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THE REPUBLIC OF UGANDA
IN THE SUPREME COURT
OF UGANDA
AT MENGO
(CORAM: ODOKI,CJ., ODER, TSEKOOKO, KAROKORA AND KANYEIHAMBA.JJ.S.C.)
CIVIL APPEAL No.10 OF 2004.
BETWEEN
BANK OF BARODA (U) LTD........................APPELLANT
AND
WILSON BUYONJO KAMUGUNDA..................RESPONDENT
[Appeal from a decision of the Court of Appeal at Kampala before
(Okello, Engwau and Byamugisha.JJ.A.) dated 3rd March, 2004 in Civil
Appeal No.66 of 2002]
JUDGMENT OF TSEKOOKO, JSC
This is a second appeal. It arises from the decision of the Court of
Appeal which overturned the judgment of the trial judge, Katutsi,
J., who had
dismissed a suit instituted by the respondent to recover shs 80m/= from the
appellant.
For easy reference I shall refer to the appellant as the
defendant and to the respondent as the plaintiff. The facts of this case
are as
follows:
Two brothers named Ham Kamugunda and Godfrey Katanywa, owned land
upon which they lived in Lake Mburo National Park in Mbarara District.
Ham
Kamugunda had a son called Wilson Buyonjo Kamugunda, the plaintiff. At some
point in time, probably in 1980s, the Uganda Government
acquired the land of the
two brothers, evicted them from the land and undertook to compensate them. The
two brothers died in 1988
before receiving the compensation for their land. The
plaintiff got letters of Administration to administer the estate of his father.
In the course of his search for the compensation, he learnt from officials of
the Ministry of Lands and from the Bank of Uganda that
compensation had in fact
been effected and that a cheque for shs 80m/= had been issued in the names of
the two dead brothers and
that the proceeds were in Baroda Bank (U) Ltd, the
present defendant. It transpired then that indeed a Uganda Government cheque
No.E003100764 for shs 80m/= had been issued on 23rd December, 1996 in
the names of the dead brothers.
Apparently, some strange persons
impersonated the two dead brothers, got the cheque and with the help of one
David Mukasa were allowed
by the defendant to open an account in the names of
the two deceased in the defendant's Kampala Branch.
Thereafter the
impersonators withdrew the money and disappeared in thin air with that
money.
The plaintiff failed to get the money. He instituted a suit in the
High Court against the defendant and David Mukasa claiming for
shs 80m/= as
special damages, interest at 26% and general damages. The claim was based on
negligence, conversion and fraud. Later,
the plaintiff withdrew the suit against
David Mukasa.
The basis of the plaintiff's claim was that the defendant
acted negligently when it allowed David Mukasa and the other strangers to
open
an account in the names of the dead beneficiaries of the cheque and negligently
allowed those strangers and Mukasa to bank the
cheque and also to withdraw the
proceeds without verifying whether the persons drawing the money were the true
owners. In its defence,
the defendant admitted that it collected the cheque in
the course of its ordinary business and placed the proceeds to the credit
of
Ham Kamugunda and Godfrey Katanywa account and that it had
received payment thereof in good faith and without negligence. It averred that
Ham Kamugunda and Godfrey Katwanywa appeared at its premises and
identified themselves. It relied on S.82 of the Bills of Exchange Act in
defence. It denied negligence.
During what appears to have been a scheduling
conference, the trial judge recorded the following as facts agreed upon between
the
parties:
"Defendant on or about 23/12/96 in its Kampala Branch opened an account-current is (sic) the names of Kamugunda and G. Katanywa and admitted a cheque No.E003100764 to the said account. Bank of Uganda cheque drawn in the names of it. Kamugunda and G. Katanywa for shs 80,000,000m/=(sic). The money was collected and credited to that account and subsequently disbursed."
Two issues were framed for determination
by the trial judge. The first issue which was the substantial one was -
"Whether the bank was negligent in opening a bank account in the names of it (sic) Kamugunda and G. Katanywa."
The second issue
was about reliefs.
After trying the suit in which three witnesses testified
for the plaintiff, and the defendant offered no evidence, the learned trial
judge answered the issue in the negative and so he dismissed the suit. Upon
appeal by the plaintiff, the Court of Appeal, by a majority
of two to one, held
that the plaintiff established his claim. It set aside the judgment of the
trial judge and instead awarded the
plaintiff special damages as claimed in the
sum of shs 80m/= with interest at 26% from 23rd December, 1996 till
payment in full. The defendant has appealed against that decision to this Court
based on nine grounds.
