THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL DIVISION)
MISCELLANEOUS APPLICATION NO. 061 OF 2011
[ARISING FROM CIVIL SUIT NO. 0388 OF 2010]
ST. NOAH GIRLS SECONDARY SCHOOL LTD::::::::::::::::::::APPLICANT
VERSUS
CRANE BANK LIMITED ::::::::::::::::::::::::::::::::::::::::::::::::RESPONDENT
BEFORE: HON. LADY JUSTICE IRENE MULYAGONJA KAKOOZA
RULING
The applicant brought this application under the provisions of order 6 rules 19 and 31 of the Civil Procedure Rules (CPR) seeking to amend the plaint. The application was supported by the affidavit of Herbert Walusimbi, a director in the applicant company. The respondent filed an affidavit in reply to oppose the application deposed on 5/04/2011 by Reghu Nair, the Head of Credit in the respondent bank.
The main ground of the application was that new facts came to light when the applicant received statements from the respondent as ordered by court in an earlier application (M/A 616/2010). In his affidavit in support of the application, Mr. Walusimbi averred that following an order of this court, the respondent did supply to the applicant a copy of the its statement of account with the respondent. That the said statement showed that shs. 100,410,959/= had been entered on the account on 12/01/2007 and this pushed the debt due up to shs. 179,078,562/=. He further averred that he perceived the amount of over shs. 100m as an additional loan facility which was given to the applicant but which he knew nothing about. He therefore disputed the amount reflected as due in the statement and further averred that the applicant had discharged its obligation to the respondent and the balance outstanding as at 08/02/2007 should have been shs. 29,821, 348/= only.
Mr. Walusimbi went on to challenge, as premature, the appointment of receivers, M/s Patrick Kisaliita and Festus Katerega on 22/02/2008 who took over the management of the assets of the applicant. He further averred that the receivers had since collected school fees but they had not rendered an account to the applicants; neither had they accounted for or shown them any credits towards the satisfaction of the debt. He finally averred that it was necessary to plead these facts in the plaint, especially in view of the fact that the applicant has also filed in this court an application to have the receivers joined as parties to the suit.
In his affidavit in reply, Mr. Reghu Nair averred that since 22/04/2008 the applicant school was managed by the receivers named above. That the applicant filed this suit without the involvement of the receivers but the directors have never filed any proceedings challenging the appointment of the receivers. He further averred that he had information from the respondent’s advocates that the main suit was not properly before court because the appointment of receivers operated as a dismissal of the directors of the applicant. That as a result, the deponent of the affidavit in support had no right to make the deposition; that the application now before court had no affidavit in support of it and therefore is fatally defective.
Mr. Nair went on to aver that when a customer takes out a loan two accounts are opened, one as a loan account and the other as an arrears account. That the sum of shs. 100,410,959/= complained of by the applicant was transferred from its loan account to its arrears account, a process which occurred when the applicant did not renew its loan. That the same amount was credited onto the applicant’s loan account which now reflects no balance outstanding. A copy of the statement was attached to the affidavit as Annexure “C”.
At the hearing of the application, Mr. Paul Kusiima for the applicant repeated the contents of the affidavit in support and emphasised that the respondent has been evasive about the amount that is due from the applicant. Mr. Isaac Walukaga for the respondent submitted that the application seeks to introduce a new cause of action because the applicants now seek to contest their indebtedness. That the claim in paragraph 6 of the plaint was for stay of sale of the mortgaged property, termination of the receivership and the furnishing of a statement of account. He relied on the decision in Eastern Bakery v. Castelino [1958] EA 461 for his submission that the court could not allow an amendment of pleadings to enable a party to introduce a new cause of action. He went to submit that the statements of account and other documents had been furnished to the applicants and an inquiry of them whether they required any further information did not lead to any further requests.
Mr. Walukaga went on to challenge the propriety of the main suit. He drew it to the attention of court that though the applicant company was in receivership, the directors of the company filed a suit without the involvement of the receivers. He asserted that the powers of the directors of a company come to an end on the appointment of receivers and the company had hitherto not contested the receivership. He added that because the company was in receivership, the suit ought to have been brought by the company “In Receivership” and not in the manner that it was brought. He prayed that the application be dismissed because in his view, it was an attempt to delay the collection of the debt.
