Prime Finance Company Ltd v Ssali Babu Salim (Civil Suit 298 of 2023) [2025] UGCommC 54 (8 April 2025)

5 THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) CIVIL SUIT NO. 298 OF 2023 PRIME FINANCE COMPANY LTD ::::::::::::::::::::::::::::::::::::::: PLAINTIFF 10 VERSUS SSALI BABU SALIM :::::::::::::::::::::::::::::::::::::::::::::::::::::::: DEFENDANT BEFORE: HON. LADY JUSTICE PATIENCE T. E. RUBAGUMYA

JUDGMENT

Introduction

15 On 13th April, 2023, the Plaintiff Company instituted this suit against the Defendant, seeking recovery of a liquidated sum advanced to the Defendant as a loan, agreed interest thereon, and costs of the suit.

Brief facts

The facts constituting the Plaintiff's claim are that; on 6th December, 2019, 20 the Plaintiff, a registered money-lending Company and the Defendant executed a loan agreement in which the Plaintiff disbursed UGX 10,000,000/= at a monthly interest rate of 10% to the Defendant, to be repaid within five (5) months, that is, by 6th May, 2020. The Defendant failed to repay the loan, including the interest, which continues to 25 accumulate.

The defence

In his written statement of defence, the Defendant denied the Plaintiff's claim, contending that the Plaintiff has no cause of action against him and

5 that he shall raise a preliminary objection that this suit is an abuse of Court process, is frivolous and vexatious and should be dismissed with costs.

The Defendant also contended that he is not indebted to the Plaintiff in the amounts stated in its pleadings and that he has never delayed making 10 payment to the Plaintiff as alleged. That, on the contrary, he had to remit monies from payments made to him by his client (directors of the Plaintiff Company), whose delay led to the continued indebtedness to the Plaintiff.

Representation

The Plaintiff was represented by Learned Counsel Sebbowa Kabali Francis 15 of M/s Sebbowa & Co. Advocates, and the Defendant was represented by M/s Tumusiime, Irumba & Co Advocates.

The Hearing

On 13th January, 2024, when this matter came up, the Defendant and his Counsel were absent. The matter was adjourned to 29th February, 2024, 20 and the parties were directed to file their witness statements and trial bundles. Learned Counsel for the Plaintiff was directed to communicate to the Defendant and his Counsel the directives of Court.

The matter then came up on 30th October, 2024, and the Defendant and his Counsel were absent. Upon a prayer by the Plaintiff's Counsel, an order

25 for substituted service through the Monitor or New Vision newspapers was issued by Court.

On 16th January, 2025, this matter came up for scheduling. The Defendant and his Counsel again did not appear, and the case was adjourned to 25th

5 February, 2025 for marking of documents. Learned Counsel for the Plaintiff was directed to update the Defendant's Counsel. On 25th February, 2025, the Defendant and his Counsel were still absent.

Court having confirmed and being satisfied that the Defendant at all times was served with the hearing notices as evidenced by; an affidavit of service 10 dated 13th September, 2024, deponed by Thomas Mukama, substituted service of the hearing notice of 11th December, 2024, in the Daily Monitor newspaper of 18th, November, 2024, a letter dated 12th November, 2024, from the Plaintiff asking for pre-trial documents evidenced by the stamp of Learned Counsel for the Defendant who received it on the same day and 15 an affidavit of service dated 18th November, 2024 deponed by Jefferey

Kiwumulo, granted the Plaintiff's prayer for the suit to proceed ex parte under Order 9 rule 20(1)(a) of the Civil Procedure Rules.

The Plaintiff proceeded by a witness statement and one witness was presented, Mr. Seiko Bashir (PW1), its Manager. The Plaintiff also 20 adduced documentary evidence as contained in its trial bundle.

The Plaintiff filed its written submissions as directed, and the same have been considered by this Court.

Issues for Determination

During scheduling, the following issues were formulated:

- 25 1. Whether the Defendant is indebted to the Plaintiff? - 2. What remedies are available to the parties?

Issue No. 1: Whether the Defendant is indebted to the Plaintiff?

5 Plaintiff's submissions

Learned Counsel for the Plaintiff recounted PW1's testimony to the effect that the Plaintiff, a money-lending Company, on 6th December, 2019, by an agreement with the Defendant, disbursed UGX 10,000,000/= to the Defendant, payable with a 10% monthly interest within five (5) months,

10 precisely by 6th May, 2020.

