DTB left with stains of illegality in the Court of Appeal judgment


There was a mood of high expectation when we assembled at the Court of Appeal (COA) to receive its judgment in the appeal filed jointly by Diamond Trust Bank Uganda and Diamond Trust Bank Kenya against Ham Enterprises and two others.

DTB Kenya had run to the COA seeking to overturn the decision of Justice Dr Henry P Adonyo, the then head of the Commercial court who had rightly found that the credit transaction which the bank had concluded with Ham was illegal for being in contravention of S.117 of the Financial Institutions Act 2004 (as amended).

On the other hand, DTB Uganda had complained that the learned trial judge had erred in law and fact in finding that it had acted as an agent of DTB Kenya without the approval of the Bank of Uganda. This was held to be in contravention of Regulation 5 of the Financial Institutions (Agent Banking) Regulations 2017.

We need to point out that the above illegalities amounted to felonies punishable by a term of three years imprisonment of the offending bank officials. Little wonder, therefore, that the DT Banks took the project of cleansing themselves of this criminality through the appeal process as a serious but desperate matter.

They raised 12 grounds of appeal to the COA and a staggering eight grounds of them were seeking an appellate pronouncement that they had not committed any illegality.

So, as we held our breath together with a section of the banking industry which was looking to acquit themselves of any adjudged illegalities, the COA decided not to show up. The COA failed to show up when it neglected to consider the all-important question regarding the illegalities committed by DTB.

It is trite that when an illegality is brought to the attention of a court of law, it has no discretion in standing with the illegality as it supersedes all questions of pleadings, admissions, etc. See Makula International Ltd Vs His Eminence Cardinal Wamala SCCA No 4 1981.

But in the DTB Vs Ham case, the COA did not just refuse to pronounce itself on the illegalities committed by DTB, in an act derogating its appellate mandate, it also abandoned the grounds of illegality presented in the appeal.

The COA instead, and regrettably so, went ahead to determine the appeal on grounds unknown to the appeal or upon the excuse of alleged procedural irregularities which were given undue regard over substantive law questions of illegality.

The COA determined the appeal on the basis inter alia that the amendment of the plaint was irregular; that Ham’s claim for money was not a liquidated demand because there was an audit and account order whereas there wasn’t any such order after it had been set aside; and finally, that DTB was never heard.

None of the above issues were framed as grounds of appeal by DTB and yet the COA went ahead to frame them, argue them and decide upon them. By dealing with the appeal in this way, the COA went against its own rules vide; Rule 102 of the Judicature (Court of Appeal rules) Directions S.I 13-10 which forbids the court from allowing an appeal on any ground not set forth or implicit in the memorandum of appeal.

The Hon Chief Justice Bart Katureebe JSC (as he then was), while admonishing the above practise, was quoted with approval in Civil Appeal No. 6/2013; Ms Fang Min Vs Belex Tours & Travel Int & Crane Bank Ltd SCCA No. 6/2013 for the binding proposition that; “It is a cardinal principal in our judicial process that in adjudicating a suit, the trial court must base its decision and orders on the pleadings and issues contested before it. Founding a court decision or relief on unpleaded matter or issue not properly before it for determination is an error of law.”

We therefore take the view that by abandoning DTB with its baggage of illegality at the temple of justice, the COA left DTB with indelible stains of illegality on its face.

Whereas DTB wanted the Court of Appeal to wipe the illegality off its face, the COA refused to do so. We believe the COA had already established that DTB had committed an illegality on the facts of the case; that it why it refused to clear its name. DTB has no option but to walk around with this illegality everywhere it goes.

It does not matter whether the case goes to retrial, appeal or whether DTB leaves Uganda. DTB will always bear an engravement of illegality in its genetic makeup until a court of competent jurisdiction specifically overturns the High court finding of illegality against it.

Having said that, we have always known the COA to be a court that has promptly dealt with the question of illegality whenever it has reared its ugly head. One example is the recent case of Crane Bank (in Receivership) Vs Sudhir Ruparelia & Another Civil Appeal No. 252 of 2019. In that case, the High court dismissed the suit on a point of law after it had found that the bank was committing an illegality by attempting to take freehold titles yet it was a foreigner prohibited from holding such land interest.

In that case, the COA promptly dismissed the appeal and upheld the illegality found by the High court. The COA did not order a retrial of the case to prove the illegality because it found that it was sufficient to establish the illegality without calling further evidence beyond the pleadings filed. We can only speculate that the illegality in the DTB Vs Ham case was too toxic to handle. That is probably the only non-legal reason as to why the COA avoided it altogether.

So, as much as we fault the COA for ordering a retrial of the case, we applaud it for not making the mistake of interfering with the High court finding that S. 177 of the FIA required a foreign bank lending in Uganda to obtain prior approval from Bank of Uganda.

This should explain why the Hon Justice Richard Buteera DCJ rightly stated at Page 6 of his judgment that a loan agreement tainted with perpetuation of an offence would not be enforced by the Ugandan courts. It is not by a slip that the DCJ makes the above statement bearing undeniable truths in an appeal where DTB is accused of blatant illegalities and offences.

Either way, that statement ties in with the High court finding that the joint DTB defence was a perpetuation of illegalities because it was tainted with illegalities under the Financial Institutions Act 2004 (as amended).

Theodore Roosevelt, the 26th president of the USA, once said that “in any moment of decision, the best thing you can do is the right thing, the next best thing you can do is the wrong thing and the worst thing you can do is nothing.”

Fortunately, in DTB Vs Ham we have something i.e. a finding of illegality by the High court which was neither considered nor ruled upon by the COA. That being the case, the COA could not and it did not set aside what it had not considered. The COA decision directing directing a retrial of the case is not a decision concerning itself with the illegalities as is.

In our view, DTB will do well to start early negotiations to repay Ham the now over Shs 140bn that was siphoned from his various bank accounts held with them.

The author is managing partner, Muwema & Co. Advocates

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