Court name
Commercial Court of Uganda
Judgment date
21 December 2011

Kyomya Byemaro John v Agro Finance Trust Ltd (Miscellaneous Application-2011/376) [2011] UGCommC 117 (21 December 2011);

Cite this case
[2011] UGCommC 117
Coram
Obura, J

THE REPUBLIC OF UGANDA

 

IN THE HIGH COURT OF UGANDA AT KAMPALA

 

(COMMERCIAL DIVISION)

 

MISCELLANEOUS APPLICATION NO. 376 OF 2011

 

(ARISING FROM HCCS NO. 221 OF 2011)

 

KYOMYA BYEMARO JOHN:::::::::::::::::: APPLICANT

 

V E R S U S

 

AGRO FINANCE TRUST LTD::::::::::::::::::: RESPONDENT

 

BEFORE: LADY JUSTICE HELLEN OBURA.

RULING

This application was brought by the applicant under Order 36 rules 2 & 8 (possibly the applicant meant rule 3 instead of 2) of the Civil Procedure Rules (CPR) seeking for orders that:

  1. the applicant be granted unconditional leave to file written statement of defence to appear and defend Civil Suit No. 221 0f 2011; and
  2. costs of this application be provided for.

 

The grounds relied upon in bringing this application as summarized in the notice of motion and the affidavit in support sworn by the applicant are that;

  1. There are triable issues with high chance of success.
  2. The plaint and the documents attached do not state that the applicant acknowledged receipt of money as loan from the respondent and as such do not disclose any cause of action.
  3. Annexture “A” to the plaint shows that loan agreement was signed on the 4th of September 2010 but the plaintiff’s Credit Manager witnessed it on the 31st August 2010 and the General Manager who witnessed it only scribbled his signature without writing his name.
  4. Annexture “A” to the plaint specifically stated that, “the guarantor is (principle debtor) is fully liable for the payment of the principal debt and interest due on the loan in case of default by the borrower” hence no cause of action against the applicant.
  5. The respondent had no mandate from the applicant to insert names in the cheques attached to the plaint and there was no consideration to justify paying the bank using post dated cheques.
  6. A post dated cheque is not payments at all since it is not payable on demand.
  7. The cheques annexed as “E” are forbidden by Bank of Uganda notice for payment above Shs. 20,000,000/= and as such could not be cashed on the same dates as their value exceed the maximum limit.
  8. No reason is pleaded in the plaint as to why Cairo Bank Cheque No. 377959 was being retained by the respondent who appears to have cashed it.
  9. It is in the interest of substantive justice that the applicant be granted unconditional leave to appear and defend the main suit.

 

An affidavit in reply was sworn by Mr. Rammohan Konda the Managing Director of the respondent company. He deposed that the applicant was still indebted to the respondent to the tune of Shs. 286,072,279/= following a loan agreement executed between the respondent and the applicant on the 4th of September 2010. The loan agreement, the statement of account and the loan application were attached as annextures “A-1”, “A-2” and “A-3” respectively.

 

He further deposed that the applicant made a personal guarantee which was attached as annexture “B” and received the money. Further that the applicant even wrote a letter to the respondent appealing for more time to pay the 1st installment. The letter was attached as annexture “C”. He also deposed that he was informed by his lawyers that the general and vague denial of indebtedness by the applicant as contained in paragraph 5 of his affidavit in support did not constitute any plausible defence or raise any triable issue and as such the application had no merit and should be dismissed with costs.

 

I have found it necessary at this point to highlight the chronology of events from the time this application was fixed for hearing until it was heard for purposes of bring out the manner in which it was handled. The first time this application came up for hearing, the respondent was represented by Mr. Tom Magezi and Mr. Ronald Munyani held brief for counsel for the applicant who was stated to be indisposed. The applicant was not in court. Mr. Munyani applied for adjournment which was opposed by counsel for the respondent. In the interest of justice and considering that the application was coming up for the first time, this court granted adjournment but cautioned that the applicant should follow up his application to ensure that it is heard and concluded. It was also pointed out by counsel for the respondent that the application was not formerly served on his client but they just got a copy from the court file. The matter was adjourned to 12th December, 2011 for hearing.

