Africa-Press – Uganda. A Court of Appeal judge has ordered a businessman, his partners, and their hardware business to pay a multi-billion shilling loan owed to Diamond Trust Bank (U) Ltd, finding them culpable for taking money from the bank with no intention of paying back.
WK’s Hardware, Wamukwe Kadiri, John Kahuka, Namutosi Zainabu, and Fatuma Kainsa had sought powers of the appellant court to block a High Court decision in which they had been ordered to pay the Shs8.4b with interest at 17 percent per annum from the date of filing the suit until payment in full.
“It is apparent that although they took the money, the applicants clearly have no intention of paying off the loans. They have gone ahead to challenge the mortgages held by the bank over several properties, leaving that bank in a difficult situation where it has to seek other remedies other than the enforcement of the mortgages. The applicants act in concert with each other to achieve this, as it is shown in the pleadings attached to the affidavit in support of the application…,” Justice Irene Mulyagonja ruled on March 26.
The loan has since increased to more than Shs12b, including interest but excluding court fees and other fines WK’s Hardware and its backers have been condemned to pay in the various suits.
The case is the latest of several instances in which businesses and individuals have been found culpable for borrowing huge sums of money from either international lenders or local credit institutions and playing games to dodge payment.
A day before Justice Mulyagonja’s ruling, on March 25, the High Court ruled against Ugandan businessman, Geoffrey Karegyeya and his company, Kare Distribution Ltd, ordering them to pay more Shs17.2b, including interest owed to a lender based in Mauritius. In a bid to avoid repayment, Mr Karegyeya and his company had sought to dispute the legitimacy of the lending agreements with African Rivers Limited.
Aya Investments (U) Limited, another entity which sought to use delaying tactics to avoid paying $81.7m (Shs316.9b) borrowed more than 10 years ago from Industrial Development Corporation of South Africa now faces more than $167m (Shs647.9b) debt and other costs which they must pay before May 3 to avoid the auction of the Pearl of Africa Hotel.
The case
On various occasions in 2019, businessman Wamukwe Kadiri and others, through their company WK’s Hardware Ltd borrowed more than Shs8b from Diamond Trust Bank (DTB). In 2021, after they failed to repay the loan, DTB ran to the High Court to compel the company and its backers to pay ShsShs8,445,259,566 together with interest and costs of the suit. WK’s Hardware Ltd and its backers filed an application in which they sought leave to appear and defend the suit. Their application was, however, heard in their absence on the basis of the affidavit they had tendered in court and was dismissed by the High Court. The High Court found that the hardware company did not present an “arguable defence either in law or fact.”
On April 13, 2022, court ruled in favour of DTB and directed the hardware to pay Shs8,444,259,566, with interest at 17 percent per annum from the date of filing the suit until payment in full.
Dissatisfied with the verdict, the hardware firm filed a notice of appeal in the High Court on June 17, 2022. It also filed an application to validate the notice of appeal in the Court of Appeal and an application in the High Court for stay of execution which the court dismissed.
In an affidavit dated February 8, 2023, Wamukwe Kadiri lays down the grounds upon which the application was based.
The defence
Mr Wamukwe told the Court of Appeal that their application for leave to appear and defend was disposed of in their absence and without a formal hearing even after their lawyers had made several requests for a hearing date. He told the appellant court that he only got to know about the ruling when DTB’s lawyers were demanding payment.
Mr Wamukwe made several requests to the court. He told the court that he and the other applicants were willing to furnish security for costs for the due performance of the decree.
This usually serves as a guarantee that the plaintiff or applicant will comply with the court’s final judgment. The amount of security is typically a percentage of the total amount payable, including cost of suit, legal expenses, interest, principal amount and recovery charges, among other costs. He told court that there was a high likelihood of the applicants suffering substantial loss if this application was not granted.
In a July 19, 2023 affidavit, DTB opposed the application through an affidavit by Ms Sandra Nazziwa, a legal officer with the bank. She told the court that the application by WK’s Hardware Ltd and others has no legal basis “because there is no valid appeal before this court, because the notice of appeal was filed more than 14 days after judgment. This, she added, was in violation of the law and that the appeal had no chances of success whatsoever because the money demanded was borrowed from DTB and had never been paid back to date.
Mr Asuman Nyonyintono, the lawyer for WK’s Hardware Ltd and others, admitted to the Court of Appeal that his client’s notice of appeal was filed out of time by their former lawyers of Masanga and Company Advocates. He justified this, arguing that after filing an application for leave to appear and defend the summary suit that had been instituted by the DTB, they sent several correspondences to the court in a bid to have the application fixed for hearing without success. Instead, the appellant court heard, the application was eventually heard and dismissed in absence of WK’s Hardware and others plus their legal representation in favour of the bank through an oral ruling at the conclusion of a hearing.
Response, ruling
In reply, Mr Stephen Zimula for DTB bank submitted that WK’s Hardware’s application was based on an incompetent notice of appeal and that it was ought to fail. He told the court that WK’s Hardware and others filed a notice of appeal and a letter requesting proceedings in the Court of Appeal on June 24, 2022, which was two months from the date of judgment.
When the dust settled, Justice Mulyagonja ruled thus: “The applicants were aware of the judgment earlier, on May 17, 2022, as it was stated in the Court of Appeal Civil Application No. 851 of 2022, but they filed their notice of appeal on June 17, 2022. In view of the fact that the amount claimed in the decree is Shs9,402,388,983, it would appear to me that the notice of appeal was filed as an afterthought.”
She added: “Further, in view of the hefty sum that was awarded to the respondents in the suit, the filing of this application more than two weeks after the dismissal of the application for stay of execution in the High Court also amounted to delay, though not inordinate.”
The court determined that a notice to show cause as to why the DTB should not compel WK’s Hardware Ltd to pay was served and received by Mr Wamukwe on October 3, 2022. It further disclosed that WK’s Hardware Ltd and others were to appear in court the following day on October 4, 2022, to show cause why execution should not be issued against them.
Reprieve
DTB had also sought to arrest and commit the individuals behind WK’s Hardware Ltd to civil prison. Justice Mulyagonja, however, ruled that no evidence was presented that DTB had moved to execute their plan.
“A long time has passed since October 4, 2022, when the applicants were required to appear in court and nothing has happened to them. I, therefore, find that there is no imminent threat of execution that would warrant the grant of an order to stay execution,” the judge ruled.
Justice Mulyagonja also found that in absence of WK’s Hardware Ltd and others or their lawyers, the trial judge at the High Court “bent over backwards to analyse their proposed defence in the light of the plaint and the documents that were filed”.
Justice Mulyagonja also found nothing to convince her that this was a case that would benefit from a hearing of any further evidence in a full trial and thus entered judgment and a decree in favour of DTB bank.
“I, therefore, find that the applicant did not satisfy the court that the intended appeal has any likelihood of success,” she ruled.
WK’s Hardware Ltd and its backers also claimed that certain properties that were mortgaged to the DTB were done so without the authority of the owners. They, therefore, sought to get a court directive stopping DTB from selling off the properties to recover the money owed to the bank.
In rejecting their appeal, Justice Mulyagonja, however, found that DTB did not seek to dispose of the mortgaged property when they applied for notice to show cause why execution should not be issued against the applicants.
“Annexure 1 shows that the preferred mode of execution was by the arrest and committal to civil prison of Wamukwe Kadiri, John Kaukha, Namutosi Zainabu and Fatuma Kainsa. The arguments in respect of the mortgages and their validity, therefore, do not come into issue in this application and I did not consider them,” Justice Mulyagonja wrote.
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