The High Court’s Commercial Division has ordered Equity Bank UGX 126.8 million in a failed international trade deal, after court found that it negligently released shipping documents for Sanstar Bio-Polymers Limited without securing payment for the 2016 transaction.
On Monday, Justice Stephen Mubiru delivered a judgement in which he ruled in favour of Sanstar Bio- Polymers Limited, an Indian exporter, awarding the company USD 31,200 (UGX 117.2 million) the value of goods supplied to a Ugandan buyer-along with interest at 8% per annum from November 2016 until full payment.
The dispute stems from a 2016 deal in which Mukwano Industrial Suppliers Limited ordered 72 metric tonnes of liquid glucose concentrate (food grade) from Sanstar at a cost of $31,200. The parties agreed that payment would only be made upon receipt of shipping documents.
Sanstar appointed its bankers, Karur Vysya Bank Limited, to transmit the documents to Equity Bank, which was expected to act as the collecting bank and release them to the buyer only after full payment.
However, court found that the bank’s staff released critical shipping documents to the buyer’s agent without first securing payment, contrary to explicit instructions.
The total liability, now estimated at over USD 54,600 (over UGX 200 million), arising from Equity Bank’s role as a collecting bank in a documentary collection transaction.
Under the agreed “cash against documents” arrangement, the buyer was only entitled to receive shipping documents-and consequently access the goods-after making full payment.
However, the bank’s failure to adhere to these terms enabled the buyer to take possession of the goods without settling the invoice, leaving the exporter unpaid.
Following the loss of substantial sums of money, Sanstar Bio-Polymers sued the bank in order to recover the funds, damages, interest, and costs.
The court found Equity Bank negligent, after it received and acted on the documents without rejecting the role, which deemed that the bank had accepted responsibility and was therefore obligated to exercise due care.
Additionally, court found that the loss suffered by Sanstar was a natural and foreseeable consequence of the bank’s negligence.
The court ordered the bank to pay $31,200 (UGX 117.4 million) as compensation, along with interest at 8 per cent per annum from November 8, 2016, until full payment, and costs of the suit.
