Katuramu & Company, a surveying firm, has been ordered to pay Centenary Bank Shs 521 million for misleading the bank into extending a loan to a client without conducting proper due diligence on the land offered as security.
The case started in December 2021 when Hasifa Namulondo applied for a loan of Shs 350 million from Centenary Bank.
She told the bank she wanted to buy land at Ziranumba in Wakiso, but to secure the loan, she offered the same land as collateral.
Before giving out the money, Centenary Bank hired Katuramu & Company to inspect and value the land.
The surveyors reported that the land had “a double-storied residential house” and gave it an open market value of Shs 770 million, and the forced sale value was Shs 500 million.
This report convinced the bank that even if the borrower failed to pay, it could recover its money by selling the property.
After receiving the loan, Namulondo failed to repay it, and the bank moved to recover its money by selling the land.
But when another survey firm was sent to confirm the property, it discovered that the land was vacant and was instead being used for subsistence farming.
This meant the land was worth far less than what had been reported earlier.
Namulondo’s role in the problem was central because by presenting land that was undeveloped but allowing it to be treated as if it had a house, the value of the security was exaggerated.
The court had already entered a default judgment against Namulondo for failing to challenge the bank’s claims.
Court ruled that Namulondo’s actions affected loan recovery because the bank had relied on the belief that the land could easily be sold for at least Shs 500 million.
But it was the surveyors who received the biggest blame.
Centenary Bank’s lawyers from Kalenge Bwanika Kisubi & Co Advocates told the court that the surveyors were negligent because the bank relied entirely on the valuation report when approving the loan.
They argued that because of this grave mistake, the bank was unable to recover over Shs 471 million from Namulondo.
Katuramu & Company employed two law firms to defend this case: Nassali & Company Advocates and Masereka, Mangeni & Co. Advocates.
The lawyers said their agent visited the land together with the bank’s loan officer and Namulondo.
They argued that valuation is an opinion and different valuers can reach different conclusions.
They also blamed Centenary Bank for failing to double-check the property, saying it had about two months to review the report before giving Namulondo the loan.
Katuramu & Company suggested that the bank could recover money through insurance or by selling the land.
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After hearing both sides, Justice Dr. Ginamia Melody Ngwatu rejected the surveyors’ defence, saying the firm had a clear duty to provide accurate information because they were professionals.
“If someone possessing special skill… gives information… a duty of care will arise,” she said.
Justice Ngwatu added that the surveyors failed to meet basic professional standards and dismissed the argument that Centenary Bank should have discovered the mistake.
“It cannot be said that a loan officer, without any technical knowledge, would tell that the property being valued was not the property supposed to be valued,” she said.
She said the bank advanced the loan, believing the land had a house, which was not the case. This caused it a substantial financial loss.
The court ordered Katuramu & Company to pay the bank Shs 471.9 million and Shs 50 million as general damages, bringing the total to Shs 521 million.
