THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL COURT DIVISION)

MISC. APPLICATION NO. 693 OF 2012

 (Arising from Civil Suit No. 502 of 2012)

KITASHA COFFEE BUYERS AND FARMING LTD………APPLICANT

VERSUS

1. MUHIMBURA STEPHEN……………….....}
2. AZAALWA HASSAN……………………….}                 RESPONDENTS

BEFORE: HON. LADY JUSTICE HELLEN OBURA

RULING

The applicant brought this application under Section 98 of the Civil Procedure Act, Order 36 rule 4 and Order 52 rules 1, and 3 of the Civil Procedure Rules seeking for leave to appear and defend Civil Suit No. 502 of 2012 and that the costs of the application be provided for. The application was supported by an affidavit deposed by Mr. Juma Kitaka, the director of the applicant company. The 1^st respondent deposed an affidavit to oppose the application.

The grounds of this application are contained in the Notice of Motion and affidavit in support. The first ground is that part of the coffee supplied by the respondents to the applicant is not of merchantable quality and also not fit for purpose. Secondly, that the applicant company entered into a contract to purchase coffee from the respondents and had not breached the contract. Lastly, that it is just and equitable that this Honorable Court allows this application for leave to appear and defend.

When this application came up for hearing, Mr. Jingo Christopher represented the applicant while Mr. Francis Bwengye represented the respondents. They agreed to file written submissions which they did hence this ruling. On the first ground of this application, Mr. Jingo submitted that the applicant has a good defence that part of the goods was unmerchantable. He submitted that in an application for leave to appear and defend a summary suit the court should not determine the merits of the case. For that position he relied on the case of Godfrey Gatete & Another v William Kyobe SCCA No. 7 of 2005. It was therefore his view that the court would be required to determine what the applicant has to pay.

On the second ground, counsel for the applicant submitted that the coffee has not yet been sold and that is why the respondent had even applied for a temporary injunction to restrain its sale.   

In relation to the third ground, counsel relied on paragraphs 6, 10, 11 and 12 of the affidavit in support where the applicant states that the respondent will not suffer any irreparable damage if this application is not granted. He submitted that the coffee was not supplied to the applicant in time so it has suffered damages.

Mr. Bwengye for the respondents submitted that the established law is that before leave to appear and defend can be granted the applicant must prove to court that there is a question in dispute which ought to be tried as per Zora and Another v Ralli Brothers & another [1969] EA 690. He contended that in the instant application the applicant has not shown the existence of a bona fide triable issue. In response to the applicant’s contention that in the business of exportation of coffee it is a known practice that supplier receive payment after sale and or exportation, Mr. Bwengye submitted that the purported known practice or custom cannot be relied upon because the applicant has not proved the certainty of the custom. It was further argued for the respondent that the facts adduced by the applicant to show that the company paid for the coffee before delivery are inconsistent with the said custom.

He argued further that the respondents were ready and willing to and, indeed did deliver the coffee they contracted to supply and were paid upon delivery as shown in annextures “A” and “B” to the affidavit in reply. He contended that it is trite law that where no payment schedule is stipulated payment is effected upon delivery of goods. For that position he relied on P.S Atiyah “The Sale of Goods” 5^th Edition page 136 and section 28 of the Sale of Goods Act. He submitted further that the admission of Mr. Kitaka in his affidavit regarding the non existence of a written agreement specifying payment schedules makes the general rule in section 28 of the Sale of Goods Act applicable to the case at hand.

It was also submitted for the respondent that the implied condition to the effect that goods should be of merchantable quality as provided for in section 15(6) of the Sale of Goods Act applies only where goods are sold by description by a seller who deals in goods of that description. Counsel for the respondent argued that the applicant did not specify that it wanted export ready coffee and nor did the respondents sell coffee as export ready. It was argued that the respondent sold ordinary coffee and therefore there was no breach of implied condition that goods should be of merchantable quality.

The respondents’ counsel further submitted that the applicant examined and weighed the coffee before accepting and paying for it therefore cannot now claim that the coffee was not of merchantable quality. He referred to the case of Abdulla Ali Nathoo v Walji Hirji [1957] EA 207 where it was held that a buyer who has the opportunity to inspect goods before delivery cannot rely on implied warranty that goods should be of merchantable quality.

