Commercial Law Index

This is an appeal of the decision of the trial court that found the assignment of the respondent’s debt to the Assets Management Corporation of Nigeria (AMCON) as being illegal, unlawful and negligent in law.

The court determined the first issue: whether the trial court erred in its interpretation of the AMCON Act in relation to assignment of the debt and finding that the assignment was illegal, unlawful and negligent in law. The court held that the provisions relied on in the AMCON Act were clear and its only duty was interpreting the provisions according to their literal meaning not varying them. It was held that the trial court erred in its determination thereof. With respect to the other issues, the court held that the resolution of the first issue disposed the appeal making the other issues irrelevant. Accordingly, the appeal was allowed and the judgment of the trial court was set aside with costs in favour of the appellant.

The issue was whether the unilateral withdrawal of a bank guarantee by the appellant amounted to breach of contract.

The appeal emanated from judgement of trial court which found that the withdrawal of a bank guarantee by the appellant
was in breach of contract. The appellant had advanced a bank guarantee to the respondent to guarantee its trading capacity with MTN, a communications company for which it was a distributor. The parties agreed that the contract can only be terminated by giving 60 days’ notice period. The appellant unilaterally terminated the contract. 

The respondent successfully challenged the termination in a lower court and was awarded damages amounting to ten million Naira with pre-trial interest. The appellant appealed the decision on the basis that it withdrew the bank guarantee after the respondent breached the agreement. It argued that the respondent’s claim was premised on negligence which had not been proven.

The respondent maintained that the appellant breached the contract by withdrawing the bank guarantee resulting in MTN cancelling its distribution agreement with the respondent. It further argued the delivery of termination was never proved. 

The court held there was no evidence to show that the termination notice was delivered to the respondent. It found that the withdrawal of the bank grantee amounted to a breach of contract. The court ruled that it has no power to interfere with damages awarded by the lower court unless special circumstances exist. It found that the ten million award was too excessive warranting it to intervene.

The appeal was dismissed. General damages were reduced from ten million Naira to five million Naira.

The appellants appealed a judgment granting the respondent payment of a sum of money in terms of an indemnity agreement between the parties.

There were four issues for determination in the main appeal: whether the lower court had jurisdiction to hear the matter; whether the personal indemnity form did not constitute a contract between second appellant and first respondent to make second appellant personally liable to indemnify first respondent; whether the deposit of the second appellant’s title deeds with the first respondent was in furtherance of the personal indemnity form; and whether the judgment was against the weight of evidence.

As regards the first ground of appeal, the court found that the lower court was vested with the jurisdiction to hear the matter, as stated in the Insurance Act, 2003. The second ground was resolved in favour of the first respondent as the indemnity form was held to be a contract with the main aim of making the second appellant personally liable to indemnify the first respondent. Issue 3 was found in favour of the first respondent as the words of the document were found to have created an equitable mortgage over the second appellant’s property, using it as collateral to secure the counter indemnity granted by the first respondent on behalf of the second appellant. The fourth issue was resolved in favour of the first respondent, and the appeal was held to be lacking in substance and merit. The appeal was dismissed.

The issue was whether the High Court had jurisdiction to order the freezing of the bank accounts of the applicant.

The dispute emanated from an order to freeze the applicant’s three bank accounts after allegations of money laundering by the Financial Intelligence Centre (FIC). The applicant was accused of illegally receiving approximately US$ 43 000 and remittance of US$ 39 000 from a Canadian company. The applicant tried without success to apply to defreeze the bank accounts. 

The applicant further applied arguing that the Anti-Money Laundering Act (the act) only allowed the bank accounts to be frozen for one year.  It pointed out that the High Court exceeded its jurisdiction when it dismissed the application because the statutory period of 12 months had lapsed. They also challenged the decision to freeze all the accounts including money that was not part of the laundering investigation on the basis that it was an infringement of the right to natural justice.

The FIC argued that that investigation of allegation of fraud, which is criminal in nature, is not affected by time constraints.

The court held that one year was enough for FIC to investigate any alleged wrong-doing. It ruled that High Court lacked the jurisdiction to order the continuous freezing of the accounts of the applicant beyond the one year. It further ruled that moneys which stood in the accounts of the applicants before any alleged illegal transfers into the accounts should not form part of the freezing order.

A claim by the appellant was repudiated by the respondent on the grounds that the deceased had misrepresented and failed to disclose to the respondent certain details of her pre-existing medical condition which materially affected the assessment of the risk under the policy by the respondent. The issue before the court was whether the deceased made a misrepresentation during the telephone conversation as well as materiality of any alleged misrepresentation or non-disclosure, does not arise in the absence of proof of the deceased’s pre-existing medical condition.

