THE REPUBLIC OF UGANDA,
IN THE HIGH COURT OF UGANDA AT KAMPALA
HIGH COURT CIVIL SUIT NO 258 OF 2009
HUDSON MUSOKE}............................................................... PLAINTIFF
STANDARD CHARTERED BANK U LTD}.................................. DEFENDANT
BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA
The defendants counsel objected to the suit on the grounds that it is barred by res judicata; secondly that the plaint does not disclose a cause of action and thirdly that the plaintiff’s suit is frivolous and vexatious.
At the hearing the defendant was represented by William Were assisted by Ronald Asiimwe while the plaintiff was represented by Kizito Sekitoleko holding brief for Peter Walubiri and it was agreed by counsels that the court would be addressed through written submissions on the preliminary points of law the defendant’s counsel notified to Court he would raise.
The defendants first objection is based on section 7 of the Civil Procedure Act and explanation number 4 that any matter which ought to have been made a ground of defence or attack in the former suit shall be deemed to have been a matter directly and substantially in issue in that suit. The defendants counsel submitted that the parties in the current suit are the same as those in civil suit number 473 of 2007 whose subject matter was the same loan contract the same subject of litigation in the current suit. Counsel made reference to paragraph 5 of the plaint where the plaintiff seeks to justify the institution of the suit by pleading a recent discovery of fact. The new discovery of fact relates to the insurance policy as a contractual clause appearing on the first page of the loan contract and counsel contends that it is inconceivable that the plaintiff was represented by two law firms and also being a lawyer could not have seen the clause when the document was an annexure to the pleadings in civil suit number 473 of 2006. The plaintiff as an advocate and represented by two reputable firms ought to have raised the matters now pleaded in the previous suit. Counsel relied on the case of Kamunye And Others versus Pioneer General Insurance Society Ltd  EA 263 where the Court of Appeal held that res judicata applies not only to points upon which the first court was actually required to adjudicate upon but to every point which properly belonged to the subject of litigation and which the parties exercising reasonable diligence might have brought forward at that time. Counsel contended that the subject matter in civil suit number 473 of 2006 was a loan agreement between the parties and is the same subject matter in the current suit. Counsel submitted that to permit the plaintiff to proceed would be to permit the parties to a contract to institute separate suits in respect of each clause of the contract. In conclusion that the suit was bad in law and ought to be dismissed under section 7 of the Civil Procedure Act.
In reply to the objection on grounds of res judicata counsel for the plaintiffs submitted that Explanation number 4 under section 7 of the Civil Procedure Act deals with what is termed as "constructive res judicata" and is explained by learned authors Sudipo Sarkar and V R Manohar in their Book “Sakar on the Code of Civil Procedure 9th edition (2000) (reprint), Wadhwa Nagpur at pages 108 – 114. They discuss Explanation 4 of section 11 of the Code of Civil Procedure of India which is in pari materia with Explanation 4 of section 7 of the Civil Procedure Act of Uganda. In the discussion they argue that constructive res judicata will apply only when a party omits to include one of the several causes of action arising out of the same set of facts and not when different and independent causes of action arises out of altogether different facts. Secondly the plea of res judicata can only be raised between the parties in the future pleadings if it is shown that such a plea was required to be raised by the defendant to meet the claim of the plaintiff in such pleadings. For constructive res judicata to apply, the court deals with the identity of issues and not identity of subject matter. Fourthly, it must be shown not merely that the plaintiff might or could have included the claim in the previous suit but that he ought to have included it in the previous suit but that he was bound to do so. In relating the discussion of the learned authors to the facts of the plaintiff's case, the plaintiff's counsel submitted that the subject matter of civil suit number 473 of 2006 is the same as far as the loan agreement is concerned but the issues are different. In civil suit number 473 of 2006 the issue was about indebtedness of the plaintiff whereas in the current suit the issue is whether the defendant is liable for the loss occasioned to the plaintiff as a result of the Plaintiffs failure to pay the debt and execution proceedings arising from the uncontested debt. And failure to pay was occasioned by the defendant's failure to insure the date. Additionally the plaintiff did not have to plead the insurance issue in High Court civil suit number 473 since it was presumed that the loan was insured. In that suit he was concerned with defences to the indebtedness. It was not necessary to plead indemnity or contribution from a third party i.e. the insurer in a summary suit. The question of indemnity was not a defence to the previous suit that ought to have been raised.
