THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
HCT - 00 - CC - CS - 358 - 2006
DAMAS MULAGWE :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: PLAINTIFF
LANEX FOREX BUREAU LTD
2. STANHOPE FINANCE CO. LTD
3. NOORALI MANJI :::::::::::::::::::::::::::::::::: DEFENDANT
4. MOHAN DROLIA MANJI
5. DIAMOND DROLIA
BEFORE: HON. JUSTICE GEOFFREY KIRYABWIRE
J U D G M E N T
The Defendants deny the allegations and in the particular the second to fifth Defendants aver that the claim discloses no cause of action against them. The first and second Defendants at the time of the suit were closed following statutory intervention by the Central Bank.
At the pre trial scheduling conference, the following issues were agreed for trial;
2) Whether the Plaintiff did make a deposit with the first Defendant of US$160,000 as alleged?
3) If the Issue No. 2 above is answered in the affirmative, whether the Defendants or any of them is liable to pay the Plaintiff the said sum with interest as claimed?
Before I address my mind to the above issues, it is important to point out that the Court found itself in quite a dilemma when the tapes used to record the proceedings turned out to be counterfeit and the whole recorded proceedings were lost. It took a very long time to resolve this matter until all the parties agreed that the lawyers provide court with their hand written notes to guide the Court and form the Court’s record. For this practical solution the Court thanks the parties and their lawyers.
Secondly, counsel for the Plaintiff in their written submissions sought to add an issue under order 15 rule 5 (1) of the Civil Procedure Rules (CPR).
This issue is whether or not if the Plaintiff made the alleged deposit with the first Defendant, such a transaction is enforceable in law?
Counsel for the Defendants objected to this addition and did not address it directly. That notwithstanding, I find that the added issue is really part of Issue No. 3 as framed before court and both parties generally submitted on it and Court will therefore incorporate its detail within Issue No. 3 as no prejudice has been occasioned to the parties.
Section 20 (2) of the Foreign Exchange Act 2004 seems to resolve this whole issue. It provides
Counsel for the Defendants challenged Exh. P.1 on the grounds that the wording showed that the deposit had been made at once whereas the testimony of the Plaintiff showed otherwise that the monies had been accumulated over time. This submitted counsel for the Defendants was a modification of a written document which was not admissible under Sections 91 and 92 of The Evidence Act. Counsel for the Defendants attacked the credibility of Mr. Solanki (the manager of the first Defendant at the time) observing that he had made an admission that he forged several telegraphic transfers and was a convicted felon whose evidence should not be relied upon.
I have addressed my mind on the submissions of both counsel and the evidence before me.
The resolution of this issue is really a finding of fact. I have already found that the first Defendant under the law was prohibited from taking deposits as a forex bureau. There is however overwhelming evidence that the first defendant actually did take deposits from the public and this among other things led to the suspension of its license by Bank of Uganda. Indeed counsel for the first Defendant wrote on the 21st November, 2005 (See Exh. P.9) indicating that some claims would be paid while others which included that of the Plaintiff required further discussions. It is important to note that; in that letter, counsel for the first Defendant noted that they wanted “… a meeting to have all pending claims settled once and for all …”
A review of Exh. D.6 which is a table entitled “claims considered for settlement” show a list of 37 claimants seeking refund from the first Defendant. Only claims number 36 for M/S Leo Impex (U) Ltd and 37 for the Plaintiff are deposits not linked to telegraphic transfers. Furthermore, it is only the deposit of the Plaintiff that has an interest component. In that regard, the transaction between the Plaintiff and the first Defendant is unique when compared to the rest of the cases. In any event all the transactions in exhibit D.6 are not spot transactions and can therefore be deemed to be deposits from the public. That notwithstanding, there is evidence that about a year earlier on the 19th February, 2004 the Plaintiff in a similar manner deposited US$60,000- at an interest rate of US$4,500- per month (Exh. P.16).
These are two documents namely; Exh. P. 1 and 16 seem to suggest a course of dealings between the Plaintiff and the first Defendant that is a relevant fact within the meaning of Section 15 of The Evidence Act (Cap 6). That fact is that it is in 2004 and 2005 similar transactions had occurred and were documented. Based on the evidence before me therefore, I find that the Plaintiff did deposit the said US$160,000- with the first Defendant.
Counsel for the Plaintiff submitted that; the money is indeed recoverable and therefore the transaction should be seen as enforceable.
He submitted that the duty to observe the law is on the person who asks for, solicits or receives the money but not on the person who submits to the demand and pays the money. In this regard, I was referred to the case of
Following the findings in the earlier issues, this issue to my mind is straight forward. I have already found on the evidence before court that the Plaintiff deposited the US$160,000-. The evidence also shows that even after closure by the Central Bank when the first Defendant found a genuine case of money deposited with it, then the claimant was settled. In other words, that money deposited with the first Defendant was treated as had and received. I see no reason to treat this case in a different way. The said deposit of US$160,000- is money had and received and should be refunded. I so order that the first Defendant repay it.
As to the interest of US$12,000- per month also claimed by the Plaintiff, I find that this is not recoverable because it would go contrary to Regulation 15 of the Exchange Control (Forex Bureau) order 1991 which prohibits any business other than a spot transaction.
I however agree with counsel for the Defendant that there is no liability that has been established beyond the first Defendant that affects the second to fifth Defendants. The Plaintiff in paragraph 9 his plaint only pleads common management, directorship and shareholding in respect of the second, third, fourth and fifth Defendants. That in my view without more is not sufficient to lift the corporate veil against them. I agree that; Mr. Solanki appears to have been behind this whole mess. That notwithstanding, the other Defendants at best can be said to have exercised extremely poor corporate governance in the management of the first Defendant that had a collateral effect on what happened.
I accordingly dismiss the case against the second, third, fourth and fifth Defendants.
Issue No. 4: Remedies
I accordingly find that the claim for US$160,000- has been proved as money had and received and should be paid without interest as this was a prohibited transaction. The prayer for general damages is equally denied for the same reason given above.
In line with my holding in Wamala Nanseera V North Bukedi Cotton Company Ltd. High Court Civil Suit No. 755 of 2005; where a party exercises poor corporate governance which contributed to the dispute that party though successful should be denied costs. For that reason, the second, third fourth and fifty Defendants are denied costs. The Plaintiff was involved in a prohibited transaction and shall also not benefit from costs. Each party shall therefore bear their or its own costs.
Justice Geoffrey Kiryabwire
Judgment read and signed in open Court in the presence of;
- Kalibala h/b for Masembe for Defendant
- Ruth Naisamula – Court Clerk