Absa Bank has been ordered to pay a haulage firm Shs 77.5 million after it unlawfully seized the firm’s trailer in 2008 following a dispute over a loan.
An earlier ruling by the High Court had ordered that Kawa Distributors pay the bank Shs 65 million, but the Court of Appeal overturned this ruling and ordered that the bank pay the distributor instead.
The ruling was delivered by a panel led by Justice Eva K. Luswata. It also comprised justices Florence Nakachwa and Stella Alibateese.
The dispute began in March 2008, when Kawa Distributors entered into a financing arrangement with Barclays Bank (now Absa) to acquire two truck heads, an Iveco and a Mercedes Benz, for its haulage business.
Under the deal, the bank paid Shs 100m to clear the vehicles and took ownership of them, leasing them back to Kawa at monthly payments of Shs 3 million per truck over 24 months.
The trucks were registered in the bank’s name. Kawa would use them, pay the monthly fees, and had an option to buy them at the end of the lease.
Things fell apart quickly when Kawa missed rental payments in September, November and December 2008. They terminated the agreement and sent bailiffs to repossess the trucks.
The judges heard that Patrick Kasalita, a court bailiff named working with Ken Associates and accompanied by Godfrey Twinamasiko, the bank’s manager of Corporate Recoveries, went to Nalukolongo and impounded both truck heads.
Yet here is where the trouble for the bank deepened. One of the truck heads, the Iveco, was at the time attached to a trailer belonging to Kawa, registration UAB 433C, which was not part of the loan agreement at all.
The bailiffs took the trailer anyway, drove it to Shumuk Bond warehouse, and registered it there in the name of Ken Associates, acting as agent of the bank.
When Kawa’s director Fred Washaba tried to recover the trailer, he was told he would have to pay Shs 15m in parking charges before he could even be told where it was kept. He went to the Shumuk Bond in Nakawa as directed, but the trailer was no longer there.
It had been secretly moved to KT Auto Trading Company in Ndeeba because Kasalita, the bailiff, later admitted in cross-examination that the parking charges at Shumuk had become too high.
The trailer’s whereabouts were only revealed during the court hearing itself.
Kawa sued the bank, and the case went to the High Court. In 2013, Justice Geoffrey Kiryabwire ruled that Kawa was entitled to the value of the detained trailer, awarding Shs 37.5 million for it and Shs 40 million as general damages for loss of business.
But Absa counterclaimed and won Shs 65million what it described as unpaid rental arrears. Both parties appealed.
In the Court of Appeal, Kawa argued that the bank had no right to claim rental charges that accumulated after it had already terminated the agreement and taken the trucks back.
Once you repossess the vehicles, they said, you cannot keep charging rent for them. They also argued the bank had never properly proved the Shs 65 million figure it claimed.
Absa Bank, which was represented by Derrick Kizito of MMAKS Advocates, argued that the financing arrangement gave the bank the right to recover all losses flowing from Kawa’s breach of contract, including outstanding rental sums.
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After hearing the arguments, the court leaned in favour of Kawa.
“After a careful perusal of the Master Flexi Agreement, I find no indication that permits the recovery of rental arrears accumulated after the termination date,” Justice Luswata said.
She said the bank had breached its own contract by sending bailiffs without first giving proper written notice to terminate, after having already written to Kawa in November 2008 inviting it to restructure payments.
The Shs 65 million that the High Court had awarded to the bank was cancelled.
On the issue of the trailer, the judges concluded that the bank’s agents had wrongfully seized it.
“The physical removal of the trailer from its location and its delivery to the Shumuk bond constitutes a positive act of taking, sufficient to ground a claim in detinue,” Justice Luswata held.
The Shs 37.5 million awarded to Kawa by the High Court for the trailer was maintained, although it was reclassified as damages. The Shs 40 million in general damages for loss of business was also maintained.
In total, Kawa Distributors walked away with Shs 77.5 million in damages while Absa was ordered to pay half the legal costs of the case.
