The Court ordered Standard Chartered to pay UGX Â 50,000,000 in damages for failure to disburse a mortgage facility despite the Plaintiffs having met all the requirements.
The Court found that this refusal amounted to a breach of contract and violated Section 4(1) of the Mortgage Act, 2009, as well as Clause 6(1) of the Bank of Uganda Financial Consumer Protection Guidelines, 2011, which require fairness, honesty, and reasonableness in financial transactions. See here.
Sometime in September 2017, the 1st Plaintiff started working as a Credit Analyst in Standard Chartered Bank(U) Limited. In June 2020, he applied for a staff mortgage facility to purchase the Property comprised in Kawempe Division Block 195, Plot 5075 in Kampala priced at UGX 300,000,000.
The Defendant found that he qualified for a staff mortgage facility for UGX 250,000,000. The Defendant told him that, to qualify for a higher amount, the income of his wife(the 2nd Plaintiff) could also be considered.
After reviewing her pay slips, the Defendant found that the Plaintiffs jointly qualified for a facility of UGX 312,000,000.
On 15th July 2020, the Bank notified the Plaintiffs that it had approved their application for a facility of UGX 240,000,000.
However, Defendant later asked 1st Plaintiff, who had a running salary loan with Defendant at the time, to clear that loan to zero balance and to also avail proof of payment of the 60,000,000 to the Vendor.
Although the loan was not yet fully repayable at the time, the 1st Plaintiff sold his car and fully settled it. The Plaintiffs also depleted their savings and took some friendly loans to fully clear the UGX 60,000,000
On  25th August 2020, the Parties signed the facility letter and the mortgage deed. The Plaintiffs were assured that the loan would be disbursed within 5 working days thereafter. These days passed without any disbursement.
The 1st Plaintiff followed up with the Defendant in Vain. On 4th September 2020, Defendant told the 1st Plaintiff that it had recalled the loan because of an intended department restructuring which was likely to affect the 1st Plaintiff’s job.
Following that restructuring, Defendant terminated the 1st Plaintiff’s employment on 3rd December 2020.  The valuers later reported that the suit land was worth UGX 310,000,000.
Parties executed the facility agreement and the mortgage deed but these were not registered because, after their execution, Defendant was notified by its holding company of the then-intended merger of its commercial banking department and its corporate and institutional banking department.
As a result of the need to comply with this Global Banking announcement, Defendant suspended lending to all its staff members in the affected departments.
This naturally affected the Plaintiff’s mortgage. Defendant recalled the loan but agreed to reimburse all the 1st Plaintiff’s costs of the loan application.
KEY TAKEAWAYS
Financial institutions must uphold fairness and transparency, particularly in mortgage transactions, and cannot arbitrarily withhold or recall approved facilities without proper justification.
The Plaintiffs were awarded special damages of UGX 9,011,000 so, being unpaid Valuation and legal fees, plus interest therefore on at the rate of 21% p.a from 4th September 2020 until full payment. The Plaintiffs were awarded general damages of UGX 50,000,000 with interest thereon at the rate of 16% p.a from the date of Judgement until full payment. The court awarded General damages of 50,000,000/= due to the breach of contract, mental anguish & emotional distress.
Always keep all correspondence including emails in any transaction to have a fallback position when you are in court. Section 101(1) of the Evidence Act Cap 6 provided that whoever desires a court to give judgment as to any legal right or liability dependant on the existence of facts which he or she asserts must prove that those facts exist.
The facility letter & mortgage deed, in and of themselves constitute binding contracts within the meaning of *Section 10(1) of the Contracts Act.* They can be enforced as contracts irrespective of whether the mortgage deed was registered or not.
It is not possible to withdraw, or otherwise revoke an offer which has already been accepted by the borrower. Counsel for the Defendant submitted that the Defendant was not a party to transactions, Counsel added that  the instant suit  is substantially premised on an unregistered mortgage deed, and as such no claim can arise from an unregistered mortgage deed
Loss of employment does not frustrate salary loan agreements because the borrower’s salary is taken only as an indicator of creditworthiness and not as security (Standard Chartered Bank (U) Ltd V Bpb Ssekamatte Nsereko, HCCS No.0873 of 2020)
The court found that the Defendant did not act fairly, reasonably, or in good faith. This contravened Section 4(1) of the mortgage ACt,2009, and Clause 6(1) of the BOU Financial Consumer Protection Guidelines,2011. The equitable doctrine of election demands that one cannot take the benefit of a transaction while avoiding its other consequences.
The parties executed a Mortgage deed & facility offer letter ( this execution constituted an absolute & unqualified *communication of acceptance* of the terms of the facility offer letter & the Mortgage deed). It wasn’t legally possible for the defendant to withdraw a loan offer because it had already crystallized into a binding contract with attendant enforceable legal obligations.
The court ruled that the defendant’s actions, demanding repayment of a previous loan as a condition for a new loan that was ultimately denied, placed the plaintiff at a significant disadvantage. This unfair and unreasonable practice, lacking good faith, violated Section 4(1) of the Mortgage Act, 2009, and Clause 6(1) of the BOU Financial Consumer Protection Guidelines, 2011.