Furthermore counsel submitted that an omission to put forward a counterclaim was set off is not a bar to a subsequent suit for the amount according to the learned authors referred to above. The plaintiff was under no obligation to raise the question of indemnity by insurers while contesting the claim itself. Consequently counsel concluded that this suit falls outside the ambit of the constructive res judicata doctrine under Explanation 4 of section 7 of the Civil Procedure Act. He prayed for dismissal of the preliminary objection on the ground of res judicata.
In rejoinder the defendants counsel submitted that the plaintiff's suit is not based on and does not arise out of any different set of facts. The two suits were premised on the same facts drawn from one contract between the parties relating to one debt advanced to the plaintiff by the defendant. The issues and matters raised in the plaint are covered by section 7 and explanation 4 thereof of the Civil Procedure Act. The matters now raised might have been and indeed ought to have been raised as an actor or defence to the previous suit if the plaintiff seriously considered them tenable. As far as the contention that the doctrine of constructive res judicata applies to identity of issues and not identity of subject matter, counsel reiterated submissions that the issues in the two suits are inseparable in so far as determination of issues in one suit would inevitably determine the issues in the other, all issues arising out of the same contract. The issue of whether the plaintiff might have or could have included does not relate to the matters objected to by the defendant. This is because the learned authors referred to by the plaintiff's counsel include at page 111 of the book that the important test is if the matter could have been set up as a ground of attack in the former suit and if its introduction into that suit was necessary for a complete and final decision of the right claimed by the plaintiff, it would be deemed to be a matter which ought to have been made a ground of attack in that suit.
As far as the argument of the plaintiff's counsel that the plaintiff would have had a fallback position and the defendant insured the loan, counsel contended on the behalf of the defendant that an insurance policy for debts are policies in favour of the creditor i.e. the defendant in this case and not the debtor who is the plaintiff. Arguments that the plaintiff was inclined to recover by himself against the insurance firm is inconceivable. In any case and without prejudice it would have been the duty of the plaintiff to inform the defendant about his disability if any before the commencement of the previous suit or in the pleadings of the previous suit so as to enable the insured to revert to the insurer. On the contrary the plaintiff continued to represent that he had the capacity to pay. Counsel reiterated prayers for dismissal of the suit on the ground of res judicata.
The defendants counsel further argued that the plaint discloses no cause of action.
Counsel contended that the plaint was based on a contract namely the loan agreement and had been overtaken by another contract which is a consent judgement between the parties. He referred to the case of Attorney General and Uganda Land Commission versus James Mark Kamoga and another SCCA number 8 of 2004 where the Supreme Court held by Mulenga JSC that unlike judgments in uncontested cases, consent judgments are created as fresh agreements and may only be interfered with on limited grounds such as illegality. The plaintiff has not pleaded not proved any grounds for setting aside the consent judgement and is barred from asserting a different position. He submitted that the consent judgment/decree is still valid and overrides the previous contracts between the parties.
