THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION No. 482 of 2013

(ARISING OUT OF CIVIL SUIT NO. 290 OF 2013)

BALINDA COLLINS :::::::::::::::::::::::::::::::::: APPLICANT/ DEFENDANT

VERSUS

HIGENYI RONALD :::::::::::::::::::::::::::::::::::: RESPONDENT/PLAINTIFF

BEFORE:   HON JUSTICE B. KAINAMURA

RULING

The applicant, Balinda Collins, brought this application under the provisions of Order 36 rules 1, 2 and 3 of the Civil Procedure Rules. The applicant seeks orders for;

1. Unconditional leave to appear and defend Civil Suit No. 290 of 2013.
2. Costs of the application in the cause.

The application was supported by the applicant’s affidavit dated 14^th June 2013. The respondent filed an affidavit in reply deponed by the respondent dated 3^rd February 2014. The applicant filed an affidavit in rejoinder dated 10^th February 2013.

Briefly the facts upon which the main suit was based were that the applicant received UGX 82,500,000/= advanced to him as a loan by the respondent on or about the 14^th day of January 2013. That the money was then used to boost the capital contribution in PEU DE BALI BAR situated in Lungujja, Kampala. The respondent later paid UGX 1,500,000/= and undertook to pay the balance of               UGX 81,000,000/= in instalments. The respondent has since paid       UGX 1,500,000/= leaving a balance of UGX 79,500,000/= which has remained outstanding to date. The respondent then filed Civil Suit No. 290 of 2013 Under Order 36 CPR. The applicant now brings this application for unconditional leave to appear and defend that suit.

In the affidavit in support of this application, the applicant neither denied receipt of the said money nor dealing with the respondent. However, his defence is that the money advanced to him was on account of the company; therefore the claim should be against PEU DE BALI LTD. He stated that it is in the interest of justice that the court should allow this application.

The respondent filed an affidavit in reply in which he stated that the applicant’s affidavit in support was riddled with falsehoods and half truths thereby rendering the application a perversion of justice. It was his reply that sometime in January 2013 the applicant approached him with a view of selling to him some shares or stake in his company called PEU DE BALI LTD. That the applicant explained to him the need to inject cash into the business for expansion of bar and restaurant located at Lungujja, Kikandwa, Rubaga Division.

 He further stated that the applicant gave him two options; the first was to buy shares worth of UGX 100, 000,000/= in the company or in the alternative lend funds to the applicant in his individual capacity so as to inject it in the business. The respondent then gave him a loan of UGX 82, 500,000/= and later on the 21^st of March 2013 they arrived at a payment schedule on how to repay the money. This undertaking was made by the applicant personally. Additionally, the respondent averred that there was no proof of any Company resolution filed by PEU DE BALI LTD on record or before the receipt of the funds authorising the borrowing money on its behalf.

The respondent further stated that the applicant has no valid defence to the suit. That the application does not disclose a triable issue in the main suit and the applicant should therefore not be granted the unconditional leave to appear and defend.

In rejoinder, the applicant reiterated that the money was advanced to him in consideration of shares. Furthermore that he received the money in the capacity of a director to further the business activities of the company. He thus maintained that he had a plausible defence and should therefore be heard in the main suit.

The applicant was represented by Mr. Semakula Muganwa while the respondent was represented by Mr. Mugasi. Counsel addressed court in written submissions.

Counsel for the applicant first set out the brief facts, that the applicant as Director and Officer of the Company received the sum of UGX 82,500,000/= from the respondent on behalf of the Company PEU DE BALI LTD and not in his individual capacity. He cited the case of Peter Bibagamba Vs Fulgence Mungereza and Nile Mining Limited Misc App. No. 103 of 2012 where Obura J restated the principle in Maluku Interglobal Trade Agency Ltd Vs Bank of Uganda [1985] H.C.B 65 where it was held that before leave to appear and defend is granted, the defendant must show by affidavit that there is a triable issue of law or fact. He further stated that in the case of Kotetcha Vs Mohammed [2002] 1 EA 112, court held that where a suit is brought under summary procedure on a specially endorsed plaint, the defendant is granted leave to appear and defend if he is able to show that he had a good defence on merit, or that there is a point of law involved; or a dispute as to the facts which ought to be tried; or a real dispute about the amount claimed which requires determination, or any other circumstances  showing reasonable grounds of a bonafide defence.

