Court name
Commercial Court of Uganda
Judgment date
13 October 2011

Regal Pharmaceuticals Ltd v Maria Asumpta Pharmaceuticals Ltd (Company Cause-2010/20) [2011] UGCommC 114 (13 October 2011);

Cite this case
[2011] UGCommC 114

 

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

IN THE MATTER OF WINDING UP OF MARIA ASSUMPTA PHARMACEUTICALS LTD

AND

THE MATTER OF COMPANIES ACT 110

COMPANY CAUSE NO 20 OF 2010

REGAL PHARMACEUTICALS LTD)…......................................... PETITIONER

VERSUS

MARIA ASSUMPTA PHARMACEUTICALS LTD)….................... RESPONDENT

HONOURABLE MR JUSTICE CHRISTOPHER MADRAMA

JUDGMENT

This judgment arises out of a petition for a winding up order of the Respondent Company under the provisions of the Companies Act cap 110 and for other orders as shall be just. The facts of the petition are verified by the affidavit of Nilesh J. Brahmbhat the Managing Director of the Petitioner. The facts in the petition are that the Respondent Company was duly registered and incorporated under the laws of Uganda on the 5th of June 1991 with its registered office situated at plot 45 Ben Kiwanuka street Kampala. The Respondents nominal share capital is Uganda shillings 2,000,000/- and it’s main object of incorporation is to carry on the business of chemists, druggists, dry salters oil, importers and manufacturers of and dealers in pharmaceuticals, medicinal, industrial and other preparations, surgical and scientific apparatus and materials and such other objects as set forth in the Memorandum and Articles of Association attached to the petition.

The petition shows that Respondent Company owes the Petitioner a sum of US $ 220,134.15 cents which remained outstanding after a statutory demand notice was served on the Respondent. The amount arises from various pharmaceutical products supplied by the Petitioner and supported by documentary evidence attached to the petition.

The petition shows that the Petitioner had transacted with the Respondent Company as a supplier of various pharmaceutical drugs and products for several years. The debt however arose between the 12th of July 2007 and the 22nd of July 2009 when the Petitioner supplied the Respondent with various pharmaceutical drugs and products on credit. Each time goods are delivered to the Respondent Company by the Petitioner, the Respondent Company would acknowledge receipt by endorsing on delivery notes and invoices and copies of which are attached as annexure "C" to the petition. The Petitioner alleges that the Respondent Company duly paid for part of the drugs supplied while the sum claimed in the Petition remained owing to date. Attached to the petition is a financial statement depicting the said transactions as annexure "B". It is the Petitioners case that despite reminders and demands by it, the Respondent Company made no attempt to settle its indebtedness to the Petitioner and the through its legal counsel, the Petitioner made a formal demand for the payment of the debt as per annexure “E” to the Petition which was received by the Respondent’s managing director though the Respondent ignored the statutory demand notice and did not pay the sums demanded. The Petitioner further and in response to the letters dated 12th April 2010 from the Respondents lawyers, further sent the Respondent’s lawyers a copy of a financial statement relating to the relevant transactions. Consequently the Respondent is indebted to the Petitioner and is further insolvent and unable to pay its debts. In the circumstances the petition seeks orders that it is in the interest of justice that the respondent company is wound up for failure to pay its debts.

In reply the managing director of the Respondent Company Mr. Hillary Serwadda in the affidavit in opposition dated 8th June 2011 avers that:

1.      The debt claimed in the petition is fictitious because there is no evidence of orders for the goods made by the respondent company nor is there evidence of delivery of goods to the respondent.

 

2.      The petition is based on documents originated by the petitioner to which the respondent is neither a party nor are the documents within the knowledge of the respondent.

 

3.      The petition was preferred mala fide against the respondent company.

In rejoinder Petitioners managing director avers that it is grossly false to aver that the Petitioner did not order for drugs from the Petitioner or that no deliveries thereof were made to the Respondent in that:

a.       The respondent through its managing director Mr Hillary Serwadda on 18 October 2007 ordered from the respondents various pharmaceutical drugs. The fax placing order for the drugs is annexed and marked annexure "A".

 

b.      The petitioner on 18 October 2007 prepared and packaged the goods as per order and handed them over together with the invoice and imports/exports transit warehouse declaration to the respondent’s transporters Messrs Sahajanand transporters who acknowledged receipt of the same. Acknowledgement of receipt of the drugs by the respondent’s transporters was also annexed and marked "B". 

 

c.       The respondent’s managing director Mr. Hillary Serwadda on the 26th of March, 2008 and on the 7th of June, 2008 ordered from the respondent various pharmaceutical drugs annexed to the affidavit as “C” and “D”.

 

d.      The petitioner upon receipt of the said order on the 26th of March, 2008 and on the 7th of June, 2008 prepared and packaged the goods as by order and handed them over with the invoice and the importers/export transit warehouse declaration to the respondent’s transporters Messrs. Baba hardware and Messrs Sahajanand transporters who on the 2nd of October, 2008 and the 22nd of May, 2008 respectively who acknowledged receipt of the same.  Copies of the invoices, delivery notes, customs entry form and acknowledgement of receipt of the drugs by the respondent’s transporters are attached and marked as “E”. 

 

e.       Mr. Hillary Serwadda again on the 1st of October, 2008 ordered from the respondent various pharmaceutical drugs.  The order is annexed as “F”.  Again on the 1st of October, 2008 the petitioner prepared and packaged the goods as per order and handed them over with the invoice and the imports/exports transit warehouse declaration to the respondent’s transporters Messrs. Sahajanand transporters who acknowledged receipt on the 30th of January, 2009 of the same.  The copies of the invoice, delivery notes, customs entry form and acknowledgement of receipt of the drugs by the respondent’s transporters are attached and marked as annexure “G”. 

 

f.       The respondent is aware that the petitioner only supplied goods upon placement and receipt of formal orders. 

 

g.      The petitioner only supplied drugs to the respondent upon confirmation from the respondent that the pro forma invoice had been duly signed by the respondent’s pharmacists and approved by the National Drug Authority.

 

h.      The petitioner cannot export pharmaceutical drugs through the Ugandan border without its pro forma invoice been endorsed by the respondent’s pharmacist and the National Drug Authority.

 

i.        The respondent made part payment to settle its indebtedness to the petitioner for drug supplied to it but it remains indebted to the petitioner to the tune of United States dollars 228,134 15¢.

 

j.        Lastly the petitioner contends that the respondent’s affidavit contains material falsehoods and ought to be struck out for contravening the law.

