Muge James v Housing Finance Bank Limited (Miscellaneous Application No. 2249 of 2024) [2025] UGCommC 210 (7 July 2025)

THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO. 2249 OF 2024

5 (ARISING OUT OF CIVIL SUIT NO. 1169 OF 2024)

MUGE JAMES ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: APPLICANT

VERSUS

HOUSING FINANCE BANK LIMITED ::::::::::::::::::::::::::::::::::::::::::::::::::::::: RESPONDENT

10 Before: Hon. Lady Justice Dr. Ginamia Melody Ngwatu

RULING

This application was brought by way of notice of motion seeking for orders that the applicant be granted unconditional leave to appear and defend *Civil Suit No. 1169 of 2024 Housing Finance* 15 *Bank Limited versus Muge James,* and costs of the application.

The background to the application is that the applicant applied for a loan of UGX 215,000,000/= from the respondent bank; and the respondent approved the said loan and disbursed UGX 183,700,000/= to the applicant on 5th March 2021. The applicant started making a monthly 20 remittance of UGX 4,654, 785/= towards the repayment of the said loan facility. The applicant, upon loss of employment, defaulted on his monthly loan obligation and thus the respondent instituted a summary suit vide *Civil Suit No. 1169 of 2024* against the applicant to recover their debt of UGX 196,328,138 (Uganda Shillings One Hundred Ninety-Six Million Three Hundred Twenty-Eight Thousand One Hundred Thirty-Eight). The applicant then filed this application to

25 be granted leave to appear and defend the said suit.

The grounds of this application are set out in the affidavit in support of this application deponed by Mr. Muge James, a former employee of United Nations Development Program in Uganda, and are briefly are that:

- 30 1. The applicant is not indebted to the respondent bank in the sum claimed or any sum. - 2. The suit is incompetent and bad in law as it does not disclose any cause of action against the applicant. - 3. The non-renewal of the applicant's employment contract terminated the loan repayment obligation with the respondent bank. - 35 4. The loan was unsecured and there was no collateral the respondent bank took from the applicant. - 5. The applicant was aware that the applicant was working on a one-year non-renewable contract.

- 6. The salary loan was contingent on the applicant's employment contract which was not renewed by his employer and therefore, there is no way the applicant breached the loan agreement. - 7. The applicant has a good and plausible defence against the respondent bank. There are 5 triable issues which warrant the filing of a defence as these issues cannot be determined in a summary manner. - 8. Sometime in March 2021, the applicant applied for an unsecured salary loan from the respondent bank amounting to UGX 215,000,000/= (Uganda Shillings Two Hundred and Fifteen Million Only). - 10 9. The Respondent bank deducted insurance cover from his account which indemnified the respondent bank and the respondent bank does not demand any outstanding amount from the applicant. - 10. The applicant remitted the loan repayment by way of a standing order on his account to the bank as per the agreement without default. - 15 11. The non-renewal of the applicant's employment contract by his employer, the United Nations Development Program (UNDP), frustrated the entire loan agreement. - 12. Without a loan statement, it is difficult to know how much was disbursed and deducted as insurance cover and what is outstanding, if any and the applicant has not been availed the loan account statement. - 20 13. The respondent bank filing a summary suit against the applicant is dishonest and trying to attain unjust enrichment which is contrary to public policy since the respondent bank retained the insurance cost for the premium despite non-renewal of the employment contract and the respondent was settled by the insurance company. - 14. It is in the interest of justice and equity that the application for leave to appear and defend 25 is allowed so that the suit is heard and determined on its merits.

The respondent opposed the applicant's application for leave to appear and defend in an affidavit in reply deponed by Kenneth Engola, a Legal Officer at the respondent bank, and briefly are that:

- 1. On 2nd March 2021, the applicant applied for a loan of UGX 215,000,000 (Uganda 30 Shillings Two Hundred Fifteen Million only), which the bank approved and disbursed a loan of 183,700,000 (Uganda Shillings One Hundred Eighty-Three Million Seven Hundred Thousand) to the Applicant on 5th March 2021. - 2. the applicant defaulted on the payment of the monthly loan instalments and the current outstanding loan amount claimed is UGX 196,328,138 (Uganda Shillings One Hundred 35 Ninety-Six Million Three Hundred Twenty-Eight Thousand One Hundred Thirty-Eight). - 3. the loan was never disbursed based on the applicant's contractual period of employment, further it was agreed that cessation of employment was to be considered as an event of default.

