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Exposed: How Ntaganda Defeated DFCU Bank In A 35 Billions Shillings Case

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DFCU Bank In Trouble Again As Crane Bank's Appeal Approved By The England High Court

By Gad Masereka

The High Court issued its decision in the very contentious case of Excellent Assorted Manufacturers and Ephraim Ntaganda vs. DFCU Bank and The Commissioner of Land Registration on August 16, 2023.

Ntaganda was challenging multiple debits made on him and his company’s accounts with DFCU’s predecessor, Crane Bank, among other things. Ntaganda had several bank accounts and acquired numerous borrowing facilities from Crane Bank. Crane Bank drafted and asked Ntaganda to sign facility letters labeled “Renewal” on an annual basis, which Ntaganda signed believing the bank was acting in good faith.

The bank imposed different charges and debits in the stated facility letters, including a 1% usage fee, a discretionary early repayment fee not to exceed 5%, utilization fees ranging between 0.50% and 1%, arrangement fees, interest, legal fees, and stamp duty charges, among others. Crane Bank is reported to have deducted between Shs 3.2 billion and $3.2 million from Ntaganda’s bank accounts over time in accordance with these facility letters.

Ntaganda stated that he sought competent assistance and discovered that Crane Bank had always acted unlawfully, in bad faith, and illegally, causing him severe difficulty. In summary, Ntaganda claimed that Crane Bank (and, by implication, DFCU) breached its duty of care to him as a customer.

Because Crane Bank’s assets and liabilities (including Ntaganda’s loan portfolio) were acquired by DFCU Bank, the complaint was filed against DFCU. It was claimed for DFCU that Ntaganda was still owing, that the bank operated in good faith, and that any deductions or debits made on his accounts were for their own profit, with the goal of lowering Ntaganda’s liabilities to the bank.

The bank’s case was based on the fact that all debits and withdrawals, as well as any other transactions done on his accounts, were authorized by facility and sanction letters signed by Ntaganda and Crane Bank. In this regard, the bank stated that the parties should adhere to the obligations made in the different facility agreements that were completed.


The court agreed with Ntaganda that dfcu bank, through its predecessor (Crane Bank), infringed its contractual and fiduciary duties and obligations to Ntaganda by handling his accounts in an unlawful, unauthorized, and irregular manner.

Among other findings, the court determined that various debits made on Ntaganda’s accounts, such as arrangement fees, legal fees, stamp duty fees, or utilization fees, were not only illegal but also inexplicable, prompting orders for refunds.

As a result, the court determined that “the primary sums recoverable by Excellent Assorted Manufacturers are $57,000 and Shs 88 million. The major amounts recovered by Ntaganda are $3 million and Shs 3.1 billion. When combined with the accumulated interest from the respective dates of the debits to the date of judgment, the monies awarded to Ntaganda and his company totaled $7 million (Shs 25 billion) and Shs 9.9 billion, for a total of nearly Shs 35 billion.

Takeaways from the decision

It should be mentioned that the issue was not limited to bank-customer relations. It also addressed the authority of the commissioner of land registration (second defendant), the competency of witnesses, the culpability of guarantors, and whether Ntaganda was indebted to DFCU Bank.

This view of the judgment, however, is limited to banking practice. The following are some key points from the 240-page decision:

Keeping track of bank transactions

Ntaganda successfully claimed that certain debits were not warranted. Indeed, the court determined that not all of his account’s debits were supported by paperwork or explanation. The court stated that “the duty of care bestowed on the bank extends to and requires the bank to keep proper records of account.”

Although Crane Bank may have incurred the expenses that required debiting Ntaganda’s accounts, the court was not convinced that such debits were conducted for Ntaganda’s advantage or in good faith in the absence of any source documentation.

Customer interactions must be explained clearly.

Ntaganda’s main point was that certain debits were “unexplained or irregular” because they were not adequately explained.

The court noted that it was a settled position of the law that where the claimant shows that the withdrawals from his or her accounts were made by the bank in violation of a mandate, the burden shifts to the bank to prove that the withdrawals were for the purpose of discharging the claimant’s liabilities or otherwise for the benefit of the claimant and did not cause loss to the customer.

