Stanbic Bank (U) Ltd v Atabya Agencies

Supreme Court · [2006] UGSC 6 · 2006 Appeal Dismissed ✦ AI-generated summary ↓ Download

Jurisdiction

Uganda

Case Type

Second civil appeal to the Supreme Court from a Court of Appeal decision upholding a High Court order enforcing a bank guarantee

Decision

Appeal dismissed; appellant remains liable as guarantor to pay the decretal sum under the guarantee.

The full judgment

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Holding

The Supreme Court dismissed the appeal, agreeing with the concurrent conclusions of the High Court and Court of Appeal. On the proper construction of the guarantee, the appellant (as guarantor) had undertaken to pay the decretal sum if the intended appeal against the High Court decree was not decided in favour of Uganda Commercial Bank. The notice of appeal had been filed, but the subsequent appeal was struck out as incompetent because it was instituted by a wrong party, and no proper appeal was thereafter pursued. The Court held that this disposed of the appeal in the respondent's favour and triggered the guarantee. The appellant remained liable to pay; the appeal was dismissed with costs.

Facts

Atabya Agencies obtained a High Court judgment against Uganda Commercial Bank (UCB) in HCCS No. 1197 of 1999 for a sum of about Shs 904,025,816. UCB filed a notice of appeal and sought a stay of execution. The stay was granted on terms of a guarantee dated 24 June/July 2003 in which Stanbic Bank undertook to pay the decretal sum on UCB's behalf if the intended appeal was decided in favour of the respondent. An appeal (Civil Appeal No. 69 of 2003) was then instituted, but it was wrongly entitled in the name of Stanbic Bank, asserting a merger with UCB that had not legally occurred. On the respondent's motion, and upon counsel's concession that there was no merger, the Court of Appeal struck out that appeal as incompetent. No proper appeal was subsequently filed. The respondent demanded payment under the guarantee; when the appellant refused, the respondent obtained High Court orders enforcing the guarantee, which the Court of Appeal upheld.

Issues

Whether, on the proper construction of clause 1 of the guarantee, an appeal of the kind contemplated by the guarantee had been filed by Uganda Commercial Bank.
Whether the striking out of Court of Appeal Civil Appeal No. 69 of 2003 amounted to the appeal being determined in favour of the respondent, so as to trigger the appellant's obligation to pay under the guarantee.

Orders

Appeal dismissed.
Costs of the appeal awarded to the respondent here and in the courts below.

Key headnotes

Contract Law — Construction of Contracts — Guarantees — Ascertaining the Obligation Guaranteed

Where a guarantee promises payment of a decretal sum unless an intended appeal is determined in favour of the guaranteed party, the obligation to pay is triggered once it becomes clear that no appeal capable of altering the decree will be determined in that party's favour.

Civil Procedure — Appeals — Institution by a Wrong Party — Effect of Striking Out as Incompetent

An appeal instituted in the name of a party who was not a party to the trial proceedings is incompetent and liable to be struck out; where the proper party fails to seek substitution or to institute a fresh competent appeal, the matter stands determined against the party who failed to appeal.

Banking & Finance — Bank Guarantees — Enforcement Against Guarantor on Failure of Guaranteed Appeal

A bank that guarantees payment of a judgment debt as a condition of a stay of execution becomes liable to honour the guarantee where the guaranteed appeal is not validly prosecuted to a determination in favour of the guaranteed party.

Legislation cited (4)

Court of Appeal Rules r.75
Court of Appeal Rules r.76
Court of Appeal Rules r.82(1)
Court of Appeal Rules r.83(a)

Cases cited (4)

Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98
Hilbers Vs Parkinson (1883) 25 ChD 200 at pages 2003/4
Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352
L Schuler AG v Wickman Machine Tool Sales Ltd [1973] 2 All ER 39

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.