THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 523 OF 2011)

(ARISING FROM HIGH COURT CIVIL SUIT NO. 139 OF 2011)

KAMPALA RUGBY UNION FOOTBALL CLUB LTD}.....APPLICANT/DEFENDANT

VERSUS

CAPITAL VENTURES INTERNATIONAL LIMITED}......RESPONDENT/PLAINTIFF

Before Honourable Mr Justice Christopher Madrama

Ruling

The Applicants application is brought under order 6 rule 30 (1) and order 52 rules 1 and 3 of the Civil Procedure Rules for orders that:

1. The plaint in High Court civil suit number 139/2011 Capital Ventures International Ltd versus Kampala Rugby Union Football Club Limited be struck out.
2. High Court civil suit number 139/2011 Capital Ventures International Ltd versus Kampala Rugby Union Football Club Limited be dismissed.
3. Costs of this application be provided for.

The grounds of the application contained in notice of motion are that: that the plaint discloses no reasonable cause of action; that the suit is frivolous and vexatious; that the plaint not maintainable in law and in fact by reason of the defence of the applicant/defendant; that the order sought are necessary for obtaining the ends of justice and to prevent an abuse of the process of court and it is in the interest of justice, equity and fairness that the application is granted.

The affidavit of Ahamya Sam confirms the grounds of the application and spells out some of the contents of the plaint. As far as the plaint is concerned, it speaks for itself. Ahamya Sam deposes to the contents of the agreement between the parties as spelt out in the plaint.

APPLICANTS SUBMISIONS:

The Applicant’s case is that on the 10^th of December 2010 it executed an agreement for the sale of its land comprised in LRV 560 folio 7 at Naguru Road and Plot 1 Sports Lane Naguru for a consideration of United States dollars 1,600,000 with the Respondent. The respondent/plaintiff failed to meet its repayment obligations and on 3 January 2011 the applicant/defendant unequivocally rescinded and terminated the contract of sale and sold, transferred and handed over the suit land to a third party.

The respondent/plaintiff on the 6^th of January 2011 three days after receipt of the termination notice purported to pay Uganda shillings 214,000,000/= to Kampala City Council despite express notice of the termination. On 14^th of May 2011 more than four months later, the respondent filed the instant suit. It claimed specific performance of the obligations in an alleged contract, a permanent injunction and in the alternative a claim that the applicant/defendant refunds Uganda shillings 214 million that the respondent/plaintiff paid to KCC, general damages and costs. The applicant/defendant filed a written statement of defence in which it denied the claim and contended that the plaint did not disclose a cause of action against it and informed the respondent/plaintiff that it would raise a preliminary objection to the suit hence the present application.

Preliminarily the applicant first attacked the respondent/plaintiff's affidavit in reply disposed to by John Tumwebaze sworn on 19 December 2011 as being incurably defective because it is based on hearsay in paragraphs 5, 6, 7, 8, 9, 10, 11, and 12 and swears to contentious matters. Counsel further contends that the deponent does not attach any documents to show his source of information or the basis of his belief if any. In paragraphs 9 and 10, he makes reference to annexure "F" and "H” goes ahead to swear as to how they were authored yet he was never present at neither their authorship nor a party to them. He swears to technical matters which would only be in the knowledge of the parties or witnesses to the agreement. The affidavit offends order 19 rule 3 (1) of the Civil Procedure Rules and Counsel prayed that on this point the affidavit be struck out with costs.

Secondly learned counsel for the applicants attack on the affidavit is that it contains a falsehood in paragraph 14 where the deponent avers that what he stated is true and correct to the best of his knowledge. Counsel’s contention is that the matters were never and could never have been in the deponent’s knowledge. Counsel relied on the case of Banco Arabe Espanol vs. Bank of Uganda SCCA No. 8 of 1998 [1999] UGSC 1 (5) October 1999) for the holding that a false affidavit is not severable and ought not to be admitted in evidence and should be struck out.

Responding to paragraph 4 of the affidavit of Tumwebaze John which alleges that the affidavit of Sam Ahamya sworn on 13 September 2011 in support of the application is defective because it does not state whether it is based on his information or belief or both and that it should therefore be struck out. Counsel submitted that Ahamya Sam never stated that any of his averments were based on information or belief. He is an advocate of the applicant involved in the preparation and conduct of its defence and personally has first-hand knowledge of all the contents of the said affidavit as per part paragraph 1 of his affidavit.

Sam Ahamya in paragraph 1 of his affidavit dated 25^th of October 2011 is described as the secretary of the applicant/defendant and in that capacity is an official of the applicant/defendant and was personally involved in the transaction. Indeed his signature is on page 5 of the agreement attached to paragraph 6 of his affidavit of 13 September 2011 that is the written statement of defence and in particular paragraph 3 (c) thereof and annexure "A" referred to therein. The whole affidavit of Sam Ahamya was based solely on his knowledge, unlike that of John Tumwebaze. A similar objection was raised and answered in the negative in the Supreme Court case of Bank of Uganda versus Banco Arabe Espanol [2002] 2 EA 293 Court of Appeal at Kampala at page 300.

"Turning to the third ground of objection, we find no merit in this ground because the affidavit of William Kasozi was sworn solely on his own knowledge. Therefore the issue of distinguishing between matters sworn on information and those sworn on deponent’s knowledge does not arise. In the result we saw no merit in the objection and hence overruled it."

The second respondent states that the affidavit of Sam deposed matters of law which are in contention and substantive for the main suit. This deposition is misguided. In such an application for striking out a plaint for not disclosing a cause of action all that the court has to look at in determining it is the plaint and annexure attached to it. The court does not have to go into the contentious evidence in the contents in the main suit. Counsel referred to the case of auto garage and another versus Motokov [1971] EA 514 at page 520 in the judgment of Spry JA.

