Latest news we have scooped from the Lumumba based Commercial division of the High Court reveal how our media partners have already filed an application seeking to stop the impending auction. The application is expected to be handled by the presiding Judge with the speed it deserves given the fact that a lot is at stake in this matter. 

Stanbic Bank put out a public notice in the few days leading into the Christmas festival announcing the auction of the storied offices of the media house and other offices complete with the printing press.

Such notice was according the scribes involved just 30 days to repay the billions that it claims to be due and owing. The notice arrived after the media house had allegedly failed to repay the funds. At that time, the head of the commercial court, Justice Stephen Mubiru was hearing the matter and had told the proprietors of the media house to pay a percentage of the funds as a condition to waive the auction.

It’s not clear whether our colleagues in the trade adhered to the judge’s directive or not, but the bank has since gone on to instruct auctioneers to recover the money through holding a public auction for interested buyers of the property.

What we know is that the Red Pepper, much as they acknowledge having borrowed funds from Stanbic, are complaining about the ‘mafia’ manner in which the bank has been inflating the loan to colossal sums. The media proprietors are accordingly asking for a comprehensive audit of the loan in order to determine if it owes the bank money at all or give it a clean bill of health. 

Financial institutions without attempting to prejudice the current legal battle are known to charging exorbitant interest and to make up wild penalties which ends up piling unjust loans sums onto the borrowers. It is further claimed how Uganda’s commercial banks’ interest rates are the most unfriendly and some critics have gone on to hold that the rates are actually outrightly extortionate and illegal.

He was convicted of forging academic documents which he used to join the Jinja Military Academy in 2001. Further, he had forged his medical examination form, UPDF declaration form and his record of fingerprints. He additionally opened up an account with Post Bank with which – I presume the prosecution managed to prove – he intended to defraud the public.

Subsequently, through his counsel, Kahonda appealed the Jinja Magistrate Court judgment in the High Court. He was admitted to bail and all was quiet for a while, with his appeal pending.

Three years down the road, Kahonda managed to beat his opponent in the recently concluded – fiery too – NRM primaries. Although the electroral result wasn’t contested – thereby impugning the integrity of the Electoral Commission (EC) – there were forces underway.

Citing article 80 of the Constitution, Godfrey Kahonaho (an apparently concerned citizen) filed a petition before the EC to disqualify Kahonda and his victory in the primaries. The article, 80(2)(f), bars anyone that has been, within seven years to the election, convicted – by a court of competent jurisdiction – of a crime related to “dishonesty and moral turpitude”; or, under art.80(2)(g), an offence under any law relating to elections conducted by the Electoral Commission.

As one may notice, Kahonda was convicted three years ago and therefore, Kahonaho’s petition has merit. By all legal indications, Kahonda’s conviction stands unless a court orders a stay of execution or suspension of sentence.

Under Order XLVIII [4] of the Civil Procedure Rules SI 71-1 (CPR-SI-71-1) and rule 6(2) of the Judicature (Court of Appeal) Rules (JCAR), institution of an appeal does not of itself suspend a sentence or stay an execution unless the Court orders so.

Noteworthy, is that the JCAR, under rule 6(1), indicates that in the period granted for instituting an appeal (14 days after issuance of judgment and sentence), or, where an appeal is instituted, until its resolution, a sentence of death or capital punishment is stayed.

The Criminal Procedure Code Act, Cap 116 (CPCA) is silent on the implication of an appeal against a sentence and/or judgment of the court. However, under s40, an inference may be drawn to imply that instituting an appeal doesn’t mean a suspension of sentence; similar to the provisions of the CPR-SI-71-1 and JCAR. The section indicates that one who is not admitted to bail and has a pending appeal is referred to as an appellant prisoner.

It is therefore implied that until an appeal is heard by the appellate court, the previous judgment and sentence stand. That is so unless an application is made to the court to stay the execution of the sentence on account of the pending appeal.

Why go on about these rules? Well, it is important to understand where Kahonda’s conviction stands, de jure, owing to his institution of an appeal in the High Court against the Jinja Magistrate Court decision!

Presently, Kahonda applied to the High Court for an interim order for the EC not to entertain the petition made to it regarding his qualification to participate in the upcoming Parliamentary elections. This application is made on the grounds of his pending appeal.

Logically, it will be granted seeing as a disqualification of Kahonda’s candidature would amount to a loss on his part. A loss that would understandably be detrimental should he be acquitted by the High Court.

