When Uganda's highest Court, the Supreme Court on June 6, 2023 ordered that Civil Suit No. 43 of 2020 be remitted to the High Court for retrial before another judge, you would have expected, businessman Ham Kiggundu to be a happy man.
After all it is he who had lodged the case at the High Court, against Diamond Trust Bank Uganda and Diamond Trust Bank Kenya, accusing the two banks of unfair contractual terms and illegal deductions from his accounts. A retrial therefore would mean that he has a chance to prove all his allegations and even get a full account reconciliation of all financial transactions between the parties and possibly a refund of UGX34,295,951,553 and USD USD23,467,670.61 that he says was unlawfully deducted from his accounts.
But hell no!
He doesn't want his case anymore.
He has now petitioned the Constitutional Court, seeking to reverse the Supreme Court ruling, that among others upheld the legality and enforceability of syndicated lending contracts. The legality and enforceability of syndicated lending are at the centre of the businessman's defence after he curiously downplayed his earlier 'illegal deductions" claims.
Under Constitutional Petition No. 18 of 2023, dated 07th of July 2023 Ham, and his two companies, Ham Enterprises Ltd and Kiggs International (U) Ltd, now wants the Constitutional Court to compel the Supreme Court to retry Supreme Court Civil Appeal (SCCA) No. 13/2021 as well as two other related applications.
In his petition brought against the Attorney General and the two banks, Ham Kiggundu says the Supreme Court judgement was injudicious and "in complete violation of the Uganda code of judicial conduct and the Petitioners' inviolable rights to be heard". This, he says, caused him to suffer "an infringement of his constitutional right to a fair hearing".
Through his lawyers, M/s Muwema & Co. Advocates and Solicitors and Kimara Advocates & Consultants, wants the Constitutional Court to compel the Supreme Court to "expunge the proceedings and judgment in CivilAppeal No. 13/2021 from the public records of Uganda" as well as retry the entire Supreme Court Civil Appeal (SCCA) No. 13/2021.
Facts and background to the case
Ham and his companies borrowed money from DTB-U and DTB-K which Ham failed to pay back in full. As a result, DTB commenced a recovery process in early 2020. By this time, the businessman owed DTB-U USD 4,014,444 and DTB-K USD 6,974,600.
In response, Ham filed Civil Suit No. 43 of 2020 in the High Court against the DTB claiming unfair contractual terms and illegal deductions from his accounts. Ham also sought an order directing a full account reconciliation of all financial transactions between the parties.
DTB-U and DTB-K filed a joint defence denying the allegations and reaffirmed that Ham was indebted to both of them in the sum of USD 4,014,444 and USD USD6,974,600 respectively.
DTB conceded to the full account reconciliation as requested by Ham.
However, on 10th August 2020, Ham amended his claim and introduced an entirely new claim, and said the loan agreements were illegal and unenforceable since, among others, DTB-K did now have a license to lend in Uganda. He then, amongst other orders, asked the court to declare that since the money lent to him was lent to him irregularly, illegally and in contravention of the Financial Insinuations Act (2004), the loan agreements were therefore null, void and unenforceable. He instead asked the court to order DTB-U and DTB-K to pay him UGX34,295,951,553/= and USD USD23,467,670.61 respectively; money that he said was unlawfully deducted from his accounts. He also prayed that the Court orders an unconditional removal of mortgages on his properties as well as discharge all corporate and personal guarantees issued to secure Ham's borrowings.
In a 7th October 2020, Justice Adonyo of the High Court ruled in favour of Ham and and ruled that the money lent to the businessman was done so illegally and that it shouldn't be repaid. Ham's properties and all corporate and personal guarantees issued to secure the borrowings were to be released and returned to him.
DTB-U and DTB-K, dissatisfied with Justice Adonyo's ruling, filed an appeal Civil Appeal No 242 of 2021 in the Court of Appeal. On 5th May 2021, the Court of Appeal delivered its judgment, setting aside the orders of Justice Adonyo and ordering that the matter be sent back to the High Court for hearing before another judge.
Cornered, Ham, in Supreme Court Civil Appeal No. 13 of 2021, appealed the Court of Appeal ruling. Before the Supreme Court could deliver its judgement, Ham filed two other applications Civil Application No. 051/2021 and Civil Application No. 015/2023.
However, the Supreme Court went ahead to deliver a judgement in the main appeal, dismissing Ham's appeal altogether. In Summary, the Supreme Court, in a lead judgment by the Chief Justice, Hon. Owiny-Dollo ruled that there was no law forbidding the creation of a syndicated agency relationship such as the kind entered by DTB-U and DTB-K. He further ruled that syndicated lending transactions between foreign banking/non-banking institutions and Ugandan entities did not require Central Bank licensing if the funds involved are not raised from domestic deposits. He concluded that therefore syndicate lending contracts such as the one between DTB and Ham were legal and enforceable.
