Transafrica Assurance Co. Ltd v Cimbria (EA) Ltd (Civil Appeal No. 11 of 2001)

Observed later treatment

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.

Holding

The Court of Appeal held that an institution issuing a performance bond is bound to honour it according to the bond's terms once the conditions are satisfied, regardless of any dispute between buyer and seller over the underlying contract, save where there is fraud of which it has notice. The appellant's claimed dispute concerned the contract between the seller and buyer, not the bond, and was not a bona fide dispute of the debt arising on the bond. As the bond conditions were met and demands went unanswered for over three weeks, the company was unable to pay its debt. The trial judge properly exercised her winding-up discretion under sections 222(e) and 223 of the Companies Act. Appeal dismissed.

Outcome

Appeal dismissed; High Court winding-up order against the appellant upheld

Facts

The appellant executed a performance bond dated 24 July 1997 in favour of the respondent (supplier) securing the balance of payment under a contract of sale dated 12 February 1997 between the respondent and Mytrade (U) Ltd (buyer) for a coffee drying and processing plant valued in Danish Kroner. The supplier delivered the plant after the bond was executed. When the buyer failed to pay the balance, the supplier demanded payment under the bond. The appellant did not respond for over three weeks and the supplier petitioned the High Court to wind up the appellant under section 222(e) of the Companies Act. The appellant denied liability, contending that a separate contract dated 19 February 1997 between the respondent and Mytrade Ltd of Nairobi had superseded the 12 February 1997 contract, and that the validity of the underlying contract was disputed. The High Court found there was no substantial bona fide dispute of the debt and ordered the winding-up. The appellant appealed.

Issues

1. Whether the appellant, as the institution that issued a performance bond, is liable under the terms of the bond despite a dispute between the seller and buyer over the underlying contract.
2. Whether there was a substantial bona fide dispute of the debt such that a winding-up order should not have been made.
3. Whether the trial judge wrongly exercised her discretion in ordering the winding-up of the appellant under section 222(e) of the Companies Act.

Orders

• Appeal dismissed.
• Judgment and winding-up order of the High Court upheld.
• Costs awarded to the respondent here and in the High Court.

Rules and key headnotes

Legislation cited (4)

• Companies Act Cap 85 s.222(e)
• Companies Act Cap 85 s.223
• Rules of the Court of Appeal r.97(1)
• Rules of the Court of Appeal r.91(1)

Cases cited (4)

• Edward Owen Engineering Ltd v Barclays Bank Ltd [1978] 1 QB 171
• Hamzeh Malas & Sons v British Imex Industries Ltd [1958] 2 QB 127
• Mbogo v Shah [1968] EA 93
• Re Lympne Investments Ltd [1972] 2 All ER 385

Cases citing this judgment (5)

How later Ugandan judgments in the Wakilii corpus have cited this case. Treatment labels come from Sequitur — Uganda’s citator — each backed by a verbatim span from the citing judgment, and are not an assertion that this case is, or is not, good law.

• Daimond Trust Bank Uganda Ltd v Muchope (Civil Application No. 131 of 2009)
• Oilnet Petroleum (U) Ltd & Anor v Futures Energy Co. Ltd (Miscellaneous Application No. 387 of 2015)
• Orient Bank Ltd v Avi Enterprises Ltd (Civil Appeal No. 2 of 2013)
• Orient Bank Limited v Avi Enterprises Limited (Miscellaneous Application No 37 of 2013)
• Magezi and Anor v Rupaleria (Miscellaneous Application 6 of 2003)

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