Mr. Kanyemibwa and Mr. Ahimbisibwe represented the
defendant at the hearing of this appeal but it was Mr. Kanyemibwa who actually
argued the appeal. He proposed to argue grounds 1,2,8 and 9 separately but
ground 3,4,6 and 7 together. It is convenient to discuss
ground 1,2 and 3
together.
The complaints in these grounds are framed in these words -
"1. The learned majority Justices of Appeal erred in law in awarding
a sum of shs 80,000,000/= to the respondent as money had and
received by the
appellant.
2. The learned majority Justices of Appeal erred in law and fact in holding that in its pleading, the appellant did not dispute the respondent's title or claim to cheque No.E003100764 in the sum of shs 80,000,000/=.
3. The learned majority of the Justices of Appeal erred in law and failed to properly evaluate the evidence on record in holding that the respondent adduced sufficient evidence proving title to the said cheque."
Arguing the first ground, Mr.
Kanyemibwa contended that the plaintiff did not aver in the plaint for "money
had and received." Counsel
relied on Paget's Law of Banking, 12th
Edition. Learned counsel further contended that the Court of Appeal erred
in awarding the whole of shs 80m/= to the plaintiff who had not
proved a portion
of the money to which he was entitled. For that contention Counsel relied on
Joshi Vs Uganda Sugar Factory (1968) EA 570.
Mr. Keneth Kakuru,
counsel for the plaintiff, opposed the appeal. On the first ground, learned
counsel submitted that the defendant
admitted receipt of the money. As regards
the second ground, Mr Kakuru contended that there was no need to adduce evidence
to prove
plaintiff's title to the cheque because title to the cheque was
admitted and that is why at the trial no issue in that regard was
framed for
determination.
It is instructive to refer to relevant pleadings.
In his
plaint, the plaintiff averred that -
(a) His father H. Kamugunda and G. Katanywa owned the land which was taken over by the Uganda Government. (b) On 23/12/1996 cheque No.E.003100764 for shs 80m/= in compensation for the said land was issued payable to his father H. Kamugunda and G. Katanywa. (c) By 23/12/1996, H. Kamugunda and G. Katanywa had died. The cheque was therefore fraudulently obtained by one David Mukasa who obtained the proceeds of the cheque through the defendant. (d) That the defendant was negligent in that it allowed David Mukasa to use the cheque to open an account in the names of the two dead men without verification of those men and in allowing the withdrawal of the money without satisfactory identification of those entitled to it. (e) That one Joseph Lukanga, a servant of the defendant provided unsatisfactory identification of the two men before Mukasa withdrew the money on account of H. Kamugunda and G. Katanywa.
In the 1st paragraph of its
written statement of defence, the defendant contented itself by just stating
that it did not admit the relationship
between the plaintiff and H, Kamugunda or
that the plaintiff was the administrator of Kamugunda's estate.
In
paragraphs 4 and 5 of the same written defence, the defendant expressly admitted
receipt of the cheque in the sum of shs 80m/=
and the collection of the amount
which was put on the account of Ham Kamugunda and G. Katanywa. Indeed, as noted
earlier in this
judgment before the trial began it was agreed between the
parties that that was the position. However the defendant relied on S.82
of the
Bills of Exchange Act for the proposition that it received the cheque,
its proceeds and operated Kamugunda and Katanywa account according to law. It
therefore
denied negligence.
Mr. Kanyemibwa relied on Joshi's case
(supra) for the view that in pleadings, an averment of not admitting facts
alleged by the opposite party amounts to a denial and
so the other side must
prove its case. In my considered view the plaintiff adduced sufficient evidence
at the trial to establish
his relationship with the deceased and his entitlement
to the cheque and its proceeds. Furthermore, I think that pre 1998 judicial
decisions such as Joshi's case on the effect of pleadings must be
evaluated in the light of the provisions introduced by the Civil
Procedure (Amendment) Rules, 1998. For instance, Order 6 Rule 1 of
CP Rules as amended requires parties to summarise the evidence and to list the
witnesses and documents
they propose to rely on at the trial. Accordingly the
defendant indicated in its summary of evidence that it would produce evidence
to
prove that persons entitled to the cheque were properly verified. It also named
three witnesses.