As an exception to the condition that goods should be of merchantable quality, it was submitted for the respondent that the applicant did not intimate to the seller that it had rejected the goods in line with section 35 of the Sale of Goods Act but rather continued to make payments long after the delivery of the goods.

In rejoinder, counsel for the applicant argued that the applicant had not breached the contract since there was no sale agreement between the parties as stated in paragraph 7 of the affidavit in support. He referred to section 11(1) of the Sale of Goods Act to the effect that stipulation as to time of payment are not deemed to be of essence of a contract of sale and submitted that payment was not of essence in the said contract and therefore the applicant is supposed to pay within a reasonable time.

In regard to section 28 of the Sale of Goods Act to the effect that delivery of goods and payment of the price are concurrent conditions, counsel for the applicant argued that the above provision simply stipulates the duty of both the buyer and seller but it does not specify the time when the purchaser should make the payments. According to him, this leaves the purchaser/applicant in a position where he has not breached the contract.

Counsel for the applicant contended that the coffee was purchased by description from the respondent and therefore the respondent had a duty to supply goods that are of merchantable quality and that which match with exportation standards.

He added that the applicant made an allegation in the affidavit in support under paragraphs 2, 3 and 4 that the respondents fraudulently mixed good coffee with bad coffee knowingly and therefore the allegation of fraud needs to be proved. The case of Uganda Commercial Bank v Mukoome Agencies [1982] HCB 21 was cited where it was held that where fraud is alleged the party alleging it must be given an opportunity to prove it and it is trite law that a substantive allegation of fraud in an affidavit in opposition raised a triable issue entitling the defendant to leave to defend the suit. 

However, earlier in his submissions, Mr. Bwengye raised a preliminary objection to the application to the effect that paragraphs 5, 6, 9 and 11 of the respondent’s affidavit contain deliberate falsehoods intended to mislead court into a miscarriage of justice. He added that an application supported by a false affidavit is bound to fail. He relied on the case of Bitaitana v Kananura [1977] HCB 34 where it was held that the application is bound to fail because the applicant in such a case does not go to court with clean hands. He also cited the case of Eric Tibebaga v Fr. Narsensio Begumisa & 3 Others SCCA No. 18 of 2002 for the legal position that where an affidavit is riddled with falsehood, the application is not supported by valid affidavit.

Counsel for the respondent additionally submitted that the applicant is abusing the court process as reflected by the persistent contradictions and falsehoods in their affidavit which are intended to pervert the legal process by misleading this court. He cited the case of Attorney General & Uganda Land Commission v James Mark Kamoga and James Kamala SCCA No. 8 of 2004 where Mulenga JSC defined abuse of court process to involve using the court process for an improper purpose. Counsel for the applicant made no submission in response to the above objection. I will deal with that objection before delving into the merit of this application.

This court is well aware of the previously strict view that an affidavit riddled with falsehoods cannot support the application as cited by counsel for the respondents. I also had the benefit of looking at the holding of a single Justice of the Supreme Court in Eric Tibebaga v Fr. Narsensio Begumisa & 3 others (supra). However, I am also aware that the Supreme Court sitting as a full bench adopted a more liberal approach to dealing with defective affidavits such as the one alleged by the respondents. In the case ofCol.(Rtd) Besigye Kizza v Museveni Yoweri Kaguta & Electoral Commission (Election Petition No. 1 of 2001) [2001] UGSC 3, their Lordships held that the offending paragraphs could be safely severed and the rest admitted.

In the premises, I find no basis for rejecting the entire affidavit and I decline to do so. I have addressed my mind to the paragraphs that are alleged to contain falsehood and indeed I do agree that paragraphs 5, 6, 11 of the affidavit in support contain what is at variance with the documents attached to the affidavit in reply. I would therefore agree that they contain some deliberate falsehood and instead proceed to sever them from the affidavit in support. The rest of the unoffending paragraphs of the affidavit will be considered.  

I now turn to consider the merit of this application. I have given due consideration to the arguments made for and against this application. I have also analyzed the pleadings and attachments filed in this matter. The issue is whether the applicant should be granted leave to appear and defend the suit.

InMaluku Interglobal Trade Agency v. Bank of Uganda [1985] HCB 65, at 66 it was held:

“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…. 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.”

