Wakilii

Ssebowa v DFCU Bank Ltd (Civil Suit No. 422 of 2012)

High Court · [2014] UGCOMMC 51 · 2014 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit seeking declaratory relief and injunction concerning extent of guarantee liability
Decision
Plaintiff's claim substantially allowed; defendant's counterclaim for larger sums rejected; plaintiff liable only for guaranteed amount of UGX 50,000,000 plus interest minus sums already paid

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The plaintiff guaranteed only UGX 50,000,000 for supply of cement to Mikwano Investments Ltd, not UGX 147,041,507 for restructured facilities. The defendant's demand based on a further charge document was rejected where the plaintiff proved he was unaware of handwritten insertions and correspondence showed he declined to pledge property for earlier loans. Defendant bound by its initial demand letter calling the guarantee for UGX 49,825,068.31. Declarations granted in plaintiff's favour.

Outcome

Plaintiff's claim substantially allowed; defendant's counterclaim for larger sums rejected; plaintiff liable only for guaranteed amount of UGX 50,000,000 plus interest minus sums already paid

Facts

In 2009 the plaintiff was approached by Mikwano Investments Ltd to guarantee UGX 50 million for purchase of cement from Hima Cement Ltd. The plaintiff deposited his certificate of title with the defendant bank as security and a mortgage/further charge document dated 3 December 2009 was executed showing three sums totalling UGX 147,041,507. When Mikwano defaulted, the defendant initially demanded UGX 49,825,068.31 from the plaintiff on 28 September 2010. The plaintiff acknowledged liability and proposed instalment payments, depositing UGX 8 million. On 10 January 2011 the defendant issued a final demand for UGX 206,434,764, alleging the plaintiff had guaranteed all of Mikwano's obligations. The plaintiff contended he guaranteed only UGX 50 million and that other figures were inserted in the mortgage document without his knowledge. Documentary evidence showed Mikwano had informed the bank in May 2008 that the plaintiff did not want his property used as security for other loans.

Issues

  1. How much did the Plaintiff and his co-guarantor, Serunjogi Geoffrey, guarantee under the mortgage agreement?
  2. How much is the Plaintiff indebted to the Defendant in the circumstances?
  3. What remedies are available to the parties?

Orders

  • Declaration that the Plaintiff only guaranteed Uganda shillings 50,000,000 advanced by the Defendant to Hima Cement Ltd in favour of Mikwano Investments Limited and no more.
  • Declaration that the Plaintiff is indebted to the Defendant as a guarantor of the said amount of Uganda shillings 50,000,000 together with interest, minus any amounts already paid by him towards settlement of his obligations.
  • Declaration that the Defendant is bound by its demand dated 28 September 2010 disclosing a sum of Uganda shillings 49,825,068.31 as the outstanding amount.
  • Costs of the suit awarded to the Plaintiff.

Rules and key headnotes

Guarantees — Extent of guarantor's liability — Conflicting documentary evidence
Where a bank demands payment from a guarantor based on a mortgage document stating one sum but earlier correspondence and the bank's own demand letters establish the guarantee was for a lesser amount, the guarantor is bound only by the amount he knew and agreed to guarantee, not sums retrospectively added to secure pre-existing debts of the principal borrower.
Documentary Evidence — Parol Evidence Rule — Exception for mistake of fact
Under sections 91 and 92 of the Evidence Act, oral evidence is inadmissible to contradict the terms of a written agreement except to prove facts that would invalidate the document such as mistake in fact. Where a party executes a document at a different time from other parties and testifies he was unaware of handwritten insertions, oral evidence is admissible to prove he did not know or agree to those terms.
Security Documents — Further Charge — Requirement of pre-existing charge
A further charge presupposes an existing charge on property. Where the evidence shows the guarantor had declined in writing to pledge his property for earlier loans and only the co-guarantor's spouse consented to a further charge, the purported further charge over the guarantor's property cannot bind him to liabilities beyond the new guarantee he expressly gave.
Bank guarantees — Demand by creditor — Bank's rights of recourse against guarantor
Where a bank issues a guarantee to a third party creditor and is called upon to pay, the bank's rights of recourse against the guarantor of that facility are limited to the sums paid under the guarantee and cannot be enlarged by subsequently asserting that the same security covered unrelated debts of the principal borrower.
Declaratory Relief — Scope and availability
Under Order 2 rule 9 of the Civil Procedure Rules, the court may make binding declarations of right whether any consequential relief is or could be claimed. A guarantor may seek declaratory relief to establish the extent of his obligations to a creditor even before enforcement proceedings are commenced, where there is genuine uncertainty as to the scope of liability.

Legislation cited (5)

Cases cited (4)

  • Kazzora v Rukuba (Supreme Court Civil Appeal No. 13 of 1992)
  • Barclays Bank of Uganda v Jing Hong and Guo Dong (High Court Civil Suit No. 35 of 2009)
  • Moschi versus Lep Air services Ltd [1973] AC 331
  • Guaranty Trust Company of New York versus Hannay and Company Limited [1915] 2 KB 536

Full judgment

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

Ssebowa v DFCU Bank Ltd (Civil Suit No. 422 of 2012) [2014] UGCommC 51 (13 May 2014)
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.