The Respondent’s Managing Director Mr. Hillary Serwadda further filed a supplementary affidavit in reply dated 7th of March 2011 which refers to a supplementary affidavit of Mr. Nilesh J Brambhat and avers that the Respondent sold the business as an ordinary and normal business transaction without any intention to defraud as alleged.

I have however not found the said supplementary affidavit in support of the petition giving facts of sale of the business of the Respondent on the court record. What is on record are affidavits in MA No. 252 of 2010, being an application for appointment of an interim liquidator and MA 257 of 2010 which is an application to compel the second Respondent to produce in court all documents in its possession relating to licensees, status of ownership and any change thereto of Messrs Pyramid Pharmaceuticals Ltd, Messrs Jex Pharmacy, Messrs Medics Pharmacy and Messrs. Maria Assumpta Pharmaceuticals Ltd.  The application is supported by the affidavit of Susan B Kaggwa which avers from the information of Nilesh that the company business was sold.

At the hearing the Petitioner was represented by Kaggwa Brian for the Petitioner and Niwagaba for the Respondent. After pleadings were closed counsels for the parties agreed to file written submissions for and against the petition.  

In the written submissions filed on behalf of the Petitioner, learned Counsel for the Petitioner summarised the facts in the pleadings and concluded that they show that the Respondent owes the Petitioner a sum of US$ 228,143.15.

Learned counsel contended that between the period 12th of July, 2007 and 22 July, 2009 upon the formal orders of the Respondent for the supply of pharmaceutical products the Petitioner supplied the Respondent pharmaceutical goods on credit. The Respondent had been a long standing customer of the Petitioner hence the supply of goods to it on credit. Orders were made by facsimile under the hand of the Respondents Managing Director one Hillary Serwadda. That annexure “a” to the petition is an admission by the Respondent of its indebtedness by letter dated 18th October 2007.

Counsel went through a series of the said pattern of transactions wherein the Respondent’s managing director Hillary Serwadda would order for drugs by fax, and the petitioner would respond by packaging the goods as per order and hand over all the documents to the transporters. The documents for export to Uganda or import into Uganda from Kenya included the invoice and imports/export/ transit warehousing declaration. The Respondent or its transporters would acknowledge receipt of the goods. Counsel submitted that the sums of money invoiced in each transaction corresponds to the East African Customs entry forms and certificate of origin duly consigned to the Respondent (Maria Assumpta Pharmaceuticals Ltd.). He further contended that the delivery notes under each transaction correspond to the orders placed by the Respondent and was duly received by the Respondent or its transporter agents. He concluded that it is evidently clear that the Petitioner only supplied goods pursuant to the formal orders for the supply of pharmaceutical goods placed for the supply by the Respondent and ordered goods were supplied and received. Counsel maintained that the transaction complied with the National Drug Authority Act which required different parties including the Respondent’s pharmacist to endorse the relevant documents.

He contended that the supply of drugs is governed by the National Drug Authority “guidelines for importation and exporter of pharmaceuticals” which have been drawn in accordance with part V for the control of transport, import and export of drugs and sections 43, 44, 45 and 46 of the National Drug Policy and Authority Act cap 206. The guidelines ensured that all drugs to be imported into the country are registered and is given special clearance by the National Drug Authority. The procedure is that: An order is placed by the respondent with the manufacturer/petitioner who then prepares a pro forma invoice which would be sent to the Respondents. Upon receipt of the pro forma invoice by the Respondent, the Respondent will send it to the Petitioners local technical representative, who was in the instant matter, is Abacus Pharma, for signature. After the local technical representative has signed the pro forma invoice, it is sent to the Respondent’s authorised pharmacist for endorsement. For every consignment of drugs to be imported, the pro forma invoice has to be endorsed by the pharmacist from the importer or any other technical person. The documents are then sent to the National Drug Authority for approval and signature and the Respondent would send a copy to the Petitioner to commence manufacturing or preparation of the drugs for delivery export to the Respondent. The importer is required to pay verification fees equal to 2% FOB value of the ascertained goods to the National Drug Authority. A verification certificate corresponding to the particulars of ascertained drugs to be imported is then issued by the National Drug Authority. The approved copies of the proforma invoice and verification certificate are then sent to the port of entry and the importer (the respondent), who in turn advises the manufacturer/supplier (the petitioner). The supplier of the goods would then prepare and package them for collection by the Respondent or its transporter agents. At the port of entry, the drugs are inspected by a National Drug Authority Inspector before release into the country.

Counsel contended that the relevant pharmaceutical goods could enter into Uganda from Kenya without approval of the authorities such as the Kenya Revenue Authority and Uganda Revenue Authority using inter alia the duly approved/endorsed pro forma invoice by the Respondent’s pharmacist and Uganda National Drug Authority.

Counsel further referred to the documentation and the financial statement attached to the petition and affidavits in reply. He contended that the Respondent’s indebtedness is duly admitted in a letter dated 18th October 2007 by the Respondent’s managing director as per annexure "A" to the affidavit in reply. A statutory demand for the debt was made and ignored. The Respondent was also sent a copy of the financial statement of the transactions relating to the claim of the petitioner to no avail. Learned counsel submitted that the Respondent’s business was craftily sold and transferred to a third party Messrs Pyramid Pharmaceuticals Ltd. Counsel referred to a supplementary affidavit in support of the petition and annexure “A”, “B” and “C” for copies of the agreement of sale of the pharmaceutical business licenses, the letter from the respondent confirming the change of name, proprietorship and management and the receipt from the National Drug Authority in confirmation thereof. I have failed to trace any supplementary affidavit in support of the petition except that there is an affidavit in support of chamber summons for the appointment of an official receiver as interim liquidator. This is MA 252 of 2010 of the Civil Division of the High Court (and MA 667 of 2010 of the Commercial Division) filed in court on the 14th of June 2010. The chamber summonses, by the time of this judgment, were not yet issued by the Registrar of the Court for service on the Respondent and remain unsigned.

Learned counsel for the Petitioner contends that the Respondent sold its business license and changed its name to Messrs Pyramid Pharmaceuticals Ltd to evade and or frustrate the Petitioner from recovering monies due to it. This is because at the time of the said transfer of its pharmaceutical businesses to Messrs Pyramid Pharmaceuticals Ltd and Messrs Jazz Medix Ltd the sum of US dollars 228,234.15 had been demanded by the Petitioner and remained owing. He contended that the Respondent got goods on credit without any intention of paying back. He contended that this amounted to fraud against the Petitioner and other creditors. That one of the creditors was lucky to get wind of the Respondent’s unlawful activities and duly notified the National Drug Authority requesting it not to effect the transfer of the Respondents license until such time as when the Respondent had settled its indebtedness.

