On March 3, 2021, Hussein Ahmed approached Platinum Credit Uganda for a loan of Shs 31.4 million at an interest rate of 4% per month.
As security, he handed over the logbooks for two vehicles: a Toyota Land Cruiser registration number UAW 911K valued at Shs25 million, and a Toyota Alphard registration number UBE 217M valued at Shs30 million.
The loan was to be repaid within 18 months in monthly instalments of Shs3.2 million. In case of delayed payment, he was to be charged a penalty of Shs 96,000 per day.
Yet barely two months later, on May 112021, Platinum issued a demand notice after Ahmed failed to keep up with the payment schedule. They sat with him and drew another repayment schedule, but still, he failed to hit the target.
Platinum then moved in to recover its money, impounded the Toyota Land Cruiser, and advertised it for sale. Ahmed’s vehicle was eventually sold by public auction for Shs20 million.
This did not impress Ahmed. He took the credit institution to court, arguing that, in the first place, the loan conditions were unfair. He cited the penalties for defaulting as exorbitant and Illegal.
Platinum Credit insisted that the loan agreement was valid, that Ahmed had defaulted, and that after selling his vehicle thery still demanded Shs 22 million from him due to accumulated penalties and interest.
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Justice Stephen Mubiru was tasked with hearing the matter, and at first, he set March 14, 2022, as the hearing date. Later, due to other commitments, the date was moved to May 24, 2022. All the parties were informed,
On May 24, Ahmed did not appear in court, leaving Justice Mubiru perplexed since he had sued Platinum. They tried to contact him and his lawyers, but to no avail.
The court then adjourned the matter to 24 August 24, 2022 to hear the counterclaim lodged by Platinum Credit. Still, neither Ahmed nor his lawyers showed up, and no explanation was given for their absence.
But Platinum, through their lawyers from Origo Advocates, presented the loan agreement and a loan ledger showing the outstanding amount after the sale of the vehicle.
They argued that since Ahmed had failed to file a reply to the counterclaim within 15 days as required by law, the company was entitled to a default judgment, dismissing the case.
Justice Mubiru, citing Order 8 rule 11 and Order 9 rule 6 of the Civil Procedure Rules, agreed. He said that where a counterclaim is for a liquidated amount, and the counter-defendant fails to reply, the counterclaimant is entitled to judgment.
“Having been duly served with the counterclaim, the plaintiff/counterdefendant did not file a reply to it within the prescribed 15 days. By reason of this default, the counterclaimant (Platinum) is … entitled to judgment for the liquidated sum of Shs22 million,” Justice Mubiru said.
However, he took issue with the monthly 4% interest rate that Platinum charged on its loans.
Justice Mubiru emphasised that courts have discretion under section 26 of the Civil Procedure Act to reduce interest where it is “manifestly excessive or unconscionable”. He said credit institutions like Platinum Credit must factor in the “ever-rising inflation rate and depreciation of money” while coming up with the interest rate.
In his view, the fair interest rate on Ahmed’s loan ought to have been 3% per month or 36% per year.
This partly explains why Justice Mubiru rejected Platinum’s demand for compensation for breach of contract.
Still, the case was ruled in Platinum’s favour. The only consolation for Ahmed was that he was told to only pay Shs 22 million, which was outstanding.
To make matters easier for him, he will pay this money at a rate of 3% per month, not the 4% charged by Platinum. This looks like a fair deal, is it?
