Court name
Commercial Court of Uganda
Judgment date
15 April 2007

Sarah Kagoro t/a Rwengoma & Quality Tailoring Groups, Nyamurambi Women Group v ECLof (HCT-00-CC-CS-2002/104) [2007] UGCommC 34 (15 April 2007);

Cite this case
[2007] UGCommC 34


GROUPS, NYAMURAMBI WOMEN GROUP.….……                                                                                                                                                PLAINTIFF





ECLOF ………………………………………………….                                                                                                                                                   DEFENDANT








The defendant M/S Uganda Ecumenical Loan Fund (ECLOF) is a Micro Finance Credit Institution. The plaintiff Sarah Kagoro trading as Rwengoma Women Group, Quality Tailoring Group and Nyamurambi Women Group was a client of the defendant since 1995.

The plaintiff’s claim is that in December 1995 she obtained a loan of shs 13,125,000/= with 17% interest per annum repayable within a period of three years. That for the said loan she pledged her workshop machinery as a security to wit:


Vanguard Electricity Generator
(ii)     Button Honor Electric Sewing Machine
(iii)    Electric Rocking Sewing Machine
(iv)     A Button Fixing Machine
Before wholly repaying the first loan she contracted another loan under the same terms and using the same machinery as security. She stated that both the first and the second loan have been fully paid. In March 1999 the plaintiff obtained another loan under the same terms. In May 1999 without any warning or notice, the defendant instructed M/S Maka General Agencies Auctioneers who impounded her machines to wit five electric sewing machines and two Juki Sewing machines which were not part of the security pledged to the defendant. The plaintiff contends that the seizure of her tailoring workshop machinery was unlawful, vindictive and high handed.

The plaintiff further claims that the defendant maliciously and wilfully wrote to the United States Embassy Visa Section, claiming that she was indebted to the defendant to the tune of Shs40,000,000/= and as such she should not be granted a visa to go to the United States. She claims for general damages, recovery of the machines or its market value, interest and costs.

In its written statement of defence the defendant stated that the plaintiff obtained three consecutive loans of:


Shs 13,125,000/= in December 1995.
(ii)     Shs 13,500,000/= in August 1996
(iii)    Shs 12,240,000 in May 1998
That the plaintiff did not repay the loan monies. That all the plaintiff’s workshop machinery were pledged as security for the loans from the defendant in a separate oral agreement which empowered the defendant to impound and sell the plaintiff’s machinery upon the plaintiff’s default in loan repayments. The defendant counter claimed for shs.43, 263,298/= being the total of principle and interest on the loan.

In her reply the plaintiff in an answer to the counter-claim restated that the 1st and 2nd loans were paid, save Shs, 3,500,000/= which was owing on the second loan at the time of attachment of her goods.

Representation was Mr. Vincent Kamugisha for the plaintiff. Counsel for the defendant was Mr. Ezekiel Muhanguzi and later Mr. Erick Muhwezi.

The following facts were agreed at the Scheduling Conference:


The plaintiff obtained three consecutive loans from the defendant as indicated above in the defendant’s written statement of defence.
2.       The plaintiff’s machinery listed in annexture D to the plaint was impounded by the defendant’s agents in a bid to enforce the loan repayment.
3.       The plaintiff owes the defendant a sum of
Shs. 3,500,000/= on the loan of Shs13, 500,000/= granted on 20th August 1996.
(ii)     Shs10,200,000/= on the loan of Shs12,240,000/= granted on 14th May 1998, and
(iii)    Shs4, 300,000/= on account of interest on the above two loans as at the time of attachment of the machinery – i.e. 18th May 1999, making a total of shs18, 000,000/= due.
The machines attached and listed in the said Annextures were:-


Button Hounor – One Electric Machine
2.       Rock Sewing Machine – one Electric Machine
3.       One Vanguard Petrol Generator
4.       One Button Fixing Machine – Brother Model – Electric
5.       Five Brother Sewing Machines Electric
6.       Two Uaki Sewing Machines Electric
The following issues were agreed for Courts determination:


Whether the plaintiff is indebted to the defendant and if so by what amounts?
2.       Whether the defendant’s impounding of the plaintiff’s machinery was lawful?
3.       If not, what remedy is available to the plaintiff?
4.       What other remedies, if any, are available to the parties?
Issue No. 1 Whether the plaintiff is indebted to the defendant and if so by what amounts?
It was an agreed fact that the defendant had advanced to the plaintiff three consecutive loans as follows:-