On the basis of the above counsel contended that the Respondent’s indebtedness is not disputed and no plausible ground has been raised in the affidavit in opposition to the petition to suggest otherwise. That the affidavit in opposition contains material falsehoods warranting court striking out the same henceforth and that it is just and equitable that this honourable court makes an order for the winding up of the Respondent Company.

In support of the facts learned counsel for the Petitioner cited Palmer’s Company Law, Volume 1 by C.M. Schmitthoff for the principle of law that where a petitioner proves that its debt remains unpaid and the company is insolvent it is the duty of the court to order a winding up. Secondly inability to pay a particular debt within a reasonable time is prima facie evidence of indebtedness. He submitted that inability to pay debts can be shown by failure to satisfy a statutory demand. Counsel relied on the case of Mann and Another vs. Goldstein and Another [1968] 1 ALL E.R. 769, for the legal preposition that where a debt is established and even where the company appears to be solvent, it can remedy this by paying the debt otherwise a winding up petition may succeed for persistent non payment of the debt. In Re: Tandy vs. Harmony House furniture Co. Ltd [1964] 1 ALL NLR 31 the Supreme Court of Nigeria held that though a company may have assets sufficient to meet its obligations but if it is demonstrated that it cannot meet its current liabilities, it is commercially insolvent. Counsel submitted that there was no dispute as to the exact amount due to the Petitioner as it is proved by the affidavit in reply by Nilesh Brambhat dated 17th June 2010. Secondly that the facts show that the Respondent has deliberately disposed off its assets and there are no adequate assets to meet its current liabilities. Counsel concluded that the Petitioner had established a prima facie case of indebtedness which debt remained outstanding for more than twenty one days.

In reply learned counsel for the Respondent submitted that no evidence had been adduced proving that the Respondent ordered for goods or that it was supplied by the Petitioner with the goods as alleged. To illustrate counsel submitted that annexure “C” to the petition which is a statement of account should not be relied on by the court because it is a unilateral document generated by the Petitioner. A substantial part of the documents attached are proforma invoices which documents are quotation of prices. Few invoices attached do not have corresponding evidence of delivery of the goods covered therein to the Respondent. One delivery note is dated 16th of April 2007 long before the alleged claim in the petition arose namely between 12th July 2007 and 22nd July 2009. Moreover counsel contended that the delivery note does not reveal who received it. He concluded that the documents were inadmissible. Turning to annexure “A”, “B”, “D”, and “F” of the Petitioners affidavit in reply, he contended that the existence of the documents were contested by the Respondent and were therefore inadmissible. Counsel raised many questions as to the authenticity of the documents relied on by the Petitioner. Counsel further contended that as far as the National Drug Authority signature and the pharmacists signatures are concerned, there is no evidence that the Respondent’s local technical representative signed annexure “A”, “B”, “D” and “F”. Neither did they sign the financial statement annexure “C”. 

The Respondent submitted that no connexion was made between the Respondent and the two carriers namely Sahajanand Transporters and Messrs Baba Hardware. There is no evidence of a contract between the said transporters and the Respondent.

Learned counsel for the Respondent further submitted the petition does not indicate what kind of contract it was whether an ex works or ex stores contract. The petition also does not show where the factory or stores are where the Respondent took delivery of the goods. He contended that if any FOB terms applied, there is no evidence that the transporters were named by the Respondent and whether they performed in accordance with the contracts of carriage, if any. He contended that in FOB terms the purchaser is not a party to the contract of carriage and it was up to the Petitioner to ensure that the carrier performs its part. However there is no evidence of carriers appointed by the Respondent.

Counsel further hypothesized that if it is a CIF contract, there is no evidence from the carriers on record. There is also no evidence of orders and supplies. Counsel further contended that the affidavit of the managing director of the Respondent denies that there was ever a transaction between the Petitioner and the Respondent on credit and this averment has not been rebutted.

Counsel further contended that the documents attached to the affidavit in reply to the Respondent s affidavit in opposition such as the alleged letter/fax from Hillary Serwadda ordering for supplies of goods has no evidence in the petition of any response thereto by the Petitioner. The guidelines for medical supplies submitted on by the Petitioner were even flouted by the letters. Counsel attacked the authenticity and veracity of annexure “A” – “F” and submitted that the Respondent denies their existence. That it would require a handwriting expert or viva voce evidence to establish the truth about the same. There is no evidence from the National Drug Authority that drugs were ever made and supplied as averred in the petition.

As far as the law is concerned learned counsel for the Respondent submitted that as regards carriers in an FOB contract, the buyer is not privy to the contract of carriage. There is no basis in fact or law tying the Respondent to the carriers/transporters named in the documents.

Counsel further submitted that there is no evidence that the pharmaceutical products mentioned in the petition as having been supplied to the Respondent were ever registered with the National Drug Authority. That annexure “A”, “C” “D” and “F” to the affidavit of the Petitioner in reply are not orders from the Respondent. Using the guidelines of the National Drug Policy and Authority Act counsel attacked the petition for not showing that such a transaction as stipulated in the guidelines was ever carried out or executed in that:

·         There was no proforma invoice in response to the alleged orders for pharmaceutical products.

·         No evidence of signature of the petitioners local technical representative (Abacus Pharma)

·         No evidence that Abacus Pharma sent any proforma invoice to the Respondent to sign,

·         The signatures to annexure “C” and “D” to the affidavit in reply cannot be tied to the Respondent or anybody.

·         No evidence that the proforma invoice was ever sent to the National Drug Authority for approval and signatures.

·         No evidence that the duly endorsed proforma invoice was sent to the Petitioner.

·         There is no verification certificate from the National drug Authority for the importation of drugs without which it would be an offence to import drugs into Uganda.

·         There is no inspection report from the National Drug Authority for entry of the products into Uganda.

Learned counsel for the Respondent further attacked the financial statement attached to the petition as a unilateral document that cannot prove indebtedness of the Respondent.

As far as the sale of the licence of the Respondent is concerned counsel for the Respondent contends that as a business concern, the license sold was for trading/marketing rights and premises only. There is no certificate of change of name and none has been produced in evidence.

As far as section 222 (e) and 223 of the Companies Act is concerned counsel contended that the Petitioner did not prove indebtedness of the Respondent and the alleged debt is contested on substantial grounds. No debt has been proved in a court of law. There is also no evidence of insolvency of the Respondent on record showing that it cannot pay the debt that is disputed. He concluded that the Petition was filed mala fide and was without merit and should be dismissed with costs.

