Court name
Commercial Court of Uganda
Judgment date
2 March 2004

ABaumann (U) Ltd v Crane Bank Ltd (Miscellaneous Application-2003/589) [2004] UGCommC 5 (02 March 2004);

Cite this case
[2004] UGCommC 5


THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL COURT)

MISCELLANEOUS APPLICATION NO. 589 OF 2003
(Arising out of Civil Suit No. 191 of 2001)

A. BAUMANN (U) LIMITED………………………………………… APPLICANT
VERSUS
CRANE BANK LIMITED
…………………………………………… RESPONDENT
 

BEFORE: THE HONOTJRABLE MR. JUSTICE JAMES OGOOLA


RULING
 

1. On 12/09/2003, this Court delivered its Judgment in the head suit: HCCS No. 191/200 1 in favour of the Defendant (CRANE BANK). The Plaintiff (BAUMANN) promptly took steps to appeal to the Court of Appeal against that Judgment. In addition, BAUMANN filed the instant application seeking a stay of execution of that Judgment pending disposal of the appeal. That application was brought pursuant to the former Section 101 (now section 98) of the Civil Procedure Act (Cap. 71 of the 2000 Edition of the Laws of Uganda).

2. The grounds for this application were stated to include the following - namely, that:

“(a)      The Applicant [was] dissatisfied with the whole decision of the Court.

(b)      The application has been made without unreasonable delay.

(c)      The Title Deed of LRV 223 Folio 6, the Applicant’s only property within the jurisdiction of this Court, is already in the custody of the Respondent.

(d)      The Applicant’s appeal will be rendered nugatory f execution is not stayed.
(e)      The Applicant stands to suffer substantial loss of valuable and prime property if no stay is ordered.”

3.       In their oral submission, learned counsel for the Applicant (Mr. Ebert Byenkya and Mr. William Byaruhanga) articulated the three criteria under our law that justify a Court order for a stay of execution, - namely:

(i)      that the Applicant would otherwise suffer substantial loss;

(ii)     that the Applicant has not evinced unreasonable delay in filing the application; and

(iii)    that security for the Respondent’s costs in the High Court has been given.

4.       Counsel averred that all three conditions above had been duly met in this instant application. In particular, that there had been no unreasonable delay in proferring this application, in as much as that application was filed on 24/09/03 - a mere 12 days after delivery of the judgment in the head suit. Similarly, the subject matter of the suit being appealed is truly substantial, namely a decretal amount of US$ 994,142 not to mention the property’s appraised current market value of $ 2.5 million or Ushs. 4.3 billion - let alone the non-monetary value of the suit property: Plot 7, Parliament Avenue, Kampala, which is a historic property situated in a prime location of this capital city of Kampala. In short, the Applicant risks losing an extremely valuable property, unless this Court orders a stay of execution.

5.       As regards the third criterion, namely the requirement for the Applicant to give security, the Applicant emphasised that the law requires security for costs only (not for the entire decretal amount); and that the value of the Applicant’s mortgaged property (whose title deed is already in the possession of the Respondent), greatly exceeds the decretal amount and any interest that may be charged thereon even for the 2 years that the appeal is likely to take.

6.       For his part, learned counsel for the Respondent (Mr. Kanyerezi opposed the application for stay of execution, on the grounds that:

(a)      the Court should also be alive to the interests of the successful party (the Respondent) who should be allowed to enjoy the fruits of his success;

(b)      an appeal does not operate as a stay of proceedings (per 0.39, r. 4 of the Civil Procedure Rules), although the Court may for sufficient cause order execution. This is the real test.

(c)      as regards the “substantial loss” test, the learned counsel assured this Court that the Respondent was not at all interested in the mortgaged property itself - but rather in the monetary claim only (i.e. the decretal amount). In this regard, the Respondent undertook to restitute the decretal money should the Appellant succeed on the appeal - see generally Mr. Reghu’s affidavit of 29/09/03 deponed in support of the Respondent’s case in this matter.

(d)      the Respondent did not intend to execute the judgment in the head suit by selling the suit property. Rather, the Respondent intends to execute by recourse to the many other options that are available - such as, for example, appointing a Receiver/Manager of the rental income from that property; or garnisheeing BAUMANN’s account; or taking possession of the suit property, or foreclosing the same, without sale.

7.       I have given considerable attention to the various contentions of the respective counsel for the two parties. As regards the test of “unreasonable delay”, even counsel for the Respondent readily conceded that the instant application was brought in a very timely fashion. Therefore, nothing more need be said about that.

8.       Similarly, the criterion requiring the Applicant to pay security also needs no belabouring. The applicable rule of practice is quite clear. The Applicant is obliged to pay security for costs only - and not for the entire decretal amount - see the Supreme Court case of Kampala Bottlers Ltd. v Uganda Bottlers Ltd, S.Ct. Civil Application No. 25 of 1995; which held quite categorically that:

“Under [0.3, r. 4 (3) of the Civil Procedure Rules, the Applicant must show... that security for costs has been given by the Applicants.”