I will first consider Mr. Walukaga’s application to have the affidavit in support of the application struck out for being incompetent in that it was deposed by a director of the company. Mr. Walukaga asserted that the appointment of receivers brings the powers of directors of a company to an end. Mr. Kusiima offered no contest but I cannot agree with Mr. Walukaga’s submission. Unlike in winding up proceedings, the board of directors does not become functus officio on the appointment of a receiver. However, the powers of the directors are substantially superseded since they cannot act so as to interfere with the discharge by the receiver of his responsibilities (Gower’s Principles of Modern Company Law, 6th Edition by Davies, P., at 386-387). Mr. Walusimbi’s affidavit was therefore competent.
Going on to the applicant’s application, Order 6 rule 19 CPR provides that the court may, at any stage of the proceedings, allow either party to alter or amend his or her pleadings in such manner and on such terms as may be just. It further provides that all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties. In Eastern Bakery v. Castelino (supra), the Court of Appeal for East Africa summarised the law on amendment of pleadings. It was held that amendments to pleadings sought before the hearing should be freely allowed, if they can be made without injustice to the other side; and that there is no injustice if the other side can be compensated by costs. The court went on to hold that amendments are not to be denied just because they introduce a new case. But there is no power to enable a distinct cause of action to be substituted for another, not to change by means of amendment the subject matter of the suit. That the court would refuse leave to amend where the amendment would change the action into one of a substantially different character or where the amendment would prejudice the rights of the opposite party existing at the time of the proposed amendment.
Mulla on the Code of Civil Procedure (1908) (16th Edition, Butterworths, at 1836) summarises instances in which an application to amend ought to be refused. Included in the categories of applications are those where the amendment is not necessary for the purposes of determining the real questions in controversy between the parties as where it is merely technical or useless and of no substance.
I considered the facts stated in the affidavits and examined the statements that were annexed thereto by both parties, and which I believe are the basis of this application. The applicant’s suit is for an account. The applicant requested for statements in an earlier application and they have been supplied. She now wishes to challenge the statement of account annexed to the affidavit in support as Annexure “A”. The same statement is annexed to the WSD as Annexure “A”. There is another statement, Annexure “C” to the affidavit in reply here and I take it to be an integral part of the statement in Annexure “A” above. I have no doubt that in a suit for an account, the parties have to examine all documents that relate to the account in dispute to establish what is due and that in this suit must include the two statements referred to above. That, I am of the view, will be a question of evidence, not pleadings.
I do not agree with Mr. Walukaga’s submission that the amendment sought would substantially change the plaintiff’s cause of action, or any of them. I think that it would only amplify one of the causes of action which is that the applicant wants to have an account taken before the procedures for recovery of the debt can be continued by the respondent bank. The applicant also wants to plead to facts relating to alleged misdeeds of the receivers because she has filed an application in this court to have them joined as parties to the suit. There is no doubt that that would be putting the cart before the horse for the application has not yet been granted. An amendment to include facts relating to the receivership would only be necessary if and when the application to join the receivers as parties is granted.
As to whether the main suit is properly before this court, or whether the applicants can challenge the actions of the receivers by way of a suit (of the nature of that which is now before this court) will be an issue to be determined in the main suit and after they are included as parties to the suit, if at all that can be achieved. I am again of the view that challenging the receivership would not be a new cause of action and I say so because one of the prayers in the main suit is that the receivership be halted or terminated. Whether that can be achieved by way of a suit such as the one now pending before court is again a question for determination therein.
In conclusion, I see no need for an amendment of the plaint at this point. The facts that are necessary to determine the applicant/plaintiff’s case as it stands have already been pleaded. All that applicant needs to do is call evidence to prove her case when the time comes to do so. Since it is a suit for an account, statements will be exchanged and the accounts scrutinised at that point. The application was therefore unnecessary and it is hereby dismissed with costs to the respondent.
Irene Mulyagonja Kakooza
JUDGE
04/05/2011
