THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL COURT  DIVISION)

MISCELLANEOUS APPLICATION NO. 28 OF 2013

(Arising from Civil Suit No. 356 of 2010)

FRANCO MUGUMYA:::::::::::::::::::::::::::::::::::::::::::::::APPLICANT

VERSUS

TOTAL (U) LTD ::::::::::::::::::::::::::::::::::::::::::::::::::::::RESPONDENT

BEFORE HON. LADY JUSTICE HELLEN OBURA

RULING

This application was brought under Order 36 rules 10 and 11, Order 9 rule 9, Order 52 rules 1 and 2 of the Civil Procedure Rules (CPR) and Section 98 of the Civil Procedure Act (CPA) for orders that:

1. The Ex parte Judgment/Decree dated 6^th November 2012 and subsequent memorandum in execution process reached on 24^th December 2012 in Civil Suit No. 386 of 2012 be set aside and/or stayed.  
2. The applicant be allowed to file a defence.
3. Costs of this application be provided for.

The grounds of this application are contained in the notice of motion and the affidavit in support to the application deposed by the applicant. The gist of those grounds is that the applicant was arrested and committed to civil prison yet his application to set aside the exparte decree had been fixed for hearing. The applicant avers that he was only released upon signing a memorandum of understanding which is tainted with fraud. The applicant further avers that he has a good defence to the whole claim.

The respondent opposed the application based on the grounds stated in the affidavit in reply deposed by Mr. Faustine Mugisha, the respondent’s Retails Sales Manager. The respondent also filed two additional affidavits deposed by Kiwanuka Lawrence and Batabaire Joshua. In response to those affidavits, there are three affidavits in rejoinder deposed by Mugisha Rowland, Col. Godfrey Muhame and Mr. Franco Mugumya, the applicant.

The facts giving rise to this application are that upon the respondent’s termination of his dealership license the applicant’s indebtedness to the respondent was found to be Ug. Shs. 51,480,469/=. On that basis the respondent instituted a summary suit against the applicant and summons was served by way of substituted service in the New Vision newspaper of 16^th October 2012. The applicant did not apply for leave to appear and defend the suit within the prescribed time. Consequently, a decree was entered in the respondent’s favour. The applicant then filed an application to set aside the decree together with the warrant of his arrest. At the time of filing that application the execution process had already commenced and the applicant was subsequently arrested and committed to civil prison. Following a memorandum of understanding reached between the parties, the applicant was released from civil prison. It is now the applicant’s contention that that memorandum of understanding is tainted with fraud and should be set aside together with the decree and the applicant be granted leave to appear and defend the suit.

When this matter came up for hearing Mr. Edward Sekabanja represented the respondent while Mr. Abaine represented the applicant. Both counsel filed written submissions in the matter which are considered in this ruling.

The issues for determination as framed by the applicant are;

1. Whether the application discloses a good cause to warrant setting aside of the decree.
2. Whether there are triable issues justifying the grant of leave to appear and defend the suit.

Regarding the first issue, counsel for the applicant submitted that good cause means sufficient cause and relied on Nicholas Roussos vs Gulam Hussein Habib Virani  & Another SCCA No. 9 of 1993 for the grounds which amount to sufficient cause as including mistake of advocate though negligent. He argued that there is good cause since on 7^th December 2012 the applicant filed Misc. Application No. 757 of 2012 through his then lawyers M/s Lukwago & Co. Advocates which was fixed for hearing on 28^th January 2013 but the applicant’s former counsel failed to serve the respondent by the time of execution. It is the applicant’s contention that the same was a mistake of counsel since the applicant was diligent enough to instruct his counsel to file and prosecute the application.                 

Additionally, the applicant’s counsel relied on the case of Peter Mulira vs Mitchell Cotts CACA No. 5 of 2002 where it was held that a consent judgment may not be set aside except for fraud, collusion or for ignorance of material facts and argued that there was dishonesty, duress and undue influence whose effect vitiates the agreement entered by the parties. It is the applicant’s contention that he signed the agreement acting under the mercy and influence of the court bailiff and respondent’s lawyer which is why he is contesting it now.