I’m no expert on legal procedure thus – as I run the risk of misapplying the law – I will use the civil law principles to conclude on the probable result of Kahonda’s application to the High Court for an interim order.

Order XLIII [4](3) CPR-SI-71-1 lays down factors that may justify a court’s orders to stay an execution or suspend a sentence. Particularly, XLIII [4](3)(a) provides that where the applicant stands to make a ‘substantial loss’ – to the court’s satisfaction – where the order is not made, the court should make the order.

The CPCA does not provide, necessarily, what should satisfy a court to admit bail. However, one may logically conclude that since a court has the power to not admit one to bail, it has requirements that should, to its satisfaction, cause it to, or not to, admit one to bail. Thus, where one is admitted to bail, the court ought to have been satisfied that one is worthy of it.

Naturally, under criminal matters, consideration is given more to the safety of the public and one’s capability to adhere to the law (not to escape from the country) in wait for the resolution of the matter. Thus, it is only optimistically, that I think Kahonda was admitted to bail because, being a Member of Parliament, it was imperative that he kept at work; where the risk wasn’t so great that he might keep offending the law.

I would therefore conclude that, although Kahonaho’s petition to the EC has merit, it may not achieve the desired outcome. Unless, of course, the EC can hear the matter before the High Court decides on the application. Besides that, Kahonda will succeed and the petition before the EC will not be heard until the appeal is resolved. By then, given the nature of procedure such matters undergo, the elections may already have been conducted and winners announced.

I must clarify here, again, that I’m no expert at law. It is still possible that for justifications unknown to my legally inept mind (yet to be equipped with full legal knowledge) the High Court may dismiss Kanhonda’s application. Then, the EC will carry on with hearing the petition. As I noted earlier, the petition has merit, thus, Kahonda will likely be disqualified. Of course, he can always appeal the EC’s decision; in which case, he would apply for another interim order seeking the same as the present one – on and on it will go!

Alternatively, if the prayers of the application are granted, Kahonda may well go on to participate in the Parliamentary elections. If he is elected, he will be a potential convict on the floor of the August House. Needless to say, his seat will be vacant upon conviction – I think.

As you have seen, there is so much conjecture in my conclusion. Nonetheless, it is not baseless! Kahonda may have nothing to fear from Kahonaho’s petition; in the same measure, there may be cause for worry!

In Uganda, these cases are many; Frederick J.K Zaabwe Vs. Orient Bank Ltd and 5 others, Sinba (K) Ltd and 4 others Vs. Uganda Broadcasting Corporation, Sam Kuteesa and others Vs. Attorney General, etc. The salient feature among these cases is that they stated the obvious, but which obviously had long since been abandoned by the losers, yet just a little caution would have prevented such gross implications of the decisions. If I must add, the decisions led to loss of colossal sums of monies.

The same can be said of the decision of Ham Kigundu and others Vs. Diamond Trust Bank. From the reaction of other banks, the Uganda Bankers’ Association and the hastily released statement from the Ministry of Finance, its clear that the decision has upset the whole Banking industry, development partners and of course, Government.

One thing every Ugandan must understand, is that one of the most regulated industries in the world is the banking and financial industry. The requirements for operating a bank or financial institution are onerous. The qualifications of service in certain positions in a financial institution are quite high. This is the more reason that whoever is a player in the Banking industry, should, before getting upset, understand the reasoning of the Learned Judge.

The reasons are obvious for such control, the need to protect the economy, the need to collect taxes and attendant revenue, the need to protect citizens generally, the banking customers and to prevent organized crime and money laundering, etc. The more reason why the decision of court in Ham Vs. DTB is very important to every Ugandan.

Ham Kigundu and others filed HCCS No. 43 of 2020 against Diamond Trust Bank (U) Ltd and Diamond Trust Bank (K) Ltd, seeking among others the recovery of monies unjustly and illegally obtained from the 1st Applicant’s bank accounts and for various breaches of contractual, fiduciary and statutory duties.

Subsequently Ham filed an amended plaint, where, inter alia, he specifically raised questions of the illegality of Diamond Trust Bank (K) Ltd conducting of financial institutions’ business in Uganda without a license to do so under the Financial Institutions Act, 2004 (as amended). It is on this later complaint that the whole case was decided.

It was argued for Ham that Diamond Trust Bank (K) Ltd illegally conducted financial institution business without a license and/or in contravention of the Financial Institutions Act (2004) as amended.

