Court has ordered a businessman Joseph Sendagire and valuer Eddie Nsamba Gayiiya to jointly pay more than Shs448 million to KCB Bank Uganda Limited as recovery of loan fraudulently acquired and losses incurred.
Justice David Wangutusi of the Commercial Division of the High Court ordered Sendagire and Gayiiya to pay to the bank Shs398,201,669 as the loan sum and Shs50 million as general damages.
He ordered that the loan sum shall attract an interest of 20 percent per annum from May 2012 while the Shs50 million attracts 6 percent from date of judgment and that the duo shall pay legal costs incurred by the bank.
The court ruled that the Sendagire, a bank client and bank valuer Gayiiya are jointly responsible for the loss incurred by KCB Bank Uganda Limited due to their fraudulent actions.
Court heard that in 2012, Sendagire applied for a Shs300 million loan from the bank and mortgaged his land in Najera, Kira Town Council but on valuation, Gayiiya presented a report of a different property that is developed.
Justice Wangutusi held that Gayiiya committed fraud and acted dishonesty during the survey of the mortgaged property thereby contributing to the loss incurred by the bank after giving out the loan money to the client (Sendagire).
He reasoned that Gayiiya is liable for contributory negligence when he opened and made valuation of a different land other than the land mortgaged thereby giving a higher value.
The case
In 2013, KCB Bank sued its former client Sendagire, jointly with valuer Gayiiya for breach of contract, recovery of Shs398,201,669 and its accumulated interest, general damages, interest on any pecuniary award as well as legal costs incurred.
The case resulted from Sendagire’s default on loan repayment and failure to respond to the bank’s statutory notices and demands.
The bank sued Gayiiya for general damages and interest with costs resulting from professional negligence while carrying out his business of surveying and valuation.
Justice Wangutusi observed that Gayiiya’s report was riddled with falsehoods whose explanation the bank said was gross negligence and over valuation of the security.
How it started
Ugandan enterprises urged to explore regional oil and gas opportunitiesCourt heard that KCB advanced a loan of Shs300 million to Sendagire to buy off his outstanding loan with Finca Bank, provide working capital and purchase a heavy duty truck from Japan.
The loan was repayable in 48 months and would attract interest at 32 percent per annum upon Sendagire presenting his title of land at Najera, Kira Town Council.
Court records indicate that KCB Bank instructed Gayiiya to go and open boundaries, conduct evaluation of the property and a report but he instead sub contracted Paul Kintu of Terrain Consult to do the job and that Sendagire submitted a report giving the current market value of the property at Shs650 million and the forced sale value of Shs455 million.
Upon commencing proceedings to realise the mortgage, the court heard that the Bank instructed the Knight Frank Uganda Limited to survey and value the same property a year after the mortgage agreement and reported that the property that had been described as developed was in fact undeveloped and had a restricted sale of only 14.4m and an open market value of Shs24m.
Court reasons
Justice Wangutusi held that the valuation provided was of a different plot and not the one the plaintiff had sent him to establish and value.
He also dismissed Gayiiya’s assertions against the bank that it contributed to the negligence reasoning that the due diligence that was exhibited is contained in the appointment letter relying on his expertise.
“For the second defendant (Sendagire) to value a different property from that shown on the title and going ahead to submit a report in respect of a fully developed property when the one in issue was not developed is an error that falls outside the permissible margins or errors and therefore brought into question the valuer’s competence and the care which he carried out his task,” Justice Wangutusi held.
The judge ruled that Gayiiya cannot shield himself from liability by the excuse that Paul Kintu was a private contractor because he failed in his duty he owed to the bank who entrusted him with the opening of boundaries and valuation.
According to court records, Gayiiya had sued Kintu jointly with UAP Insurance Uganda Limited on third party notice claiming for indemnity based on a professional indemnity insurance policy.
The judge ruled that while Gayiiya can recover from Kintu, he cannot exonerate himself from the bank’s claims because he failed in his duty he owed to the bank who had entrusted him with opening of boundaries and valuation.
Justice Wangutusi explained that the insurance firm cannot be held liable for the loss because of an element of fraud which falls outside the professional indemnity policy covers.
