THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
MISCELLANEOUS APPLICATION NO 406 OF 2010
ARISING FROM HIGH COURT CIVIL SUIT NO 61 OF 2002
GREENLAND BANK LTD (IN LIQUIDATION)……………………………………………………………….RESPONDENT
Before Hon. Justice Christopher Madrama
2. the decree in High Court civil suit number 61 of 2000 be set aside
3. the costs of the application are provided for
2. That the purported service of summons by substituted service was ineffective.
3. That is in the interest of justice for all parties that the execution of the decree be stayed pending determination of the application for setting aside the decree.
In the year 1994 the Applicant obtained an overdraft facility from the Respondent bank which facility was secured by titled land comprised in Buwalakata in Bulemezi. While he was away in the UK his family informed him that the Respondent had attached and sold security pledged for the overdraft facility namely the said land, a BMW saloon car, a Toyota ED, a Jiefang Truck, and woodwork machinery, which, according to his belief settled his indebtedness to the bank. Since 1995 he has been in the United Kingdom and only came back to Uganda in the year 2008. He avers that he was never informed of the existence of any suit against him. He only found out about the suit in June 2010 eight years after its institution when a notice to show cause why a warrant of arrest shall not issue against him was delivered at his father’s House in Mengo Kampala. Thereafter the applicant established through his lawyers from court record that a suit had been filed against him in 2002 by summary procedure and summons to apply for leave to defend was served by way of substituted service ordered by court. He avers that substituted service can be ordered where service could not be effected in the normal (or ordinary) manner. He avers that his physical address was known to the respondent. Consequently, the ground for the grant of the substituted service that his address was unknown was false and misleading. He further avers that by the time of the order for substituted service in the New Vision Newspaper of 29th June 2002 he was out of the country. Consequently the applicant avers that service was not effective.
The Respondent’s affidavit in reply is sworn by one Maliza Kwera Counsel for the Respondent on the 17th of November 2010. Maliza Kwera avers that the applicant sought and was granted an overdraft facility by the Respondent but did not settle his indebtedness and by the 8th of June 2010 the indebtedness of the applicant was Uganda shillings 257,199,602/= including interest and costs as expressed in the warrant of arrest in execution dated 1 July 2010; The Respondents representative further avers that the Applicant was properly and effectively served by way of substituted service as ordinarily service of court process upon him were futile because his physical address could not be traced in his file with the Respondent.
Counsel Richard Nsubuga appeared for the Applicant/judgment debtor while Counsel Noah Wesige appeared for the Respondent/judgment creditor
Counsel Richard Nsubuga submitted that the order to serve service of summons was erroneously and dishonestly obtained by the Respondent and the purported service was therefore ineffective. He recounted the facts in the affidavit in support. He submitted the Applicant did obtain a loan facility from respondent in 1994. However since 1995, the Applicant 1995 had been out of the country and only returned 2008. He referred court to annexure “A”, “B”, “C”, and “D” to the Applicant’s affidavit as proof that for the material period in question that the Applicant was a resident of the United Kingdom. That the applicant was informed that his property had been sold to satisfy a debt he owed the Respondent while he was in the United Kingdom and before the suit was filed. The Applicant believed that his debt had been fully settled by sale of his property by the bank.
Counsel submitted that the Applicant became aware of the suit only after been served of a notice to show cause, annexure “E” to the affidavit in support. He emphasized that the ground for substituted service was that the Applicant could not be found neither his physical or postal address. He submitted that this was erroneous and misleading because the Applicant had availed his physical and postal address to the Respondent. Further submitted that the warrant of arrest was fraught with misrepresentations as the Applicant was never served with notice to show cause. He submitted that the Applicant had a defence in that his property had been sold in satisfaction of the debt and also that the compound interest could not be legally charged as had been done in this case. Counsel further submitted that the plaint upon which the decree was obtained was improper in that even the statement of account of the Applicant was not attached. Counsel referred to the case of Geoffrey Gatete and Angela Nakigonya vs. William Kyobe Supreme Court Civil Appeal No. 7 of 2005. The Judgment of Mulenga JSC particularly from pages 8 second paragraph to page 9 thereof.
