Judge Asked To Step Aside In Simbamanyo House Case

Equity Bank Uganda denied having ever facilitated or engaged in facilitating any illegal cover to have Equity Bank Limited and Bankone Limited engage in financial institutions business in Uganda.

Peter Kamya, an architect, has asked Justice Boniface Wamala to disqualify himself from hearing Simbamanyo House cases, citing bias. “The judge has not conducted himself in an impartial manner with respect to our cases.

“He has made inappropriate comments and exhibited unacceptable conduct in the course of hearing the cases,” Kamya said.

He made the request on Tuesday October 13 before the judge delivered a ruling on an appeal in which Kamya is challenging the payment of $3m (about sh10b), which is 30% of the outstanding loan owed to Equity Bank Uganda.

The Commercial Court deputy registrar, Susan Kanyange, had directed the Simbamanyo managing director to pay the money before his case is heard. Kamya’s lawyer, Fred Muwema, told the judge that it was not necessary for him to deliver his ruling, arguing that the appeal had been overtaken by events since Simbamanyo building has been sold.

Kamya had placed the building and three plots of land in Mutungo, Kampala, as collateral for a $10m (about sh37.8b) loan on November 16, 2017. Muwema maintained that court had aided the bank to gain from illegality.

“The question of the legality of external lending has been prejudiced by the sale of the mortgaged property,” he said.

Last Thursday, Equity Bank sold Simbamanyo House on Lumumba Avenue to Meera Investments at $5m (sh18.5b) after Kamya failed to pay 30% of the outstanding loan. In a letter addressed to the registrar, Kamya complained that the judge, on September 7, granted him 30 days to pay sh10b yet a ruling on appeal challenging the same was to be delivered in 45 days.

“This mismatch meant that the banks would have sold the properties long before that, thus making his ruling on the appeal nugatory,” Kamya submitted. He added: “This is outrightly unfair and another instance that proves bias.

DEFENCE

In its defence, the bank claims Simbamanyo did not honour its obligations to pay the loan. Equity Bank Uganda denied having ever facilitated or engaged in facilitating any illegal cover to have Equity Bank Limited and Bankone Limited engage in financial institutions business in Uganda. Do not expect a fair judgement as his acts have made us lose confidence that a fair decision shall be arrived at.” Muwema and Wilson Gad represent Simbamanyo, while the bank is represented by Fred Mpanga and Sim Katende.

MAIN SUIT

On March 4, Simbamanyo sued Equity Bank Uganda, Equity Bank Limited and Bankone Limited, accusing them of unlawfully debiting its loan account with fabricated and unexplained amounts plus uncertain interest charges. Simbamanyo is challenging the propriety and legality of the various loan agreements, mortgages and other securities in favour of the respondents, Equity Bank Kenya and Bankone, which were created in November 2017.

Simbamanyo also seeks, among other declarations, that the tripartite agreement made on August 20, 2012 and mortgage over its properties under the impugned facility agreement were illegal.

HOW IT STARTED

Court documents indicate that on August 20, 2012, Equity Bank granted Simbamanyo a loan of $6m (about sh21.6b). The loan was to finance the construction of a hotel at Mutungo, a Kampala suburb, and to take over a prior facility from Shelter Afrique. Under the said facility, Equity Bank advanced $2.5m (the Kenyan loan) to Simbamanyo while Equity Bank Uganda lent it $3.5m.

Simbamanyo contends that it started servicing the loan but required more financing, which culminated in two additional facilities granted by Equity Bank Uganda of $1.2m (about sh4.3b) for the completion of the hotel.

It also asserts that Equity Bank Uganda and Kenya brokered a new deal with Bankone, a Mauritius-based bank, to lend $10m (sh36b) to it to pay the old loan with Equity Bank lenders.

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“The decision to borrow an amount in excess of $7,195, 877, which was reflecting as the outstanding amount was dictated and influenced by Equity Bank lenders with the knowledge and approval of Bankone,” the estate contends.

In fear of the impending adverse actions at the time, Simbamanyo says it accepted the Bankone loan offer, which was made on November 16, 2017 to bridge $10m Mauritian loan for purposes of refinancing the existing loans for a period of 24 months.

“Following the Mauritian loan, Equity Bank made a corresponding but fictitious bi-party loan offer for the same amount and tenure to the plaintiff,” the document reads. Simbamanyo contends that the fictitious loan amounted to fraudulent misrepresentation by Equity Bank.

The estate claims that it received $538,908 out of the $10m advanced by Bankone as some of the funds in excess of $7,195,877 were diverted by the defendants. According to court documents, the interest chargeable under the loan facility was 10%, with a default interest rate of 3%.

The estate, however, contends that under the term of facility II, it was again required to pay loan processing fees amounting to $200,000 and quarterly loan, and interest repayments of $398,000, which it was dissatisfied with.

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