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General Industries Uganda Limited v Non Performing Assets Recovery Trust (Civil Appeal 24 of 1996)

Court of Appeal · [1998] UGCA 37 · 1998 Appeal Dismissed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Civil appeal from a decision of the Non-Performing Assets Recovery Tribunal
Decision
Appeal dismissed; Tribunal's decision in favour of the respondent upheld

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Holding

The Court of Appeal dismissed the appeal, holding that the Uganda Commercial Bank provided consideration for the Shs. 700 million loan the appellant assumed, both through transfer of liability from General Parts and through forbearance in deferring repayment, which constitutes valid consideration. The mortgage (Exh P4) was a genuine legal mortgage under section 9 of the Mortgage Decree, intended only as additional security and not to embody all restructuring terms. The Tribunal properly exercised its discretion in refusing the oral application to call a High Court record, and, being established to ensure expeditious recovery of overdue loans, was not bound to apply the Evidence Act strictly but only the rules of natural justice, which it observed.

Facts

General Parts (U) Ltd, controlled by Haji Haruna Semakula, ran up a large overdraft with the Uganda Commercial Bank (UCB) reaching about Shs. 1.75 billion by 1991. To reschedule the debt, it was agreed the loan be split: General Parts retaining Shs. 1,059,577,365 and the appellant, General Industries (U) Ltd (a related company), assuming Shs. 700 million. On 12 August 1991 a mortgage (Exh P4) over six properties was executed by UCB as lender and General Parts, the appellant, and Semakula as mortgagors to secure the Shs. 700 million. Powers of attorney and guarantees were also executed. The appellant defaulted on repayments due from January 1993. Under Statute No. 11 of 1994, UCB assigned the Shs. 700 million debt to the respondent, which demanded payment and advertised the secured properties for auction. The appellant sued in the Non-Performing Assets Recovery Tribunal seeking a declaration of non-indebtedness and cancellation of the mortgage and sale, alleging want of consideration. The Tribunal dismissed the suit, and the appellant appealed.

Issues

  1. Whether the Uganda Commercial Bank provided consideration for the Shs. 700 million loan arrangement assumed by the appellant.
  2. Whether forbearance to sue by the lender constituted sufficient consideration.
  3. Whether the mortgage (Exh P4) was a valid legal mortgage under section 9 of the Mortgage Decree.
  4. Whether the Tribunal wrongly exercised its discretion in disallowing the appellant's oral application to call for a High Court record.
  5. Whether the Tribunal was improperly constituted by reason of a member having previously acted for the appellant.
  6. Whether the Tribunal was bound to apply the Evidence Act strictly.

Orders

  • Appeal dismissed with costs to the respondent here and in the court below.

Key headnotes

Contract Law — Consideration — Forbearance to Sue as Sufficient Consideration
Forbearance by a lender, such as deferring the date for repayment of a debt that is immediately due, constitutes sufficient consideration to support a promise to be responsible for the debt.
Contract Law — Consideration — Inference from Proved or Admitted Facts
A court may find the existence of consideration by inference from facts proved or admitted, without direct proof, where the conduct of the party is otherwise inexplicable except on the basis that consideration was received.
Land & Property — Mortgages — Legal Mortgage as Additional Collateral Security
A mortgage executed as additional security in a loan restructuring arrangement is a legal mortgage even though it does not incorporate all the terms and conditions of the restructuring, where the negotiations indicate it was intended only as collateral security.
Contract Law — Interpretation of Documents — Joint Intention of Parties
When interpreting a clause in a document the court is concerned with the joint intention of the parties as expressed in the document; what one party may privately have had in mind is irrelevant.
Evidence — Statutory Tribunals — Departure from Strict Rules of Evidence
A tribunal established to provide expeditious recovery of overdue loans is not bound to apply the Evidence Act strictly, provided it observes the rules of natural justice.
Civil Procedure — Calling for Records — Exercise of Discretion under O.12 r.6 CPR
An application to send for and rely on the record of another suit under Order 12 rule 6 of the Civil Procedure Rules must ordinarily be made by chamber summons, and the grant of such an application lies within the court's discretion.
Administrative Law — Natural Justice — Disqualification of Decision-Maker
Although a tribunal member who previously acted for a party ought to disqualify himself so that justice is seen to be done, his failure to do so does not occasion a miscarriage of justice where the decision went against that member's former client.

Legislation cited (5)

  • Non-Performing Assets Recovery Trust Statute 1994 (Statute No. 11 of 1994) s.16
  • Non-Performing Assets Recovery Trust Statute 1994 (Statute No. 11 of 1994) s.18
  • Mortgage Decree No. 17 of 1974 s.9
  • Civil Procedure Rules O.12 r.6
  • Evidence Act

Cases cited (4)

  • Crears v Hunter (1887) 19 QBD 34
  • Currie v Misa (1875) LR 10 Ex 153
  • Damodar Jinabhai and Co Ltd v Eustace Sisal Estates Ltd [1967] EA 153
  • R v Sussex Justices, ex parte McCarthy [1924] 1 KB 256
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.