THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCEOOAJEOUS APPLICATION NO 131 OF 2013

[ARISING FROM HIGH COURT CIVIL SUIT NO 395 OF 2012]

1. MICHAEL OKELLO ODONGO ISAAC}
2. STANDARD HIGH SCHOOL LIRA LTD}..................................... APPLICANTS

VERSUS

ARVIND PATEL}............................................................................ RESPONDENT

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA

RULING

The Applicants filed this application under order 9 rule 12 and order 9 rule 27 of the Civil Procedure Rules by notice of motion under order 52 rules 1 and 3 of the Civil Procedure Rules and section 98 Civil Procedure Act for orders that the judgement and decree in civil suit number 395 of 2011 is set aside, for execution of the decree issued on 24 November 2012 be stayed or set aside and costs of the application be provided. The application is supported by the affidavit of the 1st applicant. The applicant raises three grounds in the notice of motion. The first ground is that the applicants were never served with the summons and plaint in the main suit and white thereby prevented from filing a defence to the suit. The second is that the applicants have a good defence to the suit as there is no money due and owing from the applicants to the respondent. Lastly that it is just and equitable that the judgement and decree issued by the court in civil suit number 395 of 2011 be set aside and execution of the decree dated 24th of November 2011 is stayed or set aside.

The affidavit of the first applicant is that he is a director of the second applicant and on 21 March 2011 he approached the respondent was a non-moneylender and obtained the loan advance of Uganda shillings 28,000,000/=. He duly paid the loan by way of deposit into the respondents account at Bank of Baroda account number 95020400000082 according to the deposit slips attached the affidavit as A, A1, A2,and A3. Consequently he was surprised to learn from the respondent that he had instituted a suit in the court against him in civil suit number 395 of 2011 recover the loan advance he had already paid. It was further surprised to learn from the court record that the respondent had obtained a judgement and decree had been issued against him and the second applicant for the sum of Uganda shillings 55,565,568/=. He avers that the second applicant and him himself one of us out with summons and plaint in civil suit number 395 of 2011 and were prevented from filing a defence to the suit. Upon perusal of the court record he came across the affidavits of one Godfrey Ssebuuma which he says attaches a forged stamp of the second applicant as well as a forged signature of the deponent. That there is a good defence to the suit as there is no money owing to the respondent. It contends that it is just and equitable that the judgement and decree passed by the court is set aside and execution stayed and set aside.

The affidavit in reply is sworn by Arvind R Patel, the respondent to the application affirmed as follows. The applicants approached him for a friendly loan of Uganda shillings 28,000,000/=. By a written agreement he advanced the sum which was to be refunded by 21st of May 2011 failure for which the applicants would pay an additional loss of income of 20% per month according to clause (C) of the agreement. This explains the sum of Uganda shillings 55,565,568/=. The applicants defaulted in payment and despite several reminders by phone calls and letters neglected to pay. The respondent commenced civil suit number 395 of 2011 on 18th of October 2011. His lawyers Kaggwa and Kaggwa advocates sent a process server on the 31st day of October 2011 one Godfrey Ssebuuma who travelled to leader and was introduced and shown the whereabouts of the applicants. The process server went to the office of the defendants and formed the first applicant was also the chairman and board of directors of the second defendant/applicant. The first applicant read through the documents and acknowledged receipt on his behalf and on behalf of the second defendant. On the documents namely the summons he stated his intention to pay and settle the matter. The first applicant however neglected to pay. Consequently the respondent obtained a judgement in default of filing a defence and extracted a Bill of costs which was taxed. The respondent has kept in touch with the applicants/defendants who kept promising to pay. He avers that he has been patient for almost 2 years and was surprised when he applied for execution and the applicants applied to stay execution alleging that they were never served. Secondly delegation that the stamp and signature were forged is false. Finally the applicants have no defence and the sum of money claimed is still due and owing.