Similarly, the Court of Appeal in DFCU Bank Ltd v Dr Ann Persis Lusejjere, Civil Application No. 29 of 2003 held that:

“Under Order 39, r. 4 (3) of the CPR an application for stay of execution pending an appeal must be accompanied by payment of security for costs “.

In my recent ruling in Tropical Commodities Ltd v International Credit Bank, Commercial Court Misc. Application No. 379/2003, I expressed considerable misgiving and intellectual discomfiture with the position taken by the Supreme Court in the Kampala Bottlers case, and by the Court of Appeal in Lusejjere’s case. Identical sentiments have also been forcefully expressed by my brother, LUGAYIZI, J in Tahar Fourati Hotels Ltd v Nile Hotel (International) Ltd, High Court Misc. Application No. 614/2003. Nonetheless, I am bound in this matter by the above two holdings of the highest courts of the land.

9. In the instant application, while the Applicant must be obliged to pay security for the Respondent’s costs, this Court cannot be blind to the fact that the Respondent already has possession of the Applicant’s Title Deed to the suit property: Plot 7, Parliament Avenue; and that that property’s value is, by any measure, far in excess of the decretal amount of $ 994,142 (contained in the challenged Judgment).

10. In the result, the interests of justice dictate that the Respondent should not be required to deposit an inordinately large sum as security for costs. The security must not be so excessive as to encourage luxurious litigation only, nor should it be so low as to encourage even frivolous litigation. Therefore, the Court must balance the risk of stifling or even extinguishing the Applicant’s chance of an appeal (through an unbearable sum for security), as against the risk of the Respondent not being able to enjoy the fruits of its success at this stage (i.e. pending disposal of the appeal). In my view, should the Applicant be denied the chance to appeal (on account of inability to pay an excessive sum for security), the result would be fatal. However, if the Respondent is denied the enjoyment of the fruits of its success at this stage, the result would be only temporary and transient, and capable of being reversed at the appeal stage by an appropriate monetary recompense. Such recompense includes the interest of 10% p.a. which the Court ordered to be paid on the decretal amount, and which continues to accrue until full payment of the decretal amount. Accordingly, the balance of convenience in this case, is decidedly in favour of the Applicant.

11. In the circumstances of this case, I am inclined to order the Applicant to pay security for costs, but only in the relatively modest amount of US$ 15,000 (or its equivalent in Uganda Shillings, calculated at the exchange rates prevailing today).

12. The last, and by far the most difficult criterion in this case, is the requirement for the Applicant to satisfy the “substantial loss” test. The difficulty does not so much concern the mathematical computation of the matter. In that regard, I am indeed convinced by the Applicant’s averment that the value of the suit property is substantial - in as much the market value of that property is anywhere in the region of $2.5 million (over Ushs.4.3 billion). Rather, the difficulty arises from the effect of the Respondent’s express undertakings contained in Mr. Reghu’s affidavit (supra), and which were fully articulated for the Court’s record by the Respondents’ counsel as comprising an undertaking:

(a)      not to sell off the suit property at this stage by way of execution of the Judgment;

(b)      to restitute to the Applicant the decretal amount of $ 994,142 in the event that the Applicant’s appeal succeeds; and

(c)      to give security by way of a bank guarantee for the refund of the decretal amount if the appeal succeeds.

13. On their face, the above three undertakings appear to effectively shield the Applicant from any risk of suffering substantial loss - since the suit property would not be sold off pending the disposal of the appeal; and since the decretal amount would be restituted by the Respondent in the event that the Applicant won the appeal. Nonetheless, there is a measure of speculative assumption in this line of argument. Inherent in the argument is the obvious presumption that all things will stay the same. However, it is impossible to guarantee that the particular circumstances of the Respondent - let alone those of the Applicant - will remain the same as those now obtaining. A change in the fortunes of either party during the appeal process could affect the status quo quite substantially (for better or for worse). The Respondent bank could fail. The Applicant company could go into liquidation and be left at the mercy of its creditors. Rather than engage in any such speculative argumentation, this Court would prefer to stay on safer terrain - by ensuring that execution of the Judgment is stayed pending the outcome of the appeal.

14.      In light of all the above, this Court:

(1)      finds that the Applicant has fully met all the criteria required for a stay of execution;

(2)      orders the Appellant to deposit in this Court a sum of US$15,000 (or its equivalent in Uganda Shillings, using today’s exchange rates) as security for the Respondent’s costs of the head suit and of this instant application;

(3)      orders that the security ordered in (2) above, be paid not later than thirty days from today’s date, as a condition for the Applicant to prosecute the appeal;

(4)      awards the costs of this application to the Applicant.

Ordered accordingly.
James Ogoola
JUDGE
03/03/2004