Wakilii

Biryomunmaisho and Another v Centenary Rural Development Bank Limited (Miscellaneous Application 131 of 2023)

High Court · [2024] UGHC 536 · 2024 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for leave to appear and defend arising from a summary suit for recovery of a guaranteed loan
Decision
Application dismissed; applicants must proceed to answer the summary suit without leave to defend

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court dismissed the application for unconditional leave to defend, holding that the applicants failed to establish a plausible defence. The applicants, as loan guarantors who executed personal guarantees and received independent legal advice, were properly notified of the borrower's default and bound by their contractual obligations under sections 71(1) and (2) of the Contracts Act 2010. Their arguments regarding lack of demand notice, inclusion of the employer as guarantor, and discrepancies in amounts were found to lack merit.

Outcome

Application dismissed; applicants must proceed to answer the summary suit without leave to defend

Facts

On 30 November 2021, Centenary Rural Development Bank Limited advanced a loan of UGX 110,000,000 to Okello Julius secured by personal guarantees executed by the applicants on 29 November 2021. The guarantees were signed after the applicants received independent legal advice. Okello Julius defaulted on his loan obligations. The respondent bank served a demand notice dated 18 January 2023 on Okello Julius for UGX 103,811,598, which was copied to the applicants. On 20 and 25 January 2023, the applicants wrote to the bank requesting removal of holds on their accounts. The respondent filed Civil Suit No. 14 of 2023 as a summary suit claiming UGX 105,569,526. The applicants sought leave to defend, arguing they were not served with demand notices, that the borrower's employer Soroti University should have been sued as a guarantor, and that there were discrepancies in the amounts claimed.

Issues

  1. Whether the applicants have raised triable issues to enable the court to grant them leave to appear and defend Civil Suit No. 14 of 2023.

Orders

  • Application for unconditional leave to appear and defend Civil Suit No. 14 of 2023 dismissed.
  • Costs of the application awarded to the respondent bank.

Rules and key headnotes

Banking & Finance — Loan Guarantees — Liability of Guarantor upon Default
Under sections 71(1) and (2) of the Contracts Act 2010, the liability of a guarantor is to the extent to which the principal debtor is liable unless otherwise provided by contract, and this liability takes effect upon default by the principal debtor.
Civil Procedure — Summary Procedure — Leave to Defend — Test for Triable Issue
Before leave to appear and defend is granted under Order 36 of the Civil Procedure Rules, the defendant must show by affidavit that there is a bona fide triable issue of fact or law. The defence raised must not be a sham defence intended to delay the plaintiff from recovering money due.
Contract Law — Guarantees — Notice to Guarantor of Default
Where a guarantor has executed a guarantee and received independent legal advice, and the demand notice to the principal debtor is copied to the guarantor, the guarantor is deemed to be properly notified of the default and cannot raise lack of personal service of the demand notice as a triable issue.
Contract Law — Guarantees — Parties to Guarantee
Only persons who execute guarantee documents in favour of a creditor are bound as guarantors. A third party who merely provides a letter of undertaking to pay salary through a bank account does not thereby become a guarantor of the borrower's loan obligations.

Legislation cited (6)

Cases cited (3)

  • Geoffrey Gatete and Another v William Kyobe (Supreme Court Criminal Appeal No. 7 of 2005)
  • Maluku Inter Global Trade Agency Ltd v Bank [1985] HCB 65
  • Ariho Trevor v Standard Chartered Bank Uganda Limited (Miscellaneous Application No. 560 of 2021)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Biryomunmaisho and Another v Centenary Rural Development Bank Limited (Miscellaneous Application 131 of 2023) [2024] UGHC 536 (19 June 2024)
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.