"… I do not with respect, think any question of onus arises; the matter is one to be decided by perusal of the plaint and any annexure to it not on a basis of evidence…"

Counsel prayed that the court be pleased to strike out the respondent/plaintiffs affidavit with costs and dismisses the respondent/plaintiff's objections to the applicants affidavit with costs and deals with the instant application on its merits.

Issues:

1. Whether the respondent/plaintiff's plaint in High Court civil suit No.  139 of 2011 discloses a cause of action against the applicant/defendant?
2. Whether the respondent/plaintiff's plaint in High Court civil suit No. 139 of 2011 ought to be struck out and/or dismissed?
3. Whether the respondent/plaintiff ought to pay the applicant/defendant's costs of High Court civil suit number 139 of 2011 and all applications arising there from?

Whether the respondent/plaintiff's plaint in High Court civil suit number 139 of 2011 discloses a cause of action against the applicant/defendant?

Learned counsel for the applicants counsel cited Auto Garage versus Motokov (1971) EA 514 which sets out the necessary ingredients of a cause of action as averments that the plaintiff enjoyed a right, that right was violated, and that the defendant is liable for the violation. It is submitted for the applicant that the plaintiff has not passed the tests laid out in the above Auto Garage vs. Motokov. Firstly the applicant contended that the relevant agreement was terminated by a letter dated 3 January 2011. Secondly there was total failure of consideration in that the sum of 286 million Uganda shillings supposed to be paid to the defendants account in Stanbic Bank Uganda limited was not paid. The applicant terminated the contract before the plaintiff paid ground rent on 6 January 2011. By the time the contract was terminated the plaintiff had not paid any ground rent. The applicant further contended that there was none payment of Stamp Duty as provided for under section 40 of the Stamps Act chapter 342 which provides that an agreement/document which is registrable would be inadmissible in a court of law before payment of stamp duty. Consequently counsel contends that there is no agreement before court and none exists. Counsel relied on the cases of Dieter Pabst vs. Abdu Ssozi and Another HCCS 294 of 2001; Kananura Melvin Consulting Engineers vs. Connie Kabanda CA 31 of 1992, (Supreme Court) for the proposition that a document that is subject to stamp duty cannot be admitted in court without payment of stamp duty. Counsel further referred to page 11 of Proline Soccer Academy vs. Lawrence Mulindwa and 74 Ors HCT – 00 – CV – MA – 0459 – 2009.

Counsel for the applicant further submitted that the suit was filed in bad faith. Reference is made to paragraphs 12 and 18 of the affidavit of Ahamya Sam and John Musoke which are to the effect that the respondent abandoned its application for a temporary injunction on realising that the applicant/defendant had sold and transferred the suit land to a third party. Consequently the cause of action for specific performance cannot stand. Secondly the claim for refund of Uganda shillings 214 million which is money paid outside the life of the contract is untenable because the affidavit of Ahamya Sam avers that the respondent was in the final stages of getting a refund of the sum of Uganda shillings 214 million from Kampala Capital City Authority. It is the applicant’s case that despite findings that the respondent continued pursuing a refund from Kampala City Council Authority, the only reason it is not yet paid is the preservation order issued by this court. Consequently and by reason of the above factors the suit is frivolous and vexatious. It's a remedy for refund lay with Kampala Capital City Authority. On being paid, it would render the suit nugatory in that no specific performance can be granted and no refund was possible as Kampala Capital City Authority would have paid the third party. Counsel concluded that the plaintiff has no cause of action and that the suit is frivolous and vexatious.

On the question of whether the plaint should be struck out counsel referred to the case of Auto Garage versus Motokov (supra) and submitted that the plaint is invalid should be struck out. Counsel made the same prayer in respect of issue number 3.

On the question of costs, learned counsel for the applicant submitted that costs should follow the event that the applicant be awarded costs with an additional prayer for a certificate of three counsels.

Issue No. 4.

Whether the respondent/plaintiff or to pay the applicant/defendant's costs of High Court civil suit number 139 of 2011 and all applications arising there from.

Costs follow the event. The applicant/defendant ought to be put back to the position it was before the suit was filed by a refund or compensation for his legal expenses for defending the action and for filing the application.

The applicant/defendant was forced to file several applications to allow this court to see the true nature of the respondent/plaintiff's approbation and reprobation. Counsel submitted that the applicant/defendant has been put to unnecessary inconvenience and that the respondent/plaintiff to pay the costs of High Court civil suit number 139 of 2011 and all applications arising there from.

During the pendency of the suit, and given the complex and difficult nature of this case that required extensive research and consultation and vigilant litigation, tedious nature of this suit, the applicant/defendant was forced to hire three firms of advocates to handle this matter. Counsel prayed that the court be pleased to award costs to the applicant/defendant for this application and defending the main suit with a certificate for three counsels.

In reply the plaintiff/Respondents case is that after execution of the contract to purchase the suit property, the respondent proceeded to pay Uganda shillings 214,200,000 to Kampala City Council for a lease offer on 7 January 2011, pursuant to the terms in the sale agreement. On 26th of January 2011, the applicants wrote to the respondent claiming the offer was only valid for 10 days after signing of the agreement and therefore the agreement was rescinded and the sale nullified. The applicant then proceeded to sell and transfer the property to a third party.

As far as preliminary matters are concerned learned counsel for the plaintiff/respondent submitted that the application seeks orders to strike out the respondent’s plaint on the ground that it does not disclose a cause of action. This application should be dismissed owing to the fact that the affidavit in support of the application sworn by one Sam Ahamya is defective and should be struck out. The reason for its defectiveness is borne out of the fact that the deponent does not state from whence he obtained the information he swears to, that is, whether it is from his knowledge and/or belief.