That the Defendant failed or neglected to pay the entire sum of UGX 10,000,000/= and the interest despite several reminders. That as of 17th January, 2023, the total amount owed by the Defendant was UGX 219,527,429/= and that at the time of filing the witness statement, it was

15 UGX 831,580,640/= due to the accrued 10% interest per month. Learned Counsel referred to exhibits PEXB-01, PEXB-02, PEXB-03, PEXB-04 and PEXB-05, presented by PW1 for proof of its claim.

Owing to PW1's testimony, Learned Counsel submitted that the Defendant did not lead any evidence on oath to rebut the above evidence. Relying on

20 the case of *Cargo World Logistics Limited Vs Royal Group Ltd HCCS No. 157 of 2013*, Learned Counsel referred to a breach of contract as a situation where a party to a contract fails to fulfil a term in the contract. That it occurs when a party neglects or refuses to perform its bargain.

In conclusion, Learned Counsel submitted that the Defendant is liable for 25 breach of contract and is indebted to the Plaintiff due to his failure to pay the loan and the interest thereon.

Analysis and Determination

I have considered the pleadings, evidence on the Court record and the Plaintiff's written submissions while resolving this matter. It is trite that

5 in civil cases, whoever desires any Court to give judgment as to any legal right or liability must prove the existence of the facts which he asserts. (See: Sections 101, 102 and 103 of the Evidence Act, Cap. 8). The standard of proof is on the balance of probabilities.

While relying on Section 91 of the Evidence Act, Hon. Lady Justice C. 10 K. Byamugisha (as she then was) in the case of *William Kasozi Vs DFCU Bank Ltd HCCS No. 1326 of 2000*, stated that:

> *"Once a contract is valid, it creates reciprocal rights and obligations between the parties to it."*

Section 32(1) of the Contracts Act obligates each party to a contract to 15 perform their respective promises.

I am also mindful that it is not the function of the Court to make contracts between parties but rather to construe the surrounding circumstances to effectuate the intention of the parties. (See: *Omega Bank Plc Vs O. B. C. Limited (2005) 8 NWLR (pt.928), Jiwali Vs Jiwali [1968] EA 547 and* 20 *Fina Bank Ltd Vs Spares and Industries Ltd [2000] 1 EA 52).*

The case before me is that, through an agreement, dated 6th December, 2019, the Plaintiff, disbursed a loan of UGX 10,000,000/= to the Defendant, payable within five (5) months, that is, by 6th May, 2020, at a monthly interest rate of 10%. However, that the Defendant failed to repay

25 the said loan despite several reminders. On the other hand, in his written statement of defence the Defendant denied the claim, contending that he is not indebted to the Plaintiff.

To prove its case, the Plaintiff relied on the testimony of PW1 which was to the effect that, the Plaintiff, a licensed money lending Company

- 5 executed a loan agreement with the Defendant on 6th December, 2019 in which it disbursed UGX 10,000,000/= to the Defendant to be repaid in five (5) months, by 6th May, 2020 as per Clause 6.1 of PEXB-02. That the Defendant was to repay the loan amount with 10% monthly interest on the disbursed amount, which the Defendant failed to repay. - 10 PW1 further testified that several reminders were sent to the Defendant requesting and demanding payment of the monies owed, but in vain. It was also PW1's testimony that at the time of filing the suit, the Defendant owed the Plaintiff UGX 219,527,429/=. - In his submissions, Learned Counsel for the Plaintiff sought recovery of 15 UGX 831,580,640/= as the outstanding amount due to the interest. PW1 testified that the Defendant has deprived the Plaintiff of the use of the money that the Plaintiff was entitled to from 6th May, 2020 to date.

To support his testimony, PW1 tendered in the following exhibits; the Plaintiff's money lending licence for 2019 as PEXB-01, the agreement 20 dated 6th December, 2019 between the Plaintiff and the Defendant as PEXB-02, an email dated 11th January, 2022, demanding payment as PEXB-03, a demand notice dated 28th November, 2020 as PEXB-04, an email dated 23rd July, 2020, from the Plaintiff reminding the Defendant of the loan, as PEXB-05 and the Defendant's loan statement as PEXB-06.

25 I have examined the above exhibits tendered in evidence by PW1. PEXB-02 shows that on 6th December, 2019, the Plaintiff executed a loan agreement with the Defendant and, by Clause 6.1 and Clause 4.0, the amount advanced was UGX 10,000,000/= at an interest rate of 10% per month.

5 Clause 6.2 therein stipulated that the total amount to be paid was UGX 13,400,000/= inclusive of the principal sum and the interest thereto. The said agreement was signed by both parties, and the Defendant never disputed the same in its written statement of defence.

Given the above, the Plaintiff proved its case of the existence of the loan 10 agreement between it and the Defendant, and I find so.