The first applicant filed an affidavit in rejoinder in which he stated that the loan advanced to him was advised by a moneylender included the principal sum of Uganda shillings 20,000,000/= with interest of 8,000,000/= bringing the total of Uganda shillings 28,000,000/=. The respondent gave him a cheque for Uganda shillings 20,000,000/which was banked on his account on 24th of March 2011. The Uganda shillings 8 million was the interest charged on the principle at 20% per month which in the agreement was termed loss of income. The applicants have to get paid 34,000,000/= on the basis that the respondent insisted that an additional Uganda shillings 6,000,000/= is interest for the delay in payment of the entire sum. The parties had several meetings in which the respondent acquiesced to the delay in payments. By the time of institution of the suit in October 2011 the respondent had received 16,000,000/= from the applicant but misrepresented in court that the applicants are not paid a single cent towards discharge of the loan. By the time the respondent obtained judgement and extracted a decree for Uganda shillings 55,000,000/= on 24th of November 2011, he had already received from the applicants Uganda shillings 22,000,000/=. He however with held this information from the court. The respondents conduct in obtaining judgement and extracting a decree of Uganda shillings 55,000,000/= was manifestly unfair, unjust and an abuse of the process of court amounting to fraud. Further payments are made to the respondent on 10 February 2012, 22nd of May 2012, 14 December 2012 and 8 August 2012 bringing the total amount paid to Uganda shillings 34,000,000/=. Last but not least the act of having the suit transferred for execution even after receiving an amount of Uganda shillings 34,000,000/= was dishonest and an abuse of the process of court.

At the hearing of the application, the applicant was represented by Counsel Lenard Ote while the respondent was represented by Counsel David Kaggwa. Counsels opted to address court in written submissions.

The submissions of the applicants counsel is that the applicant has a good defence to the suit as there is no money due and owing to the respondent. Counsels contention is based on the averments of fact from the first applicant that the loan agreement was in advance of Uganda shillings 28,000,000/= and the applicants have to date paid a total sum of Uganda shillings 34,000,000/=. By the time the suit was filed the respondent had received the sum of Uganda shillings 16,000,000/= which was concealed from the court. A of obtaining judgement and decree on 24th of November 2011 the respondent had received an additional 6,000,000/= making it the total of Uganda shillings 22,000,000/= which fact was concealed from the court. By the time of filing this application the respondent had received Uganda shillings 34,000,000/= from the applicants by the respondent went ahead to send the file to the execution division for execution of the decree. Consequently counsel contends that the acts of the respondents were an abuse of the process of court. Secondly the conduct of the plaintiff/respondent wanted to fraud which means an act of dishonesty according to Black's Law Dictionary 9th edition. The facts conceived from the court went to the root of the decree/value thereof.

Secondly counsel contended that the transaction that the respondents sought to enforce through the court process was an illegal contract according to section 11 and 12 of the Money Lenders Act cap 273 which illustrates interest chargeable in such transactions to 24% per annum or 2% per month. The agreement provides for loss of income chargeable at the rate of 20% per month however it was actually interest chargeable. Counsel submitted that a court of law cannot sanction what is illegal and illegality once brought to the attention of the court overrides all questions of pleading, including any admissions made thereon as held in the case of Makula International Ltd versus His Eminence Cardinal Nsubuga Wamala [1982] HCB at page 11.

Counsel also submitted that order 9 rule 12 gives the court wide and unfettered discretion set aside ex parte judgments.

The loan amount of Uganda shillings 28,000,000/= as being satisfied in full by payment of Uganda shillings 34,000,000/= by the fact was concealed from the court.

Counsel also adopted submissions for the prayer to stay execution and have the decree set aside.