In response, counsel for the respondent submitted that the case of Nicholas Roussos vs Gulam Hussein Habib Virani & Another (supra) has been cited out of context since it was the litigant who did not instruct counsel to apply for leave to appear and defend the suit after summons had been served on him and therefore filing Misc. Application No. 757 of 2012 months after the judgment had been entered was not mistake of counsel.  The respondent’s counsel also argued that the principles outlined in the case of Peter Mulira vs Mitchell Cotts (supra) only apply to setting aside consent judgments and not to the present application seeking to set aside a summary judgment.

Without prejudice to the above argument, it was submitted for the respondent that the applicant does not disclose in his affidavit any fraudulent conduct by the respondent and/or its agents save for the allegation that he was arrested shortly before Christmas and was not represented by his advocate when the bailiff picked him from prison and made him to sign a memorandum of understanding. It is the respondent’s contention that absence of the applicant’s lawyer at the time of signing the said memorandum cannot be construed as fraud on the part of the respondent since the respondent was not obliged to advise the applicant whether or not to seek legal representation at the material time. Counsel for the respondent also submitted that the applicant had a  right to object to the memorandum of understanding while before the Deputy Registrar, Execution Division but he did not do so implying that he was in agreement with all the terms therein.

Furthermore, counsel for the respondent contended that the affidavits in rejoinder of Mugisha Rowland and that of Col. Godfrey Muhame contain falsehoods which render them incompetent, unreliable and should be disregarded since the applicant was duly represented by a senior army officer at the rank of Colonel who ought to have objected to the signing of the memorandum in the absence of their counsel if indeed that was necessary.

In rejoinder, the applicant’s counsel submitted that the memorandum of understanding formed a new agreement between the parties and by the fact that it was endorsed by court it is construed as a consent judgment and therefore the principle of setting aside of consent judgments outlined in the case of Peter Mulira vs Mitchell Cotts (supra) do apply to the instant case.  He also maintained that there was fraud on the part of the respondent as shown by the actions of the court bailiffs in presenting to the applicant, his wife and guarantor the last pages of the consent memorandum and personal guarantee and convincing them to sign with a reason that the additional documents of the consent were still being typed as it was the last working day to Christmas.

The applicant contended that the respondent’s act of not reconciling any books of account with the applicant when a deduction of Ug. Shs. 32,812,661/= had been made from the applicant’s account from Old Kabusu petrol station on 19^th November 2012 constituted fraud since the entire decretal sum was demanded during execution without reconciliation of accounts. 

As regards the respondent’s contention that the applicant was duly represented by a senior army officer who ought to have objected to the signing of the memorandum in the absence of counsel, the applicant’s counsel argued that legal representation in court matters is by way of an advocate as provided for under Order 3 rule 1 of the CPR and not an army officer. He also pointed out that Muhame Colonel Godfrey is not even an army officer as Colonel is merely his name.

I have given due consideration to the pleadings and the supporting documents filed in this matter. I have also addressed my mind to the submissions made by both counsel. I must observe that there are three legs of this application. The first one is to do with the decree entered under the provisions of Order 36 rule 3 of the CPR, the second one is in respect of the memorandum of understanding that was subsequently signed by the parties in execution of the decree and the third one concerns leave to appear and defend the suit. Order 36 rule 11 of the CPR is the law applicable in an application to set aside a decree entered under the provisions of Order 36 rule 3 of the CPR.  I will therefore focus on that rule for purposes of determining whether the decree should be set aside.  Under Order 36 rule 11 of the CPR before the decree is set aside this court must be satisfied that either service of summons on the applicant was not effective or the applicant must show any other good cause that prevented him from applying for leave to appear and defend the main suit within the prescribed time.

