the
18th Century when he said:
No Court will lend its aid to a man
who founds his cause of action upon an immoral or illegal act. If the cause of
action appears
to arise ex turpi causa ....... the Court says he has no right to
be assisted. See: Success in Law, 4th Edn by Richard H. Bruce at p.
260.
In the instant case, the plaintiff is not a registered money
lender. He lent money to the defendant at an agreed interest of 25%
per month,
an excessive rate indeed given the current commercial rate of between 20 –
25% per annum. Court is cutely aware
that the plaintiff, apparently upon the
realisation that what he did was in contravention of the law, has decided to
abandon his
claim for interest. It is submitted by counsel that the abandonment
of the claim is an attempt to circumvent the law which prohibits
Courts from
sanctioning and enforcing illegal contracts. I agree with that submission. I
think it is fair to say that not every
person who lends money is a money lender
within the meaning of the Act.
Commenting on a similar law, Farwell J. in
Litchfield –Vs- Dreyfus [1906] 1 K.B 584 at 588 -89
observed:
“ .... .... a man who carries on business as a money lender, and is not registered under the Act, cannot recover. But not every man who lends money at interest carries on the business of money lending. Speaking generally, a man who carries on a money lending business is one who is ready and willing to lend to all and sundry, provided that they are from his point of view eligible.”
I agree.
Relating the principle
to the issue now before the Court, there is unchallenged evidence that the
plaintiff lent money to the defendant
at an interest. The defendant was simply
introduced to the plaintiff as a money lender by an acquaintance to both and
from that
time they started dealing with each other in matters of money. Court
is satisfied that neither party knew the other before the incident.
In other
words the plaintiff did not merely extend a loan to a friend albeit at interest.
It was his business and he was ready and
willing to lend his money to all and
sundry, to use the very words of the learned Judge, provided that they were from
his point of
view eligible.
Under S. 2 (4) (b) of the Money Lenders Act,
Cap 273 [formerly S. 3 (2)], it is an offence to carry on business as a money
lender
without having in force a proper money lenders licence authorizing one to
do so.
In the instant case, since the plaintiff had no money lending
licence and was carrying on business of money lending, any agreement
or contract
between him and the defendant was illegal. It cannot be enforced by the Court
on account of being an illegal act and
therefore a base cause.
The question
of the same being a friendly loan does not arise because from the
plaintiff’s own admission the agreement was that
he pays interest on the
principal sum at the rate of 25% per month. There cannot be anything friendly
about a loan that on a yearly
basis translates into 300% interest on the
principal sum, the mischief, the unsatisfactory state of affairs which the Act
was enacted
to remedy. I have already observed that the plaintiff made a last
minute attempt to abandon the claim for interest, an act he said
was out of good
will. Counsel for the defence has argued, quite correctly in my view, that the
amendment does not save the plaintiff
in any way because whereas the plaint
stands to be amended, the transaction still remains the same. I agree.
Amending the plaint
does not in itself purify the illegal transaction. Once a
party demonstrates that the transaction was illegal, as the defendant
has done
herein, the cause of action is deemed to have arisen ex turpi causa, and the
Court says that he has no right to be assisted.
The illegality extends to the
cheques as well on which the plaintiff further bases his claim. The
plaintiff’s claim is based
on a base cause. Court cannot enforce it
against the defendant.
As to whether the plaintiff is entitled to the
reliefs claimed or at all, in view of my finding in the first issue, he is not
entitled
to any of the reliefs claimed for in the plaint. The suit would be
dismissed. However, in the event of a successful appeal, in
view of the
plaintiff’s claim for special damages, I shall try to assess the evidence
in respect of that claim to determine
whether I would have awarded him
anything.
As to his claim for special damages in the sum of
Shs.9,000,000-, the rule has long been established that special damages must be
pleaded and proved by the party claiming the same.
From the evidence, the
transactions between them started way back in 1999. Neither the plaintiff nor
the defendant appears to know
the date. There was no written agreement between
them to give the basis for the computation of interest. It is therefore the
plaintiff’s
word against that of the defendant. The plaintiff claims that
the money was advanced on two separate occasions in instalments of
Shs.6m and
Shs.3m respectively. The defendant issued three cheques: one for Shs.14m,
another for Shs.2,635,000- and the other for
Shs.2,700,000-. From the evidence
of the parties, the cheques were undated when they were issued to the defendant.
