Court name
Commercial Court of Uganda
Judgment date
22 March 2011

Cooperative Bank Ltd (In Liquidation) v Amos Mugisa (Miscellaneous Application-2009/549) [2011] UGCommC 15 (22 March 2011);

Cite this case
[2011] UGCommC 15

THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL DIVISION)
MISCELLANEOUS APPLICATION NO. 549 OF 2009

(ARISING FROM CIVIL SUIT NO. 141 OF 2009)

 

                 
THE CO-OPERATIVE BANK LTD}
(IN LIQUIDATION)                  }:::::::::::::::                                                                                                                                APPLICANT/DEFENDANT

 

 

VERSUS
 

 

 

 

AMOS MUGISA      :::::::::::::::::::::::::::::::::::::::::                                                                 RESPONDENT/PLAINTIFF

 

 

 

BEFORE: HON. LADY JUSTICE IRENE MULYAGONJA KAKOOZA

 

RULING

The applicant brought this application under the provisions of s. 98 of the Civil Procedure Act and Order 9 rule 12 of the Civil Procedure Rules. She sought for orders that the interlocutory judgment entered by the Deputy Registrar on 27/05/2009 in HCCS 141 of 2009 be set aside and that she be allowed to file a written statement of defence out of time.

The application was supported by an affidavit deposed by Evelyn Nanyonga, a coordinator or agent of the applicant, which is a company in liquidation following its seizure by the Central Bank in 1999. In her affidavit, Ms. Nanyonga stated that on 7th September in a year she did not state, she checked on the status of various cases in this court in which the applicant was a party. That on doing so, she was informed that an interlocutory judgement had been entered against the applicant in favour of the respondent in HCCS 141 of 2009. She further averred that the applicant was never served with summons to file a defence in the suit and that she had a good defence to the suit.

The respondent opposed the application and to that end he filed an affidavit which he deposed on 11/03/2011. In his affidavit, the respondent averred that Ms. Evelyn Nanyonga was incompetent to depose an affidavit in support of the application because she had no personal knowledge of the facts of the case in issue, and she was not in a position to tell whether service of process in the suit was effected upon the applicant or not. He further stated that summons to file a defence were served upon the applicant by Peter Muleba (a process server) and received by one Namale Shamim, an official in the applicant company. He attached a copy of the said affidavit to his as Annexure “A.”

The respondent further averred that Namale Shamim accepted service of the summons by signing on the original summons and the plaint. He attached the two to his affidavit as Annexure “B” and “C.” He finally asserted that the Registrar entered the interlocutory judgment after being satisfied that service was effected upon the applicant and therefore he opposed the application to set it aside the interlocutory judgment.
 

At the hearing of the application, Mr. Nathan Osinde who represented the applicant submitted that ordinarily, service of summons on a defendant in a suit has to be effected personally. That since the applicant was a company, service effected upon an officer of the company would suffice. He relied on Kampala City Council v. Apollo Hotel [1985] HCB 78, for the submission that service on a company has to be effected on senior officers of the company who are in a position to take legal action. He further submitted that though the respondent averred that Namale was an officer of the company, it was not stated in what capacity she received the summons. That in addition, no company stamp was affixed against her acknowledgment of receipt of the summons and plaint. He concluded that Namale who received the summons was not a responsible officer of the company and therefore no service was effected upon the applicant in compliance with the law.

Mr. Osinde further submitted that whether to set aside an interlocutory judgment or not lies entirely within the discretion of the court. Further that on authority of E. Zikampata v. Uganda Libyan Co. [1979] HCB 52, the court has a wide discretion to set aside ex parte judgments and to deny the applicant the order sought in this case would amount to a grave injustice.
 

In his submissions to oppose the application Mr. Deus Nsengi submitted that in order for an application such as this one to be granted the applicant has to prove that summons were not served, he was prevented from filing a defence for sufficient cause, and that he has a good defence to the plaintiff’s claim. He went to state that when Namale acknowledged receipt of the summons and plaint she was well aware of what she was doing. Further that the applicant had failed to show that she was prevented from filing a defence for sufficient cause. He went on to argue that though the applicant stated that she had a good defence to the suit, the said defence was not disclosed and the applicant filed no proposed WSD. Further that the allegation that the deponent of the affidavit in reply had no personal knowledge of the facts relating to the suit was never substantiated and therefore the affidavit was not challenged. And finally that should court deem it fit to grant the application then costs of the application should be borne by the applicant.
 
