Larb U LTD. & 2 Others Vs Green Land Bank ( in Liquidation) & Anor
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THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA HOLDEN AT KAMPALA
MISCELLANEOUS APPLICATION NO 490 OF 2010
ARISING FROM CIVIL SUIT NO 253 OF 2010
- LARB (U) LTD }
- AZALIA LUBEGA }
- ROSE LUBEGA } ……………………………….………..APPLICANTS/PLAINTIFFS
- GREENLAND BANK (IN LIQUIDATION)
- SIL INVESTMENTS LTD }…… RESPONDENTS/DEFENDANTS
BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA
The application of the Applicants was lodged under order 6 rules 28 and 29, order 13 rules 6 and order 52 rules 1 and 3 of the Civil Procedure Rules, section 98 of the Civil Procedure Act and sections 33 and 39 of the Judicature Act for determination of points of law. The Applicants contend inter alia that there was a demand for Uganda Shillings 373,305,924/= by the Respondents against them arising from a decree in High Court Civil Suit No. 478 of 1996 Greenland Bank Ltd vs. LARB (U) Ltd, Azalia Lubega and Rose Lubega, the Applicants in this application. Their contention is that the said demand for payment was void in that:
- Greenland Bank which went into liquidation could not charge interest anymore and the intended execution based on a sum derived from accumulated interest on the account of the applicants was null and void.
- That the amount demanded arose from a civil suit and execution for the decreed amount was barred by the law of limitation in that execution had already been completed by Messrs Victoria General Auctioneers and Court Bailiffs and Government Auctioneers by February 1997 in which they had sold the property of the applicants/plaintiffs comprised in LRV 1483 folio 16 plot 6 Ngobi Road at Iganga and LRV 1597 Folio 20 Plot 1 Baxi Close Jinja to recover the judgment debt of shillings 80,089,250/=
- That the appointment of the second Respondent as a debt collector against the plaintiffs/applicants was null and void.
- That the respondent illegally collected shillings 5,000,000/= from the applicants/plaintiffs and they have sued to recover the same.
The application is supported by the affidavits of Azalia Lubega and Rose Lubega sworn to on the 30th of August 2010 respectively which affidavits give the background to High Court Civil Suit No. 478 of 1996. The summary of their joint averments is that the application is for determination of points of law which would substantially dispose of the plaintiff’s suit. The facts are that the demand of the Respondents arose from a decree in HCCS 478 of 1996 between the same parties to this application. The Applicants contend that the demand was a nullity because Greenland Bank went into Liquidation and could not lawfully charge interest. Moreover execution had already been levied against the Applicants in the previous suit namely a judgment debt in HCCS 478 of 1996 and court bailiffs sold the Applicant’s property pursuant to the execution proceedings in February 1997. The Applicants further contention is that the appointment of the second Respondent as a debt collector was a nullity because execution for the amount claimed had been done. The charging of interest on the Applicant’s account formerly managed by Messrs Greenland Bank was illegal because the bank was no longer in operation. That the demand made upon the Applicants could not be enforced because, it was barred by the Civil Procedure Act. They contend that HCCS 478 of 1996 was completed in that judgment and decree were entered and execution completed. In 1996 Greenland Bank claimed shillings 77,369,060/= in the previous suit and judgment was entered for shs 80,089,250/=. Execution process for the decreed amount was levied on the Applicants by Messrs Victoria General Auctioneers, Court Bailiffs, Government Auctioneers and Rent Collectors who sold the applicants property pursuant to execution process.
There is no affidavit in reply by any of the Respondents to this application. Instead the Applicants filed further affidavits on court record on the 8th November 2010. The affidavits are sworn by Rose Lubega and Azalia Lubega respectively. The court's stamp has 8 November 2010 as being the date on which it was filed on the court record. However it was sworn to before the Commissioner for Oaths on 9 November 2010 by both applicants. There is no evidence of the court record that fees were paid for these additional affidavits. I cannot assume that the court's stamp shows a wrong date. I accordingly struck out the additional affidavits in support of the application.
On the 20th of April 2011 when the suit came for hearing, the Applicants/Plaintiffs counsel applied to proceed ex parte and I directed that the Respondent’s counsel be notified of the points of law sought to be argued under order 15 rules 2 of the Civil Procedure Rules and both parties would put in written submissions on these points. The applicants were represented by learned counsel Brian Othieno while counsel on record for the respondents/defendants is learned counsel Luswata Kibanda. The points of law namely of law learned counsel for the plaintiffs sought to argue from the applicant’s application are:
- The interest charged from 1997 – date is illegal and therefore the respondents claim cannot stand.
- Recovery of the sum of Uganda shillings 373,305,924/- claimed by the Respondent is barred under section 35 of the Civil Procedure Act.
- The third point of law is that with liquidation of Greenland Bank the bank - customer relationship ceased to exist and as such the bank could not continue charging interest under the Financial Institutions Act since its licenses had been revoked.
Court noted that the above questions if determined would dispose of the suit wholly or substantially and will be tried under order 15 rules 2 of the Civil Procedure Rules. Counsel for the Respondents was to be notified and the parties would put in their written submissions on the following points of law under order 15 rules 2 of the Civil Procedure Rules, namely:
- Whether the interest charged from 1997 to date is illegal and therefore the respondents claim cannot stand.
- Whether recovery of a sum of Uganda shillings 373,305,924/- claimed by the Respondent is barred under section 35 of the Civil Procedure Act.
- Whether with liquidation of Greenland Bank the bank - customer relationship ceased to exist and as such the bank could not continue charging interest under the Financial Institutions Act since its licenses had been revoked.
Plaintiffs’/Applicants’ written Submissions:
The brief facts are:
That Greenland bank Ltd did sue the applicant plaintiffs under provisions of the CPR for summary procedure in HCCS No. 478 of 1996 in which they claimed a total of Ushs. 77,369,060 shillings/=. Judgment was entered against the Applicants/Plaintiffs in default. After extraction of the decree, execution proceedings were commenced which resulted in the attachment and sale of the Applicants/Plaintiffs property comprised in LRV 1483 Folio 16 plot 6 Ngobi Road at Iganga and LRV 1597 Folio 20 plot one Baxi close Jinja. Execution was done in February of 1997.
On 5th March 2010, over 13 years after the decree, the second Defendant/Respondent did serve the Applicant/Plaintiff's with a demand notice claiming a total of Ushs. 378,305,924/=. This claim as per the demand letter arose from HCCS No. 478 of 1996 earlier on referred to. The second Defendant/Respondent went further and lodged a caveat on the Applicants property comprised in FRV 447 Folio 20 Plots 51 – 53 Nkrumah Road, Kampala to protect the said alleged interest which property was not part of the loan at all.
The points of law as argued under order 6 rule 28 and 29, order 13 rule6, order 52 rule is 1– 3, 5 98 of the Civil Procedure Act Cap 71 and section 39 and 33 of the Judicature Act, Cap 13.
- Interest on the claim
Annexure B to the affidavit sworn by Azalia Lubega in support of the application dated 30th of August 2010 is a demand notice dated 5th of March 2010 from the second Respondent to the first Applicant. It states in the second paragraph:
"We hereby refer to the High Court Civil Suit No. 478 of 1996 between Greenland Bank Ltd of one part vs. Azalia Lubega and Rose Lubega of the other part in which you were ordered to pay a total sum of Uganda shillings 80,089,250/= and interest thereon". The interest to date has accumulated to Uganda shillings 298,416,674/= after deductions of all the sale monies.