 

On 12th December 2011 when this application was called on for hearing, Mr. Munyani again appeared holding brief for counsel for the respondent and informed court that he had instructions to take over conduct of the case but he had not yet filed a notice of change of advocate. He reported that the applicant was sick and produced a medical form as proof. He stated that the applicant was willing to settle the dispute amicably and prayed for an adjournment of one week to enable the parties meet and agree on the terms of settlement. He also undertook to file a notice of change of advocate within that one week.

 

In view of the applicant’s undertaking to settle this matter amicably, counsel for the respondent conceded to the application and this court granted the applicant the last adjournment to 21st December 2012 on condition that the matter would proceed for hearing if no consent agreement was reached.

 

On 21st December, 2011, Mr. Munyani appeared for the applicant having filed a notice of change of advocate shortly before court commenced. He also informed court that the parties had failed to meet and the applicant had filed an affidavit in rejoinder which he would rely on in his submission. His attempt to get another adjournment was opposed by counsel for the respondent and this court declined to grant it. The applicant was again absent allegedly still indisposed.

 

The affidavit in rejoinder was clearly filed out of time without the leave of court and should have been rejected but court exercised its discretion to rely on it because of its content which contradicted what was deposed in the affidavit in support of this application. The applicant conceded in the affidavit in rejoinder that he received the loan and had failed to pay the same. He however, deposed that since the respondent had advertised for sale the land (Block 248 Plot 123) that he had given as security for the loan, he believed the same had been sold after thirty days from the date of that advertisement which was done on the 10th of October 2011. He further deposed that upon that sale by the respondent he was no longer indebted to the respondent at all. He did not attach any document to prove the alleged sale apart from the newspaper advertisement.

 

He also deposed that according to the loan agreement the guarantor Mr. Sam Mutabazi was the principle debtor who was fully liable for the payment of the loan and the interest thereon in case of default by the applicant. Impliedly he was stating that he was not responsible for paying the money which he borrowed from the respondent.

 

Counsel for the applicant based his submission on the affidavit in rejoinder and submitted that the applicant was not denying his indebtedness to the respondent. He contended that since the applicant had failed to pay the debt, the respondent should recover the same from the guarantor in accordance with the provisions of the loan agreement. He submitted in the alternative, that the respondent had a right under the loan agreement to sell the security without recourse to court and that is what the applicant believed the respondent did when the land was advertised for sale.

 

He contended that the applicant had raised two triable issues in the application, namely;

  1. Whether the applicant still owes the respondent any money; and
  2. Whether the guarantor is not liable for the loan.

He prayed that the application be granted and costs be awarded to the applicant.

 

Counsel for the respondent opposed the application and submitted that it is trite law that before court entertains an application for leave to appear and defend, the court must study the grounds raised in the affidavit in support and ascertain whether there is a substantial triable issue or the application is merely a sham. He referred to the case of Abubakar Kato Kasule v Tomson Muhwezi [1992-93] HCB 212 in which that principle was stated.

 

He referred to paragraph 5 of the affidavit in support in which the applicant denied receipt of the loan amount and submitted that this position was greatly contradicted by the content of the affidavit in rejoinder wherein the applicant admitted that he received the loan and defaulted in payment.

 

As regards the allegation that the respondent had sold the applicant’s property that was given as security, counsel first of all submitted that the applicant had neither disclosed his source of information as required nor attached any document in proof of the alleged sale. Secondly, he submitted that the sale was not done as alleged because upon conducting a search at the land office it was discovered that the applicant was not the registered proprietor of the said land.

 

He contended that the applicant had defrauded the respondent by giving a fake land title which showed that he was the owner of that land. He stated that he had a copy of the letter from land office in his chambers. He prayed for leave to avail the same to court later as the matter was raised in the affidavit in rejoinder which was served upon him in the court room. Since this document was very vital in determining this application, court granted him leave to avail the same to court with a copy to the applicant’s counsel before close of business on that day and he did so.

 

As regards the contention that the guarantor is fully responsible for payment of the loan and the interest due, counsel submitted that they had not yet exhausted all the avenues for recovering the debt from the applicant. He submitted that it is until they have done so that they would pursue the guarantor.

He submitted that this application is a mere sham intended to fleece the respondent of its money and to waste court’s time. He prayed that it should be dismissed with costs and judgment be entered against the applicant under Order 36 rule 5 of the CPR.

 

It is a settled principle of law that before leave to appear and defend is granted, the defendant/applicant must show by affidavit or otherwise that there is a bonafide triable issue of law and fact. This principle was stated in the case of Abubakar Kato Kasule v Tomson Muhwezi (supra) as well as in Hasmani v Banque Du Congo [1938] EACA 88, and Twenstche Overseas Trading Co. Ltd v Bombay Garage Ltd [1958] EA 741.

