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General Industries (U) Ltd v Non-Performing Assets Recovery Trust (Civil Appeal No 24 of 1996)

Court of Appeal · [1998] UGCA 68 · 1998 Appeal Dismissed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Civil appeal from the decision of the Non-Performing Assets Recovery Tribunal dismissing the appellant's suit
Decision
Appeal dismissed; Tribunal's dismissal of the appellant's suit upheld

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Holding

The Court of Appeal dismissed the appeal, holding that the Uganda Commercial Bank had provided consideration to the appellant for the Shs. 700 million loan: the debt was transferred to the appellant's account and the Bank's forbearance in deferring repayment constituted sufficient consideration, which a tribunal may find by inference. The mortgage deed (Exh P4) was a valid legal mortgage intended only as security; prior negotiation documents could not contradict it. The Tribunal properly exercised its discretion in refusing to call further records, was not bound to apply the Evidence Act strictly under the NPAART Statute, and a member's prior representation of the appellant occasioned no miscarriage of justice since the appellant lost.

Facts

General Parts (U) Ltd, controlled by Haji Haruna Semakula, accumulated a large overdraft/loan with the Uganda Commercial Bank, reaching about Shs. 1.75 billion by 1991. Negotiations led to splitting the debt: General Parts retained Shs. 1,059,577,365 while Shs. 700 million was transferred to the account of the appellant company, General Industries (U) Ltd. A mortgage (Exh P4) was executed on 12 August 1991 charging six properties as security for the Shs. 700 million, supported by powers of attorney and guarantees. Repayment by the appellant was deferred to begin 1 January 1993. The appellant defaulted. Under the Non-Performing Assets Recovery Trust Statute 1994, UCB assigned the loan to the respondent, which advertised the secured properties for auction. The appellant sued the Tribunal for a declaration that it was not indebted and to cancel the mortgage, arguing there was no consideration. The Tribunal dismissed the suit, finding consideration had moved from UCB.

Issues

  1. Whether the Uganda Commercial Bank provided consideration to the appellant for the Shs. 700 million loan arrangement.
  2. Whether forbearance and the giving of time to repay constituted sufficient consideration.
  3. Whether the contested mortgage (Exh P4) was a legal mortgage under section 9 of the Mortgage Decree.
  4. Whether prior negotiation documents could be relied upon to interpret the mortgage deed.
  5. Whether the Tribunal wrongly exercised its discretion in disallowing the application to call for the High Court suit record.
  6. Whether the Tribunal was properly constituted given that a member had previously acted for the appellant.
  7. Whether the Tribunal was bound to follow the Evidence Act strictly.

Orders

  • Appeal dismissed.
  • Costs to the respondent in the Court of Appeal and in the court below.

Key headnotes

Contract Law — Consideration — Forbearance and Giving of Time
Forbearance to enforce a debt, including the deferral of an immediately due repayment, can constitute sufficient consideration for a party's undertaking to assume liability for that debt.
Contract Law — Consideration — Proof by Inference
A court or tribunal may find the existence of consideration by inference from facts proved or admitted, without requiring direct proof, where the circumstances justify such an inference.
Land & Property — Mortgages — Legal Mortgage as Collateral Security
A mortgage deed executed as additional collateral security in a loan restructuring is a legal mortgage and need not incorporate all the terms and conditions of the underlying restructuring arrangement.
Evidence — Interpretation of Documents — Exclusion of Prior Negotiations
When interpreting a document the court is concerned with the joint intention of the parties as expressed in the document; where a deed is the final document, evidence of prior negotiations is inadmissible to contradict it.
Evidence — Statutory Tribunals — Application of Evidence Act
A tribunal established to provide expeditious recovery of non-performing assets is not bound to apply the Evidence Act strictly, but must observe the rules of natural justice.
Civil Procedure — Adjudicator — Prior Representation of a Party
Although an adjudicator who has previously acted for a party should disqualify himself so that justice is seen to be done, his failure to do so occasions no miscarriage of justice where any prejudice would have favoured that party and the party in fact lost.
Civil Procedure — Calling for Records — Discretion under Order 12 rule 6
An application to call for and inspect the record of another suit under Order 12 rule 6 must ordinarily be made by chamber summons supported by affidavit, and the court has discretion to grant or refuse it.

Legislation cited (4)

  • Non-Performing Assets Recovery Trust Statute, 1994 s.16
  • Non-Performing Assets Recovery Trust Statute, 1994 s.18
  • Mortgage Decree No. 17 of 1974 s.9
  • Civil Procedure Rules Order 12 rule 6

Cases cited (4)

  • Crears v Hunter (1887) 19 QBD 34
  • Currie v Misa (1875) LR 10 Exch 153
  • Damodar Jinabhai & Co Ltd v Eustance 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.