Standard Chartered Bank has been ordered to pay a fine of UGX 60 million after a Ugandan court found it had wrongfully cancelled a mortgage facility granted to a couple.
The ruling, delivered by Justice Patricia Mutesi of the High Court, stated that the bank had acted unlawfully when it withdrew a loan approved for Peter Victor Kwagala and his wife, Priscilla Mbabazi.
Loan Approval, Cancellation
Kwagala, a former credit analyst at Standard Chartered Bank, had applied for a staff mortgage in 2020 to purchase land with rental properties in Kawempe division. The property was valued at UGX 300 million.
Initially, he qualified for a USD 250 million mortgage, but after including his wife’s income, the couple was approved for a USD 312 million facility.
The bank required them to provide proof of paying 20% of the property value (USD 60 million).
To meet this, the couple paid an initial deposit of USD 5 million, submitted the necessary documents, and on July 15, 2020, received official loan approval for USD 240 million.
However, the bank later asked Kwagala to clear his existing salary loan and provide full proof of the USD 60 million payment.
The couple used their savings and borrowed money to meet this condition.
On August 25, 2020, they signed the final mortgage documents and were told the funds would be disbursed within five working days.
Instead, the bank informed Kwagala that his department was set to be phased out.
In December 2020, he lost his job, and the bank cancelled the loan, citing his unemployment as the reason.
Court Ruling
Feeling aggrieved, Kwagala and Mbabazi took the matter to court, arguing that the bank had breached its contractual obligations.
Justice Mutesi ruled in their favour, stating that the facility letter and mortgage deed were binding contracts under the law.
“The mortgage deed and the facility letter created binding and enforceable legal obligations. The plaintiffs complied with all their duties, while the defendant failed to disburse the loan,” the judge stated.
She further ruled that the bank’s decision to withdraw the loan due to restructuring plans went beyond the terms agreed upon in the contract.
Compensation Awarded
As a result, the court ordered Standard Chartered Bank to pay:
-USD 9 million in special damages, with 21% annual interest from 2020 until full payment.
-USD 50 million in general damages, with 16% annual interest until fully paid.
The legal costs incurred by the couple.
The ruling reinforces the legal standing of loan agreements and highlights the obligations financial institutions have once loan contracts are signed.
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