In rejoinder the Petitioner’s counsel objected to the submissions of the Respondents counsel on the ground that they completely depart from its pleadings. He prayed that the submissions be struck out. Counsel relied on the cases of Interfreight Forwarders (U) Ltd vs. East African Development Bank Civil Appeal No. 33 of 1993 that issues are framed from the pleadings and evidence directed to prove the pleadings. He also referred to Uganda Breweries Ltd vs. Uganda Railways Corporation [2002] 2 EA 634 and other authorities on the same point.  He submitted that the Respondent’s reply does not raise the question of non existence of a contract between the transporter and itself and between itself and the Petitioner; the authenticity, legality and veracity of the documents in support of the petition; the non delivery of drugs and the invoices by the Petitioner to the Respondent; the lack of endorsement of proforma invoices by the National Drug Authority and the fact that the contract is not an FOB contract.

Counsel submitted that the facts relied on by the Respondent’s counsel in its submissions should not be entertained by the court otherwise it will occasion a miscarriage of justice. Secondly he contended that the Respondent’s answers were evasive and in contravention of Order 6 rules 8 of the Civil Procedure Rules. He prayed that the Respondent’s affidavits be struck out.

Lastly on the preliminary point he contended that the Respondent’s submissions are frivolous and vexatious and do not respond to the Petitioners allegations and should be struck out under orders 6 rule 7 and 30 of the Civil Procedure Rules. Counsel submitted that a pleading can be struck out at any stage of the proceedings and cited the case of Mbori and Another vs. Sanhani and Others [2006] 2 EA 187 in support of this contention.

He prayed that I strike out the Respondents submissions and defence on the ground that (a) they are a departure from the earlier pleadings; (b) the defence is nonspecific and evasive; and (c) the defence and submissions do not respond to the allegations in the petition and are not legally acceptable.

Without prejudice and as far as the merits are concerned learned Counsel for the Petitioner submitted that under sections 10 of the Contract Act 2010 and section 4 (1) of the Sale of Goods Act cap 82 a contract can be oral and written and it may be implied by the conduct of the parties. Further under Halsbury’s Laws of England, 4th Edition volume 9 (1) paragraph 603 a contract has 4 elements which are present in the petitioners transaction with the respondent namely;

-          Two definite parties to the contract,

-          Parties who are in agreement,

-          They intended to create a legal and binding relationship,

-          There was consideration or some other factor which the law considers sufficient to support the promise to pay.

He contended that the Respondent does not deny the relationship. Annexure “A” and “C” to the affidavit in reply evidence a request addressed to the Petitioner and signed by the Respondents managing director Mr. Hilary Serwadda requesting for drugs on credit and promising to pay. He contended that the said orders amounted to an offer and that the Petitioner accepted the order by raising a pro forma invoice and subsequently delivering the drugs to the Respondent’s transporters based on FOB contract terms.

As far as the Respondent contents that there is no evidence that the transporters to whom the goods were delivered were the agents of the Respondent, counsel contended that the in an FOB contract the sellers places the goods on a vessels which has been named by the buyer. The goods were handed over to the Respondents nominated transporters. The delivery notes show proof of the goods to the Respondent through the transporters. The customs declaration forms indicate that the goods were cleared at Busia Customs post in favour of the Respondent. Counsel concluded that the goods were handed over to the Respondents when the Petitioner handed them over to the nominated transporters who were agents of the Respondent.

As far as the authenticity of the documents are concerned, counsel contended that the Respondent had been furnished by the National Drug Authority with the copies of the documents in issue as the Petitioner did not retain a copy. Moreover if the Respondent had raised it in its pleadings the Petitioners would have obtained certified copies from the National Drug Authority.

As far as the question of whether the transaction is illegal for non compliance with the regulations for importation of drugs in that the drugs were not registered is concerned counsel submitted that had the Respondent raised this issue in the pleadings, the Petitioner would have furnished certified copies of the registration. Counsel finally cited the case of Re: Global Tours and Travels Ltd [2001] 1 EA 195 at 196 where Hon Justice Ringera for Kenya High court held that where the dispute of the claim of indebtedness was frivolous there was no substantial dispute and the petition would be granted. Counsel submitted that there was no legitimate or substantial dispute and there is no disputed debt.

Counsel contended that all that the Petitioner needed to prove is that the respondent was unable to pay its debts after service of a statutory demand on it. The Respondent had an opportunity to dispute the debt but never responded to it. There is no evidence that the debt in disputed on genuine and substantial grounds. Counsel prayed that the winding order be made accordingly.

I have carefully evaluated the pleadings and evidence on record and the submissions of Counsel set out above. Starting with the preliminary point of law Counsel for the Petitioner prayed that I dismiss the answer to the petition and the submissions for departing from the pleadings and for being vague and evasive. The pleadings are specifically governed by the Companies (Winding Up) Rules Statutory Instrument 110 – 2. The said rules give the form of a petition and timelines within which to file the pleadings. A petition is presented at the office of the court registrar who fixes a time and place for the hearing of the petition. Notice of the time and place appointed for hearing is then advertised seven days before the hearing.  The petition is then also served upon the company sought to be wound up. The rules show that the grounds for winding up are contained in the petition itself which petition is verified by an affidavit referring to it. An affidavit verifying the petition is filed within four days after the petition has been presented to the registrar of the court. Thereafter affidavits in opposition to the petition are to be filed within 7 days of the filing of the affidavit verifying the petition and notice of the affidavit in opposition is given to the Petitioner or his/her advocate. An affidavit in reply to the affidavit in opposition is filed within 3 days of the receipt of notice of the filing of the affidavit in opposition by the Petitioner of his/her or its advocate.

The petition was duly presented in court on the 5th of May 2010 and signed and sealed by the registrar on the 15th of June 2010. The affidavit verifying the petition is affirmed by Nilesh J. Brahmbhat and commissioned on the 5th of May 2010 and filed on court record on the 6th of May 2010. The petition was advertised on the 19th of May 2010 in the Uganda Gazette.  The affidavit in opposition is sworn by Hilary Serwadda Managing Director of the Respondent on the 8th of June 2010 and filed in court on the same day. An affidavit in reply to the affidavit in opposition is sworn on the Petitioners behalf by Nilesh J. Brahmbhat on the 17th of June 2010 and filed on court on the 18th of June 2010. A further supplementary affidavit in reply/opposition sworn by Hilary Serwadda on the 7th of March 2011 is also filed on court record on the 7th of March 2011.