Secondly the defendants counsel submitted that the suit is frivolous and vexatious in so far as it is not serious and lacks any legal basis. He further relied on the consent judgement between the parties for the submission that the consent judgment operated as estoppels against the plaintiff asserting a different position from that contained therein. He relied on the case of Huddersfield Banking Co Ltd versus Henry Lister & Sons Ltd (1895) 2 CHD at page 273 particularly the judgement of Lindley LJ at 280. He further relied on section 114 of the Evidence Act of Uganda for the doctrine of statutory estoppels. Secondly the suit is frivolous because it was brought in bad faith only to deny the defendant the benefit of the consent judgement and decree which the plaintiff has already benefited from. Paragraph 4 (F) of the plaint demonstrates that the plaintiff benefited from the consent judgement by paying part of the monies under the consent judgement and causing the defendant order its position on the interest due on it by varying the loan repayment terms to accommodate the plaintiff. He submitted that the plaintiff cannot approbate and reprobate and relied on the case of the Verschures Creameries Ltd versus Hull and Netherlands Steamship Company Limited (1921) 2 KB 608.
Counsel submitted that in this suit the plaintiff seeks to discharge the consent judgement but in the absence of any grounds for setting it aside the suit is frivolous and vexatious and calculated to deny the defendant the benefit of the consent judgement. He submitted on grounds for setting aside the consent judgement established in several authorities namely that a consent judgments cannot be discharged or varied unless obtained by fraud or collusion, an agreement contrary to the policy of the court or where the consent judgement was given without sufficient material facts or in misapprehension or ignorance of material facts or any grounds for setting aside a contract between the parties. Counsel relied on the cases of Hirani vs. Kassam (1952) EACA 131 and that of Ken Group of Companies Ltd Versus Standard Chartered Bank Uganda Limited miscellaneous application number 486 of 2012.
In the alternative the defendants counsel argued that the plaintiff does not disclose a cause of action because the contract providing for insurance is not extended to the circumstances of the plaintiff. Under paragraph 4 (F) and (G) of the plaint, it is averred that the plaintiff failed to pay the loan for reasons other than the risks sought to be insured against such as death or disability. The plaintiff and the defendant had agreed in the loan agreement to insure risks which were death and disability. None of the risks occurred and the claim in the plaint cannot be sustained. In those circumstances the plaint discloses no cause of action.
In reply the plaintiff's counsel submitted that the plaintiffs suit does not challenge the consent judgement in High Court civil suit number 473 of 2006 neither does it challenge the plaintiff's indebtedness under the loan agreement. The cause of action is a new cause of action upon discovery of the defendant's breach of contractual duty to insure and the law. The basis of the claim is the defendant’s failure to insure making the plaintiff liable to pay the loan which could have been averted if the insurance policy had been taken. Counsel further contested the insurance policy attached as annexure "A" to the written statement of defence on the ground that it does not relate to the loan agreement between the plaintiff and the defendant. This is because the insured in the policy were Standard Chartered Bank and Uganda Revenue Authority and not the plaintiff. Secondly the policy was signed and issued on 17 August 2006 long after the plaintiff had left the employment of Uganda revenue authority by over one year and the plaintiff could not have been a beneficiary under the policy. The plaintiff left Uganda revenue authority on 20 July 2005 when his contract was lawfully terminated. Thirdly the policy that the defendant undertook was to cover the whole duration of the loan period of 36 months but the one attached to the written statement of defence is only one year. Fourthly the amount that was insured was Uganda shillings 13,636,402,623/= and the premium of 204,546,039/= do not relate to the plaintiff. Fifthly the policy was signed and issued after High Court civil suit number 473 of 2006 had been filed. The policy was issued and signed long after the defendant accepted demanding for loan repayments. At that time there was no insurance policy in place to cover the plaintiff's indebtedness.
Finally the plaintiff's counsel submitted that the suit seeks to prevent the defendant from benefiting from its breach of the loan contract. The arguments that the plaintiff did not suffer disability in terms of the insurance policy are arguments on the merits and should not be tried in a preliminary objection.