In this case Hon. Mulenga JSC examines order 36 rule 11 and at page 8 looked at what is deemed good service and effective service. The Hon Judge of the Supreme Court held that the term “effective” means having the desired effect or producing the intended/desired result. “Effective service” means service having the intended or desired effect and the contrary is true.
He submitted that the Respondent would to have known that the Applicant was out of the country. In any event there was no effective service and the defendant was not given an opportunity to defend himself. He submitted that the Applicant as a responsible person would have taken steps to defend the suit had he known. That the bank charged compound interest which was not lawful. That in any case the suit was barred by the statute of limitations. Consequently there are triable issues.
Counsel Noah Wesige opposed the application. He submitted that counsel for the Applicant Mr. Nsubuga added another remedy which is to seek leave to appear and defend. According to him the orders quoted for the application do accommodate such a remedy. He prayed that court takes note of that. That the application substantially challenges service and gives grounds for stay of execution and setting aside. On the other hand Counsel for the Applicant advances other grounds which are erroneous. He invited court to have submissions on extraneous matters outside the pleadings expunged from his submissions.
Counsel for the Respondent’s reply on the submission quoting rule 11 of order 36 and the definition of Hon. Justice Mulenga JSC was that, the word “effective” means service producing the intended result. That should be by serving defendant personally. From the affidavit in support paragraphs 3 and 4, he submits that the Applicant admits that he was not there to be served personally because from 1995 he was not in Uganda but in the United Kingdom. The Applicant does not show that he had notified the Respondent Bank when he left the country.
In his opinion the Applicant left the bank no choice. Furthermore referring to the affidavit of James Kalende paragraph 3 thereof, the Applicant’s physical address at the time of execution of the loan was not known. According to the bank the loan application documents which were executed did not have the Applicant’s physical address.
The Respondent’s counsel submitted that prior efforts had been made to serve the applicant in an ordinary manner. But they failed on account that his physical address could not be found and secondly because it was impossible because the applicant was outside jurisdiction which by default left the bank with the only option of seeking service through the media. However the bank had no knowledge that the applicant was resident outside jurisdiction. This is important to take note of. Counsel invited court to note that the applicant had been informed by his family while he was outside the country that the bank had attached his property. (Like saying why did they not inform him about the suit when advertised in the papers?) In his submission the applicant imposed a duty on the bank that it ought to have known that he was out of the country. That if they had done investigations they should have known. In his view the bank was not obliged to do that or investigate where he was. The duty of the Respondent bank was only to look for the place where he ordinarily resided. Once they failed to establish this they had to seek orders for substituted service.
Counsel for the Respondent wondered why if the bank had sold the Applicant’s property, there was no documentation of any kind? Where is the evidence? He submitted that it was obvious that the Applicant did not have the evidence. Whether property was attached by the bank with respect to the specific debt is the issue which the applicants counsel ought to have found evidence for. Regarding the propriety of the respondents specially endorsed plaint for a summary suit, he submitted that the statement of account of the applicant was attached contrary to the submissions of the applicants counsel paragraph 5 of the plaint refers. As far as the issue of interest is concerned he submitted that upon closure the interest on the principle should have stopped running.
As far as the issue of limitation is concerned, counsel for the Respondent submitted that this was speculative. In his opinion banks can choose when to recall the facility. This can, knowing the nature of loan facilities, stretch for up to 10 years before the loan is recalled after default. Some loans are recalled earlier and this is a matter of the discretion of the bank.
Order 5 CPR rule 18 deals with ordinary service. An order was made and adverts were run. All that is required is that the plaintiff should have served the summons in a manner prescribed by court. To that extent, service was effective and proper. Orders made pursuant to substituted serviced were effective. He prayed that the application is rejected wit costs.
