THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL COURT DIVISION)

MISC. APPLICATION NO. 90 OF 2013

(Arising from Civil Suit No. 119 of 2012)

1. WINNIE OKIDI
2. OKIDI EASTER SANTOS
3. DASAWIHI LTD::::::::::::::::::::::::::::::::::::::::::::::::::::::::::                                                                                                    APPLICANTS

VERSUS

FINA BANK (U) LTD:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::                                                                                                     RESPONDENT

BEFORE: HON. LADY JUSTICE HELLEN OBURA

RULING

This application was brought under the provisions of Order 6 rules 19 and 31 of the Civil Procedure Rules (CPR) and Section 98 of the Civil Procedure Act (CPA) seeking for orders that the applicants/defendants be granted leave to amend their written statement of defence and that provisions be made for the costs of the application.

The grounds of the application are stated in the affidavit of Ms. Winnie Okidi, the first applicant and director in the third applicant. Among others they are that; the applicants/defendants would like to clearly state and clarify the real questions in dispute to allow this Court to resolve them conclusively; the 3^rd applicant/defendant signed a loan agreement with the respondent/plaintiff with the full knowledge, consent and direction of the respondent/plaintiff for purposes of passing the loan amount to Josiku Technical Services Limited which it did; the 3^rd applicant did not take any money from it neither did it have any consideration; the loan agreement and the guarantees are illegal and void as they did not meet the qualification for a valid contract; the amendment has been brought without undue delay and it is in the interest of justice and equity that the amendment is allowed as it will not prejudice the respondent/plaintiff in any way.

The application was opposed by the respondent on the grounds stated in the affidavit in reply deposed by Mr. Pooran Kukreja, the Executive Director of the respondent. When the application came up for hearing Mr. Ojok Julius represented the applicants while Mr. Mugisa and Ms. Angela Kobel represented the respondent. Both parties filed written submissions in the matter which are considered in this ruling. 

Counsel for the applicant referred to the law on amendment of pleadings as stated by this Court in the case of Buffalo Tungsten Inc vs SGS Uganda Limited Misc. Application No. 06 of 2012 which restated the principles that govern amendment as stated in the Supreme Court case of Gaso Transport Services (Bus) Ltd vs Obene (1990-1994) EA 88.

Counsel for the applicants submitted that the amendment sought does not cause any injustice to the respondent and it is neither barred by law nor made mala fide arguing that if the application is not granted it may lead to multiplicity of suits.

In response to the respondent’s contentions that the amendment sought is prejudicial to the respondent’s case, is a total departure from the written statement of defence with the effect of altering the entire written statement of defence, counsel for the applicants submitted that the respondent’s contentions are without substantiation. Counsel contended that the issue in controversy is whether the defendants are liable to pay the full loan and the respondent by opposing the application seeks to prevent or block the defendants from telling the truth. Counsel submitted further that the proposed amendments are not new defences since in paragraph 4 of the written statement of defence the applicants indicated that the claim was not tenable and now the applicants seek to expound on the same and give details.

On the other hand counsel for the respondent argued that upon perusal of the proposed written statement of defence, paragraph 6(a) to (h) introduces a new cause of action against a third party a company which was not privy to the transaction between the 1^st, 2^nd and 3^rd applicants in this matter. Counsel contended that Josiku Technical Services Limited is not a necessary party for the effectual adjudication of the issues as to whether the 1^st, 2^nd and 3^rd applicants had breached any of their obligations under the loan agreement executed by the applicants and the respondents as provided in the loan agreement.

It was then submitted that the amendment sought is prejudicial to the respondent’s case and is a total departure from the applicants’ written statement of defence already on record. Counsel argued that the said Josiku Technical Services Limited is not indebted to the plaintiff on the basis of the written statement of defence as currently framed and the loan documents, personal guarantees and the deeds of assignment attached to the plaint do not show any involvement of Josiku Technical Services Limited. Further that the respondents would be greatly prejudiced if the amendment is allowed.

He submitted that the loan agreement between the 3^rd applicant and the respondent, guarantee agreements and deeds of assignment between the 1^st and 2^nd applicants with the respondent constitute valid contracts which are enforceable at law against the respective parties.

Counsel argued that the application does not satisfy the required conditions to warrant amendment of the written statement of defence and the applicants may still be able to argue their defence of none indebtedness to the respondent on the basis of the current written statement of defence.

It is the submission of the respondent’s counsel that the applicants seek to use this opportunity to exhaustively elaborate all issues which were stated in the current proposed written statement of defence thereby introducing a new claim/ cause of action against Josiku Technical Services Limited which was not a party. Counsel for the respondent cited the case of Laitu Advani vs AAR Hegit Services Limited HCCS 143 of 2008 where the Court adopted the definition of a cause of action set out in Halsbury’s Laws of England, 4^th Edition Vol. 37 at page 24 to mean;

“A cause of action is simply a factual situation the existence of which entitles one person to obtain from Court a remedy against the other”

It was the contention of counsel for the respondent that in the instant case there are no facts connecting the respondent and Josiku Technical Services Limited and therefore the applicants ought to have filed third party proceedings for the third party to make a contribution or indemnity claimed in whole or in part. See: Total Oil Products Limited vs William M K Malu & Others [1965] EA 164.

In a brief reply to the above submissions the applicants’ counsel maintained that the applicants do not intend to add Josiku Technical Services Limited as party to this suit as that application was withdrawn. The applicants’ counsel also reiterated that no prejudice will be occasioned to the respondent.