- 4. the applicant is still indebted to the respondent to a tune of UGX 196,328,138 (Uganda Shillings One Hundred Ninety-Six Million Three Hundred Twenty-Eight Thousand One Hundred Thirty-Eight). - 5. the outstanding loan amount has never been settled by insurance as claimed by the 5 Applicant. - 6. the application lacks merit and is intended to waste the court's time and also frustrate the process of recovery of the respondent's money. - 7. it is in the interest of justice and fairness that this application is dismissed with costs. - 10 The applicant, in his affidavit in rejoinder, reiterated what he had stated in his affidavit in support of the application and further contended that the respondent is hiding a signed copy of the loan agreement that has all terms and deductions specific to this transaction to make him liable and that the respondent has not denied that the loan was unsecured and that the respondent has disclosed varying amounts in terms of the loan disbursed in the plaint and the affidavit in reply.

15

Representation at the hearing

The applicant was represented by Mr. Tumwesigye Louis of Tumwesigye Louis & Co. Advocates; while the respondent was represented by Mr. Simon Godfrey Kibuto of Orima & Co. Advocates. The parties were granted leave to file written submissions which are on court record.

20

Issue for determination

The issue for determination is whether the applicant has disclosed a triable issue of fact or law, thereby entitling them to a grant of leave to appear and defend *Civil Suit No. 1169 of 2024*.

25

Determination of court

The pleadings and submissions of the parties have been taken into consideration. The submissions will, however, not be reproduced here. This matter is decided as follows:

Applications for leave to appear and defend are premised on Order 36 rules 3 and 4 of the Civil Procedure Rules SI 71-1, as amended. Order 36 rule 3(1) of the Civil Procedure Rules provides that upon the filing of an endorsed plaint and service of the same on the defendant, the defendant shall not appear and defend the suit except upon applying for and obtaining leave from the court.

35 Further, Order 36 rule 4 of the Civil Procedure Rules provides that the application for leave to appear and defend the suit shall be supported by affidavit which shall state whether the defence alleged goes to the whole or to part only, and if so, to what part of the plaintiff's claim.

In the consideration of an application for leave to appear and defend, the applicant is required to 40 demonstrate to court that there are issues or questions of fact or law which ought to be tried. This

requirement aims at ensuring that a defendant with a triable issue is not shut out. (See *M. M. K Engineering vs Mantrust Uganda Ltd Miscellaneous Application No. 128 of 2012;* and *Bhaker Kotecha vs Adam Muhammed [2002]1 EA 112*)

- 5 For an applicant to be granted leave to appear and defend a suit, the applicant must show that there is a bona fide triable issue of fact or law that he/she will advance in defence of the suit. This principle was stated in the case of *Maluku Interglobal Trade Agency vs Bank of Uganda [1985] HCB* 65, at 66 where court stated that: - *"Before leave to appear and defend is granted, the defendant must show by* 10 *affidavit or otherwise that there is a bonafide triable issue of fact or law. When there is a reasonable ground of defence to the claim, the defendant is not entitled to summary judgment. The defendant is not bound to show a good defence on the merits but should satisfy the court that there was an issue or question in dispute which ought to be tried and the court shall not enter upon the trial of issues* 15 *disclosed at this stage."*

The respondent herein filed a summary suit vide *Civil Suit No. 1169 of 2024* against the applicant for recovery of an outstanding loan balance of UGX 196,328,138 (Uganda Shillings One Hundred Ninety-Six Million Three Hundred Twenty-Eight Thousand One Hundred Thirty-

- 20 Eight) arising from the breach of a salary loan agreement between the respondent bank and the applicant. The applicant disputed the respondent's claim and asserts that the plaint and the application raise triable issues. The applicant contended that the loan offer letter was never attached by the respondent to the pleadings yet it contains conditions of the loan. - 25 Defendants in cases which fall under Order 36 of the Civil Procedure Rules are protected by being given the right to apply to court for leave to appear and defend the suit. When the court receives the application and is satisfied by the applicant's/defendant's affidavit in support of the application, that the defendant has raised a genuine triable and not a sham or frivolous issue, it will grant the defendant leave to appear and defend the suit. (Order 36 rule 4). See *Post Bank (U)* 30 *Ltd versus Abdu Ssozi (supra)*