Under order 19 rule 3 (1), all affidavits shall be confined to such facts as the deponent is able of his or her knowledge to prove, except on interlocutory applications on which statements of his/her belief may be admitted provided the grounds are stated. Counsel cited Bombay Flour Mill vs. Patel (1962) EA 803, in which Sir Ralph Windham CJ held that due to the fact that the affidavit did not state anywhere whether the facts disposed to, or any of them are true to the deponent’s knowledge, or are true to the best of his information and belief. He upheld the decision of the learned trial magistrate that the affidavit was incompetent and the application cannot be granted on the strength of it.

The affidavit in support of the application does not state in any paragraph the means through which the deponent came to know the facts alleged or whether they are within his knowledge. The misguided statement made in paragraph 3 of the applicants submissions directing this court to an affidavit sworn on 25 October 2011 purporting to give legitimacy to the affidavit of Sam Ahamya by stating that he is the secretary of the applicant and therefore court should merely assume that he was aware of the facts deposed to is totally misplaced, and lacks merit. The simple truth is that the deponent swore this affidavit in his capacity as an advocate of the applicant, a fact he clearly states in paragraph 1 of the affidavit in support, and nowhere does he state the source of his information as mandated by order 19 rule 3 (1) of the Civil Procedure Rules.

Issues

Counsel contended that the only issue for determination is whether or not the plaint discloses a cause of action. The application asserting that the plaint discloses no cause of action is misconceived and has no merit. The cause of action is a claim for special and general damages arising out of breach of contract for sale of land. Counsel relied on Auto Garage versus Motokov [1971] EA 514, for the ingredients of a cause of action

Counsel submitted that in this case the plaintiff’s cause of action in this matter is that it contracted with the defendant for the sale of the suit property. In the furtherance of this venture, the plaintiff proceeded to deposit sums totalling Uganda shillings 214,200,000 with Kampala City Council for the lease offer on 7 January 2011. The defendant in total disregard of its obligations under the sale agreement and through nefarious dealings proceeded to sell the land to a third party as a result of which the plaintiff suffered loss in the form of interest payments it became obligated to pay as it borrowed sums from financial institutions to cover the costs of the sale. The defendants counsel tries to argue that it there is no cause of action because of the fact that the sale agreement was rescinded by a letter written to the plaintiff.

This is clearly a misconception of the plaintiff’s case. The plaintiff’s case is that while it is correct that this letter was written, it was written before the lapsing of the contract period of 10 days provided for in the sale agreement which gives the 10 January 2011 as the expiry date. By the expiry date, the plaintiff had already deposited money with Kampala City Council. Secondly the court can only arrive at a decision as to whether that is a correct assertion of the facts in this case or not after hearing the evidence of both parties but not on the submissions of counsel. In any event, it would be entirely premature for court to make any judgment on whether or not this contract for sale was rescinded or not.

On failure of consideration the plaintiff’s counsel pointed out that his learned friend misses the point in that the sale agreement paragraph 2 (a) clearly states that it was one of the obligations of the plaintiff to pay ground rent of Uganda shillings 214,000,000/= to Kampala City Council which was done and is in itself sufficient to support a cause of action in breach of contract because the contract was already part performed by the plaintiff. Similarly whether there is any veracity in the plaintiffs claim, this claim can only be ascertained after leading evidence to prove this fact. Counsel submitted that the applicant's contention that the suit is frivolous and vexatious is laughable. The case of Maximo Oleg Petrovich versus Petra Chanda and another High Court civil suit number 802/97 is authoritative on what amounts to a frivolous and vexatious suits as well as the determination of causes of action. The learned judge while quoting Lush J in Norman versus Mathews (1916) 87 L.J.K.B 857 at 859 states:

"In order to bring a cause of action within the description of frivolous and vexatious, it is not sufficient merely to say that the plaintiff has no cause of action. It must appear that his alleged cause of action is one which on the face of it, is clearly one which no reasonable person could properly treat as bona fide and contend that he had a grievance which he was entitled to bring before court."

He goes on to define how a cause of action should be determined:

"In considering that the plaint discloses a cause of action only the plaint must be looked at so that it is apparent on its face that the plaintiff appears as a person aggrieved by the violation of his rights and that is the defendant who is liable".

In specific reply to his friends assertion that the sale agreement which is annexed to the plaint has no stamp duty paid there for and is inadmissible, counsel directed the court's attention to the first paragraph on page 11 of the very authority quoted in the applicants submissions. That is Pro-line Soccer at the Academy versus Lawrence Mulindwa and four others High Court civil suit miscellaneous application number 0459 – 2009, in which it is clearly stated that an unstamped document can be rendered admissible in evidence on payment of the duty which the instrument is chargeable in addition to any penalty that may be prescribed.

This ruling is in line with section 40 of the stamps Act chapter 342 which places a duty on the person charged with receiving evidence to only impound the stated document and ensure that the requisite stamp duty is paid. In any event, such an assertion cannot be properly adjudicated upon at a preliminary stage such as this but should be decided upon the parties adducing evidence. In all the objections raised by the applicant are misconceived, lack merit and should be dismissed with costs. As far as costs are concerned counsel contended that the costs of the application should be in the main cause.

In rejoinder learned that counsel for the applicant retorted that it is false that the agreement was executed on 31 December 2010 and the payment was to be done by 10 January 2011. Counsel referred to the stamp on page 5 of the agreement where the applicant indicated the date to be 10 December 2010. The applicants counsel further submitted that the respondent falsely states that it was informed of the recession of the agreement on 26 January 2011 which day was a public holiday. He referred to the letter of recession dated 3rd of January 2011 and receipt of the same day by the respondent.

Secondly counsel submitted that the submissions that the affidavit of Jet Tumwebaze be struck out was not challenged and should be allowed. Thirdly learned counsel for the applicant submitted that the applicant’s application is supported by three affidavits which should not be fragmented but should be read as a whole.