The Supreme Court also proceeded to uphold an earlier Court of Appeal finding that the High Court awards by Justice Adonyo to Ham were without legal basis.
Having conclusively pronounced itself on the legality of syndicate lending, the Supreme Court then ordered that High Court Civil Suit No. 43 of 2020, which was the genesis of the appeal to the Court of Appeal, and ultimately to the Supreme Court, be remitted to the High Court for trial before another judge; basing only on issues of fact.
Ham's Constitutional Petition
Unsurprisingly, in a Constitutional Petition No. 18 of 2023, Ham is vehemently challenging the Supreme Court decision, saying that it erred when it delivered its judgement before hearing and disposing of Civil ApplicationNo. 051/2021 and Civil Application No. 015/2023.
"The act or conduct of the Supreme Court of scheduling a pre-hearing of Civil Application No. 051 /2021 which was an application for judgment on admission and then declining to pre-hear the said application, was an injudicious and biased act which infringed the Petitioners' inviolable right to a fair hearing contrary to and in contravention of Articles 2, 20,21, 28, 44, 126 and 128 of the Constitution," Ham contends in his Constitutional Court Application.
"The act and/or conduct of the Supreme· Court of receiving and declining to hear Civil Application No. 15/2023 to interalia adduce additional evidence from the Central Bank of Kenya indicating that the 3rd Respondent (DTB-K) had committed illegalities in respect of the credit transaction with the Petitioners, was animproper and inappropriate exercise of judicial power and thereby infringed the inviolable right to a fair hearing contrary to Articles 2, 20, 21, 28, 44, 126 and 128 of the Constitution," Ham adds in his application.
Ham also says that the Supreme Court's ruling on syndicated lending was extrinsic to Civil Appeal No. 13/2021 and therefore injudicious.
Ham also wants the Constitutional Court to declare that the "act or conduct of the Supreme Court declaring that foreign lending by foreign banks should be free and unregulated in Uganda usurps the power of Parliament to legislate against illicit money transactions, is an improper and inappropriate exercise of judicial authority andis a craw back on the public policy of Uganda which is inconsistent with and is in contravention of Articles 2, 28, 44, 79, 123 and 126 of the Constitution."
The Supreme Court is yet to fix a date for hearing the application.
Experts weigh in on the case
Commenting on this case earlier, senior commercial and corporate lawyers very familiar with the banking industry have said that Ham is "simply buying himself" more time to "organise his house". Some other analysts have suggested that he is trying to stretch this case so as to "get enough time to first pay off other banks, which will then free liquidity to pay off DTB-U and DTB-K when finally the noose tightens around his neck".
It shall be recalled that besides being indebted to DTB-U and DTB-K, the businessman on 04th April 2019 borrowed USD 7 million from Absa Bank Uganda. Around the same time, he borrowed UGX5 billion from Orient Bank (now I&M Bank Uganda). The repayment status of these two other loans is not clear but the CEO East Africa Magazine understands that around the same time, the DTB loans went bad, Ham was equally having problems servicing those two other loans as well.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
Writing soon after the Supreme Court ruling, respected lawyers, Phillip Karugaba and Rehema Nakirya Ssemyalo of ENS Africa said that the legality and enforceability of syndicated lending notwithstanding Ham would still have been obligated to repay the loan, as the Contracts Act 2010, binds a person who receives an advantage under a void agreement to restore it or pay compensation to the person from whom they received the advantage.
"Even if the court had found it illegal for a foreign lender to advance a loan to a Ugandan borrower without a licence from the BoU, the borrower would still have been obligated to repay the loan. Under the Contracts Act 2010, a person who receives an advantage under a void agreement is still bound to restore it or pay compensation to the person from whom they received the advantage. In other words, the borrower (Ham) would still have to repay the debt to DTBK," wrote.
Using the Supreme Court of Zambia's precedent in the Zambia Extracts Oils and Colourants Ltd v Zambia State Insurance Pension Trust Fund (SCZ Judgment No. 31 of 2016), the two lawyers opined that "allowing the borrower to walk away with such a substantial sum without repaying it would be unconscionable and contrary to public policy and public interest".
"The courts must consider public policy concerns before invalidating such contracts. For example, a finding that a contract made with an unlicensed banker is invalid would mean that persons who had deposited money with such an unlicensed banker would be unable to recover money that such an unlicensed banker had lent as it would be disabled from performing its own obligations, including those owed to its depositors," reasoned Karugaba and Nakirya.
Additional reporting from CEO East Africa Magazine
