Appeal court halts sh147.7b Dei Industries loan case
Justice Florence Nakachwa, sitting as a single Justice of Appeal, ordered a stay of the hearing and all proceedings in High Court Civil Suit No. 929 of 2024 pending the hearing and final determination of the applicants' intended appeal.
Justice Nakachwa said she did not have jurisdiction, sitting as a single Justice, to determine whether the applicants' notice of appeal was competent.
KAMPALA - The Court of Appeal has stayed proceedings in a loan dispute involving Dei Industries International Ltd, Dei Biopharma Ltd and Dr Mathias Magoola after an audit report put the applicants' alleged indebtedness at US$39,911,245, equivalent to about sh147.7b.
Justice Florence Nakachwa, sitting as a single Justice of Appeal, ordered a stay of the hearing and all proceedings in High Court Civil Suit No. 929 of 2024 pending the hearing and final determination of the applicants' intended appeal.
According to the ruling, the applicants obtained several credit facilities from the respondent banks between 2016 and 2021 to finance the establishment of a pharmaceutical manufacturing facility.
The applicants later disputed the loan balances, alleging that excessive interest and other charges had resulted in inflated balances.
The applicants and the respondent banks initially agreed to have KPMG review the disputed loan accounts.
However, the applicants challenged KPMG's involvement, prompting the Commercial Court to direct the Institute of Certified Public Accountants of Uganda (ICPAU) to nominate an independent audit firm.
ICPAU appointed Clayton & Co, which produced an audit report dated June 28, 2025.
The Commercial Court dismissed the applicants' application on July 29, 2026.
The applicants then filed a notice of appeal and asked the Court of Appeal to stay proceedings in the main suit until their intended appeal was heard and determined.
The respondent banks opposed the application, arguing that the applicants had no automatic right of appeal against the dismissal and had not obtained the required leave to appeal.
The respondent banks also argued that the applicants could challenge the Clayton & Co audit report during the hearing of the main suit by cross-examining its author and presenting evidence against its findings.
Justice Nakachwa said she did not have jurisdiction, sitting as a single Justice, to determine whether the applicants' notice of appeal was competent.
She said that issue could only be determined by a full bench of three Justices of Appeal.
On the applicants' request for a stay of proceedings, Justice Nakachwa said the intended appeal raised issues concerning the genuineness of the audit report and whether it accurately reflected the applicants' indebtedness to the respondent banks.
The applicants told court that they operate a pharmaceutical manufacturing business producing essential medicines for conditions including HIV, malaria, cancer, diabetes and neurodegenerative disorders.
Justice Nakachwa said the applicants had satisfied the requirement of demonstrating substantial loss that could arise if the proceedings continued
On the balance of convenience, the judge referred to the Commercial Court's finding that ICPAU was not required to consult the applicants or the respondent banks before nominating an audit firm because doing so could undermine its independence.I
She said the Commercial Court's position showed that it considered Clayton & Co's appointment to have been made in accordance with its order.
Justice Nakachwa held that allowing the High Court proceedings to continue while the applicants challenged the audit process before the Court of Appeal would prejudice the applicants.
The judge also found that the applicants had not delayed unreasonably in filing the application, noting that it was filed about four months after the Commercial Court dismissed the applicants' application
She consequently ordered that the hearing and all proceedings in High Court Civil Suit No. 929 of 2024 be stayed pending the hearing and final determination of the applicants' intended appeal
She ordered that costs of the application would abide the outcome of the intended appeal.