Thirdly counsel submitted that the respondent has abandoned the claim for specific performance of the contract and refund of Uganda shillings 214 million with the result that it amounted to an admission that it has no cause of action i.e. for prayers (a) and (b). He contended that there is a limping claim for general damages for the processing of loans by the respondent in order to buy the suit property. He contended that the aspect of the loan was unsubstantiated. There was no breach of contract disclosed by the plaint.

On the question of breach of contract counsel contended that the agreement was executed on 10 December 2010 and the 10 days expired on 20 December 2010. Thereafter the agreement was terminated on 3 January 2011. He contended that the suit of the respondent was a desperate attempt to resurrect a dead contract.

Counsel contended that the respondent can only recover damages if reasonably foreseeable as a result of breach. The applicant was not informed of any corresponding bank credit arrangement and this is not in the contract. Counsel concluded that damages can only be recovered if reasonably foreseeable. The respondent presented itself as a financially capable person.

As far as section 40 of the Stamps Act is concerned counsel submitted that the section does not provide for the court holding onto the document until after payment of duty. He contended that the court cannot act on this document (The agreement between the parties).

As far as the question of bad faith of the respondent is concerned, counsel for the applicant submitted that the respondent has not replied on this question and the court should take note of this fact. He reiterated his prayers that the suit be dismissed.

Ruling:

I have taken into account the lengthy written submissions of both counsels.  In its written submissions the applicant addressed the court on preliminary matters and attacked the affidavit of counsel Jet Tumwebaze. On the other hand, the respondent attacked the affidavit of Sam Ahamya as being fatally defective and cannot support the application. Counsel for the respondent principally relied on the case of Bombay Flour Mill vs. Chunibhai M. Patel [1962] EA 803. In that case the trial magistrate dismissed an application for unconditional leave to appear and defend the suit on the ground that the affidavit did not state the deponent’s means of knowledge or his sources of information and belief. On appeal to the High Court Sir Ralph Windham CJ after reviewing the authorities on the question of an affidavit which does not disclose its sources of information or means of knowledge agreed with the magistrate and dismissed the appeal. The ground of the dismissal was that the affidavit in support of the application for unconditional leave to defend did not state the means of the deponent’s knowledge or the sources of his information and belief. On the other hand counsel for the applicant relied on the case of Bank of Uganda versus Banco Arabe Espanol (2000) 2 EA page 297. The Supreme Court of Uganda overruled an objection to an affidavit on the ground that it did not distinguish between matters sworn on information and those sworn on the deponent knowledge. The court overruled the objection on the ground that it was sworn on the deponent’s knowledge and therefore the question of distinguishing between matters sworn on information and those sworn on the deponent’s knowledge did not arise. Counsel for the respondent on the other hand submitted that the affidavit does not indicate that it is sworn on the deponent’s knowledge. In defence of this submission, the applicants counsel rejoined that the deponent was an advocate for the applicant and is deemed to have sworn the affidavit on this basis of his knowledge.

Turning to the question of the affidavit of Ahamya Sam, the principal attack on this affidavit is that it deposes to matters of law which are in contention and substantive for the main suit. Secondly that it is defective as the deponent does not state whether it is based on his information or belief or both and therefore the affidavit should be rejected. Starting with the second point as to whether it is fatal not to indicate whether the affidavit is based on information or belief, it is necessary to go through the paragraphs of the affidavit in support. Firstly, paragraphs 2, 3, 4, and 5 of the affidavit in support of the application makes averments of fact from the plaint. All the said paragraphs refer to the plaint. Secondly paragraphs 6, 7, 8, 9, 10, 11 and 12 refer to the written statement of defence and an application for a temporary injunction in paragraph 12 thereof. In other words the above paragraphs in substance indicate their sources of information in each paragraph. As far as the objection relating to indicating the source of information or the grounds of belief are concerned the objection goes to form and not substance and cannot be sustained. The second objection relates to averments in contentious matters in paragraphs 13, 15, 18, 19 and 25 – 28 of the affidavit of Sam Ahamya. These are matters that should have been left for arguments. Order 19 rule 3 (1) permit statements of belief provided the grounds of belief are stated. As a professional, Sam Ahamya could have given the grounds of his belief. I agree with the respondents counsel that averments in contentious matters are improper unless they come by way of belief and the grounds of belief which are stated.

Does this make the application fatal? Having reviewed the authorities and the principle of severance, I am of the opinion that the ends of justice would be served better if court ignores averments in the contentious matters stated in the above paragraphs but does not strike out the affidavit on that ground. The objection of the respondent with regard to the affidavit of Sam Ahamya in support of the application is therefore overruled with no order as to costs.

As far as the objection relating to the affidavit of Jet Tumwebaze is concerned the respondent has not opposed the objection in its submissions in reply. I would therefore not make any reference to this affidavit in my ruling.

The applicant’s application is brought under order 6 rule 30 (1) and order 52 rules 1 and 3 of the Civil Procedure Rules and is for an order that the plaint be struck out or in the alternative for the plaint to be dismissed and for costs of the application to be provided. The grounds of the application are that:

1. That the plaint discloses no reasonable cause of action.
2. That the suit is frivolous and vexatious
3. That the plaint is not maintainable in law and in fact by reason of the defence of the applicant/defendant.
4. That the orders sought are necessary for obtaining the ends of justice and to prevent the abuse of the process of this court.
5. That is in the interest of justice, equity and fairness that this application is granted.

