Court name
Supreme Court of Uganda
Judgment date
20 December 2004

Pearl Motors Ltd v Bank of Baroda (U) Ltd (Civil Appeal-2002/15) [2004] UGSC 34 (20 December 2004);

Cite this case
[2004] UGSC 34

THE REPUBLIC OF UGANDA

IN THE SUPREME COURT OF UGANDA

AT MENGO

CORAM: ODOKI, CJ; ODER; TSEKOOKO; KAROKORA, AND
MULENGA, JJS.

CIVIL APPEAL NO. 15 OF 2002

BETWEEN
PEARL MOTORS
LTD:
:::::::::: APPELLANT

AND

BANK OF BARODA (U) LTD:
::::::::::
RESPONDENT

(Appeal from the judgment of the Court of Appeal the Hon. Justice L. E.
M. Mukasa-Kikonyogo, DCJ, G. M. Okello, JA, and C. N. B. Kitumba,
JA, Dated the
16th day of May 2002, in Civil Appeal No. 32 of
2001)




REASONS FOR THE JUDGMENT OF THE
COURT:


On 7th October, 2004, we heard this appeal and dismissed it with
costs. We promised to give our reasons which we now give.

The background facts of the case were as follows:

The respondent, a limited liability company, is a commercial banking
institution. The appellant is also a limited liability company,
a dealer in
motor vehicles and had an account No. 017/60/07475 with the respondent bank. By
its letter dated 24th June 1992 (Exh. D1), the respondent agreed to
grant credit facility to the appellant by way of an overdraft in the sum of
Uganda
Shillings 200,000,000=. The appellant obtained the loan on 24th
April 1993. The terms and conditions of the loan were stipulated in the
Exh. D1. The loan was payable within 12 months and the interest
rate was 24%
p.a. The appellant had to provide a number of securities to the respondent which
included inter alia - Plot No. 13 Jinja
- Road which belonged to East African
General Insurance Company, Block 236, Plot No. 722, Bweyogerere, Plot No. 22
Block 635, Kireka.

The appellant used the loan money to import vehicles for sale. Vehicles were
imported hut owing to market conditions they were sold
at loss.

By 26th April 1996, the appellant had paid a sum of Uganda
Shillings 307,097,916= to the respondent which included the principal sum and
some interest. The appellant had contended that by so doing it had discharged
its indebtedness to the appellant. It therefore, demanded
for the return of the
four above mentioned securities. The respondent refused to return the securities
on the ground that the appellant
had not paid unapplied interest amounting to
Uganda Shillings 79,913,308=. The appellant sued for the return of the
Certificate of
titles. The respondent counter-claimed for the said unapplied
interest. The unapplied interest of Shs. 79,987,916= which, because
of the Bank
of Uganda Regulations, had never been reflected in the appellant's bank
statement. So the appellant did not know how
it was arrived at. The appellant
believed that the interest had been waived. It therefore, disclaimed liability
to pay such interest.
On lst December 1994, the appellant's account
was classified as a non-performing asset. This was done in accordance with the
Regulations
of the Bank of Uganda Norms on Assets Quality For Financial
Institutions (Exh. D10). That meant that any interest could not be debited
to
the appellant's account from the date of classification of the account as a
non-performing asset. That interest had to be kept
on a suspense account. Then
according to the evidence of Margaret Matovu (DW2), Director of the Commercial
Banking of the Bank of
Uganda, the respondent had to keep the appellant's
account according to the Bank of Uganda Regulations. The appellant was bound to
pay unapplied interest unless it was waived by the
respondent.


Appellant's suit was dismissed with costs by the learned
trial judge. Further the learned trial judge entered judgment for respondent
on
the counterclaim for the sum of Shs. 79,913,484=. The appellant was ordered to
pay interest on the counterclaim at 24% p.a. from
the date the counterclaim was
filed till payment in full.


The appellant's appeal to the Court of
Appeal was dismissed with costs hence this appeal.