 

 In light of the aforementioned principle, the issue for determination in this application is whether the defendant/applicant has by affidavit or otherwise disclosed a triable issue. In determining this issue, I was mindful of the holding in Maluku Interglobal Trade Agency Ltd v Bank Of Uganda [1985] HCB 66 that the defendant/applicant does not have to show a good defence on the merits but should satisfy court that there is an issue or question in dispute which ought to be tried and the court should not enter upon the trial of issues disclosed at this stage.

 

The applicant in the affidavit in rejoinder and as was submitted for him did not deny that he took a loan of Shs. 189,000,000/= from the respondent which has continued to accrue interest. His main defences for failure to pay the said loan that he wants this court to determine in the main suit are two-fold. Firstly, that since the respondent advertised for sale the land that he had given as security, the same must have been sold to recover the loan and interest thereon and so he was no longer indebted to the respondent. Secondly, that even if the said land was not sold, under the loan agreement, the guarantor was the principle debtor who was stated to be fully responsible for the payment of the loan and the interest due upon default by the borrower.

 

As regards the first alleged triable issue, I have looked at the letter from the Ministry of Lands, Housing and Urban Development dated 14th October 2010 signed by Mr. Edwin Muhereza for the Commissioner for Land Registration. The letter is addressed to M/S Tumusiime, Kabega & Co. Advocates counsels for the respondent. It was written in response to the request made by the said law firm for a search on Kyadondo Block 248 Plot 123 land at Kauku. The relevant part of that letter for purposes of this ruling states as follows:-

 

“….The following entries appear on the Titles Register:

REG. Proprietor: MARGARET NALUKWAGO P.O.BOX 16192, KLA REGISTERED UNDER INST. NO. KLA 392154 ON 8.10.08

AREA; 0.20 HECTARES

INCUMBRANCES: MORTGAGE BY STANBIC BANK (U) LTD P.O. BOX 7131, KLA.

REGISTERED UNDER INST. NO. KLA 392155 OF 8.10.08…”.

 

A photocopy of the Land Register with the above particulars was attached showing that it is a special certificate issued on 18.12.06 under instrument No. 318164 the duplicate certificate which was originally issued having been lost. It also shows that prior to the transfer to Margaret Nalukwago on the date stated above, Mr. Kyomya Byemaro John (the applicant) of P.O. Box 1412 Kampala was the registered proprietor of the said land having been registered on 25.7.07 under instrument No. KLA 347024.

 

Attached to the letter from the respondent’s counsel forwarding the above documents was also the original certificate of title for Kyadondo Block 248 Plot 123 Land at Kauku measuring 0.20 hectares that was given as security by the applicant to the respondent. The Certificate of Title is stated to have been issued in accordance with the provision of section 71 of the Registration of Titles Act, the 29th day of January, 07, the duplicate which was originally issued having been lost. The registered proprietor of the land as per that Certificate of Titles is Mr. Kyomya Byemaro John of P.O. Box 1412 Kampala having been registered on 25.7.07 under instrument No. KLA 347024.

 

Other previous entries on that title indicate that the following people were once the registered proprietors of that land:

  1. Naomi Manyangwa Binaisa of P.O. Box 14123, Kampala having been registered on 8.6.72 under Instrument No. KLA 65335.
  2. Capt. Patrick Katumba Bogere of P.O. Box 20, Entebbe having been registered on 12.11.75 under Instrument No. KLA 79322.
  3. Joseph Lusse of P.O. Box 30096, Kampala having been registered 18.2.87 under Instrument No. KLA 123785.

It is noteworthy that entries for the previous registered proprietors in the two certificates with their particulars and dates of registration plus instrument numbers are the same. The only major difference is that the registered proprietor in the special certificate of title attached to the search report is Nalukwago Margaret as opposed to Mr. Kyomya Byemaro John that appears in the original certificate of title given to the respondent by the applicant.

 

One wonders how the same plot can have two Certificates of Title each bearing the name of a different registered proprietor. To my mind this can only be explained by the strong suspicion that there could have been some fraudulent dealings by the applicant with intension to defraud the unsuspecting members of the public. It is possible that the applicant obtained a special Certificate of Title for purposes of transferring the land to the current registered proprietor but retained the original duplicate certificate of title in his name for fraudulent use like in this case.