Counsel for the applicant argued that there was good cause warranting the setting aside of the decree while the respondent’s counsel contended that no such good cause had been shown. Various authorities explain the phrase “sufficient cause” which is normally used interchangeably with the phrase “good cause” In the case of Rosette Kizito v Administrator General and Others [Supreme Court Civil Application No. 9/86 reported in Kampala Law Report Volume 5 of 1993 at page 4] it was held that sufficient reason must relate to the inability or failure to take the particular step in time. In Nicholas Roussos vs Gulamhussein Habib Virani & Another (supra) the Supreme Court of Uganda held that some of the circumstances which may amount to sufficient cause include mistake by an advocate though negligent, ignorance of procedure by an unrepresented defendant and illness by a party.

For this first leg of the application to succeed the applicant has to state a justifiable reason why he did not take the necessary action by filing an application for leave to appear and defend the suit. The applicant in his affidavit in support contended that he was not served with the summons in summary suit. However, he never elaborated on it and his counsel did not also address it in his submission. Counsel instead based his arguments on the circumstances surrounding the execution of the decree and the failure of the applicant’s former counsel to serve Misc. Application No. 757 of 2012 on the respondent. According to him this constitutes good cause which warrants the granting of this application.

As regards the allegation of lack of service, there is an affidavit of service on record which shows that there was an attempt to serve the applicant directly with the summons but when he failed to turn up where they had agreed to meet with the process server and even switched off the mobile phone on which he was contacted, the respondent obtained a court order directing substituted service by advertising the summons in the newspaper and affixing a copy thereof the same on the notice board of this court. Another affidavit of service confirms that substituted service was effected as ordered and a copy of the newspaper in which the advertisement appeared was attached.

Substituted service is a recognized mode of service of process in accordance with Order 5 rule 18 (1) of the CPR. It is specifically provided in sub-rule (2) of rule 18 that substituted service under an order of the court shall be effectual as if it had been made on the defendant personally. Since substituted service in Civil Suit No 386 of 2012 from which this application arises was done under an order of the court, I find it effectual and I have no reason to hold otherwise since the applicant has not adduced any evidence to challenge it. I am therefore not satisfied that the applicant was not served with the summons as alleged.

As regards the other arguments on failure of the applicant’s former counsel to serve Misc. Application No. 757 of 2012 on the respondent at the time of execution, I have failed to fathom how it constitutes good cause for setting aside the decree in the instant case. I do not see any connection between the two as failure to serve an application to set aside a decree in default could not have prevented the applicant from filing an application for leave to appear and defendant the suit.  In any event, even if the application had been served on the respondent it would not have assisted the applicant in any way as an application to set aside a decree does not automatically stay execution of a decree.

Most importantly, good cause as defined in the authorities cited above must relate to the applicant’s failure to file his application for leave to appear and defend the suit within the time limit set by the summons. The above arguments for the applicant are misconceived as they do not in any way explain why the applicant failed to take the necessary action. The grounds upon which they are based are not helpful to support this leg of the application and for that reasons I do not find any sufficient cause for setting aside the decree. The first leg of this application therefore fails.

As regards the prayer to set aside the memorandum of understanding on the alleged ground of fraud, I will consider the now settled principles on setting aside a consent judgment because a memorandum of understanding is reached by consent of both parties. In this particular case it contains the terms of settlement of the decretal amount plus costs which the parties presumably agreed upon in execution and court endorsed it.

In the case of Attorney General and another v James Mark Kamoga & another Civil Appeal No. 8 of 2004 (2008) UGSC 4, Mulenga, stated at page 11 that unlike judgments in uncontested cases, consent judgments are treated as fresh agreements, and may only be interfered with on limited grounds such as illegality, fraud or mistake. He then stated thus at page 17:-

“It is a well settled principle therefore, that a consent decree has to be upheld unless it is vitiated by a reason that would enable a court to set aside an agreement, such as fraud, mistake, misapprehension or contravention of court policy. This principle is on the premise that a consent decree is passed on terms of a new contract between the parties to the consent judgment. It is in that light that I have to consider the consent decree in the instant case”.