It was further argued for him and others that the financial transactions that the Diamond Trust Banks arrived at with Ham and Others were contrary to the Financial Institutions Act 2 of 2004 (as amended) since Diamond Trust Bank (K) Ltd did not have a license to operate in Uganda but issued credit facilities to Ham and others who are residents of Uganda. This, in addition to the fact that the 1st Respondent acted as an agent of the 2nd Respondent in order to facilitate the said financial transactions which was illegal and contrary to the Financial Institutions Act.

From the onset, the expression “financial institutions business” must be understood. It is defined under section 3 of the Financial Institutions Act, Act 4 of 2004 as amended by section 3 (k) & (l) of Act No. 2 of 2016 to include the extending or lending money held on deposit by way of financing of commercial transactions, consumer and mortgage credit as well as engaging in foreign exchange business.

With the 2nd Respondent being a foreign bank engaged in the business of lending or extending money held on deposits through mortgage credit and financing of commercial projects – which acts were required to be licensed by Bank of Uganda even for a foreign bank – the transactions were illegal and expressly prohibited under the Financial Institutions Act where no prior license was obtained.

According to Counsel for Ham and others, there was sufficient evidence to show that the alluded financial institutions business was commenced in Uganda. The mortgage facility letter was drafted in Uganda by Ugandan lawyers and even witnessed in Uganda.

Further, Ham and his Companies were Ugandan companies based in Kampala, Uganda and issued securities for the loan facilities through mortgages, debentures and other securities registered in Uganda. The 2nd Respondent never sought the permission of the Bank of Uganda to carry out its business in Uganda as required under sections 4 (1) and 117 of the Financial Institutions Act, which is rendered a crime under S. 126 (3) of the Financial Institutions Act and Regulation 5 of the Financial Institutions (Agent Banking) Regulations 2017.

These claims were not sufficiently answered by the banks. To quote verbatim, their written statement of defense under Paragraph 19 only briefly stated that “13 (k) of the Amended Plaint is denied and the Plaintiff shall be put to strict proof thereof. The defendants contend that the credit facilities obtained by the Plaintiffs from the 2nd Defendant were lawfully obtained in Kenya and are recoverable and enforceable”.

This then left the question to be determined at that stage as the legality of the contracts entered into by the parties. The decision led to a finding that they were not.

In a Letter of Offer dated the 23rd October, 2017 from Diamond Trust Bank (K) Ltd to Ham and others titled, Establishment of a term loan for USD 4,000,000 (United States of America Dollars Four Million), Diamond Trust Bank (K) Ltd wrote thus: “By accepting this Letter of Offer you irrevocably authorize Diamond Trust Bank (U) Kampala who are our appointed agents for this lending to debit your account held with them with the said appraisal fee and taxes simultaneously with establishment of the facility in the banks books and on each anniversary of the term loan and remit funds to us.”

All the Banks had to do was get approval and/or license from the Central Bank of Uganda and/or any other authorized entity. They did not.

Section 126 (3) of the Financial Institutions Act, 2 of 2004 As Amended provides that; A financial institution which does any act prohibited by this Act or fails to do anything required by this Act commits an offense and where no specific penalty is provided, the financial institution is liable on conviction to a fine not exceeding two hundred and fifty currency points and in the case of a continuing offense to an additional fine not exceeding fifty currency points for each day on which the offense continues.

While Regulation 5 (1) of the Financial Institutions (Agent Banking) Regulations 2017 expressly bars such a transaction if not approved by Bank of Uganda, it provides that: “A financial institution shall not conduct agent banking in Uganda without the prior written approval from the Central Bank.”

It needs to be emphasized that the terms of these sections of the law are couched in mandatory terms coupled with punishment for none compliance, which beyond doubt makes it absolutely mandatory to comply with them.

The question that then remains to be seen is whether DTB (K) Ltd and DTB (U) Ltd or even Ham and others Recover any money from such a clearly illegal transaction, expressly barred by Law? The moralists would argue that Ham, having received the money cannot be let to go scot free without refunding it, even if Diamond Trust Bank (K) Ltd did not have a license to lend to him in the circumstances.