It is not in dispute that the respondents supplied coffee to the applicant and the bulk of the purchase price was paid. The outstanding amount of Shs. 163,277,000/= claimed by the respondents in the main suit is also not denied. The applicant’s reasons for failure to pay which constitute the grounds of this application are quite contradictory as noted by counsel for the respondents. They include the allegation that some of the coffee were not of merchantable quality, delayed delivery of the coffee beyond the agreed time, lack of written agreement specifying payment schedules hence no breach of contract, never mind that some payments were made in advance, no formal demand was made for the balance and the alleged trade usage in the coffee industry where payments are made to suppliers after sale or export of the coffee supplied.

For avoidance of doubt, the allegation of delayed delivery of the coffee that is contained in paragraphs 5, 6 and 11 of the affidavit in support will not be considered in view of my decision to sever those paragraphs from the affidavit for containing falsehood.

Be that as it may, I have found difficulty in synchronizing the above grounds. I find them devoid of sincerity and mere afterthoughts intended to delay justice and abuse the court process. For example, the main ground of this application that some of the coffee are not of merchantable quality appears to have been raised only when the respondent came to court. The applicant does not indicate whether rejection of the coffee was intimated to the respondent as stipulated by Section 35 of the Sale of Goods Act.  That section provides as follows:-

“The buyer is deemed to have accepted the goods when he or she intimates to the seller that he or she has accepted them or when the goods have been delivered to him or her, and he or she does any act in relation to them which is inconsistent with the ownership of the seller,orwhen, after the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that he or she has rejected them” (emphasis added).

It is merely stated in paragraph 4 of the affidavit in support of the application that was sworn three months after the goods were delivered and partly paid for that the applicant was “contemplating to return” the coffee to the respondents. It is the view of this court that the applicant is deemed to have accepted the coffee since it retained the same beyond the reasonable time within which it was expected to intimate to the respondents that it had rejected the same.

I must also observe that according to the payment slips attached to the affidavit in support, the applicant continued to make payments in installments from 1^st August 2012 when the 1^st batch of coffee was delivered till 25^th October 2012. That conduct is inconsistent with the allegation that some of the coffee was not of merchantable quality. I am therefore of the firm view that the applicant having sat on its right to reject the goods by communicating within reasonable time is now estopped from raising the issue at this stage when the respondents are demanding payment of the outstanding balance. For that reason, I do find that the first ground of this application is an afterthought that lacks merit and cannot be tried in the main suit as a bona fide issue.

I also find unconvincing the argument that lack of a written agreement specifying payment schedules does not make the applicant be in breach of the contract.  This argument is not consistent with the applicant’s conduct of paying the bulk of the purchase price before exportation. In the absence of a written contract specifying terms of payment, this court is more inclined to believe the respondents’ version that payment was to be made upon delivery as opposed to after exportation.

Even if this court were to believe that payment was to be made within reasonable time, I would think in commercial terms any time beyond three months would not be reasonable. Both parties are business persons who need quick turn over for their investments and money held up for over three months cannot make them achieve that target. This view is supported by the applicant’s own argument that there was delay to deliver the coffee between 1^st August when the parties entered the contract and when the deliveries were made. If a period of less than one month is considered a delay then how much more delay is a period of three months.

For the above reasons, my conclusion is that the alleged lack of written agreement specifying the terms of payment is no excuse for failure to pay. I therefore do not find it a bona fide triable issue that would merit granting this application.

Similarly, it is my view that the alleged lack of formal demand for the outstanding balance and so called trade usage in the coffee industry do not raise any bona fide triable issues. The applicant has not shown that the payments it made prior to the filing of this case were upon demand. In any event, section 27 of the Sale of Goods Act provides that it is the duty of a buyer to accept and pay for the goods supplied in accordance with the terms of the contract.

All in all, the applicant has failed to show that there are bona fide triable issues of fact or law that would warrant granting this application so that the main suit is heard on the merits. In the result, this application must fail and it is dismissed with costs as it lacks merit.

Judgment is entered for the respondents against the applicant in the main suit in the sum of Shs.163,277,000/= as prayed. Interest is awarded on that amount at 22% per annum from the date of this judgment until payment in full. Costs of this application and the main suit are awarded to the respondents.

I so order.

Dated this 12^th day of March 2013.

Hellen Obura

JUDGE

Delivered in chambers at 3.00 pm in the presence of Mr. Job Obonyo holding brief for Mr. Christopher Jingo for the applicant whose officials were absent and Ms. Eva Nabitaka holding brief for Mr. Francis Bwengye for the respondents who were present.

JUDGE

12/03/13