Paragraph 4 (a) of the Defendant's Written Statement of Defence is further confirmation of the claim which the defendants plead that "judgement was entered in their favour for recovery of Ushs. 80,089,250 shillings/= plus interest. Citing copy of the decree and warrant of attachment hereto attached as Annexure "C" and "D" respectively." In paragraph 4 (d) the Defendants plead that "after execution a total of Ushs. 60,089,250/= plus interest thereon remained unpaid totalling to Ushs. 348,164,543/= the question is whether this interest is claimable in law.
Counsel contended that the said interest is not claimable in law since it was not specifically awarded in the decree issued in HCCS No. 478 of 1996. The decree is attached as annexure "C" to the Written Statement of Defence and is clear as to what was awarded by the Honourable Court i.e.
"It is hereby decreed that judgment be entered in favour of the plaintiff for Ushs.77,369,060/=amount claimed in the plaint plus taxed costs of this suit."
Nowhere is it mentioned in the said decree that there was also interest awarded. Since the decree is silent on interest, interest cannot be claimed by the Defendants.
Annexure "A" to the Written Statement of Defence is the plaint that gave rise to the said Decree. In paragraph 4 thereof, Greenland Bank Ltd claimed for the recovery of a debt due and owing in the amount of Ushs. 77,369,060/= being "money advanced to the defendant together with accumulated interest commission and other banking charges thereon". Paragraph 5 of the said plaint reiterates the same position. In other words, the claim filed in 1996 included a claim for the principal sum together with accumulated interest. The claim for the principal sum together with interest therefore merged in the judgment and decree, and there was no further order issued by the court to pay further interest from the date of judgment. The said further interest was not even claimed in the plaint. In Paget's law of Banking 11th edition at page 183, the learned authors write about the necessity to plead interest before and after judgment, if a plaintiff feels such interest should be paid:
"This can be achieved by providing that contractual interest is to be paid 'as well before as after judgment'. The use of this language is based on the decision of the House of Lords in Economic Life Assurance Society versus Osborne, which upheld the distinction between (i) a covenant for interest which is merely ancillary to, and merges in any judgment for payment of the principal sum and (ii) an independent covenant for interest which does not merge in the judgment"
In this matter, the interest and principal claim merged in the judgment and decree. There was no further claim for interest.
The decree brought finality to the contract between Greenland Bank Ltd and the Applicants. No claim was made for interest after judgement, and neither was the interest awarded. It is clearly not claimable. It is on these grounds that the applicants seek a court declaration that the said claim of interest is illegal and unenforceable. This claim is clearly brought under order 6 rules 28 CPR for the Honourable Court to determine whether the Defendant/Respondents are entitled to claim interest.
Notwithstanding the above, learned counsel contended that the pleadings of the Defendant show that they are claiming the principal sum together with interest. This is clearly a counterclaim by the Defendants which is a suit itself, even though they do clearly state so in the pleadings that it is a counterclaim. Section 3 (3) of the Limitation Act Cap 80 clearly bars such a claim since the same is being brought after the expiration of 12 years. Interest cannot be charged after the expiration of 6 years under the said provision of the law and counsel prayed that court makes a declaration to this effect against the Defendants.
- Section 35 Civil Procedure Act
Counsel submitted that the intention of the defendants is to recover Ushs. 348,164,543/= from the applicants. This intention is demonstrated by the demand notice already referred to dated 5th March 2010 and the act of lodging a caveat on the applicants property (which property was not a security in the overdraft agreement between the applicant and Greenland Bank Ltd) which is clearly shown in the further affidavit in support of the notice of motion by the second and third applicants. It is also not disputed that the respondents are originating their claim alleging the non satisfaction of the decree in HCCS No. 478 of 1996. To recover the monies in the claim therefore, the respondents have to execute the decree in HCCS No. 478 of 1996. Filing another suit would clearly be Res Judicata.
Section 35 of the Civil Procedure Act specifically bars execution of decrees after 12 years from the date of the decree sought to be executed. The decree in HCCS No. 478 of 1996 is dated the 11th day of June 1996. It is over 14 years since the decree was issued by this honourable court. Clearly, any execution in this regard is barred by law. The defendant's therefore cannot recover under HCCS No. 478 of 1996. No further execution can be levied under HCCS No. 478 of 1996. The applicants therefore prayed for a declaratory order to this effect against the respondents.
- The Financial Institutions Act
The Financial Institutions Act provides for the licensing of financial institutions like banks. The licensing authority is the Bank of Uganda. On the liquidation of Greenland Bank Ltd, the Bank of Uganda did revoke its banking licence under section 30 of the Financial Institutions Act. This therefore means that from the date of liquidation, Greenland Bank Ltd could not continue demanding interest. The Bank of Uganda did discontinue the operations of Greenland Bank Ltd. Learned counsel contended that the respondents claim to charge interest to date has no legal basis and contravenes the Financial Institutions Act. None of the respondents is a financial institution known under the said Act which entitled them to charge interest.
On the contractual point of view, counsel submitted that a claim for interest under a contract is contractual, in other words, the parties to the contract must have agreed to the rate of interest to be charged. The contract to charge interest was between the applicants and Greenland Bank Ltd. The applicants have never contracted to pay interest to the respondents. Under the law of contract therefore, the respondents have no basis of claiming interest from the applicants.
In conclusion learned counsel sought the following declarations after determination of points of law under order 15 rules 2 of the CPR namely:
- That interest is not claimable by the applicants as the same was not prayed for in the pleadings and neither was the same awarded in HCCS No. 478 of 1996.
- That execution for any outstanding balance if any in HCCS No. 478 of 1996 is barred under section 35 of the Civil Procedure Act, and is as such not available to the respondents.
- The respondents are not a financial institution known under the Financial Institution Act and as such cannot charge the alleged interest.
- There is no contract between the applicants and respondent wherein it was agreed that interest should be charged.
- That the caveat lodged in the applicants property LRV 447 Folio 20 Plot 51 – 53 Nkrumah Road, Kampala be vacated as a consequence of the findings of the above.
- Counsel prayed for costs of the suit.
Written Submissions of the Respondents/Defendants in reply
Greenland Bank Ltd did sue the applicants under summary procedure vide HCCS No. 478 of 1996, claiming a total of UShs. 77,369,060/=. Judgment was entered against applicants/plaintiffs in default. After extraction of the decree, execution proceedings were commenced which resulted into the attachment and sale of the applicant/plaintiff's property comprised in LRV 1483 Folio 16 Plot 6 Ngobi Road at Iganga and LRV 1597 Folio 20 Plot 1 Baxi close Jinja execution was done in February of 1997.
On 5th March 2010 the defendant's served the applicants with a demand notice claiming a total of Ushs. 378,305,924/=. That the applicant’s acknowledged their indebtedness and paid the respondents Ushs. 5,000,000/= Learned counsel addressed court on the following points of law under order 15 rules 2 of the Civil Procedure Rules:
- That the interest charge from 1997 to date is illegal and therefore the respondents claim cannot stand.
- That recovery of the sum of Uganda shillings 373,305,924/= claimed by the respondent is barred under section 35 of the Civil Procedure Act.
- That with liquidation of Greenland bank, the Bank customer relationship ceased to exist, and as such the bank could not continue charging interest under the Financial Institutions Act since its license had been revoked.
Interest on the Claim
Learned counsel for the respondent submitted that the banking business involves a bank lending out money upon a chargeable interest. The charging of interest is allowed both under the Financial Institutions Act and under Bank of Uganda regulations. The charging of interest in this particular case is done in the ordinary sense, this interest continues to accrue at the banking or facility rate until payment is completed. The applicants did not cite any provisions of the law or shown any authority barring the respondents from charging interest on an outstanding debt. Learned Counsel contended that barring the respondent from charging interest would defeat the whole purpose of the banking business.
