Wakilii

El Bueno Technologies Limited v Insolx Ingeniera S.A (In liquidation) & Another (Miscellaneous Application 432 of 2022)

High Court · [2024] UGCOMMC 161 · 2024 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for security for due performance arising from civil suit for damages
Decision
Application dismissed with no order as to costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court dismissed the application for security for due performance. Order 40 Rule 5 Civil Procedure Rules did not apply because the applicant failed to demonstrate an intention by the 1st respondent to obstruct or delay enforcement of any decree. The court held that proceeds from cashing a performance guarantee are contractually the employer's property, not the contractor's. Granting the relief would unfairly convert the applicant into a secured creditor, prejudicing other creditors in the 1st respondent's Spanish insolvency proceedings. The applicant failed to prove the existence or quantum of any payables due to the 1st respondent from the 2nd respondent.

Outcome

Application dismissed with no order as to costs

Facts

The applicant was a sub-contractor engaged to complete works on an electricity grid interconnection project originally contracted to the 1st respondent. The 1st respondent had entered into a contract with the 2nd respondent (UETCL) to construct substations for electricity grid interconnection. The 1st respondent secured advance payment guarantees and a performance guarantee of USD 3,000,000 with Ecobank. In July 2017, the 2nd respondent was notified that the 1st respondent had applied for bankruptcy in Spain. The 2nd respondent cashed the performance guarantee and terminated the contract. The 2nd respondent then engaged the applicant and other contractors to complete the project. The applicant sued the respondents for USD 191,462.60 special damages and USD 300,000 general damages in the main suit. The applicant sought an order requiring the 2nd respondent to deposit USD 300,000 in court as security for due performance, alleging that the 1st respondent was insolvent and had quit the jurisdiction leaving only the money cashed from the performance guarantee.

Issues

  1. Whether the applicant was entitled to an order for security for due performance under Order 40 Rule 5 of the Civil Procedure Rules.
  2. Whether the court should exercise its inherent powers under Section 98 of the Civil Procedure Act to order the 2nd respondent to deposit USD 300,000 in court as security.
  3. Whether the proceeds of cashing a performance guarantee constitute property of the principal contractor or the employer.
  4. Whether granting the relief sought would prejudice other creditors in the insolvency proceedings involving the 1st respondent.
  5. Whether the applicant had established that there were payables due to the 1st respondent from the 2nd respondent.

Orders

  • Application dismissed.
  • Each party to bear their own costs.

Rules and key headnotes

Civil Procedure — Security for Due Performance — Order 40 Rule 5 Civil Procedure Rules — Elements Required
An applicant seeking security for due performance under Order 40 Rule 5 of the Civil Procedure Rules must demonstrate that the defendant has an intention to defeat or delay the enforcement of a possible decree, not merely that the defendant has quit the jurisdiction leaving property behind.
Civil Procedure — Inherent Powers of Court — Section 98 Civil Procedure Act — Exercise in Interests of Justice
The invocation and utilization of the court's inherent powers under Section 98 of the Civil Procedure Act to make orders in the interests of justice do not require pleading, and the court may make such orders even if not specifically prayed for in the pleadings where circumstances justify it.
Contract Law — Performance Guarantees — On-Demand Guarantees — Autonomy Principle — Ownership of Proceeds
The proceeds from cashing an on-demand performance guarantee are the contractual property of the employer-beneficiary and not the contractor, as the guarantee constitutes a primary independent obligation by the guarantor to pay the employer upon demand, independent of the main contract.
Commercial Law — Corporate Insolvency — Protection of Creditors — Attachment Before Judgment
Where a defendant is undergoing insolvency proceedings, a court should not attach assets before judgment for the benefit of a single unsecured creditor holding a contingent debt, as this would unfairly convert that creditor into a secured or priority creditor and prejudice other creditors in the insolvency pool.
Contract Law — Privity of Contract — Sub-Contractors — Third Party Rights
A sub-contractor cannot claim a benefit from the principal agreement as they have no privity in respect of that contract, except as third-party beneficiaries or within other recognized exceptions to privity such as agency, assignment, or succession.
Evidence — Burden of Proof — Civil Proceedings — Balance of Probabilities
In civil proceedings, the burden of proof lies upon the party who alleges, and that party must prove their case on a balance of probabilities. Courts base their decisions on evidence and not assumptions, abstractions or innuendos.

Legislation cited (7)

Cases cited (24)

  • Ssengendo Paul & Another v Pio Crypto Centre Investment Limited & Another (Miscellaneous Application No. 345 of 2021)
  • Nobert Kahiire v Richard Lutaaya (Miscellaneous Application No. 1617 of 2021)
  • Bahman (Prince Abdul) Bin Turki Al Sudairy v. Abu Taha, [1980] 3 ALL ER 409 at 412
  • Polly Peck International plc v. Nadir (No 2) [1992] 4 All ER 769
  • Kagumaho Musana v Rama and 3 Others (Miscellaneous Application No. 933 of 2019)
  • Tullow Uganda Limited & Another v Jackson Wabyona & Others (Miscellaneous Application No. 443 of 2017)
  • Green Meadow Limited v Patrice Namisono (Miscellaneous Application No. 1368 of 2022)
  • MS Fang Min v Belex Tours & Travel Ltd (Civil Appeal No. 1 and 6 of 2013)
  • Stephen Kasako v Christ's Heart Church Limited (Miscellaneous Application No. 831 of 2023)
  • DFCU Bank v Abubakar Technical Services & General Supplies Limited (Miscellaneous Application No. 764 of 2022)
  • 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
  • UETCL v Citibank Uganda Limited & Others (Miscellaneous Application No. 1397 of 2020)
  • DFCU Bank Limited v Polat Yol Yapi San Vstie AS & Another (Miscellaneous Application No. 217 of 2022)
  • Polat Yol Yapi San Vstie AS v UNRA (Miscellaneous Application No. 3 of 2022)
  • Roko Construction Ltd v The Aga Khan University & Another (Miscellaneous Cause No. 15 of 2022)
  • Miller v Minister of Pensions (1947) 2 ALL ER 372 at page 373
  • Night Nagujja v Namuwonge Agnes & Others (Miscellaneous Application No. 1878 of 2021)
  • Centenary Bank v Federation of Association of Uganda Exporters Limited & Others (Civil Suit No. 474 of 2016)
  • Bank of Uganda and Another v Kaweesi Sulaiman and Others (Miscellaneous Application No. 1047 of 2022)
  • Johnson v. Gore Wood & Co [2001] 1 All ER 481
  • Dunlop Pneumatic Tyre Co Ltd v. Selfridge Ltd [1915] AC 847
  • Wagagai Mining Uganda Limited & Others v Freight Sendy Limited & Others (Civil Suit No. 895 of 2020 and 6 of 2021)
  • Lunco Constructors Limited v The Attorney General Of Uganda & Others (Civil Suit No. 318 of 2004)

Full judgment

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El Bueno Technologies Limited v Insolx Ingeniera S.A (In liquidation) & Another (Miscellaneous Application 432 of 2022) [2024] UGCommC 161 (3 May 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.