Furthermore, Counsel argued that in determining whether there is a plausible defence, court has a duty to study the grounds raised and be certain that if the facts alleged by the applicant are established, there would be a plausible defence. Referring to the case of Abubakar Kato Kasule Vs Tomson Muhwezi [1992-93] H.C.B 212, Counsel submitted that there is an established principle that the applicant is not bound to show a good defence on the merits of the case but should satisfy court that there is an issue or question in dispute between the parties which court ought to investigate.

Counsel submitted that the applicant was not denying the receipt of the monies advanced by the respondent; however the question lies on whether the applicant received the money in his individual capacity or as an officer of the company. He argued that specifically in the deed of acknowledgement, the involvement of PEU DE BALI BAR cannot be ignored as it is a business of PEU DE BALI LTD. He argued that these are facts that need to be investigated. Counsel referred to the words “an issue” which according to Webster’s dictionary at page 677 is defined as the point in question between parties to an action. Counsel argued that the matter and issue in the case can only be resolved by hearing the parties and determining the merits of the case. Counsel also cited the case of Zola Vs Ralli Brothers Ltd [1969] EA 691 which was cited with approval in Begumisa George Vs East African Development Bank M.A NO.451 Of 2012. where the East African Court of Appeal stated inter alia that “if the judge to which application is made considers that there is any reasonable ground of defence to the claim, the plaintiff is not entitled to summary judgement”.

In conclusion, cited the case of Republic Motors Ltd Vs Atlantic Decorators and General Construction [1982] H.C.B 104 for the holding that a defendant in a summary suit that desires to defend the suit must first obtain leave to appear and defend. It was his submission that the court grant him leave to appear and defend on grounds that there is a triable issue of fact that ought to be heard between the parties and adjudicated upon. He further stated that there was a plausible defence against the plaintiff’s claim as it is brought against the wrong party. It was his submission that the prayers in the Notice of Motion should be granted.

In his submissions Counsel for the respondent stated that it was true a sum of UGX 82,500,000/= was advanced by the respondent to the applicant. He however disputed the assertion by the applicant that the money was not received in his personal capacity but was in the company’s interest. Counsel broke down his submissions in form of issues which included;

1. Whether the sum received by the applicant from the respondent of UGX 82, 500,000/= was a loan to PEU DE BALI LTD and not the applicant in his personal capacity.
2. If the said sums were advanced to PEU DE BALI LTD; whether the same was capital contribution for the acquisition of shares in PEU DE BALI LTD by the respondent;
3. Whether the applicant is liable for the repayment of the loan aforesaid;
4. Whether the application raises a triable issue(s) of fact or law or a good defence on the merits and or a dispute or question which ought to be tried.

The first to third issues were co-currently addressed by Counsel who found them similar and analogous. Making reference to paragraphs 17-20 of the applicant’s affidavit in reply, Counsel submitted that the application falls short of any merit and has not demonstrated a plausible defence. He further argued that whereas the respondent was approached by the applicant to buy shares in the company, the offer was out rightly declined. This meant the money was lent to the applicant in his personal capacity. Furthermore, that the applicant willingly and voluntarily undertook to repay the loan according to the terms agreed with the respondent and that there was evidence of this in paragraphs 7-16 of the affidavit in reply and annextures ‘’A’’ and ‘’B’’.