Further the argument that the respondents have indirectly filed a counterclaim which is barred by section 3 (3) of the Limitation Act is no tenable in that the respondents have not filed any counterclaim at all and perusal of the court record would settle this claim. The respondents have not filed any suit as envisaged by this section and as such the applicants cannot claim limitation in their own suit. Learned Counsel relied on my ruling in MA No. 421 of 2010 namely Larb Uganda Ltd & 2 Ors versus Greenland Bank Ltd where I ruled that:
"Counsel for the applicant submission is that execution would be barred by section 3 (3) of the Limitation Act. I agree with counsel for the respondent that the section clearly does not apply. It is the applicants who filed a suit. This section bars an action founded on a judgement. An action is a proceeding commenced in court. An action is a suit commenced in any manner prescribed under section 19 of the Civil Procedure Act. The manner of commencement of the action is prescribed by the rules of the court i.e. see section 2 of the Civil Procedure Act which interprets the word "prescribed" to mean prescribed by the rules. The respondents have not commenced any action in any manner prescribed and the Limitation Act, cannot apply to them under the above section. This section is simply a defence to a suit or an action commenced in a court of judicature.”
Counsel prayed that the court be pleased to dismiss the same arguments of the plaintiff’s counsel.
3. Civil Procedure Act section 35.
The applicants are arguing that the respondents are trying to recover Uganda shillings 348,164,543/= which is barred by section 35 of the Civil Procedure Act. It is important to produce this section 35.
Section 35 talks about application for execution being made, and counsel submitted that the respondents have not made any application for execution whatsoever and as such this section does not apply. Moreover the section can only act as a defence and not as a sword.
Writing to the applicants and reminding them of an outstanding debt, which they acknowledged by paying shillings 5,000,000/=, did not amount to an application for execution as envisaged under section 35 of the Civil Procedure Act.
Counsel submitted that even if section 35 were to be applied, the fact that there is an outstanding debt owed by the applicants to the 1st respondent does not mean that the applicants are precluded from paying the outstanding balances. Therefore their conduct of paying Ushs 5,000,000/= means they acknowledged the debt, and as a result gave the respondent a fresh ground to claim for the balance.
- The Financial Institutions Act.
Learned counsel submitted that the submissions made by the plaintiffs under this heading were not tenable. He contended that there is no evidence whatsoever by affidavit or otherwise that shows that the 1st respondent’s license was revoked or that the Bank of Uganda discontinued the operations of the 1st respondent.
Section 30 cited by the applicants read together with section 10 of the Financial Institutions Act does not say that once a bank was into liquidation the Central Bank shall revoke its license. The two sections use the word "may" which is not mandatory and unless the applicants have adduced evidence to that effect it cannot be assumed.
Counsel therefore prayed that the court be pleased to overrule the arguments by the applicants as it has no basis.
Learned counsel prayed that the court be pleased to dismiss this prayer numbers 1, 2 and 3 of the plaintiffs for the reasons advanced above. As far as the 4th prayer is concerned learned counsel submitted that it is not tenable as it has no basis, it was not pleaded and the applicant in their pleadings are not raising the issue of contract at al. If this prayer is to be allowed it would mean that the applicants are saying that there was no bank-customer relationship. The 5th prayer is equally not tenable. The applicants by this application cannot remove a caveat lodged; this prayer is strange on this kind of procedure and the question raised by court for determination. Counsel therefore prayed for dismissal of the suit with costs of the applicant’s entire application.
Plaintiffs/Applicants Submissions in Rejoinder
The plaintiff/applicant reiterates the submission made in support of the application has this to reply in rejoinder.
Interest on the claim
The applicants/plaintiffs submitted that under section 30 of the Financial Institutions Act Greenland Bank Ltd was closed. Bank of Uganda as the central bank followed sections 30, 31 and 32 and seized the bank and finally wound up. Under the said sections once that process was gone through Greenland Bank Ltd was no more and was no longer in the banking business. The bank was finally wound up and its assets disposed of. Interest is contractual and once the bank ceased to exist it could no longer be able to charge interest. The decree of the High Court did not provide for interest either. Once a decree was passed the court became functus officio. Bank of Uganda could not appoint SIL Investments Ltd because matter was closed by execution. Under section 26 of the Civil Procedure Act interest is at discretion of the court. Counsel referred to Harbutts Plasticide Ltd versus Wyne Tank and Pump company Ltd (1970) 1 All E.R 225. In the case of Highway Furniture Mart Limited versus the Permanent Secretary and another (2006) 2 E.A 94 interest antecedent to the suit is only claimable under an agreement where it is provided (contractual interest).
The applicant/plaintiff filed this suit for a declaratory judgement which under the provisions of law cited can be finalised on the points of law as set out in the notice of motion.
The statement reproduced by SIL Investments and Greenland bank in liquidation, have no legal basis as they did not have a banking license.
As far as interest having no legal foundation is concerned learned counsel further relied on Greenland Forex Bureau (K) Ltd versus Greenland Bank Ltd (in liquidation) and HCCS No. 398 of 2002, THE CO-OPERATIVE BANK LTD (IN LIQUIDATION) VERSES CHRISTOPHER KISEMBO AND OTHERS where Hon Justice Geoffrey held that the plaintiff bank was under liquidation and was therefore no longer trading. There was no justification in that regard to charge commercial interest as prayed.
The Civil Procedure Act section 35
Counsel further submitted that the respondents wrote several letters intending to sell the applicant/plaintiff's property. These are letters dated 5th March 2010 by SIL Investments Ltd to M/S Larb Uganda Limited, letter dated 1st July 2010 from the advocates to the applicant, letter from M/S Luswata-Kibanda and Co. Advocates to The Director Larb Uganda Ltd dated 29th June 2010 annexure "C”, letter dated 29th April 2010 from the Advocates of the plaintiff to M/S SIL investments Ltd see annexure "D" to the application.
In all those letters counsel contended that it was very clear that the applicant/plaintiff denied liability and only paid Ug.Shs. 5,000,000/= conditionally. This payment was without prejudice. Counsel referred to in the letters of the advocates.
In the averments in the affidavits of both Azalia and Rose Lubega shillings 5,000,000/= was paid conditionally. The applicant demands a refund of shillings 5,000,000/= illegally paid to the defendants. Counsel referred toHCCS No.742 of 2004 OBED TASHOBYA VERSUS DFCU BANK LTD before Honourable Justice Geoffrey where it was held that if a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. (See Halsbury’s laws of England volume 3 (1) (fourth edition) para 184 and Barclays bank Ltd versus WJ Simms son and Cooke (Southern) Ltd (1980) QB 677 at 695. According to the Privy Council in Imperial bank and Canada versus Bank of Hamilton (1903) A.C. at 56 a payment is made under a mistake of fact if it is so made honestly, notwithstanding that the payer has means of which he did not avail himself of knowing the true facts.
Counsel reiterated submissions that in the instant case as already stated a period of more than 12 years has elapsed since the 11th day of June 1996 when the decree was issued and a warrant of attachment dated 31st January 1997 to execute the said decree. It is now 14 years ago since those events happened. Clearly there is a statute bar to recover under the same decree as 14 years have elapsed now.
Learned counsel referred to the case of Mukula international versus Cardinal Nsubuga and another Civil Appeal Number four of 1981 (1982) HCB page 11 once limitation as a point of law is raised it cannot be ignored by court. Limitation is a statutory defence. Lovell versus Lovell (1970) 3 All England law reports 721 parliament gave limitation as a statutory defence. In the case of Charles Mpiima versus Attorney General civil suit number 980/1990 (1990 – 1991) 2 KALR 54 -Limitation does not even have to be pleaded. Court can on its own discretion take cognisance of the fact of limitation.
