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Financial Access Commerce & Trade Service (U) Limited v Ndawula & Another (Civil Suit 901 of 2021)

High Court · [2024] UGCOMMC 116 · 2024 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of money under guarantee
Decision
Judgment entered for the Plaintiff; Defendants ordered to pay the claimed sum plus general damages, interest, and costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court held that where defendants execute a deed of guarantee and indemnity for a third party's debt, and the third party defaults, the guarantors remain liable to pay the full debt on demand. The guarantor's obligation continues even after the creditor accepts the debtor's repudiation, transmuting into an obligation to compensate by way of damages. The court awarded the plaintiff the principal sum, discounted penalties, interest, general damages, and costs against the guarantors who failed to appear and defend the claim.

Outcome

Judgment entered for the Plaintiff; Defendants ordered to pay the claimed sum plus general damages, interest, and costs

Facts

The plaintiff lender advanced UGX 300,000,000 to Namirembe Offsprings Ltd under a credit facility agreement dated 13th March 2019. The two defendants executed a deed of guarantee and indemnity dated 14th March 2019, jointly and severally guaranteeing repayment of all monies, interests, costs, and charges due under the facility. The defendants also executed a deed of assignment of accounts receivable from three maize milling companies in favour of the plaintiff. The plaintiff disbursed the full loan amount in tranches on a revolving basis. Namirembe Offsprings Ltd defaulted on repayment despite multiple demand notices dated October and December 2020. In March 2021, the second defendant signed a payment plan committing to monthly payments of UGX 52,401,310, but the company failed to honour this obligation. The plaintiff terminated the facility and demanded full payment from the defendants as guarantors. The defendants were served with the suit but did not enter appearance. At the time of filing, the outstanding amount comprised principal of UGX 227,346,267, interest of UGX 36,109,189, and default interest of UGX 103,370,141. The plaintiff discounted penalties by 50%, claiming a total of UGX 315,140,527.

Issues

  1. Whether the Plaintiff is entitled to the sum of UGX 315,140,527 from the Defendants under the deed of guarantee and indemnity dated 14th March 2019
  2. What remedies are available to the parties?

Orders

  • Judgment entered for the Plaintiff against the Defendants.
  • Defendants to pay the Plaintiff UGX 315,140,527.
  • Defendants to pay general damages of UGX 10,000,000.
  • Interest at 20% per annum on the principal sum from the date of judgment until payment in full.
  • Interest at 10% per annum on general damages from the date of judgment until payment in full.
  • Costs of the suit awarded to the Plaintiff.

Rules and key headnotes

Guarantee and Indemnity — Guarantor's Obligation on Principal Debtor's Default
A guarantor who executes a deed of guarantee and indemnity undertakes to pay on demand all monies due to the lender by the borrower in case of the borrower's default. The guarantor's obligation is to see to it that the debtor performs the obligations which are the subject of the guarantee; a breach of those obligations by the debtor entails a breach by the guarantor of his own contract for which he is liable to the creditor in damages to the same extent as the debtor.
Guarantee and Indemnity — Continuation of Guarantor's Obligation After Debtor's Repudiation
Where the creditor has accepted the debtor's repudiation of obligations under a credit facility, the guarantor's obligation to the creditor does not thereby come to an end. It continues to exist although transmuted by operation of law into an obligation to compensate the creditor by way of damages for the loss suffered by reason of the debtor's breach.
Credit Facilities — Recovery from Guarantors After Default
Where a lender advances a credit facility to a borrower under a facility agreement, and guarantors execute a deed of guarantee and indemnity, the lender is entitled on the borrower's default to elect to terminate the facility and demand full payment from the guarantors of all sums owing under the facility agreement, including principal, interest, and contractual penalties.
Damages — General Damages for Breach of Guarantee
In assessing general damages for breach of a guarantee agreement, the court considers the financial loss caused to the creditor and the deprivation of the opportunity to utilize and re-invest the sums advanced. The award of general damages is at the discretion of the court and is guided by the value of the subject matter, the economic inconvenience suffered, and the nature and extent of the breach.

Legislation cited (1)

Cases cited (6)

  • Moschi v LEP Air Services Ltd [1972] 2 All ER 393
  • Adonia Tumusiime and 318 Others v Bushenyi District Local Government and Another (HCCS No. 32 of 2012)
  • James Fredick Nsubuga v Attorney General (HCCS No. 13 of 1993)
  • Uganda Commercial Bank v Kigozi [2002] 1 EA 305
  • Charles Acire v Myaana Engola (HCCS No. 143 of 1993)
  • Kibimba Rice Ltd v Umar Salim (SC Civil Appeal No. 17 of 1992)

Full judgment

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

Financial Access Commerce & Trade Service (U) Limited v Ndawula & Another (Civil Suit 901 of 2021) [2024] UGCommC 116 (28 March 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.