No such evidence was adduced. So Joshu's case is
not helpful.
During the trial, the plaintiff and two other witnesses
testified that his father Ham Kamugunda and his brother Katanywa died in 1988,
that is 8 years before the cheque for compensation was issued in 1996. This
evidence had been substantially set out in the summary
of evidence which was
annexed to the plaint. The plaintiff testified further that he is the
administrator of the estate of his father.
He was supported by Dawson Rugigi
(PW1). The plaintiff was hardly cross-examined on his evidence. Nor was he
challenged on the
relationship with the deceased nor on the fact of his status
as the lawful administrator of the estate of his dead father. Indeed
the
defendant elected not to give evidence, not even to call David Mukasa who was
described in the statement of defence as a long
standing customer of the
appellant who had introduced "Ham Kamugunda and Godfrey Katanywa."
Neither did the defendant call any of its employees to whom the two persons
were allegedly identified when the account was opened
in the names of the two
dead brothers.
In its written defence, the defendant averred, in para 5, that
"the said Ham Kamugunda and Godfrey Katanywa were duly introduced to the
defendant by David Mukasa a long standing customer of the defendant and
their account was opened in a regular manner." Yet despite that express
admission of the involvement of David Mukasa in the opening of the account, the
learned trial judge surprisingly
accepted the submission at the trial by
defendant's counsel that -
"..................... the plaintiff undertook to prove that the account in question was opened at the instance of David Mukasa but there is no any iota of evidence that the said person was so involved."
In this, the learned trial judge erroneously acceded to misleading
contentions of defence counsel, because the involvement of David
Mukasa at least
in the opening of the account was admitted by the defendant in its statement of
defence and in the summary of evidence
annexed to that defence.
Mr.
Kanyemibwa's contention that the plaintiff never pleaded money "had and
received" in order to be entitled to it is, with respect,
no basis for saying
that the plaintiff was not entitled to the money. Clearly, on the facts of this
case, the father of the plaintiff
together with his brother (Katanywa) were
entitled to the cheque and the money. Undoubtedly there is no evidence showing
how much
of shs 80m/= was due to each of the two dead brothers. This may be so
probably because the two brothers might have been joint owners
of the land.
This is explicable on the basis that a single cheque was issued in their joint
names, instead of two separate cheques.
Further the plaintiff was not
challenged in cross-examination about what portion of land did not belong to his
father. Since the
plaintiff is the lawful administrator of his father's estate
he is entitled to claim the money. Nobody else has come forward to
lay claim on
any part of the money. Needless to say, the defendant is not entitled to any
portion of that money. So the defendant
cannot be the one to require the
plaintiff to establish title to only a portion of the money.
In her lead
judgment with which another member of the court concurred, Byamugisha, JA., said
this-
The plaintiff averred in paragraph 4(a) and (b) of the plaint facts
which show his claim or title to the cheque. The paragraph was
couched in the
following words:
"4(a) The plaintiff's father H. Kamugunda owned land in Mburo National Park together with the late G. Katanywa. The said land was taken over by Government.
(b) on 23rd December, 1996 a cheque No.E003100764 for shs 80,000,000/= ......... drawn on the Bank of Uganda was issued payable to H. Kamugunda and G. Katanywa being compensation for the above land."
The learned Justice of Appeal then noted that
in its reply the defendant simply averred that it had no knowledge of the
matters alleged
in the above paragraph. Consequently she concluded that the
averments by the defendant did not dispute the plaintiff's title or his
claim to
the cheque.
As title to the cheque was not made an issue for determination the learned justice held that it was not necessary to call evidence to prove matters that were not disputed by the respondent although she found that the plaintiff had in fact adduced evidence at the trial to prove title to the cheque.
I respectfully agree with the view of the learned Justice of
Appeal.
Mr. Kanyemibwa referred us to passages in Paget's Book
(Supra). First the passage at page 483 under the heading "Entitlement to
Immediate Possession" are not helpful to the defendant's case. According to
the author, it is generally agreed, in stating the requisite for a plaintiff
in
conversion, that the plaintiff must have been entitled to immediate possession
of the chattel at the date of conversion. The
author cites cases explaining
circumstances when a plaintiff in an action in conversion may or may not
succeed. In the present case,
there is no dispute that the father of the
plaintiff was entitled to the cheque and to the proceeds of it. The plaintiff
stood in
the shoes of his father upon becoming the legal administrator of the
estate of his father. As I stated earlier, title to the cheque
and its proceeds
is indisputable.