The applicants don't have to have been defendants to raise it; court can on its discretion allude to it in its judgement because it is a serious point of law. Even if the respondents have not filed an action to recover the amount or applied for execution, the applicant all the same seeks a declaration judgement that they cannot take an action like demand for money, do a recovery process, go for receivership, etc on a matter where there is a judgement and decree after the expiration of 12 years.
The applicants/plaintiffs in the present case aver that no counterclaim for Uganda shillings 348,164,543/= has been filed by the respondents/defendants and it cannot be claimed from the applicant/plaintiffs.
The respondents do not have the basis of demanding for Ug.Shs. 348,164,543/=. There is even no basis why they lodged a caveat on the applicant’s property comprised in Plot 51 – 53 Nkrumah road Kampala FRV 447 folios 20.
The applicants cannot remove the caveat because there is a pending suit. Counsel prayed that this suit be finalised on points of law as prayed in this application. Learned counsel for the plaintiff made additional lengthy submissions which submissions are not in rejoinder and cannot be referred to in this judgment.
I have carefully gone through the pleadings of the parties, the attachments there to and the issues on points of law argued in the written submissions of both counsel. The issues on point of law in the written submissions are the following:
- Whether the interest charged from 1997 to date is illegal and therefore the respondents claim cannot stand.
- Whether the attempted recovery of the sum of Uganda shillings 373,305,924/= by the respondent is barred under section 35 of the Civil Procedure Act.
- Whether with liquidation of Greenland Bank, the bank customer relationship ceased to exist, and as such the bank could not continue charging interest under the Financial Institutions Act, since its licence had been revoked.
Learned counsel for the plaintiff submitted that the interest charged arises from a demand notice dated 5th of March, 2010 from the second respondent to the plaintiffs. The contention of the plaintiff’s counsel is that the demand arises from HCCS No 478 of 1996 between Greenland bank Uganda Ltd vs. Azalia Lubega and Rose Lubega. In that suit the defendants who are the current plaintiffs were decreed to pay a sum of Uganda shillings 80,089,250/=. The demand notice also charged the plaintiffs interest at Uganda shillings 298,216,674/=. After execution against the plaintiffs the decreed amount was reduced to Uganda shillings 60,089,250/= which remain unpaid plus interest which amounted to Uganda shillings 348,164,553/=. Counsel argued that interest had not been awarded in the decree which is annexure "C" to the written statement of defence. In the decree referred to in judgement was for Uganda shillings 77,369,060 shillings/= as claimed in the plaint together with taxed costs which were awarded. The plaintiff's case is that no interest was awarded or decreed and no further interest was decreed after the judgement. He submitted that interest should be pleaded in the suit. Further interest had not been pleaded and interest was barred by limitation after six years from the date the cause of action arose. He contended that interest was contained as a counterclaim in the written statement of defence of the defendants and is barred by the Limitation Act.
On the other hand the contention of the defendants counsel is that limitation does not apply to the plaintiff’s case. The interest that was charged by the defendants was a normal interest that continued to accumulate under the Financial Institutions Act. Secondly the defendant did not file a counterclaim in its written statement of defence and the issue of limitation does not arise.
I have addressed my mind to this issue which is whether interest could be charged from 1997 to date by the defendants as alleged.The Applicants case is that the Respondents no longer operate as a bank and Greenland in Liquidation is an entity of the Bank of Uganda and a totally different party from HCCS 478 of 1996. Pursuant to execution process in the former suit, court bailiffs sold an unfinished house at plot 1 Baxi Close Jinja LRV 1597 folio 20 for shillings 20,000,000/= belonging to the Applicants. They also sold land comprised in LRV 1483 Folio 16 Plot 6 Ngobi Road Iganga with a completed house but the court bailiffs did not account for the proceeds of the sale. The Applicants disagreed that Uganda shillings 80,089,250/= remained unpaid after execution and therefore accumulated interest leading to the claim of the Respondents of Uganda 348,164,543/= was owing. Greenland Bank in Liquidation had not demanded any money from the Applicants and twelve years have elapsed since execution was carried out by the aforesaid Court Bailiffs.
The Applicants further averred that the decreed sum in the suit was shillings 80,089,250/= and the judgment and decree did not provide for any interest. Moreover they contend that after warrant for execution expired, it was never renewed. The letter of Messrs SIL investments Ltd being the demand notice dated 5th of March 2010 reads as follows:
"We act for and on behalf of Greenland Bank Ltd (in liquidation).
We hereby refer to High Court civil suit number 478 of 1996 between Greenland Bank Ltd of one part Vs Azalia Lubega and Rose Lubega of the other part in which you were ordered to pay total sum of Ug shs 80,089,250/= and interest thereon.
The interest to date has accumulated to Shs. 298,216,674/= after deductions of all the sale monies realized after the sale of Property comprised in LRV 1597 folio 20 plot 1 Baxi close Iganga and LRV 1483 Folio 16 plot 6 Ngobi Road Iganga.
TAKE NOTICE THEREFORE, that unless you pay DIRECTLY to as the total outstanding balance of Shs. 378,305,924/= plus our collection fees within 14 working days (14 days) from date of receipt of this letter, we shall use all available means to realize the same.
However if you wish to negotiate a repayment plan for the balance please contact us before 14 days elapse."
The second letter attached to the affidavits is the letter of Victoria General Auctioneers, Court Bailiffs Government Auctioneers and Rent Collectors. This letter is dated 5th February 1997. It is entitled: “H.C.C.S. NO. 317 OF 1996, GREENLAND BANK LTD VS YOUR SELVES.
"We refer you to the above Civil Suit in which a warrant of attachment of your lands together with buildings and other developments thereon has been issued to us. See the enclosed copy thereof.
Unless you pay to us in full the decretal amount as shown on the Warrant plus our fees and disbursements before the date of sale, we shall have no alternative but to act as instructed. Enclosed is a copy of the advertisement for the sale of your houses and land on 3rd March, 1997, if you haven't paid.
Take further notice that, we have paid for other advertisements in the New Vision, Ngabo and Crusader News papers which are coming out any time."
The bailiffs wrote another letter dated 5 February 1997 addressed to the occupants of LRV 1483 Folio 16 plot 6 Ngobi Road IGANGA and it is entitled: HCCS NO: 478 of 1996. GREENLAND BANK LTD VS LARB (U) LTD, AZALIA LUBEGA, ROSE LUBEGA. It reads in part:
"We have been instructed by the High Court of Uganda at Kampala to attach and sell by public auction the above mentioned property under your occupation, see attached copy of the Warrant.
This is to request you to remove yourselves peacefully from the said property by 11th February, 1997 to enable our intended purchasers to inspect the same while vacant without inconveniencing anybody.
If you fail to comply with our request, we shall have no alternative but to use lawful force to evict you at once.
By copy of this letter, the DPC Iganga Police Station and the Chairman LC 1 of the Area are hereby informed.”
The warrant of the court is dated 31st of January 1997 and signed by the deputy Chief Registrar in High Court civil suit 478 of 1996. The notification of sale in the warrant is for property LRV 1483 folio 16 plot 6 Ngobi Road Iganga and LRV 1597 folio 20 plot 1 Baxi close Jinja. The property is also advertised in the Monitor Newspaper dated February 5, 1997 pages 16 thereof.
The Applicants through their counsel Messrs Mukwatanise & Co. Advocates respond to the demand complained about in their letter dated 1st July 2010. The reference line of their letter reads: "Demand Notice to Messrs LARB (U) Ltd.”
"We make a reference to the above and in particular your letter of 29th June 2010 regarding the claim of M/S Sil Investments Ltd for Shs. 373,305,924/=.