In the instant case, the applicant’s reason for alleging fraud, duress and undue influence are firstly, that he signed the memorandum of understanding on Christmas Eve when courts were going for a long vacation and so he had no choice but to sign it. Secondly, that he had no legal representation at the time of signing the memorandum of understanding as his lawyer was not aware of the same. Thirdly, that he was made to sign the last page of the memorandum of understanding without looking at the amount stated therein.

Upon thoroughly perusing all the affidavits and the documents as well as reviewing the submissions, I find the allegation of fraud, duress and undue influence unsubstantiated. The chronology of events does not support the argument that there was dishonesty in the timing of the applicant’s arrest, committal to civil prison and subsequent release upon a memorandum of understanding being signed. This is because the summary suit was filed on 10^th September 2012 and substituted service was done on 16^th October 2012. The decree was entered on 6^th November 2012 and the bill of costs was taxed and allowed on 8^th November 2012. On the 14^th of November 2012, counsel for the respondent wrote to the registrar of Commercial Court Division requesting that the file be transferred to Execution Division for purposes of execution. From the documents attached to the affidavit in support of the application there is no doubt that the file was accordingly transferred and execution proceedings ensued with the Deputy Registrar, Execution Division issuing a warrant of arrest on 16^th November 2012. On 20^th December 2012 the applicant was arrested and committed to civil prison. On 24^th December 2012 the applicant was produced before the Deputy Registrar Execution Division and it was reported that the parties had signed a memorandum of understanding. The applicant then paid some moneys and also issued some post dated cheques in accordance with the terms of the memorandum of understanding where upon he was released.

To my mind the above chronology of events shows that when Civil Suit No. 386 of 2012 was filed it took the normal course given that the defendant did not apply for leave to appear and defend the suit. The plaintiff’s counsel then was justified in taking the steps he took and the matter went for execution the usual way as there was no order for stay. It is my firm view that arresting the applicant around Christmas time, that is, on the 20^th of December 2012 was merely a coincidence as the execution process was already on course.  I would have thought otherwise if the process was commenced and rushed to have the applicant locked up during Christmas season.

I find more believable the respondent’s version as stated in the additional affidavit in reply sworn by Mr. Batabaire Joshua, the auctioneer that the applicant’s wife and friend contacted him claiming that they had mobilized some money and they were ready to enter a payment proposal. Naturally that is what is expected of a spouse and a friend when the other is embattled. On the whole I do not find any proof that this was a deliberate act with intention to defraud or cause misapprehension which was taken advantage of by the respondent’s agent to unduly influence the applicant to sign the memorandum of understanding against his will.

I also find difficulty in believing the applicant’s contention that he was made to sign the last page of a document whose content he did not know. If at all the applicant did not fully understand the contents of the memorandum of understanding and worse still, if he was made to sign the same against his will, he should have objected to it when he appeared before the Deputy Registrar, Execution Division. However, the applicant states in paragraph 13 of his affidavit in support of the application that the bailiff produced him before the registrar, Execution Division and told him that they had reached a memorandum of understanding but does not state whether he objected to that statement. The applicant’s failure to complain when he had the opportunity to do so, in my view, casts doubt on the truthfulness of his current allegation which to my mind is an afterthought. Besides, if at all the applicant did not know the amount stated in the memorandum of understanding then why did he issue post dated cheques for that amount? Could it be that he was also made to sign the cheques without seeing the amounts stated therein? I do not think so and I am not at all convinced by that contention.

Lastly on this point, the fact that the applicant signed the memorandum of understanding in the absence of his lawyer in my view cannot be blamed on the respondent. I say so because it was incumbent upon the applicant to insist on the presence of his lawyer before he could sign any document. His wife and friend who arranged for his production from prison should have notified his lawyer about the steps they were taking. It is my considered opinion that the applicant sat on his right to legal representation by not insisting on the presence of his lawyer and so he cannot be heard to complain later.

