Wakilii

Jemba v Allied Bank International (U) Limited (Civil Appeal 26 of 2008)

Court of Appeal · [2018] UGCA 238 · 2018 Appeal Partly Allowed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Civil appeal from High Court judgment entering judgment for the plaintiff bank against a guarantor
Decision
Appeal dismissed save for reduction of interest from 25% to 16% per annum simple interest; High Court judgment upheld as modified

The full judgment

Read the complete, verbatim text of this judgment.

Sign in to read the full judgment

AI-generated summary. This summary was generated by AI from the full text of the judgment. It may contain errors or omissions — always read the source judgment before relying on it.

Holding

The Court of Appeal dismissed a guarantor's appeal against judgment on a guarantee, holding the trial Judge properly evaluated the evidence and pleadings and correctly found the receivers never sold the principal debtor's stock in trade, so the guarantor was not discharged. The appellant was bound by his written statement of defence and had contradicted himself in testimony. On interest, the Court found 25% per annum (simple, not compound as alleged) excessive for funds that should be measured against fixed-deposit or bond returns rather than a commercial lending rate, and reduced it to 16% per annum simple interest on the principal under Civil Procedure Act s.26(2). The appeal was otherwise dismissed with costs.

Facts

The respondent commercial bank advanced financial facilities to Messrs Permex International (U) Ltd, whose Managing Director, the appellant, executed a guarantee in the bank's favour. Permex defaulted on repayment, leaving shs. 34,019,926 due on 30 July 1999. The bank appointed receivers who took control of Permex's stock in trade (valued at shs. 138,095,000) intending to sell it and recover the debt. The appellant resisted, obtaining a High Court interim order restraining sale, which was later dismissed on 30 August 1999. The receivers' locks on the warehouse were removed and replaced by the appellant's locks; when receivers cut the locks and re-entered, the warehouse was empty and the stock removed. The appellant, admitting the guarantee, denied liability arguing the receivers had sold the stock and failed to account. He called no witnesses and contradicted himself on whether and when the goods were sold, while his written statement of defence pleaded the goods had not been sold. The bank sued on the guarantee for the sum due plus interest.

Issues

  1. Whether the trial Judge failed to resolve the factual dispute over accountability for the principal debtor's stock in trade taken over by the respondent's receivers.
  2. Whether the appellant was discharged from his guarantor liabilities by the receivers' control and sale of the stock in trade.
  3. Whether the award of interest at 25% per annum was manifestly harsh, unconscionable and excessive.

Orders

  • Grounds 1 and 2 of the appeal disallowed.
  • Award of 25% per annum interest set aside and substituted with 16% per annum simple interest on the principal sum of shs. 34,019,926 from the date of filing suit till payment in full.
  • Appeal dismissed except as to interest.
  • Judgment of the High Court upheld with modification on interest.
  • Respondent awarded costs of the appeal and those in the court below.

Key headnotes

Guarantees — Discharge of Guarantor — Whether Realisation of Security Discharges Surety
A guarantor is not discharged from liability where the creditor's receivers did not in fact sell or realise the principal debtor's stock in trade; the guarantor remains liable on the guarantee for the outstanding debt.
Pleadings — Party Bound by Own Written Statement of Defence
A defendant is bound by the contents of his written statement of defence and cannot resile from it through contradictory oral testimony at trial.
Appeals — Duty of First Appellate Court to Re-evaluate Evidence
A first appellate court must rehear the case by reconsidering and re-evaluating the evidence adduced at trial and make up its own mind, while giving due weight to the trial judge's findings on the demeanour and credibility of witnesses she observed.
Interest — Court's Discretion to Award Reasonable Rate on Decretal Sum
Under Civil Procedure Act s.26(2) a court may award interest at a rate it deems reasonable; the appropriate rate reflects what would be earned on a fixed deposit or bond rather than the rate a bank charges on a commercial loan, justifying reduction of an excessive rate.

Legislation cited (3)

  • Evidence Act s.102
  • Judicature (Court of Appeal Rules) Directions, SI 13-10 Rule 30(1)
  • Civil Procedure Act s.26(2)

Cases cited (2)

  • Banco Arabe Espanol v Bank of Uganda (Civil Appeal No. 8 of 1998)
  • Pandya v R [1957] EA 336
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.