Originally the
appellant had tiled two grounds of Appeal. However, at the hearing of the
appeal, counsel for the appellant applied
to tile amended Memorandum of Appeal.
Mr. Kanyemibwa, counsel for the respondent opposed the proposed amended
memorandum of appeal.
After hearing both counsel on the application, we allowed
the proposed amended memorandum of appeal to be tiled. It states that:

"That the learned Justices of Appeal erred in law when they did not
subject the evidence on record to a fresh scrutiny as an appellate
court ought
to have done and therefore, failed to find (as they ought to have done) that the
appellant had discharged its obligations
under the overdraft facility and that
its securities ought to have been released by the respondent
Bank."


Mr. Matovu, counsel for the appellant submitted that the Justices of Appeal
did not evaluate and subject the evidence on record to
fresh scrutiny as
appellate court ought to have done and therefore, failed to find that the
appellant had discharged its obligation
under the overdraft facility and that
its securities ought to have been released by the respondent. He contended that
right from
the High Court to Court of Appeal, the wrong document Exh. D 1 dated
24th June 1992, was considered to be a contract document when the
matter came to court whereas the relevant document of contract was not
considered. Counsel submitted that Exh. D1 was a wrong document and that the
document governing the contract was Exh. D 7 dated 29th December
1994.


Mr. Kanyemibwa, counsel for the respondent submitted that the
appeal had no merit. He submitted that counsel for appellant had not
shown any
other document of contract which the courts failed to consider other than Exh.
D1.

On the unapplied interest, the respondent was awarded by the trial court the
interest on the counter-claim amounting to Shs. 79,913,484=.
There was no appeal
against that award before the Court of Appeal. In the circumstances, the
appellant could not get their securities
until they paid the interest. He
therefore, prayed for the appeal to be dismissed with costs.

It is convenient at this stage to consider and dispose of Mr. Matovu, counsel
for the appellant's submission that the two courts below
wrongly considered Exh.
D1 dated 24th June 1992, to be the contract document whereas the
document governing the contract was Exh. D7 dated 29th December 1994.

With respect, we think that counsel for the appellant was neither honest nor
serious in his submission. In our opinion the letter
Exh. D7 dated 29th
December 1994, though not very legible was complaining about the
appellant's failure to repay the loan. The letter, Exh. D7, stated
in part on
page 2 as follows:

" It is regretting to note that despite several

reminders/letters to you, there is no positive response for repayment
of the loan/overdraft facility sanctioned. We therefore, request
you to settle
the credit extended to you within 14 days from the date of receipt of this
letter failing which we shall he constrained
to proceed against you legally to
recover the outstanding dues, which means auctioning the property mortgaged to
the hank to recover
the above
credit/facility.





Having carefully perused both Exh.
D1 and Exh. D7, we think that Exh. D7 was raised as an afterthought, because
clearly there was
no way either the High Court or the Court of Appeal could have
treated Exh. D7 as a contract, having come in existence only when
the respondent
was complaining about the appellant's failure to repay the loan/overdraft
granted to them under Exh. D1. That was
long after the contract had been
made.

The appellant further complains about failure by the Court of Appeal to
evaluate evidence as required by Rule 29 of the Rules of the
Court of Appeal and
section 12 of the Judicature Act. With respect to learned counsel, we are unable
to appreciate the relevancy
of section 12 in this appeal.

Section 12 of the Judicature Act provides that:

"For the purpose of hearing and determining an appeal, the Court of
Appeal shall have all the powers, authority and jurisdiction vested
under any
written law in the court from the exercise of the original jurisdiction of which
the appeal originally emanated."


Rule 29( I) states that:

"On any appeal from the decision of the High Court acting in the
exercise of its original jurisdiction, the Court of Appeal may:

(a) re-appraise
the evidence and draw inferences of
fact.

(b) In its discretion, for sufficient reason, take additional evidence or
direct that additional evidence be taken "


The power of a first appellate court to re-evaluate evidence is not a new
principle. In Coghlan - v- Cumberland (3) [1898] 1 ch 704,
the Court
of Appeal in England held, " where, as in this case,
the appeal turns on a question of fact, the Court of Appeal has to bear in mind
that its duty is to rehear
the case, and the court must reconsider the materials
before the judge with such other materials as it may have decided to admit.
. .
.