Earlier Mr. Kanyemibwa raised the question of lack of
pleading "money had and received" in the plaint. At pages 490 and 491,
Paget's Book (supra) relied on by counsel states, inter alia, that
wherever conversion lies, and money has been received or negotiable instrument
converted, the claimant many waive the wrong of conversion and sue for "money
had and received" to his use. The author further opines that the
claims are usually joined in the alternative and that this is the form in which
the
action is couched against a banker who has collected cheque for someone
without title. This is not the case here.
All this does not require
discussion because the plaintiff's action against the defendant was based on
negligence whose basis was,
inter alia, that the defendant did not identify
David Mukasa properly and that it was negligent in allowing strangers to open an
account and draw the money in the name of the deceased persons.
As noted
already, the learned trial judge dismissed the suit on the basis that the
plaintiff failed to prove negligence.
In the Court of Appeal, the
plaintiff, argued grounds 2 and 3 which were complaints against the findings of
the trial judge that no
negligence was proved against the bank.
These
grounds were framed as follows: -
"2. The learned trial judge erred in law and in fact when he did not find that the plaintiff had on a balance of probabilities proved his case.
3. The learned trial judge erred in law and in fact by applying the wrong principles of law to the facts before him and thus reaching the wrong conclusion."
The learned Justice of Appeal discussed arguments on these two grounds in these words:
"These two grounds concern proof of negligence and who had the burden to prove it. Negligence when used in connection with a banking transaction like the one we are dealing with, refers to breach of duty to the possible true owner. The test to be applied was laid down in the case of TAXATION COMMISSIONER ENGLISH, SCOTTISH AND AUSTRALIAN BANK LTD (1920) AC 683 where it was held that the bank has a duty not to disregard the interest of the true owner. Therefore it has a duty to make inquiries if there is anything to arouse suspicion that the cheque is being wrongfully dealt with. Establishing the customers identity and the circumstances under which the cheque was obtained can assist in doing so."
The learned Justice of Appeal referred to three other English Courts decisions in which provisions (similar to S.81 and 89 of our Bills of Exchange Act) were considered. She relied on the opinions of the English Courts in those three cases, re-evaluated the evidence in the instant case and concluded that -
• The plaintiff had averred in the plaint that the bank failed to verify the identity of David Mukasa who allegedly introduced the two impersonators to the bank. • Although the Bank denied allowing Mukasa to open the account on which the cheque was deposited, the bank admitted in its defence that Mukasa introduced the two customers who brought the cheque and opened the account. • The plaintiff proved that Ham Kamugunda and G. Katanywa were dead. • That the bank admitted that it collected the cheque. • That the plaintiff proved that the two pictures in possession of the bank were not of Kamugunda and Katanywa (two dead brothers). • The bank had a duty to prove that in opening the account and collecting the cheque, it exercised due care. She observed that it is a well known recognised practice of bankers in this country not to open an account for a new customer without first ascertaining the respectability of the customer. This is done by obtaining references and letters of introduction from respectable customers of the Bank. In her view the defendant adduced no evidence of the steps and precautions it took to verify the identity of the two impersonators before opening the account and collecting the cheque. • She concluded that this was negligence. Engwau, JA, concurred with these findings.
I respectfully agree with the opinion
of the majority Justices of the Court of Appeal that the bank was negligent in
not verifying
the identifies of the two strangers before allowing those
strangers to open an account upon which they deposited the cheque for shs
80m/=.
This amount by ordinary standard was a huge amount of money. It should have
aroused the curiosity of the defendant. I think
that Byamugisha J.A., properly
re-evaluated the evidence on the record before she concluded that the defendant
was negligent.
Only one issue was framed at the commencement of the
trial. The issue was whether the bank was negligent in opening a bank account
in the names of Kamugunda and Godfrey Katanywa without verifying their identity.
The contention of the plaintiff was that the bank
was negligent in that it did
not take obvious steps to verify the identity of the two persons who opened an
account in the names
of the two dead brothers. The plaintiff proved that the
land of the two had been acquired by Government, which undertook to give
compensation to the owners. The plaintiff's investigations showed that the
Government had issued out a cheque in the names of his
father and his uncle in
the sum of shs 80m/= and that that cheque had been banked with the defendant
bank.