As far as the pleadings are concerned, the plaintiffs cause of action against the defendant is in breach of contract for sale of land and is seeking orders for; specific performance; a permanent injunction restraining the defendant from further dealing with his client; general damages and costs of the suit. Alternatively and without prejudice the plaintiff seeks refund of Uganda shillings 214,200,000 plaintiffs money paid as a deposit for the purchase price, interest thereon at commercial rate; general damages and costs of the suit. It is alleged in the plaint that the defendant executed an agreement on 31 December 2010 for the purchase of the defendant's land comprised in leasehold register volume 560 folio 7 plot 11 Naguru Road at plot one sports the measuring 0.64 acres and 1.2 ha or 3.01 acres respectively. It is alleged that the consideration payable for the loan was United States dollars 1,600,000 which was to be paid for in instalments at different periods and a first instalment of United States dollars 217,000 was to be paid within 10 days from the signing of the agreement in the following manner. Uganda shillings 214 million was to be paid to Kampala District Land Board for the lease offer. A sum of Uganda shillings 286 million was to be paid into the account held by the club at Stanbic Bank Ltd. It is alleged that the agreement further provided that in clause 2 (ii) that the defendant upon receipt of the first instalment shall sign as a sign of good faith hand over the title to the clubhouse for security and safe custody to Sebalu & Lule Advocates or any other authorised attorney of the plaintiff. The plaintiff alleges that unknown to itself the defendant passed a resolution which was registered on 4 January purporting to sell the same suit land to another purchaser and for the same price.

The plaintiff alleges that on the 4 January 2011 it got a letter dated 3 January 2011 from the defendant purporting to rescind the contract claiming that the plaintiff did not honour the terms of the agreement and due to "urgency of time". It went ahead and paid Uganda shillings 214,200,000 to Kampala City Council for a lease offer on 7 January 2011 pursuant to the contract terms as it had already processed loans for the cause. On the 26^th of January 2011 the defendant wrote to the plaintiffs lawyers claiming that the offer of the plaintiff was only valid for 10 days after signing of the agreement and that all the monies had to be paid by 27 December 2010. The defendant breached the contract in that it terminated the agreement before the lapse of 10 days contrary to the agreement terms. The plaintiff had processed several loans from banks and other credit institutions to raise the sums based on the assurance that it had the contract to purchase the property from the defendant. Consequently the plaintiff contends that the defendant's action to cancel the contract was a total breach of contract and that the lapse of 10 days would have occurred on 10 January 2011 and the defendant is therefore liable for breach of contract.

In its written statement of defence the applicant states in paragraph 3 (a) that the contract of purchase was executed on 10 December 2010. Furthermore, the defence avers that the agreement inter alia was for the plaintiff to pay the first instalment within a period of 10 days from 10 December 2010 according to the terms stipulated in the agreement. Annexure "A" to the plaint is dated 31st of December 2010 on the front page thereof. On the other hand the page where the defendant has signed the agreement page 5 of annexure “A” shows that it was executed on 10 December 2010 according to the stamp of the defendant. The defendant avers that the date of 31^st December 2010 was inter alia fraudulently inserted in the agreement by the plaintiff and particulars of fraud are pleaded.

The question of when the agreement was executed is at the centre of the main controversy between the parties. Was the date of 31^st December fraudulently inserted?

The question of whether the agreement was signed on 10 December 2010 or 31 December 2010 is a question of fact. This is a factual controversy in terms of order 15 rule 1 of the Civil Procedure Rules. Order 15 rule 1 provides as follows.

            "Framing of issues

1. Issues arise when a material proposition of law or fact is affirmed by the one-party and denied by the other.
2. Material propositions as those propositions of law or fact, which the plaintiff must allege that in order to show a right to sue or a defendant must allege in order to constitute a defence.
3. Each material proposition affirmed by one party and denied by the other shall form the subject of a distinct issue.
4. Issues are of two kinds: issues of law and issues of fact.
5. At the hearing of the suit the court shall, after reading the pleadings, if any, and after such examination of the parties or the advocates as may be necessary, ascertain upon what material propositions of law or fact the parties are at variance, and shall thereupon proceed to frame and record the issues on which the right decision of the case appears to depend.
6. Nothing in this rule requires the court to frame and record issues where the defendant at the hearing of the suit makes no defence, or where the issue has been joined upon the pleadings."

Without deciding this application and in terms of order 15 rule 1 of the Civil Procedure Rules the question of when the agreement was signed is an issue in controversy. Secondly there is an allegation that dates in the contract were fraudulently inserted. Yet dates are material. Even though a party may assert that the answer is obvious, it is an issue that the applicant is attempting to try on the basis of affidavit evidence and not only on the basis of the plaint and attachments thereon.

The question then is whether it is proper to try this issue on the basis of affidavit evidence. It would also be a crucial issue upon which the decision of the court would turn on the merits of the suit if it is to be tried. The second issue which I must point out is whether it is proper to look at the defence of the defendant or the affidavits of the applicant to determine such a question of fact as set out above. As noted earlier, this application is made under order 6 rule 30 (1) of the Civil Procedure Rules which provides as follows:

“The court may, upon application, order any pleading to be struck out on the ground that it discloses no reasonable cause of action or answer and, in any such case, or in the case of the suit or defence being shown by the pleadings to be frivolous or vexatious, may order the suit be stayed or dismissed or judgment be entered accordingly, as may be just." (Emphasis added)

The action required of the court is to strike out any pleading on the ground that it does not disclose any reasonable cause of action or that it is frivolous or vexatious. The pleadings may be struck out or the suit stayed or dismissed or judgment entered as the case may be. I would like to again to set out the grounds of the application:

1. That the Plaint Discloses No Reasonable Cause of Action.
2. That the suit is frivolous and vexatious.
3. That the plaint is not maintainable in law and in fact by reason of the defence of the Applicant/Defendant.
4. That the orders sought are necessary for obtaining the ends of justice and to prevent the abuse of the process of this court.
5. It is in the interest of justice, equity and fairness that this application is granted.

