[2024] UGCommC 116

#### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

## [COMMERCIAL DIVISION]

## **CIVIL SUIT NO.0901 OF 2021**

#### FINANCIAL ACCESS COMMERCE

**AND TRADE SERVICES (U) LTD::::::::::::::::::::::::::::::::::::**

#### **VERSUS**

#### 1. NDAWULA EDWARD

**2. NANSUBUGA ERINA ]::::::::::::::::::::::::::::::::::::**

## **Before Lady Justice Patricia Kahigi Asiimwe**

#### Judgment

#### Introduction

The Plaintiff brought this suit against the Defendants for 1. recovery of UGX 315,140,527, interest at a commercial rate from the date of judgment until full pay, general damages, and costs of the suit.

## Plaintiff's case

- The Plaintiff advanced Namirembe Offsprings Ltd a credit facility $2.$ of UGX 300,000,000 under an agreement dated 13^th March 2019. The credit facility was to finance the procurement of goods and services from pre-selected suppliers who had been approved by the Plaintiff. - The $1^{st}$ and $2^{nd}$ Defendants under a deed of guarantee and 3. indemnity dated 14^th March 2019 jointly and severally guaranteed payment of all monies, interests, costs, commissions, and other charges due under the facility agreement. - 4. The Plaintiff contends that Namirembe Offsprings Ltd cannot pay the sums owing and due under the facility agreement hence

Page 1 of 6

electing to terminate the facility and demand full payment from the defendants as guarantors. The Plaintiff made several demands to the defendants who also did not pay back the money.

# Representation

5. The Plaintiff was represented by M/S Engoru Mutebi Advocates. The defendants were served and did not make an appearance, the matter was set down for formal proof.

# Issues

- $\mathbf{I}$ Whether the Plaintiff is entitled to the sum of UGX 315,000,000 from the Defendants under the deed of guarantee and indemnity dated 14^th March 2019 - $\mathbf{H}$ What remedies are available?

# Plaintiff's evidence

- 6. The Plaintiff brought one witness, Isabel Diana Sembiro (PW1), the Country Manager of the Plaintiff. She testified that on 14^th March 2019, the Defendants gave security in the form of a Directors' Guarantee and Indemnity for the facility advanced to Namirembe Offsprings Ltd. - Furthermore, on 14^th March 2019, the defendants executed a 7. deed of assignment of accounts receivables due from M/S Famusha Maize Millers Ltd, M/S Jeirah Maize Millers, and M/S Tukole Millers and General Store Ltd in favor of the Plaintiff. - 8. On 20^th March 2019, M/S Famusha Maize Millers Ltd and M/S Jeirah Maize Millers signed acknowledgments of assignment wherein they assigned all accounts receivables to the Plaintiff. On 24^th August 2019, M/S Tukole Millers and General Store Ltd signed more acknowledgments in favor of the Plaintiff.

- 9. The Plaintiff disbursed the entire sum of UGX 300,000,000 to Namirembe Offsprings Ltd by bank transfer in tranches on a revolving basis. - 10. The said money has not been paid despite several reminders dated 13^th October 2020, 19^th October 2020, and 2^nd December 2020. The Plaintiff hired M/S Quest Holdings Ltd to recover the sums due and owning, the said firm wrote a demand notice for the sum of UGX 353,117,228.00 which was received by the $2^nd$ Defendant on 17^th March 2021. - 11. On $17^{th}$ March, the $2^{nd}$ Defendant executed a payment plan in which she indicated that Namirembe Offsprings Ltd would pay UGX 52,401,310 every month commencing April 2021. However, the Company did not honor its obligation. The Plaintiff then elected to terminate the loan facility and to demand full payment from the defendants as guarantors. - 12. The interest charged per month was $2.5\%$ and the Default interest was 4% per month. At the time of filing the suit the outstanding principal sum was UGX 227,346,267, interest was UGX 36,109,189 and default interest was UGX. 103,370,141. - 13. The Plaintiff company decided to discount the penalties by 50% which is equivalent to UGX 51,685,071. Therefore, the total sum being claimed is UGX 315,140,527 inclusive of principal, interest, and the discounted penalties.

#### Resolution

*Issue: Whether the Plaintiff is entitled to the sum of UGX 315,140,527* from the defendants under the deed of quarantee and indemnity dated 14^th March 2019.

Counsel for the Plaintiff filed written submissions which court $14.$ has considered.