On the question of receipt of money on behalf of the company as capital contribution Counsel argued that this was unfounded and neither backed by any evidence nor the Companies Act or principles of company law. Referring to Sections 71, 73 and 80 of the Act Counsel argued that there has to be a resolution, accompanied by share transfer forms or certificate which must be registered with the Registrar of Companies. He asserted that this application was a ploy to deprive the respondent a summary judgment on the liquidated sum.

Submitting on the law regarding summary judgments, Counsel cited the case of Zola Vs Ralli Brothers Ltd [1969] E.A 691 at page 694 where it was held that Order 35(now Order 36 of the CPR) is intended to enable a plaintiff entitled to a liquidated claim to which there is no good defence, to obtain a quick, summary judgment without being unnecessarily denied what is due to him by the delaying tactics of a defendant. Additionally, he cited the case of Corporate Insurance Co. Ltd v Nyali Beach Ltd [1995-1998] E.A 7 where it was held that leave to appear and defend will not be given merely because there are several allegations of fact or law made in the defendant’s affidavit. Counsel argued that the applicant should satisfy court on the allegations so raised that they amount to reasonable ground for defence of the suit. It was Counsel’s argument that the applicant had not proved the allegation that the money was received on behalf of the said company which is clearly controverted by the absence of any company resolution or share transfer forms or certificates as required by the Companies Act. Counsel also cited Section 91 of the Evidence Act Cap 6 and contended that oral evidence cannot be brought to challenge evidence in writing. Counsel argued that the annextures C and D cannot be coutroverted because they were voluntarily executed by the applicant. Counsel cited the case of Lisseden Vs Bosch (1940) A.C 412 at 417 where Lord Maugham stated that it is settled law that in law a person is not allowed to take the benefits under an instrument and at the same time disclaim liability imposed by the same instrument.  

In conclusion, Counsel submitted that the application should be dismissed with costs to the respondent and judgment entered as claimed in the summary plaint, since the applicant has failed to demonstrate any plausible defence or issues to warrant a trial on the merits.

In the alternative, Counsel submitted that should court be inclined to grant the leave to appear and defend them the court should grant conditional leave to the applicant. He cited the East African case of Kundal Restaurant Vs Devshi & Co. [1952] 19 EACA 77 where court stated that where there is good ground for believing that the defence is a sham, leave will be given subject to payment of the money in to court.

In rejoinder Counsel for the applicant responded to the four issues raised by the respondent’s counsel. He addressed issue four first which was; whether there was a triable issue of fact or law by stating that as stated in the case of Maluku International Trade Agency Ltd Vs Bank of Uganda [1985] HCB 65 the defendant is not bound to show a good defence on the merits but satisfy court that there is an issue or question in dispute which ought to be tried. Counsel reiterated his earlier submission that the defendant had a good defence upon which the applicant should be granted unconditional leave to appear and defend. He also added that the money was not received in personal capacity but on behalf of the company, which money was used to put up infrastructure of the company. In conclusion Counsel stated that the application raises triable issues which need judicial consideration before court can make its decision.

In response to issues 1, 2, and 3, Counsel on the question whether the UGX 82,500,000/= was received by the applicant as an individual or on behalf of the company, stated that the demand for more evidence at this level/ stage of the case is not necessary and a misconception of the law relating to leave to appear and defend. Counsel thus prayed that leave to appear and defend be granted.

Ruling

This application was brought under Order 36 rule 3 (1) (4)CPR. It is an agreed fact by both parties that the applicant received               UGX 82,500,000/= as a loan from the respondent. The contention lies in the fact that the applicant denies liability for the debt stating that he received the monies in the capacity of a company officer of PEU DE BALI LTD and not in his individual capacity as alleged.

The claim is one of a liquidated demand. Black’s law dictionary defines a liquidated amount as a figure readily computed, based on an agreement’s term. In the case of Yiga Simon Vs Fina Bank HCT- 00 – 0058 – 2012, Obura J stated that;

“a liquidated demand is in the nature of a debt, a specific sum of money due and payable under or by virtue of a contract which is either already ascertained or capable of being ascertained as a mere matter of arithmetic.”