 I do not therefore find any valid reason for setting aside the memorandum of understanding as all the alleged grounds have not been proved to my satisfaction. Consequently, the 2^nd leg of this application must also fail.

On the 3^rd and last leg regarding leave to appear and defend the suit, in view of my findings and conclusion on the first two legs of this application, it would not have been necessary to consider the prayer for leave to appear and defend the suit. However, for purposes of fully determining this application so as to avoid any doubt I will also consider the arguments of counsel on this leg of the application.

Counsel for the applicant contended that there are triable issues because the applicant gave the respondents cheques as security in line with the respondent’s policy but they were banked in bad faith. It is therefore the applicant’s contention that it is not indebted to the respondent to the sums claimed. The applicant also contended that some money was paid using plus card and no reconciliation was done to capture such payments before the main suit was filed.

As regards the contention that the cheques were banked in bad faith, I have perused the affidavit in reply to the notice of motion deposed by Mr. Faustine Mugisha the respondent’s Retail Sales Manager and annexture “A” thereto being a notice of termination of the applicant’s marketing license. The deponent stated in paragraph 5 that it was a business practice for the applicant to issue post dated cheques as security for credit supplies but the same would be banked at their due dates without any reference to the applicant. He further deposed in paragraph 6 that the applicant issued bad cheques for the period he was in charge of the station and in December 2011 he made a commitment never to issue them again but shortly after he did issue bad cheques to the tune of Shs. 80,000,000/=. This is borne by the content of annexture “A” in which the respondent referred to various meetings and communications with the applicant about his performance as a dealer of Kabusu service station. It alluded to the applicant’s written commitment not to issue anymore bad cheques and informed him that the respondent had received bounced cheques worth Shs. 80,000,000/=. It further informed the applicant about the decision to terminate his lincense and requested him to prepare to hand over the station on 30^th January 2012.

Indeed the documents on record show that the applicant did hand over the station on 25^th January 2012. The applicant in his affidavit in rejoinder generally denied the contents of those paragraphs but said nothing about annexture “A” and it’s content. In the absence of  a specific denial that he did not receive a copy of annexture “A” and in view of the handover that took place around the time stated in the notice, I am more inclined to believe that the license was terminated for the reasons stated in the notice which the applicant never protested. I do not therefore see any issues related to the cheques which would merit trial.

As regards the applicant’s claim that the respondent did not reconcile the books of account when a deduction of Ug. Shs. 32,812,661/= had been made from the applicant’s account from Old Kabusu petrol station on 19^th November 2012. I have carefully studied the documents attached to the affidavits and I do agree with the explanation in paragraph 15 of the affidavit in reply of Faustine Mugisha that the money deducted belonged to Elite Enterprises and not the applicant. This is because the applicant had long handed over operations of the petrol station to Elite Enterprises on 25/01/2012 when the said transfer took place on 19^th November 2012. It cannot therefore be said that the money on the plus card belonged to the applicant unless specific proof is given which has not been done. In any event, the transfer was to Elite Enterprises and not to the respondent.

On the general allegations that the suit was filed before reconciliation was done to capture payments made, I am satisfied with the explanations made by Faustine Mugisha in paragraph 9 of his affidavit in reply that reconciliation was done as per annexture “B” thereto which shows the accounts. These facts were never disputed in the affidavit in rejoinder deposed by the applicant. I therefore do not find any triable issue which relates to those undisputed facts. In a nutshell, the so called good defence to the claim is a sham that cannot justify granting leave to appear and defend the main suit.

On the whole, all the three legs of this application must fail and in the result all the orders prayed for are denied and the application is dismissed with costs.

I so order.

Dated this 14^th day of February 2014.

Hellen Obura

JUDGE

Ruling delivered in chambers at 3.00 pm in the presence of Mr. Noah Kibome who is holding brief for Mr. Edward Sekabanja for the respondent. The applicant and his counsel are absent.

JUDGE

14/02/14