December 1995 – Shs13, 125,000/=
August 1996 - Shs13, 500,000/=
May 1998 - Shs12, 240,000/=

On the above loans the defendant counter-claimed as follows:

1st Loan                  Shs9, 240,625/= principal and
Shs 789,019/= interest

2nd Loan                  Shs13, 309 000/= principal and
                           Shs 1,533,254/= interest

3rd Loan                  Shs 12,240,000/= principal and
Shs 6,242,400/= interest

Thus making a total claim of Shs43, 263,298/= being Shs, 34,798,625/= principal and Shs8, 464,673/= interest. The defendant did not call any evidence to prove its counter claim. A claim of this nature is a claim for special damages and as such must not only be specifically pleaded but also strictly proved. See Kyambadde Vs Mpigi District Administration (1983) HCB 44. However, the plaintiff in her reply to the written statement defence and counter –claim in answer to the counter claim admits owing shs3, 500,000/= on the second loan. At the Scheduling Conference it was agreed as a fact by both parties that by the time of impounding the plaintiff’s machines on 18th May 1999 the plaintiff owed the defendant a total of shs18,000,000/= in respect of the second and third loans. Therefore as submitted by Counsel for the defendant this issue was resolved by admission of the plaintiff and conceded by the defendant at the Scheduling Conference that the amount owed by the plaintiff to the defendant on account of the loan and interest at the time of filing of the suit and counter-claim was Shs18,000,000/=. In answer to the first issue I accordingly find that the plaintiff was indebted to the defendant in the sum of Shs18, 000,000/=

Issue No. 2 Whether the defendants impounding of the plaintiffs machinery was lawful?
It is an agreed fact that the plaintiff’s machines as listed in Annexture D and listed here in above were impounded by the defendant. The machines were impounded on 18th May 1999. In her testimony the plaintiff stated that she received all the three loans on identical agreements, that is identical to exhibit P1 and exhibit D1 (a). The agreements provided:-
“3. If any of the said instalments of the principal sum or any party thereof or under this Agreement is in arrears for --- after the same has become payable as aforesaid then the whole of the said sum of Shs --- (Shillings ---) or of such part thereof as is for the time being unpaid shall thereupon immediately become due and payable with interest thereon at the rate aforesaid to the date of actual payment thereof.


In the event of default or failure by the Borrower to pay any sum due and payable under the Agreement, the Lender shall be obliged to seek appropriate legal redress and may for that purpose institute legal proceedings against the Borrower and or the Guarantor for the recovery of the amount due and payable.”
The plaintiff testified that she had fully settled the first loan. There is no evidence to contradict her testimony with respect to the first loan. I therefore find that by 18th May 1999 when the plaintiff’s machines were impounded she had fully settled the first loan.

The only documentary evidence available in respect of the second loan of Shs13, 500,000/= are of the Ledger Card, exhibit D3 (c) and the Proposed Repayment Schedule – Exhibit D3 (d). The two documents show that the loan was payable over a period of four years effective from 20th August 1996 to 20th August 2000. The plaintiff in her testimony stated that when she received the third loan, which was on 14th May 1998, she still had an outstanding amount due on the second loan in the sum of Shs 3,500,000/= Her testimony is corroborated by that of PW2 Abila Patrick, who was the defendant’s Credit Officer at the time when the third loan was granted. This was the balance due and agreed upon by the parties at the Scheduling Conference.

The Loan Agreement, exhibit D1(a), the Proposed Repayment Schedule, Exhibit D1(c) and the Ledger Card, Exhibit D1(d) show that the third loan of Shs12,240,000/= was granted on 14th May 1998 payable in a period of three years effective from 22nd August 1998 until 22nd June, 2001. The letter Exhibits P2 show that the defendant on 18th May 1999, by that letter, instructed M/S Maka General Agencies to recover Shs18,000,000 from the plaintiff by attachment and selling mortgaged properties to wit a generator and electric sewing machines. By letter
of the same date, exhibit P3, M/S Maka General Agencies demanded from payment and gave notice of attachment in default of payment. The inventory of attached properties, exhibit, P4, shows that the attachment was done the very day, 18th May 1999. This was one year and three days for the date when the third loan was granted on 14th May 1998. It is the plaintiff’s testimony that she had not made payment on the third loan. The loan Agreement, exhibit D (a) shows that the first instalment on the third loan was due on 22nd August 1998.