The court held that the respondent bore the onus to prove that the deceased had misrepresented herself to the respondent. The respondent also had to prove that the deceased had failed to disclose that she had received medical advice or treatment previously. There was however there was no clear understanding between the parties as to the evidential status of the contents of the hospital records. The court ruled that the respondent failed to discharge that onus to prove that the deceased did misrepresent herself as there was inadequacy and lack of clarity in the hospital records.

The court expressed that that the court a quo erred in concluding that it was not in dispute that the illnesses were noted correctly in the hospital records. The court also noted that the court a quo paid scant regard to the admissibility of the evidence as a result the parties had to file supplementary heads of argument.

 Accordingly the court upheld the appeal.

The applicants sought an interim interdict against the respondent bank, with which they had a bank-client relationship, to restrain it from terminating the operations of the applicants’ banking facilities.

The court considered whether courts could direct the respondent to continue its operations in the country against its will. The court held that the respondent’s decision to exit the country’s banking sector is one that the courts cannot interfere with.

The court relied on the respondent’s constitutional right to trade, which also entails the election of not utilising such right. The court remarked that the respondent’s decision to cease operations in the country rested on commercial considerations which were highlighted in para 15 of the judgement.

The respondents right to or not trade supersedes any right the applicant may have, thus the application was dismissed with costs.

The respondent refused to accept the principle of simple interest. The appellant declined to pay compound interest. The dispute was taken to court for resolution. The liability whether to pay compound or simple interest can only commence from the date when the dispute whether to pay that interest is resolved.

The court held that when determining which interest to use a clear distinction needs to be made between the reasons for awarding a simple interest and those that justify an award of compound interest in legal proceedings. A simple interest arises invariably when a party which is liable or owes money fails to pay what is due before or on the date agreed, stipulated, implied. The court exercises its discretion as to the rate and date when interest shall be paid.

However, the award of compound interest depends on other different criteria beside the discretion of court. Compound interest is not founded simply on the mere fact of indebtedness nor on the date the principal debt becomes due nor on the duration it has taken to pay since accruing. It is based on one or more of a multiplicity of reasons such as the law applicable to the transaction, the nature of the business transacted or agreed between the parties, the construction of the agreement or contract made between the parties, the trade custom of the business out of which the indebtedness arose, intentions of the parties or the consequences of the commercial transaction that was concluded between them.

The court concluded that the arguments advanced on behalf of the respondent did not point to the award of a characteristically compound interest. There was no evidence presented or authorities cited to suggest that in this case compound interest was intended, implied or anticipated by the parties or implied by law. The authorities cited in this appeal did not assist court to decide that there was a compound interest implied or contemplated in this case. In the result, the appeal succeed.

A dispute between the company and the bank arose in respect of a specimen signature card allegedly issued for Susan Margaret Howard Bristow (Susan) as a director of the company. The dispute arose because the signature of Dr. Alex Babitunga authenticating Susan's specimen signature card was apparently forged. Additional words written on the card, altering the previous arrangements with the bank requiring two signatures for authorisation of withdrawals, appeared without any initials, signatures, authentication or stamping by the person or persons who cancelled them. The bank permitted certain withdrawals from the company bank account in accordance with the instructions on the card; as opposed to the earlier instructions.

The respondent alleged that the appellant had acted in breach of its duty to the respondent as its customer and had been negligent in permitting the respondent’s accounts to be cleared of all the money in them without the respondent’s authority.

The issues were whether the lower court erred in law and in fact in not holding that the respondent was estopped from saying that Susan Bristow was not an authorized signatory to the respondent's account.

The court explained that the principles of estoppel provides that when one person has, by his or her declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon that belief, neither he or she nor his or her representative shall be allowed, in any suit or proceeding between himself or herself and that person or his or her representative, to deny the truth of that thing. One of the conditions for the doctrine to apply is, therefore that the act or omission by the person against whom estoppel is to be set up, as a defense, must have been intentionally caused, in the instant case the fraud which the two courts below found had caused the appellant to act to its detriment believing it to be true was unknown to the respondent until the police report. The court held that the defense of estoppel was not available to the bank against the company because the respondent was unaware of Susan's fraudulent signatures on the cheques until the police investigation and report.

The court held that all documents concerning the respondent's accounts were in the possession and custody of appellant bank. Only the appellant knew and was responsible for entries on the bank accounts, it bore responsibility as the banker to what entries were made on those accounts without respondent's authority. The appeal was therefore dismissed with costs.

The plaintiff contested the validity of the sale and transfer of its property by the first defendant, alleging the transaction was tainted by illegality and fraud. The mortgaged property was auctioned in a public sale pursuant to the terms of the credit facility agreement concluded between the parties. 