By the time the cheque was issued out on 23/12/1996 and banked the
father and his brother had long died, having died eight year earlier
in 1988.
There was no evidence from the defendant bank to rebut this evidence. The bank
stated in its written defence that the two
people who opened the account were
introduced by David Mukasa, a long standing customer of the Bank. The bank did
not adduce any
evidence showing who this David Mukasa, was and for how long he
had been a customer to the bank for purposes of showing that he was
a reliable
and respectable customer upon which the bank could rely to allow the opening of
a new account for purposes of depositing
a big government
cheque.
Byamugisha.J.A, relied correctly on S.106 of the Evidence
Act for the view that the particulars of negligence pleaded in the plaint
that related to the manner of opening the account and collecting
the cheque,
though pleaded by the plaintiff, were facts especially within the knowledge of
the defendant bank and, therefore, the
plaintiff had no burden to prove them.
That section reads as follows: -
"In Civil Proceedings, when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him."
On the basis of these provisions, Byamugisha,
JA found, and I respectfully agree with her, that the burden was on the bank to
call
David Mukasa or evidence to show who opened the account. Since the bank
averred in its statement of Defence and its summary of evidence
that it was
Mukasa who introduced the two persons in whose names the account was opened
whereon the cheque was banked the bank bore
the burden to establish this. On
this basis it is more probable than not that the alleged David Mukasa was
involved in opening the
account and in the disbursement of its
proceeds.
By ordinary values, the amount of money involved was reasonably
big. As opined by the learned Justice of Appeal, it is a notorious
practice in
Banks in this country for a new customer to be introduced by customers already
known in the bank. The tendency is to
require at least two referees. The
referees should be reliable and respectable customers. From the bank's averment
in its written
defence, the two men were introduced by David Mukasa before the
account was opened. That implies that the men were strangers in
the bank. They
did not operate or have an existing account with the bank. A Government Bank of
Uganda cheque was involved. Surely
the defendant should have inquired how the
depositors were entitled to the money, who they were and from where they came.
The defendant
bore the responsibility of establishing whether the bearers of the
cheque were the genuine payees or not before allowing them to
deposit the cheque
and to draw its proceeds.
I am satisfied that the respondent proved
negligence against the bank. In these circumstance I agree that defendant is
not protected
by S.81 of the Bill of Exchange Act.
Accordingly grounds1
and 2 must fail.
Although Mr. Kanyimibwa initially intimated that he would
argue grounds 3,4 6 and together, he actually argued ground 3
separately.
Mr. Kanyimibwa referred to various passages in the judgment
of Byamugisha, JA in which the learned Justice of Appeal held that -
• The plaintiff adduced sufficient evidence to prove title to the cheque. • The plaintiff's evidence was not hearsay. • The bank collected the proceeds of the cheque.
Counsel then contended that
plaintiff's evidence was hearsay and so counsel urged us to accept the
dissenting opinion of Okello, JA,
that the plaintiff failed to establish title
to the cheque.
Mr. Kakuru argued grounds 3,4 and 5 together and supported the
majority decision of the Court of Appeal.
Okello, JA, dissented on the basis that the Plaintiff had failed to prove title to the cheque. According to the learned Justice of Appeal, this was because the evidence of the plaintiff and his first witness (PW1) did not establish that the cheque which was collected by the bank had been for compensation and intended for the dead brothers, (Ham Kamugunda and Godfrey Katanywa), rather than those other persons who appeared at the defendant's Bank and opened the account in those names. Therefore according to the learned Justice of Appeal, the plaintiff failed to establish a prima facie case that he was entitled to the cheque. So the Bank was not negligent in paying out the proceeds of the cheque. With greatest respect, I think that the learned Justice of Appeal put a higher burden of proof on the plaintiff than was necessary. On the facts of this case it would be an extreme coincidence and highly unlikely that two totally strange persons would by coincidence bear names identical to those of the two dead brother, get also a government cheque bearing the same names and the same amount of money and deposit it in the same bank where the Bank of Uganda said the cheque for the dead brothers had been deposited.
Ground three has no substance. I have already covered it in my discussion
of grounds 1 and 2. In my opinion, Byamugisha, JA., properly
and adequately
re-evaluated the evidence before she concluded that the plaintiff established
title to the cheque.
Ground 3 must fail.