The evidence clearly shows that by 19th May 1999 when the plaintiff properties were impounded by the defendant there was default of payment in respect of the second and the third loans. The plaintiff testified that she had experienced financial problems and had notified the defendant of her inability of to pay at the time and the defendant had accepted her plea. PW2, the defendants Credit Officer then, testified that the defendant’s policy in the event of default was not to take drastic measures like recalling the full loan or attaching the security offered before the maturity date. In respect of second loan the maturity was 22nd August 2000 and for the third loan the maturity date was 22nd June 2001. The property was impounded before the maturity dates of each of the two loans. In the plaintiff’s case PW2 testified that a meeting was held in November 1998 involving the Credit Department, Legal Department and the Programme Manager where it was agreed to put pressure on the plaintiff to pay but not recall the loan or impound the security. In cross- examination the witness stated that the decision of the meeting was communication to the plaintiff. This communication was not adduced in evidence.

Mr. Kamugisha, Counsel for the plaintiff, submitted that the defendants decision to extend the plaintiffs repayment schedule therefore varied and rendered paragraph 3 of the loan agreement which empowered the defendant to recover the whole loan on the failure to pay any instalment inapplicable. That it had been substituted by the new position which extended the repayment period. Counsel argued that the impounding of the machinery was improper because she was not in default as her loan had been extended.

Neither the minutes nor the resolution of the said management meeting nor the communication to the plaintiff was adduced in evidence. The plaintiff has not adduced sufficient evidence to prove an extension of the repayment period in respect of any of the two loans. The repayment schedules and Ledger Cards clearly show that repayment were by instalments at agreed intervals. The relations between a banker and its customer is contractual in nature. It is a relationship which embraces mutual duties and obligations. Monies lent to a customer are repayable either on demand or in the case of term loans at a specified future date. In the instant case the loans were term loans and provided for due dates on which instalments were payable. The mechanics of payment test as stated in the dictum of Blackburn J. In Brightly Vs Norton and quoted by Walton J. in Bank of Baroda Vs Panessar (1986) 3 All ER 751 is:-

“I agree that a debtor, who is required to pay money on demand or at stated time, must have it ready and is not entitled to further time in order to look for it.”
Therefore the loan monies were due and subject to recovery. The issue is whether the defendant acted lawfully when it impounded the plaintiff’s machinery.

The loans were granted upon loan agreements. Apart from a guarantor the loan agreements did not provide for any security. In her testimony the plaintiff testified that there was no security provided for in any of the agreements. That the defendant’s staff visited her workshop looked at her machinery and approved it for security but that in the agreements no security was mentioned. Though not mentioned in the agreements, the practice was that she issued cheques post-dated to the date of payment of each instalment. There was no evidence adduced to contradict her testimony in this regard. Mr. Muhwezi, Counsel for the defendant submitted that the pledging of machinery as security for the loans was verbal and silent on the procedure of enforcing the verbal agreement for recovery of the loan against the security. In Katyoni Vs Kaitumba (1972) 2 ALR Comm (Uganda) Ssekandi Ag J. defined a pledge as a bailment of goods by a debtor to his creditor to be kept with him till the debt be discharged. The general property in the things remains in the pledgor. But a special property in them passes to the pledgee in order that he may be able to sell the goods if his right to sell arises.

However section 6 of the Money Lenders Act provides that no contract for the repayment by a borrower of money lent to him or her by the money lender, or for payment of interest on money lent, and no security given by the borrower in respect of such contract shall be enforceable unless it is in writing and signed personally by the borrower. The plaintiff’s testimony was that the machinery was looked at and approved as security by the defendant’s staff. Approval is subject to being agreed upon as security. There was no written agreement signed by the plaintiff as to security. So even if later there was any such oral agreement of bailment the same would on the basis of section 6 above be unenforceable.

Also section 91 of the Evidence Act provides:

“When the terms of a contract or of a grant, or of any other disposition of property, have been reduced to the form of a document and in all cases in which any matter is required by law to be reduced to the form of a document no evidence , except as mentioned in section 79, shall be given in proof of the terms of that contract, grant or other deposition of property or of such matter except the document itself, or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions herein before contained
And of relevancy to the matter before this court section 92 of the same Act provides:-
“92. When the terms of any such contract, grant or other disposition of property or any matter required by law to be reduced to the form of a document, have been proved according to section 91, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest , for the purpose of contradicting, varying , adding to or subtracting from its terms, but


