A Ugandan company and its two directors have been ordered to pay more than Shs102 million after a consignment of fuel declared for transit to the Democratic Republic of Congo failed to reach its destination, leaving an insurance company to settle the resulting customs bill.
The High Court in Kampala’s Commercial Division ruled that Gemcolink Logistics Limited, its director Etudi Paul and fellow director Gaudensia Etudi Arereng must jointly and severally pay CIC General Insurance Uganda Limited Shs102,258,778, the amount the insurer paid to the Uganda Revenue Authority (URA) after the consignment became the subject of a customs tax demand.
The court also ordered the defendants to pay interest at 20 per cent per year from January 24, 2021, until the debt is cleared, as well as the costs of the lawsuit.
In a judgment delivered on October 12, 2026, Justice Stephen Mubiru rejected the company’s argument that it was merely a transporter and clearing agent, as well as claims that a third party had fraudulently used its customs system to process the disputed declarations.
The judge found that Gemcolink had assumed responsibility for the customs obligations when it obtained a customs bond from CIC and that the company had failed to prove the fuel was exported to the Democratic Republic of Congo.
How the fuel became a Shs102 million liability
The dispute arose from a customs bond worth Shs2 billion that CIC issued to support Gemcolink’s operations as a licensed customs clearing and freight-forwarding agent.
The bond covered the period from January 1 to December 31, 2018. Gemcolink signed a corporate counter-guarantee, while Etudi and Gaudensia signed personal guarantees undertaking to indemnify the insurer against claims and liabilities arising from the bond.
The disputed consignment consisted of fuel declared for transit through Uganda to Bunia, in the Democratic Republic of Congo.
Two customs declarations were involved. Declaration D53717 attracted taxes of Shs52,438,628, while declaration D50413 carried a tax assessment of Shs49,820,150. Together, the two declarations produced a liability of Shs102,258,778.
Evidence from URA’s Asycuda customs management system showed that the goods had been imported into Uganda on April 1, 2019, rather than being re-exported to their declared destination.
Under Section 20(2) of the East African Community Customs Management Act, 2004, goods imported under transit arrangements but not duly re-exported within the prescribed period are deemed to have been imported.
That provision became central to the court’s decision because the defendants could not establish that the fuel had reached Bunia.
URA called on the customs bond on September 16, 2020, after the taxes remained unpaid. According to evidence presented by CIC, the insurer advised Gemcolink to provide proof that the goods had been exported or challenge the tax demand in court.
Gemcolink did neither.
CIC subsequently paid URA Shs102,258,778 on January 24, 2021, and sought reimbursement from the company and the two directors under the guarantees they had signed.
The defendants denied liability.
Company said it was only a transporter
Gemcolink argued that it was not the importer of the fuel but had acted as a clearing agent in a transaction involving Ken-Freight East Africa Limited.
Etudi told the court that the customs declarations had been generated fraudulently by Abdul Razak, an agent in Malaba who had previously worked with Pantek International and supplied business to Gemcolink.
According to Etudi, Razak had accessed Gemcolink’s account on URA’s Asycuda system and processed the declarations without authorisation.
The company also argued that the matter had been under investigation by Interpol since November 27, 2019, and that CIC had paid URA prematurely before the investigations were completed.
But Justice Mubiru found that the explanation did not relieve Gemcolink of its obligations under the customs bond.
The judge noted that Gemcolink had voluntarily obtained the bond and signed a corporate counter-guarantee covering customs liabilities.
The company could not escape those obligations simply by describing itself as a transporter or agent rather than the importer.
“The 1st defendant was the bond principal, it voluntarily took out the customs bond and executed a corporate counter-guarantee,” the judge wrote.
He added that a party that voluntarily executes a bond covering customs obligations remains liable for those obligations regardless of whether it characterises itself as an agent or transporter.
The judge also pointed to provisions of the East African Community Customs Management Act governing the responsibilities of authorised agents and the owners of goods.
Gemcolink, as the licensed clearing agent that had assumed obligations under the bond, was responsible for ensuring that the consignment was properly handled and that the customs duties were paid if the goods were not exported.
Dispute over access to the customs system
The court also examined the allegation that Razak had fraudulently accessed Gemcolink’s Asycuda account.
