THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISC. APPLICATION NO. 896 OF 2013

(ARISING FROM CIVIL SUIT NO 06 OF 2012)

FREDRICK MUGAWE AND ANOTHER …… APPLICANTS/PLAINTIFF

VERSUS

AGRO FINANCE TRUST LIMITED AND

TOM SAMUEL MAGEZI …………………RESPONDENTS/DEFENDANTS

BEFORE LADY JUSTICE FLAVIA SENOGA ANGLIN

RULING

By this application made under S.33 Judicature Act, SS. 96 and 98 C.P.A, 0.9 rules 12 and 27, 0.50 rule 8, 0.51 rule 6 and 0.52 rule 1 and 3 C.P.R, the Applicants sought orders of this court setting aside the default judgment in the counter claim against the Applicants, in C.S. 06/12, dated 07.02.12.  The Applicants also prayed court to grant them leave to file a defence to the counter claim out of time or that the time for filing defence to the counter claim be enlarged and costs of the application provided for.

The background of the application is that on 05.01.12, the Applicants filed civil suit 06/12 seeking a declaration that the first Applicant no longer had any valid claim over the Applicants property pledged as security for a loan, a declaration that shs. 47,343,639/- demanded by the Respondents is not due and owing from the Applicants, that the Second Respondent’s purchase of Motor vehicle Registration No. UAP 748D was characterized by fraud; and an order that the Respondents release all the Security pledged for the loan; interest; a permanent Injunction issue against the Respondents restraining them from making any further claim against the Applicants, general, aggravated and exemplary damages and costs of the suit.

The Respondents filed a defence and a counter claim for shs. 354,310,049/-; general damages, interest and costs of the suit.  The Applicants omitted to file a reply to the counter claim and consequently, the Respondents applied for and obtained a default judgment against the Applicants and extracted a decree.  It is the said judgment and decree that the Applicants seek to set aside in this application.

The grounds for the application are set out in the motion and the supporting affidavit sworn by one Kyambadde Peter, the Applicants’ Attorney.

Briefly, the grounds of the application are that: The Applicants’ previous Advocate one Edward Muyise failed to file a defence to the counter claim within the prescribed time though he had full instructions.  Hence default judgment was entered against the Applicants.  That failure to file the defence to the counter claim was due to the negligence/error/mistake of the Applicant’s previous Advocate, and his conduct should not be visited upon the Applicants.

The decree extracted by the Respondents was materially defective for including interest not given in the default judgment.

And that no prejudice will be occasioned to the Respondents if the default judgment is set aside.

Further that, the application was made without undue delay, before execution of the default judgment commenced and it is therefore in the interests of justice that the application be granted and the substance of the dispute heard and decided on merit.

Opposing the application, the Respondents filed an affidavit in reply deponed by Nduho Mugyenyi, a credit officer of the First Respondent.  He contended that the Applicants obtained a loan facility of Ug. Shs. 130 million at the rate of interest 4.25% per month; with a penalty of 1% per day on the amount in default.  That the ledger card does not indicate payments made on 07^th and 08^th December, 2011 and the accruing amount on the penalty charge.

Also that, all payments by the Applicants were first applied to pay the outstanding principal and thereafter no payment was made on the penalty.  And the legal and recovery costs have never been paid.

When the application was called for hearing on 27.03.14, both Counsel agreed to file written submissions.

The issue for court to determine is: whether there are sufficient grounds for setting aside the default judgment and decree in C.S. 06/12.

In his submissions, Counsel for the Applicant relied upon the supporting affidavit insisting that failure to file the defence was a mistake or error of the previous advocate and that the Applicants cannot be made to suffer for the mistakes or lapses of their Counsel.

Counsel relied upon 0.9 rule 12 C.P.R and the case of Nicholas Roussos Vs Gulam Hussein, Habib Viram and Another SC CS 09/93 to state that “ this court has wide discretion to set aside exparte judgment,” and that the grounds for setting aside such judgment “include mistake by an Advocate through negligence”.  The case of Golooba Godfrey Vs Harriet Kizito SCCA 07/2006 which echoes the same position was also cited for emphasis.

Counsel for the Respondents submitted in reply that the affidavit in support of the application was based on hearsay contrary to 0.19 rule 3 C.P.R, and more so, since Muyise did not file an affidavit.  He relied upon the case of Eric Tibebaga Vs Fr. Narsensio Begumisa [2003] UG SC 14, SC C.A.18/2002, where the Supreme Court held that “an affidavit based on hearsay evidence is inadmissible.”

