Wakilii

George William Semivule v Barclays Bank of Uganda (HCT-00-CC-MA 267 of 2008)

High Court · [2010] UGCOMMC 3 · 2010 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for unconditional leave to defend summary suit arising from HCCS 111 of 2008
Decision
Applicant granted unconditional leave to defend the main suit

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court granted the applicant unconditional leave to defend. Although on-demand guarantees are generally payable on demand without proof or conditions (save for clear fraud), the position changes when such guarantees are given together with a mortgage. Section 16 of the Mortgage Act provides that obligations under any agreement collateral to a mortgage shall be no greater than the obligations of the mortgagor under the mortgage. Without the mortgage deed being produced, it was not possible to determine the extent of obligations by way of summary suit, thus establishing a triable issue.

Outcome

Applicant granted unconditional leave to defend the main suit

Facts

Barclays Bank of Uganda brought a summary suit against three defendants including George William Semivule to recover UGX 1,743,864,285 on the strength of personal guarantees executed by the defendants. The loan was secured by a mortgage over property comprising a school owned by Berkerley Educational Enterprises Ltd. The parties had attempted to jointly sell the school to recover the debt but failed, prompting the bank to enforce the personal guarantees. Semivule applied for unconditional leave to defend, arguing that the bank had not exhausted recovery measures against him, that the transaction was tainted with illegality, that the wrong interest rate had been applied, and that the school's assets were sufficient to cover the debt. The bank argued that Semivule had signed a classic on-demand guarantee payable on written demand.

Issues

  1. Whether the applicant should be granted unconditional leave to defend the summary suit.
  2. Whether an on-demand guarantee given together with a mortgage is subject to the limitations in section 16 of the Mortgage Act.
  3. Whether the obligations under the personal guarantee are governed by the Mortgage Act where the guarantee is collateral to a mortgage.

Orders

  • Application for unconditional leave to defend is granted.
  • Applicant may file defence within 14 days of this ruling.
  • Costs in the cause.

Rules and key headnotes

Civil Procedure — Summary Procedure — Leave to Defend — Tests for Granting Leave
Before leave to appear and defend 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 should satisfy the court that there is an issue or question in dispute which ought to be tried. However, the defence must be stated with sufficient particularity to appear genuine; general and vague statements denying liability will not suffice.
Banking & Finance — On-Demand Guarantees — Enforcement — Exception for Fraud
An issuer of an on-demand guarantee must pay according to its guarantee on demand if so stipulated, without proof or conditions. The only exception is when there is clear fraud of which the issuer has notice. Such guarantees are virtually promissory notes payable on demand.
Banking & Finance — On-Demand Guarantees — Interaction with Mortgage Act — Section 16 Limitation
Where an on-demand guarantee is given together with a mortgage, section 16 of the Mortgage Act applies. The obligations of any party to any agreement or arrangement collateral to a mortgage, whether by way of guarantee, indemnity or otherwise, shall be no greater than the obligations of the mortgagor under the mortgage. In the absence of the mortgage deed being produced, it is not possible to determine the extent of obligations under the mortgage by way of summary suit, thus establishing a triable issue.

Legislation cited (3)

Cases cited (5)

  • Makulu International Ltd v Cardinal Nsubuga & Another (Civil Appeal No. 4 of 1981)
  • Zola & Another V Ralli Brothers Ltd & Anor [1969] EA 691 (CA)
  • Maluku Interglobal V Bank of Uganda [1985] HCB 65
  • Kundalal Resturant V Deushi & Co. [1952] EACA 77
  • Edward Owen Engineering Ltd V Barclays Bank International Ltd [1978] 1 Q.B 159 or 1978] 1 Lloyds Rep 166

Full judgment

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

George William Semivule v Barclays Bank of Uganda (HCT-00-CC-MA 267 of 2008) [2010] UGCommC 3 (9 March 2010)
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.