THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL COURT DIVISION)
MISC. APPLICATION NO. 470 OF 2012
(Arising from Civil Suit No. 312 of 2012)
M & B ENGINNEERS LTD…………………………...APPLICANTS
BEFORE: LADY JUSTICE HELLEN OBURA
The applicants brought this application under Order 36 rules 3 and 4 and Order 52 rules 1, 2 and 3 of the Civil Procedure Rules (CPR) seeking for orders that they be granted unconditional leave to appear and the defend Civil Suit No. 312 of 2012 and that the costs of the application be provided for. The application was supported by an affidavit deposed by Mr. Bitagase Moses, the 1st applicant who is also the Managing Director of the 2nd applicant company.
The grounds of this application as contained in the Notice of Motion and affidavit in support are that the applicants jointly and severally are not indebted to the respondent as alleged in the suit or at all. Secondly, that the respondent acted fraudulently in presenting the cheques in question for payment knowing that he had been fully paid. Lastly, that the applicants have a good and plausible defence to the suit as they are not indebted at all to the respondent.
In his affidavit in support of the application, Mr. Bitagase Moses averred that he borrowed Ug. Shs. 80,000,000/= from the respondent on behalf of the 2nd applicant. Further that the respondent charged interest of about 30% on the said money thus totaling to Ug. Shs. 103,000,000/=. He further stated that the respondent took four postdated cheques for the equivalent sum of Ug. Shs. 103,000,000/= to cover both the principal sum and interest charged by the respondent. Mr. Bitagase also averred that the 1st applicant as Managing Director of the 2nd applicant did pay the respondent cash from the 1st applicant’s residence in Nalya in early June 2012.
In his affidavit in reply and opposition to this application, Mr. Mugambe stated that the applicants are justly and truly indebted to him in the sum of Ug. Shs. 103,000,000/= which has never been paid. He averred that he advanced the 1st applicant as an individual Ug. Shs. 103,000,000/= and not Ug. Shs. 80,000,000/= to the 2nd applicant. He further stated that the 2nd applicant is sued for having issued cheques to him as the guarantor of payment. He also denied ever charging any interest of 30% on the sum of Ug. Shs. 80,000,000/=.
When this matter came up for hearing on the 13th day of December 2012, Mr. Alex Candia represented the applicants while Mr. Arthur Mukwatanise represented the respondent. Both counsel were agreeable to filing written submissions in the matter having failed to reach an amicable resolution of the dispute.
In his submissions Mr. Candia first raised three preliminary points of law which he submitted on at length. He contended that those preliminary points of law would dispose of the entire suit without going into the merits of the application. Firstly, he argued that the summary suit was incompetent before court and bad in law for there was no affidavit in support of the specially endorsed plaint in accordance with Order 36 rule 2 of the CPR. He added that the respondent’s claim was strongly founded on the impugned cheques but they were not annexed to the accompanying affidavit and sealed by the commissioner for oath in compliance with rule 8 of the Commissioner for Oaths Rules.
Secondly, it was argued that the respondent chose to enter into an oral contract with the 1st applicant allegedly to advance Ug. Shs. 103,000,000/= contrary to section 10(5) of the Contracts Act No. 7 of 2010 which prescribes that a contract of such value must be in writing. He argued that the omission to have a written contract in respect of the present claim was fatal as it goes to the root of the respondent’s case in so far as no amount of oral evidence is admissible to prove the contents of such contracts in view of section 91 and 92 of the Evidence Act Cap. 6.
Finally, counsel for the applicants submitted that the purported action against the 1st applicant based on the alleged guarantee is void, frivolous and vexatious and unenforceable in law mainly because the alleged guarantee is not in writing contrary to section 10(6), (7) and section 68 of the Contracts Act.
In reply, Mr. Mukwatanise argued that the procedure under Order 36 rule 2 of the CPR was properly followed as the specially endorsed plaint was accompanied by an affidavit. He also submitted that the documents were properly attached to the plaint as required under Order 7 r 14 of the CPR and such documents are not required to be verified under rule 8 of the Commissioner for Oaths Rules as submitted by the applicants. In addition, Mr. Mukwatanise submitted that because the respondent’s claim was relying mainly on cheques, the cause of action was brought under the Bills of Exchange Act Cap. 68 and not under the Contracts Act as submitted by the applicants.