 There is a clear cut agreed fact that the UGX 82,500,000/= was advanced to the applicant. The respondent/plaintiff claims in the specially endorsed plaint UGX 79,500,000/= in arrears from the payments the applicant made so far. The claim is one of a liquidated amount since the monies in arreas are ascertained. More to this is the fact that there is a contract between the two parties as denoted in the payment schedule between the applicant and respondent marked annexure ‘’B” to the plaint. This in my view satisfies one of the conditions for granting a summary judgment as provided for under Order 36 CPR and the case of Yiga Simon (supra)

The applicant is enjoined to prove that there is a bonafide triable issue in order to be granted unconditional leave to appear and defend. Counsel for the applicant cited the case of Kotetcha Vs Mohammed [2002] E.A 112 where it was held that where a suit was brought under summary procedure on a specially endorsed plaint, the defendant is granted leave to appear and defend if he is able to show that he had a good defence on merit, or that a difficult point of law is involved; or a dispute as to the facts which ought to be tried; or a real dispute as to the amount claimed which requires taking an account to determine; or any other circumstance showing reasonable grounds of a bonafide defence. He also cited Kato Kasule Vs Tomson Muhwezi [1992-93] H.C.B 212 where it was held that there should be a plausible defence ascertained by court upon consideration of the grounds and facts raised by the applicant. Counsel stated that it was not in dispute that the respondent advanced a sum of UGX 82,500,000/=. What was in contention was the beneficiary of the sum.

Counsel for applicant argued that the beneficiary of the loan was the company – PEU De BALI LTD which was liable to pay the same.  

I have considered the arguments of both counsel and find no plausible defence available to the defendant/applicant. The common law principle of privity of contract set out in the case of Tweedle Vs Atkinson (1861) 1 B & S 393 as cited in Chitty on Contracts 28^th Edition volume 1, at page 969 is to the effect that;

“privity of contract means and only means that a person cannot acquire rights, or be subjected to liabilities, arising under a contract to which he is not a party”.

The facts and evidence show that the sum claimed was indeed received by the applicant and the Company which was not privy to the contract cannot be pursued. I have carefully considered the evidence on record especially annextures A and B attached to the specially endorsed plaint. Whereas both the acknowledgement receipt and payment schedule begin thus; ‘’I Balinda Collins…………………,’’ the applicant states that it was on behalf of the company that the money was received. The applicant’s name appears in both documents and if indeed he was acting as an officer of the company then this should have been clearly disclosed.

Additionally, Iam persuaded by the respondent counsel’s submission that if it were for the company that the applicant was acting for, there would be at least evidence of a resolution registered or some other proof since a company is a legal person and has criteria to be followed in making such decisions like increase of capital. More to that, section 91 of the Evidence act gives documentary evidence more weight as compared to oral evidence. I see no evidence availed to defeat the privity of contract rule and exempt the applicant from personal liability. Both the annextures A and B are evidence of the commitment that the applicant made for himself. They therefore point to the fact that the applicant is liable to pay the outstanding sums. Iam very much alive to the fact that on the acknowledgement receipt dated 14^th January 2013, and signed by the applicant and respondent, there is a phrase stating;

‘’ …….in lieu of monetary funding sought to boost capital contribution of PEU DE BALI Bar.’’

This phrase however is vague and cannot lead to the conclusion that the Company was the one borrowing.

I am of the view since it is the applicant who personally received the money and entered into an agreement with the respondent, he should be the one to bear the burden of repayment.  

In the result I find that the application is devoid of merit and leave to appear and defend is denied.

Judgment in Civil Suit No. 290 of 2013 is entered for the plaintiff/respondent as prayed with costs in this application and the suit. 

B. Kainamura

Judge

14.08.2014