(b)      the existence of any separate oral agreement as to any matter of which a document is silent and which is not inconsistent with its terms , may be provided. In considering whether or not this paragraph applies the court shall have regard to the degree of formality of the document;
(c)      the existence of any separate oral agreement, constituting a condition precedent to the attaching any obligation under any such contract, grant or disposition of property may be proved,
(d)      the existence of any distinct subsequence oral agreement to rescind or modify any such contract, grant or disposition of property may be proved, except in cases in which that contract, grant or disposition of property is by law required to be in writing or has been registered according to the law in force for the time being as to the registration of documents
(e)      -----
(f)      ---”
In Mujuni Ruhemba Vs Skanka Jensen (U) Ltd (1997 – 2001) UCL 92 the Court of Appeal held:-
“—The law governing variation of contract was stated in Cheshire and Fitoot, Law of Contract, 9th Edition page 535 that:

“an oral variation leaves the written contract intact and enforceable.”

That means that a contract which by law is required to be in writing, can only be varied by subsequent written agreement. Oral agreement cannot vary such a contract. –“

Section 6 of the Money Lenders Act required the loan agreement to be in writing and signed by the borrower. The loan agreements were silent about security, save for the guarantor.

The defendant did not call any evidence to either prove the oral agreement or bring the oral agreement within the exceptions covered by section 92 of the Evidence Act. Any such subsequent oral agreement as to security was illegal and unenforceable. As a remedy in the event of default the loan agreements provided that the Lender shall seek appropriate legal proceedings against the borrower and or the Guarantor. There was no legal proceedings instituted and the plaintiff’s properties were attached without any court order.

However, in her pleadings the plaintiff stated that she pledged her workshop machinery as security to wit.


Vanguard Electric Generator
(ii)     Button Honor Electric Sewing Machine
(iii)    Electric Rocking Sewing Machine
(iv)     A Button fixing Machine
It is trite that a party is bound by her pleadings. Even if on the basis of that it is argued that the plaintiff by her pleadings admitted that the above machinery had been pledged as security, section 40 of the Chattels Transfer Act provides:-
“Where an instrument expressly or impliedly give power to guarantee to sell all or any of the chattels comprised in it without applying to Court, the sale shall be by public auction, unless the grantor and encumbrancers subsequent to the grantee, if any, consent to a sale by private treaty.”
The above section envisages that unless provided otherwise the power to sell by a grantee should be exercised with prior order of Court and by public auction. A guarantee where he exercise his right to liquidate the debt due by attachment and sell of the security he is not required to hold on the security or convert it to its use but he is under a duty to sell the security and use the proceeds to pay off the loan, accumulated interest and costs of the sale and pay the balance over to the borrower, if any. This requirement imposes a duty on the lender to give an accountability of the sale proceeds. There is no evidence that the attached machinery has ever been sold in a bid to liquidate the debt for property impounded in May 1999. Considering all the above I find that the defendant acted unlawfully when it impounded the plaintiffs machinery and continued to detain the same.

Remedies available to the parties

In her pleadings the plaintiff prayed for:-

General damages
(b)      Recovery of the machinery and in the alternative its market value.
(c)      Interest at Commercial ruling rate on (a) and (b)
(d)      Costs
There is no evidence to show that the machinery has ever been disposed of. It can therefore safely be presumed that the machinery is still in the custody of the defendant or its agents. Therefore it is hereby ordered that the defendant do with immediate effect release all the machinery impounded from the plaintiff to the plaintiff, that is;


One electric Button Honor machine
(ii)     One electric Rock Sewing machine
(iii)    One Vanguard Petrol Generator
(iv)     One electric Button Fixing machine – Brother Model
(v)      Five brother Sewing machines
(vi)     Two electric Juki Sewing machines
Court was not at all helped with regard to the alternative prayer. The plaintiff did not adduce any evidence as to the value of the machinery. Her counsel’s submission that the machinery’s estimated value was in the region of Shs40, 000,000/= was not supported by any evidence.

Without any evidence as to the market value of the impounded machinery I am disabled in my assessment. I have not come across any direction in our Civil Procedure Rules as to how the assessment can be done. Yet Article 126(2) (c) of the Constitution enjoins this Honourable Court to ensure that adequate compensation is awarded to victims of wrongs. The machinery was impounded in May 1999 and this suit filed in February 2002. In view of the lapses of time the possibility of the machinery not being available as I make this order cannot be ruled out. Section 98 of the Civil Procedure Act give this Court unlimited inherent powers to make such order as may be necessary for the ends of Justice or to prevent abuse of the process of the Court. In the event the defendant find itself unable to return the machinery to the plaintiff for the proper ends of justice I hereby direct that this file be placed before a Registrar of this court who shall appoint a valuer agreeable to Counsel of both parties who shall give the current market value of the machines impounded. The registrar shall determine the period with which the Report shall be filed in Court. The amount so determined shall be the compensation to be paid by the defendant to the plaintiff, in the event the defendant fails to deliver up the machines to the plaintiff.