Ground C above requires the court to take into account the defence of the applicant/defendant. I have carefully reviewed the authorities on order 6 rule 30 (1) of the Civil Procedure Rules. Firstly and before venturing into judicial precedents order 6 rule 30 (1) CPR can be interpreted on the basis of its own language. The rule gives the court discretionary powers by using the phrase "the court may". Secondly, the court acts upon application of the party to either strike out the plaint or the defence. What must be emphasised is that the court strikes out any pleading. In other words, the court looks at the pleading to establish whether it discloses no reasonable cause of action or answer. This is necessarily a question of pleadings only. The second arm of the rule is where the suit or defence is shown by the "pleadings" to be frivolous or vexatious. Whatever is shown is shown by the pleadings. Again the court only examines the pleadings as clearly enunciated in the rule itself. Before I take leave of this matter, we have already established that the court moves upon application of any party. The question of the competence of the application and the question of affidavits cannot prevent the court from looking at the pleadings of the parties under order 6 rule 30 (1) of the Civil Procedure Rules. To answer the question of pleadings in this application, it will be crucial to define what is meant by "upon application". Do the words "upon application" mean that the application has to be a formal application?

In this particular case, the applicant filed a formal application by notice of motion. I am in serious doubt as to whether an examination of any pleading only may only be made upon a formal application. This is an interesting question given the history of the rule and its interpretation by the courts of the common law countries. Is additional evidence required to examine the pleadings and thus determine the question? As we will note, additional facts may be required in very peculiar circumstances.

As far as order 6 rule 30 (1) of the Civil Procedure Rules is concerned, we must first consider the ground of whether there is a reasonable cause of action or defence disclosed and what materials are necessary to establish that. In this case we are concerned with whether there is a reasonable cause of action as the pleading being attacked is the plaint and not the defence. According to Odgers 'Principles of Pleading and Practice in Civil Actions of the High Court of Justice 22^nd edition page 148, "on an application based on this ground alone, no evidence is admissible." The court only looks at the pleadings, particulars, and not any affidavit.

That authors refer to the case of Winlock versus Maloney [1965] 2 All ER 871The digest of the case is that the defendants applied under RSC, Ord 18, r 19a, and under the inherent jurisdiction of the court, to strike out the writ, statement of claim, and replies and to stay or dismiss the action on the grounds that these pleadings disclosed no reasonable cause of action, and were vexatious and an abuse of process. Ten affidavits were filed on the application, five on each side. The hearing before the Master took more than two full days and the master delivered a twenty-two page judgment and struck out the plaintiff’s pleadings. The plaintiff appealed.

The rule under which the defendants’ application to the court was made is similar to order six rule 30 (1) of the Civil Procedure Rules and is the English RSC, Ord 18, r 19, which provides:

“(1) The court may at any stage of the proceedings order to be struck out or amended any pleading or the endorsement of any writ in the action, or anything in any pleading or in the endorsement, on the ground that (a) it discloses no reasonable cause of action or defence, as the case may be; or (b) it is scandalous, frivolous or vexatious … .or (d) it is otherwise an abuse of the process of the court; and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.”

Danckwerts LJ stated at page 874:

“The practice under the former rule, b RSC, Ord 25, r 4, and under the inherent jurisdiction of the court, was well settled. Under the rule it had to appear on the face of the plaintiff’s pleading that the action could not succeed or was objectionable for some other reason. No evidence could be filed. In the case of the inherent power of the court to prevent abuse of its procedure by frivolous or vexatious proceedings or proceedings which were shown to be an abuse of the procedure of the court, an affidavit could be filed to show why the action was objectionable.

His Lordship agreed with earlier authorities in Lawrance v Lord Norreys [1886–90] All ER Rep at p 863; (1890), 15 App Cases at p 219. That it is an inherent jurisdiction which ought to be very sparingly exercised and only in very exceptional cases. The court concluded that the registrar/master had usurped the powers of the trial court in that the matter required the calling of oral evidence which can be tested by cross-examination. The court clearly made the distinction between an application to strike out a pleading on the ground that it discloses no reasonable cause of action and where the suit may be shown to be frivolous and vexatious or an abuse of the process of court. In the former case, the affidavit evidence is allowed and only the pleadings may be examined. In the latter case (frivolous and vexatious case) affidavit evidence may be allowed. One may argue that the Rules of the Supreme Court of England cited above expressly exclude additional evidence in determination of the question of whether "a reasonable cause of action" is disclosed. Parallel to this assertion however are the judicial precedents which define "reasonable cause of action". The term "reasonable cause of action" was defined by Lord Pearson in the case of Drummond Jackson versus British Medical Association [1970] 1 All England Law Reports page 1094 per Lord Pearson at page 1101

“In my opinion the traditional and hitherto accepted view—that the power should only be used in plain and obvious cases—is correct according to the evident intention of the rule for several reasons. ... No exact paraphrase can be given, but I think ‘reasonable cause of action’ means a cause of action with some chance of success, when (as required by r 19(2)) only the allegations in the pleading are considered. If when those allegations are examined it is found that the alleged cause of action is certain to fail, the statement of claim should be struck out.”

The Ugandan authorities clearly indicate that only the pleadings are to be examined to determine whether there is a cause of action or "reasonable cause of action". This would be consistent with the English authorities that there is no need for evidence and additional evidence is inadmissible. Before I conclude this matter it would be necessary to review the Ugandan authorities.