Your clients demanded from our client above named on 5.3. 2010. Our reply to yours of 29.4. 2010 copy of which is attached for ease of reference has never been attended to.
Our clients were convinced by one Evelyn Nanyonga of Sil Investments Ltd that a deposit be made towards the principal which our client believes is far less than the principal as at the time of the decree having lost two properties at your client's initiative and hand. This was under High Court Civil Suit No. 478 of 1996 but the court file is still misplaced.
Our clients paid shillings 5 million awaiting the accountability demanded vide our letter of 29.4.2010.
It has surprised our clients that the matter which was expected to be amicably resolved turned out in the language of your letter.
It is our client’s view that our letter be replied to and you confirm the proceeds of sale of the two properties so that a negotiated settlement can be reached."
On 29 June 2010 the second Respondent’s lawyers wrote again a demand notice which reads:
"We act for and on behalf of our client SIL INVESTMENTS LTD herein after referred to as agents of the Bank of Uganda who are the official liquidators of defunct Greenland bank (U) limited. As you are fully aware you are indebted to our client to a tune of Uganda shillings 378,305,924/=. …However, you have already paid Uganda shillings 5,000,000/= …. by way of a bank overdraft number 024683.000.2200.100 dated 10th June 2010 in the names of our clients which we acknowledge receipt leaving an outstanding balance of Uganda shillings 373,305,924/= … only.
TAKE NOTICE that unless you pay to us Uganda shillings 372,305,924/= … plus 30,000,000/= … being, our collection fees within 21 days from the date hereof or alternatively you furnish us with a reasonable schedule of payment we shall not hesitate to apply for receivership order at your own peril, costs and embarrassment.
Stand duly warned and expect no further warning from us!
The Applicant’s letter through their lawyers dated 29th of April 2010 reads as follows:
"Sil investments Ltd
30 Kampala Road,
PO Box 12351,
Re: Demand notice to Messrs Larb Uganda ltd.
We act for and on behalf of our client above named that has handed to us your letter of 5th March 2010 demanding Shs. 378,305,924/=.
It is worth noting that in your letter you rightly stated that our client’s properties were sold. However you did not disclose how much were the proceeds.
The High Court order and Civil Suit No 478 of 1996 was for shs. 77,369,060/= with shs. 2,720,194/= as costs. It appears you added shs. 80,089,250/= and shs. 298,216,674/= and demanded shs. 378,305,924/=. This does not put into account the proceeds of sale.
The purpose of this letter is to demand for a statement of account to enable us respond appropriately. We would appreciate a copy of the decree as we try to obtain copies from the court record.
In the meantime, liability is denied and we have instructions to resist the exorbitant amount being demanded as our client is of the view that the proceeds of sale of the two properties extinguished liability."
The genesis of this matter is that the defendants who represent Greenland bank in liquidation claim under a suit filed by Greenland bank namely HCCS No 478 of 1996 brought by way of a summary suit under order 33 of the Civil Procedure Rules (before revision now order 36 after revision), against the current plaintiffs. The cause of action is contained in paragraph 4 of the plaint and states as follows:
"4. The plaintiffs claim against the first and second and third defendants severally and jointly is for the recovery of a debt due and owing in the amount of Uganda shillings 77,369,060/= being money advanced to the defendants together with accumulated interest, commission and other banking charges thereto on the request of the second and third defendant by way of an overdraft facility extended and duly transferred on the defendant's current account number 040 3021."
The facts constituting the cause of action can be found between paragraphs 5 to 7 of the plaint.
"5. As a result, the defendants are indebted to the plaintiff on the said account in the sum of Uganda shillings 77,369,060/= being money paid by the plaintiff to the defendant by way of overdraft plus accumulated interest, commission and other banking charges thereto.
6. That the said money has not been paid and despite several demands by the plaintiff from the defendant to pay the same, the defendant has neglected and/or failed to effect repayment and the said amount has remained due and owing as an outstanding debt and the plaintiff shall aver that the defendant has no defence or at all against the claim.
7. The said money was extended to the defendant in Kampala within the jurisdiction of this honourable court and notice of intention to sue was duly served on the defendant. Where for the plaintiff prays for summary judgment against the defendants under order 33 Civil Procedure Rules for:
(a) Uganda shillings 77,369,060/=
(b) Costs of the suit."
The decree which is annexure "C" attached to the written statement of defence reads in part:
"it is hereby decreed that judgement be entered in favour of the plaintiff for shillings 77,369,060/=, the amount claimed in the plaint plus taxed costs of the suit.”
Judgement was entered by the deputy registrar on 11 June 1996. Application for judgement was made under order 33 rules 3 of the Civil Procedure Rules by the plaintiff’s counsel on 6 June 1996. The application is annexure "B" to the written statement of defence. The warrant of attachment tells the same story. The warrant of attachment is annexure "B" to the written statement of defence. It is dated 31st of January 1997 and includes the decreed amount of 77,369,060/= and taxed costs of 2,720,190/=. The total amount in the warrant is 80,089,250/= shillings. The written statement of defence of the defendant does not deny the fact that the claim arose from the previous decree of this honourable court. Paragraph 4 (a) avers that the defendants were successful parties in High Court civil suit number 0478 of 1996 and judgement was entered in their favour for recovery of Uganda shillings 80,089,250/= plus interest. A copy of the decree annexure "C" however does not include interest. What is material is that the written statement of defence avers in paragraph 4 (c) thereof that the proceeds of the execution under the warrant which is attached as annexure "D" to the written statement of defence "only raised a total of Uganda shillings 20,000,000/= and Victoria Auctioneers and Court Bailiffs ... filed returns which are on court record." That after execution a total of Uganda shillings 60,089,250/= plus interest thereon remained outstanding and totalling to Uganda shillings 348,164,543/=. The written statement of defence attached annexure "F" showing the statement of account. The statement of account annexure "F" is in respect of the first plaintiff and shows an interest of 25%. This statement covers the period between April 1999 and 30th of July 2010.
As far as additional facts are concerned the written statement of defence pleads that the plaintiffs paid Uganda shillings 5,000,000/= upon demand for this money by the defendants. A perusal of the statement annexure "F" to the written statement of defence shows that out of the total indebtedness of the plaintiffs Uganda shillings 25,000,000/= was paid. From the above facts it shows that 20,000,000/= was realised from the sale of the plaintiffs property and Uganda shillings 5,000,000/= was subsequently paid upon demand by the defendants.
It is therefore clear that not only interest but also the principal amount remained unpaid. In other words after the execution was accomplished, not all money was recovered. It is a fact pleaded by the defendant and also asserted by the plaintiffs that the demand primarily arose from a loan transaction which ended up in the plaint set out above. This suit was by summary procedure under order 33 (36 revised Civil Procedure Rules). There was a claim for the principal sum which included accumulated interest at the date of filing the suit. There was no defence filed to the suit and the court entered judgement in accordance with the statement of claim in the plaint. This was for the principal sum plus costs under order 33 rules 3 of the Civil Procedure Rules before revision. Under rule 3 judgments are entered upon default of the defendant to file an application for leave to defend the suit.
Points of law were raised by pleadings of the plaintiff in this suit. In the application I ruled that the point of law would be set down for hearing under order 15 rules 2 of the Civil Procedure Rules. The material facts to argue the point of law were admitted in the written statement of defence and the relevant documents attached as referred to above. This is enabled by order 6 rule 28 of the Civil Procedure Rules which provides:
"Any party shall be entitled to raise by his or her pleading any point of law, and any point of law so raised shall be disposed of by the court at or after the hearing; except that by consent of the parties, or by order of the court on the application of either party, a point of law may be set down for hearing and disposed of at any time before the hearing."
