Court name
Commercial Court of Uganda
Judgment date
8 February 2007

Shafa Cleaners & Anor v Tropical Africa Bank (HCT-00-CC-MA-2006/801) [2007] UGCommC 15 (08 February 2007);

Cite this case
[2007] UGCommC 15

Last Updated: 25 May 2007

 

Shafa Cleaners & Anor V Tropical Africa Bank HCT-00-CC-MA-0801-2006 [2007] UGCommC 15 (9 February, 2007)

 

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

HCT-00-CC-MA-0801-2006
(ARISING FROM HCT-00-CC-CS-062- 2006)

SHAFA CLEARERS AND FORWARDERS LTD........................................................................................................... .                     APPLICANT/DEFENDANT
NKUTU SHABAN SADIQ
                                                                                                                               VERSUS

TROPICAL AFRICA BANK LTD ...................                                                                                                                                             RESPONDENT/PLAINTIFF

9 February 2007

                                                                                    BEFORE: HON. JUSTICE LAMECK N. MUKASA

RULING

This is an application brought by way of Notice of Motion under Order 36 rule 11 and Order 52 rules 1 and 3 of the Civil Procedure Rules for Orders that:-

1. The exparte decree and judgment passed against the applicants in the main suit be set aside.
2. Execution of the aforesaid decree be set aside.
3. Applicants be granted unconditional leave to appear and defend the main suit
4. Costs of this applicant be granted to the applicants.

The grounds for the application are that:-

1. The Applicants have a good defence to the respondents claim, namely that:-

(a) the main suit was wrongly instituted against the 2nd Applicant, Nkutu Shaban Sadiq.
(b) The respondent’s debt is disputed.

2. The Applicants have a counter claim against the respondent for breach of contract.
3. There are bonafide triable issues which go to the root of the whole of Respondents claim.
4. It is just and equitable that the orders sought be granted.

The brief background to this Application is that the Respondent M/s Tropical Africa Bank Ltd, filed Civil Suit No. 62 of 2006 against the Applicants, M/s Shafa Clearers and Forwarders Ltd and Shaban Sadiq Nkuutu, jointly and severely seeking recovery of the liquidated amount of shs16,089,920 as at 31st December 2005 plus accrued and accruing interest until payment in full in respect of an overdraft facility advanced by the Respondent to the Applicants. Judgement was on 31 March 2006 passed in favour of the Respondent pursuant to the provisions of Order 33 (now 36) rule 3 of the Civil Procedure Rules.

This application is made under Order 36 rule 11 of the Civil Procedure Rules which states:-

"After the decree the court may, if satisfied that the service of the summons was not effective or for any other good cause, which shall be recorded, set aside the decree and if necessary stay or set aside execution and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the court so to do, and on such terms as the Court thinks fit."

The rule gives court the discretion to set aside a decree if satisfied that the service was not effective or for any other good cause. In Sulaiman Nsamba Vs Fred Balinda HCCS No. 102/98 (1998) KALR 64 Justice Akiiki – Kiiza held that once an applicant for an order to set aside an axparte decree under Order 33 (now 36) rule 1 establishes that he has a defence on the merits of the case, then in light of all facts and circumstances both prior and subsequent it is just and reasonable to set aside the decree. In Fr Francis Payer Vs Josephat Kawalya Mwebe & Others H.C.C.S. No.194/94 (1995) IV KALR 143 Justice Kereju held that justice required that the defendants who had shown an interest in being heard should be given the opportunity as long as they can be penalised in costs. In Patel Vs Cargo Handling Services Ltd (1994) EA 75 Duffas P at page 76 stated:-

"--- in this respect defence on merit does not mean ---- a defence that must succeed it means --in a triable issue, that which raise a prima facie defence and which should go to trial for adjudication"

Therefore what is important at this stage is only for the applicant to establish a triable issue sufficient for proposes of granting the leave to defend the suit.

The application is supported by an affidavit sworn by Nkuutu Shaban Sadiq, the 2nd Applicant and Executive Director of the 1st applicant. In the affidavit it is admitted that the 1st Applicant applied for various overdraft facilities from the Respondent but it is denied that it was granted a facility to the tune of Shs15,000,000/= as stated in the plaint. The applicants contend that the 1st Applicant was granted an overdraft facility of shs14,000,000/= at an interest agreed not to exceed 19% per annum. The specific interest rate to be applied was at the time of disbursement of the overdraft facility still the subject of negotiations between the 1st Applicant and the Respondent but that the Respondent applied varying interest rates per month from 0.82% to 3.8% per month which comes to 9.8% per annum to 45% per annum. The Applicants claim that the said interest was unconscionable, unascertained and contrary to the agreement between the parties. The applicants further content that by 31st May 2006 the 1st Applicants indebtedness to the Respondent for both the principal and interest stood at UgShs17,751,296/= which by 31st August 2006 the 1st Applicant had paid all the principal pending payment of the accrued interest, if any, which was yet to be ascertained and finally resolved by the Respondent after its Board had met over the issue.

Specifically about the 2nd Applicant, in paragraph 15, Nkuutu avers that at all times material to this suit he was acting as the Executive Director and therefore an agent of the Applicant, a disclosed principal.

