Local government accounts are off limits to creditors — court

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The High Court in Tororo has, in a ground-breaking ruling, held that local government accounts held by entities such as districts, municipalities and local councils are generally not subject to garnishment.

Garnishment is a legal process where a court orders a third party (such as a bank) to withhold funds from an individual’s account to satisfy a debt owed to a judgment creditor.

In a ruling dated April 16 this year, High Court Judge Henry Isabirye Kawesa established that funds on local government accounts are generally exempt from garnishment because the money is held in trust for the public.

This means a judgment creditor cannot seize funds from the accounts of districts, municipalities and local councils to satisfy a debt unless a court specifically orders it, after confirming no exempt funds are present.

The ground-breaking decision stems from an application filed by Tororo District Local Government, challenging a move by Mulowooza Kayondo, who sought to attach the district’s accounts after winning a court case against it.

Joshua Serugendo from the Attorney General’s Chambers, Mbale Regional Office, represented the district in the case, while Ibrahim Kagwa from M/s Nyanzi, Kiboneka and Mbabazi Advocates represented Mulowooza.

The district filed the application after Mulowooza sought to attach two accounts held by the district to recover his money. The debt arose from rent arrears.

Citing the 2017 court decision in the case of Administrator General versus Umar Kakooza, Justice Kawesa said money held by a trustee for the benefit of a beneficiary cannot be garnished for the benefit of the judgment creditor for the purpose of satisfying a debt incurred by the trustee.

“It is not in dispute that the accounts in question have statutory transfers implying that their monies are payable out of the Consolidated Fund under relevant laws. In conclusion, therefore, I find that in the absence of evidence to the contrary, the funds on the accounts in question are plainly held by the district in trust for the public and cannot therefore be garnished,” Kawesa ruled.

Serugendo said the decision implies that judgment creditors cannot garnish the accounts of local governments since they hold money in trust for the central government.

“This decision simply implies that the local government account is a trust account and cannot be garnished,” Serugendo said.

Asked what remedy would be available to judgment creditors, Serugendo said they should push to have the money appropriated in the budget, rather than resorting to garnishee proceedings that may affect the operations of the local governments, which hold the accounts on behalf of the central government.