In rejoinder the defendants counsel contended that the plaintiff has not in the submission replied to the defendant's objection that this would does not raise a cause of action and relies on the contract that has been replaced by another contract namely the consent judgement. The plaintiff opted to replace the loan contract with a consent judgement. Any rights that the plaintiff purports to enjoy ought to be contained in a valid contract. Such rights cannot be said to be violated when drawn from a contract which has been replaced by another. The effect of the plaintiff’s suit is to set aside the consent judgement. This is evidence from the prayer in the plaint for a permanent injunction restraining the defendant from having the plaintiff committed to prison or making further demands against the plaintiff in execution of High Court civil suit number 473 of 2006. Such a prayer has the effect of discharging the consent judgement and in effect set it aside.
On the grounds or reasons given to attack the insurance policy attached to the written statement of defence, the plaintiff's counsel disagreed with the facts. The reasons as to the dates and details of the insurance policy are raised by the plaintiff in reply to the defendant's objection and were not pleaded and therefore a departure from the pleadings contrary to order 6 rule 7 of the Civil Procedure Rules which the court ought to disregard.
Without prejudice counsel contended that it was conventional for the creditor to be insured and not the debtor. As far as the date of the policy was concerned, the insurer undertook to insure the rest seems the subject matter namely the loan could not be extinguished and policy executions or renewals need not bear the date of the loan contract. Furthermore the beneficiary under the policy attached to the written statement of defence is the defendant and not Uganda Revenue Authority.
As far as the contention that the plaintiff suffered disability should be the subject matter of the trial on the merits, the defendants counsel submitted that what was meant were the risks envisaged under the loan contract. In any case the plaintiff did not plead disability or death and cannot be tried without the departure from pleadings contrary to order 6 rule 7 of the Civil Procedure Rules. Finally counsel submitted that the plaintiff has not responded to arguments raised in an objection on the grounds of appropriation and reprobation or estoppels arising out of the consent judgement. Counsel invited the court to dismiss the plaintiff’s suit.
The Plaint of the plaintiff was filed on 10th of July 2009. It is a claim for special, exemplary and general damages for breach of contract, interest thereon and costs of the suit. The first objection to the suit is that the plaint is barred by the doctrine of res judicata. Both counsels submitted on the doctrine of res judicata under section 7 of the Civil Procedure Act and particularly explanation 4 thereof which provides as follows:
"Any matter which might and ought to have been made a ground of defence or attack in the former suit shall be deemed to have been a matter directly and substantially in issue in that suit."
In Uganda, Explanation 4 of the Civil Procedure Act was considered by the East African Court of Appeal, in the case relied on by the defendants counsel, namely the case of Kamunye and others v The Pioneer General Assurance Society Ltd  1 EA 263 (CAK) at 265 where Law Ag V-P held that:
“The test whether or not a suit is barred by res judicata seems to me to be – is the plaintiff in the second suit trying to bring before the court, in another way and in the form of a new cause of action, a transaction which he has already put before a court of competent jurisdiction in earlier proceedings and which has been adjudicated upon. If so, the plea of res judicata applies not only to points upon which the first court was actually required to adjudicate but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time Greenhalgh v. Mallard,  2 All E.R. 255. The subject matter in the subsequent suit must be covered by the previous suit, for res judicata to apply Jadva Karsan v. Harnam Singh Bhogal (1953), 20 E.A.C.A. 74.” (Emphasis added)
From the test formulated in the above case, the issue is whether the matter in controversy in the subsequent suit properly belonged to the subject of litigation in the former suit and whether the parties through the exercise of reasonable diligence, ought to have included it as part of the plaint or the defence. The case of Greenhalgh v Mallard  2 All ER 255 of the Court of Appeal is to the same effect. Somervell LJ held at page 257 that res judicata:
“... is not confined to the issues which the court is actually asked to decide, but that it covers issues or facts which are so clearly part of the subject-matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them.”
