Wakilii

Centenary Rural Development Bank v Tejas and Others (Civil Suit 106 of 2020)

High Court · [2023] UGCOMMC 102 · 2023 Judgment for Defendant AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of loan arrears under Order 36 rule 2, proceeding ex parte against 2nd and 3rd Defendants after 1st Defendant's death
Decision
Suit dismissed against 2nd and 3rd Defendants; Plaintiff retains option to pursue estate of 1st Defendant or 2nd and 3rd Defendants subject to limitation

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that guarantors are liable only for debts incurred after the guarantee agreement was executed. Where a plaintiff seeks to recover a lumpsum comprising multiple loans but the guarantee covers only one loan obtained after the guarantee date, the plaintiff must prove how much of the claimed sum falls within the guarantee. The bank failed to distinguish between the pre-guarantee and post-guarantee loan balances. Suit dismissed.

Outcome

Suit dismissed against 2nd and 3rd Defendants; Plaintiff retains option to pursue estate of 1st Defendant or 2nd and 3rd Defendants subject to limitation

Facts

The 1st Defendant obtained two loans from the Plaintiff bank: UGX 24,000,000/= on 10 June 2019 and UGX 30,000,000/= on 27 November 2019. The 2nd and 3rd Defendants executed a guarantee agreement on 27 November 2019 for a maximum liability of UGX 30,000,000/= plus interest. The 1st Defendant defaulted. The Plaintiff sued for UGX 46,701,794/= representing the combined outstanding balance of both loans. The 1st Defendant died during proceedings. The court granted leave to the Defendants to defend, but the matter proceeded ex parte against the 2nd and 3rd Defendants after the 1st Defendant's death and the withdrawal of their counsel. The Plaintiff did not serve the estate of the 1st Defendant.

Issues

  1. Whether the 2nd and 3rd Defendants guaranteed both loans obtained by the 1st Defendant or only the second loan obtained after the guarantee agreement was signed.
  2. Whether the Plaintiff proved on a balance of probabilities that the 2nd and 3rd Defendants owed the entire sum of UGX 46,701,794/=.

Orders

  • Suit dismissed.
  • Plaintiff to bear its own costs, the matter having proceeded ex parte.

Rules and key headnotes

Contract Law — Guarantee — Scope of Liability — Temporal Limitation
A guarantor's liability is limited to debts incurred by the principal debtor after the date of execution of the guarantee agreement unless the guarantee expressly covers pre-existing debts.
Banking & Finance — Loan Recovery — Burden of Proof on Creditor
Where a creditor seeks to recover a lumpsum comprising multiple loans but the guarantee covers only one loan, the creditor must prove how much of the claimed sum falls within the scope of the guarantee agreement.
Evidence — Burden of Proof — Ex Parte Proceedings
Even where a suit proceeds ex parte and there is no rebuttal from the defendant, the plaintiff bears the burden of proving the case on a balance of probabilities and must place before the court evidence to sustain the averments in the plaint.
Contract Law — Guarantee — Death of Principal Debtor
The death of a principal debtor does not discharge the estate from liability for debts contracted prior to death and does not discharge a guarantor for those debts.

Legislation cited (5)

Cases cited (3)

  • Miller v Minister of Pensions [1972] 2 All ER 372
  • Kirugi and Another v Kabiya and Three Others [1987] KLR 347
  • Moschi v Lep Air Services Ltd [1973] AC 331

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 Tejas and Others (Civil Suit 106 of 2020) [2023] UGCommC 102 (31 August 2023)
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.