This question has been considered in several leading authorities in the common law. The locus classic-us being the now famous case of Fibrosa Spolka Akajjna vs Fairbran Lawsan Combe Barbour Ltd (1943) AC 32 in which Lord Wright observed, in justification of refunding money or benefit derived from a frustrated contract, basing on the doctrine of unjust enrichment and the remedy of restitution, as follows:

The Claim in the action was to recover a prepayment of pounds 1, 000 made on account of the price under a contract which had been frustrated. The claim was for money paid for a consideration which had failed. It is clear that any civilized system of law is bound to provide remedies of cases of what has been called unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which is against conscience that he should keep.

The Court of Appeal in Uganda Broadcasting Corporation Vs. Sinba (K) Ltd and others considered these positions. The case arose from a sale of UBC land without prior approval of the Minister. Specifically, Section 6(a) of the UBC Act stipulates that UBC could only sell or otherwise dispose of property subject to ‘prior approval of the Minister’; Court stated at length that:

There was no contract to enforce. In his own words at page 26 of his Ruling the learned judge correctly states the position of the law as follows:- “No court ought to enforce an illegal contract or allow itself to be made an instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal once the illegality is duly brought to the notice of the Court.

He went ahead to rely on the Supreme Court case of Active Automobile Spares Vs Crane Bank & Rajesh Pakesh (supra) in which the Supreme Court held that courts of law will not enforce an illegal contract. In that case the Supreme Court went on to hold that where a person invoking the aid of the court is implicated in the illegality, courts of law would not come to his assistance. And that it matters not whether the defendant has pleaded the illegality or not. If the plaintiff proves illegality, the court ought not to assist him.

The above principle of law was followed recently by this court in the case of Nipun Norattam Bhatia Vs Crane Bank Ltd (Civil Appeal No. 76 of 2006) (unreported) in which this court refused to enforce an illegal contract and declined to make any orders that would assist any of the parties. By doing so it refused, for good reason I must add, to allow itself to be made an instrument of enforcing obligations arising out of a contract it had held was illegal”.

From the above statement of. The court of Appeals it appears to be the basic principle of law, that in cases of illegal contracts and contracts riddled with illegalities the Loss falls where it lies. Meaning no money can move from one side to another. Each party bears its loss.

It is on this basis that I would argue that if there is any outstanding balance under the illegal contract that was still due and owing from Ham and others to the Banks, then the Banks may not be in a position to recover the same.

It will be noted that the learned Judge also directed that the banks refund Ugx. 34,295,951,553/= (Uganda Shillings Thirty–Four Billion Two Hundred Ninety-Five Million Nine Hundred Fifty –One Thousand Five Hundred and Fifty-Three Only) and USD. 23,467,670.61 (United States Dollars Twenty-Three Million Four Hundred Sixty-Seven Thousand Six Hundred and Seventy Only) being monies that were unlawfully taken by them from the Applicants/Plaintiffs loan accounts to Ham and others.

My view is that, considering that both parties were complicit in this illegality, it would run counter to established principles stated above and reiterated in the UBC Vs Sinba Case, the import of which is that the loss falls where it lies.

Many foreign banks which open up subsidiaries in other countries do this, where they under capitalize the “local” banks, which then keep relying on the parent bank whenever large sums of money are needed, rather than get the proper licensing from regulatory authorities.

They come up with schemes where the parent bank purports to advance the loan, the local bank serves as the collection and lending agent and then transmits the money to the parent bank. This scheme facilitates a lot of money laundering, evasion of taxes which may include income taxes on interest earned, stamp duties on mortgage deeds, of course, even the licensing fees that accrue when the License is applied for. It can be rightfully argued that the decision is bad for the Banking industry, especially when you consider that many banks are bound to lose colossal sums of money, Others have argued that this decision is bad for syndicate Lending.

Having read the judgment, I have not read anywhere, where the learned Judge stated that Banks and merchants shouldn’t engage in syndicated banking. All the case implies and I believe rightly so, is that whatever lending devices financial institutions want to engage in, they must do so in accordance with the law! It cant have been for idle purposes that the Legislature enacted many acts and regulations.

Therefore, a more important argument would be that its worse for the banking industry if banks are allowed to operate outside the law. Even a football game has rules!, for its these rules which protect everyone involved.

Here at home the government was quick to react to COVID-19. In a national address that set stage for a semi-series of what social media termed ‘keeping up with Ssevo’, the President assured the country that his government was ready to take the bull by the horns. Schools were shut down and at later stages; public transport, private transport, places of worship and entertainment spots were suspended from operation. Only essential workers, as designated by the Office of the Prime Minister (OPM), were permitted to continue operation.