 

This suspicion is further compounded by the applicant’s conduct which I find quite strange and suspicious for two main reasons. First of all, it is rather strange that the applicant observed the alleged sale of his land from a distance and that is why he is just suspecting that it could have been sold without bothering to know the price at which it was sold and the balance if any. It is quite unusual that a genuine land owner would not make any effort to save his property from being sold. The bulk of applications we handle in this court are by mortgagors/land owners who are trying to save their property from sale by seeking temporary injunctions. This is the first case I have handled where the “land owner” feels so relieved by the alleged sale of his property which he apparently watched from a distance!

 

Secondly, the applicant never appeared in court for the three times this application came up for hearing despite court’s directives that he appears.

 

I believe the respondent has fallen victim of the applicant’s fraudulent scheme because of the failure of its officials to carry out due diligence by verifying the information given by the applicant before disbursing the loan as prudence demands.

 

The applicant having orchestrated that suspected fraud is now telling this court that the loan was fully covered by the security he gave which he believes the respondent must have sold and recovered its money and as far as he is concerned he owes nothing to the respondent. I find this argument unconvincing.

 

Surely, in view of the above findings of suspected illegality should this court grant leave to the applicant to appear and defend the main suit? My answer is a definite no because the applicant has no plausible defence that would warrant granting unconditional or even conditional leave to appear and defend the main suit. The evidence available shows that the security he gave for the loan which he believes could have been sold to recover the loan was not sold because the Certificate of Title is not genuine.  A court of justice cannot sanction illegality as was stated in the case of Makula International v His Eminence Cardinal Nsubuga Civil Appeal No. 4 of 1981.

 

Since the land could not be sold, it means that the loan and the interest thereon is still outstanding. This leads me to consider the argument for the applicant that it was the guarantor who was fully responsible for payment of the loan and not the applicant. In my view, this is yet another untenable argument that this court cannot sit to determine in the main suit. Such argument can only be advanced by a fraudulent person. The applicant borrowed money then deliberately sat back without making any effort to pay simply because he was waiting to call to play a provision in the loan agreement that the guarantor should pay in case of default by the borrow.

 

This, in my opinion is a flagrant abuse of the good gesture that guarantors extend to borrowers. If this court were to uphold such unjust and unfair argument, I bet no one would ever be willing to be a guarantor and the negative impact of that on the banking sector and the economy at large would be so grave. The provision in the loan agreement that the applicant is seeking to shield himself with was not intended to relieve the applicant as a borrower from paying the money that he borrowed and utilized for his personal benefit. The duty to pay the loan squarely falls on the borrower and the guarantor is only called upon to pay where efforts to recover from the borrower has failed. Clearly, from the evidence available and as submitted for the respondent, the avenues for recovering the loan and the accrued interest from the applicant has not yet been fully exhausted hence the main suit where both the applicant and the guarantor have been sued.

 

As it was held in the case of Zola & Another v Ralli Brothers Ltd. & Another [1969] EA 691 at page 694, Order 36 is intended to enable a plaintiff with a liquidated claim, to which there is clearly no good defence to obtain a quick and summary judgment without being unnecessarily kept from what is due to him by the delaying tactics of the defendant.

 

I do not find any merit in the proposed defence advanced by the applicant that it should be the guarantor to pay. Neither do I find any reasonable ground of defence on the allegation that the land was sold and the loan plus interest recovered. The alleged triable issues are both unsustainable and therefore a mere sham that is intended to buy time and abuse the court process.

 

In the circumstances, I find that this application lacks merit and it is dismissed with cost. Judgment is accordingly entered for the plaintiff/respondent in the sum of Shs. 286,072,279/= as prayed for in the plaint and costs of the main suit plus costs of this application are awarded to the plaintiff.

 

Before I take leave of this matter, in view of my finding that there is suspected fraud on the Certificate of Title for Block 248 Plot 123, I order that this matter be referred to the police for investigation and appropriate action.

 

I so order.

 

Dated this 22nd day of December, 2011

 

 

Hellen Obura (Mrs)

JUDGE

 

Ruling delivered in chambers at 2.30 pm in the presence of Mr. Tom Magezi for the respondent, Mr. Rammohan Konda the Managing Director for the respondent and Mr. Allan Kibirige the Operations Manager of the respondent. The applicant and his counsel were absent.

 

JUDGE

22/12/2011