In his submissions in rejoinder, Mr. Candia reiterated his earlier arguments but added that Order 7 rule 14 of the CPR was not applicable in a summary suit. I agree with him to that extent. He maintained that annexing of documents to the plaint does not make them evidence unless they are made part of the affidavit and sealed as required by law.
I have had the benefit of perusing the specially endorsed plaint that was filed in court on 3rd August 2012. Attached to that plaint is an affidavit in support of the summary suit deposed by Kenneth Mugambe, the respondent. The affidavit bears a stamp indicating that it was received in this court on the same date the plaint was filed. I therefore have no reason to believe that the specially endorsed plaint did not comply with order 36 rule 2 of the CPR in as far as accompanying the plaint with an affidavit is concerned.
As regards the alleged incompetence of the said affidavit due to want of form, it is now settled that any procedural irregularity that is not of a fundamental nature should be ignored in view of Article 126 (2) (e) of the Constitution. In the case of Horizon Coaches Limited v Edward Rurangaranga & Another  1 EA 77, Katureebe JSC stated that where the effect of adherence to technicality may have the effect of denying a party substantive justice, the court should endeavour to invoke the provisions of Article 126 (2) (e) of the Constitution. In view of the above position, this court is inclined to ignore the objection raised by counsel for the applicant based on want of form as a mere technicality and overrule the objection.
Similarly, I find that failure to annex the cheques and other annextures to the affidavit in support and have it sealed by the commissioner for oaths is not fatal as the applicants do not deny issuing them. The 1st applicant in his affidavit in support of the application confirmed that he issued the cheques. If indeed counsel for the applicant had carefully read the very authority of Lugazi Progressive School & Another v Sserunjogi & 4 others Misc. Application No. 50 of 2000 which he heavily relied on to support his argument, he would have known that Musoke Kibuuka, J followed the Court of Appeal decision in Uganda Corporation Creameries Ltd and Henry Kawalya v Reamation Ltd, and overruled a similar objection for lacking merit. The learned judge observed that Engwau JA. drew a distinction between “exhibits” and “annextures” attached to affidavits and stated as follows:-
“In my view, whether or not those annextures have been securely sealed with the seal of the advocate who commissioned the affidavits thereof, does not offend rule 8 because they were not exhibits produced to a court during a trial or hearing in proof of facts. In any case the annextures in the present case are not in dispute. Even if those annextures were detached, the affidavits thereof would still be competent to support the Notice of Motion. Rule 8 though mandatory, is procedural and does not go to the root as to competence of affidavits”.(Emphasis added).
On the alleged illegality of the contract due to non-compliance with section 10 (5) of the Contracts Act, 2010, I do agree with counsel for the respondent that the respondent’s claim is based on a debt in respect of which the 1st applicant issued chegues to him. A bill of exchange has been held to amount to an independent contract within the wider contract in pursuance of which it was executed and is not dependent as regards its enforcement on due performance of the latter. See James Lamont & Co. Ltd. V Hyland Ltd  KB 585 that was followed by the Court of Appeal in Kotecha v Mohammed  1 EA 112. I therefore find that the cheques are adequate to show the applicants’ indebtedness to the respondent even without necessarily going into the form of the earlier agreement.
On the capacity in which the 2nd applicant is sued, I believe this is a matter that could be raised in the main suit as opposed to this application. It could be one of the issues for trail.
For the above reasons, the objections are overruled for lacking merit. I now turn to consider the main issue in this application as to whether the applicants are entitled to be granted leave to defend the suit.
Mr. Candia submitted without prejudice to his objections that the applicants have already paid the respondent in full and the respondent acted fraudulently in presenting the impugned cheques for payments in order to be paid twice. He also argued that the 1st applicant denied being liable for the debts of the 2nd applicant merely because he is the second applicant’s Managing Director. In Mr. Candia’s view the applicants’ affidavit discloses triable issues for this court to determine whether the applicants are jointly or severally indebted to the respondent in the sum claimed or at all.
