Nzeyi v Bank of Uganda and Another (Constitutional Petition No. 42 of 2012) [2020] UGCC 13 (4 November 2020)

Key Facts

Issues

• The third issue relates to the remedies sought by the petitioner, including a permanent injunction to prevent the winding up and sale of NBC, general damages for inconvenience, and costs of the petition. The petitioner also requested further declarations from the court regarding the constitutionality of the BOU's actions.
• The second issue concerns whether the actions taken by the Bank of Uganda (BOU)—including the takeover, liquidation, revocation of the National Bank of Commerce's (NBC) license, and its subsequent sale to Crane Bank—were inconsistent with or violated constitutional provisions such as Article 2 (supremacy of the Constitution), Article 26 (property rights), Article 27 (privacy), Article 28 (fair hearing), Article 40(2) (economic rights), Article 42 (fair administrative decisions), and Article 162 (BOU's functions).
• The first issue framed by the court is whether specific sections of the Financial Institutions Act (FIA)—namely 17(a), 28(5), 57, 77, 88, 89, and 102—are inconsistent with or contravene Articles 2 (supremacy of the Constitution), 26 (protection from deprivation of property), 27 (right to privacy), 40(2) (economic rights), 42 (fair administrative treatment), 44 (non-derogable rights), and 162(2) (BOU's constitutional compliance).

Holdings

• The court determined that the BOU's takeover, liquidation, revocation of NBC's banking license, and sale to Crane Bank Ltd on 27th September 2012 were lawful and in the public interest. The court found no evidence of procedural violations or unconstitutional conduct in these actions.
• The court concluded that the petition lacked merit and dismissed it without granting remedies. Each party was directed to bear its own costs, as the issues raised did not warrant redress under the Constitution.
• The court held that the provisions of the Financial Institutions Act (FIA) challenged by the petitioner are constitutional and do not violate the 1995 Constitution of Uganda. The court found that the Bank of Uganda (BOU) acted within its statutory authority to protect depositors' interests and maintain financial stability, and the petitioner did not prove unconstitutional actions.

Remedies

• The court mandated that the first respondent (Bank of Uganda) bear the costs of the petition, as part of the remedies awarded to the petitioner following the court's findings of constitutional violations.
• The court ordered the Registrar to forward the case file to the High Court's commercial division within seven days to assess and determine the damages owed to the petitioner and other shareholders of the National Bank of Commerce for the unconstitutional actions of the first respondent.
• The court found that the first respondent's revocation of NBC's license, management takeover, and sale to Crane Bank Ltd on 27th September 2012 contravened multiple constitutional provisions, including Articles 2, 28, 26, 27, 40(2), 42, 44, and 162. This declaration addresses the petitioner's claims of unconstitutional actions by BOU.

Legal Principles

• The court applied the Wednesbury principle to assess the rationality of Bank of Uganda's actions, finding that the closure and liquidation of National Bank of Commerce (NBC) were irrational and an abuse of discretion due to procedural irregularities and lack of evidence. The decision emphasized that administrative actions must be lawful, reasonable, and procedurally fair.
• The court interpreted the Financial Institutions Act and Constitution using a purposive approach, emphasizing the public interest in maintaining financial stability. It concluded that the law's intent was to protect depositors and the economy, requiring systematic enforcement of regulatory measures.
• The court examined whether NBC was denied a fair hearing under the audi alteram partem principle. It concluded that while NBC was given opportunities to address its issues, the simultaneous revocation, takeover, and sale in one day without proper procedural adherence violated the requirement for just and fair administrative treatment.

Precedent Name

• R v. Wholesale Travel Group Inc.
• Baku Raphael Obudra and Obiga Kania V Attorney General
• Wycliffe Kiggundu V Attorney General
• Kimani Waweru & 4 ors V Central Bank of Kenya
• The Minister of Employment and Immigration v. Chiarelli

Cited Statute

• Financial Institutions Act, 2004
• Constitution of the Republic of Uganda
• Bank of Uganda Act (CAP 51)

Judge Name

• Cheborion Barishaki
• Ezekiel Muhanguzi
• Geoffrey Kiryabwire
• Kenneth Kakuru
• Stephen Musota

Passage Text

• This petition therefore fails and is dismissed. Each party to bear its own costs.
• I find that the first respondent acted outside the scope of its authority when it revoked the National Bank of Commerce's licence, closed the Bank, took over its management and sold it all in one day, without complying with PART IX of the Financial Institutions Act and without specifically complying with the mandatory provisions of Section 84 of that Act.
• If the Petitioner thought that the process was clothed with illegality, irregularity or impropriety then the course of action would be an application for judicial review in the High Court. This Court, basing on affidavit evidence alone is not best suited for that role.