The rule allows any party to the suit to apply to the court to set down a point of law for hearing. Secondly in this case I was of the opinion that the suit or a substantial part thereof could be disposed of on points of law only under order 15 rules 2 of the Civil Procedure Rules. I therefore requested the parties to put in written submissions on the points of law as they have done.
The question to be discussed is whether a subsequent claim is barred? Firstly, it is not disputed that there was no further court action after execution proceedings were taken and a sum of shillings 20,000,000/= was realised. What the plaintiffs are complaining about is a demand notice by the defendants. There was also threatened receivership of the first plaintiff. If a subsequent suit is filed against the plaintiffs, would it be res judicata? In other words was a final judgement given upon filing HCCS No. 0478 of 1996? From a reading of the plaint and the subsequent judgement of the court under order 36 rules 3 of the Civil Procedure Rules, the award of the court was based on the principal sum and accumulated interest at the time of filing of this suit. The statement of account was included as annexure to the plaint. I have already analysed the statement of account above. Upon a final order being entered, could further interest be charged? What must be noted is that before the previous suit was filed there was a default by the plaintiffs to repay the overdraft facility. The suit claimed the principal sum outstanding together with interest. The plaint which has been quoted above shows that the defendants claim in the previous suit was based on an overdraft facility extended to the plaintiff company and at the request of the second and third plaintiffs. No loan agreement was pleaded.
Learned counsel for the plaintiff addressed me on the question of limitation and submitted that the claim by the defendants was time barred. He further addressed court at length on the applicability of the Financial Institutions Act and contended that the defendant bank had been wound up and could no longer charge interest. His position was that the charging of interest was illegal. Learned counsel for the defendant on the other hand contended that interest was being charged in the ordinary course pursuant to a loan.
The purpose of the Limitation Act can be discerned from the preamble of the Act. It provides: "An Act to provide for the limitation of certain actions and applications and for matters incidental thereto and connected there with." Section 3 of the Limitation Act and subsection (1) (a) provides that an action founded on a cause of action in contract or tort shall not be brought after the expiration of six years from the date on which the cause of action arose. The premises on which both parties submitted can be misleading because the defendants have not filed an action in this court. However, there is a rationale behind that argument which may be considered. This rationale is based on the intention of the Limitation Act. The limitation Act de-limits actions in courts of law after the expiration of particular years specified for separate causes of action. This rationale was considered in the case ofEridad Otabong Waimo vs. Attorney General Civil Appeal No. 6 of 1990 reported in  V KALR page 1, it was held by the Supreme Court per Judgment of Oder JSC at page 5 thereof:
“...the continuing nature of the tort of false imprisonment or unlawful detention and the effect of this attribute upon the law of limitation as provided in Act 20 of 1969 is correct. This means, therefore, that if the imprisonment begun more than 12 months before court action but continued to a time within that period damages for so much of the imprisonment or detention as took place within the 12 months before the action may be recovered, although a plea of the statute prevents the recovery of damages for so much of the imprisonment or detention as took place outside that period.
What is material is the use of the phrase "accrual of a cause of action". In the case of breach of contract, the cause of action accrues from the time of the breach. Can it be said that after the contract had been breached and the defendants filed a suit against the plaintiffs in 1996, that there was accrual of fresh causes of action? Was the contract between the parties still subsisting? The defendants had already moved for execution against the plaintiffs. In other words the plaintiffs were not compliant with the terms of the contract culminating in the filing of an action against the plaintiffs. It is also material that the plaintiffs in the previous suit who are the defendants in the current suit claimed the principal sum plus accumulated interest at the time of filing the action.
I have considered the implications of the charging of interest after the filing of suit in the circumstances of the case. Final judgement had been obtained on the state of facts that existed in 1996 when the suit had been filed. At the material time there was a fundamental breach of the contract by the plaintiffs in that they failed to meet the obligations to pay back the overdraft facility extended by Messieurs Greenland Bank Uganda Limited now represented by the defendants. I do not need to go into the novel arguments advanced by both counsels. After the fundamental breach by failure to pay the loan, it is inconceivable to think that the contract subsisted when there was no new relationship between the parties to the overdraft facility. Having failed to pay the overdraft, the relationship came to an end and Greenland bank Uganda limited sued for its money. It obtained a final judgement upon a state of facts that existed at the time. Execution was conducted and allegedly was unable to realise all the money that was due to the bank. This is the crux of the problem. The claim on behalf of Messrs Greenland bank in liquidation is not based on a fresh accrual of a cause of action. It is based on the judgment obtained in 1997. In that judgement, no order for further interest was made. Further observation can be made about this judgement. The first observation is that it was not based on a contract that had been adduced in court. Attached to the pleadings was a statement of account. This supports the pleadings that there was an overdraft facility extended to the plaintiffs. The accumulated interest was on the overdraft and was claimed upon default. Failure to realise the full amount decreed is a matter that arises in execution. I therefore do not agree with the defendants counsel that interest charged in the circumstances was interest charged in the ordinary course of business of a bank and pursuant to a loan contract. I shall have occasion to discuss this matter further in respect to the issue dealing with the effect of section 35 of the Civil Procedure Act on the defendants claim against the plaintiffs. I would like to wind up the question of interest by considering the effect of a fundamental breach of the contract for an overdraft facility.
A fundamental breach may be considered a repudiation or termination of the contract in the sense that the contractual relationship ceases to exist. This is based on the construction of the relevant contract. In this case there was no specific contract in the previous suit that had been admitted. What was pleaded was an overdraft facility extended to the defendants in the previous suit now the first plaintiff company. What was pleaded was an obligation to pay the overdraft facility which had been breached by the first plaintiff company. The effect of a fundamental breach was discussed by the House of Lords in the context of its effect on an exemption clause in the case ofSuisse Atlantique Société D’armement Maritime S A v N V Rotterdamsche Kolen Centrale  2 All ER 61. Lord Reid said at page 71 of his judgment:
“If fundamental breach is established, the next question is what effect, if any, that has on the applicability of other terms of the contract. This question has often arisen with regard to clauses excluding liability, in whole or in part, of the party in breach. I do not think that there is generally much difficulty where the innocent party has elected to treat the breach as repudiation, bring the contract to an end and sue for damages. Then the whole contract has ceased to exist, including the exclusion clause, and I do not see how that clause can then be used to exclude an action for loss which will be suffered by the innocent party after it has ceased to exist, such as loss of the profit which would have accrued if the contract had run its full term.” (Emphasis added)
In Law of Contract in East Africa, R.W. Hodgin states in pages 188 – 189 that a contract is discharged by fundamental breach. He writes:
"In deciding whether there has been a fundamental breach of the contract it is necessary to ask whether it is a condition or a warranty that has been broken.… We can say that a condition is a major term of the contract and breach of such a term allows discharge of the contract, and that a warranty is a minor term that attracts only an award of damages. If the breach goes to the root of contract and affects is commercial viability, it is said to discharge the contract.
In this case the plaintiffs had obviously abandoned the obligations to pay both the principal and interest under the overdraft facility extended to the first plaintiff company. The defendant company namely Greenland bank Uganda limited sued and obtained final judgement. By suing pursuant to the default of the plaintiffs, the contract had come to an end and they had sought the help of court to realise the amount that was due on account of the principal sums advanced and accumulated interest that was outstanding. The demand notice of the defendants was therefore of no legal effect since no new cause of action had arisen. There is however an interesting twist to this issue namely the fact that there is no legal impediment for anybody to write a demand for any amount that they think is due and owing so long as the demand does not amount to a tort of nuisance or assault that may be actionable in a court of law.
