Ratidu Trading Ltd and Others v Equity Bank (U) Ltd (Miscellaneous Application 2646 of 2023) [2025] UGCommC 56 (10 April 2025)

5 THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO. 2646 OF 2023

(ARISING FROM Civil Suit NO. 1102 OF 2023)

10 1. RATIDU TRADING LTD

2. TITI KAYONDO KABI

3. ASINGWIRE ALEX MUKASA ::::::::::::::::::::::::::::::::::::::::: APPLICANTS

VERSUS

EQUITY BANK (U) LTD. ::::::::::::::::::::::::::::::::::::::::::::::::::::::::: RESPONDENT

15 BEFORE HON. LADY JUSTICE HARRIET GRACE MAGALA

RULING

BACKGROUND

The 2nd Applicant borrowed Ugx. 450,000,000/= from the Respondent at a simple interest rate of 22% per annum. This loan would be paid back within 24 20 equal monthly installments of Ugx. 23,345,170/=. According to the facility agreement dated 18th February 2019, it was an agreed term that upon default, the 2nd Applicant was to be charged default interest at a rate of 24% per annum. While the first facility was still running, the Respondent disbursed a loan sum of Ugx. 550,000,000/= (Uganda Shillings Five Hundred Fifty Million)

- 25 to the 1st Applicant, to be repaid within 24 monthly equal installments of Ugx. 29,079,103/=. The 2nd and 3rd Applicants guaranteed the loans. The loans were restructured and consolidated with a variation in the debt payment terms, and as of 19th July 2022, the consolidated outstanding sum stood at Ugx. 1,128,002,985/= (Uganda Shillings One Billion One Hundred Twenty-Eight - 30 Million Two Thousand Nine Hundred Eighty-Five) to be repaid in 64 equal

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- 5 monthly installments of Ugx. 33,833,863/= (Uganda Shillings Thirty-Three Million Eight Hundred Thirty-Three Thousand Eight Hundred Sixty-Three). However, the Applicants defaulted on their loan obligations and failed to service the loan. Subsequently, the Respondent filed a summary suit vide Civil Suit No. 1102 of 2023 against the Applicants for the outstanding sum of Ugx. - 10 1,317,881,432.26/= (Uganda Shillings One Billion Three Hundred Seventeen Million, Eight Hundred Eighty-One Thousand Four Hundred Thirty-Two and Twenty-Six Cents).

Application

This application was brought under Section 98 of the Civil Procedure Act, Cap.

15 71 (now Cap. 282), Order 36 Rule 11, and Order 52 Rules 1, 2, & 3 of the Civil Procedure Rules, S. I 71-1. The Applicants sought orders that this court grant them unconditional leave to appear and defend Civil Suit No. 1102 of 2023 and that the costs of this application be provided for.

The application was supported by an affidavit sworn by the 2nd Applicant who 20 stated that:

- 1. The 1st Applicant is not indebted to the Respondent in the above-claimed amount. - 2. He mortgaged his properties comprised in Kyaggwe Block 530 Plot 3 and 259 land at Gulu and Nasuti to secure the credit facilities granted to the 25 1st Applicant, and the Respondent would foreclose the same in the event of the 1st Applicant's default. - 3. He signed a personal guarantee for the Respondent securing Ugx. 972,202,848/= that the 1st Applicant had borrowed. - 4. He believes that his obligation is discharged when the 30 creditor/Respondent omits to do any act which his duty enjoins him to. - 5. The 1st Applicant has paid over Ugx. 700,000,000/= in repayment of the credit facilities granted to it, but the Respondent has not offset it from the amounts borrowed, hence claiming exaggerated amounts.

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- 5 6. The loans were obtained on a reducing balance principle, whose balance should be much less than the amount claimed. Thus, they have been subjected to excessive, unconscionable, and illegal interest contrary to the facility agreements. - 7. The first Applicant has a good and plausible defense to the suit, which 10 warrants leave to appear and defend Civil Suit No. 1102 of 2023. Triable issues of fact and law can only be determined through a trial inter party.

In reply, the Respondent stated that the Applicants were still indebted to the Respondent to the tune of Ugx. 1,317,881,432.26/=, which sums remain unpaid to date. The 2nd Applicant's obligation and liability are only discharged

15 at law when the debt is fully paid. The Applicants have not attached any proof of payment claimed and thus have not raised any triable issues over the claim in the summary suit to merit the grant of unconditional leave to appear and defend it.

Appearance and representation

20 M/s Gulf Advocates represented the Applicants, while M/s Kimara Advocates & Consultants represented the Respondent. Both parties' written have been duly considered.

Issues for determination

- 1. Whether there are sufficient grounds to grant this application? - 25 2. What remedies are available to the parties?

Determination

The Applicants submitted that the Respondent attached land comprised in Kyaggwe Block 530 Plot 388, land at Gulu and Nasuti instead of Kyadondo Block 219 Plot 388, land at Najjera as agreed in Clause 6 of Facility agreement 30 (Annexure A). It was the Applicant's contention that the 2nd Applicant, as mortgagor did not sign the mortgage deed in Latin character, thus the mortgage deed is invalid. The Applicants submitted that the 1st Applicant did not authorize

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5 the 2nd Applicant to borrow, and neither was the corporate guarantee sealed by the 1st Applicant. The mortgage transaction was void due to a lack of spousal consent, considering that the attached properties were matrimonial property. Further, the Respondent attached a notice of sale describing land at Kyaggwe Jinja road, yet no mortgage instrument is indicated. Therefore, the notice falls 10 short of the statutory requirements while foreclosing a mortgaged property.

