Wakilii

Mian Aqueel & Anor v Exim Bank (U) (Ltd) (MISCELANEOUS APPLICATION NO. 497 OF 2017)

High Court · [2018] UGHCCD 208 · 2018 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application by notice of motion to set aside statutory demand and enlarge time for filing, arising from Bankruptcy Cause No. 6 of 2017
Decision
Application to set aside statutory demand and enlarge time dismissed; bankruptcy proceedings to continue

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that guarantors are immediately liable upon default by the principal debtor without requiring prior court decree or exhaustion of security. Service of the statutory demand was valid where effected at the postal address registered with the creditor and used by applicants in correspondence. A pending civil suit by the principal debtor does not bar bankruptcy proceedings against guarantors. Application to set aside statutory demand and enlarge time dismissed with costs.

Outcome

Application to set aside statutory demand and enlarge time dismissed; bankruptcy proceedings to continue

Facts

The applicants are guarantors of a loan facility extended by the respondent bank to Abisha Steel Industries Limited. The principal borrower defaulted on its loan obligations. The respondent served a statutory demand on the applicants via registered mail to P.O. Box 33151, Kampala on 23 March 2017. The applicants filed this application on 8 June 2017, seeking to set aside the statutory demand and enlarge the time for filing, alleging non-service or service to a wrong address. The applicants claimed they had changed their postal address to P.O. Box 009, Lugazi on 11 October 2013 and notified the respondent. The respondent maintained that no change of address was communicated and that the applicants continued to use P.O. Box 33151 in subsequent correspondence and on their company stamp. The principal borrower had filed a civil suit (HCCS No. 05 of 2017) disputing the debt.

Issues

  1. Whether the court ought to extend the time within which to file the application setting aside the statutory demand.
  2. Whether the statutory demand should be set aside and Bankruptcy Cause No. 6 of 2017 be dismissed with costs.
  3. Whether the pending civil suit by the principal debtor affects the liability of the guarantors to comply with the statutory demand.

Orders

  • Application dismissed.
  • Costs awarded to the respondent.

Rules and key headnotes

Banking & Finance — Guarantees — Liability of Guarantor — Immediate Liability Upon Default
A guarantor's liability arises immediately upon default by the principal debtor to the full extent of the obligation, without requirement for notice of default, prior recourse against the principal debtor, or exhaustion of security held by the creditor.
Banking & Finance — Guarantees — Creditor's Right to Sue — Choice of Remedies
A creditor may proceed simultaneously against the principal debtor and the guarantors in the same action or in separate proceedings; the creditor is not required to sue or obtain judgment against the principal debtor before proceeding against the guarantors.
Banking & Finance — Guarantees — Effect of Security — No Bar to Proceedings
The fact that a creditor holds security in respect of a debt does not bar the creditor from proceeding against guarantors; whether the security is sufficient to satisfy the debt is a triable issue to be proved with evidence and does not prevent enforcement of the guarantee.
Civil Procedure — Service — Proof of Service — Change of Address
Where a party alleges change of address, the burden lies on that party to prove that notice of the change was effectively communicated to the other party; continued use of the old address in correspondence and official stamps negates the assertion of change.
Commercial Law — Insolvency — Statutory Demand — Setting Aside — Concurrent Proceedings
A pending civil suit by the principal debtor disputing the debt does not operate as a bar to bankruptcy proceedings against guarantors; the bankruptcy proceedings and the civil suit may proceed concurrently.
Civil Procedure — Extension of Time — Sufficient Cause — Applicant's Own Mischief
Where delay in filing an application is occasioned by the applicant's own mischief, negligence, or failure to properly communicate change of address, the court will not find sufficient cause to enlarge time under section 5(3) of the Insolvency Act.

Legislation cited (12)

  • Insolvency Act No. 11 of 2011 s.3(1)
  • Insolvency Act No. 11 of 2011 s.3(5)
  • Insolvency Act No. 11 of 2011 s.4
  • Insolvency Act No. 11 of 2011 s.5(3)
  • Insolvency Act No. 11 of 2011 s.5(4)
  • Insolvency Act No. 11 of 2011 s.264
  • Insolvency Regulations No. 35 of 2013 r.5
  • Insolvency Regulations No. 35 of 2013 r.6
  • Insolvency Regulations No. 35 of 2013 r.203
  • Contracts Act 2010 s.71
  • Contracts Act 2010 s.71(2)
  • Civil Procedure Act Cap. 71 s.96

Cases cited (6)

  • Godfrey Magezi and Another v Sudhir Ruparelia (Civil Miscellaneous Application No. 10 of 2002)
  • Stanbic Bank Ltd v Cellular Galore Ltd and 2 Others (High Court Civil Suit No. 50 of 2010)
  • Barclays Bank Ltd v Jing Hong and Guo Dong (High Court Civil Suit No. 35 of 2009)
  • Bank of Uganda v Banco Arabe Espanol (Court of Appeal No. 23 of 2000)
  • Moschi v Lep Air Services Ltd [1973] AC 331
  • Shanti v Hindocha and Others [1973] EA 207

Full judgment

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

Mian Aqueel & Anor Vs Exim Bank (U) (Ltd) (MISCELANEOUS APPLICATION NO. 497 OF 2017) [2018] UGHCCD 208 (14 November 2018)
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.