Wakilii

Reamation Limited v Uganda Corporation Creameries Limited and Another (Civil Suit 738 of 1995)

High Court · [1997] UGHC 14 · 1997 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of pre-finance loan advanced for coffee export business
Decision
Judgment entered in favour of the Plaintiff for US$365,000 with interest at 25% per annum from filing to judgment and costs. Account ordered of coffee export transactions to establish profit-sharing.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that no partnership existed between Reamaton Ltd and Uganda Corporation Creameries Ltd under the Partnership Act or in fact. The sharing of profits alone does not create a partnership where the parties' true intention and surrounding circumstances indicate a debtor-creditor relationship. The second defendant did not give a valid guarantee as there was no written memorandum signed by him sufficient to satisfy the Contract Act s.4. Both defendants were jointly and severally liable for the pre-finance loan of US$365,000.

Outcome

Judgment entered in favour of the Plaintiff for US$365,000 with interest at 25% per annum from filing to judgment and costs. Account ordered of coffee export transactions to establish profit-sharing.

Facts

Reamaton Ltd, a UK company engaged in import/export and finance, was approached by Henry Kawalya (Executive Director of Uganda Corporation Creameries Ltd) in January 1994 to arrange pre-financing for coffee export. Reamaton Ltd borrowed US$365,000 from F.H. Bertling and transferred it to the first defendant through Kawalya's personal account in instalments between June and November 1994. The arrangement was that the loan would be repaid within three months and Reamaton Ltd would receive 30% of profits from the coffee business. The defendants failed to repay the loan. The first defendant issued irrevocable instructions to Bank of Baroda to remit US$200,000 to Reamaton Ltd but later cancelled the instructions. The defendants paid US$130,818 which they claimed was in respect of the loan, but Reamaton Ltd maintained this was repayment of separate loans and expenses, not the coffee pre-finance debt.

Issues

  1. Whether the relationship between the plaintiff and first defendant was that of debtor/creditor.
  2. Whether the first defendant and plaintiff were partners.
  3. Whether the second defendant guaranteed the first defendant's performance of the contract.
  4. Whether the defendants are liable to the plaintiff and if so, how much.

Orders

  • Declaration that the First Defendant and the Plaintiff are not partners either under the Partnership Act Cap.86 or under any circumstances.
  • The claim against the Second Defendant on a contract of guarantee is dismissed.
  • The Second Defendant is jointly and severally liable with the First Defendant for money transferred by the Plaintiff to both Defendants.
  • Judgment entered in favour of the Plaintiff against both Defendants, jointly and severally, for US$365,000 or its equivalent in local currency.
  • Order for an Account of the Defendants' coffee export transactions from 1 June 1994 to establish the Plaintiff's share of 30% of the profits.
  • Interest on the decretal sum at the rate of 25% per annum from the date of filing suit till the date of judgment.
  • Costs of the suit awarded to the Plaintiff.

Rules and key headnotes

Partnership Law — Proof of Partnership — Profit-Sharing as Evidence
The receipt by a person of a share of the profits of a business is strong evidence that he is a partner, but whether or not the relationship of partnership exists depends on the real intention and agreement of the parties and not on the mere fact of participation in profit. The court should not treat the receipt of a share of profit alone as prima facie evidence of partnership if there are other circumstances to be considered side by side with it.
Partnership Law — Joint and Several Liability for Debts as Indicator
Where one party borrows money from a bank and injects it into a business venture while the other party is not jointly liable to repay that bank loan, this is an indication of weight that no partnership exists between the parties. Partners would be jointly liable for debts incurred for partnership purposes.
Partnership Act — Loan with Profit-Sharing Does Not Create Partnership
Under section 3(a) of the Partnership Act, the advance of money by way of loan to a person engaged in business on a contract that the lender shall receive a rate of interest varying with profits or shall receive a share of profits does not of itself make the lender a partner with the person carrying on the business, even where the contract is not in writing. The absence of a duly signed written memorandum is a formal deficiency which cannot be seized upon to exclude the true intention of the parties as it appears from interpretation of the agreement as a whole.
Guarantee — Statute of Frauds — Requirement of Written Memorandum
To constitute an enforceable contract of guarantee there must be a promise to answer for the debt of another, and section 4 of the Contract Act requires that such promise be evidenced by a memorandum or note in writing signed by the party to be charged. Documents that do not contain within their four corners a promise by the alleged guarantor to answer for the debt of another, or that are signed by the guarantor only in a representative capacity and not as a party to be charged, do not satisfy the statutory requirement.
Pleadings — Material Facts Must Be Pleaded, Not Legal Conclusions
It is bad pleading to allege merely that a right, duty, or liability exists; the material facts must be set out which give rise to such right or create such duty or liability. A pleading alleging guarantee must state the facts constituting a promise to answer for the debt of another, not merely use the legal label 'guarantee'.

Legislation cited (9)

Cases cited (5)

  • Bodeley v Consolidated Bank (1888) 38 Ch D 238
  • Davis v Davis (1894) 1 Ch 393
  • Pooley v Driver (1876) 5 Ch D 471
  • Re Fort & Lane Railway [1892] 2 Ch 499
  • Davis v Bustwell (1913) 2 KB 47

Full judgment

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

Reamation Limited v Uganda Corporation Creameries Limited and Another (Civil Suit 738 of 1995) [1997] UGHC 14 (29 July 1997)
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.