That brings me to the second aspect of this matter which is whether the payment of Uganda shillings 5,000,000/= by the plaintiffs to the defendants upon demand for an outstanding amount led to the accrual of a fresh cause of action. It is the contention of counsel for the defendants that the 5,000,000/= paid by the plaintiffs amounted to an acknowledgement and led to the accrual of a fresh cause of action against the plaintiffs.
It is my humble opinion that the question of whether this payment led to the accrual of a fresh cause of action cannot be considered in this matter or in this suit. First of all the defendants contend and assert that they did not file a counterclaim against the plaintiffs for any amount complained about. The question of whether there was accrual of a fresh cause of action pursuant to an alleged acknowledgement of the debt can only be considered in the context of a suit for recovery of the alleged debt.
My final conclusion on the question of whether interest was illegally charged from 1997 is that without prejudice to the question of whether the 5,000,000/= amounted to an acknowledgement of the debt and therefore the accrual of a fresh cause of action, that the defendants could not sue on the judgment. They have not done so. Since there was no contractual relationship existing between the parties as such after the judgment of 1997, which judgement did not include interest in the decree, interest cannot be charged. There was no provision in a contract that permitted interest to be charged after the suit had been concluded. This is not a question of whether it was illegal or not. I will however consider the question of whether the declaration sought by the plaintiffs should be made when dealing with the remedies.
Section 35 of the CPA
The second issue to be considered is "whether the recovery of the sum of Uganda shillings 373,305,924/- claimed by the Respondent is barred under section 35 of the Civil Procedure Act."
Learned counsel for the plaintiffs further submitted that section 35 of the Civil Procedure Act bars execution of decrees after 12 years. He contended that 14 years have passed since the decree was issued. Whether it is execution through court process or execution outside court process no further execution could be entertained. The defendant’s position on the other hand is that the section only applies to applications for a fresh execution after 12 years. The provision is a defence and not a sword in that the defendant had not applied for execution and the plaintiff was not entitled to raise this section against it.
Section 35 of the Civil Procedure Act provides as follows:
35. Execution barred in certain cases.
(1) Where an application to execute a decree not being a decree granting an injunction has been made, no order for the execution of the decree shall be made upon any fresh application presented after the expiration of twelve years from—(a) the date of the decree sought to be executed; or
(b) Where the decree or any subsequent order directs any payment of money, or the delivery of any property to be made at a certain date or at recurring periods, the date of the default in making the payment or delivery in respect of which the applicant seeks to execute the decree.
(2) Nothing in this section shall be deemed—
(a) to preclude the court from ordering the execution of a decree upon an application presented after the expiration of the term of twelve years where the judgment debtor has, by fraud or force, prevented the execution of the decree at some time within twelve years immediately before the date of the application; or
(b) to limit or otherwise affect the operation of any law of limitation for the time being in force in Uganda.
This section bars an application for a fresh execution after 12 years from the date of the decree sought to be executed. Secondly where the order directs the payment of money subsequent to the decree, it bars a fresh application from the date of default of making payment or delivery of the property. The point as is made by defendants counsel is whether the demand notice to the plaintiffs amounted to execution within the meaning of section 35 of the Civil Procedure Act. As far as the formal application is concerned, the defendants have not applied afresh for execution of the decree. To a limited degree the provision would not apply. This is however simplistic because under section 35 (2) (b) of this section does not limit or affect the operation of the law of limitation for the time being in force in Uganda.
As stated above there was no provision for interest in the decree upon which the defendants relied on to make the demand. Secondly there was no contractual provision or term of a contract relied on for interest to keep on accumulating. Thirdly the doctrine of res judicata ensured that no subsequent suit could be filed with respect to the facts upon which the decree was obtained in 1997. Last but not least, the facts have established that execution was imperfect in that the decreed amount had not been realised in full. It logically follows that the defendant could only be pursuing the remainder of the outstanding amount on the decreed sums. This included the principal amount, plus accumulated interest and costs at the time of judgment. In terms of res judicata, no further sums could be claimed in a court of law. Where a right cannot be established in a court of law that right has no legal basis for enforcement. It therefore follows that if section 35 bars execution in the circumstances of the case after a period of 12 years, the rights if any which the defendant could have enjoyed had been barred by statute from enforcement. Thus sections 3 of the Limitation Act which limits a suit founded on a cause of action in contract to 6 years from the date of accrual of a cause of action and section 35 of the Civil Procedure Act which bars execution after 12 years from the date on which the decree is issued or the date of default to pay the money or deliver the property ordered by court bars enforcement.
Since the rights of Greenland bank to the money was barred by statute, it cannot even be pursued outside court through coercion. In cases of land where an action is barred by limitation, the right of action is extinguished and the land reverts to the one in possession. This was held in the case of John Oitamong versus Mohamad Olinga (1985) HCB 86. It was held that Limitation is a shield and not a sword. It simply means the extinction of stated claims and rights of action are limited in point of time and are lost if not pursued within due time. The doctrine of limitation differs from the doctrine of acquiescence although both have similar effects. It was further held that both acquiescence and limitation destroy the formers owner’s right to remedy. Lastly the court noted that since the respondent had been in undisturbed occupation of the suit land from 1946 to 1979, the appellant was barred by the doctrine of estoppels from claiming possession of this land.
The rationale for limitation of actions was considered in R B Policies at Lloyd’s v Butler  2 All ER 226 at pages 229 – 230 per Streatfield J:
I cannot think that that is the policy of the Limitation Act, 1939, or that to construe its words in favour of the plaintiffs would be to construe them in a way which harmonises with the intention of the legislature. I agree that one of the principles of the Act is that those who go to sleep on their claims should not be assisted by the courts in recovering their property. But another equally important principle is that there shall be an end of these matters, and that there shall be protection against stale demands. In A’ Court v Cross, Best CJ referred to the policy of the Limitation Act, 1623, in this way (3 Bing 332):
“It has been supposed that the legislature only meant to protect persons who had paid their debts, but from length of time had lost or destroyed the proof of payment. From the title of the Act to the last section, every word of it shows that it was not passed on this narrow ground. It is, as I have heard it often called by great judges, an act of peace. Long dormant claims have often more of cruelty than of justice in them.” ”
As I have noted above if a right that is barred by statute is pursued through a demand notice as in this case, it is up to the person from whom the monies are demanded to deny it. The plaintiff could have said that they are not liable and that would have been the end of the matter. On the other hand the defendants could have filed an action if they were entitled to the money. It could not be based on the previous decree as submitted by the defendants counsel. This could only have been on the basis of the accrual of a fresh cause of action. This is based on section 22 (4) and 23 of the Limitation Act. In the case of Jones v Bellegrove Properties Ltd  2 All ER 198 Lord Goddard CJ in interpreting a statute in pari materia with section 22 (4) held that the statute does not extinguish a debt. It only bars the right of action. An acknowledgement leads to the accrual of a new cause of action. In this case there was no counterclaim based on an alleged fresh cause of action by the defendants. The defendants did not plead acknowledgement of a debt within the context of the Limitation Act. Instead the written statement of defence pleads an admission of the debt based on the decree of 1997. Learned counsel for the defendant further admitted that the defendants had no counterclaim in the suit.
As it were, before any further action could be taken by anybody, the plaintiffs rushed to court to seek declarations. Order 2 rule 9 of the Civil Procedure Rules permits the court to make binding declarations in the following words:
"No suit shall be open to objection on the ground that a merely declaratory judgement or order is sought by the suit, and the court may make binding declarations of right whether any consequential relief is or could be claimed or not."
The plaintiffs are entitled to seek declarations of right without reference to the enforcement of those rights. In the case of Ellis vs. Duke of Bedford (1899) 1 Ch 494 Lindley MR at page 514-515 interpreted rules in pari materia with order 2 rule 9 where he said: .