The plaintiff's counsel on the other hand relied on Sakar’s the Law of Civil Procedure 9th edition 2000 at pages 108 – 114 where the subject is exhaustively discussed. The learned authors refer to explanation 4 as the rule of "Constructive Res Judicata". At page 108 they note that “... a matter which might and ought to have been made a ground of attack or defence in the former suit but which was not done so by any of the parties, will also be deemed to have been a matter directly and substantially in issue in such suit and the rules of res judicata will equally apply to it". The doctrine is that such a matter is considered to have been constructively in issue because the parties had an opportunity of bringing it up. The doctrine of res judicata will apply only if a party omits to include one of the several causes of action arising out of the same set of facts and not to different and independent causes of action arising out of different sets of facts. The principle of raising the plea of constructive res judicata between respondents is inapplicable to the matter before the court. However the authors indicate that in applying the doctrine of constructive res judicata, identity of issues and not identity of subject matter is relevant.
I have considered the law referred to by counsels. The plea of res judicata will be considered together with the question of causes of action which is the second objection of the defendants counsel. This is because some of the arguments are more or less the same in that they refer to the consent judgment in the previous suit. In the previous High Court civil suit number 473 of 2006, the plaintiff therein is Standard Chartered Bank Uganda Limited while the defendant is the current plaintiff. In the current suit the plaintiff is Hudson Musoke while the defendant is Standard Chartered Bank Uganda Limited. In the current suit the plaintiffs claim is for special, exemplary and general damages for breach of contract, interest and costs of the suit. The plaintiffs cause of action as averred in the plaint is that on 27 June 2005 the plaintiff applied for a loan from the defendant for Uganda shillings 42,000,000/=. On 30 June 2005 the defendant approved and granted the loan to the plaintiff. That it was a condition precedent for the defendant get an insurance policy cover for repayment of the loan upon the plaintiff suffering death or disability which disability may include financial disability and loss of employment and the sum of Uganda shillings 1,685,000/= was deducted from the loan amount for the insurance policy. On 20 July 2005 the plaintiff lost his employment with Uganda Revenue Authority which was the employer of the plaintiff.
The plaint avers that owing to lack of any formal or permanent employment the plaintiff failed to pay the balance of the loan and the current defendant filed a suit and obtained judgement against the plaintiff in High Court civil suit number 473 of 2006 and attached and sold the plaintiffs vehicle. The plaintiff was thereafter arrested and spent time in jail from 9 April 2008 2/28 of June 2008 when he was released by court with the consent of the defendant. The gist of the plaint is that the plaintiff recently discovered that in breach of the loan agreement the defendant did not take out the insurance policy in favour of the plaintiff which could have protected the plaintiff from liability to pay the loan balance in case of any disability. Consequently the plaintiff avers that the defendant is in breach of the contract to insure the loan after deducting Uganda shillings 1,685,000/= from the plaintiff for that purpose. The plaintiff holds the defendant liable for general damages, exemplary damages, and special damages.
High Court civil suit number 473 of 2006 ended with a consent judgement between the parties. In the consent judgement it is agreed that the defendant shall pay to the plaintiff the outstanding loan amount with costs amounting to Uganda shillings 28,673,074/= in monthly instalments with effect from 30th of July 2007. The consent judgement also provided that in case of default on any instalment payment the outstanding balance shall be due and payable in one lump sum. Apparently the defendant who is now the plaintiff defaulted in payment and ended up in jail for the debt. A strong argument was made that the contract by way of the consent judgement overrides any other contract made by the parties prior in time concerning and the loan agreement. Consequently that the plaintiff cannot rely on any contracts executed prior to entering the consent judgement, including the contract to insure the loan.