He contended that the Applicants had not shown how the exception to the general rule against hearsay assists.

In rejoinder, Counsel for the Applicants submitted that the Respondent’s Counsel disregarded S.1 of the Evidence Act as interpreted in the case of Trans African Assurance Co. Ltd Vs. National Social Security Fund SCCA 01/99 [1999] KALR 334 to the effect that their best evidence rule does not apply to affidavits.  And secondly that Counsel did not draw on distinction between rule 43 (1 of the Judicature (Supreme Court Rules) Directions, upon which the decision in Tibebaga hinged; and 0.19 rule 3 (1) C.P.R. which applies to the instant application; as recognized by Hon. Kato JSC in the Tibebaga case (Supra).

Upon giving the submissions of both Counsel, the best consideration I can in the circumstances; I wish to point out that decided cases have established that 0.9 rule 12 C.P.R “gives court unfettered discretion to set aside exparte judgment….” – See Attorney General & Another Vs James Mark Kamoga and Another, SCCA. 08/04 [2008] UGSC 4.  – Mulenga JSC.

While under 0.9 rule 27 C.P.R, where a decree is passed exparte against a defendant, court will set aside the decree if the defendant satisfies it that she/he was prevented by sufficient cause from appearing when the suit was called for hearing among other things, upon such terms as court thinks fit.

In the present case, the Applicants rely upon the ground that their default was  due to the negligence of their previous Counsel, who otherwise had full instructions and whom they failed to meet despite making several appointments.

Without any evidence to the contrary, I find that the Applicants have established sufficient cause for failure to file a defence to the counter claim.

According to the case of Capt. Philip Ongom Vs Catherine Nyero Owota, SCCA 14/2001 [2003] KALR, it was established that “a litigant ought not to bear the consequences of an Advocate’s default unless the litigant is privy to the default or where the default results from the default of a litigant to give instructions to the Advocate”.

The case concerned failure to file a defence and appear when suit was called for hearing.  Application to set aside the exparte judgment was made under 0.9 rule 27 C.P.R.

In the present case, as already pointed out, the Applicants had given instruction to Muyise and Co. Advocates who filed the suit and that was their known address for service.

Therefore, the omission or mistake of Counsel of not filing a reply to the counter claim cannot be visited upon the Applicants.  They engaged Counsel so that they could be advised on the requirements of the law and gave him full instructions but he let them down.

While the Applicants could take action against their former Counsel, cases are to the effect that “whether or not the party has a cause of action against the former advocate is immaterial and irrelevant to the issue whether he was prevented by sufficient cause from appearing” - See the case of Capt. Philip Orgom (Supra)

If Counsel for the Respondents believes that Applicants can take action against their former Counsel, it implies that he believes former Counsel was at fault.

Court also finds that the supporting affidavit in the present case is not objectionable though it contains hearsay matters because the deponent laid a proper foundation of his knowledge of the facts upon which he depones.  It would only be objectionable if such was not the case.  – See Reamation Ltd Vs Uganda Corporation Creameries Ltd and Another S.C. CA 07/2000 – Hon Tsekooko J.S.C

The supporting affidavit in the present case indicates that “whatever is stated herein above is true to the best of my knowledge and belief, save for what is deponed out of information the source of which is disclosed.  Paragraphs 9, 11,13,15,16 and 19 of the affidavit show that the source of information is the current Advocates and that he believes it to be true. 

The affidavit is proper as it clearly indicates the source of information.

The other ground advanced for setting aside the decree is that it contains interest not stated in the default judgment.  According to the Applicants’ affidavit, interest was awarded at court rate.  The case of Hwang Sung Industries Ltd Vs Stirling International Ltd [2007] KALR 464 was relied upon to support the contention that “where a decree includes payment of interest, which had not been awarded in judgment it is void”.

Counsel argues that this was an indicator of fraud which “vitiates contracts, judgments and all transactions whatsoever.”  The case of FAM International Ltd. And Another vs. Muhammad El Fatm, SCCA 16/93, was cited in support. (Not applicable to the circumstances of this case, Decree was issued in error.)

Further that “deviation of dates of a decree and judgment are grounds for setting aside judgment and decree.” -  He relied on the case of Onaba Henry and 179 Others vs. Uganda Cooperative Central Union Ltd. (in Liquidation through Mungereza and Egadu) Joint Liquidators [2002] KALR 454.

