Wakilii

DFCU Bank Limited v Abubaker Techinical Services and General Supplies Limited (Miscellaneous Application 764 of 2022)

High Court · [2023] UGCOMMC 29 · 2023 Application Granted — Plaint Struck Out AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to strike out plaint under Order 6 rule 30 for failure to disclose a reasonable cause of action arising from Civil Suit No. 805 of 2022
Decision
Plaint struck out as against applicant bank for failure to disclose a reasonable cause of action

Observed later treatment

Cited — treatment unverified cited in 3 (treatment unverified) Sequitur — Uganda’s citator · Derived from citing cases in the Wakilii corpus — not an assertion that this case is good law.

Citator coverage is limited to judgments in the Wakilii corpus and source-matched treatment records. Absence of a signal is not an assertion that the case remains good law.

No adverse treatment recorded Cited 3 times with no adverse treatment recorded; not yet tested on the merits. Derived from citing cases in the Wakilii corpus — a deterministic signal, not legal advice.

AI-generated summary. This summary was generated by AI from the full text of the judgment. It may contain errors or omissions—always read the source judgment before relying on it.

Holding

A principal suing a guarantor bank for wrongfully honouring a call on unconditional on-demand performance and advance payment guarantees must plead that the call was manifestly unlawful, fraudulent, or unconscionable, and that the guarantor had actual notice of a strong prima facie case of those circumstances at the time of payment. Where the plaint contains bare conclusions without supporting factual averments establishing these essential elements, it fails to disclose a reasonable cause of action and must be struck out.

Outcome

Plaint struck out as against applicant bank for failure to disclose a reasonable cause of action

Facts

The respondent entered into subcontracts with Shimizu-Konoike Joint Venture for construction works, procuring an Advance Payment Guarantee and Performance Guarantee from the applicant bank in favour of the joint venture. Following addenda reducing the respondent's scope of works and allegations of default, the joint venture called on both guarantees in September 2022. The respondent obtained an interim administrative order restraining payment, which was revoked on 15 September 2022. On 21 September 2022, the applicant honoured the call and paid UGX 813,085,542. The respondent then sued the applicant and the joint venture seeking declaratory orders, refund of sums paid under the guarantees, damages, interest and costs, alleging the call was non-compliant, fraudulent, and that the guarantees had been extinguished by variations to the subcontracts made without the applicant's consent. The applicant applied to strike out the suit for failure to disclose a cause of action.

Issues

  1. Whether the plaint discloses a reasonable cause of action against the applicant bank for honouring a call on performance and advance payment guarantees.
  2. Whether a principal suing a guarantor bank must plead that the guarantor had actual notice of a strong prima facie case of manifest unlawfulness, fraud, or unconscionability at the time of honouring the call.

Orders

  • The plaint is struck out as against the applicant (2nd defendant).
  • Costs of the application and the suit awarded to the applicant.

Rules and key headnotes

Banking & Finance — Performance Guarantees — On-Demand Guarantees — Autonomy Principle
On-demand performance guarantees constitute primary independent obligations to pay that are independent from the underlying contract and are triggered by written demand, without regard to whether the principal has performed the underlying contractual obligations or is in default, subject only to the exceptions of fraud, unconscionability, and express terms to the contrary.
Banking & Finance — Performance Guarantees — Uniform Rules on Demand Guarantees (URDG) — Independence from Underlying Contract
Article 5(a) of the Uniform Rules of Demand Guarantee (URDG) ICC Publication No. 758 provides that a guarantee is by its nature independent of the underlying relationship and the guarantor is not concerned with or bound by such relationship, and the undertaking to pay is not subject to claims or defences arising from any relationship other than that between the guarantor and the beneficiary.
Banking & Finance — Performance Guarantees — Guarantor's Obligation to Reject Call — Manifest Unlawfulness, Fraud, or Unconscionability
A guarantor has an obligation not to pay if the call is manifestly unlawful, fraudulent, or unconscionable, but the guarantor has no obligation to make its own searches to verify whether the underlying contract has been fulfilled; once informed by the principal that a call is unlawful, the guarantor must ascertain in its own opinion whether the call is unlawful.
Civil Procedure — Pleadings — Cause of Action — Essential Elements in Suit Against Guarantor
A principal suing a guarantor for honouring a call on a performance guarantee must plead facts identifying the nature of the guarantee, the obligations owed by the guarantor under its terms, that the call was honoured in spite of a strong prima facie case of manifest unlawfulness, fraud, or unconscionability, and that the guarantor had actual notice of such circumstances at the time of payment, and the injury suffered as a consequence.
Civil Procedure — Striking Out Pleadings — Failure to Disclose Reasonable Cause of Action — Bare Conclusions Insufficient
Where a plaint contains bare conclusions without supporting factual basis establishing the essential elements of a claim, the court may strike out the plaint under Order 6 rule 30 of the Civil Procedure Rules for failure to disclose a reasonable cause of action.

Legislation cited (7)

Cases cited (9)

  • Mukisa Biscuit Manufacturing Co Ltd v West End Distributors Ltd [1969] EA 696
  • Attorney General v Major General Tinyefuza (Constitutional Petition No. 1 of 1997)
  • Cooke v. Gull, LR 8E.P 116
  • Read v. Brown 22 QBD 31
  • Auto Garage and others v Motokov (No 3) [1971] EA 514
  • Kebirungi v Road Trainers Ltd and two others [2008] HCB 72
  • Edward Owen Engineering Ltd v. Barclays Bank International Ltd [1978] 1 QB 159
  • Ward Petroleum Corp. v. Federal Deposit Inc. Corp (1990) 903 F. 2d 1299
  • Kelly Lake Cree Nation v. Canada, [1998] 2 F.C. 270 (T.D.)

Cases citing this judgment (3)

How later Ugandan judgments in the Wakilii corpus have cited this case. Treatment labels come from Sequitur — Uganda’s citator — each backed by a verbatim span from the citing judgment, and are not an assertion that this case is, or is not, good law.

Full judgment

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

DFCU Bank Limited v Abubaker Techinical Services and General Supplies Limited (Miscellaneous Application 764 of 2022) [2023] UGCommC 29 (1 September 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.