Equity Bank main branch at Church House.
Gombe Educational Services Limited has won a court case against Equity Bank (U) Ltd after the High Court found the lender breached a loan facility agreement by failing to disburse funds and later rescinding the contract. Justice Patience T.E. Rubagumya awarded the plaintiff UGX 122,248,000 and UGX 31,500,000 for valuation and audit expenses, plus UGX 80,000,000 in general damages, with interest and costs.
The court heard that Gombe Educational Services requested a combined facility of UGX 18.5 billion in November 2019, and Equity Bank later issued a loan offer of UGX 17.8 billion, which was accepted and secured by several properties and corporate guarantees. According to the judgment, the bank halted disbursement after schools closed during the COVID-19 pandemic, then rescinded the agreement in March 2021, citing unfavourable conditions in the education sector. The plaintiff argued it had complied with all conditions precedent, incurred major expenses in reliance on the facility, and was left unable to secure alternative financing because the bank retained the title documents. The defendant denied breach, saying the loan never crystallized because conditions precedent were unmet and the pandemic affected the cash flow projections.
Justice Rubagumya held that the bank had not shown that disbursing the facility during the pandemic would have imposed a radically different duty than the one it had accepted when signing the contract. The judge found no proof that COVID-19 frustrated the agreement, and concluded that Equity Bank breached the contract by failing to avail the facility and by arbitrarily rescinding it. She declared the loan agreement breached, ordered payment of the proven costs, awarded damages, and granted interest at 10% on the costs and 6% on the damages until full payment.
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