Wakilii

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

High Court · [1997] UGHC 33 · 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 loan and account of profits
Decision
Both defendants held jointly and severally liable to repay the loan of US$365,000 with interest and costs; plaintiff entitled to account of profits from coffee business

Observed later treatment

No later-treatment classification is recorded for this judgment.

Citator coverage is limited to judgments in the Wakilii corpus and source-matched treatment records. Absence of a signal is not an assertion that the case remains good law.

AI-generated summary. This summary was generated by AI from the full text of the judgment. It may contain errors or omissions—always read the source judgment before relying on it.

Holding

Held that no partnership existed between the plaintiff and first defendant. The receipt of a share of profits alone does not establish partnership where other circumstances indicate a debtor-creditor relationship. The second defendant did not guarantee the first defendant's debt as there was no memorandum or note in writing sufficient to satisfy section 4 of the Contract Act. However, both defendants were jointly and severally liable for the coffee pre-finance loan of US$365,000 received from the plaintiff.

Outcome

Both defendants held jointly and severally liable to repay the loan of US$365,000 with interest and costs; plaintiff entitled to account of profits from coffee business

Facts

The plaintiff, an English company engaged in import/export and finance, was approached by the second defendant (Executive Director of the first defendant company) to arrange pre-financing in foreign currency for coffee export. The plaintiff obtained US$360,000 from its financiers F.H. Bertling and transferred a total of US$365,000 to the first defendant through the second defendant's personal account between June 1994 and November 1994. The agreement provided for repayment within three months and gave the plaintiff 30% of profits from the coffee business. When the defendants failed to repay, the plaintiff sued for recovery of the loan amount. The defendants contended they were partners with the plaintiff, that they had suffered losses due to a slump in coffee prices, and that partial repayments had been made. The defendants also claimed a set-off for commissions allegedly owed.

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

  • 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 account of the defendants' coffee export transactions from 1 June 1994 to establish the plaintiff's 30% share of profits.
  • Interest awarded at 25% per annum on the decretal sum from date of filing suit to date of judgment.
  • Costs of the suit awarded to the plaintiff.
  • Claim against second defendant on contract of guarantee dismissed.
  • No award made in respect of second defendant's claim for set-off as it was abandoned.

Rules and key headnotes

Partnership — Evidence of Partnership — Receipt of Share of Profits
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 that relationship exists depends on the real intention and agreement of the parties and not upon the mere fact of participation in profit. The court should not treat the receipt of a share of profit alone as prima facie evidence if there are other circumstances to be considered side by side with it.
Partnership — Indicators Against Partnership — Separate Borrowing Liability
Where one party borrows substantial capital from third parties for injection into the business and the other party is not jointly liable for such borrowing, this is an indication of some weight that no partnership exists between the parties. Partners would ordinarily be jointly liable for capital borrowed for partnership business.
Partnership — Partnership Act Section 3(a) — Loan on Terms of Profit Share
The proviso in section 3(a) of the Partnership Act requiring a written and signed contract applies only where a party seeks the benefit of the statutory provision that the advance of money by way of loan on terms of receiving a share of profits does not of itself make the lender a partner. The absence of a written contract does not, by itself, create a partnership where the true intention of the parties was to create a debtor-creditor relationship.
Guarantee — Requirements for Valid Guarantee — Memorandum in Writing
To constitute a valid contract of guarantee, there must be a promise to answer for the debt of another. Section 4 of the Contract Act requires that such a contract of guarantee be evidenced by a memorandum or note in writing signed by the party to be charged. Documents signed by a person in their capacity as director of a company, which do not contain any statement of a promise to answer for the debt of another, are insufficient to establish a personal guarantee.
Burden of Proof — Counter-Claims and Set-off — Commission Entitlement
Where a defendant claims set-off on the basis of alleged commission entitlement, the burden rests on the defendant to prove the amount of commission earned. Bare assertions of entitlement to commission without proof of the quantum earned are insufficient to establish the claim.
Pleadings — Defective Pleadings — Guarantee Claims
In pleading a claim on guarantee, it is insufficient to allege merely that the defendant guaranteed payment. The pleading must allege the material facts giving rise to the guarantee, namely that the defendant promised to answer for the debt of another if the plaintiff would provide the loan. Similarly, a defence to a guarantee claim must plead the specific statutory or factual grounds of defence relied upon.

Legislation cited (8)

  • Partnership Act Cap 86 s.3(a)
  • Partnership Act Cap 86 s.4(3)
  • Contract Act Cap 45 s.4
  • Contract Act Cap 45 s.4(1)
  • Exchange Control Act Cap 158
  • Prevention of Corruption Act 1970 s.1
  • Civil Procedure Rules O.6 r.1
  • Civil Procedure Rules O.6 r.5

Cases cited (5)

  • Bodeley v Consolidated Bank (1888) 38 Ch D 238
  • Davis v Davis (1894) lchJ93
  • Pooley v Driver (1876) 5 Ch D 471
  • Re Fort & L Rail (Smith L.J.)
  • Devis v Bustwell [1913] 2 KB 47

Full judgment

↓ Download PDF

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

Reamaton Limited v Uganda Corporation Creameries Ltd and Another (Civil Suit 738 of 1995) [1997] UGHC 33 (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.