In rejoinder Mr. Richard Nsubuga counsel for the Respondent submitted that leave to appear and defend under order 36 rule 11 of the Civil Procedure Rules and rule gives court power where a decree is set aside to give leave to defendant to appear and defend. This is a consequential remedy and may be given in the interest of justice. He submitted that there are various modes of service. The preferred service is service on the person. He submitted that it is banking practice that banks do not give money without personal details. He reiterated his submission on compounded interest. As far as substituted service is concerned he wondered whether they looked for the Applicant’s physical address.
I have perused the pleadings and attachments thereto and carefully considered the submissions of counsel for the parties. The cardinal issue in this application is whether there was effective service of summons by way of substituted service on the Applicant/defendant. The fact of the Applicant/defendant being served by way of substituted service in High Court Civil Suit No. 61 of 2002 in the New Vision of 29th June 2002 is not in dispute. The resolution of the cardinal question as to whether the substituted service was effective or valid would in my judgment effectively resolve this application brought under order 36 rules 11 of the Civil Procedure Rules: Order 36 rule 11 of the CPR provides as follows:
What the court needs to be satisfied about is whether the service of summons in the particular circumstances of the case was effective or whether there was some other good cause to set aside the decree. Was service of summons effective or was there some other good cause why the decree should be set aside or why execution be stayed or set aside and defendant be given leave to appear and defend the suit? In my judgment where the question of service is decided the court does not have to look into other matters like whether there are triable issues, which go to the merits of the suit. Those issues can only be dealt with if the court finds that service was good. Whether or not there was proper service is a fundamental question affecting the right to be heard and should be tried first. It deals with the basic principles of natural justice, which principle is one of fundamental rights and freedoms enshrined under article 28 (1) of the Constitution of the Republic of Uganda. Clause 1 thereof provides that: “In the determination of civil rights and obligations or any criminal charge, a person shall be entitled to a fair, speedy and public hearing before an independent and impartial court or tribunal established by law.” The question of fair hearing includes an element of a right to be heard in the matter. The common law adage for this is “no one should be condemned unheard”. It is not only the right to be heard but a right to a fair hearing. It is therefore prudent to deal firstly with the fundamental question of whether the service on the Applicant by substituted service was good or not.
Resolution of this issue revolves on whether substituted service made in ignorance of the absence of the defendant from jurisdiction is fatal. I do not seek to determine or lay out general rules or circumstances in which service on a person who at the time of substituted service is outside jurisdiction for whatever reason is effective or a nullity.
Can substituted service be made on a person who is outside the jurisdiction of the court? If it cannot but is nonetheless made in ignorance of the fact that the person is outside jurisdiction, can the service be held to be effective and valid?
We examine the circumstances of this application, there is no dispute as to the fact that the applicant was outside the country in the United Kingdom between the years 1995 – 2008. Neither is there a dispute as to the fact that substituted service was ordered in June 2002 for service on the defendant. There is also no dispute that the applicant by the time he left owed the Respondent Bank some money which had been advanced him as an overdraft.
Order 14 rule 6 of the civil procedure rules sub rule 1 CPR provides that the court may on its own motion, and may in its discretion upon the application of any of the parties to the suit, send for, either from its own records, or from any other courts, a record of any other suit or proceeding and inspect the record.
Whereas the above provision deals with proceedings in any other suit, I have perused the file of main suit, namely High Court Civil Suit No. 61 of 2002, and examined the record. The Respondent filed a suit in February 2002 claiming inter alia 72,660,998 shillings. It is averred that the applicant over drew his account as at 31st of March, 2001. And that the balance attracted an interest of 25% per annum. The suit was filed by way of summary procedure under order 33 as it then was of the Civil Procedure Rules (Now order 36 revised edition of the rules). Summons was first issued on the 25th of February, 2002. The record shows that summons were again re-issued on the 10th of June, 2002. The affidavit of James Bentley Kalende avers as follows: “...