Further, Clause 8.0 of PEXB-02 obligated the Defendant to pay back the full loan facility of UGX 10,000,000/= within five (5) months from the date of receipt of the said monies together with interest of 10% per month till payment in full. PEXB-03, an email from the Plaintiff to the Defendant 15 dated 11th January, 2022, shows the Plaintiff's concerns of repeated requests to the Defendant to pay the loan amount. PEXB-04, a demand notice dated 28th November, 2020 from the Plaintiff to the Defendant, reflects the Plaintiff's demand of the outstanding amount of UGX 23,808,455/= from the principal amount of UGX 10,000,000/=.

20 Further, PEXB-05, an email dated 23rd July, 2020, shows more demands by the Plaintiff requesting the Defendant to pay his loan arising from PEXB-02. Lastly is PEXB-06, the Defendant's account. PEXB-06 reflects a loan amount of UGX 10,000,000/= released to the Defendant on 9th December, 2019, payable within five (5) months, the due date being 6th 25 May, 2020 at 10% interest per month. PEXB-06 portrays that, from the time the money was released, the Defendant credited his account four times; that is on 9th December, 2019 with UGX 400,000/=, 12th February, 2020, with UGX 2,000,000/=, 24th February, 2021, with UGX 8,225,000/= and 5th May, 2023 with UGX 4,000,000/=, all amounting to UGX 30 14,625,000/=. - 5 The analysis of PEXB-06 shows that by 6th May, 2020, the due date for the full payment of the loan, the Defendant had only paid UGX 2,400,000/= that is on 9th December, 2019 and 12th February, 2020 respectively out of the contractual sum of UGX 13,400,000/= inclusive of the principal and interest as reflected under Clause 6.2 of PEXB-02. - 10 Clause 6.0 of PEXB-02 shows the schedule of the loan payment, but as reflected in PEXB-06, the Defendant did not comply with it. The demands reflected in PEXB-03, PEXB-04, and PEXB-05 show that by 11th January, 2022, the Defendant had not paid the money in issue and has never paid the same to date. - 15 Therefore, the Plaintiff's evidence shows that the Defendant failed or refused to repay the loan amount as per the agreed time and manner stipulated in the loan agreement. Consequently, in the absence of any evidence to the contrary, this Court finds the Defendant indebted to the Plaintiff. - 20 Accordingly, issue No. 1 is answered in the affirmative.

Issue No. 2: What remedies are available to the parties?

Analysis and Determination

In its plaint, the Plaintiff sought the following remedies:

- i. An order directing the Defendant to pay the Plaintiff the money received as a loan pursuant to the loan agreement dated 6th 25 December, 2019; - ii. An order directing the Defendant to pay the Plaintiff all of the agreed interest on the money that the Defendant received as a loan

5 pursuant to the loan agreement dated 6th December, 2019, from the Plaintiff from the date of receipt until full payment to the Plaintiff.

i. An order of repayment of the money received as a loan

10 In submission on this remedy, Learned Counsel for the Plaintiff referred to the case of *Barclays Bank of Uganda Ltd Vs M. Bakojja Civil Suit No. 53 of 2011* for the proposition that the only compensation for nonpayment of a debt is payment of the debt.

Learned Counsel also submitted that the Plaintiff is entitled to UGX 15 831,580,640/=, being money owed under the suit agreement at the time of making the witness statement and prayed for the same. This amount of money is inclusive of the principal sum and the accrued interest. Hence, to grant the above amount, I have to first resolve prayer (ii) as to whether the Plaintiff is entitled to the interest as per the loan agreement?

20 ii. Whether the Plaintiff is entitled to the interest as per the loan agreement?

Whereas I am cognizant that in construing contractual provisions, the object of the Court is to give effect to what the contracting parties intended and that to ascertain the intention of the parties, the Court reads the terms 25 of the contract as a whole, giving the words the natural and ordinary

- meaning...." (See the case of *Bank of Credit & Commerce International S. A (In Liquidation) Vs Munawar Ali & Others [2001] 1 All ER 96*). Clause 8.0 of PEXB-02, the loan agreement, provides for interest of 10% per month, on the loan amount. - 30 By the effect of Clause 8.0 of PEXB-02, Learned Counsel for the Plaintiff submitted that at the time of filing the witness statement of the Plaintiff

5 dated 21st March, 2024, the total amount owed by the Defendant was UGX 831,580,640/= due to the interest of 10% per month that the parties agreed to in PEXB-02.