Mr. Muzamiru Kibedi, counsel for the Applicant, submitted that the applicant has raised various triable issues, namely:-

1. Liability of the 2nd applicant advanced.
2. Dispute on the amount advanced whether it was shs 15,000,000 or Shs14,000,000.
3. Dispute on the interest rate charged.

The Respondent filed two affidavits in reply sworn by Wegulo T Addah, the Respondent’s Bank Secretary, and another by Basaija David Kisembo, a Court bailiff. In his affidavit Wegulo maintains that the overdraft facility granted was of Shs15,000,000. Therefore the amount of the facility remains in dispute. He also avers that the overdraft facility was granted at an interest rate of 30% per annum as the Respondent Banks Credit Policy and practice. That the Respondent charged interest on outstanding balances at the rate of 30% per annum. The deponent thereby avers that interest was charged at a uniform rate of 30% per annum yet the Applicants contend that the respondent applied varying interest rates varying from 9.8% per annum to 45%. I have also studied the annextures referred in Wegulo’s affidavit and found that none of them classified the overdraft facility as a temporary facility. So the interest rate in also in dispute. In paragraph 7 it is averred that the 2nd Applicant was joined as a party who would be affected by the outcome of the case. In her submission Ms Basaza Waswa sought to rely on Order 1 rule 3 CPR which provides:-

"All persons may be joined as defendants against whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions is alleged to exist, whether jointly, severally or in the alternative, where, if separate suits were brought against those persons, any common question of law or fact would arise."

Counsel referred to the Credit facilities Application Forms where the 2nd Applicant was named as one of the owners and directors of the 1st Applicant and argued that the 1st Applicant was the registered proprietor of the land at Block 222 Plot 845 Namugongo which was deposited as security. In the plaint it is claimed that the Applicants had jointly and or severally applied for and the Respondent granted them the overdraft facility and that the applicants had jointly and severally defaulted in the repayment of the monies borrowed. The 2nd Applicant on the other hand denies personal liability. There is therefore an issue of the 2nd Applicants personal liability which require adjudication. Considering all the above I find that the applicants have established sufficient triable issues.

Ms. Basaza Waswa submitted that the Applicants had failed to show why they did not take the right steps at the right time. That instead of showing good cause for the Applicants failure to apply for leave to defend the suit, they had only laboured to show traible issues. She argued that that was secondary. She relied on Caltex Oil (U) Ltd Vs Kyobe (1998-1990) HCB 141 wherein Byamugisha J (as she then was) held that for Court to exercise its wide and discretionary powers to set aside a decree obtained under Order 33 (now 36) rule 3 the applicant had to satisfy Court either that there was no service or he had to show any other good cause. That sufficient cause had to relate to the failure by the applicant to taken the necessary step at the right time. However, her Lordship observed that there was no and first rule as to what constitutes any other good cause. That each case has to be considered on its own peculiar circumstances. In Fr Francis Payer Vs Kawalya Mwebe (supra) Justice Kireju having found that it was apparent that the defendants were in fact served with the summons to enter appearance went on to find that justice, however required defendants who had shown an interest in being heard should be given the opportunity.

In the instant case the Applicant have not anywhere disclaimed service of the summons in the summary suit. They do not dispute the indebtedness but dispute the personal liability of the 2nd applicant and the amount of the facility advanced and the interest chargeable. Further they contend that according to them they had paid all that owing to the respondent and have shown interest to defend the suit. In the premises it is only just and reasonable that the decree is set aside and they are allowed to defend the suit. I accordingly so order.

The applicants have also prayed for an order setting aside the execution of the decree. In the Respondents affidavit in reply sworn by Basaija, the Court bailiff, he avers that he on 12th July 2006 obtained a warrant of attachment and sale of the suit property from court. On 20th July 2006 the property was advertised in the Monitor Newspaper and on 21st August 2006 sold by public auction to the highest bidder one Acham Anne. A return of execution was filed on 30th August 2006.

The 2nd Applicants in his affidavit in support of the application avers that he had previous to the attachment and sale sold off the suit property to one Byekwaso Bob on 4th July 2006 and disputes that the purported sale ever took place. Also in paragraph 4 of his affidavit in rejoinder the 2nd Applicant claims that the alleged sale was conducted contrary to the law in as far as it was carried out without a valuation report which was required by the Registrar.

Mr. Kibedi submitted that there was a question of the legality and bonafideness of the sale of the suit property. Whether the property was properly sold is an issued raised in the Applicant’s counter claim. To make an order setting aside the attachment and sale of the suit property at this stage will amount to pre-determining the Applicants’ Counter-claim. It is also trite that Court must have before it and ensure that all persons whose interest may be adversely affected by the relief claimed are either joined as parties or are made cognizant of the action in order that such persons may be bound by the decision of the court and bring litigation to an end. See Maria Naluvugo Vs Isaac Hategyekimana (1977) HCB 71. I therefore decline to make an order on this issue at this stage.

I accordingly make the following orders:-

(i)

The exparte judgment and decree passed against the Applicants in Civil Suit No 62 of 2006 is hereby set aside.

(ii)

The applicants are granted unconditional leave to file their written statements of Defence within 7 days from the date hereof.

(iii)

The order as to costs in the main suit shall bind the costs of this application.

LAMECK N. MUKASA
Judge
9February 2007