The complaint in
Ground 8 is that the majority Justices of Appeal erred in law and fact in
holding that although the particulars of
negligence were not proved the defect
was cured by admissions of the defendant as contained in the written statement
of defence.
I disposed of this ground when I considered grounds 1,2 and 3.
Anyway Mr.Kanyemibwa referred to pleadings of both parties and contended
that
the defendant in paragraph 6 of its WSD specifically denied that Mukasa opened
and operated the account on which shs 80m/= were
deposited. He contended that
the Court of Appeal erred in holding that the burden of proof shifted to the
defendant. Mr. Kakuru
submitted that upon proof by the plaintiff that Ham
Kamugunda and Katanywa were dead, the burden shifted to the defendant to prove
that the men were the ones who opened and operated the account. Of course in
para 5(ii) of its WSD, the defendant averred that Ham
Kamugunda and Godfrey
Katanywa were duly introduced to the defendant by David Mukasa, a long standing
customer of the defendant and
the account was opened in a regular manner. In 5
(iii) the defendant also averred that Ham Kamugunda and God Katanywa duly
identified
themselves to the defendant.
However the defendant neither
explained in the same written statement of defence or the summary of evidence
annexed thereto nor gave
evidence to show how the two identified themselves. In
compliance with the provisions of the Civil Procedures Rules as amended in
1998,the defendant, as stated earlier listed 3 witnesses as its witnesses. None
was called. No explanation was offered why they
were not called or why they
could not testify.
Para 6 of WSD upon which Mr. Kanyimibwa relied was worded
thus:
"The defendant specifically denies tat the said account was opened by David Mukasa and operated by him in the names of Ham Kamugunda and Godfrey Katanywa as alleged in the plaint."
May I point out at the risk of being lengthy that in its summary of evidence which was annexed to the defence, the defendant stated the following:
"The first defendant shall lead evidence to the effect that on 31st December, 1996 it opened a savings account in the names of Ham Kamugunda and Godfrey Katanywa who appeared at the first defendant's premise at Plot 18, Kampala Road and introduced by David Mukasa, a customer of the first defendant. The said Ham Kamugunda Godfrey Katanywa and David Mukasa duly identified themselves to the first defendant's staff upon which the said account was opened. The first defendant accepted the deposit of the cheque of shs 80,000,000/= on the said account which on the face of it was drawn in favour of the said account holders. The said account was operated in accordance with the mandate given to the bank."
Needless to say, this summary of evidence is part of defence
pleadings. Two features in this summary are worthy of note. First the
two
drawees of the cheque were introduced to the bank by David Mukasa who was
alleged to be a customer of the bank. Second, the
two drawees and David Mukasa
then identified themselves to the staff of the bank before the account was
opened and the cheque deposited
on that account.
The defendant never gave
evidence. Only two pictures of two strange men in whose names the account was
apparently opened were shown
to the plaintiff. The plaintiff denied knowledge
of them and asserted that those were strangers. The pictures were even not
produced
nor formerly tendered in evidence. No document in possession of the
bank relating to the opening of the account was ever produced
in Court to show
what steps were taken in verifying the identities of the two strange men and
even of Mukasa. The bank claimed that
the account was operated in accordance
with the mandate given. This mandate was not produced in Court either. Summary
of evidence
listed that mandate among documents to be produced by the bank.
There is no evidence of what the mandate looks like. Did the account
operators
provide names and specimen signatures? If so, how did they look like? If no
signatures, what was the substitute? Again
according to the list of documents,
which is part of defence pleadings, Ham Kamugunda presented 7 cheques and three
savings withdrawal
slips. These were apparently in the possession of the
defendant when this case was instituted in the High Court. These documents
were
listed as part of pleadings required by Order 6 Rule 1 as amended by SI 1998
No.26. These documents were not tendered in evidence.
They were not shown to
the plaintiff or to his witnesses so that he could establish whether, assuming
his father Ham Kamugunda could
write, he had signed those documents (the
cheques, the withdrawal slips and the mandate). In such circumstances, it is
legitimate
to draw an adverse inference that if such evidence was adduced it
would have been adverse to the bank to the effect that the bank
was negligent in
the manner it allowed the account to be opened and to be operated. The bank
bore the burden to show that it was
not negligent. In all probability the
account was opened and operated by David Mukasa. Therefore ground 8 must
fail.
No submissions were made on grounds 4,6 and 7. I take it that the
appellant abandoned these grounds. They must accordingly fail.
