Wakilii

Farm Uganda Farmers Group Limited and 2 Others v Stanbic Bank Uganda Limited (Miscellaneous Application 777 of 2023)

High Court · [2023] UGCOMMC 76 · 2023 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for unconditional leave to appear and defend a summary suit under Order 36 of the Civil Procedure Rules
Decision
Application dismissed; summary judgment entered in favour of the bank for the full amount claimed plus interest and costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court Commercial Division refused the applicants' request for leave to defend a summary suit for loan recovery. The court held that the applicants failed to demonstrate a triable defence. Their claim that a third party owed them money which would fund loan repayment did not constitute a defence, as the bank was not party to agreements with the third party and received no instructions to deduct funds from any joint account. The existence of a potential claim against a third party does not entitle a defendant to leave to defend. Judgment was entered for the bank for UGX 263,072,329 plus interest and costs.

Outcome

Application dismissed; summary judgment entered in favour of the bank for the full amount claimed plus interest and costs

Facts

Stanbic Bank advanced a loan of UGX 500,000,000 to Farm Uganda Farmers Group Ltd in December 2021 for working capital. The second and third applicants executed personal guarantees. The applicants serviced the loan partially but defaulted on the balance of UGX 263,072,329. The applicants claimed their ability to repay was constrained because a third party, Blue Cup Company Ltd, owed them UGX 650,000,000. The applicants alleged they had entered into a joint venture with Blue Cup and opened a joint account, and that the bank was aware the loan would be funded from this account. The bank denied knowledge of any arrangement with the third party and stated the third party was never part of the loan facility. The applicants obtained a consent judgment against Blue Cup, but payments under that judgment were to be made to an account at Centenary Bank, not Stanbic. The bank filed a summary suit under Order 36 seeking recovery of the outstanding amount. The applicants applied for leave to appear and defend.

Issues

  1. Whether the Applicants should be granted unconditional leave to appear and defend the summary suit.
  2. What remedies are available to the parties.

Orders

  • The Applicants are denied leave to appear and defend Civil Suit No. 0418 of 2023.
  • Judgment is entered against the Applicants jointly and severally for the sum of UGX 263,072,329.
  • Interest on the judgment sum at the rate of 12.5% per annum from the date of judgment until payment in full.
  • Costs of the Application and the main suit awarded to the Respondent.

Rules and key headnotes

Civil Procedure — Summary Suits — Leave to Appear and Defend — Test for Granting Leave
Before leave to appear and defend a summary suit is granted, the defendant must show by affidavit or otherwise that there is a bona fide triable issue of fact or law. The defendant is not bound to show a good defence on the merits but must satisfy the court that there is an issue or question in dispute which ought to be tried. The court shall not enter upon the trial of issues disclosed at this stage.
Civil Procedure — Summary Suits — Leave to Defend — Burden of Proof on Disputed Amount
Where an applicant for leave to defend disputes the quantum of the debt claimed, the applicant must submit sufficient evidence to prove payment of the disputed amount. Mere allegation without proof does not constitute a triable issue. He who alleges must prove under Section 101 of the Evidence Act.
Banking & Finance — Banker-Customer Relationship — Duty to Act on Customer Instructions
A bank has a duty to act in accordance with the lawful request of its customers in the normal operation of customer accounts. Without proof of instructions from the customer to the bank to deduct money from a particular account, the bank cannot be faulted for not making such deductions.
Civil Procedure — Summary Suits — Third Party Claims — Effect on Leave to Defend
The fact that a defendant might have a claim for contribution or indemnity against another person does not entitle the defendant to leave to defend a summary suit. The defendant can obtain such indemnity by a separate suit. The same principle applies to counterclaims.
Civil Procedure — Summary Suits — Consequence of Refusal of Leave to Defend
Under Order 36 Rule 5 of the Civil Procedure Rules, where the court refuses to grant leave to appear and defend a summary suit, the plaintiff is entitled to a decree for the amount stated in the plaint.

Legislation cited (4)

Cases cited (6)

  • Makula Interglobal Trade Agency v Bank of Uganda [1985] HCB 65
  • Geoffrey Gatete and Another v William Kyobe (Supreme Court Civil Appeal No. 7 of 2005)
  • Corporate Insurance Co. Ltd v Nyali Beach Hotel Ltd [1995-1998] EA 7
  • UMEME Ltd v Justice Anup Singh Choudry (Miscellaneous Application No. 736 of 2021)
  • Makau Nairuba Mabel v Crane Bank Ltd (Commercial Suit No. 380 of 2009)
  • George Fredrick Wekesa v Caltex Kenya Ltd (High Court Civil Suit No. 1674 of 1997)

Full judgment

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

Farm Uganda Farmers Group Limited and 2 Others v Stanbic Bank Uganda Limited (Miscellaneous Application 777 of 2023) [2023] UGCommC 76 (20 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.