2. That summons in summary suit were issued for service upon the defendant but service could not be effected upon the defendant in the normal manner, as the physical address of the defendant was not availed to the plaintiff bank;
3. That Mr. Moses Adriko counsel for the plaintiff applied and an order for substituted service was made…
4. That Moses Adriko instructed me to advertise the said summons in the new vision newspaper, which appeared on the 29th day of June 2002 [original copy of the newspaper is hereto attached marked “A”]...”
From the affidavit of James Bentley Kalende the reason why the defendant could not be traced for purposes of service was because his physical address had not been availed to the plaintiff bank. It should be noted, that the Applicant does not contest the fact that he was indebted to the bank to the tune of over 72,000,000 Uganda shillings. He avers that his property was attached when he was out of the country. No documents have been adduced in evidence to prove these facts. More evidence would be required to establish what the actual facts are as what is available on record is not sufficient.
The sole question is whether service on the Applicant by substitute service when he was a resident of the United Kingdom between 1995 and the year 2008 was effective service as envisaged under rule 11 of order 36. The wording of rule 11 would be important for this analysis. It provides in part that court has to be: “…satisfied that the service of the summons was not effective ...” Was service not effective? Is effectiveness of service a question of fact? The case of Geoffrey Gatete and Angela Maria Nakigonya versus William Kyobe Supreme Court Civil Appeal No. 7 of 2005 is instructive. The judgment of the court was delivered by Mulenga JSC with concurrence of the rest of the panel of Supreme Court Judges. At page 8 second paragraph to page 9 quote:
The Oxford advanced learner’s dictionary defines the word “effective” to mean “having the desired effect; producing the intended result”. In that context, effective service of summons means service of summons that produces the desired or intended result. Conversely, in ineffective service of summons means service that does not produce such result. There can be no doubt that the desired and intended result of serving summons on the defendant in the civil suit is to make the defendant aware of the suit brought against him so that he has the opportunity to respond to it by either defending the suit or admitting liability and submitting to judgment. The surest mode of achieving that result is serving the defendant in person. Rules of procedure, however, provide for such diverse modes for serving summons that the possibility of service failing to produce the intended result cannot be ruled out in every case.
For example, in appropriate circumstances service may be lawfully made on the defendant’s agent. If the agent omits to make the defendant aware of the summons, the intended result cannot be achieved. Similarly, the court may order substituted service by way of publishing the summons in the press. While the publication will constitute lawful service, it will not produce the desired result if he does not come to the defendants notice. In my considered view, these examples of service envisaged in order 36 rule 11 as “service (that) was not effective.” Although the service on the agent and substituted service would be “deemed good service” on the defendant entitling the plaintiff to a decree under order 36 rule 3, if it is shown that the service did not lead to the defendant becoming aware of the summons, the service is “not effective” within the meaning of order 36 rule 11. (See Pirbhai Lalji vs. Hassanali (1962) EA 306).
The word “deemed” is commonly used in legislation to create legal or statutory fiction. It is used for the purpose of assuming the existence of the fact that in reality does not exist. In St Aubyn (LM) vs. Attorney General (1951) 2 All England reports 473, at page 498 Lord Radcliffe describes the various purposes for which the word is used where, he says –
Counsel for the respondent, submitted that the plaintiff/respondent was not aware that the defendant was out of jurisdiction. In other words the respondent acted bona fide and without notice that the applicant was out of the country. Had the respondent been aware, it was open to them to apply for service outside jurisdiction or to commence proceedings or issue a bankruptcy notice. The above case is clearly distinguishable because it deals with the substituted service in cases where the defendant is within jurisdiction. The case does not apply to circumstances where the defendant is outside the jurisdiction except by analogy.