The last
ground is ground nine which was framed thus:
"The learned Justices of Appeal erred in law in awarding excessive interest of 26% p.a from 23rd December, 1996."
This ground was argued in the alternative for reasons I cannot
appreciate. I think that this is an independent ground.
Be that as it may,
Mr. Kanyimibwa cited S.26 of CP Act and our decision in Milton Obote
Foundation Vs Kennon Training Ltd (S.Ct. Civil Appeal No.25 of 1995)
(unreported) for the views that -
(a) Award of interest is discretionary. (b) The action in this case arose from a tortuous act and not based on a commercial transaction. (c) Court did not give reasons why it awarded interest at 26% from, 23/12/1996.
Learned
Counsel urged us to grant the rate of 6%.
Mr. Kakuru was of contrary views.
That 26% rate was proper because the court had to put the plaintiff in the same
position as before.
That this was a commercial transaction. That the Court
rates applied only after judgment.
The plaintiff did not indicate in his
plaint and when he gave evidence why he claimed interest at the rate of 26%. In
written submissions
at the trial, counsel for the plaintiff submitted that the
defendant was a banking institution having a commercial relationship with
the
plaintiff who should get interest on his money for the use of which he was
deprived unlawfully. The learned trial judge said
nothing about these
submissions other than dismissing the suit.
In the Court of Appeal all
the three justices recorded Mr. Kakuru who appeared for the plaintiff (as
appellant then) as having asked
for interest at the rate of 21% p.a from
23/12/1996.
Starting with the submission on interest in the Court of Appeal
the Court did not explain why it awarded 26% instead of 21% asked
for by the
plaintiff in that Court.
The law on the subject of interest is well known.
By virtue of S.26 (2)-
"Where and in so far as a decree is for payment of money, the court may in the decree, order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged from the date of the suit to the date of the decree in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit with further interest at such rate as the Court deems reasonable on the aggregate sum so adjudged from the date of the decree to the date of payment or to such earlier date as the court thinks fit."
It is clear from these provisions that -
• Where there is no agreement between the parties as to the interest of rate payable, award of interest by Court is discretionary. The discretion must be exercised judiciously.
• Interest can be award as follows:
(i) Interest on principal sum prior to the institution of a suit.
(ii) On the principal sum at a given rate from the date of filing a suit.
(iii) Interest on aggregate sum reflected in the decree till payment or earlier.
It is evident that in awarding interest and at what
rate the court is guided by the circumstances of the case.
An award of
26% as interest in this case is on the high side. The circumstances given do
show that the plaintiff lost use of money
due to him but they do not show why he
should get the high interest rate of 26%. I would set aside the award of
interest at the rate
of 26% p.m. I would substitute the rate of interest as
follows: -
(a) Interest at 10% p.a from 1/1/1997 to 31/12/1998 prior to the institution of the suit. (b) Interest at the rate of 8% p.a from 31/12/1998 when the suit was instituted to 3/3/2004 when the Court of Appeal gave judgment in favour of the plaintiff. (c) Interest at the rate of 6% p.a from date of judgment till payment in full.
So
ground 9 succeeds partially.
I would dismiss the appeal with costs to the
plaintiff in this court and in the courts below.
I would vary the decree of
the Court of Appeal as regards the rate of the in the manner discussed
above.
JUDGMENT OF ODOKI, CJ
I have had the advantage of reading in draft the judgment prepared by my
learned brother, Tsekooko, JSC. I agree with him that this
appeal should be
dismissed with the orders he has proposed.
As the other members of the
Court also agree, this appeal is dismissed with orders as proposed by Tsekooko
JSC.
JUDGMENT OF ODER, JSC.
I have had the benefit of reading in draft the judgment of Tsekooko, JSC.
I agree with him that the appeal should be dismissed. I also agree with the
orders proposed by him.
JUDGMENT OF KAROKORA, JSC:
I have had the advantage of reading in draft the judgment prepared by
my learned brother, Justice Tsekooko, JSC, and I agree with
him that this
appeal has no merit and must therefore be dismissed with costs to respondent
as he has proposed.
JUDGMENT OF KANYEIHAMBA, JSC.
I have had the benefit of reading in draft the judgment of my learned
brother, Tsekooko, J.S.C and I agree with him that this appeal
be dismissed. I
also agree that the respondent be awarded costs as varied by the proposed order
of Tsekooko, J.S.C.
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