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Absa Bank Uganda Limited v Chukwu Ejiofor and Another (Civil Appeal 231 of 2022)

High Court · [2022] UGCOMMC 132 · 2022 Appeal Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from Deputy Registrar's ruling making a garnishee order absolute
Decision
Appeal allowed and garnishee order absolute reduced to reflect only unencumbered funds available at date of service.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

A garnishee order nisi attaches only funds that the judgment debtor can himself honestly deal with. Funds on a bank account subject to a cash-secured payment guarantee cannot be garnished because legal title vests in the bank and equitable title in the beneficiary during the guarantee period. The judgment debtor has only a reversionary interest. Lien priority follows first in time, first in right. A payment guarantee recorded before a garnishee order takes priority. The court allowed the appeal and reduced the garnishee order absolute from UGX 287,174,642 to UGX 55,671,729.

Outcome

Appeal allowed and garnishee order absolute reduced to reflect only unencumbered funds available at date of service.

Facts

On 6 September 2019 judgment was entered in favour of the first respondent against the second respondent for UGX 287,174,642. On 24 September 2019 a garnishee order nisi was granted and served on the appellant bank, attaching the second respondent's account. The bank disclosed on 7 October 2019 that the account held UGX 455,671,729, of which UGX 400,000,000 was subject to a cash-secured payment guarantee issued on 25 March 2019 in favour of Vivo Energy Uganda Limited, valid until 21 March 2020. The bank maintained only UGX 55,000,000 was available for attachment. After stays of execution were eventually set aside, the Deputy Registrar on 29 February 2022 made the garnishee order absolute for the full judgment sum, ordered the bank to restore the account to the 24 September 2019 status by crediting UGX 455,000,000, and found the bank in contempt of court for allowing withdrawals during the garnishee period.

Issues

  1. Whether all funds on the judgment debtor's bank account were attachable under a garnishee order nisi, including funds subject to a cash-secured payment guarantee.
  2. Whether the learned Deputy Registrar erred in law when she made the garnishee order absolute for the full judgment sum rather than limiting it to unencumbered funds available on the date of service.
  3. Whether the learned Deputy Registrar erred in law when she held the appellant bank in contempt of court without affording it a hearing.
  4. Whether the appellant is entitled to the remedies sought.

Orders

  • Appeal allowed.
  • Garnishee order absolute in the sum of UGX 287,174,642 discharged.
  • Garnishee order absolute substituted with one in the sum of UGX 55,671,729.
  • Finding of contempt of court against the appellant set aside.
  • Costs of the appeal and of the impugned execution proceedings awarded to the appellant.
  • Appellant granted leave to offset the agreed or taxed costs from the garnished amount.

Rules and key headnotes

Garnishee Orders — Attachable Debts — Cash-Secured Payment Guarantees
A garnishee order nisi attaches only debts owing or accruing due from the garnishee to the judgment debtor — that is, funds over which the judgment debtor has disposing power which he may exercise for his own benefit. Funds subject to a cash-secured payment guarantee cannot be garnished because during the validity of the guarantee, legal title vests in the bank and equitable title in the beneficiary, while the account holder retains only a reversionary interest accruing upon expiry.
Payment Guarantees — Legal Effect of Cash-Secured Guarantees on Account Funds
When a bank issues a payment guarantee secured by cash in deposit with the bank, a lien is created on the account to the extent of the funds secured by the guarantee. Legal ownership or title to the secured funds vests in the bank during the validity period of the guarantee, while equitable ownership vests in the beneficiary. The customer cannot withdraw these funds until expiry of the guarantee and has no disposing power over them.
Garnishee Orders — Lien Priority — First in Time, First in Right
Lien priority follows the first in time, first in right rule. A payment guarantee recorded with the bank before service of a garnishee order nisi has priority over the judgment lien created by the garnishee order. A judgment creditor cannot attach funds that are subject to a prior-ranking lien in favour of another party.
Garnishee Orders — Date of Attachment — No Extension for Subsequent Accruals
A garnishee order nisi attaches debts owing or accruing due on the date of service of the order. It does not attach future debts that may or may not accrue on a future date. The amount attachable is fixed as at the date of service and does not increase by virtue of interest accruing on the decretal sum or other subsequent events.
Contempt of Court — Procedural Requirements — Notice and Opportunity to Be Heard
Before imposing civil contempt sanctions, minimum fair trial rights require that the alleged contemnor be given notice of the charge and an opportunity to be heard. A finding of contempt made without affording the party a hearing is a violation of fair trial rights and must be set aside.

Legislation cited (8)

Cases cited (21)

  • Father Nanensio Begumisa and three Others v Eric Tiberaga (Supreme Court Civil Appeal No. 17 of 2000)
  • Lovinsa Nankya v. Nsibambi [1980] HCB 81
  • Choice Investments Ltd. v. Jeromnimon [1981] 1 All E.R. 225
  • Joachimson v. Swiss Bank Corporation [1921] 3 KB 110
  • Societe Eram Shipping Company Limited and others v. Hong Kong and Shanghai Banking Corp Ltd, Compagnie Internationale de Navigation [2003] 3 WLR 21; [2003] 3 All ER 465; [2003] 2 Lloyd's Rep 405; [2004] 1 AC 260
  • Webb v. Stenton [1883] 11 QBD 518
  • Regina v. Chief Registrar of Friendly Societies, ex parte New Cross Building Society [1984] 2 WLR 370
  • In re General Horticultural Co, Ex p Whitehouse (1886) 32 Ch D 512
  • Rogers v. Whiteley (1889) 23 QBD 236
  • Edward Owen Engineering Ltd v. Barclays Bank International Ltd [1978] QB 159
  • United City Merchants (Investments) Ltd. v. Royal Bank of Canada, [1982] 2 All E.R. 720
  • Hamzeh Malas & Sons v. British Imex Indus. Ltd., [1958] 2 Q.B. 127
  • Bolivinter Oil SA v. Chase Manhattan Bank NA [1984] 1 WLR 392, [1984] 1 Lloyds Rep 251
  • R D Harbottle (Mercantile) Limited v. National Westminster Bank Limited [1978] 1 QB 146
  • Pritchard v. Westminster Bank Ltd [1969] 1 All ER 999
  • Rainbow v. Moorgate Properties Ltd [1975] 1 W.L.R. 788
  • Pritchett v. English and Colonial Syndicate [1899] 2 QB 428
  • Société Eram Shipping Co Ltd v. Cie Internationale de Navigation and others [2001] CLC 685
  • Jennifer Rwanyindo Aurelia and another v School Outfitters (U) Ltd (Court of Appeal Civil Appeal No. 53 of 1999)
  • National Pharmacy Ltd. v. Kampala City Council [1979] HCB 25
  • Uganda Development Bank v. Muganga Constructions [1981] HCB 35

Full judgment

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Absa Bank Uganda Limited v Chukwu Ejiofor and Another (Civil Appeal 231 of 2022) [2022] UGCommC 132 (7 April 2022)
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.