I have given due consideration to the application, supporting affidavit, and the attachments thereto as well as the affidavit in reply and its annextures. I have also carefully read the submissions of both counsel. The question for determination by this Court is whether leave should be granted to the applicants to amend their written statement of defence.

This application was brought under Order 6 rule 19 of the CPR which empowers this Court with the discretion to allow alterations or amendment of pleadings in such manner, at any stage of the proceedings and on such terms as may be just and as may be necessary for the purpose of determining the real questions in controversy between the parties.

Counsel for the applicant correctly cited the principles of law which guide court in exercise of judicial discretion while considering amendment of pleadings. These  principles were cited by this Court in the case of Buffalo Tungsten Inc VS SGS Uganda Limited (supra) as per Tsekooko, JSC  in Gaso Transport Services (Bus) Ltd vs Obene (supra) where he stated that the four principles that appear to be recognized as governing the exercise of discretion in allowing amendments are:-

1. “The amendment should not work injustice to the other side.

An injury which can be compensated by an award of costs is not treated as an injustice.

2. Multiplicity of proceedings should be avoided as far as possible and all amendments which avoid such multiplicity should be allowed.
3. An application which is made mala fide should not be granted.
4. No amendment should be allowed where it is expressly or impliedly prohibited by any law (for example limitation actions)”.

The test that the instant application must pass as stated by Tumwesigye, JSC in Mulowooza & Brothers vs N. Shah Ltd (supra) is whether the proposed amendment introduces a distinct new cause of action instead of the original one or whether and in what way it would prejudice the rights of the respondent if it was allowed.

As I understand it, there is controversy as to whether the defendants are liable to pay the full loan to the respondent. Through this application the applicants seek to clarify the details in their written statement of defence to include facts that absolve them of liability for the loan. This is opposed by the respondent majorly on the ground that the proposed amendment introduces a new cause of action against a third party and it is prejudicial to the respondent’s case and is a total departure from its written statement of defence already on record.

Turning to whether the applicants are introducing a new cause of action, I have perused the written statement of defence on record filed by the applicants and in paragraph 4 thereof the applicants averred as follows:

“In further answer to the plaintiff’s claims, the defendants shall aver and contend that the claim is not tenable.”

I have also perused paragraph 6 of the proposed amended written statement of defence in which the applicants aver that the respondent requested the 1^st applicant to use the 3^rd applicant to sign for a loan of Ug. Shs 200,000,000/= to be channeled to Josiku Technical Services Limited which was acceptable to the first applicant.

It is further averred that the paper documentation of the loan and guarantees were effected by the 3^rd applicant and the money passed to Josiku Technical Services limited through the 1^st applicant in cash, without documentation, with the full knowledge, approval and direction of the respondent. The defendants also allege that they never deposited any guarantees save for the ones that were already with the bank on a Ug. Shs. 50,000,000/= facility and the car log books.

In my view these among other facts are pleaded to explain why the respondent/plaintiff’s claim is not tenable at law by clarifying the state of affairs surrounding their alleged indebtedness to the respondent.

Now as to whether the proposed written statement of defence introduces a new cause of action against Josiku Technical Services Limited which was not a party to the transaction, the issue is whether the applicants’ amendment substitutes one distinctive cause of action for another or changes the subject matter of the suit or would change the action into one of a substantially different character. See: Eastern Bakery vs Castelino [1958] EA 462 (CAU).

A new cause of action will only be rejected in an amendment if it is distinct and capable of changing the subject of the suit or changes the action into one of a substantially different character. Indeed paragraph 6(a) to (h) of the proposed amended written statement of defence seeks to add facts that were never pleaded in the initial written statement of defence. However, I do not agree with the respondent that the amendment should be rejected because it introduces a new cause of action against a third party. To my mind the allegation that money was signed for on behalf of a third party and passed onto that party is a mere allegation in defence to the claim which will be subject to proof during the trial by adducing evidence just like any other allegations in the pleadings. It does not in my firm view raise a distinct new cause of action in itself because the party who is alleged to have received the money is not even party to the suit.

In my view the best course of action would have been for the applicants to issue a third party notice to the said Josiku Technical Services Limited but since they have opted to take this course I believe they are prepared to prove it as it is a matter of evidence. In the circumstances, the argument of the respondent based on new cause of action is misconceived and it is accordingly rejected.

As regards the respondent’s contention that the application is prejudicial to it, I have failed to see the substantiation of that allegation in both the affidavit in reply and submissions of the respondent to satisfy myself that it is indeed prejudicial. This is because the respondent did not elaborate on the alleged prejudice that would be occasioned to it if this application is granted. I therefore fail to find any prejudice that would be occasioned to the respondent.

In the result, I do find that the amendment sought by the applicant is not barred by the law governing amendment of pleadings. The application is allowed and leave is granted to the applicants to amend their written statement of defence in Civil Suit No. 119 of 2012 as proposed in the draft amended written statement of defence. The amended written statement of defence shall be filed within ten days from the date of this ruling. The costs of this application are awarded to the respondent.

I so order.

Dated this 13^th day of November 2013

Hellen Obura

JUDGE

Ruling delivered in chambers at 3.00 pm in the presence of:

1. Ms Nakato Juliet holding brief for Mr. Ojok Julius for the applicant.
2. Ms. Angela Kobel for the respondent.

Both parties absent.

JUDGE

13/11/13