Mode of service is provided for under order 5 rule 8 of the Civil Procedure Rules. Rule 8 provides:
Where there are several defendants service shall be made on each defendant. (See rule 9 of order 5). Specific provision is made for service on agents under rule 10 of order 5. What is important to note is that the rule provides that “Wherever it is practicable, service shall be made on the defendant in person, unless he or she has an agent empowered to accept service, in which case service on the agent shall be sufficient.” It follows that the Civil Procedure Rules provide for service on the Defendant in person or on an agent empowered to accept service. The current application is not related to service on agents at all but is concerned with impractical service on the defendant by reason that his physical address had not been availed to the bank.
Furthermore it is instructive to read order 5 rule 13 which permits service on the defendant’s agent or adult member of the family. Rule 13 provides:
Where the defendant cannot be found service may be made on any adult member of the defendant’s family. The crux of the matter before me is not failure to find the defendant in his address of service. This, as was submitted by counsel for the respondent is a case where the defendant’s address could not be established. In fact this position is borne out by paragraph 6 of the affidavit in reply by MALIZA KWERA which avers inter alia that “…That the applicant was properly and effectively served by way of substituted service as efforts to ordinarily effect service of court process upon him were futile as his physical address could not be traced on his file with the Respondent;”
In other words there was no attempt to serve any adult member of the applicant’s family because the physical address of the defendant or his family for the matter could not be established. I cannot suggest that substituted service could have been made on an adult member of the family. This is not tenable because no attempt was made or could have been made to engage rule 13 of order 5 of the Civil Procedure Rules. Substituted service was then admittedly sought under the erroneous belief the Applicant was within the jurisdiction of the court. Order 5 rule 18 assumes that the defendant sought to be served by substituted service is within the jurisdiction of the court when summons are issued. It provides:
(2) Substituted service under an order of the court shall be as effectual as if it had been made on the defendant personally.”
The intention of the substituted service is to make the defendant aware of the suit in another way because he or she cannot be served personally. The defendant can only be served personally when he or she is within the jurisdiction of the court. Specific provision has been made in the Civil Procedure Rules for service on a defendant who resides outside jurisdiction of the court. The question of being outside jurisdiction should be examined broadly to include service outside a magisterial area in case of Magistrates Courts or outside the Country in case of the High Court of Uganda (See order 5 rule 22).
The requirement for service by a court having jurisdiction is analogous to the provisions of section 21 of the Civil Procedure Act when dealing with Magistrates Courts.
(2) The court to which such document is sent shall, upon receipt of it, proceed as if it had been issued by that court and shall then return the document to the court of issue together with the record, if any, of its proceedings with regard to it.”
Magistrates seeking to serve documents in another magisterial district may send the document for service to a court in that district. Furthermore analogous is the provision of section 15 (a) of the Civil Procedure Act cap 71 which provides: “subject to limitations in sections 11 to 14, every suit shall be instituted in a court within the local limits of whose jurisdiction – (a) the defendant or each of the defendants, where there are more than one, at the time of commencement of the suit, actually or voluntarily resides, or carries on business, or personally works for gain.” Part of order 5 rule 18 (1) of the Civil Procedure Rules which deals with substituted service reproduces the above section of the Civil Procedure Act in so far as it provides for fixture of the summons in some conspicuous place where: “...in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the court thinks fit”
In conclusion, where the defendant ordinarily resides outside jurisdiction he or she cannot be held to be a person ordinarily resident within the local limits of the court’s jurisdiction. The defendant was in the United Kingdom from 1995 – 2008. By the time the suit was filed in February 2002 and summons issued, he had been a resident of the United Kingdom for about 7 years. He was therefore ordinarily a resident of the United Kingdom by the time of filing the suit in 2002 and issuance of summons.
