Esther Kasirye V Patience Mugwenzi 3 others (CIVIL SUIT NO 93 OF 2018)

Observed later treatment

No later-treatment classification is recorded for this judgment.

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.

Holding

Held that where shareholders of a company designated as joint signatories withdraw company funds without the required joint authorisation, they are personally liable for the loss. The corporate veil may be lifted to impose personal liability on the wrongdoing shareholders rather than making the company liable, thereby avoiding unfair implication of the innocent shareholder in the fraud.

Outcome

First and second Defendants held liable; quantum of liability and costs to be determined after hearing fourth Defendant's defence

Facts

The Plaintiff and the first and second Defendants were shareholders and directors of the third Defendant company, established to carry out business consultancy and training. By company resolution, all three were appointed joint signatories to the company's bank account at the fourth Defendant bank. An initial credit of UGX 143,981,985 was deposited into the account as payment for business services. Contrary to the joint signatory resolution, the first and second Defendants withdrew funds from the account without the Plaintiff's authorisation. The bank's relationship manager alerted the Plaintiff on two occasions when cheques were presented. The Plaintiff objected but the bank paid out on the first occasion. On the second occasion the bank stopped payment on legal advice. By August 2017 only UGX 3,232,719 remained in the account. The first and second Defendants were hostile, abusive, and evasive when the Plaintiff attempted to discuss the matter.

Issues

1. Whether the first and second Defendants were liable for withdrawing funds from the company account without the Plaintiff's authorisation contrary to the joint signatory resolution.
2. Whether the third Defendant company should be held liable for the unauthorised withdrawals by its shareholders.
3. Whether the corporate veil should be lifted to impose personal liability on the first and second Defendants.

Orders

• First and second Defendants found liable for the loss incurred by the Plaintiff.
• Third Defendant not found liable.
• Corporate veil lifted to impose liability on first and second Defendants personally.
• Determination of actual quantum of liability and costs reserved pending hearing of the fourth Defendant's defence.

Rules and key headnotes

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