Supreme Court dismisses bank appeal over sh504m loan dispute
A five-member panel comprising Justices Percy Night Tuhaise, Elizabeth Musoke, Stephen Musota, Catherine Bamugemereire and Monica Kalyegira Mugenyi upheld the Court of Appeal decision, which had dismissed the bank’s appeal and ordered the return of excess land to Etats Limited.
The Supreme Court also ordered the bank to pay the respondents’ costs of the appeal and those of the courts below.
KAMPALA - The Supreme Court has dismissed an appeal by Absa Bank Uganda Limited, formerly Barclays Bank Uganda Limited, in a long-running dispute over the recovery of a sh504.9m loan and the sale of property belonging to Etats Limited.
A five-member panel comprising Justices Percy Night Tuhaise, Elizabeth Musoke, Stephen Musota, Catherine Bamugemereire and Monica Kalyegira Mugenyi upheld the Court of Appeal decision, which had dismissed the bank’s appeal and ordered the return of excess land to Etats Limited.
In the lead judgment, Justice Stephen Musota found no merit in any of the four grounds raised by the bank.
The Supreme Court also ordered the bank to pay the respondents’ costs of the appeal and those of the courts below.
The dispute dates back to 2008, when Barclays Bank, the successor in title to Nile Bank, sued Etats Limited’s directors, James Balyejusa, Margaret Balyejusa and Martin Kakembo, seeking recovery of sh504,998,901.
The bank said Etats Limited had obtained loan facilities comprising a sh360m loan, a sh260m overdraft and a sh179.2m certificate discounting facility.
According to the judgment, Etats Limited defaulted on its payment obligations in January 2007, leaving sh504,998,901 outstanding by August 2008.
The directors, however, disputed liability and argued that the bank had acted negligently in selling the company’s mortgaged property.
They said one of the properties, situated at Plot 30-34 Eden Road, Jinja, had been valued in 2004 at Sh865m as its current market value and sh605m as its forced sale value.
Etats Limited subsequently sued Barclays Bank in 2009, alleging that the sale of its security was illegal, fraudulent and negligent.
The two suits were later consolidated and heard together by the High Court.
In a judgment delivered on February 24, 2014, Justice Wilson Musene, now deceased, found the bank negligent, fraudulent and reckless in the sale of the property.
The judge ordered the bank to account for the proceeds of the mortgage sale and to pay Etats Limited the difference between the true market value of the property and the sale price.
He also ordered the return of Plots 3 and 5 Masese Rise, Jinja, to Etats Limited and awarded the company sh75m in general damages.
The bank appealed to the Court of Appeal, while Etats Limited and the other respondents filed a cross-appeal.
On March 11, 2024, Justices Kibeedi, Gashirabake and Oscar Kihika dismissed the bank’s appeal and allowed the cross-appeal.
The Court of Appeal also ordered that the 7.53 acres, which it found to be in excess of the 2.97 acres mortgaged to the bank, be returned to the respondents. It also awarded them costs of the High Court suit and the cross-appeal.
The bank then appealed to the Supreme Court on four grounds.
One of the grounds concerned the return of Plots 3 and 5 Masese Rise. The bank argued that the respondents had not pleaded for the return of the properties or presented evidence supporting such an order.
Justice Musota, however, held that the order was consequential to the trial court’s findings and was supported by the evidence on record.
The Supreme Court also considered a dispute over the size of the land at Plot 30-34 Eden Road.
The bank argued that the property measured 1.2 hectares, equivalent to about 2.97 acres, based on the certificate of title.
The respondents maintained that the land measured 1.8 hectares, equivalent to about 4.5 acres.
Justice Musota found that the deed print forming part of the certificate of title showed that Plot 30 measured 0.677 hectares, Plot 32 measured 0.607 hectares and Plot 34 measured 0.516 hectares, giving a total of 1.8 hectares.
He held that the Court of Appeal was right to find that the land measured 1.8 hectares.
The Supreme Court also rejected the bank’s argument that the Court of Appeal had failed to determine one of the grounds concerning the award of the difference between the sale price and the market value of the property.
Justice Musota found that the Court of Appeal had considered the ground and upheld the trial court’s award.
On costs, the bank argued that since the two High Court suits had been consolidated, costs should not have been awarded separately.
The Supreme Court rejected the argument, holding that the two suits had started as separate cases and had only later been consolidated for trial.
Justice Musota said there was no miscarriage of justice arising from the award of costs in both suits.
The Supreme Court consequently dismissed the appeal in its entirety, upheld the Court of Appeal judgment and ordered the bank to pay the respondents’ costs in the Supreme Court and the courts below.