First of all there is no evidence as to when the affidavit in opposition was served or given notice of to the Petitioner or its advocate. As noted above an affidavit in reply to the affidavit in opposition is to be filed within three days of the notice thereof to the petitioner or advocate. Secondly there is no evidence that leave to file a supplementary affidavit in opposition was ever given to the Respondent by the court. Furthermore the affidavit in support of the chamber summons MA 252 of 2010 and filed on the court record on the 14th of June 2010 should not be relied upon in support of the petition. In any case it was filed even before the affidavit in reply to the affidavit in opposition and could not have been intended to support the petition. Be the above as it may, none of the parties ever raised the question of timelines and I must presume that any non compliance with the time lines has not prejudiced the case of any of the parties.

As far as striking out submissions of the Respondent’s Counsel is concerned, orders 6 and 7 of the Civil Procedure Rules deal with pleadings and not submissions. For instance order 6 rules 7 prohibits the raising of new grounds of claim or allegation inconsistent with a previous pleading. This rule does not apply to petitions and is therefore inapplicable to winding up proceedings which are commenced by petition. Be that as it may, a submission should only support the case of the party which has been pleaded or attack the other parties’ case on the merits of the law and points of fact which can be obtained from the record.

 

As to whether the affidavit in opposition is evasive or not is a question of fact and the evasiveness need to be spelt out. For instance the affidavit in opposition avers that the claim in the petition is fictitious. The word “fictitious” is a manner of expression and a question of the use of language. It means in effect that the claim in the petition is not true or genuine or has not factual basis. The Respondent further avers that the there is no evidence of orders for the goods or delivery thereof to the Respondent. In the submissions the Respondents raises this in detail by attacking the documents. These documents are on record and the Respondent’s counsel is within his legal limits to attack them for inherent defects on fact and on points of law. The Respondent further through its managing director asserts that the documents relied on by the Petitioner were originated by the Petitioner and the Respondent is not privy to it. These denials though not in detail raise plausible answers to the petition for purposes of showing a dispute and giving a foundation to the submissions of the Respondents counsel. For the above reasons the prayer of counsel for the Petitioner to strike out the Respondents submissions and defence on the grounds (a) they are a departure from the earlier pleadings; (b) that the defence is not specific and evasive; and (c) the defence and submissions do not respond to the allegations in the petition and are not legally acceptable, is overruled and the petition will be decided on its merits.

 

This petition invokes sections 222, 223 and 224 of the Companies Act Cap 110 Laws of Uganda for the prayer to wind up the Respondent. The primary ground in the petition and which has been argued by the Petitioner is that the Respondent is insolvent and unable to pay its debts. This is founded on section 222 (e) and 223 (a) and (c) of the Companies Act cap 110. The Respondent disputes that it owes the Petitioner any money.  Sections 222 (e) and (f) relied on provide that:

 

“222. Circumstances in which a company may be wound up by the court

 

A company may be wound up by the court if—

 

(e) the company is unable to pay its debts;

 

(f) the court is of opinion that it is just and equitable that the company should be wound up”

 

A company unable to pay its debts is defined by section 223 of the Companies Act which provides that:

 

223. Definition of inability to pay debts.

A company shall be deemed to be unable to pay its debts—

(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one thousand shillings then due has served on the company, by leaving it at the registered office of the company, a demand under his or her hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor;

(b) ... ; or

(c) if it is proved to the satisfaction of the court that the company is unable to pay its debts, and in determining whether a company is unable to pay its debts the court shall take into account the contingent and prospective liabilities of the company.”

 

The petition is founded on the ground that the Respondent company is unable to pay its debts in terms of section 222 (e) the Respondent having been served with a statutory demand notice under section 223 (a) of the Companies Act cap 110 and which is has failed to comply with within twenty one days. The second foundation of the petition is that that the Respondent Company is unable to pay its debts due to insolvency.

The application of section 222 of the Companies Act 110 has been considered in a number of judicial precedents. These precedents interpret statutes of the United Kingdom in pari materia with section 222 (e) and 223 of the Companies Act cap 110. In the case of Re Tweeds Garages Ltd [1962] 1 All ER 121 the Respondent company was at all material times heavily indebted to the Petitioners, although the exact amount of the indebtedness was disputed. The company was insolvent. On petition to wind-up the company, Plowman J interpreted a provision of the 1948 Companies Act of Britain which is in pari materia with the Ugandan Companies Act section 222 (e) and 223 (a) and held that what was in dispute was the amount of money owing and there was no doubt that the Petitioners were creditors for amounts which would entitle them to a winding up order. An answer to a petition which disputes the exact amount owed to the Petitioners was not a sufficient answer to a petition and a winding-up order would be issued. In the case of Mann and Another v Goldstein and Another [1968] 2 All ER 769 shares in each of two companies namely J Ltd and C Ltd were held equally by the plaintiffs and by the first defendant and his wife. Each company was insolvent because of inability to pay its debts as they fell due.

 The first defendant presented a winding-up petition against J Ltd based on an alleged debt for director’s fees. The debt was contested on the ground that the first defendant drew money from J Ltd without deduction for income tax. There was no authority for the payments other than the voting of the director’s fees. The court noted that this was a substantial defence as to the alleged debt, which would require investigation before the debt was established. W Ltd the second defendant presented a winding-up petition against C Ltd based on an alleged debt of £347 for goods supplied. C Ltd and M Ltd which latter company had been sold to the first defendant used the same premises. There appeared to have been confusion whether goods ordered from W Ltd were supplied to C Ltd or M Ltd. The court noted that again there was a substantial defence to the alleged debt, which required investigation. There was evidence that a winding-up petition would injure the goodwill of each company and in an action to restrain the prosecution of the winding-up petitions it was held that the existence of the debt on which each winding-up petition was founded was disputed on grounds showing a substantial defence requiring investigation. Secondly the petitioner did not establish that he was a creditor and thus had the locus standi to present the petition and the companies court was not the appropriate court to decide the dispute; accordingly, the presentation of the petitions was an abuse of the process of the court, and injunctions would be granted restraining, until trial or further order, the advertisement or prosecution of the winding-up petitions.

UNGOED-THOMAS J at pages 772 – 775 noted that under section s 222 of the Companies Act, 1948a the ground relied on in the petition was that the company was unable to pay its debts. This ground must be in addition to the precondition for filing a petition which is that the petitioner must be a creditor, and is not alternative to it.