Changing the sanction letter regime

The parties had multiple sanction letters, which stated that all legal documentation and registration charges… surveyors’ fees for surveying land, advocates’ fees for verifying land titles, and valuers’ fees for appraising property offered for mortgage shall be charged to [the 2nd Plaintiff’s] current account.

Please keep enough money in your checking account to cover the costs. The bank used the aforementioned clause to explain the debits on Ntaganda’s accounts, but the court was not convinced.

The court ruled that simply possessing a sanction letter does not give you permission to debit the consumers’ accounts since they signed an agreement to that effect. Even in such a case, the court believes that the consumer is entitled to notice before any such debit is made.

Strengthening the Central Bank’s position

The central bank’s position as the regulator is unquestionably maintained. In this instance, Ntaganda claimed that certain of the charges debited or paid to their account had never been announced by the central bank as legitimate fees.

“Once a regulator issues and publishes official charges and leaves no room by way of a general clause for imposing charges outside the circular,” the court writes, “the understanding is that an entity subject to such regulation cannot act outside such regulation.”

As a result, the court concluded that “the practice of banks charging fees contrary to what has been endorsed by the regulator, the Bank of Uganda, is illegal and dangerous to the economy.”

The court’s decision raises two intriguing questions: (1) Is the central bank the sole decider of all fees that Ugandan banks must charge? and (2) in the absence of any ambiguity or if the parties explicitly describe a fee, can one breach a contract just because the fee was not publicized by the Bank of Uganda?

Financial consumer protection recommendations issued by the BoU

In 2011, the Bank of Uganda issued the “Bank of Uganda Financial Consumer Protection Guidelines 2011” in order to protect financial product consumers from unethical individuals in the banking business.

According to the High Court, the guidelines lack the power of law and hence cannot be relied on. In this decision, the court found that “in the absence of a superior legal instrument, guidelines issued by a regulatory body have persuasive authority, and the court is able to derive useful guidance from them.”

The court also ruled that “the bank was duty-bound to follow the guidelines and not openly flout them, especially where doing so resulted in an overt injustice.”

The legal effect of the rules has been questioned over time, but this case reignites the topic, “Are the guidelines having the force of law?”

Regardless of your opinions, the court’s position is that guidelines published by a regulatory agency have persuasive authority and can provide meaningful guidance to the court.

Given that they were issued to all supervised financial institutions (SFIs: commercial banks, credit institutions, and microfinance deposit-taking institutions), the same SFIs are now obligated to follow the guidelines and not openly flout them, particularly where doing so would result in an overt injustice. Given that there have been two High Court judgments with varying conclusions on the legal status of the guidelines, it may be time for a higher court or body to clear the air.

Customers’ silence over account mismanagement does not constitute agreement.

When a customer’s account is mishandled, it is always required or expected that the customer notify the bank of the suspicious behavior within a reasonable time frame.

What remains debatable is whether the customer’s silence in the face of any mismanagement or unauthorized debits or withdrawals amounts to an admission that whatever transpired was tolerated. In this case, the court reached a different decision. It stated that “when a customer opens up an account with the bank, the bank is under a duty to apply its skill, expertise, and all manner of safeguards to ensure that the customer’s money is safe from actions by third parties and other unauthorized persons.”

The court’s decision also places the banks in jeopardy. Equity, as a general rule, benefits the vigilant. As a result, by concluding that a customer’s silence does not constitute permission for any account mishandling, the court may have opened the door to a slew of lawsuits by Crane Bank’s erstwhile sluggish clients against holders of Crane Bank’s assets and liabilities. This is a scenario that will be closely monitored.

The gleaming thread

Despite reaffirming several other principles, the court’s decision focuses primarily on the banks’ duty of care to their consumers.

The judgment’s golden thread is one that reaffirms the bank’s obligation to inform the customer of and about changes that are likely to prejudice the client. The court’s decision reaffirms that the bank cannot act unilaterally, even in the face of clearly unambiguous instructions executed by the consumer.

As a result, for any bank to be safe in its transactions with various consumers, it is necessary to keep customers informed of developments pertaining to their accounts.

This is due to the fact that when a customer registers an account with the bank, the bank is obligated to utilize its ability, experience, and a variety of precautions to ensure that the customer’s money is safe against acts by third parties and other unauthorized persons.

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