THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISC. APPL. NO. 0617 OF 2012 AND MISC. APPLI. NO. 616 OF 2012

ARISING FROM CIVIL SUIT NO 0129 OF 2012

1. JESSY TECHNICAL SERVICES LTD}
2. JOSEPH LUKYAMUZI}...........................................................                                                                                                                                APPLICANTS

VERSUS

1. AJAY INDUSTRIAL CORPORATION LTD}
2. RELIEF LINE (U) LIMITED}..................................................                                                                                                                                    RESPONDENTS

BEFORE HON JUSTICE CHRISTOPHER MADRAMA

RULING

The Applicants application is brought under section 98 of the Civil Procedure Act, order 9 rules 12, and order 52 rules 1, 2 and 3 of the Civil Procedure Rules. The applicant seeks orders that the court set aside the default judgement and decree in civil suit number 129 of 2012 against the applicants, for execution to be set aside as against the second applicant, for the court set aside the committal order issued against the second applicant and discharge him from execution by way of arrest and detention in civil prison. The applicants seek unconditional leave to file their written statement of defence to defend the main suit and costs of the application to be provided. The applicants aver that they were prevented by sufficient cause from filing their respective defences to the suit. This is because the applicants were not served with summons and pleadings. Therefore the default judgement in the main suit was erroneously/wrongfully entered against the applicants and is liable to be set aside. The applicants maintain that the second applicant was not a party to the contract/transactions giving rise to the suit and alleged to have been breached. That the applicant was wrongfully sued and judgement and decree were wrongfully entered against him. Secondly that the second applicant was wrongfully arrested and committed to civil prison in execution of a decree passed in the main suit arising from claimed liabilities against the first applicant, a body corporate which is distinct from the second applicant. The second applicant was wrongfully arrested and committed to civil prison when he was not in any way personally indebted to the respondents. The applicants have a good/plausible defence to the claims in the suit which merit adjudication by the court and it is in the interest of justice that the court be pleased to set aside its judgement and decree in the main suit and execution thereof and also unconditionally discharge the second applicant from detention in civil prison. The deposition in support of the application is made by the second applicant Joseph Lukyamuzi.

The deponent’s deposition is that his lawyers obtained photocopies of documents from the court record from which he was appraised of the circumstances under which judgement was entered against him and the first applicant leading to his arrest and detention in civil prison. Their contention is that the first applicant has never been served with summons and pleadings. Secondly the affidavit of Naika Edward Gabula filed on 24 April 2012 is false in so far as the deponent was never informed of any such summons by the receptionist at the first defendant's premises, and he never had any contact with the process server nor did he instruct him to deposit the summons and plaint at the first applicant's premises as averred in the affidavit of service. The deponent makes reference to the letter of the respondents counsel applying for an order of substituted service. It shows that the registrar of the court advised the respondents counsel to apply for an order of substituted service. The affidavit indicates that summons was advertised by order of the court but the deponent avers that he was seeing the advert for the very first time. Secondly only the summons was advertised. The applicant avers that there is no record of any application for an order of substituted service having been made and an order being granted. The ground of the application is therefore that there was no proper service of the summons or effective service of the summons and pleadings on the applicants.

The second applicant further states that he has a good and a plausible defence on the merits in that the first applicant is a corporate body distinct from the second applicant and therefore the second applicant was wrongfully arrested and committed to civil prison for the debts/decree in execution in the suit. The applicant is not a party to the contract the basis of the decree and was wrongly sued. He is sued in his personal capacity in the plaint because of being the managing director of the first applicant. The respondents knew that there were dealing with a limited liability company and not the second applicant. The facts of the transaction are that the first respondent contracted the first applicant to supply four consignments of borehole materials. One consignment was valued at US$39,114 equivalent to 93,009,320/= Uganda shillings at an exchange rate of 2380. The consignment was delivered but did not match materials into which they were to fit for making boreholes. The first applicant informed the first respondent that the consignment which had been delivered did not match with the borehole materials whereupon the first respondent undertook to send another consignment of matching materials valued at US$30,911 equivalent Uganda to shillings 73,568,180/=. The precondition was for the first applicant to secure the whole outstanding monies including the value of the second consignment by a cheque in the names of the second respondent. The cheque was issued by the first applicant as security and availed to the regional manager of the first respondent who works for the second respondent. The cheque was to be banked upon delivery of the second consignment but for unknown reason the respondents in breach of the undertaking banked the cheque before delivery of the second consignment.