Although all this was in good faith, its enforcement especially by the somewhat inept Local Defence Unit (LDU) personnel was with a hand that was reminiscent of the Obote era.

The measures/directives of government in the effort against COVID-19 will definitely leave a mark. Here, I’m not talking about the social evolution as ignited by the novel virus. The President’s directives had the force of law. This feature, when observed, whatever one’s political philosophy, creates a query of legality, or illegality, as the case may be. The framers of this Republic’s Constitution were keen on eliminating the possibility of a presidency like that of Obote I and Amin.

The Supreme law of the land requires that any derogation of any rights should be in a manner that is acceptable and demonstrably justifiable in a free and democratic society. With the country juridically operating under ordinary circumstances, the top office trampled Ugandans’ rights to; work, free movement and education. How close they came to withholding that most fundamental of democratic rights; the right to vote!

Since the country was operating under ordinary conditions; thus, under the limitations of Article 43 of the Constitution; as opposed to a looser measure of legality provided by Articles 46 and 47 under a state of emergency, the President and government in general overreached and many of its actions were ultra vires. Yet, it was all necessary and inevitable. However, no regard was given to the mandate of the law.

Arguments may be raised that the government (Ministry of Health) has the mandate to decree under the Primary Health Care Act. However, the rules were issued by the ministry after the verbal committal by the Head of State. The police, either in ignorance or arrogance, enforced mandates that were null and void, as there was no waiting for the rules from the ministry to be issued.

The president has no mandate in any capacity or any situation as per the constitution, to issue guidelines (as they were called) that have the force of law (this being a mandate of parliament). For instance, a truck driver that was arrested in breach of curfew, having been on a long upcountry trip at the time the rule was declared by the President on national television, would have no case to answer. Not only because there was no Act of Parliament or Ministerial rule against it at the time, but also because such a rule, had it been issued legally, would fail under the test of Article 43.

Further, the President’s purported creation of a crime (by decree) was an insult to democracy. ‘Whoever causes a gathering should be charged with attempted murder!’ This is not acceptable or demonstrably justifiable in a free and democratic society! Though his logic, having been explained in one of his addresses, may make sense to some; it has no legal grounds or legal logic for that matter. Or perhaps, he was joking!

At this point I’ll beg to be understood. I do not denounce the measures that the government took. However, I despise the abuse of procedure that happened. The government was complacently allowed liberty to abuse its power provided it was directed against the spread of COVID-19. This was an emergency. Yet, the President, against advice from the Speaker and Chief Justice, refused to declare a state of emergency. Byaruhanga AG, supported maintenance of the juristic status quo. He intimated that there was no satisfaction, on the part of the President, that there was need for a state of emergency. Also, there was worry over human rights that may unnecessarily be derogated. Nevertheless, in the end, the country was in a de facto state of emergency.

Whereas some countries didn’t declare states of emergency, my view is that Uganda ought to have done so. First world countries have systems that are capable of operating in emergencies without really having to declare a state of emergency. Also, for those countries, dire situations (usually political) would necessitate such an emergency. These countries also have different histories from ours. Whereas we have to worry about an ultimate presidency, the USA, UK, Italy and the likes have no such worries. Nevertheless, various states in America, and numerous countries declared states of emergency.

Under Article 110, the President, though given authority, has his actions checked by parliament more often than would happen under ordinary circumstances. The actions and declarations by the government (ministry of health) ought to be considered with apprehension. They have fostered violations of human rights. I’ll reiterate, my issue is not with the directives having been issued. My contention is against the circumstances under which the government passed these declarations.

The Primary Health Care Act, the authority of which the ministry relied on, ought to be read in accordance with the Constitution. Granted, the rights violated during the lockdown period were derogatory rights. Nevertheless, even the derogatory rights ought to be derogated with legal authority. And any authority that grants power to derogate a right ought to do so with respect to democratic principles and justice.

In other words, my view is that it should be declared by a body of authority (such as the Constitutional Court) that the Primary Health Care Act (the sections of which the Ministry of Health drew authority) should be applied in a state of emergency, where the country does not require acceptable and demonstrably justifiable policies. Similarly, that the Presidential directives were legally null and void; but for the direness of the circumstances hindering accountability.

It should be done, I opine, to eliminate bad precedent. History should not show us to have tolerated this without question, lest some other President uses it as justification for unacceptable and demonstrably unjustifiable oppression. Of course, under the guise of an emergency without declaring a state of emergency that would create scrutiny over his/her actions.