In reply the respondents counsel the applicants acknowledged signing the agreement between the parties for the advance of Uganda shillings 28,000,000/=. There was a valid and binding loan agreement between the parties. In the absence of fraud or he will misrepresentation the applicants are bound to abide by the terms of the agreement. By 21st of May they had not paid and were in breach of the agreement and liable to pay the outstanding sum and loss of income. Clause C of the agreement provides that in case of failure to pay the creditor, the creditor and borrower agreed that the money shall attract loss of income on blocked working capital at the rate of 20% per month from the date of default until the final settlement.

The respondents counsel further submitted that delegation that the respondent is a moneylender and should be bound by the Money Lenders Act are futile and baseless. Lending money does not make the respondent in moneylender. The burden was on the applicant to prove that the respondent was a moneylender. Additionally the money was not advanced on any interest.

Civil suit number 395 of 2011 was filed after the breach of contract and hence the suit for recovery of money including loss of income which was three months after the said breach. The suit was therefore not brought in bad faith as alleged by the applicants.

In rejoinder the applicants counsel submitted that the evidence that the respondent was a known moneylender has not been contracted. As far as the contractual effect of the loan agreement is concerned, counsel reiterated arguments that it was an illegal contract and unenforceable in law. Counsel further added that the agreements admission in evidence a bunch to an illegality for reason of non-payment of stamp duty. He relied on section 2 of the Stamps Act. Under section 42 no instrument chargeable with stamp duty shall be admitted in evidence for any purpose by any person unless the instrument is duly stamped.

Secondly the respondent has not commented on the receipt of Uganda shillings 34,000,000/= detailed the in the applicants submissions therefore the applicants have a meritorious defence to the respondents suit.

The second ground is that the applicants were never served with summons and plaint in civil suit number 395 of 2011 and were prevented by sufficient cause from filing a defence to the suit.

The applicant’s case is that the acknowledgement of service has a forged signature and forged stamp of the first and second applicant's respectively. Counsel pointed out the difference between the stamp on the acknowledgement and that on the loan agreement. The difference between the two stamps is that one is rectangular and another one is nearly circular. Secondly the signatures on the purported acknowledgement and that in the loan agreement are different. Thirdly the return of service was acknowledged at the back of the summons and bears a personal note purportedly from the first applicant. The discrepancies coupled with the respondent/plaintiff's conduct of this suit casts suspicion on the affidavit of service. Counsel submitted that under order 9 rule 27 of the civil procedure rules the court is empowered to set aside the decree which was passed were the summons was not duly served.

In reply the respondent's counsel relied on the affidavit of service for the submission that the applicant was served with summons in the presence of one Bua Akol who identified the first applicant and helped locate him. The first applicant is a director in the second applicant on whose behalf he acknowledged service. The handwritten notes behind the summons a written in the handwriting of the first applicant which handwriting was similar to other documents attached and referred to. The allegation that the signature was forged was denied and is futile as the handwriting and signature belongs to the first applicant. The process server was required under order five rules 16 of the civil procedure rules to file an affidavit of service which was proof of service. The allegation that there was want of service is being raised two years after waiting for the applicants to pay and promises that they would pay.

Finally on ground three learned counsel submitted that it is just and equitable that the judgement and decree is stayed and set aside under section 98 of the civil procedure act which empowers the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of court.

Ruling

The first question to be considered in this application is whether the applicants were duly served with summons.

Summons was issued on 18 October 2011 for service on the applicants. Proof of service is contained in the affidavit of Godfrey Ssebuuma, sworn at Kampala on 10th of November 2011. According to paragraph 3 thereof on 31 October 2011 he went to the defendant's offices located in Lira town to effect service of summons and plaint. He found the first applicant who is the chairman of the board of directors of the second defendant present and introduced himself and the purpose of his visit to the offices and then served him with summons and plaint. He read through the documents and acknowledged receipt of the same on behalf of the second defendant by appending his signatures and school stamp on the document.

