The Court of Appeal has found non-operational Lanex Forex Bureau Limited culpable of illegally receiving customer’s money amounting to $160,000 (over Shs560m) as deposit in contravention of banking regulations.
A panel of three judges of the Appeal Court; Cheborion Barishaki, Stephen Musota and Christopher Madrama, unanimously ruled that Lanex Forex Bureau Limited received the deposit from its customer, Damas Mulagwe yet it was prohibited by law from accepting deposits from customers.
“Its officials were forbidden from accepting such deposits and issuing receipts for them. The officials are culpable under the law but there is no sanction against the customer who innocently deposits money and the officials of the forex bureau accepted the deposit,” Justice Madrama ruled.
According to Court records, in October 2005, Mulagwe deposited $160,000 as a fixed deposit in the forex bureau and he was given a receipt for acknowledgment but contrary to the banking regulations.
The judges have now ordered the defunct forex bureau to refund Mulagwe’s $160,000 which was received as deposit contrary to the financial institutions’ regulations.
Justice Madrama in a lead judgement also dismissed with costs, the appeal by Lanex Forex Bureau Limited that had sought to overturn a lower court decision.
He said that the appeal did not have merit since the forex bureau did not deny receiving the said money.
Justice Madrama ruled: “For the appellant (Lanex Forex Bureau Limited) to retain the sum of $160,000 would amount to unjust enrichment when it is prohibited from receiving such deposits for purposes of the business of fixed deposit accounts.”
The Appeal Court reasoned that the forex bureau did not challenge the question of fact of deposit of $160,000 but only argued that it was illegal deposit received by an employee dishonestly and outside the scope of his employment and the statutory mandate.
“So the ground of objection specified is clearly the holding that the appellant (Lanex Forex Bureau) should refund an illegal deposit. It does not contest that the deposit was made,” Justice Madrama held.
Justice Madrama said that they could not fault the High Court judge for making an order for refund after finding that the money was received illegally.
He added: “In the circumstances, the licence of the appellant (Lanex Forex Bureau) was liable to be revoked and the appellant was accountable to Bank of Uganda. There is no obligation on the part of the respondent (Mulagwe) to the Bank of Uganda.”
Lanex Forex Bureau had appealed against a 2011 High Court decision seeking for orders to quash its proceedings and an order for refund of the illegally deposited and received by its employees.
The forex bureau was represented by Mr Bwogi Kalibala while Senior Counsel Godfrey Lule represented Mulagwe.
In January 2011, the High Court delivered a judgment following a dispute between Lanex Forex Bureau Limited and Damus Malangwe.
The High Court ordered Lanex Forex Bureau to refund the illegally deposited funds received by its employee dishonestly and outside the scope of his employment and outside the statutory mandate of financial institutions.
Mulagwe sued the forex bureau and four other persons jointly for recovery of $160,000 being the unpaid deposit or advance to the accused forex bureau. Mulagwe through his lawyers sought for payment of $12,000 being the contractual interest payable per month from October 2005 till final payment.
However, the High Court found that the interest of $12,000 per month that was claimed by Mulagwe was not recoverable because it was contrary to the Exchange Control Regulations.
The court decision comes years after the Lanex Forex Bureau has since closed shop after the regulator, Bank of Uganda revoked its licence following numerous fraud complaints.