A director of the first respondent requested the first applicant to give him US$10,000 to help procure the second consignment which was unavailable. The first applicant raised Uganda shillings 20,000,000/= which money was received by the regional manager of the first respondent, employed by the second respondent. The first respondents claim for the outstanding sum in respect of the first consignment has a set-off of Uganda shillings 20,000,000/= and it is premature as the first applicant is only entitled to pay the same upon delivery of the second consignment by the respondents. So the amount of Uganda shillings 166,578,940/= claimed and awarded in the judgement was wrongfully claimed and awarded.

In reply the country manager of the second respondent company Mr Pragnesh Bhavsar made in deposition in opposition to the application. He contends that the decree was already executed and the second applicant is detained in civil prison and therefore the application is in vain. The first time service was effected on the defendants by way of deposit of summons and pleadings at the place of work as indicated in the affidavit of service. Secondly the applicant was advised by court to proceed by way of substituted service and the applicant did apply for substituted service and obtained an order for substituted service. Summons was advertised and an affidavit of service to that effect was filed.

Secondly the applicants have no plausible defence against the respondents claim as they admitted the claim time and again according to annexure attached to the affidavit. Default judgement was therefore properly entered by the court after the applicants failed to file a defence. Even after judgment had been entered the applicants continued to make admissions of liability. Though the first applicant is a body corporate, it acted through its director, the second applicant who was sued jointly and severally with the first applicant. The respondent further asserts that the applicant was supplied with all the goods it ordered for worth Uganda shillings 166,578,980/=. This was secured on the understanding of the parties by a cheque number 005057 for the same amount which has not been paid to date.

At the hearing of the application counsel Joseph Kyaze represented the applicants while Counsel Kintu Carolyn represented the respondents.

The applicants counsel submitted at length on the propriety of the service of summons on the applicants at the offices of the first applicant. He relied on the facts stated in the affidavit of service of Naika Edward Gabula. The affidavit of service is to the effect that the process server proceeded to the first defendant's offices at Nsambya near the Catholic Church with a signpost reading the names of the first applicant. When he reached in the premises of the applicant he met a lady to whom he explained the purpose of his visit. The lady informed him that the second defendant/the second applicant was out. He obtained the telephone number of the second applicant and called him whereupon he was advised by the second applicant to deposit the summons and plaint at the premises of the first applicant/defendant and collect signed copies later. Thereafter the process server made several attempts to get signed copies from the defendant's/applicants in vain.

Counsel contended that this did not amount to effective service on the second applicant or the first applicant. He submitted that the second applicant did not authorise anybody to receive any summons on his behalf and he has denied having a telephone conversation with the process server. Secondly service has to be made on the defendant personally which was not done. Counsel relied on several authorities namely the judgement of honourable justice Geoffrey Kiryabwire in Emiru Angose vs. JAS Projects Ltd miscellaneous application number 429 of 2005; which holds that service is to be effected on the defendant in person or an agent empowered to accept service. In that case service on the receptionist was not service on a recognised agent. Counsel also referred to the case of Electoral Commission versus Mbabaali Jude miscellaneous application number 53 of 2006 where personal service was defined as being to the person of the defendant. It was also held that failure to serve the process on the defendant went to the root of proper procedure in litigation. Counsel referred to other authorities namely Lukyamuzi James versus Akright Projects Ltd and another High Court civil suit number 319 of 2002 for the holding that a director is separate from a company has held in the case of Salmon versus Salmon [1897] AC 22; Kangaho Edward versus Hiraa Traders Ltd; John Lubega Matovu vs. Mikwano Investment Limited miscellaneous application number 156 of 2012 arising from High Court civil suit number 172 of 2011.