“The insolvency requirement, however, unlike the creditor requirement, is only a pre-requisite of the order and not a pre-requisite of the presentation of the petition.” (Emphasis mine)

After the question of locus standi is sorted out the court inquires into the company’s inability to pay its debts and decides whether it is an appropriate case for the exercise of its jurisdiction to make a winding-up order.

The court analysed some three general case scenarios and what course the court will take in each case scenario namely:

1.      When the creditor’s debt is clearly established;

2.      When it is clearly established that there is no debt; and

3.      When the debt is disputed on substantial grounds

As far as the first scenario of when the creditor’s debt is clearly established is concerned the learned judge held that the court:

“would not, in general at any rate, interfere even though the company would appear to be solvent, for the creditor would, as such, be entitled to present a petition and the debtor would have its own remedy in paying the undisputed debt which it should pay. So, to persist in non-payment of the debt in such circumstances would itself either suggest inability to pay or that the application was an application that the court should give the debtor relief which it itself could provide, but would not provide, by paying the debt. Further, the winding-up order on the ground of inability to pay debts would be the very matter which it would be for the companies court to decide after presentation of the petition: and validly to present a creditor’s petition which the company inexplicably would not pay could hardly, in general at any rate, be an abuse of the process of the court.

The holding is persuasive for the proposition of law that when the debt is not disputed the company court has the mandate to decide whether there was inability to pay the debt and why.

On the second scenario where there is no debt owing the court noted that it meant that there was no creditor and therefore the petitioner has no locus standi. Once it is clear there is no debt to pay, pursuit of the petition would be an abuse of the process of court.

On the third scenario which is the situation where the debt is disputed on some substantial ground which is neither frivolous nor without substance, and the company is solvent the court will restrain the prosecution of a winding up petition. The honourable learned judge noted:

As Sir George Jessel MR ((1877), 18 ChD at p 559, n) said in the judgment from which I have already quoted, “When a company is solvent, the right course is to bring an action for the debt: … ” So, to pursue a winding-up petition in such circumstances is an abuse of the process of the court.

The question to determine is therefore whether the dispute of the debt by the Respondent is frivolous or lacks substance and whether the company is solvent.  In Re: Hoima Ginneries Ltd (No. 2) [1964] EA 439, the Petitioners applied for winding-up of Hoima Ginners Ltd on the ground that the company was unable to pay its debts pursuant to non compliance with the terms of a statutory demand notice issued under s. 222 (e) and s. 223 (a) of the Companies Ordinance 1958. The sum claimed in the notice was a compilation of damages the petitioners claimed that they were entitled for breach of certain contracts by the company. There were however no prior proceedings in any court to determine the question of liability of the Respondent and hence the question of damages. The Respondent contended that there was no breach of contract and the Petitioners were not entitled to any damages.

The court dismissed the petition for winding up in the absence of a judgment which determined liability and the quantum of damages.

At pages 441 – 442 Slade J held:

No authority has been cited to me for the proposition sought to be established by counsel for the petitioning creditors, namely that I should myself determine, not only whether there can be said to be a bona fide disputed debt, one which is in other words, disputed on substantial grounds, but also myself to try the issue whether the debt exists at all, for that purpose considering the terms of the contracts, determining whether there has been any breach of any of those contracts entitling the petitioning creditors to damages, and if so, the measure of those damages. So far as my researches have taken me, it would appear to me that a petitioning creditor seeking a winding up order founded on unliquidated damages should first establish with certainty what the quantum of damages is, (Emphasis added)

Finally to wind up on persuasive judicial precedents the practice of the courts is summarised by Magarry J in Re: Lympne Investments Ltd [1972] 2 All ER 385. In this case the petitioner served a demand on the respondent company for the repayment of a debt of £3,500 and the debt remained unpaid within three weeks. The petitioner filed a petition for winding up whose main ground was inability of the respondent company to pay its debts pursuant to the statutory demand. The respondent contended that the three weeks stipulated (see section (223 (a) of the Companies Act cap 110) had not elapsed since the statutory demand was served. Secondly that the sum claimed was for payment for shares in another company, International Skyways Ltd, held by it in trust for the petitioner.

The learned judge held that the petition was presented on day too soon and would be dismissed on that ground. Secondly, there was a substantial dispute as to the existence of the debt. Thirdly when a debt was disputed on substantial grounds the petitioner was not a ‘creditor’ within the meaning of s 224(1) (b) of the Act with locus standi to present a petition even if the respondent company were insolvent. Fourthly it would be wrong to stay the petition to await the disputed debt to be tried in other proceedings.

 MEGARRY J at p bottom 388 – 389:

“It therefore seems to me that this petition must fail. A real dispute, turning to a substantial extent on disputed questions of fact which require viva voce evidence, and involving charges of fraud or near fraud, cannot properly be decided on petition. Nor is it right, or in accordance with the modern practice, to stand over the petition in order that the disputed issues may be resolved in other proceedings. ...The Companies Court must not be used as a debt-collecting agency, nor as a means of bringing improper pressure to bear on a company. The effects on a company of the presentation of a winding-up petition against it are such that it would be wrong to allow the machinery designed for such petitions to be used as a means of resolving disputes which ought to be settled in ordinary litigation, or to be kept in suspense over the company’s head while that litigation is fought out. Further, Mann v Goldstein, cited with approval in the New Zealand Court of Appeal in Bateman Television Ltd v Coleridge Finance Co Ltd, provides authority for saying that when a petition is based on a debt which is disputed on substantial grounds, the petitioner is not a ‘creditor’ within s 224(1) of the Companies Act 1948 who has the locus standi requisite for the presentation of the petition, even if the company is in fact insolvent. Again, the existence of a dispute on substantial grounds as to the existence of any debt defeats the contention that Lympne has, within the meaning of s 223(a), ‘neglected’ to pay the sum required by the statutory notice: see Re London & Paris Banking Corpn. In the context of a notice requiring a person to do some act, I do not see how it can be said that the person ‘neglects’ to do that act if the reason for not doing it is a genuine and strenuous contention, based on substantial grounds, that the person is not liable to do the act at all.”