It is not known
which cheque was meant to act as security for payment of which
instalment.
The defendant’s version is that he was given a loan of
Shs.1,000,000- and another of Shs.850,000- on separate occasions. That
between
1999 and the filing of this case by the plaintiff, he had paid Shs.10,570,000-
to the plaintiff. He produced evidence of
payment to the plaintiff directly and
through his (plaintiff’s) bank Account.
I have not had considerable
difficulty deciding which of the two versions is more credible than the other
because the casual and informed
manner in which the plaintiff handled these
important issues of money. For instance, although the plaintiff admits that the
defendant
made some payments to him, he does not know how much they add up to.
He was simply not keeping track of the payments. Accordingly,
what he thinks is
owed to him by the defendant can only be an estimate, a matter of conjecture.
He bases his claim on the 3 cheques
which add up to Shs.19,335,000-. However,
he does not know by what factor a loan of Shs.9m would add up to that much. In
my view
he has not come out clean on the evidence against the defendant.
Whereas in the criminal trial his claim was that he lent Shs.19,335,000-
to the
defendant, as it has turned out now, he did not give him cash to that tune. And
whereas in the criminal trial he swore that
the defendant had not paid him
anything, he now acknowledges receipt of some payments from him much as he does
not know how much
it adds up to. Moreover, whereas in the criminal trial he
insisted that money deposited on his account by the defendant was his
(the
plaintiff’s) own money which he was giving him to deposit on his
(plaintiff’s) account by virtue of the defendant
being an employee of the
bank, he has now admitted that the defendant used to pay him cash and at times
he would deposit the money
on the account. It is a well known principle of law
and practice that a man who swore the contrary of that which he stated on a
previous occasion was not worthy of belief. See: M. Kabenge –Vs-
James K. Mpalanyi Civil Appeal No. B 56 of 1962, M.B.
84/64.
Assuming that the plaintiff advanced Shs.9m to the
defendant and that the loan carried no interest, as the plaintiff has now
invited
us to find, then the amount partly paid to him directly and partly
deposited on to his account in the Bank amounting to Shs.10,570,000-
rested the
loan, in the absence of the plaintiff’s own account of how much he
received from him. It is submitted that while
in custody the defendant
undertook to pay Shs.5m to the plaintiff as evidence that he owed him money. I
take cognizance of the fact
that this was a person in custody, on account of his
alleged failure to settle the debt. The possibility of undue pressure on him
cannot be ruled out. I have considered the evidence of both parties in its
totality. I also had the opportunity to note their demeanour
as they testified.
In my view, as between the plaintiff and the defendant, the defence version
makes much more sense than that of
the plaintiff. The defence version is much
more credible than that of the plaintiff. I therefore accept his
(defendant’s)
evidence that following a misunderstanding between them over
the outstanding amount, he issued to the plaintiff the impugned cheques.
They
were merely to serve as evidence of indebtedness to the plaintiff, not that he
owed him the amount stated thereon. They were
to it down and determine who owed
what to the other but they never did. Instead the plaintiff banked them and
they bounced. It
is little wonder that he was acquitted in criminal trial.
Accordingly, even if the plaintiff’s cause of action had been okayed,
I
would still have found that the plaintiff had failed to prove his claim against
the defendant.
As regards costs, the usual result is that the loser
pays the winner’s costs. However, this practice is subject to the
Court’s
discretion such that a winning party may not necessarily be
awarded his costs, even though they probably ran into millions of
shillings.
In light of the peculiarities of the case, especially given that
the defendant benefited from the illegal transaction; the casual
manner in which
the parties handled important issues of money; and the manner in which the
defendant, a banker, abused the institution
of cheques, I’m inclined to
order that each party bears its own costs, save any costs which may already have
been decreed to
either party in any event. It is so ordered.
For the
reasons stated above, the suit is dismissed. Each side shall bear its own
costs. I order so.
Yorokamu Bamwine
J U D G
E
03/07/2006
03/07/2006
Parties present.
Okuni Charles
– Clerk.
Court: Judgment delivered.
Yorokamu
Bamwine
J U D G E
03/07/2006
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