Learned counsel thereafter argued that there was substituted service because the registrar was not satisfied with the alleged or purported personal service on the defendants at the premises of the first applicant. As far as the substituted service is concerned he contended that whereas the summons was advertised, it was not accompanied by a plaint and attachments thereto. He relied on the decision of this court in Valery Alia vs. Alionzi John High Court civil suit number 156 of 2010; in that case the court held that there was no copy of the plaint attached as ordered in the summons and therefore there was no proper service in terms of order 5 rule 2 of the Civil Procedure Rules. Secondly the second applicant avers in the affidavit that he was seeing the advertisement for the first time after he was notified of the order against him. He prayed that the court sets aside the default judgement entered against the defendants.

In reply learned counsel for the respondents contended that there was proper service on the applicants in the first instance by deposit of the summons at the office of the first applicant. Deposit of summons on the premises of the defendant is provided for under 29 rules 2 of the Civil Procedure Rules order 5 rules 1. Secondly service was effected through substituted service after an order of the court. This summons was advertised in the New Vision newspaper of July 11, 2012. In a letter written by the respondents counsel dated 26th of April 2012 applying for judgement in default of appearance, the registrar notes in her own handwriting and advice to counsel to apply for substituted service. Subsequently the respondent applied for substituted service as advertised in the newspapers and judgement in default of filing a defence was entered by the registrar on 9 August 2012.

Ruling

The first issue is whether there was proper service on the applicants. The question of whether there was proper service on the applicant has become subjective. It can be shown that ordinarily leaving the summons with a copy of the plaint attached at the registered office of the Corporation such as the first applicant in terms of order 29 rules 2 of the Civil Procedure Rules would be proper service. However, that would concern the first applicant. Secondly the registrar was apparently not satisfied with the service because when the respondent applied for default judgement, the registrar advised them to apply for substituted service on the defendants. The powers of the registrar are defined by the rules. Order 9 rule 5 of the Civil Procedure Rules provides that where a defendant fails to file a defence on or before the date fixed in the summons and the plaintiff is desirous of proceeding upon default of filing the defence under any of the rules of order 9, he or she shall cause an affidavit of service of the summons and failure of the defendant to file a defence within the prescribed time to be filed upon the court record. This is what the respondent did but the registrar was not satisfied with the service of summons. She advised them to serve through substituted service in the newspapers. Secondly she acted on the substituted service and not on the personal service on the defendants when she entered judgment in default of appearance under order 9 rule 6. The respondents had abandoned their claim for general damages.

Thirdly as far as the second applicant is concerned, I agree with the applicants counsel that there was no personal service on the second applicant as prescribed by order 5 rule 10 of the Civil Procedure Rules. The rule provides that service shall be effected personally on the defendant or on an agent duly empowered to accept service. Rule 10 reads as follows:

"10. Service to be on defendant in person or on his or her agent

Wherever it is practicable, service shall be made on the defendant in person, unless he or she has an agent empowered to accept service, in which case service on the agent shall be sufficient."

Where it is not practicable to effect service on the defendant personally, it may be made on an agent empowered to accept service. The words “empowered to accept service” is read in the context of recognised agents as prescribed by order 3 of the Civil Procedure Rules. An empowered agent is an agent recognised under order 3 of the Civil Procedure Rules. Suffice it to say that the receptionist was not proved to be an empowered agent of the second applicant/defendant by the affidavit of service of the process server. It was not proved that the 2^nd Applicant empowered the receptionist at the offices of the first Applicant to accept service on his behalf. Acceptance of service in the context of order 3 rule 1 is an "act" which is required in any court to be done by a party. This is because service has to be made on the defendant personally and therefore acknowledgement of service is an act to be done by a party i.e. the defendant. Consequently the definition of recognised agents by order 3 rule 2 of the Civil Procedure Rules is applicable. In that rule agents are defined as persons holding powers of attorney authorising them to make appearances and applications and do such acts on behalf of the parties. Secondly it means persons carrying on trade or business for and in the names of the parties not resident within the local limits of the jurisdiction of the court. Finally order 3 rule 5 of the Civil Procedure Rules provides that besides the recognised agents described in rule 2 of the order, any person residing within the jurisdiction of the court may be appointed an agent to accept service of process. Order 3 rule 5 (2) specifically provides that the agents so appointed shall be either special or general and the appointment shall be by an instrument in writing signed by the principal and a certified copy of which shall be filed in court. The receptionist described by the process server does not fit the description of an agent authorised or empowered to accept service by the second respondent.

