Stanbic Bank Uganda Limited v Ugaden Cocoa Trading Limited & Another (Civil Suit 159 of 2020) [2023] UGCommC 222 (11 December 2023)

Key Facts

Transaction Type

Issues

• The court considered whether the Plaintiff's suit was prematurely filed, as the Defendants claimed the one-year repayment period was waived by the Plaintiff, making the suit premature.
• The court assessed whether the Defendants breached their contract with the Plaintiff by failing to fulfill their repayment obligations under the overdraft facility and the personal guarantee.
• The court determined the remedies available to the parties, including the payment of the outstanding sum, interest, general damages, and costs, following the breach of the overdraft facility and personal guarantee.

Holdings

• The court found that the filing of the suit by the Plaintiff was not premature, as the Defendants did not dispute the notice of default issued in July 2019 and failed to repay the overdraft within the stipulated period.
• Both Defendants were found in breach of their contractual obligations. The 1st Defendant failed to repay the overdraft facility, and the 2nd Defendant's personal guarantee liability was not discharged due to lack of evidence supporting a waiver of the repayment terms.
• The court ordered the 1st Defendant to pay USD 257,993 (principal and interest), the 2nd Defendant to pay USD 50,000 under the personal guarantee, UGX 10,000,000 in general damages, 9% annual interest on the decretal sum from suit filing, 6% annual interest on general damages, and full costs of the suit.

Remedies

• The 1st Defendant is ordered to pay USD 257,993 to the Plaintiff for the outstanding overdraft amount.
• The 2nd Defendant is required to pay USD 50,000 as a personal guarantee for the overdraft.
• Interest at 9% per annum is awarded on the decretal sum from the date of filing the suit until full payment.
• The Defendants are held liable for breaching the overdraft facility extended by the Plaintiff.
• General damages of Uganda Shillings Ten Million are awarded to the Plaintiff.
• The Defendants are ordered to pay the costs associated with the legal proceedings.
• Interest at the court rate of 6% per annum is awarded on general damages from the date of judgment until payment.

Contract Value

Monetary Damages

Legal Principles

• The judgment relies on the principle that valid contracts create legally binding obligations (Pacta Sunt Servanda), emphasizing that the Defendants are bound by the terms of the facility letter and guarantee.
• The judgment applies the legal definition of breach of contract under Section 10(1) of the Contracts Act and case law, finding the Defendants failed to fulfill their repayment obligations under the overdraft facility and personal guarantee.
• The court awarded costs to the Plaintiff under Section 27 of the Civil Procedure Act, following the principle that costs typically follow the outcome of the litigation.
• Under Section 101 of the Evidence Act, the burden of proof lies on the party asserting facts to demonstrate their existence. The court emphasized that the Defendants failed to provide evidence supporting their claim of a waived repayment period.

Precedent Name

• Surgipharm Uganda Ltd Vs Anatoli Batabane
• Wallersteiner Vs Moir
• Attica Sea Carriers Corporation Vs Ferrostaal Poseidon Bulk Reederei G.M.B.H
• Barclays Bank of Uganda Limited Vs Howard M. Bakojja
• William Kasozi Vs DFCU Bank Ltd
• Uganda Commercial Bank Vs Deo Kigozi
• Nakawa Trading Co. Ltd Vs Coffee Marketing Board

Key Disputed Contract Clauses

• The overdraft facility included a contractual interest rate of 12.75% per annum, which increased to 20.75% upon default under clause 5.3 of the facility letter. This rate was relevant to the quantum of interest awarded by the court.
• The court analyzed the clause in the overdraft facility that required repayment strictly on demand by the Plaintiff, without obligation to provide prior notice, which was central to the dispute over whether the suit was prematurely filed.
• The court examined the contractual limitation of the 2nd Defendant's personal guarantee to USD 50,000, determining that the Plaintiff could not seek recovery beyond this sum from the guarantor despite the 1st Defendant's default.

Cited Statute

• Evidence Act, Cap. 6
• Contracts Act
• Contracts Act, 2010
• Contracts Act, Cap. 6
• Civil Procedure Act

Judge Name

Passage Text

• I shall grant interest of 9% per annum on the decretal sum as prayed by the Plaintiff from the date of filing the suit until payment in full.
• Accordingly, I find both Defendants in breach of the contract in issue.
• In the foregoing, I find that the filing of this suit by the Plaintiff was not premature.

Damages / Relief Type

• Compensatory Damages: USD 257,993 (principal and interest at 9% per annum from 2020 to payment in full)
• Compensatory Damages: UGX 10,000,000 (general damages) with 6% interest per annum from judgment date to payment in full
• Costs of the suit awarded to the Plaintiff