Learned counsel for the Petitioner submitted that the debt was not disputed on substantial grounds. He relied on the case of Re Global Tours and Travels Ltd [2001] 1 EA 195 (CCK) being a decision of Hon Justice Ringera of the Milimani Commercial Courts Division of the High Court of Kenya at Nairobi. After reviewing the English precedents which interpreted the sections of the UK Companies Act which he noted were in pari materia also with the Kenya equivalent of section 222 (e) and 223 of the Companies Act of Uganda he gave his understanding of a substantial dispute at page 198 of the law report as follows:

“My understanding of these authorities is that where an alleged debt is disputed on substantial grounds or bona fide, the claimant thereof is not a creditor and does not therefore have locus standi to present a winding-up petition. And the words “disputed on substantial grounds” and a “bona fide dispute” appear to be used interchangeably in the authorities. To support that, the following is pertinent. In Halsbury’s Laws of England (4 ed) Volume 7(3) the learned editors distil the law as follows: “A winding-up order may not be made on a debt which is (disputed in good faith by the Company; the court must see that the dispute is based on a substantial ground … If there is a genuine dispute, the petition may be dismissed or stayed”.

In the explanatory notes to this passage, it is pointed out that Harman J in the case of ex p fin soft Holding SA [1991] BCLC 737 held that “the essence of the test was whether the dispute was substantial, the good faith or bad faith of the company in putting forward the defence being irrelevant”. The editors then add, “it is insufficient for a ‘defence’ to be honestly put forward if on fact there is no substance in it”.

In short, I think the authorities show that in determining whether an alleged creditor has locus standi to present a petition, the Court must answer the question whether the alleged debt is disputed on a substantial ground. If it is, he is not a creditor within the meaning of the law. If it is not, he is a creditor. The alleged debt need not be clearly and unequally admitted by the company. And a substantial dispute is not merely to be inferred from the affirmation of one party that there is a dispute and an affirmation to the contrary by the other party.”

The summary of the judgment of my brother Judge of the Kenyan High Court is that the term that a petition is “disputed on substantial grounds” means that it is disputed on a ground which is a plausible defence in an action for the debt claimed. My duty in that regard is to establish whether the Respondent has raised a plausible defence which may succeed if proved in an ordinary suit for the debt the subject matter of the petition.

The evidence attached to the petition of the indebtedness of the Respondent inter alia includes annexure “C”. Annexure “C” is a statement of account of transactions for a period commencing 1st April 2007 to November 2009. The accounts are entitled Maria Assumpta Pharmaceuticals Ltd and are stamped at the bottom of each page by the petitioning company and signed.  Annexure “C” is accompanied by several documents including certificates of origin issued under the East African Community Customs Management Act 2004 and a COMESA certificate of origin.  Annexure “D” is a further statement of account for December 2009. Annexure “E” is a demand notice addressed to the Respondent and dated 7th April 2010 by Messrs Impala Legal counsel for the petitioner where there is a demand for US $ 228,134.15. Annexure “F” is another letter dated 13th of April 2010 addressed to Messrs Niwagaba & Mwebesa Advocates by Messrs Impala Legal counsel for the petitioner. The letter makes reference to a letter by Messrs Niwagaba and Mwebesa Advocates dated 12th April 2010. However the letter referred to was not attached. The letter forwards the financial statement prepared by the Petitioner for the attention of the said counsels for the Respondent. 

The Respondent in its affidavit in reply denies the Petitioners claim and says that the debt is not due and that even none can be proved in proper proceedings.

In reply to the affidavit in opposition Nilesh J Brahmbhat further attached annexure A – G for purposes of proof that the Respondent Company did order for the pharmaceutical products from the Petitioner and the same were supplied.  Annexure “A” to this affidavit is a copy of a fax said to be sent by Hillary Serwadda. Unfortunately the fax does not indicate the fax numbers and the time of sending the fax, neither does it have the full signature and names of the said MD of the Respondent. The photocopy of the document annexure “A” as attached to the affidavit is incomplete. However annexure “A” is dated 18th of October 2007 and counsel for the Petitioner contends that it contains an admission of the debt. The said facsimile reads inter alia:

I hereby bring to your attention my programme. First of all I was supposed to remit $ 400,000 but unfortunately I have been disorganised by the Abacus Scheme as I informed you on the phone this week. Therefore request management to allow me to remit $300,000 and the balance to come after 60 days of more collections - $220,000.

And also allow me to pick some items which are out of my stock as follows. I intend to pick the consignment if you so allow me by 3rd/ 11/ 2007.   

As far as the said admission is concerned, paragraph 4 of the affidavit which attached annexure “A” does not talk of an admission. It is not known whether payments were made after 60 days as promised in the letter. Annexure “A” is supposed to be followed by annexure “B”. Annexure “B” is a proforma invoice for several products worth US $ 290,000.00 Attached to it is annexure “B” which is a delivery note No. 0236435 dated 9th November 2007 for 750 cartons of medicines for Maria Assumpta and delivered to Messrs Sahajand Transporters. Annexure “B” also has delivery note No. 0236434 dated 9th November 2007 for 900 cartons of medicines for Maria Assumpta of P.O. Box 5207 Kampala and delivered to Sahajand transporters. Another delivery note is No. 0236431 dated 8th November 2007 for 1,700 cartons of medicines also delivered to Sahajand Transporters on behalf of the respondent. Finally delivery note no. 0236430 dated 8th of November 2007 delivered to Sahajand Transporters and the goods are 1,437 cartons of medicines. 

Annexure “B” further includes an import/export/transit/warehousing declaration form No. 2007NBI300200 stamped by both Kenya Revenue Authority and Uganda Revenue Authority at Busia on the 10th of November 2007. The form is issued by Kenya Revenue Authority Customs and Excise Department. It shows the exporter as the Petitioner and the importer as the Respondent. The goods are pharmaceutical products. The customs agent is Speedex Logistics Limited Nairobi. The letter for the consignment dated 8th of November 2007 by the petitioner is addressed to Sahajanand Transporters and gives a list of items included for 1650 cartons of medicines supplied to the respondent. The list includes the packing advice, certificate of analysis, customs entry number, COMESA number, Invoice number, the truck number and the names of the driver among other things. Annexure “C” to the affidavit in reply to the affidavit in opposition affirmed by Nilesh J Brahmbhat also attached annexure “C” which is supposed to be the orders of Hillary Serwadda Managing Director of the Respondent. The second page of the photocopied document has the names Hilary Serwadda and some sign that looks like a signature. It is dated 26th March 2008. It however does not show that it is a fax document in terms of the electronic numbers that would apply to a fax message. Annexure D” is a similar order and has the names and of Hillary Serwadda. I compared without reaching a conclusion, the signatures on the said fax messages with that on the affidavit in opposition. My conclusion is that the signature of the facsimile is incomplete for purposes of comparison as far as annexure “C” and “D” are concerned. Annexure “E” is a list of products sold to the Respondent and signed by the Petitioner. Annexure “E” also has two delivery notes. Delivery note 0254524 dated 3rd of November is received by Baba H/Ware on behalf of the Respondent and for 1502 cartons of medicine. Delivery note No. 0242929 is for 1,800 cartons of medicine delivered to Sahajanand Transporters written to be on behalf of the Respondent. The import/export/transit/warehousing declaration form in respect of declaration No. 2008NBI 399126 has similar details with the declaration form of annexure “B” with the main difference being that annexure “E” declaration form is only stamped by the Kenya Revenue Authority Busia and not Uganda Revenue Authority. Another import/export/transit/warehousing declaration forms in respect of declaration numbers 2008NBI 399108 and 2008NBI 368880 have only Kenya Revenue Authority Stamp and not Uganda Revenue Authority Stamps compared to annexure “B”. All forms are issued by the Kenya Revenue Authority Customs and Excise Department.