The Respondent maintained her averments and submitted that the Applicants have not supported any evidence or facts on their claims of not being indebted to the Respondent and that the loan balance was subjected to excessive, unconscionable, and illegal interest contrary to the facility agreements.

15 Through the evidence attached in the Affidavit in reply, the Applicants agreed to the latest variation terms of the loan repayment dated 19th July 2022. They admitted that their debt stood at Ugx. 1,128,002,985/=. However, no payment deposit was ever made after the variation. Therefore, the court would be right to observe that the Applicants' allegation that they paid over Ugx. 700 million is 20 without proof. The Respondents further submitted that the Applicants argued

completely new matters outside their pleadings.

The law on applications for leave to appear and defend a summary suit is provided for under Order 36 Rule 4 of the Civil Procedure Rules S. I No. 71- 1, and it states that:

25 "*An application by a defendant served with a summons in Form 4 of Appendix A 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, and the court also may allow the defendant making the application to be examined on* 30 *oath. For this purpose, the court may order the defendant, or, in the case of a corporation, any officer of the corporation, to attend and be examined upon oath, or to produce any lease, deeds, books or documents, or copies*

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5 *of or extracts from them. The plaintiff shall be served with notice of the application and with a copy of the affidavit filed by a defendant."*

The Defendant who seeks to oppose an application for judgment under Order 36 will have to do so in one of the following ways:

- (a) On a preliminary technicality - 10 (b) By showing that there is a clear defence. - (c) By showing that there is a serious issue of fact to be tried. - (d) By showing that there is an arguable point of law. - (e) In certain circumstances, raise a prima facie set-off or counterclaim.

15 (f) By showing the court that there should be a trial for another reason.

Where the court is satisfied upon application, it may grant conditional or unconditional leave to defend. To avoid judgment being entered for the plaintiff, the defendant must show that there is a triable issue or that, for some other

20 reason, there ought to be a trial. Where the defendant raises a triable issue in his or her affidavit, he must not be shut out at this stage and must have leave to defend, although his case may appear weak. On the other hand, mere denials of the plaintiff's claim are insufficient. The defendant must disclose the nature and extent of his defence in a clear language."

25 In *Maluku International Trade Agency Ltd vs. Bank of Uganda [1985] H. C. B 65 at page 66, court held that:*

*"1. Before leave to appear and defend is granted, the defendant must show by 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* 30 *plaintiff 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 should not enter upon the trial of the issue disclosed at this stage.*

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5 *2. The defence must be stated with sufficient particularity to appear genuine. General or vague statements denying liability will not suffice."*

Courts of law have stressed that before leave to appear and defend is granted, the Applicant must disclose the nature of the claim against the Respondent or the objections to the Respondent/Plaintiff's claims which could be either

- 10 founded on law or fact or on a mixture of law and fact which are bonafide and which merit serious judicial considerations during trial in the main suit. (*see Roko Construction Ltd vs. Ruhweza Transportation & Construction (U) Ltd HCMA No. 831 of 2020*). Therefore, the Applicants' defence must arise from the claims raised by the Respondent in her Specially Endorsed Plaint. - 15 According to the facts before the court, the Respondent seeks to recover a sum of Ugx. 1,317,881,432.26/= arising from the breach of the loan facility repayment agreement. However, the Applicants allege that they first paid over Ugx. 700,000,000/=, which ought to have been offset from the outstanding amount. No from off evidence was presented in court to support this averment. - 20 Secondly, the Applicants averred that they were not indebted to the Respondent. The court was not presented with any evidence to support this assertion.

The Applicants' submissions are a far departure from their pleadings. They go on and on about the transaction being void while tactfully dodging to address 25 the issue of whether the money borrowed was ever repaid. This, in my opinion, shows that the applicants neither deny ever borrowing the money nor repaying it but are clutching at straws to find a reason not to repay by introducing new matters. I must agree with the Respondent that the Applicants' arguments amount to approbation and reprobation conduct, wherein the Applicants

30 approve and reject the Respondent's claims. (*see Simbamanyo Estates Ltd vs. Equity Bank Uganda Ltd & 2 Ors HCMA No. 414 of 2022 at pages 13 & 14*).

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5 This court, therefore, finds that the Applicants do not have a genuine defence to the Respondent's claim and have failed to show that there are any triable issues to be determined by this honorable court.

Lastly, a mortgagor is discharged of their loan obligation when he/she fully pays the loan amount to the mortgagee (see Sections 13 & 17 of the Mortgage Act

- 10 Cap. 239). In the present case, the parties executed a third-party mortgage, where the 2nd Applicant and 3rd Defendant secured the loan acquired by the 1st Applicant from the Respondent. Therefore, the 2nd and 3rd Applicants undertook to pay the 1st Applicant's loan in case she failed to do so (see *Guma Paulino vs. Bank of Africa & 2 Ors HCCS No. 13 of 2008 at page 6*). - 15 Therefore, the 2nd Applicant and 3rd Defendant's obligations as guarantors were not discharged simply because the foreclosure process of the securities failed, but they are discharged when the money borrowed by the 1st Applicant has been fully paid.

This application is dismissed with costs to the Respondent, and a judgment is

20 entered in favor of the Respondent in HCCS No. 1102 of 2023 in accordance with Order 36, Rule 5 of the Civil Procedure Rules as amended.

Dated and signed at Arua this 10th day of April 2025.

Harriet Grace Magala

25 Judge

Delivered online via ECCMIS this 14th day of April 2025.