In Uganda the courts have held that in determining this question, only the plaint can be examined. Both counsels subscribe to this view. In Ismail Serugo vs. Kampala City Council and the Attorney General Constitutional Appeal No.2 of 1998 Wambuzi CJ as he then was held at pages 2 and 3 that in determining whether a plaint discloses a cause of action under Order 7 rule 11 or a reasonable cause of action under order 6 rule 29 (before revision of the rules now order 6 rule 30) only the plaint can be looked at. He stated:

“ ... and in so far as is relevant Order 6 Rule 29 provides as follows;

The court may, upon application, order any pleading to be struck out on the ground that it discloses no reasonable cause of action and, in such case, may order the suit to be stayed or dismissed or judgment to be entered accordingly…

I agree that in either case, that is whether or not there is a cause of action under Order 7 Rule 11 or a reasonable cause of action under Order 6 Rule 29 only the plaint can be looked at...” (Emphasis added)

The Supreme Court further defined what a cause of action is in the case of Major General David Tinyefunza vs. Attorney General of Uganda Const. Appeal No. 1 of 1997 were the court cited with approval the definition of a case of action by Mulla on the Indian Code of Civil Procedure, Volume 1, and 14th Edition at page 206:

A cause of action means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court.  In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant.  ... It is, in other words, a bundle of facts, which it is necessary for the plaintiff to prove in order to succeed in the suit.  But it has no relation whatever to the defence which may be set up by the defendant, nor does it depend upon the character of the relief prayed for by the plaintiff.  It is a media upon which the plaintiff asks the court to arrive at a conclusion in his favour.  The cause of action must be antecedent to the institution of the suit.” (emphasis added)

The Supreme Court emphasised that the facts for disclosure of a cause of action must be alleged in the plaint. They cited the cases of Attorney General vs. Oluoch (1972) EA.392. In that case, the court held that the question is determined upon perusal of the plaint and attachments thereon with an assumption that facts pleaded or implied therein are true. There are two important points to be made in this case. The first point is that the plaint only would be perused and attachments thereto. The second point which is crucial is that the court and the parties assume that whatever is averred in the plaint is true. If this is a cardinal principle for determination of what a reasonable cause of action or a cause of action is, the applicant's application seeks to challenge the averment in the plaint as a falsehood. Wouldn't this be a trial of a matter in controversy on the cardinal issue of fact which is central to the controversy between the parties under order 15 rule 1 of the Civil Procedure Rules? Anticipated judgment on this controversy should be reserved whether the question is obvious or not until evidence has been adduced and a chance given to the parties to cross-examine the witnesses. Court should be concerned with the principles for determination of whether there is a reasonable cause of action or not which is done on perusal of the plaint and on the assumption that it is true. As to whether the resolution of the controversy is obvious is to be a matter for trial on viva voce evidence where parties may be cross examined on their assertions of fact. This is therefore a procedural question. Secondly, it goes on to show that the affidavits which amount to additional evidence are not necessary for me to determine this question. Such a matter can only be determined to the extent whether the formal application is defective. This would lead to no possible good because the pleadings can be examined upon an oral application to determine whether "they disclose a reasonable cause of action". In saying this, I have yet to touch upon the question of whether the application is "frivolous and vexatious and an abuse of the process of court" an assertion that may require evidence and hence a formal application. As far as the question of a reasonable cause of action is concerned, this cannot be determined on the basis of the affidavit evidence. The question of when the agreement was executed is a triable issue and cannot form the basis of striking out the pleadings of the plaintiff on the strength of any affidavit evidence.

Before we wind up this issue we later need to examine the issue of whether the plaint is maintainable on a point of law.

In Ismail Serugo vs. Kampala City Council and Another (supra) Hon. Justice Mulenga JSC held that a distinction must be made between an application to reject a plaint and one to dismiss it on a point of law as held in Nurdin Ali Dewji & ors vs. G.M.M. Meghji & Co., and others (1953) 20 EACA 132. In that case the Court of Appeal criticised the judge for overlooking the distinction between rejection of a plaint under order 7 rules 11 and the dismissal of a suit on a point of law under order 14 rule 2 Tanganyika (Order 15 rule 2 Uganda). Justice Mulenga JSC further cited an earlier Supreme Court of Uganda case of Wycliffe Kiggundu Kato vs. Attorney General Civil Appeal No 27 of 1993 where they said:

“A distinction must be drawn between an application to reject a plaint and one when a matter of law is set down for argument as a preliminary point. That distinction was very clearly explained in Nurdin Ali Dewji & ors vs. Meghji & ors (1953) 20 EACA 132. The distinction is that under order 7 Rule 11 (a) of the rules an inherent defect in the plaint must be shown rather than that the suit was not maintainable in law. In the latter case a preliminary point should be set down for hearing on a matter of law……..if the state insists that as a matter of law no suit can be brought, the state should not try to have the plaint rejected under order 7 Rule 11, but should apply to have the suit dismissed on a preliminary matter of law.”

Kiggundu v. Attorney General is also reported in [1993] V KALR page 80 and at page 87 for the quotation. Order 7 rule 11 (d) also permits a plaint to be rejected on a point of law. See Opio v Attorney General reported in (1990 – 1991) 1 KALR 66 where it was held that a suit time barred by statute must be rejected and Iga v Makerere University [1972] EA 65. In the applicant’s case, there is no attempt to have the plaint dismissed on a point of law. What is attempted is to prove that the plaintiff’s suit does not disclose a reasonable cause of action against the defendant or that it is frivolous or vexatious.

For purposes of this ruling, the determination of a point of law does not require a formal application before it can be argued. A point of law is set down for hearing under order 6 rule 29 and order 15 rule 2 of the Civil Procedure Rules. A point of law may be determined at any time before the hearing. As much as can be discerned the applicant asserts that no stamp duty was paid in respect to the agreement under sections 40 and 42 of the Stamps Act and therefore the agreement upon which the plaintiff relied on in the suit is inadmissible. This is a hard point to make in view of the fact, and a point on which both counsels agree that only pleadings have to be examined. An assumption is made that the facts pleaded are true. The question of admission in evidence of the written contract between the parties cannot arise at this stage or before trial. The agreement remains part of the pleading and may or may not be admitted at a later stage. What the parties submitted to is the question of admissibility of a document in evidence. This question could properly arise when the suit is being tried. I need to add that failure to pay stamp duty on the contract document would not operate to nullify the terms of the agreement. As to whether this contract between the parties is proven by using different principles such as whether there was consideration, whether the parties had capacity and whether this evidence should be accepted. Until the time for adducing evidence arises if at all it does, this matter must rest. However, the suit is not yet being tried and what is being tried is the application of the respondent. The court operates on the assumption that the pleadings are correct inclusive of the contract between the parties. Last but not least on this point, the determination of a point of law is properly made under order 6 rule 29 of The Civil Procedure Rules which provides:

"If, in the opinion of the court, the decision on the point of law substantially disposes of the whole suit, or of any distinct cause of action, ground of defence, set off, counterclaim, or reply thereto, the court may thereupon dismiss the suit or make such other order in the suit as may be just."

