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Rahbot Chick (U) Limited & Another v Stanbic Bank Uganda Limited (Miscellaneous Application 782 of 2023)

High Court · [2024] UGCOMMC 83 · 2024 Application Dismissed — Summary Judgment Entered 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 for recovery of liquidated debt arising from Civil Suit No. 422 of 2023
Decision
Summary judgment entered against applicants; applicants and guarantor jointly and severally liable for loan balance of UGX 151,289,018 plus interest at 21% per annum from 31 March 2023 until full payment.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court dismissed an application for leave to appear and defend a summary suit for recovery of UGX 151,289,018 arising from a defaulted short-term loan facility. The court held that the applicants failed to demonstrate a bonafide defence or triable issue. The borrower's obligation to repay the loan was not legally contingent upon payment by a third-party buyer (Ugachick) under a separate supply contract. The variation letter was validly executed by the managing director. The allegation of signature forgery on the variation letter was an afterthought and would not affect the borrower's independent obligation to repay. Summary judgment was entered for the bank.

Outcome

Summary judgment entered against applicants; applicants and guarantor jointly and severally liable for loan balance of UGX 151,289,018 plus interest at 21% per annum from 31 March 2023 until full payment.

Facts

On 1 December 2021, Stanbic Bank granted a short-term loan facility of UGX 100,000,000 to Rahbot Chick (U) Limited for poultry business operations. The loan was repayable within 45 days at 21% per annum interest and secured by personal guarantees from two directors. On 17 January 2022, the facility was varied to include Ugachick Poultry Breeders Ltd as a counterparty and to assign proceeds from the borrower's supply contract with Ugachick to the bank. The facility was disbursed on 27 January 2022. The borrower defaulted on repayment. The bank filed a summary suit seeking recovery of UGX 151,289,018. The borrower applied for leave to defend, arguing repayment was contingent on Ugachick's payment under a separate supply contract and alleging the third guarantor's signature on the variation letter was forged. The borrower had made a partial repayment of UGX 10,000,000 in November 2023 after filing the application.

Issues

  1. Whether there is a bonafide defence to, or any triable issue arising in the summary suit.

Orders

  • Application dismissed.
  • Summary judgment entered in favour of the respondent in Civil Suit No. 422 of 2023.
  • Applicants and Wolderfuael Ghide Ghabreyesus jointly and severally liable to pay outstanding loan balance of UGX 151,289,018 to the respondent.
  • Interest awarded at contractually-agreed rate of 21% per annum from 31 March 2023 until full payment.
  • Costs of this application and those of the summary suit awarded to the respondent.

Rules and key headnotes

Banking & Finance — Loan Agreements — Repayment Obligations — Independence from Third-Party Contracts
A borrower's obligation to repay a loan facility is not legally contingent upon payments the borrower expects to receive from third parties under separate commercial contracts unless the loan agreement expressly provides for such contingency.
Civil Procedure — Summary Suits — Leave to Defend — Test for Bonafide Defence
To obtain leave to appear and defend a summary suit, an applicant must demonstrate by affidavit a bonafide triable issue of fact or law. The applicant need not show a good defence on the merits but must satisfy the court that there is a genuine issue in dispute which ought to be tried. Leave will be denied where the defence is untenable, frivolous, or merely intended to prolong litigation.
Contract Law — Personal Guarantees — Liability of Guarantors
Personal guarantors are bound to honour their guarantees irrespective of whether third parties perform their obligations to the principal debtor under separate contracts, unless the guarantee instrument expressly provides otherwise.
Contract Law — Variation of Contracts — Authority to Bind Company
A managing director with authority to bind a company may validly execute a variation to a loan facility agreement. An allegation of forgery of a co-director's signature on the variation, raised only after utilising the facility and defaulting on repayment, will be treated as a disingenuous afterthought where the managing director had independent authority to bind the company.

Legislation cited (2)

Cases cited (2)

  • Maluku Integlobal Trade Agency v Bank of Uganda [1985] HCB 65
  • Agony Swaibu v Swalesco Motor Spare and Decoration Dealers (HCCA No. 48 of 2014)

Full judgment

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

Rahbot Chick (U) Limited & Another v Stanbic Bank Uganda Limited (Miscellaneous Application 782 of 2023) [2024] UGCommC 83 (27 February 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.