Moreover now, under the Judicature Act, actions can be brought merely to declare rights, and this is an innovation of a very important kind. I am referring to Order XXV rule 5 which says ‘No action shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the court may make binding declarations of right whether any consequential relief is or could be claimed or not.’ Having regard to that rule, it appears to me impossible now to say that one grower could not maintain such an action as this, on behalf himself and all other growers of fruit and vegetables, to assert preferential rights to which he says the whole class of growers are entitled”.
Such a declaration of right is made without reference to their enforcement. In the case of Guaranty Trust Company of New York versus Hannay and Company Limited  2 KB 536 at page 562 Pickford LJ held:
“… I think the effect of the rule is to give general power to make a declaration whether there be a cause of action or not, and at the instance of any party who is interested in the subject matter of the declaration. It does not extend to enable a stranger to the transaction to go and ask the court to express an opinion in order to help him in other transactions...”
At page 572 Bankes L.J stated that the rule should be given a liberal interpretation. He said:
“In every action there must be a plaintiff who is the person seeking relief (Judicature Statute Act, 1873, s. 100), or to use the language of order XVI, r. 1, a person in whom a right of relief is alleged to exists, whose application to the Court is not to be defeated because he applies merely a judgment or order, and whose application for declaration of his right is not to be refused merely because, he cannot establish a legal cause of action. It is essential, however, that a person who seeks to take advantage of the rule must be claiming relief. What is meant by this word relief? When once it is established, as I think it is established, that a relief is not confined to a relief in respect of a cause of action it seems to follow that the word itself must be given its fullest meaning. There, is, however one limitation which must always be attached to it, that is to say, the relief claimed must not be something unlawful or unconstitutional or inequitable for the court to grant or contrary to the accepted principles upon which the exercises jurisdiction. Subject to this limitation, I see nothing to fetter the discretion of the Court in exercising a jurisdiction under the rule to grant relief, and having regard to the general business convenience and the importance of adapting the machinery of the Courts to the needs of suitors I think the rule should receive as liberal a construction as possible.”
In conclusion the plaintiffs would be entitled to a declaration notwithstanding whether any consequential relief could be sought. Therefore in as much as the right to a declaratory order is concerned, it is sufficient to note that section 35 of the Civil Procedure Act and the Limitation Act section 3 thereof barred both enforcement of the decree of 1997 or any purported interest that may have accrued from 1997. Even if no action has been commenced by the defendants, the plaintiffs would be entitled to a declaration of their rights without reference to how it could be enforced. As I have noted above, the question of whether there was accrual of a fresh cause of action pursuant to payment by the plaintiffs of Uganda shillings 5,000,000/= can only be determined if the defendants had filed an action for relief on the basis of any alleged fresh cause of action. That is not the case in this matter. It is the plaintiffs who were seeking refund of shs 5,000,000/= in the current suit. This cannot be determined on the point of law argued in this matter. A demand was made for this money and the plaintiffs paid. Whether they were acting under a mistaken belief is a matter for trial and determination after evidence has been adduced.
Whether the claim or charging of interest was an illegality under the Financial Institutions Act?
Learned counsel for the plaintiff submitted that under the Financial Institutions Act, on the liquidation of Greenland bank its licenses was revoked by the bank of Uganda under section 30 of the Act and the bank of Uganda discontinued operations of the said Greenland bank. Consequently it is the contention of the plaintiff's counsel that the continued charging of interest by the defendants has no legal basis. Learned counsel for the plaintiff also submitted that the contract which existed was between the plaintiff and Greenland bank but there was no contractual relationship with the defendants.
In reply, the defendant argued that no evidence was led or admissible that the licence of the defendant bank had been revoked. Counsel for the defendants contended that section 30 of the Financial Institutions Act should be read together with section 10 of the said Act. Secondly the defendants counsel argued that the provisions of law quoted do not specify that a bank under liquidation shall have its licenses revoked. That the power to revoke the license is discretionary and no evidence was led to show that the licenses had been revoked.
Paragraph 10 of the plaint avers that on the 1st day of April 1999 the first defendant bank was closed by Bank of Uganda and placed under liquidation as "Greenland Bank in Liquidation". At the time of the alleged closure by the bank of Uganda, the relevant law was the Financial Institutions Act chapter 54 laws of Uganda since revoked by the Financial Institutions Act 2004. In rejoinder to the respondent/defendants submissions learned counsel for the plaintiff contended that under section 30 of the Financial Institutions Act, Greenland bank Ltd was closed. Bank of Uganda as the central bank followed sections 30, 31 and 32 and seized the bank and finally wound it up. Section 30 (1) of the Financial Institutions Act gives powers to the central bank to take possession of a financial institution under certain situations which are spelt out therein. Section 30 (2) applies certain conditions to the financial institution that is seized under the section. Section 31 deals with management of the seized financial institution. Finally section 32 (1) provides that the central bank or an appointee of the central bank upon a financial institution becoming insolvent, shall be the receiver of the financial institution. I agree with the submissions of learned counsel for the defendants that section 10 of the Financial Institutions Act gives the bank of Uganda discretionary powers to revoke the licence of the bank. It provides as follows:
“10. Revocation of licence.
The central bank may, at any time, in consultation with the Minister, revoke a licence of a financial institution if it is satisfied that the financial institution—
(a) has ceased to carry on business;
(b) has been declared insolvent;
(c) has gone into liquidation;
(d) has been wound up;
(e) has been dissolved;
(f) is carrying on business in a manner detrimental to the interests of depositors;
(g) has failed to comply with any condition stipulated by the central bank under section 6(5).”
No evidence has been adduced that the licence of Greenland bank had been revoked by the bank of Uganda. The submissions of learned counsel for the plaintiff were therefore without any factual basis and cannot be accepted or argued as a point of law. The point of law submitted on cannot be decided on the basis of the materials on the court record.
Paragraph 6 of the plaint provides that the plaintiffs claim against all the defendants jointly and/or severally is for declarations that the purported claim of Uganda shillings 373,305,924/= is null and void. Secondly it is for a declaration that the demand of Uganda shillings 5,000,000/= is illegal and for a refund of the same.
Having made the above findings the following declarations are made under order 2 rule 9 of the Civil Procedure Rules:
- That no interest was awarded in the judgment and decree of the High Court in High Court civil suit number 478 of 1996 between the parties to the suit.
- That no fresh execution proceedings had been commenced in High Court civil suit number 478 of 1996 since 1997 and such fresh execution if attempted would be barred under section 35 of the Civil Procedure Act.
- Under section 3 of the Limitation Act and section 35 of the Civil Procedure Act any claim arising from High Court civil suit number 478 of 1996 is barred by limitation.
- Any caveat lodged on the plaintiff’s property by the defendants cannot have as its basis the decree in HCCS No. 0478 of 1996 which decree no longer has any enforceable interest.
A declaration cannot be made about the payment of Uganda shillings 5,000,000/= by the plaintiffs to the defendants as prayed for by the plaintiff.
Furthermore, the payment of Uganda shillings 5,000,000/= by the plaintiffs to the defendants cannot form the basis of any order as it was not indicated whether the demand amounted to a tort or breach of any right. In any case the matter cannot be determined on the point of law in view of the contention of the defendants that it amounted to an admission of a claim.
The plaintiff is awarded half of the taxed costs of the suit having succeeded in obtaining some declarations. The plaintiffs claim for special, general and aggravated damages is set down for hearing on merits after evidence as prayed for in the notice of motion.
Judgment delivered in open court this 26th day of March 2012
Ruling delivered in the presence of:
Brian Othieno for the plaintiffs,
Plaintiffs in court,
Nobody for the respondent.
Ojambo Makoha Court Clerk
26th March 2012