Orient Bank Ltd v Francis Paschal Ntabaaazi and Mathias Senyondo (Civil Suit No 712/97) [2001] UGHC 130 (17 October 2001)

# **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA CIVIL SUIT NO 712/97**

**ORIENT BANK LTD:::::::::::::::::::::::::::::::::::PLAINTIFF**

**VERSUS**

**FRANCIS PASCHAL NTABAAZI)**

**MATHIAS SENYONDO DEFENDANTS**

### **BEFORE: THE HON. LADY JUSTICE M. S. ARACH-AMOKO**

## **JUDGEMENT**

The Plaintiff is a limited liability company carrying on banking business in Kampala. It sued the Defendants jointly and severally for repayment of Shs 2^,158,619 plus interest thereon, and an order offoreclosure against the Second Defendant in respect of land comprised in Kibuga Block 8, Plot 452 and 451, plus the costs ofthe suit.

The brieffacts ofthe case are that the <sup>1</sup>st Defendant, a customer ofthe Plaintiff, applied for and was granted an overdraft facility ofshs 15 million on the 30/10/95. The 2nd Defendant guaranteed the facility and also granted the 1st Defendant a Power ofAttorney to use his land comprised in Kibuga Block 8, Plot 452 at Mengo as security for the said facility. The title deed was deposited with the Bank. The 1st Defendant failed to pay the money despite repeated demands, and it has risen to Shs 23,158, 619 by the time of filing this suit.

The 1st Defendant denied the debt in toto and put the Plaintiffto strict proof. The 2nd Defendant denied that ^guaranteed the payment ofthe said loan or signed the guarantee deed referred to in the plaint. In the alternative, but without prejudice to the foregoing, the 2nd Defendant averred that the plaint disclosed no cause of action against him as the purported guarantee is not valid in law or at all. That ifthe <sup>1</sup>st Defendant is liable to pay, the loan, then he is notjointly and severally liable for the said debt.

Both Defendants prayed for dismissal ofthe suit with costs.

The following issues were agreed:

- 1. Whether the 2nd Defendant granted a Power ofAttorney to the 1st Defendant or not. - 2. Whether the 2nd Defendant gave a personal guarantee to the 1st Defendant. - 3. Whether the 1st and 2nd Defendants are jointly liable. - 4. Whether remedies are available to the Plaintiff.

Mr. Alan Shonubi represented the PlaintiffBank, and called Mr. Kanakapura Sreekantai Shiva swamy, the Plaintiffs credit Manager as the sole witness. Mi'. Othieno Brian appeared for the 1st Defendant, but did not call any evidence. He chose to argue his client's case on the basis ofthe guarantee. The 2nd Defendant was not represented, and he did not appear in court.

On the first two issues, that is, whether the 2nd Defendant granted the 1st Defendant a Power ofAttorney and a Personal Guarantee or not, both advocates agreed that he did so. Copies ofthe Power ofAttorney duly registered dated 1/11/95 and the Guarantee deed ofthe same date were tendered in court as Exhibits P3 and Pl. The answer to the first two issues are therefore in the affirmative.

As for the 3rd issue, that is, whether the 1st and 2nd Defendants are jointly liable. It is clear from the evidence ofPW1, that the 1st Defendant borrowed the sum of Shs 15 million from the Plaintiff. (Exhibit Pl) is the Deed of Guarantee signed by the 2nd Defendant. The guarantee provides in paragraph <sup>1</sup> ds follows:

" I/We the undersigned hereby guarantee to you the payment of and undertake on demand in writing made on the undersigned by you or any of your Directors Local Directors Managers or Acting Managers to pay to you all sums ofmoney which may now be or which hereafter may from time become due or owing to you anywhere from or by the Principal either as principal or surety and either solely orjointly with any other person upon current banking account bills of exchange or promissory notes or upon loan or any other account whatsoever or for actual or contingent liability including all usual banking charges." The 1st Defendant has failed to pay the money despite repeated demands. The 2nd Defendant was served with a demand letter (Exhibit P6") was calling upon him to make good his guarantee and he has failed to do so. A guarantee is written under taking by one person to answer for the debt or default of another person. Black's Law Dictionary 5th Edition defines "guarantee" at page 634 as " a guarantee is an undertaking by one person that another shall perform his contract or fulfil

his obligation, or that ifhe does not, the guarantor will do it for him

The contract of a guarantor is his own separate contract. It is in the nature a warranty by him that the thing guaranteed to be done by the Principal shall be done, not merely an engagement jointly with the Principal to do the thing". The 2nd Defendant is therefore solely liable for the debt under the Guarantee.

Which brings me to the fourth and last issue, that is remedies. According to PW1, when the facility was granted it was Shs 15 million (Exhibit P9). The facility was for 3 months w.e.f. 30/10/95. It was to attract interest at 24% p.a., the interest rate changed to 30% p.a. after default, and this was communicated to the 1st Defendant b a letter dated 23/6/97 (Exhibit P12). I accept this evidence in the absence of any other evidence to controvert it. The Plaintiffis therefore in my view, entitled to the interest on default from the 23/6/97 till date offiling the suit. The total sum at that time was Shs 23,158,619. The Plaintiff is also entitled to interest on this total sum at 20% p.a. from the date offiling till payment in full.

The Plaintiffis also entitled to foreclose on Block 8 Plot 452, land at Mengo; which was mortgaged to it as security for the said loan. The Plaintiff cannot j foreclose on Plot 451 as prayed for the simple reason that, even ifit is owned by the 2nd Defendant as welfjit was not part ofthe security. Ifthe 2nd Defendant wrongly or fraudulently described the Plot in question as alleged and the Plaintifflater on discovered that the Residential Plot described therein is on a different Plot which did not form part ofthe security, then the Plaintiffmust bear the loss occasioned by the negligence or laxity ofits officials who should have verified the plot before accepting the title as security.

In the result and for the foregoing reasons, judgement is entered against the 2nd Defendant for:

1. Shs 23,158,619

2. Interest on (1) at 20% p.a. from date offiling till payment in full. 3. An order offoreclosure ofPlot No 452 Block 8 land at Mengo. 4. Cost.

# M. S. ARACH-AMOKO

#### **JUDGE**

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