$\mathcal{L}$

- 15. Section 68 of the Contracts Act, 2010, defines a "guarantor" as a person who gives a guarantee. The same provision defines a "contract of guarantee" to mean a contract to perform a promise or to discharge the liability of a third party in case of default of that third party, which may be oral or written. - 16. The defendants signed guarantee agreements on 14^th March 2019. Under clause 1 of the agreement, the defendants undertook to pay on demand money due to the lender by the borrower (Namirembe Offsprings Ltd). - 17. Under a guarantee agreement a person guaranteeing another's debt undertakes to answer for the debt or default of another person who borrowed the money. (See Anu Arora, Banking Law, 2014, Pearson Education Limited, pg. 648). - In the case of Moschi Vs LEP Air Services Ltd ALL ER 1972 18. [2] **page 393** it was held as follows:

*In the absence of any agreement to the contrary, the* obligation of a quaranter at common law was to see to it that the debtor performed the obligations which were the subject of the quarantee; a breach of those obligations by the debtor entailed a breach by the quarantor of his own contract for which he was liable to the creditor in damages to the same extent at the debtor. Where the creditor had accepted the debtor's repudiation of his obligations the *guarantor's obligation to the creditor did not thereby come* to an end; it continued to exist although transmuted by operation of law into an obligation to compensate the creditor by way of damages for the loss which he had suffered by reason of the debtor's breach. The contract of... confirmed the common law obligation of the appellant as *quarantor by providing that he 'personally quaranteed the performance by [the company] of its obligation to make the* payments.

19. In this case, the Plaintiff has adduced evidence that the Plaintiff and Namirembe Offsprings Ltd entered into a credit facility agreement (PE 9). The Plaintiff also attached proof that the money was disbursed under PE 16. In addition, the Plaintiff adduced in evidence emails reminding the Defendants to pay the money (PE $17$ ) and a demand notice from Quest Holdings Ltd (the recovery firm) to Namirembe Offsprings Ltd (PE 18). The Plaintiffs evidence is that Namirembe Offsprings Ltd did not pay the money due. This evidence is uncontroverted.

- Court notes that on 30^th September 2021, the Defendants were 20. each sent demand notices (PE 20 and 21). The Plaintiff's uncontroverted evidence is that the defendants have not paid the money. - Court finds that by virtue of the undertaking made by the 21. defendants in the guarantee agreement, the Plaintiff is entitled to recover UGX 315,140,527 from the defendants.

This issue is answered in the affirmative.

## *Issue 2: What remedies are available to the parties?*

The Plaintiff prayed for general damages. The law on general 22. damages was summarized in the case of **Adonia Tumusiime &** 318 Ors v. Bushenyi District Local Government & Anor **HCCS No.32 of 2012** thus:

> The position of the law is that the award of general damages is at the discretion of the court, and always as the law will presume to be the natural consequence of the defendant's act or omission. See James Fredrick Nsubuga v. Attorney General, H. C. C. S No. 13 of 1993. Secondly, in the assessment of the quantum of damages, courts are mainly guided, inter alia, by the value of the subject matter, the economic inconvenience that a party may have been put through, and the nature and extent of the breach. See Uganda Commercial Bank v. Kigozi [2002] 1 EA. 305. A plaintiff who suffers damage due to the wrongful act of the

defendant must be put in the position he or she would have *been in had she or he not suffered the wrong. See Charles Acire v. Myaana Engola, H. C. C. S No. 143 of 1993; Kibimba* Rice Ltd. v. Umar Salim, S. C. Civ. Appeal No.17 of 1992."

- 23. PW1 testified that the Defendants have caused the Plaintiff financial loss and deprived it of the opportunity to utilize and re-invest the sums which were advanced to Namirembe Offsprings Ltd. - Court finds that general damages of UGX. 10,000,000 are 24. sufficient in the circumstances. - 25. In conclusion judgment is entered for the Plaintiff against the Defendants for the payment of: - a) The sum of UGX. $315,140,527$ ; - b) General damages of UGX. 10,000,000; - Interest of 20% per annum on a) above from the date of $c)$ this judgment until payment in full; - d) Interest of $10\%$ per annum on b) from the date of this judgment until payment in full; and - e) Costs of the suit.

# Dated this 28^th day of March 2024

Rall. **. . . . . . . . . . . . . . . . . . .**

# Patricia Kahigi Asiimwe

Judge

Delivered on ECCMIS