As regards general damages the plaintiff’s counsel submitted that the plaintiff had testified that she is now grounded having lost her business and the numerous tenders she had at the time. He therefore suggested an award of shs50, 000,000/= as fairly adequate compensation for the loss suffered. In her testimony the plaintiff merely stated that she had some outstanding orders which she lost. No such pending orders were furnished to help Court satisfy itself on the depth of the alleged loss. I agree with the defendant’s Counsel that it was not enough for the claimant to throw any amount in the face of the Court and pray for the award thereof without any iota of evidence in support thereof. In Fulugensio Samako Vs Edirisa Ssebugwawo (1999) HCB 15 it was held that in an action for damages one of the duties of Counsel should be to put before Court material which would enable it to arrive at a reasonable figure by way of damages.

However the general principal behind an award of general damages is to try and place an injured party in as good as position in money terms as he would have been had the wrong complained of not occurred. General damages are imposed or presumed of have occurred from a wrong complained of on account of the fact that they are its immediate, direct or proximate result. The plaintiff must on a balance of probabilities prove her damage by proving not only that she has suffered damages but also its extent or amount. The plaintiff testified that when the defendant took all the machines she was and has remained grounded. That she had pending orders which she could not do. But did not adduce evidence of any such orders. All the same her machines were for the tailoring business which must have been earning her an income. No records were availed but still, her expectations and business were shattered. The machinery was impounded the same day notice was given to her and the letter stated:

“You are further advised not to resist the lawful execution as this will tantamount to criminal offence.
All relevant authorise are hereby informed.”
The letter was copied, among others, to OPC Kampala Extra, DPC Old Kampala, and L.C.I. of area. Exhibit P4, the inventory of the machinery impounded shows that the machinery was attached the very same day of the notice.

The conduct of the defendant’s agents was high-handed. The plaintiff must have suffered loss and inconvenience a result. Considering all the above I consider an award of shs 4,000,000/= adequate compensation as general damages. I award the same.

The plaintiff prayed for interest on the general damages and the market value. In the event it is the market value as ordered to be paid to the plaintiff, in failure of delivery of the machines, the plaintiff is awarded interest on that market value so ascertained and the general damages above at the court rate from the date of this judgement until payment in full.

The defendant had Counter-claimed for a total sum of shs 42, 263,298/= with costs on the Counter-claim. The defendant did not adduce any evidence to prove its counter-claim. However, at the scheduling conference it was an admitted fact that at the time the plaintiff’s machinery was impounded she owed the defendant a sum of shs 18,000,000/=. Counsel for the defendant in his submission prayed for judgement in the admitted sum of shs 18,000,000/= under Order 11 rule 6 of Civil Procedure Rules. The rule provides:

Any party may at any stage of a suit, where an admission of facts has been made, either on the pleadings or otherwise, apply to the court for such judgement or order as upon the admission he or she may be entitled to, without waiting for the determination of any other question between the parties and the court may upon the application make such order, or given such judgment, as the court may think just.”
Further admission of the plaintiff’s indebtedness to the defendant in the sum of shs 18,000,000/= can be traced in her counsel’s letter to the defendant dated 2nd January 2001, Exhibit D5. Therefore, on the plaintiff’s admission judgment on the Counter –claim is entered in favour of the defendant in the sum of shs18, 000,000/=.

In the final result it is hereby ordered that judgment is entered in favour of the plaintiff in the main suit and it is hereby ordered as follows:-


The defendant should return to the plaintiff all the machines impounded on the 18th May 1999;
Or, in the alternative the defendant shall pay to the plaintiff the current market value of the machines impounded determined in the manner here in above provided.


The plaintiff is awarded general damages of Shs4,000,000/=
(c)      The plaintiff is awarded interest at the current rate on the general damages and in the event it is the market value payable then also on the amount so payable from the date of Judgment until payment in full.
Regarding the counter-claim by the defendant judgment is entered in favour of the defendant in the sum of Shs18, 000,000/=

In view of my find above the plaintiff is awarded 60% of the taxed costs of this suit.

I so order.


Hon. Mr. Justice Lameck N. Mukasa
16th April 2007