For the respondent, Mr. Mukwatanise submitted that the respondent was provided with two motor vehicle registration cards and the four cheques. He submitted that the applicants allege to have fully paid but have not proved payment of the said sum or any part thereof. He relied on section 101 of the Evidence Act to submit that he who alleges must prove. Counsel for the respondent further submitted that there is no acknowledgement of Ug. Shs. 103,000,000/= and an undertaking to return the cheques upon the alleged payment. He contended that the 1st applicant does not mention whether he retrieved the registration card of his personal vehicles which are with the respondent. He added that the applicants have never demanded for the return of the log books and the cheques either prior to this suit or in their pleadings.
He cited the case of Geoffrey Gatete & Another v William Kyobe SCCA No. 7 of 2005where it was held that the court has to determined whether the defendant has shown good cause to be given leave to defend and good cause had been held to amount to evidence that the defendant has a triable defence in the suit.
In rejoinder, counsel for the applicants argued that failure or delay in demanding for the return of the log books is no proof that the respondent was not paid since the demand can be made at any time the 1st applicant deems fit.
I have carefully considered the written submissions on the merits of this application as well as the affidavits and the attachments. It is now settled that in an application like this one, the applicant must prove that there is a bona fide triable issue of fact or law that he will advance in defence of the suit. In Churanjilal & Co. v. A. H. Adam (1950) 17 EACA 92, the Court of Appeal for East Africa ruled that a defendant who has a stateable and arguable defence must be given the opportunity to state and argue it before court. That decision was followed by the High Court of Uganda in the case of Maluku Interglobal Trade Agency v. Bank of Uganda  HCB 65, at 66 where the principle was concisely stated as follows:-
“Before leave to appear and defend is granted the defendant must show by affidavit or otherwise that there is a bona fide triable issue of fact or law. When there is a reasonable ground of defence to the claim, the defendant is not entitled to summary judgment. The defendant is not bound to show a good defence on the merits but should satisfy the court that there was an issue or question in dispute which ought to be tried and the court should not enter upon the trial of the issues disclosed at this stage.”
The above principles were also applied by Mukasa J. in the case of Maria Odido v Barclays Bank of Uganda Ltd HC Misc. Application No. 645 of 2008 who further observed that at this stage the court is not required to inquire into the merits of the issues raised, however the issue so raised should be real and not a sham. Court must be certain that if the fact alleged by the applicant were established there would be a plausible defence and if the applicant has a plausible defence he should be allowed to defend the suit unconditionally.
In my considered opinion the applicants have stated issues of fact that would justify the grant of leave to defend the suit. While the 1st applicant alleges that the 2nd applicant was lent Ug. Shs 80,000,000/= at an interest rate of 30%, the respondent insists that he lent Shs. 103,000,000/=. It is therefore not clear what the principle amount lent was. It is also not clear how the alleged interest if at all was added onto the amount of Ug. Shs 80,000,000/= to arrive at the sum claimed.
The applicants also alleged that the amount lent was fully paid by them although no proof was availed to court. Since the respondent vehemently denies being paid it is the view of this court that the issue has to be canvassed as it forms the basis of the applicants’ defence. That can only be done if the applicants are allowed to defend the suit so that the issue is properly adjudicated by court hearing the parties.
In addition, the applicants have raised matters of law on the capacity in which the 1st applicant is sued. I believe this and all the other issues merit judicial consideration in a fully fledged hearing so that evidence other than the one already adduced is heard in order to conclusively determine the matter in dispute.
For those reasons, I am satisfied that there are issues which ought to be tried in the main suit. I therefore find that the applicants have made out a good case for leave to be granted for the applicants to appear and defend the suit. In the premises, this application is allowed. The applicants are granted unconditional leave to file a defence in the suit which shall be filed within 10 days from the date of this order. Costs of this application shall be in the main cause.
I so order.
Dated this 7th day of March 2013.
Delivered in chambers at 3.00 pm in the presence of Mr. Matovu Akram holding brief for Mr. Alex Candia for the applicant and Mr. Arthur Mukwatanise for the respondent. Both parties were absent.