However, Section 26(1) of the Civil Procedure Act, Cap. 282 enjoins this Court to reopen the contract of parties where it believes the interest 10 to be harsh and unconscionable. The Section stipulates that:

*"Where an agreement for the payment of interest is sought to be enforced, and the Court is of the opinion that the rate agreed to be paid is harsh and unconscionable and ought not to be enforced by legal process, the Court may give judgment for the payment of* 15 *interest at such a rate as the Court may consider just."*

The above provision guides that contractual interest is only enforceable if the Court finds it not harsh and unconscionable.

The above was upheld by this Court in the cases of *R. L Jain Vs Komugisha and 2 Others HCCS No. 98 of 2018 and Rajnish Jain* 20 *(Administrator of the Estate of the late R. L Jain Vs Lokii Peter Abraham Civil Suit No. 277 of 2013 and Jas Ventures International Limited Vs Atuhaire Juliet Civil Suit No. 676 of 2021*.

Whereas Tier 4 Microfinance Institutions and Money Lenders Act, Cap. 61, which regulates the Plaintiff Company's business in issue, did 25 not at the time of this transaction in 2019 specify the interest rates to be charged for such transactions, Section 87(2) of the Tier 4 Microfinance Institutions and Money Lenders Act stipulates that;

*"Where Court is satisfied that a borrower has defaulted in payment of a sum due to the money lender under a money lending* 30 *agreement and that there is a further outstanding amount under*

5 *the agreement that is not yet due, the Court may determine the contract and order the principal outstanding to be paid to the money lender, with such interest as the Court may allow, up to the date of payment."*

I take issue with the amount due because it was premised on a monthly 10 interest rate of 10%, which, following an annual rate, is equivalent to 120%, per annum which in my considered view is unjustified, harsh and unconscionable.

"Unconscionability" applies to a contract or contractual provision that is so unfair or oppressive to one party that no reasonable or informed person 15 would agree to it. An unconscionable contract or provision leaves one party with no real, meaningful choice and is unreasonably advantageous to the other party, usually due to the other party's superior bargaining power. The purpose and justification of the doctrine is to protect the weaker party to a contract from the possibility that the stronger party abuses that power 20 and writes the terms of the contract to its sole advantage. It, in essence, addresses victimization, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in inequitable circumstances, in breach of reasonable standards of commercial practice.

(See the cases of *Jas Ventures International Limited Vs Atuhaire* 25 *Juliet Civil Suit No. 0676 of 2021 and MTN Two One Two Staff Cooperative and Credit Society Limited Vs Samuel Majwega Musoke Civil Suit No. 0082 of 2021*).

In the case of *Jas Ventures International Limited Vs Atuhaire Juliet (supra)* the Court observed that:

5 *"A rate of interest that is considered to be excessive as compared to prevailing market interest rates, if not justified by the fact that the nature of the loan in issue carries an unusually high risk, is prima facie usurious."*

The Court also cited the case of *Juma Vs Habibu [1975] 1 EA 108*, where 10 the Court, having found that an interest rate of 5% percent per month, equivalent to 60% per annum, charged in a mortgage deed was unreasonable, reduced it to 12% per annum.

The Plaintiff in the instant case did not in any way justify the excessive interest rate of 10% per month or highlight the risks that would possibly 15 justify such a rate. Given the above and my considered view that the 10% monthly interest rate on the loan amount was unconscionable, harsh and excessive, I substitute the unconscionable rate of interest in the loan agreement with a rate of 30% per annum on the loan amount of UGX 10,000,000/= from 6th December, 2019 until payment in full.

20 Costs of the suit

Section 27(2) of the Civil Procedure Act provides that the costs of any action shall follow the event unless the Court, for good reasons, orders otherwise. In the case of *Uganda Development Bank Vs Muganga Construction Co. Ltd [1981] HCB 35,* Hon. Justice S. T. Manyindo (as 25 he then was) held that:

*"A successful party can only be denied costs if it is proved, that but for his or her conduct, the action would not have been brought. The costs will follow the event where the party succeeds in the main purpose of the suit."*

5 In the circumstances, since there is no reason to deprive the Plaintiff of the same, it is entitled to the costs of this suit.

Accordingly, the following orders are issued:

- 1. The Defendant is hereby ordered to pay the Plaintiff the money received as a loan under the loan agreement dated 6th December, 10 2019 with interest at the rate of 30% per annum until payment in full. - 2. The payment in (1) above shall be less UGX 14,625,000/= (Uganda Shillings Fourteen Million Six Hundred Twenty-Five Thousand Only), - 15 being the money paid by the Defendant to the Plaintiff. - 3. Costs of the suit are awarded to the Plaintiff.

I so order.

20 Dated, signed and delivered electronically via ECCMIS this 8th day of April, 2025.

Patience T. E. Rubagumya JUDGE 258/4/2025 6:45am