I have carefully considered the argument that the subject matter of the previous suit was the loan agreement and particularly the clause which imposes an obligation on the defendant to insure the loan. The defendant's argument is further that the subject matter of the current suit is the insurance contract which was a term under the previous contract the subject matter of the previous suit. On the other hand the plaintiff's counsel's argument is that the issues in the two suits are different. In the first suit the issues related to the indebtedness of the plaintiff to the current defendant who was the plaintiff then. The second suit on the other hand deals with a different issue which is whether the defendant is liable for the loss occasioned to the plaintiff as a result of the his failure to pay the debt and execution proceedings arising from the uncontested debt. By extension of the argument it is contended on the behalf of the plaintiff that failure to pay by the plaintiff was occasioned by the defendant's failure to insure the loan. By a further extension of the argument the plaintiff’s case was that in the previous suit it was not necessary to raise the question of indemnity since the plaintiff dealt with defences to the previous action. Indemnity was not a defence to the previous action.
The plaintiff attaches annexure "A" which is a loan offer letter from the defendant. The terms of the loan offer letter relating to the question of insurance provides as follows:
"Your loan is insured against death and disability. The insurance premium and arrangement fees (5% of the total amount borrowed or a minimum of UGS 250,000) have been recovered from your transactional account as advised below.
Arrangement Fee + Group Insurance Premium = UGS 1,685,000…"
In the plaint the plaintiff does not deny the existence of civil suit number 473 of 2006 or the decree issued therein. The plaintiff does not deny being indebted to the defendant. The plaintiff's grievance arises from what happened during execution. The plaintiffs claim is that he should not be personally held liable having paid premium for the insurance of the loan. The alleged breach of loan agreement concerns alleged failure to insure. The contention is that insurance deals with indemnity of the plaintiff but does not contest liability of the plaintiff. There is a complex argument about who is the insured.
A critical analysis of the argument does not do away with the plaintiff’s contention. Even if it is the bank which is insured, it would mean that the insurance company would be able to indemnify the bank from liability arising from the plaintiff’s disability or death. The plaintiff's case revolves around interpretation of the word "disability" in the offer letter. It is apparent from the plaintiff’s pleadings and submissions that he interprets the word "disability" to mean inability to pay due to termination of his employment. It is also apparent from the pleadings that the plaintiff paid for his loan through monthly deductions from his salary. It is not yet clear whether the amount was remitted by the plaintiff's former Employers namely Uganda Revenue Authority or it was paid by the plaintiff on his own initiative. The actual loan contract executed between the plaintiff and the defendant has not been attached. The argument of the plaintiff's counsel that the plaintiff is not contesting his liability under the previous suit suggests strongly that the issue in the current suit is not about the plaintiff’s liability at all. This argument seems to be unclear in light of the counter submission that the plaintiff ought to have raised the question of the liability of the defendant if any in the previous suit. On the other hand the plaintiff's case is that he discovered that the loan had not been insured after the previous suit had been concluded and execution proceedings had been taken out. His contention is that failure to insure the loan amounted to breach of contract. Having in mind the submission that the loan was being insured to cover or indemnify the bank against any loss due to the insurable risk namely death or disability of the plaintiff, it cannot be submitted at this stage of the proceedings that the plaintiff ought to have raised this issue in the previous suit. This is because the issue arose after the suit had been completed and the plaintiff was found to be liable. The plaintiff’s case is that money was deducted for purposes of insurance of the loan and therefore the bank should be indemnified by the insurance company. The breach of contract alleged relates to the failure to take out the insurance policy after deducting money for it by the bank.
I agree with the plaintiff's counsel that the previous suit dealt with the liability of the plaintiff to the current defendant and the extent of that liability. On the other hand the current suit does not dispute the judgement of the court. There is therefore an arguable case.