During cross-examination, Etudi acknowledged that he personally managed the account and that it was password-protected. He said access was restricted to him and his wife, Gaudensia, the company’s other director, and that the password expired every 30 days.
He also admitted that he had personally signed and entered declarations D53717 and D50413 into the system on December 1, 2018, at the Malaba border crossing.
Etudi maintained that Razak had generated the declaration forms, but he could not explain how the agent had obtained the account credentials.
The judge found that the company had not adequately established the alleged unauthorised access or demonstrated that it had taken sufficient steps to investigate, protect the account or challenge the declarations.
“The 1st defendant cannot disclaim responsibility for declarations made on its own controlled system,” Justice Mubiru wrote.
The judge concluded that the declarations had been made under credentials controlled by Gemcolink’s directors and that the company could not avoid responsibility for activity conducted through its account.
The court further found that the defendants had failed to prove fraud. Although they alleged that the customs clearance was fraudulent, the evidence did not establish the claim to the required standard.
“Whereas fraud vitiates payment under a bond, the burden of proving fraud lies on the party alleging it, and conclusory allegations are insufficient,” the judgment states.
The court therefore rejected the argument that the alleged fraud excused Gemcolink from paying the customs debt.
Why the insurer was entitled to recover the money
The defendants also challenged CIC’s decision to pay URA before the investigations were completed.
Justice Mubiru found that CIC had consulted URA and given Gemcolink an opportunity to produce evidence of export or challenge the tax demand in court. The company failed to pursue either course.
The court held that URA had validly called on the bond after the conditions governing the transit consignment had not been fulfilled.
The insurer was therefore entitled to honour the demand and subsequently seek indemnification from the company and the individuals who had guaranteed its obligations.
In considering the insurer’s payment, the judge explained that a surety’s decision is assessed on whether it acted in good faith and whether the amount paid was reasonable.
Payments by sureties are “scrutinised only for good faith and reasonableness as to amount paid”, the judgment states, adding that “conclusory allegations of bad faith are insufficient”.
The defendants had not established that CIC acted in bad faith or that the amount it paid was unreasonable.
The court consequently found that CIC was entitled to recover the money it had paid URA under the customs bond.
Directors held personally liable
The judgment also underscored the consequences of signing personal guarantees to support a company’s obligations.
Gemcolink had signed the corporate counter-guarantee, while Etudi and Gaudensia had signed personal guarantees undertaking to indemnify CIC against liabilities arising under the bond.
The court found that those commitments entitled the insurer to pursue all three defendants for the amount paid to URA.
The order was made against them jointly and severally. This means CIC can seek recovery of the full amount from any of the defendants, subject to the terms of the court order, rather than being restricted to collecting a separate portion from each one.
The ruling reinforces the financial exposure that can arise when company directors personally guarantee obligations connected to customs transactions.
For Gemcolink, the central issue was not simply whether it physically owned the fuel or had acted as an intermediary in its movement. The court focused on the obligations the company had accepted under the customs bond and the failure to establish that the goods had been exported as declared.
Court awards 20 per cent annual interest
In addition to the principal sum of Shs102,258,778, Justice Mubiru awarded interest at 20 per cent per year from January 24, 2021, the date CIC paid URA, until the debt is fully settled.
The judge explained that interest was intended to compensate the insurer for being deprived of the use of its money.
The judgment referred to the principle that a party who has been kept out of money may be compensated for the cost of borrowing equivalent funds.
“The plaintiff has been deprived of the use of its funds since 24th January, 2021,” the judge wrote.
He added that interest should reflect the cost of borrowing and serve a compensatory purpose rather than simply punish the defendants.
The court declined to award separate general damages for breach of contract, reasoning that doing so would duplicate the compensation provided through interest for the loss of use of the money.
It also ordered the defendants to pay the costs of the suit, applying the general rule that costs follow the outcome of a case unless there is a good reason to order otherwise.
The judgment was delivered electronically on October 12, 2026, in CIC General Insurance Uganda Limited v. Gemcolink Logistics Limited, Etudi Paul and Gaudensia Etudi Arereng, Civil Suit No. 1058 of 2020.
CIC was represented by R.G. Masaba Advocates, while the defendants were represented by Ingura & Co. Advocates.
