Wakilii

Centenary Rural Development Bank v Nyenya Africa General Contractors Limited and Others [2026] UGHC 723

High Court · 2026 Judgment Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit by a bank for recovery of an outstanding loan balance, contractual interest and costs
Decision
Plaintiff's entitlement to recover under the original facility upheld in principle; quantum not ascertained and referred to an auditor for reconciliation, with final orders to abide that outcome

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Where a banking facility agreement requires variations to be by written supplementary agreement, an unwritten loan restructuring is ineffective as a contractual variation and amounts only to an indulgence; the original facility terms continue to govern. The borrower who received and utilised the funds, acknowledged the debt and instructed liquidation of its fixed deposits cannot rely on the absence of a written restructuring to escape liability, and the bank's appropriation of the deposits was a lawful exercise of its contractual right of set-off pursuant to express mandate. No interest was payable on the liquidated deposit. Guarantors became liable on the principal debtor's default under section 71 of the Contracts Act. As neither party proved the balance outstanding, an auditor was directed to reconcile the accounts.

Outcome

Plaintiff's entitlement to recover under the original facility upheld in principle; quantum not ascertained and referred to an auditor for reconciliation, with final orders to abide that outcome

Facts

On 10 May 2022 the bank granted the first defendant a line of credit limit facility of UGX 1,000,000,000, valid for 12 months at 19.5% per annum, drawable in tranches. Security comprised two fixed deposits totalling UGX 600,000,000, personal guarantees by the second and third defendants, a debenture over the first defendant's assets and a specific charge. Two disbursements of about UGX 500,000,000 each were made in June and July 2022 and were utilised. The first defendant defaulted when the tranches fell due. In December 2022 it requested a three-month restructuring and extension; the bank internally restructured the facility, creating new loan accounts, but no written supplementary agreement was executed, contrary to clause 25(i) of the facility agreement. After a demand of 5 April 2023, the first defendant, through its director, acknowledged indebtedness and authorised liquidation of the fixed deposits; the bank liquidated principal and interest totalling UGX 626,823,205 and applied it to the loan accounts. On 4 May 2023 the bank recalled UGX 594,000,000. The defendants denied indebtedness, disputed the restructuring and claimed interest on the deposit. Neither party adduced evidence of the balance outstanding under the original facility.

Issues

  1. Whether the restructuring of the loan facility without a written supplementary agreement amounted to a binding variation of the facility agreement.
  2. Whether the defendants are indebted to the plaintiff and, if so, in what amount.
  3. Whether the bank lawfully liquidated and appropriated the first defendant's fixed deposits in reduction of the loan.
  4. Whether the defendants are entitled to interest on the liquidated fixed deposit of UGX 600,000,000.
  5. Whether the second and third defendants are liable as guarantors of the first defendant's borrowing.
  6. What remedies are available to the parties.

Orders

  • The restructuring of the loan without a written agreement did not constitute a binding amendment or variation of the loan contract.
  • The defendants remain indebted to the plaintiff under the original facility, if at all.
  • The liquidation of the fixed deposit was lawfully undertaken pursuant to the defendant's instruction and in exercise of the plaintiff's right of set-off.
  • The defendants' claim for interest on the liquidated fixed deposit is dismissed.
  • An auditor is to be appointed by the Deputy Registrar of the Commercial Court to carry out a reconciliation exercise based on the first defendant's bank statements under the original agreement, apply the proceeds of the liquidated fixed deposit and determine the defendants' liability.
  • The orders of the court shall abide the outcome of the reconciliation.

Rules and key headnotes

Contract Law — Variation — Clause Requiring Written Amendment
Where parties expressly agree that any amendment or variation of their contract must be reduced into writing by way of a supplementary agreement, an oral or informal variation is ineffective and the court will not remake the bargain the parties made for themselves.
Banking & Finance — Loan Restructuring — Absence of Written Agreement — Survival of Original Facility
An unwritten restructuring or rescheduling of a loan amounts only to an indulgence by the lender and does not replace the original contractual terms; the absence of a written restructuring does not extinguish the debt, which remains recoverable under the original facility together with contractual interest.
Banking & Finance — Banker's Right of Set-off — Combination of Accounts by Express Mandate
Where the facility agreement permits the bank to combine accounts and apply funds standing to the customer's credit in reduction of a debt, and the customer expressly instructs liquidation of a fixed deposit toward the loan, the bank's appropriation is a lawful exercise of its contractual right of set-off pursuant to mandate and does not vary the loan agreement but merely directs the mode of repayment.
Banking & Finance — Acknowledgement of Indebtedness by Conduct — Approbation and Reprobation
A borrower who receives and utilises loan funds, acknowledges the debt and makes arrangements for its repayment thereby affirms the indebtedness and cannot simultaneously deny liability by relying on defects in an informal restructuring arrangement.
Contract Law — Guarantees — Extent and Commencement of Guarantor's Liability
Under section 71 of the Contracts Act 2010 a guarantor's liability is coextensive with that of the principal debtor unless otherwise provided by contract, and it takes effect upon the principal debtor's default; guarantors who execute guarantee agreements become liable for the sums due the moment the borrower fails to pay.
Evidence — Proof of Quantum in Debt Claims — Reference to Auditor for Reconciliation
Where neither party adduces evidence establishing the balance outstanding under a loan facility, the court cannot ascertain the sum due and may direct that an auditor be appointed to reconcile the bank statements and other relevant documents, with final orders abiding the outcome of that exercise.

Legislation cited (1)

Cases cited (4)

  • Pamrone Investments Limited v Bank of Africa (U) Limited (Civil Suit No. 322 of 2015)
  • Bradford & Bingley PLC v Rashid [2006] UKHL 37
  • Harriet Mushega and Others v Kashaya Wilson (Civil Suit No. 564 of 2016)
  • Irving v Veitch (1837) 3 M&W 90, 107

Full judgment

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

Centenary Rural Development Bank v Nyenya Africa General Contractors Limited and Others [2026] UGHC 723 (28 April 2026)
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.