Such a point of law would have been raised by pleadings under order 6 rule 28 of The Civil Procedure Rules. The point of law may then be set down for hearing and be disposed of at any time before the hearing. As noted in the above Supreme Court case it may be set out under order 15 rule 2 of the Civil Procedure Rules. Having said this, the question of whether there is a proper formal application to determine this question would not arise. As noted above the question of the Stamps Act section 42 deals with admissibility of evidence and ought to be raised at the trial of the suit.

Because what is being challenged is the plaint of the plaintiff, affidavits in support or opposition of the application should be restricted to determination of whether there are grounds for saying that the suit is frivolous or vexatious or an abuse of the process of court. This is because the other grounds as discussed above may be dealt with without a formal application.

As to whether this application is frivolous or vexatious or an abuse of the process of court the case law suggests that some limited information or evidence by way of affidavits giving grounds or the reason why may be admitted. It is however proper to look into the rule itself. Order 6 rule 30 (1) of the Civil Procedure Rules and the relevant part thereof provides "in case of the suit or defence being shown by the pleadings to be frivolous or vexatious…” I must first of all highlight the fact that again the rules refers to pleadings. The suit has to be shown by the pleadings to be frivolous or vexatious. The words "abuse of the process of court" to not appear in the rule and seem to originate from the rules in England or under section 98 of the Civil Procedure Act. As far as the applicant’s application is concerned the grounds for this attack on the plaintiff’s suit are the following:

1. That the respondent pleaded or relied on a rescinded contract in the suit which contract was terminated on 3 January 2011.
2. There was failure of consideration in that the respondent did not pay 286 million under the contract which was the first instalment payable within 10 days.
3. The ground rent was paid after the contract had been terminated.
4. There was no payment of Stamp duty on the contract document.
5. There was bad faith in that the respondent abandoned its application for a temporary injunction and sought a refund from Kampala Capital City Authority.
6. Consequently the application for specific performance by the respondent in the suit was not possible due to the transfer of the suit property to a third party and secondly the refund of the money claimed in the plaint is in the hands of Kampala Capital City Authority.

Consequently it is the applicant's contention that the suit is frivolous or vexatious. I must firstly comment that the applicant has not challenged the fact that the plaintiff claims general damages. The applicant's contention is that the plaintiff would not be entitled to general damages on the ground that it obtained loans to enable it purchase the defendant's property. This argument cannot be sustained and is on the merits of the suit. It amounts to an admission that the plaintiff enjoys a cause of action. It is not a point of law but depends on the determination of points of fact. It assumes the fact that the contract was lawfully terminated if at all which is pleaded by the defence. We have already resolved the question that the court only looks at the pleadings of the plaintiff to determine whether there is a reasonable cause of action or whether the suit is shown by the pleadings to be frivolous or vexatious.

Secondly I have carefully reviewed the attachments and pleadings of the plaintiff. As far as the date of the contract is concerned I have already ruled that this is a question of fact and that this is material and crucial in the resolution of the dispute. It requires the adducing of evidence as to explain the disparity between the date of 31st of December 2010 and 10th of December 2010. Such testimonies will be subjected to cross examination. In other words before such evidence is adduced it would be premature to determine the consequences of the dates of this contract so as to conclude that it would be frivolous or vexatious or an abuse of the process of court to bring the suit after termination. This is materially a procedural issue because the court cannot look into the substance of the inadmissible evidence at this stage of the proceedings.

Secondly, on the question of the plaintiff having paid its money amounting to Uganda shillings 214,000,000 to Kampala Capital City Authority, under the contract after the contract had been terminated, the question of dates should not be resolved that this stage. Thirdly is the question that this money was paid to a third party. The doctrine of being privy to a contract ensures that it is only the parties to the contract that can enforce the clause that this money should be paid to Kampala District Land Board for a lease offer. No details of the lease offer have been given and a lease offer by its nature is an invitation to treat and is not the lease itself. I have noted another obvious point that Kampala City Council is not Kampala District Land Board. There are therefore triable issues that arise in the suit that cannot be resolved through affidavit evidence.

Annexure "B" is the company resolution dated 23rd of December 2010 and registered on 4 January 2011. It resolves that the property be sold to another party. What is interesting is that the document is stamped by the respondent on 3 January 2011. The letter terminating the contract is also dated 3rd of January 2011.

Last but not least I refer to annexure "E" originating from the defendant and addressed to the managing partner of Sebalu, Lule & Company Advocates dated 26th of January 2011. Paragraph 3 of the letter writes that the agreement was signed on 13 December 2010. This contradicts the assertion of the applicant that the agreement was signed on 10 December 2010 upon which all the submissions of counsel depends.

In the premises, the plaintiff’s plaint raises triable issues that merit consideration on the merits after evidence has been adduced. The applicant’s application is accordingly overruled with costs.

Ruling delivered at Kampala this 24^th day of February 2012

Hon. Mr. Justice Christopher Madrama

Delivered in the presence of:

Simon Tendo Kabenge for the Applicant,

No representative of Applicant in court,

No counsel for Respondent,

Legal Secretary of Respondent Martin Odutu in court,

Ojambo Makoha Court Clerk

Hon. Mr. Justice Christopher Madrama

24^th day of February 2012