I was unable to review the authorities cited by counsel for the applicant in support of his submission because they are not available at this court and he did not supply copies thereof. However, in Ladak Abudallah Muhamed Hussein v. Griffiths Isingoma Kakiiza & 2 Others, SCCA No. 8 of 1995, the Supreme Court, Odoki J.S.C. (as he then was) held with regard to Order 9 Rule 9, (now Rule 12) CPR that it give the court an unfettered discretion to set aside or vary ex parte judgments upon such terms as may be just. And in National Enterprises Corporation v. Mukisa Foods Ltd; Civil Appeal No. 42 of 1997, citing the decision in Anlaby v Praetorius (1888) 20 QBD 764 at 769, Berko J.A. distinguished two instances in which an ex parte judgment may be set aside. In that case, the court held that there is a strong distinction between setting aside a judgment for irregularity, in which case the court has no discretion to refuse to set it aside, and setting it aside where the judgment, though regular, has been obtained through some slip or error on the part of the defendant, in which case the court has discretion to impose terms as a condition for granting the defendant relief.
 
In the instant case, it has been proposed that the interlocutory judgment was entered irregularly because service of summons was acknowledged by one who was not a responsible officer of the company. That then begs the question; who should receive court process in a company under liquidation such as the applicant is?

Ordinarily, the service of process on a company is governed by Order 29 rule 2 of the CPR which provides as follows:
 

“Subject to any statutory provision regulating service of process, where the suit is against a corporation, the summons may be served—
(a) on the secretary, or on any director or other principal officer of the corporation; or
(b) by leaving it or sending it by post addressed to the corporation at the registered office, or if there is no registered office, then at the place where the corporation carries on business.”
 
However, it seems that on the winding up of a company the provisions of Order 29 rule 2 (a) cease to operate. I say so because the business of the company ceases on winding up, except in so far as winding up its business is concerned. Pursuant to s.244 of the Companies Act, the liquidator appointed to wind up the company carries out that business. S. 244(1) of the Act then gives the liquidator power to bring or defend any action or other legal proceeding in the name and on behalf of the company. Since notice of the liquidator and his/her address must by law be published in the gazette, it follows that the provisions of Order 29 rule 2 (b) are saved and service on the company would be properly effected if the process is left at the office of the liquidator.

There was no argument against the fact pleaded by the respondent that the official address of the liquidator of the applicant was at Greenland Towers on Kampala Road, as stated in the affidavit of Peter Muleba dated 27/04/2009 verifying service of the summons and plaint on the applicant (Annexure “A” to the affidavit in reply). I therefore find that service of the plaint and summons was properly effected upon the applicant by leaving them at the office of its liquidator. It also appears to me that given the provisions of Order 29 rule 2 (b) CPR, any person in the office of the liquidator that was competent to receive posted matter directed to that office could also properly receive the summons. The resultant interlocutory judgment was therefore a regular judgment within the meaning assigned to that phrase in Anlaby v. Praetorius (above), in that it was obtained because the defendant/applicant failed to take a particular step in the suit within the time stipulated under the rules, not because of some misdeed of the respondent or his counsel. Therefore the court is not as a matter of right under an obligation to set it aside but it could exercise its discretion to do so on given terms imposed upon the applicant.

Counsel for the respondent argued that the applicant did not prove that there was sufficient cause for her failure to file a WSD. It is my view that in order to determine whether sufficient cause has got to be shown for failure to take any step in a suit such as happened in this case, recourse has to be had to the provision under which the application was brought. Order 9 rule 12 CPR provides for setting aside ex parte judgments as follows:
 

“Where judgment has been passed pursuant to any of the preceding rules of this Order, or where judgment has been entered by the registrar in cases under Order L of these Rules, the court may set aside or vary the judgment upon such terms as may be just.”
 
The terms of Order 9 rule 12 appear to be different from the terms of Order 9 rule 27 CPR which provides for setting aside a decree that is passed ex parte against a defendant as follows:-
 
“In any case in which a decree is passed ex parte against a defendant, he or she may apply to the court by which the decree was passed for an order to set it aside; and if he or she satisfies the court that the summons was not duly served, or that he or she was prevented by any sufficient cause from appearing when the suit was called on for hearing, the court shall make an order setting aside the decree as against him or her upon such terms as to costs, payment into court, or otherwise as it thinks fit, …”                                        
{My Emphasis}

 

It now becomes clear from the comparison of the two provisions that the requirements for success of applications under the two rules are quite different for obvious reasons. While O. 9 rule 12 gives very wide discretion to courts to set aside interlocutory judgments, O.9 rule 27 provides for setting aside decrees and limits the discretion to cases where sufficient cause for non appearance (among others) is proved. It was therefore not the applicant’s legal obligation to prove “sufficient cause” for her failure to file a WSD, as is required under O.9 rule 27 where a party fails to attend the hearing. The decision under O.9 rule 12 CPR therefore rests entirely upon the discretion of the court.