Authorities provide that for res judicata to apply, it must be shown that the subject matter was clearly part of the subject matter of litigation and clearly could have been raised in the previous suit. The question of whether the insurance could have been raised has been answered by asserting first of all that the plaintiff was unaware that no insurance policy had been taken out at the time of the previous suit and execution thereof. It is not explicitly clear that the matter could have been raised to meet the requirements of defence. Defence deals with liability and it is doubtful whether it would be a counterclaim as the claim is not against the defendant but would be against a third party. The question of whether the consent judgment bars the plaintiff under the doctrine of estoppels from raising the issue of whether this claim of the defendant ought to have been made against the third party does not support the plea of res judicata but could be a defence to the current suit. It is however something that would be considered on the issue of whether the plaint discloses a cause of action or whether it is frivolous and vexatious and an abuse of the process of court. As far as res judicata is concerned, there cannot be any strong finding that the plaintiff ought to have raised the claim or defence in the previous suit based on the facts. I agree with the submission that indemnity by an insurance firm was not a defence nor a counterclaim as the claim would be against a third party and not the defendant. In any case establishing liability against the plaintiff in the former suit does not detract from the terms of any contract of insurance. The plaintiff would be submitting in the suit that he would have been covered and the defendant could have had recourse to another source for indemnity. What is even significant is that in the previous suit the defendant was the plaintiff and filed a summary plaint and the plaintiff who was the defendant to the summary plaint applied for unconditional leave to appear and defend the suit. No defence was filed and a consent judgement was entered in the application for leave. Issues cannot therefore be generated from pleadings between the parties other than showing that the defendant who is the plaintiff to the current suit admitted liability. The application for leave to file a defence cannot operate as a defence to the previous action. The only pleading on record is the summary suit for recovery of a liquidated demand with interest from the 30th of May 2005 till payment in full. The summary of the summary suit is that the plaintiff obtained a loan from the defendant who was the plaintiff in that suit. Thereafter the current plaintiff who was the defendant in the previous suit absconded from the instalment payments. As usual it is averred in the summary suit that the current plaintiff who was the defendant in civil suit number 473 of 2006 had no defence to the action. Issues arise from pleadings under order 15 rule 1 of the Civil Procedure Rules where it is provided that issues arise when a material proposition of law or fact is affirmed by the one-party and denied by the other. Where unconditional leave is not granted, there was no defence and therefore the question of liability for the liquidated sums claimed in the summary suit remains unchallenged and the plaintiff in the current suit does not purport to challenge it. In the current suit the consent order of the previous suit had been attached. Issues cannot be generated from the consent order as it is not a defence. In the premises it is my humble finding that HCCS No 258 of 2009 is not res judicata and there would be a trial for the first time. The previous suit was determined by way of a consent judgment without a defence.
That takes me to the next issue which is whether the consent judgement overrides previous contracts between the parties. This deals with the issue of whether the plaint discloses a cause of action. The consent decree is attached to the written statement of defence and deals with the liability of the plaintiff to pay and what the outstanding amount and costs of the suit was. It provided for the mode of payment which was to be in monthly instalments with effect from 30th of July 2007 and the amount of each instalment. It provided that in case of default on any instalments the entire outstanding balance shall be due and payable in one lump sum. The question of whether the consent decree overrides previous contracts should be given more critical appraisal. In the first place the consent did not purport to determine any issue outside the claim of the defendant in the previous suit. It did not purport to deal with insurance. I agreed in the previous issue with the plaintiff's counsel that insurance deals with indemnity. The issue of insurance also establishes who the insured is. It is an assertion that execution should not issue against the plaintiff. It would appear that it is in conflict with the consent decree which orders the plaintiff to pay in monthly instalments and makes the plaintiff liable in case of default. The plaintiff however asserts in paragraph 5 of the plaint that the plaintiff has only recently discovered that in breach of the loan agreement, the defendant did not take out the insurance policy in favour of the plaintiff which could have protected the plaintiff from liability to pay the loan balance in the case of disability.