Common law authority is that for substituted service to be valid, the defendant has to be within jurisdiction of the court when the writ for which order for substituted service is made. In the case of Myerson v Martin  3 All ER 667
The plaintiff, who was resident in Jersey, came to England where, on 14 April 1977, he initiated legal proceedings by writ for service within the jurisdiction against the defendant in respect of alleged wrongs done to him in Jersey. Although the defendant was resident outside England, he was director of a company with its head office in England. The defendant visited England often but the plaintiff failed to serve him. He was not in England on 14 April, when the writ was issued, but came to England shortly afterwards for a week. During that period and on subsequent occasions when the defendant was in England the process server tried unsuccessfully to serve him personally with the writ. The plaintiff eventually applied for, and obtained, an order under RSC Ord 65, r 4a, for substituted service of the writ. The defendant received the writ, but having received it he applied to have the order for substituted service, and the service effected there under, set aside as being improper. His contention that an order for substituted service could not be made unless at the time of the issue of the writ the defendant was within the jurisdiction and personal service could in law have been effected on him on that date. The order for substituted service was set aside by the High Court. The plaintiff appealed and contended that the rules for substituted service gave the court wide discretion to order the same whenever it was impracticable to serve him personally.
Lord Denning delivered the lead judgment of the court.
The relevant order for substituted service provides:
We have been referred to many cases on the subject. It is clear that the courts have to draw a dividing line between cases which are appropriate for service within the jurisdiction (which do not require the leave of the court) and those for service out of the jurisdiction (where the leave of the court is required). On this point for many years the courts have followed some dicta in Fry v Moore. Mr Moore had previously lived at Woodbridge in Suffolk, but, before the writ was issued, he had gone to Canada and remained in Canada thereafter. I put aside the point of waiver on which the case turned. I will only read the principle as stated by Lindley LJ ((1889) 23 QBD 395 at 397–398; cf [1886–90] All ER Rep 309 at 310):
Next there was an authoritative statement in Porter v Freudenberg ( 1 KB 857 at 887, [1914–15] All ER Rep 918 at 933). That was a case about alien enemies. A special court of seven members of this court was constituted. In a reserved judgment delivered by Lord Reading CJ the court said:
‘The general rule is that an order for substituted service of writ of summons within the jurisdiction cannot be made in any case in which, at the time of the issue of the writ, there could not be at law a good personal service of the writ because the defendant is not within the jurisdiction.’
If the defendant was in fact outside the jurisdiction at the time the writ was issued, and the plaintiff knows it, the plaintiff can take his choice and issue a writ for service within the jurisdiction, but in that case he has to wait his opportunity and hope that the defendant will return to England and be served personally. There cannot be substituted service.
Otherwise if the defendant was in fact outside the jurisdiction when the writ was issued, and is likely to remain outside, the proper course for the plaintiff is to apply for leave to serve out of the jurisdiction, in which case he can only get it if the case comes within RSC Ord 11...”
Where the Court allows service to be made outside jurisdiction, the relevant procedures have to be complied with. These include:
The objective for service on of summons on the defendant is for the court to hear the parties and for the defendant to exercise a right to be heard. A party has a right to be heard unless he or she elects to waive that right. Following the case of Geoffrey Gatete and Angela Maria Nakigonya versus William Kyobe Supreme Court Civil Appeal No. 7 of 2005, the object of service under order 36 is to make the defendant aware of the suit. Hence ineffective service would led to a decree been set aside under rule 11 thereof. The right to a fair hearing under article 28 (1) of the Constitution, a right from which there can be no derogation under article 44 (c) has to be guarded jealously. Though the Respondent as creditor needs to set the ball in motion to recover its debt and expeditiously, the question whether the defendant/applicant is liable should be established after he has been given the opportunity upon proper service of summons on him. From the little evidence on record the applicant left the country when he owed the bank over 72 million Uganda shillings. This has to be taken seriously. His tentative defence is that the bank recovered its money. No evidence is available to reach any conclusion on the matter.
Each party shall bear its/his own costs.
Delivered the 26th day of November 2010 in the presence of:
Patricia Akanyo: Court Clerk