Wakilii

Dr. Chebrot and Another v Central Purchasing Company Limited (Civil Appeal 77 of 2003)

Court of Appeal · [2007] UGCA 74 · 2007 Appeal Dismissed; Cross-Appeal Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Civil appeal and cross-appeal from a High Court judgment enforcing personal guarantees against directors of a defaulting principal debtor
Decision
Appeal dismissed; cross-appeal partially allowed; award of shs. 16,132,487 with interest and costs upheld

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Court of Appeal held that a continuing guarantee is not necessarily subject to the same six-year limitation period as the claim against the principal debtor; the guarantors' liability continues so long as the principal debtor remains indebted and in default. On its proper construction, the judgment in HCCS No. 662 of 1998 was binding on the guarantors, who were jointly and severally liable up to shs. 38 million reduced by instalments and sale proceeds. The appellants were not liable for general damages for breach. The appeal was dismissed and the cross-appeal partially allowed; the award of shs. 16,132,487 with interest and costs was upheld.

Outcome

Appeal dismissed; cross-appeal partially allowed; award of shs. 16,132,487 with interest and costs upheld

Facts

The respondent entered a hire purchase agreement with M/s Sipi International (the principal debtor) for a Steyr bus priced at shs. 49,132,487. The appellants, directors of the principal debtor, executed personal and continuing guarantees in the respondent's favour up to shs. 38,000,000. The principal debtor paid shs. 23,000,000 and defaulted, leaving a balance of shs. 26,132,487. The respondent impounded and sold the bus, then in 1998 obtained a decree against the principal debtor in HCCS No. 662 of 1998, which the debtor failed to satisfy. In 2001 the respondent sued the appellants/guarantors in HCCS No. 274 of 2001 to recover the decretal amount. The appellants raised a preliminary point that the suit was time barred. The trial judge overruled the objection and entered judgment for shs. 16,132,487 with interest at 6% from date of judgment, making no order as to costs.

Issues

  1. Whether the respondent's suit to enforce the guarantees against the appellants was time barred by the six-year limitation period.
  2. Whether the trial judge erred in awarding relief and interest under Order 7 rule 7 of the Civil Procedure Rules.
  3. Whether the judgment in HCCS No. 662 of 1998 against the principal debtor was enforceable against the appellants/guarantors.
  4. The extent of the appellants' liability under the personal continuing guarantees.

Orders

  • Appellants' appeal dismissed with costs in this Court and the High Court.
  • Respondent's cross-appeal partially allowed with 2/3 costs.
  • Judgment in HCCS No. 274 of 2001 against the appellants for shs. 16,132,487 upheld.
  • Taxed costs in HCCS No. 662 of 1998 awarded to the respondent.
  • Interest at 6% per annum from date of filing until payment in full upheld.

Rules and key headnotes

Guarantees — Continuing Guarantee — Limitation Period Distinct from Principal Debt
The liability of a guarantor under a continuing guarantee is not necessarily subject to the same six-year limitation period as the claim against the principal debtor; the guarantor's liability continues so long as the principal debtor remains indebted and in default.
Interpretation of Guarantee Instruments — Whether Claim Statute Barred Determined by Construction of Terms
Whether a suit on a guarantee is statute barred is determined on the construction of the terms of the instrument; where the instrument creates a continuing security, that term must be given effect and there is no reason to limit the cause of action to the ordinary limitation period.
Guarantees — Enforceability of Judgment Against Principal Debtor Upon Guarantor
A judgment obtained against the principal debtor is binding on a guarantor whose continuing guarantee provides for enforcement of judgments and court orders, and the guarantor is estopped from denying knowledge of such judgment; no fresh acknowledgment is required.
Guarantees — Scope of Indemnity — Exclusion of General Damages
A guarantor's liability to indemnify does not extend to general damages for breach of the underlying agreement by the principal debtor where the guarantee covers only the amount due together with costs, charges and expenses of recovery.
Reliefs — Award of Relief Not Specifically Sought — Order 7 rule 7 CPR
Where a claim is established on its stated prayers, a court need not invoke Order 7 rule 7 of the Civil Procedure Rules to grant relief; interest may be awarded in the court's discretion under section 26 of the Civil Procedure Act.

Legislation cited (2)

Cases cited (4)

  • Parr's Banking Company Ltd v Yates [1898] 2 QB 460
  • Ssango Bay Estates ltd vs Presdner Bank EACA 197O
  • Wright and Another vs Newzealand Farmers Co-operative Association of Canterbury Ltd 1939 129 ALL ER 70 PC)
  • Departed Asians Property Custodian Board v Issa Bukenya (Supreme Court Civil Appeal No. 26 of 1992)

Full judgment

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Dr. Chebrot and Another v Central Purchasing Company Limited (Civil Appeal 77 of 2003) [2007] UGCA 74 (19 June 2007)
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.