The same analysis applies to order for drugs embodied in facsimile annexure “F” which is an incomplete document. Delivery Note No. 0254599 thereof show that goods were delivered to Baba Hardware and the delivery note thereof dated 30th January 2009 annexure “G” shows delivery of 1522 cartons of medicine. Annexure “G” also has import/export/transit warehousing declaration No. 2008NBI 444307 and has the stamp of Kenya Revenue Authority.  The Petitioner on the strength of the evidence attached to the affidavit raises a prima facie case of supply of goods and indebtedness. Apart from the statement of account, no evidence of partial payment by the Respondent has been attached.

Pharmaceutical products are restricted goods under the East African Customs Management Act because their importation/exportation is regulated by the laws of the Partner’s States. The East African Community Customs Management Act defines "restricted goods" to mean:

“...any goods the importation, exportation, transfer, or carriage coastwise, of which is prohibited, save in accordance with any conditions regulating such importation, exportation, transfer, or carriage coastwise, and any goods the importation, exportation, transfer, or carriage coastwise, of which is in any way regulated by or under the Customs laws;

Restricted goods are specified in Part B of the second schedule to the East African Customs Management Act 2004 under and section 18 thereof as:

“18.- (1) The goods specified in Part A of the Second Schedule are prohibited goods and the importation thereof is prohibited.

(2) The goods specified in Part B of the Second Schedule are restricted goods and the importation thereof, save in accordance with any conditions regulating their importation, is prohibited.”

Second Schedule part B item (1) refers to restricted goods as:

“ (1) All goods the importation of which is for the time being regulated under this Act by any written law for the time being in force in the Partner State.”

In Uganda, the sale and dealing in pharmaceutical products is regulated by the National Drug Policy and Authority Act cap 206. The Act makes it mandatory for an importer of drugs to have a licence issued by the Drug Authority. The National Drug Policy and Authority (Issue of Licences) Regulations S.I. No. 206 – 3 requires that each consignment of drugs before importation shall receive a verification certificate under regulation 24 thereof before its importation. Verification certificates issued before any importation of drugs into the country shall be certified by the registrar of the National Drug Authority on behalf of the National Drug Authority Commission under regulation 26 thereof. In other words it would be easy to prove each transaction if the relevant documentation of the importation of drugs to the country are produced in evidence. The crux of this matter is whether there is sufficient evidence to conclude that there is no dispute as to the indebtedness of the Respondent or that the alleged dispute is frivolous and vexatious and therefore a winding order ought to be made.

To my mind and on the authorities submitted above the question of whether the debt has been disputed on substantial ground should be considered analogously in the same way as an application for leave to defend a summary suit under order 36 of the Civil Procedure Rules. In such cases the court does not go into the merits of the suit but tries to establish whether there are bona fide triable issues of fact or law raised by the intending defendant which would require adjudication after taking evidence viva voce. 

The question of whether substantial grounds have been raised does not mean that the defence will succeed but that it merits judicial investigation and adjudication in the ordinary way through a trial. In an application for leave to appear and defend a summary suit, the applicant has to prove by affidavit that there is or are bona fide triable issues that merit judicial consideration (See case of Souza Figuerido & Co Ltd v Moorings Hotel Co Ltd [1959] 1 EA 425 (CAK)) and Tororo District Administration versus Andalalapo Industries Ltd HCMA 12/1997 Before Justice Kania, [1997] IV KALR 126.

Underorder 36 the principles used to determine whether leave to defend should be given are whether the applicant for such leave has proved by affidavit or otherwise that there is a bona fide triable issue of fact or law. Though the applicant is not bound to show a good defense on the merits, the court should be satisfied that there is an issue or question which ought to be tried. The above statement of law and practice is analogous to the doctrine in Lympne Investments Ltd [1972] 2 All ER 385; Mann and Another v Goldstein and Another [1968] 2 All ER 769 and Re Tweeds Garages Ltd [1962] 1 All ER 121.

It is a celebrated principle that where evidence is by affidavit, the matter in question should not be substantially in dispute by contrary affidavit evidence. The Petitioners counsel contends that there was some fraud. Should this be proved by affidavit or viva voce evidence?

The Petitioner has to establish that it is a creditor. This means that there is a definite liquidated debt to which the Respondent Company has no defence. If there is a purported defence, then that the defence can be said to be frivolous and not substantial.

The affidavit of Hillary Serwadda raises substantial denials of fact as to the indebtedness of the Respondent. He attacked the authenticity of the documents relied on by the Petitioner. There is a further question as to whether the transporters who got delivery of the goods from the Petitioner acted on behalf of the Respondent. The documents attached as to the orders for the drugs by the Respondent and the supply thereof are inadequate to reach a conclusion that the Respondent has no defence to the claim. These questions can be resolved after evidence has been adduced in a proper trial. For instance the transporters and the verification certificates could aid the Petitioner in proving the claim in a civil suit. Because the debt is substantially disputed there is no need to determine whether the Respondent is insolvent. 

For the above reasons the Petitioners petition is based on a debt that is disputed on substantial grounds as the Respondent has raised triable issues as to its indebtedness which issues can only be tried in an ordinary suit. The Petition therefore stands dismissed with costs.

 

Judgment delivered in court this 14th day of October 2011

 

Hon. Mr. Justice Christopher Madrama

 

Judgment delivered in the presence of:

Byaruhanga Dennis Holding brief for Godfrey Niwagaba for the respondent

Representatives of the respondent are in court:

No body for the petitioner.

Nankya Winnie in court on behalf of the Petitioner.

Ojambo Makoha: Court clerk

 

Hon. Mr. Justice Christopher Madrama

14th October 2011