THE REPUBLIC OF UGANDA

IN THE COURT OF APPEAL OF UGANDA
  
Coram: Hon Justice G. M Okello, JA.
Hon Justice A.Twinomujuni J.A
Hon Justice C.N.B Kitumba, JA

CIVIL APPEAL NO. 34 OF 2005.

NON -PERFORMING ASSETS RECOVERY TRUST:::::::::::::: APPELLANT

AND

S.R NKABULA& SONS LTD:::::::::::::::::::::::::::::::::::::::::::::::: RESPONDENT

(An Appeal from the decision or the High Court (Ogoola, PJ) dated 17/1/2005 in high Court Commercial case NO. 0070 of 2002.)

JUDGMENT OF THE COURT.

This appeal arose from the decision of the High Court (Ogoola, PJ) dated 17^th /1/2005 in High Court, Commercial case NO. 0070 of 2002.

The appellant is the successor in title to Uganda Development Bank (UDB) by an assignment in compliance with the Non-performing Assets Recovery Trust Act. The respondent was a beneficiary to a loan advanced to it by the Uganda Development Bank. The loan was in the form of a tractor. Massey Ferguson (MF) tractor had originally been offered but by the time the respondent took advantage of the loan, Massey Ferguson tractors were not available. Instead he took a Steyr tractor. These tractors allegedly belonged to Uganda Government that had imported them. The appellant was an agent of the Government for purposes of giving out the tractors and collecting debts from those who took the tractors.

The respondent partly paid the loan but later refused further repayment on the ground that the tractor with which he was supplied was defective. He also argued that he had been induced by the officials of Uganda Development Bank to take this tractor by combination of non-disclosure of material information, combined with negligence, careless and reckless withholding of material information which was at the material time available to Uganda Development Bank concerning the non -suitability of the Steyr tractors.

At the trial, four issues were framed as follows for the determination of the court;
(a) Whether the plaintiff’s acceptance of the Steyr tractor was as
a result of inducement.

(b) Whether the inducement, if any, discharged the plaintiff from their loan obligation
(c) Whether the plaintiff was entitled to the remedies sought and

(d) The quantum of damages, if, any, to which the plaintiff is entitled.

Hon Justice James Ogoola, Principal Judge, heard the case and delivered his judgment thereon on 17-1-2005 in favor of the respondent. He answered the above issues in the affirmative hence this appeal. There is also a cross appeal;
The main appeal has six grounds as follows:
(1) The learned Principal Judge erred in law and in fact in holding that the plaintiff’s preference for a Massey Ferguson tractor was a crucial term of the loan transaction and that Uganda Development Bank failed to honour that contractual term.

(2) The learned Principal Judge erred in law and in fact in holding that Uganda Development Bank officials induced the plaintiff into accepting the Steyr by a combination of nondisclosure of material facts; combined with negligent, careless and reckless withholding of material information which was at the time available to Uganda Development Bank concerning the non-suitability of the Steyr tractor.

(3) The learned Principal Judge erred in law and in fact in holding that there were un rectified design defects in the Styer tractor which the plaintiff bought and that those defects contributed to the plaintiff’s losses.

(4) The learned Principal judge erred in law and in fact in holding that 30% of the plaintiff’s losses were attributable to the tractor’s design deficiencies.

(5) The learned Principal Judge erred in law and in fact in awarding the plaintiff shs 30,000,000/ in general damages.

(6) The learned Principal Judge erred in law and in fact in not holding that the plaintiff’s suit was barred by limitation.

The cross-appeal comprises five grounds as follows:

(1) The learned Principal judge erred in law and fact in not finding that the inducements by Uganda Development Bank to the plaintiff to accept the Steyr tractor which were done by a combination of non-disclosure of material facts, negligence, careless and reckless withholding of material information, which was available to Uganda Development Bank at the material time concerning the non suitability of the Steyer tractor amounted to fraudulent misrepresentations.

(2) The learned Principal Judge erred in law and fact in finding that the plaintiff was not discharged from its obligations under the contract and finding that it remained obliged to pay the Uganda Development Bank the outstanding balance of the loan.

(3) The learned Principal Judge erred in law and fact in finding that the un rectified defects of the suit Steyr tractor contributed to only 30% of the loss of the
business to the plaintiff and awarding the plaintiff only 30 million general damages.

