Kampala, Uganda – The High Court has ordered Standard Chartered Bank (U) Limited to pay UGX 50 million in general damages to a former employee and his wife for failing to disburse a mortgage facility despite their meeting all necessary requirements. The court ruled that the bank’s refusal constituted a breach of contract and violated financial regulations mandating fairness in banking transactions.
The ruling, delivered after a legal battle stemming from a mortgage application in 2020, found that Standard Chartered’s actions contravened Section 4(1) of the Mortgage Act, 2009, and Clause 6(1) of the Bank of Uganda Financial Consumer Protection Guidelines, 2011. These provisions require financial institutions to operate with fairness, honesty, and reasonableness in their dealings.
In June 2020, the first plaintiff, an employee of Standard Chartered working as a credit analyst, applied for a staff mortgage facility to purchase property in Kawempe Division, Kampala, valued at UGX 300 million. The bank determined that he qualified for a UGX 250 million mortgage, later increasing the amount to UGX 312 million after considering his wife’s income. On July 15, 2020, Standard Chartered formally approved UGX 240 million for the plaintiffs.
However, the bank imposed additional conditions, requiring the first plaintiff to clear an existing salary loan and provide proof of a UGX 60 million payment to the property vendor. Despite fulfilling these conditions—including selling his car, exhausting savings, and taking friendly loans—the plaintiffs did not receive the approved mortgage funds. The bank later informed them that due to a departmental restructuring, which could affect the first plaintiff’s employment, the loan had been recalled.
On December 3, 2020, Standard Chartered terminated the first plaintiff’s employment, further complicating the mortgage transaction. The plaintiffs pursued legal action, arguing that the bank’s refusal to disburse the approved loan was unlawful and caused them financial hardship and emotional distress.
The court ruled that Standard Chartered’s failure to disburse the loan after executing the mortgage deed and facility agreement amounted to a breach of contract. The facility letter and mortgage deed, the court held, constituted binding contracts under Section 10(1) of the Contracts Act, and the bank had no legal basis to unilaterally withdraw the offer after it had been accepted.
Additionally, the court found that requiring the plaintiff to clear a previous loan as a precondition for a new mortgage, only to later recall the mortgage, was unfair and unreasonable. This practice, lacking good faith, violated key financial consumer protection guidelines.
As a result, the court awarded the plaintiffs UGX 9,011,000 in special damages for valuation and legal fees, with an interest rate of 21% per annum from September 4, 2020, until full payment. Additionally, general damages of UGX 50 million were awarded, with an interest rate of 16% per annum from the date of judgment until full payment.
The ruling underscores the obligation of financial institutions to uphold transparency and fairness in mortgage transactions. The court reaffirmed that banks cannot arbitrarily revoke approved loan offers after borrowers have fulfilled stipulated conditions. Furthermore, it emphasized the importance of maintaining proper records in financial transactions to safeguard legal rights in disputes.
The case serves as a precedent in ensuring that banks adhere to ethical lending practices and honor binding contractual agreements in Uganda’s financial sector.
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