THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
HIGH COURT MISC. APPLICATION No. 438 OF 2001
Injunctions – Interlocutory application – Application for injunction to prevent interference by respondent in management of company and company assets – Factors to be considered in determining application – Locus standi of applicant – Whether prima facie case established – Order 37 Rule 2 Civil Procedure Rules
Cases referred to:
American Cyanamid Co. v Ethicon Ltd  AC 396
Kiyimba Kaggwa v Katende  HCB 43
Legislation referred to:
Civil Procedure Rules Order 37 Rules 2(1), 9
Counsel for the Applicant: Mr. David Mpanga
Counsel for the Respondents: Mr. Bernard Tibesigwa, Mr. Francis Bwengye
I have considered the very able submissions of both counsel very carefully. Those submissions raise 3 important issues, which I shall deal with respectively as follows.
Thus, the standard excludes cases that are merely frivolous or vexatious. Definitive proof of the case must surely await the adducing of evidence, and submission of counsel's arguments for and against on the merits. At this preliminary stage of the case, Court has no opportunity whatsoever to consider, let alone, to entertain any evidence. That stage can be reached only during the hearing of the substantive case on its merits.
At this preliminary stage of the proceedings, the applicant needs only to raise triable issues. In the instant application, the applicant has raised a veritable number of issues, both of fact and law, and mixed fact and law- all of which deserve a trial on the merits.
(c) Does our law envisage or recognise beneficial ownership of a company’s shares?
Was there consideration for the share transfer to the applicant, pursuant to the family's Memorandum of Understanding?
(g) If the defendants are not majority shareholder, who is? The applicant? Roadmaster cycles (India) Ltd. R.M.I. Cycles Ltd? In that event, who has the locus standi to bring this suit?
The respondents have not hitherto complained at all concerning the applicant's involvement in the affairs of Roadmaster Cycles (U) Ltd. At any rate, no evidence whatsoever has been shown to Court to that effect, nor has any such argument been canvassed by counsel in his oral submission before Court. Yet the defendants have had a whole year (since September 2000: the day of concluding the alleged Family Memorandum of Understanding), in which to complain or bring this matter to Court. Given this utter silence (for so long) on the part of the defendants, Court is satisfied that the balance of convenience is clearly on the applicant's side who, even by the respondents, own concession, has been involved in the business affairs of Roadmaster Cycles (U) Ltd.
In his submission before Court, learned counsel for the respondents produced a document (Company's Annual Return) on the Company's shareholding, showing that Defendants/Respondents own 97% of the shares of Roadmaster Cycles (U) Ltd; and that Applicant, and two others, owned only 1 % each. Accordingly, argued counsel, the applicant cannot and should not oust those who own 97%. That is fair enough. However, this Company's return, relied on by the respondents, reflects the position as at January 1999. That position is earlier in time than the position at September 2000, when, according to the applicant the position was reversed by the Family Memorandum, to show a shareholding profile that is exactly the opposite of the earlier position of 1999. Now, as to which one of these two shareholding positions is true, and which one is false, is a matter that requires evidence (whether documentary or by oral testimony) in the context of a full-fledged hearing on the merits.
Allied to the above issues, is the recent letter of September 18, 2001 from the respondents which contends that RMI cycles Ltd owns 100% shares of both Roadmaster Cycles (India), and Roadmaster Cycles (U); and that no other person, sole or joint, owns any shares in those companies. That contention raises the issue of whether any individual member of the Goyal family (whether the applicant or the respondents) owns any share(s) at all in the suit company. For his part, the applicant makes the statement that the 1st , 2nd and 3rd respondents neglected and or refused to execute and to effect a transfer of shares to the applicant. These two contentions by the respective parties, raise substantive issues that go well beyond the simple issue of whether the applicant is only a beneficial owner of the suit company Both issues deserve to be heard on their merits.
All these are interests, which are incapable of quantification. If any or all of these interests are adversely interfered with by the respondents, the detriment would redound directly to the company, and ultimately to the owners (shareholders).
Such interests cannot be compensated or atoned in damages. The damage to the shareholder becomes immensely important where as here, that same shareholder claims to be owner of 97% of the company (a claim which needs to be verified and ascertained by trial on the merits).