In response to this contention, Counsel for the Respondents submitted that the grounds had been overtaken by events, since the Respondent applied on 06.02.14 to expunge the error on the decree. Adding that the defective decree was surrendered on 27.03.14;  when the Registrar invoked his powers and recalled the decree and it therefore no longer exists.

While the decree complained of may no longer exist, court notes that the revised decrees were sent to the Registrar for signing to correct illegalities while this application was pending before court, which can be interpreted as an attempt to circumvent the due process of the law and was therefore not done in good faith.  There was no formal application therefore the correct procedure was not followed.

It has also been noted that while default judgment was entered, the decree was extracted without formal proof which was an error.

Having already found that the Applicants have shown sufficient cause to set aside the default judgment, I will not go into the issue as to whether, they have a good defence.  That will be proved by evidence at the trial.  Suffice to state that the Applicants indicate that they contest the amount allegedly demanded from them by the Respondent and how it was arrived at.  They do not agree with the default penalty of 1%.

No injustice will be suffered by the Respondents if the default judgment is set aside because both parties will be given a hearing.

Decided cases have established that “the substance of disputes should be heard and that to deny a party a hearing should be the last resort of the court”.  However, each case depends on its own circumstances.

The other issue raised by the application was the time within which it was filed.  Counsel for the Applicants claimed that the application was brought without undue delay, as the Applicants were keen to pursue the matter. – See Paragraphs 7 and 8 of the supporting affidavit and Annexture “D” notice of change of Advocates.

However, Counsel for the Respondents contended that there had been inordinate delay, as the application was filed 10 months after the new lawyer received instructions and 2 years from the date the first lawyer was served with the counter claim.  He argued that the Applicants ought to show that they were prevented by sufficient cause from taking the right step at the right time.  To support the argument he relied upon the case of Juliet Kalema Vs. Rhoda and William Kalema, Civil Appl. 24/2004 [2004] UG CA 6.

The submission of Counsel for the Respondents in this respect are rejected for the reason that; courts have held that “court can exercise its discretion to excuse a delay while construing the word” “sufficient cause” liberally or generally so that the Applicant is not made to suffer for Counsel’s mistakes” – See Narittam Bhatia and Another Vs Boutique Shazim Ltd CACA. 31/2007, [2008] KALR 475; – where the delay of 2 years due to the incompetence of Counsel was excused.

Court has already found that the first Counsel who filed the suit for the Applicants was negligent although he had full instructions and that there is no evidence that the Applicants were privy to his negligence.  They cannot therefore be punished for the mistakes of their Counsel.

The suit filed by the Applicants that resulted into the Respondents making a counter claim had not yet been disposed of.  That the Applicants are interested in pursuing the matter is evidenced by the fact that they gave instructions to new lawyers.  And as already pointed out, when judgment was entered on the counter claim, there was no formal proof.  The principle set by the courts is that “unless and until the court has pronounced a judgment upon merits or by consent, it has power to revoke the expression of its coercive power where that had only been obtained by failure to follow any of the rules of rules of procedure”. – See National Insurance Corporation Vs Mukisa Foods Ltd CA CA 42/97 , where Justice Berko quoted Lord Atkin in Evans Vs Bartlam, [1937] AC 473.

 Court agrees with the submissions of Counsel for the Applicants that court has powers to enlarge time under S.96 C.P.A and 0.51 rule 6 C.P.R; upon such terms as the justice of the case requires, if it has been shown that there are sufficient reasons that the act sought to be done could not be done at the time.  – See Narittam Bhatia case (Supra) and Rehmas Kharadin and Sons Ltd and Another Vs Kenya Commerce Bank, Kisumu HCCS 266/96.

It has already been established in this ruling that the Applicants have shown sufficient cause for failure to file the counter claim.  Time can accordingly be extended for them to file a reply to the counter claim.

For all those reasons, the application is allowed and the following orders are made:-

1. The default judgment and decree dated 17.02.12 and 22.02.12 are hereby set aside.
2. The time within which to file a reply to the counter claim us extended.
3. The Applicant is granted leave to file a reply to the counter claim within 2 weeks from the date of delivery of this ruling.
4. Costs will abide the outcome of C.S. 06/12

Flavia Senoga Anglin

JUDGE

14.05.14