Court name
Commercial Court of Uganda
Judgment date
13 February 2011

Tusker Mattresses U Ltd v Royal Care Pharmaceuticals Ltd (Miscellaneous Application-2010/38) [2011] UGCommC 9 (13 February 2011);

Cite this case
[2011] UGCommC 9
Coram
Obura, J

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO. 38 OF 2010

TUSTER MATTRESSES (U)::::::::::::::::::                                                                      APPLICANT

V E R S U S

 

 

                                                  ROYAL CARE PHARMACEUTICALS LTD:::::::::::::::::::                                                                                               RESPONDENT

 

 

BEFORE: LADY JUSTICE HELLEN OBURA.

RULING

This application was brought by the applicant under Order 33 rules 3 & 4 and Order 52 rules 1 & 3 of the Civil Procedure Rules (CPR) seeking for orders that:
a)      
the applicant be granted unconditional leave to defend the claim against the applicant in Civil Suit No. 393 of 2010 before this court, and
b)      
costs of the application be provided for.
The grounds relied upon in bringing this application as summarized in the notice of motion is that;
a)      
The claim of the respondent is based on rental arrears that are not due from the applicant.
b)       The applicant is not indebted to the respondent to the amount claimed.
c)       It is just and equitable that this application is allowed.
The application is supported by the affidavit of Mr. Hassan Ali Abdi, the Country Manager of the applicant.

A brief background of this application is that on the 1st of November 2010 the respondent/plaintiff filed a summary suit against the applicant (the 3rd defendant) and two others under O.36 rr 1, 2 &3 of the CPR for recovery of a sum of U.Shs. 400,000,000= (Shillings four hundred million only) being rent arrears and costs of the suit.

The basis of the claim as contained in the plaint in summary suit and the affidavit in support is that on the 1st day of December 2008, the respondent/plaintiff entered into tenancy agreement with the 1st and 2nd defendants in respect to plot 1336 Portbell Road, covering the ground, 1st, 2nd, 3rd, 4th and 5th floors for monthly rent of Ushs.50, 000,000=.

That the defendants continued paying rent until 1st March 2010 when they stopped and started giving excuses to the plaintiff. That upon the plaintiff demanding for rent, the 3rd defendant/applicant came up to acknowledge tenancy. That despite several reminders, the applicant refused and/ or neglected to clear the debt despite the fact that it has no defence, hence the summary suit.

The applicant then filed this application seeking for leave to appear and defend the summary suit. The averments in the affidavit in support of this application gave the applicant’s side of the story highlighting the chronology of events/transactions between the parties but denied that rent is due and owing.
 

In paragraphs 2 to 15 of the affidavit, the deponent deposed as follows:
2.       “That sometime around March 2010, the applicant took over business of the first defendant in HCCS No. 393 of 2010 Goodprice Supermarket Ltd, Miniprice Supermarket Ltd, and Halfprice Supermarket outlets which had four outlets, that is, Kitintale, Ntinda, Shauriyako and Ntinda outlets, all in Kampala, Uganda”.

3.       “That I am aware that in the Kitintale branch, the applicant occupied part of the ground floor, part of the basement and part of the offices below the basement. However, the rest of the space and the

1st and 2nd floors were not complete and they were used by the 1st defendant in HCCS No. 393 of 2010 as storage.(A bundle of photographs of the Kitintale branch before renovation are herein attached and marked annexure “A”)”.

4.       “That I am aware that, following a verbal agreement with the respondent, upon entering the premises the applicant embarked upon renovation strategies that saw it renovate, transform and consequently occupy all the floors. (A breakdown of all renovation done and monies spent is herein attached and marked annexure “B”)”.

5.       “That I am aware that the said renovation caused the applicant to re-arrange the set up of the shop, with the consent of the respondent, wherein the space of other existing tenants like Goodmeat Uganda Ltd was bought/taken over and others like DTB Bank had their contracts renegotiated to allow them to be moved from their current location, a process that is still on-going. (A copy of the Goodmeat space takeover MOU dated

24th June 2010 and the DTB addendum dated 2nd September 2010 are herein attached and marked annexure “C” and “D” respectively)”.

6.       “That I am aware that due to the above changes no rental contract was entered into or rent payment made as there was no defined space description from which the same could be computed”.

7.       “That I am aware that in March 2010 at the time of the takeover, a reconciliation was done based on invoices issued by the said first defendant in HCCS 393 of 2010 ( a copy of a bundle of the said invoices are attached herein and marked annexure “E”)”.

