Court orders bank to return illegally sold school property 

An Absa-operated ATM. Court found that Absa acted illegally when it sold property belonging to Progressive Secondary School. Photo / File 

What you need to know:

  • Court documents indicate that at appeal Progressive Secondary School had proved that it indeed never received part of the two loan facilities that it had applied for somewhere in 2004

In 2004, Progressive Secondary School in Bweyogerere, Wakiso District applied for two loan facilities of Shs650m from then Barclays Bank. 

The two facilities, which had a total value of Shs1.3b - with a seven and eight year repayment period - court documents show, were assessed by Barclays Bank for onward processing and in the subsequent offer letters, Progressive was asked to comply with terms and conditions, including “perfecting the security procedure for the three plots” put as mortgages to secure the loans, before the money would be advanced. 

Indeed, after Progressive had “perfected” the securities as directed, Barclays, which has since become Absa, proceeded to process Shs650m, as part of the Shs1.3b the school had applied for. 

However, court documents indicate that Progressive denies ever receiving the other facility of Shs650m, but instead Barclays had prepared a new offer letter with a Shs1.39b loan amount, whose repayment would expire in 60 months with effect from January 29, 2008 to January 29, 2013.   

But Progressive also claimed that Barclays still “did not effect disbursement of the new facility", which as a result, incapacitated its ability to execute or implement the expansion and development project of the school as it had been planned under the application.

Subsequently, before “expiry of the term period and after receipt of substantial amount to offset the loan [Barclays] by its letter dated November 5, 2008 made demand of the loan amount under the new facility letter,” before commencing an enforcement of the mortgage, which was eventually advertised for sale. 

However, Progressive, together with Ab’mooti Investments and Kaahwa Eriasa Amooti challenged the sale as fraudulent in 2009 and prayed for a declaration that the sale and transfer of securities be declared illegal. 

The school as well prayed for orders for recovery of mortgaged securities, take an account of all financial transactions on the loan account and order compensation for loss of income and cost of the suit. 

In its defence, Barclays indicated that the new facility was indeed disbursed on March 3, 2008 and had subsequently been credited on the account of Progressive to “offset the debit balance, which as a result of failure to service the loan was, as of November, 5, 2008, indebted to a tune of Shs1.39b. 

Therefore, after failure to service the loan obligation, according to court documents, Barclays, on November 14, 2008 issued a demand letter before another on February 19, 2009, warning of dire consequences if the loan was not settled in full. 

On November 14, 2009, after Progressive had failed to honour undertakings including a commitment to pay Shs60m during the first school term ending April 2009, Barclays subsequently advertised the mortgaged properties, which were later disposed of at Shs1.5b to Luyanzi Academic Foundation. 

In documents before court, Barclays maintained it had followed the due process including offering Progressive an opportunity to “redeem the securities, pursuant to equity of redemption upon payment of the sums owed at any time before their sell”. 

Indeed, the trial Judge in an August 21, 2019 judgement agreed with Barclays and noted that upon default, Progressive had been notified, which was followed by formal demand and statutory notices but were ignored. 

“This issue of notification by way of statutory demand and notices of sale together with advertisements were all fulfilled ….  For these reasons, court finds no merit in the suit and it dismisses it with costs,” the trial Judge ruled.   

However, dissatisfied with the ruling, Progressive, together with Ab’mooti Investments and Kaahwa Eriasa Amooti, in a 2020 suit appealed the ruling, which now included Barclays (Absa) and Luyanzi Academic Foundation as the respondents. 

Among others, Progressive noted, the trial Judge had erred when he made a finding that the school was indebted to the tune of Shs1.35b and the failure to examine Progressive’s statement of account had led the Judge to arrive at a wrong decision. 

Thus, Progressive prayed that the appeal be allowed, the whole Judgment and orders of the High Court be set aside, be granted its prayers before the High Court, including cancellation and return of titles under Luyanzi Academic Foundation and award of various damages and costs. 

Indeed in a March 2 ruling by a Coram of three judges, including Justice Richard Buteera, Justice Catherine Bamugemereire and Justice Stephen Musota, the Court of Appeal agreed that the trial Judge had erred thus ordering that Barclays, now Absa, pays damages for the illegal sale as well as ordering the Registrar of Titles to cancel and reinstate the titles to Progressive, Ab’mooti and Kaahwa Erisa Amooti as the registered owners.  

Court findings and witness statements, the Court of Appeal noted, had found that the trial Judge had grossly erred when he made a finding that Progressive was indebted to Barclays to a tune of Shs1.39b, which occasioned a miscarriage of justice.

“[Barclays] did not furnish court with sufficient evidence required to prove how [Shs1.39b] was arrived at. In the absence of cogent evidence to prove this, it is more probable than not that the sums were not disbursed as claimed. Specifically, it is beyond doubt that the [second loan facility] of Shs650m was not disbursed even after the parties formalised their lending relationship … It follows that it cannot be stated with certainty that [Progressive and others] were indebted to [Barclays] in the sums claimed,” the Court of Appeal ruled.  

The Appellant Court also ordered Barclays to pay Shs400m as profits for every year for which they remain in possession of the property from August 2009 until hand over of vacant possession at an interest of 25 percent, pay Shs200m (interest of 6 percent) and Shs50m in general and exemplary damages, respectively. 

The site where Progressive was, is currently occupied by Luyazi Institute of Technology.  We could not readily establish whether Absa (Barclays) intends to appeal the decision.  

Other grounds of appeal 

  • The learned trial Judge erred when he made a finding that the money stipulated was money received and spent thereby occasioning a miscarriage of justice. 
  • The trial Judge erred when he held that the sale of the suit property was lawful. 
  • The trial Judge erred when he ignored and or failed to pronounce himself on allegations of fraud committed at the time of sale of the suit property. 
  • The trial Judge erred when he made a finding that Barclays did not breach the facilities agreement entered into. 
  • The trial Judge erred when he made a finding that the sale of the properties went toward repayment of Progressive’s indebtedness. 
  • The trial Judge erred when he relied on the evidence of bid documents not produced before court.