It was also argued for the respondent that before this court can set the interlocutory judgment aside the applicant must show that she/he has a good defence to the suit. There is no doubt from the affidavit filed by the applicant in support of this application that no defence was disclosed. Neither was a proposed WSD filed. In National Enterprises Corporation v. Mukisa Foods Ltd. (above) the court was persuaded to set aside a judgment in default because the applicant disclosed a prima facie defence to the suit. But unlike the instant case, the application in the National Enterprise Corporation case was taken under the provisions of Order 9 rule 24 (now 27) CPR. I therefore do not think that it is a hard and fast rule that one who seeks to set aside an interlocutory judgment must disclose a prima facie case, though it would be prudent to do so to persuade the court.
 

 

In Evans v Bartlam [1937] A.C. 473, pages 479 – 480, Lord Atkin had this to say about the equivalents of Order 9 rule 12 CPR:-

 

“I agree that both rules, Order XIII., r. 10, and Order XXVII., r. 15, give a discretionary power to the judge in Chambers to set aside a default judgment. The discretion is in terms unconditional. The Courts, however, have laid down for themselves rules to guide them in the normal exercise of their discretion. One is that where the judgment was obtained regularly there must be an affidavit of merits, meaning that the applicant must produce to the Court evidence that he has a prima facie defence. It was suggested in argument that there is another rule that the applicant must satisfy the Court that there is a reasonable explanation why judgment was allowed to go by default, such as mistake, accident, fraud or the like. I do not think that any such rule exists, though obviously the reason, if any, for allowing judgment and thereafter applying to set it aside is one of the matters to which the Court will have regard in exercising its discretion. If there were a rigid rule that no one could have a default judgment set aside who knew at the time and intended there should be a judgment signed, the two rules would be deprived of most of their efficacy. The principle obviously is that unless and until the Court has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the expression of its coercive power where that has only been obtained by a failure to follow any of the rules of procedure.”

 

                                                                        {My Emphasis}
 
The principle enunciated in the last sentence quoted above was affirmed by the Court of Appeal of Uganda in the National Enterprises Corporation case. Therefore, although the applicant neither put up a prima facie case in its application nor proffered a proposed WSD, the interlocutory judgment was not the final pronouncement of the court in HCCS No. 141 of 2009. The suit had yet to be set down for formal proof of the respondent’s claim therein and on 29/05/2009 the respondent’s advocates applied to court to set a date for formal proof. This court therefore can still stay its coercive force by allowing the applicant to be heard on the matters of the suit.

I was also persuaded by the documentation attached to the respondent’s affidavit, especially by Annexure “C” thereto, that the applicant may have a defence to the respondent’s claim in the suit. Annexure “C” was a letter dated 13/01/2005 in which the respondent’s advocates wrote to the Director Commercial Banking at the Bank of Uganda. In that letter, the advocates informed the Director that the respondent did not have a personal account with the Co-operative Bank; instead a company called Amos Mugisa & Sons Chemico Industiries Ltd. held an account with the Bank. The advocates went on to state that though he did not give powers of attorney to the company to deposit his title with the bank as security for any facility, the respondent was willing to clear the balance that was due to the borrower at the closure of the bank in return for the surrender to him of the certificate of title which is the subject of the instant suit. He also requested that any interest on the facility be waived and that he be allowed to pay the balance in instalments. The respondent’s advocates followed up his requests in their letter of 13/01/2005 in a letter dated 10/06/2005, Annexure “D” to the affidavit in reply.

That being the case, it remains in doubt that the respondent had nothing at all to do with the deposit of the title with the Cooperative Bank while it was still in business, as he would have court believe. Therefore, much as the applicant did not disclose a defence in her application the facts disclosed by the respondent show that it would be more prudent and in the interests of justice to exercise my discretion in favour of the applicant rather than against her.

In conclusion, the interlocutory judgment entered against the applicant by the Deputy Registrar on 27/05/2009 is hereby set aside. The applicant shall file a written statement of defence in the suit within 7 days from the date of this order. Costs of the application shall be borne by the applicant.
 

Irene Mulyagonja Kakooza
JUDGE
23/03/2011