The applicant alleges that the stamp was forged and so was the signature. Annexure "A" to the affidavit of the respondent attaches the loan agreement. The signature of the first applicant on the loan agreement is next to a stamp of the chairman of the Board of Directors Standard High School PO Box 358 Lira. The stamp is rectangular. The stamp on the back of the summons is that of the chairman Board of Directors standard high school Lira. The stamp is however oval in shape and completely different. There is no explanation as to why the chairman should have two different stamps. The loan agreement attached to the affidavit of the responding annexure "A" has got a second feature which needs to be investigated. The agreement was made on the 21st day of March 2011 and is in the names of three juridical persons and the respondent. These are Michael Okello, Odongo Isaac and Standard High School on the one hand and Mr Arvind R. Patel on the other hand. The two pairs of names namely of Michael Okello and Isaac Odongo are separated by a comma. The separation suggests strongly that they are the names of two persons.  This appears at page 1 of the loan agreement. The signatures of the parties appear at page 2. The first signature is against the name: Michael Okello. The second signature is against the name Isaac Odongo. Finally the third signature is signed on behalf of the chairman Board of Directors Standard High School. The affidavit of service paragraph 4 thereof indicates that the process server found Mr Okello Michael Odongo Isaac. This is clearly a reference to one person. Why does the loan agreement separate Okello Michael and Odongo Isaac by making separate signatures against each pair of names? The affidavits in rejoinder attach some documents. Annexure "B" is account number 95090100001118 in the names of Okello Michael. Annexure "B1" is a deposit of 4,000,000/= indicating that it was deposited by Odongo Isaac. On the other hand the affidavit in support of the application is that of Michael Okello Odongo Isaac. Annexure "A" is a deposit slip in the names of the respondent and deposited by Okello Michael. Annexure "A1" is also deposited by Okello Michael. Annexure A2" is also deposited by Okello Michael. So is annexure "A3". Possibly the mistake could have been made by counsels for the respondent when they drafted the loan agreement. As indicated earlier annexure "A" to the affidavit in reply to the application and page 2 thereof separates Okello Michael and Odongo Isaac leaving two separate places for two different signatures. I have further considered the telephone numbers on the deposit slips attached to the affidavit in support of the application and another affidavit in rejoinder. In the affidavit in support of the application the deposit slips making deposits on the respondent’s account are made by Okello Michael whose contact is written as telephone number 0772655860. The telephone number of Odongo Isaac on the other hand is 0772356232 on deposit slip annexure "B1" to the affidavit in rejoinder. This was a deposit in the bank of Baroda Lira branch. A deposit in crane bank on account of the respondent by Michael Okello retains the phone number 0772655860. The clear evidence is that the telephone number of Michael Okello is different from the telephone number of Isaac Odongo. The possibility that counsels who drafted the loan agreement and made separate signatures for the two apparently separate personalities, made a mistake, has become more remote by reason of the above evidence.

The original of the acknowledgement and particularly the handwritten notes is written in the plural as far as the persons writing it is concerned. There is no clear explanation about the anomaly in the different stamps and the separation of the first applicant into two persons in the loan agreement. Does that explain the two different stamps? Under order 9 rule 27 of the Civil Procedure Rules where a decree is passed ex parte against the defendant he or she may apply to the court by which the decree was passed for an order to set aside if he or she satisfies the court that summons were not duly served. The anomalies indicated above raise a strong suspicion that summons were not duly served.

In the circumstances I am satisfied on the balance of probabilities that summons were not duly served. Consequently the decree passed ex parte against the applicants is hereby set aside.

The decree having been set aside, execution proceedings shall lapse. The applicants shall be served afresh with summons to file a defence. Having found that summons was not duly served on the applicants, there is no need to consider the rest of the grounds argued in this application.

The costs of the application shall abide the outcome of the main suit.

Ruling delivered in open court the 26th day of April 2013.

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Nakibenge Mike Walugembe holding brief for Lenard Ote Counsel for the applicant

Christopher Madrama Izama

Judge

26th of April 2013