(4) The learned Principal Judge erred in law and in fact in finding that the plaintiff failed to mitigate its losses.

(5) The appellant to the cross-appeal proposed to ask this court to:
(a)Dismiss the main appeal.
(b)Allow the cross appeal and vary the finding of the High Court.

(i) That the inducement amounted to fraudulent 25 misrepresentations with consequence that the respondent was discharged of its obligations to repay
the loan.

(ii) The un rectified errors of the suit Steyr tractor contributed to the largest extent of the plaintiff’s business losses.

(iii) There was no evidence that the plaintiff failed to mitigate its loss.

(iv) Costs of this appeal and cross appeal and in the High Court be awarded to the respondent
At the hearing of this appeal, Dr. Joseph Byamugisha appeared for the appellant while Mr. Nester Byamugisha represented the respondent.

Dr. Byamugisha argued all these grounds together. He pointed out that the trial judge held that the respondent’s preference for Massey Ferguson tractor was a crucial term of the loan transaction and that Uganda Development Bank failed to honour that contractual term, To this counsel contended that the question of preference of the respondent
was not one of the issues at the hearing. The trial judge therefore did not have to answer it.

He took exception to the trial judge’s description of two letters (Exh p. 13 and p.16) as copious protest correspondence.

According to learned counsel two letters are not copious. He stated that Exh P. 16 was written in 1999 long after the respondent had accepted and taken possession of the Steyr tractor in 1992. He argued that none of these letters even supported the trial judge’s finding since none of them indicated the respondent’s unequivocal rejection of the Steyr tractor.

He pointed out that on the contrary, in Exh DI, a letter written three months after Exh P. 13, the MD of the respondent unequivocally withdrew its objection of the Steyr tractor thus varying the so-called crucial term of preference for the MF tractor. He concluded that the learned Principal Judge was, therefore, wrong to conclude that the plaintiff’s preference for a Massey Ferguson tractor was a crucial term of the loan transaction.

To the above, Mr. Nester Byamugisha responded that the respondent had indicated its preference for a Massey Ferguson tractor in its application for a loan signed on 15/9/99 and insisted on the same. He submitted that the respondent’s preference for Massey Ferguson tractor was, therefore, a crucial term of the contract. The trial judge was right in so holding.

The learned Principal Judge dealt with this matter as follows:

“Subsequent to the failure of Uganda Development’s Bank’s original offer of a Massey Ferguson tractor, the plaintiff and Uganda Development Bank appeared to have entered into and formalized a second phase of the loan transaction under Steyr tractor in lieu of the Massey Ferguson. The plaintiff promptly protested and objected to the Steyr offer as evidenced by the plaintiff’s copious written protest correspondence (Exh P.13 and p.16) all of which insist on a Messey Ferguson… In this court’s view, therefore, it is quite evident that the plaintiff’s preference for a Massey Ferguson tractor was a crucial term of the loan transaction. The failure by the Uganda Development Bank to honour that contractual term became a very significant basis for the course of the evolution of subsequent events in this suit.”

The trial judge clearly relied on Exh p. 13 and p.16 to find that the respondent had copious written protest and objection to the Steyr tractor in preference for a Massey Ferguson tractor. We have looked at Exn. P.13. It is a letter dated 7/6/91 in which the Managing Director of the respondent expressed the respondent’s preference for a Massey Ferguson tractor unless there was no chance in the near future for it to be allocated a Massey Ferguson tractor. However, three months later, the same Managing Director wrote another letter, Exh Dl dated 18/9/91 in which he said in part.

“After careful investigations concerning the technical reliability of Steyr tractor, we write to formerly (sic) withdraw the above referred letter and accept the allocation of one Steyr tractor with the following accessories...”

The letter referred to as being withdrawn is Exh p.13. At this point, the respondent changed his mind and no longer had any objection to the Steyr tractor. He accepted the tractor with some accessories and took possession of them. Exh p.16 was written on 12-3-99 long after the respondent had taken possession of the Steyr tractor after it had withdrawn its earlier objection. Exh p.16 therefore cannot be protest to the Steyr tractor.

In our view, there is no evidence of copious written protests and objections to support the learned trial Principal Judge’s finding that the respondent’s preference for a Massey Ferguson tractor was a crucial term of the loan transaction. We accept Dr.