"*where a suit was brought under summary procedure on a specially endorsed plaint, the defendant is granted leave to appear if he was able to show that he had* 35 *a good defense on merit, or that a difficult point of law is involved or a dispute as to facts which ought to be tied, or a real dispute as to the amount claimed which requires taking an account to determine or any other circumstances showing reasonable claim."*

Further, in Bhaker *Kotecha versus Adam Mohammed [2002] 1 EA 112* court held that:

The applicant must demonstrate to court that there are issues or questions of fact or law in dispute which ought to be tried. The procedure is meant to ensure that a defendant with a triable issue is not shut out. *(See M. M. K Engineering versus Mantrust Uganda Ltd H. C. Misc. Application No. 128 of 2012; and Bhaker Kotecha versus Adam Muhammed [2002]1 EA 112).*

In this application, it is not in dispute that the applicant accessed a loan facility from the respondent bank and subsequently defaulted on repayment of the loan. Unfortunately, the respondent herein did not attach the loan agreement to enable this court determine the terms therein. What appears to be in issue is whether the applicant is indeed liable and to what amount. 10 At the time the applicant accessed the said loan facility, he was an employee of United Nations Development Programme. The applicant's employment contract was not renewed, thereby leading to his default of the loan repayment.

One of the conditions of a loan is that if a borrower defaults on repayment, then the whole sum 15 outstanding together with interest thereon immediately becomes due and are payable on demand. In such instances, it is common for the lending bank to institute a suit to recover the money owed; as was done by the respondent herein.

The applicant herein disputes the existence of a contract between him and the respondent and 20 contends that the respondent's money was paid by an insurance cover and a deduction of money from his account. The applicant further contends that the loan agreement between him and the respondent terminated upon the non-renewal of the applicant's employment contract since the unsecured salary loan was contingent upon the applicant's one-year employment contract; which the respondent was aware of. As such there is no cause of action disclosed by the 25 respondent/plaintiff against the applicant/defendant. The applicant admits that he applied for a salary loan of UGX 215,000,000 (Uganda Shillings Two Hundred Fifteen Million only), however, the respondent recommended UGX 183,700,000/= (Uganda Shillings One Hundred Eighty-Three Million Seven Hundred Thousand) for a period of 60 months and he started repaying UGX 4,654, 785/= monthly.

The respondent, on the other hand, claims that the outstanding balance owed to it by the applicant amounts to UGX 196,328,138/= (Uganda Shillings One Hundred Ninety-Six Million Three Hundred Twenty-Eight Thousand One Hundred Thirty-Eight) which the applicant disputes as he insists that he paid the loan but had not been availed with a loan statement to determine the 35 exact amount accruing to him and the amount he had paid. The applicant in his affidavit in rejoinder attached his statement of account which shows that money was deducted as an

insurance cost and the applicant averred that the statement presented by the respondent does not

disclose the same.

In light of the foregoing, there are indeed triable issues raised by the applicant that cannot be handled in a summary suit. For instance, there is need to establish whether: the respondent/plaintiff has a cause of action against the applicant/defendant; there is a valid loan agreement; the applicant breached the same and what is the amount due? The determination of

5 these issues in a full trial will enable court establish whether the respondent is entitled to recover its loan balance, as claimed, from the applicant. It is the finding of this court that the applicant has satisfied the conditions for the grant of leave to appear and defend *Civil Suit No. 1169 of 2024* to merit the grant of this application and as such, he is entitled to unconditional leave to appear and defend the suit.

In the premises, this application is determined as follows:

- 1. The applicant is granted leave to appear and defend *Civil Suit No. 1169 of 2024*. - 2. The applicant shall file their defence and serve it on the respondent/plaintiff within fourteen days from the date of this ruling. - 15 3. The costs of this application will abide the results of the suit.

I so order.

20 *Dr. Ginamia Melody Ngwatu Ag. Judge 7 th July 2025*

25 *Ruling delivered electronically via ECCMIS*