Consequently there was no personal service on the second applicant/defendant as prescribed by the rules. In practical terms therefore the registrar was right to advise service of summons by substituted service as far as the second applicant is concerned.

As far as the substituted service is concerned, my decision in Valery Alia versus Alionzi John High Court civil suit number 156 of 2010 refers. In that case I held that summonses issued under order 5 rule 1 of the Civil Procedure Rules were an order of the court. Order 5 rule 1 (1) (a) of the Civil Procedure Rules provides that:

"When a suit has been duly instituted a summons may be issued to the defendant –

1. ordering him or her to file a defence within the time to be specified in the summons; or
2. ordering him or her to appear and answer the claim on the day to be specified in the summons."

The rules are explicit that the summons shall contain an order for the defendant to file a defence within the time to be specified in the summons. Secondly Order 5 rule 2 provides that every summons shall be accompanied by a copy of the plaint, a brief summary of the evidence to be adduced, a list of witnesses, a list of documents and a list of authorities to be relied on. Rule 2 make it imperative that the summons shall indicate the time within which the defendant shall file a defence and secondly what must accompany the summons. In the case of Valery (supra) the summons were advertised just as in this case but were not accompanied by the items specified by rule 2 of the Order. Consequently in that case I found that there was no proper service because there was no plaint and attachments thereto accompanying the summons advertised in the newspapers. More so the summons advertised advises the defendants that there is "copy of the plaint attached hereto". However no copy of the plaint is attached to the summons advertised in the newspaper.

Apparently attaching a copy of the plaint may be expensive to litigants. However it would be a compromise of the law not to attach the plaint to the summons as provided by the mandatory provisions of order 5 rule 2 of the Civil Procedure Rules. Perhaps, and this is not indicated in the forms which are prescribed, the summons should indicate that the defendants will obtain copy of the plaint at the registry of the court. This seems to be the practice. However learned counsel for the applicant has raised the issue that there was non-compliance with the law and that has to be decided. There was non-compliance with order 5 rule 2 of the Civil Procedure Rules by failure to attach the plaint and the accompaniments prescribed by the rule. I can therefore say without any fear of contradiction that as far as the rules are concerned my ruling in the case of Valery (supra) is consistent with the rules and there are no grounds for me to depart from that decision.

In the premises and because the summons advertised in the newspapers were not accompanied by the items prescribed by order 5 rule 2 of the Civil Procedure Rules, service of summons by substituted service was not effective service for non-compliance with the rules. In the premises, as far as the second applicant is concerned, there was no proper service of summons on the second applicant. As far as the first applicant is concerned, the registrar did not rely on the deposit of the summons in the registered office of the first applicant. The registrar relied on the substituted service to enter judgement in default. The submission of the respondents counsel is that the first service of summons on the first applicant was good service. However it was apparently not service to the satisfaction of the registrar of the commercial court division. Secondly this submission would amount to a challenge to the decision of the registrar no to proceed by the first service made by the deposit of the summons in the premises of the first applicant. Needless to say the second applicant denied having a telephone conversation with the process server who alleges that he advised him to leave the summons at the principal place of business of the first applicant. The honourable registrar never had an opportunity to evaluate the contention of the second applicant that there was no such communications as stipulated in the affidavit of service of the summons at the principal place of business of the first applicant. To say the very least this was an exercise of discretion that cannot be salvaged at this stage, in any case it was not relied upon. Secondly, the respondent applied for substituted service and therefore agreed with the advice of the registrar to effect substituted service on the first and second applicants. The application was made in miscellaneous application number 350 of 2012. It is the submission of the respondents’ counsel that an order was obtained to effect substituted service on the applicants/defendants. The filing of the application by the respondent and obtaining an order thereof operates as estoppels to assert that the first service on the first respondent by deposit of the summons accompanied by the plaint at the principal place of business of the first applicant is good service. The court relied on the second service namely the substituted service to enter default judgement. The respondent cannot therefore seek to rely on an earlier service which it did not when it applied for substituted service on both the respondents.