The contract permitted that the first defendant could execute the property without application to a court if the plaintiff defaulted on payment. In accordance with this provision, the first defendant advertised and sold the plot in a public auction to the second defendant who made the purchase in good faith.

The plaintiffs challenged the first defendant’s actions on several grounds with no success before the High Court. It was argued that, because the sum advanced by the first defendant fell marginally short of the anticipated amount, it did not have to perform its obligation under the contract to pay the stipulated installments, despite having received and utilised the sum advanced by the first respondent. 

The court dismissed this argument along with further technical attacks to the alleged unlawfulness of the advertisement of the auction, the sale agreement’s adherence to statutory formalities, and the first defendant’s failure to ‘release’ the plaintiff from the mortgage following the sale of the property to the second defendant. 

The judge found in favour of the defendants, ruling that the advertisement, sale and transfer of the property had occurred lawfully and did not offend any aspects of the parties’ agreement.
 

The defendant had rejected a claim of a certain amount as allowable tax deductions by the plaintiff. This case reconciles the different calculations for bad debts used according to the Financial Institution Act and the 2005 regulations on the other hand the Income Tax Act (ITA) International Financial Reporting Standards (IFRS). 

The court considered whether the assessment followed by the defendant was unlawful.

The court held that it was not required to determine which methodology was more consistent with the ITA section 24. The rationale for accounting methods should not depart from what is provided under the ITA, which is the parent act. Therefore, the definition of a bad debt should be based on the ITA under. The court considered the practice note which had the interpretation of the Commissioner General and held that section 160 of the ITA must be followed because the practice note is only binding on the Commissioner General and her personnel. The court held that section 24 deals with deductions of bad debts and the conditions to be fulfilled for deduction must apply. Thus, the court held that a bad debt under section is allowable as a deduction under section 24.

The court held that the plaintiff was obliged to make provision for bad debts which meet the criteria under section 24 of the ITA and the practice note issued by the Commissioner, file accounts with the Bank of Uganda and be up to standard under the IFRS.

The court also considered whether the plaintiff had to comply with the Bank of Uganda Circular that regulated deductibility of bad debts for income tax. The court held that the circular was not binding because it does not deal with whether a bad debt is an allowable deduction or not.

The court was satisfied that the above sum was a bad debt that is supposed to be an allowable deduction under section 22 and 24 of the ITA.
 

The matter involved a dispute over the defendants’ refusal to release a certificate of title pursuant to an agreement to do so. 

The first issue was whether the defendant was justified in not releasing the certificate of title belonging to the plaintiffs. The court observed that the defendant’s conduct in refusing to release the title created an impression of premeditated non-performance with the defendant only using the purported mala fides (bad faith) conduct as a farcical reason. The court thus concluded the defendants' conduct was unjustifiable.

The second issue was whether the conduct led to loss for the plaintiffs.  Concerning whether there was loss of profits due to the plaintiffs being detracted from clearing their indebtedness the court found there was insufficient evidence to support it.Similarly, on the corresponding allegation that the conduct resulted in the incurring of interests due to another creditor, the court held that  payment of interests had not been proved by the plaintiff. It thus denied the claim for both loss of profits and interest payments. 

However, the court did accept that the actions of the defendant prevented them from discharging their indebtedness and thus resulted in the incurral of interest. It thus absolved the payment of the interests that arose within the affected period and consequently snuffed the corresponding counter-claimed interests for the period.

Regarding damages, the court reasoned that the plaintiffs had acted on the impression that the title would be released to enter into some arrangements which were frustrated by the defendants' unjustified conduct. It therefore granted general damages. Similarly, because of the defendants' oppressive and high-handed conduct, the court granted punitive damages.  

The matter involved a dispute over an order of suit property sale as a remedy for breach of a loan agreement granted by the trial court against the appellant.

The first question was whether the responded had paid the whole stipulated loan amount to the appellant. Assessing the evidence in the record from the trial court, the court reasoned that the trial court’s assessment had failed to evaluate crucial evidence that showed doubt in the respondent’s claim that the whole stipulated amount had been paid. The court thus concluded that the evidence indicated that the responded had failed to fully honor its performance obligation. As a result, the responded could not pursue the remedy of obliging the appellant to transfer the property for failure to repay the loan.  

The second issue concerned the right to mesne profits (i.e. profits received by tenant in wrongful possession and which are recoverable by the landlord) by the appellant and the amounts due. The court did not dwell much on the question of entitlement, instead accepting the trial court’s finding of indisputable occupation and rental collection by responded as a basis together with the fact that responded could not justify the occupation.

The court thus concluded that mesne profits were owed but order that they be set-off to the amount of the loan that the appellant still owed. The decision of the trial court was therefore set-aside and appeal allowed.