A banking transaction involving a US$300,000 loan to a company has ended in a costly legal battle for Barclays Bank of Uganda Limited now Absa Bank Uganda , with the High Court ordering it to surrender two properties belonging to a Kampala couple and pay damages.
The bank had retained the land titles of Henry Senoga and his wife, Immaculate Senoga, after Begumisa Enterprises Limited, the company that borrowed the money, allegedly defaulted on repayment.
But in a ruling, Justice Stephen Mubiru directed the bank to return the two titles to the couple, free from all encumbrances. The court also awarded the plaintiffs Shs80 million in general damages against the bank and Shs120 million against Begumisa Enterprises, bringing the total award to Shs200 million.
The decision followed a dispute over two properties in Namasuba and Bugolobi that the couple offered as security for a loan obtained by Begumisa in December 2005.
Court documents show that on November 14, 2005, Henry and Immaculate executed separate powers of attorney authorising Begumisa Enterprises to use their respective land titles as security to obtain a loan.
Henry offered his property comprised in Kyaddondo Block 273 Plot 3165 at Namasuba, while his wife pledged land comprised in LRV 3150 Folio 25 Plot 99 on Luthuli Avenue, Bugolobi.
The couple subsequently executed a third-party mortgage with Barclays Bank on December 16, 2005, paving the way for the lender to advance US$300,000 to Begumisa.
The arrangement, however, became contentious when the couple challenged the bank’s continued custody of their titles, arguing that the loan had been fully repaid and that the lender had no justification for retaining the documents.
They also questioned why the bank advanced the money to Begumisa instead of them, contending that this was contrary to the purpose for which they had granted the powers of attorney.
In their suit, the couple maintained that their properties had only been offered as security for US$300,000, which they said Begumisa had repaid in full. They further argued that the mortgage had not been perfected and was therefore null and void.
The bank disputed the claims, arguing that the couple had voluntarily accepted to act as third-party mortgagees and sureties for Begumisa. It maintained that they had undertaken to meet any outstanding obligations arising from the company’s borrowing, including interest.
Barclays further told court that Begumisa had defaulted on the loan, with the outstanding debt rising to US$727,200 by July 17, 2008.
On that basis, the bank filed a counterclaim seeking recovery of the money and authority to realise the mortgaged properties to recover its outstanding debt.
Begumisa denied the allegations and claims brought against it and asked court to dismiss the couple’s suit.
However, Justice Mubiru ordered the bank to immediately return the title for the Namasuba property registered in Henry Senoga’s name and that for the Bugolobi property registered in Immaculate Senoga’s name, both free from encumbrances.
The court also awarded the couple Shs200 million in general damages against the two defendants and ordered payment of costs of the suit and the counterclaim.