The plaintiff’s assertion is that the insurance policy should have been taken in favour of the plaintiff. This pleading does not indicate or purport to indicate who the insured as between the plaintiff and the defendant ought to be. Unfortunately the insurance policy was not attached to the plaint. It is also not clear whether the plaintiff signed a specific loan contract after the offer letter of the defendant annexure "A" with the defendant. The defendant attached a contract between an insurance company and the defendant executed on 17 August 2006 apparently after the plaintiff had left the employment of his employer. It was a contract between Lion Assurance Company Ltd and the defendant. The preamble to the contract indicated that in consideration of the payment of the premium and provided the terms and conditions of the policy have been complied with, the company undertakes to pay the benefits described in the policy to the financial institution/bank if the client debtor named in the loan or overdraft application dies, is permanently disabled, is retrenched or absconds. Under the definitions in the definitions clause of the contract "job loss" means a client debtor who becomes or remains unemployed as a direct result of retrenchment or redundancy and is receiving no income directly or indirectly from any occupation or business activity. Under the policy the insured is Standard Chartered Bank and Uganda Revenue Authority employees who have taken loans with the bank and insured with Lion Assurance Company Ltd. On the other hand a client debtor is defined as Uganda Revenue Authority Staff who have taken out loans with Standard Chartered Bank. Paragraph 6 of the written statement of defence to which the insurance policy is attached avers that the policy was concerned with insurance against death and disability and not financial disability. I am not entitled to consider the WSD as the question of whether there is a cause of action is considered from the plaint alone.
I agree that the consent judgement deals with the liability of the plaintiff and obligations to pay. The defendants counsel submitted that a consent judgement can only be set aside on limited grounds. Secondly the plaint does not seek to set aside the consent judgement. Furthermore the argument is that the plaintiff paid some monies under the consent judgement and is estopped from turning around and challenging the terms of the consent judgement. Counsel submitted that the plaintiff cannot approbate and reprobate. The plaintiff is not contesting liability to the defendant but execution against him personally.
Something was said about the nature of the insurance policy to the effect that it is the credit institution which was being indemnified in case of the insurable risk happening. Apparently the plaintiff does not contradict or contest the effect of an insurance policy. In either case the plaintiff’s argument seems to be that execution proceedings should not be taken against him by the defendant. As to whether this contradicts the terms of the consent judgement requires an appraisal of the evidence of the insurance contract if any or the loan contract. The issue cannot be determined on the basis of the materials on record and purely based on pleadings.
I also agree with the plaintiff's counsel that this issue cannot be tried as a preliminary point of law. The plaintiff claims to have discovered the breach of contract after execution proceedings had been taken out against the plaintiff pursuant to the consent decree. There is therefore an arguable case based on the state of mind of the plaintiff at the time of execution of the consent judgement which could be tried. Consequently the averments subject to proof show that the plaintiff did not have knowledge about the alleged breach of the defendant at the time of executing the consent judgement. The defendant's argument that the plaintiff as a lawyer and represented by two reputable firms who ought to have known is an argument on the merits.
For the above reasons the plaintiffs plaint discloses a reasonable cause of action and therefore cannot be frivolous and vexatious and an abuse of the process of court. The issue of whether there is a case against the defendant would be a triable issue in which finally the defendant can conclusively submit about the rights of the parties and whether the suit was properly brought against the defendant. The question of whether in law this suit can be maintained against the defendant will be tried after evidence has been adduced. The plaintiff has averred that money was deducted for purposes of the insurance policy. It was appropriate for him to assume that the insurance policy had been taken. Moreover the insurance policy attached to the written statement of defence actually covers employees of Uganda Revenue Authority who took out loans with Standard Chartered Bank. The argument that the insurable risk did not include "financial disability" is an argument on the merits of the suit. The word "disability" can be subjected to interpretation after the plaintiff has been heard. In the premises the question of whether the plaintiff can maintain an action against the defendant will be tried as an issue after adducing evidence. Consequently the preliminary objections are overruled with costs in the cause.
Ruling read in open Court this 22nd of March 2013
Christopher Madrama Izama
Ruling delivered in the presence of
Kizito Sekitoleko for the plaintiff
Plaintiff in court
Asiimwe Ronald for defendant
No representative of defendant in court.
Charles Okuni: Court Clerk
Christopher Madrama Izama
22nd March 2013