In Peters - v - Sunday Post [1958] EA 424 the Court of Appeal
for Eastern Africa stated inter alia that:

" an appellate court has, indeed, jurisdiction to review
the

evidence in order to determine whether the conclusion originally
reached upon that evidence should stand."

In our recent decision of Kifamunte Henry - v - Uganda, Cr. Appeal No.
10/1997 we reiterated that it was the duty of the first appellate court to
rehear the case on appeal by reconsidering
all the materials which were before
the trial judge and make up its own mind.

It is trite that failure by a first appellate court to re-evaluate the
material evidence constitutes an error in law. See also Pandya - v - R
[1957] EA 336.



In the instant case, with respect, we think
that the contention of Mr. Matovu were not well founded. The lead judgment of
Lady Justice
Kitumba, JA, contains a full re-evaluation of the evidence adduced
before the learned trial judge and how the learned trial judge
had handled the
evidence. For instance at page 31 of the record of Appeal, Lady Justice Kitumba,
JA, while re-evaluating the evidence
as adduced before the learned trial judge
stated that:

"The learned trial judge in her judgment said that both parties did not
dispute Exh. D1 which set down the terms and conditions of
the overdraft
agreement. One of the terms was the payment of interest. She examined the
correspondence between the parties which
were exhibited at the trial. She
observed that some of the letters of demand from the respondent mentioned the
amount owed by the
appellant to the respondent. Those letters stated what was
the principal sum and what was the interest "


Further, in her re-evaluation of the evidence, lady Justice Kitumba, JA,
considered the letter dated 11th November 1994, where defendant had
mentioned the amount owed by the plaintiff differentiating the principal from
the interest. The
letter stated in part :

"Refer to your letter PSM/SK/95/94 dated 4/11/94, requesting us to
extend repayment of your overdraft to 31/12/94. You are aware this
overdraft is
long overdue and present balance of Shs. 244,802,823= is in excess of the
sanction limit of Shs. 200 million we therefore,
propose that if you wish that
we should approach our authorities for extension, you should offset the interest
amounting to Shs.
45 million immediately."



The learned lady Justice of Appeal quoted several letters on the subject
where in the respondent was demanding repayment of the loan.
She in particular
referred to a letter dated 10/10/95 (Exh. D5) which concluded as follows:

"We therefore request you to submit your repayment plan and
arrangement to clear all dues not later than 15/12/95. For your information
present outstanding debit balance on the account is Shs. 194,567,591= after
credit of 25 million on 27/09/95. It does not include
unapplied interest which
has accumulated to Shs. 43,121,966=."

The learned Justice of Appeal thereafter cited the appellant's letter
addressed to the respondent dated 14/11/95, (Exh. D6) in which
the appellant
acknowledged the indebtedness. That letter stated in part as follows:

"Re: Outstanding Overdraft.

First and foremost we would like to thank you for your patience with us
in recovering the above outstanding overdraft. Although its
clearance has not
been on schedule we are committed to getting it cleared within a short
time

(4) And as we write, we are negotiating with one Indian Investor
prepared to offer Shs.15 million per acre for 15 acres, total Shs.
225
million."


Apparently, later the appellant paid Shs. 194,647,591= mentioned in Exh. D5,
but failed to pay the interest. When the appellant demanded
for the release of
the securities, the respondent refused to release them before interest was
paid.


The learned Justice of Appeal agreed with the finding of the
learned trial judge that the appellant had not discharged its contractual
obligation under the overdraft agreement. She held that the respondent's refusal
to release the securities was not a breach of contract.
She dismissed the appeal
with costs. The other two Justices of Appeal concurred with her. We are
satisfied that the Court of Appeal
as a first appellate court re-evaluated the
evidence properly before it dismissed the appeal. In our opinion, this appeal
has no
merit.

It was because of the foregoing reasons that we dismissed the appeal with
costs.

Dated at Mengo this 21st day of December
2004.

J.B. ODOKI
CHIEF JUSTICE

A. O.
ODER

JUSTICE OF THE SUPREME COURT

J. W. N. TSEKOOKO

JUSTICE OF THE SUPREME COURT

A. N. KAROKORA

JUSTICE OF THE SUPREME COURT

J. N. MULENGA

JUSTICE OF THE SUPREME COURT