The applicant applied under order 9 rules 12 of the Civil Procedure Rules. Rule 12 gives the court wide discretion to set aside a judgement in default of filing a defence. I have carefully reviewed the authorities and agree with the principles enunciated in Emiru Angose vs. JAS Projects miscellaneous application number 429 of 2005 arising from civil suit number 280 of 2005. Honourable justice Geoffrey Kiryabwire referred to the case of Mbogo vs. Shah [1968] EA page 93 at page 94 where Sir Clement De Lestang  V – P of the East Africa Court of Appeal held that:

 “Order 9, r. 10 gives the High Court an unfettered discretion to set aside or vary an ex parte judgment (Evans v. Bartlam, [1937] 2 All E.R. 646) and it was in the exercise of his discretion that the learned judge refused the application.”

Secondly such a judgement is not on the merits and is based on the failure to follow a procedural requirement of the law. In the case of Evans v. Bartlam [1937] 2 All E.R. 646 at page 650 Lord Atkin held that whenever a judgment is not on the merits, the court has power to set aside the exercise of its coercive powers by making an order in default upon failure to follow any rules of procedure. He said:

“I agree that both RSC Ord 13, r 10, and RSC Ord 27, r 15, give a discretionary power to the judge in chambers to set aside a default judgment. The discretion is in terms unconditional. The courts, however, have laid down for themselves rules to guide them in the normal exercise of their discretion. One is that, where the judgment was obtained regularly, there must be an affidavit of merits, meaning that the applicant must produce to the court evidence that he has a prima facie defence. It was suggested in argument that there is another rule, that the applicant must satisfy the court that there is a reasonable explanation why judgment was allowed to go by default, such as mistake, accident, fraud or the like. I do not think that any such rule exists, though obviously the reason, if any, for allowing judgment and thereafter applying to set it aside is one of the matters to which the court will have regard in exercising its discretion. If there were a rigid rule that no one could have a default judgment set aside who knew at the time and intended that there should be a judgment signed, the two rules would be deprived of most of their efficacy. The principle obviously is that, unless and until the court has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the expression of its coercive power where that has been obtained only by a failure to follow any of the rules of procedure.” (Emphasis added)

Having found that there was no proper service on the second defendant, there is no need for me to consider the rest of the grounds as service is a fundamental requirement before any order may be made against a defendant.

I have duly considered the respondent's assertions both in the affidavits in opposition and submissions that the applicants admitted the amount decreed. I will give the applicants the benefit of doubt because the respondents can always apply for judgement on admission if the default judgement is set aside and the defendants allowed to defend the suit.

In the premises, the applicant’s application succeeds. Though service could have been upheld against the first applicant, the court has discretion to set aside or vary an ex parte judgment under order 9 rules 12. In any case the defence of the second applicant is inextricably tied up with the defence of the first applicant. If the second applicant is to defend himself on the merits, then it is imperative that the first applicant also on whose behalf he purported to act, should be heard on the merits. The ex parte judgement would be set aside and the applicant is allowed to file a defence within 14 days from the date of this ruling. The amounts deposited by the second applicant as security for interim release from prison shall be retained as security for the due performance of any decree which may be passed against the second applicant/defendant.  The effect of the order setting aside the default decree and judgment is that the execution and committal of the second applicant in civil prison lapses and for emphasis is set aside.

Costs of the application shall abide the outcome of the main suit.

Ruling delivered in open court this 23rd day of November 2012

Christopher Madrama

Judge

Ruling delivered in the presence of:

Hebert Kiggundu Mugerwa holding brief for Carol Kintu for the respondents

Pragnesh Manager of second respondent in court

Mr. Mr. Joseph Kyaze for the Applicants

Second Applicant and director of first applicant in court

Charles Okuni: Court Clerk

Christopher Madrama

Judge

23rd of November 2012