Businessman Patrick Bitature. PHOTO/FILE
The Commercial Division of the High Court has dismissed an application in which businessman Patrick Bitature had sought to challenge personal liability for an unpaid loan of $13.5 (about Shs50.3b) due to Electro-Maxx.
In an application filed last year, Mr Bitature noted that whereas Absa had sought to recover Shs50.3b arising from a consent judgment of 2020 regarding indebtedness of Electro-Maxx, he was not indebted to the bank, reasoning there was no contract of guarantee executed relating to the consent judgment.
Absa had earlier sought to recover Shs50.3b from Mr Bitature as a guarantor of a $15.8m (Shs58.9b) loan advanced to Electro-Maxx and whose indebtedness, had been agreed to in a May 24, 2020 consent judgment signed by the businessman on behalf of Electro-Maxx.
“The applicant [Mr Bitature] is not indebted to the respondent [Absa] to the above amounts presumably arising from a contract of guarantee as there is no contract of guarantee executed ... relating to the consent judgment,” Mr Bitature said in an application filed through Moogi Brian & Co. Advocates.
He also noted that there was an existing application for stay of execution brought by Electro-Maxx against Absa in its bid to recover the $13.5m, indicating that his application raised bona fide triable issues that related to whether there existed a contract of guarantee and whether the enforcement of a consent judgment “can be done during the subsistence of an appeal and pending stay of execution”.
However, in a Monday ruling, Justice Harriet Grace Magala, indicated that the application for stay of execution had been dismissed on October 23, 2023, by Justice Stephen Mubiru, while at the same there was sufficient evidence before court indicating that Mr Bitature had guaranteed the debt to Electro-Maxx.
“The applicant [[Mr Bitature] denies consenting to any guarantee under the consent judgment but on perusal … to the affidavit in reply to the application, the document (consent deed) bears the signature of the applicant [Mr Bitature] above his name as a guarantor,” she ruled, noting that “this application is frivolous” relating it to a previous case which explained that a frivolous defence is one whose intention is to stall and wrongfully delay settlements of a legitimate claim. Therefore, she ruled that the application had been dismissed with costs, adding that: “The applicant [Mr Bitature] as a director and guarantor of Electro-Maxx accepted to the terms of the consent judgment and partly honoured its terms … but now turns around to dispute the same. I find this application an abuse of the court process”.
In May 2018, Absa extended $8m to Bitature’s Electro-Maxx, a power generation company, before extending another $10m in August of the same year to finance a mini oil refinery through Simba Oil, all of which were guaranteed by Mr Bitature.
However, the loans were defaulted on, which, on March 31, 2020, forced Absa to issue a demand for repayment of the outstanding amount but Electro-Maxx sued seeking to have the loans declared illegal and securities nullified.
The lawsuit resulted in a consent judgment of May 2020, in which Electro-Maxx acknowledged a debt due to Absa of $15.8b and agreed to a repayment schedule for the principal and interest at 8.73 percent per annum.
The consent judgment allowed Absa to enforce the securities for the loans, including Mr Bitature’s guarantee, if Electro-Maxx defaulted on more than three monthly installments, of which it was obliged to pay $75,000 per month from August 2020 to July 2021 and $550,003 per month until April 2024, with a final payment of $342,343 due in May 2024.
The loan amount subsequently reduced to $14.9m but Electro-Maxx failed to meet the higher installments due in August 2021, thus leading to varrying of judgment to allow Electro-Maxx pay $90,000 per month from August 2021 to January 2022, which would rise to $100,000 per month from February to April 2022, $120,000 from May to October 2022, and $663,559 per month for 22 months to August 2024.
Electro-Maxx paid the first 13 months under the new terms until September 2022, bringing the outstanding to $13.4m (Shs50.3b), but defaulted on the higher payment of $663,559, for which it renegotiated new terms, under which it would pay $120,000 per month for 10 months from October 2022 to July 2023, $999,256 per month from August 2023 to July 2024, and a final payment of $998,145 on August 31, 2024.
However, on July 12, 2023, three years after signing the consent judgment, and after paying 13 out of the expected 46 repayment installments, Electro-Maxx challenged the consent judgment, which Justice Mubiru dismissed.