8.       “That I am aware that an invoice dated

30th June 2010 had under clause (4), an estimation of the rent for Kitintale for the months of 16th Feb 2010 to 16th August 2010, an amount that was part of the items negotiated for that culminated in the signing of the MOU dated 13th July 2010 (a copy of the MOU is attached herein and marked annexure “F”)”.

9.       “That I am reliably informed by our bankers, Diamond Trust Bank, which information I verily believe to be true, that the money agreed upon at the time of signing the MOU dated

3rd July 2010 has to date been remitted to the accounts of the first defendant”.
 
10.      “That I am aware that on or about the 1st day of November 2010 he received from Nairobi a Memorandum of Understanding (MOU) describing the exact space occupied and money owed by Tusker Mattresses (U) Ltd from 13th July 2010 to 13th November 2010 rental agreement covering the rest of the tenancy period setting out the terms that the respective parties had agreed upon duly signed by the directors of Tusker Mattresses (U) Ltd”.

11.      “That I was directed to afford a copy of the MOU and the rental agreement to Dr. Gilbert Ohairwe to sign as agreed by him and his co-director of his three companies, GKO Medicines, Half Price Supermarket and Royal Care Pharmaceuticals Ltd one Tanya Ermoshkins, so that all rental arrears could be cleared. (A copy of the MOU and the rental agreement are herein attached and marked annexure “G” and “H” respectively)”.

12.      “That upon delivery of the said MOU and rental agreement I was informed, on the same day by the Kitintale branch manager one John Kimani, which information I verily believe to be true, that a suit had been filed against Tusker Mattresses (U) Ltd for non-payment of rent on the same date

1st November 2010”.

13.      “That the assertion that there are rental arrears is baseless and unfounded as the tenant, Tusker Mattresses (U) Ltd duly paid rent for the months of March to the month of June as explained in paragraphs 7, 8, and 9 above”.

14.      “That Tusker Mattresses (U) Ltd has not in any manner or form refused or neglected to pay any owed rent to the land lord Royal Care Pharmaceuticals rather the process has been frustrated, aggravated and provoked by the landlord’s omission to keep his words to the premise”.

15.      “That the landlord, the respondent herein, has failed to acknowledge receipt of the money paid for the months of March to July 13th yet he is the same signatory for all businesses conducted between Tusker Mattresses (U) Ltd and the plaintiff, 1st and 2nd defendant companies to which he and one Tanya Ermoshkins are the sole directors to all the three afore mentioned companies”.

An affidavit in reply was sworn by one Dr.Tatiana Ermoshkina a director in the respondent company. A copy of a Tenancy/Lease Agreement between Royal Care Pharmaceuticals on the one part and G.K.O. Medicines Ltd trading as Half/Miniprice Supermarket on the other part made on the 1st of December 2008 was attached to the affidavit. The deponent of the affidavit in reply rebutted almost all the averments in the affidavit in support of this application which she attacked for containing imaginations, hearsay and falsehood. Generally payment of any rent to the respondent was denied and the documents such as the MOU and invoices attached to the affidavit in support were either denied or said not to relate to the respondent. She contended that the MOU where the respondent was a party concerns good will payment to Good Meat (U) Ltd and nothing thereon mentioned anything to do with rent to the respondent.
 
This application was argued by Mr. Paul Rutisya for the applicant and Mr. Nathan Osinde for the respondent. From the submission of both counsels, it is not in dispute that the applicant took over business of the first defendant in HCCS No. 393 of 2010 trading as Goodprice Supermarket Ltd, Miniprice Supermarket Ltd, and Halfprice Supermarket Ltd and occupied business premises in all the four outlets including the one in Kitintale which is subject of this application. What is in dispute is the issue of payment of rent.
 
Mr. Rutisya referred to paragraphs 8 and 9 of the affidavit in support of the application which states that rent was remitted to the respondent covering the period up to 13th July 2010. He submitted that paragraph 13 of the affidavit confirms that position.

He further submitted that paragraphs 10 and 11 of the affidavit state quite clearly that there is a Memorandum of Understanding (MOU) describing the exact space occupied and money owed by the applicant from 13th July 2010 to 13th November 2010. Further that the MOU and the rental agreement with the terms agreed upon by the applicant, Dr. Gilbert Ohairwe and his Co-Director of his three companies, GKO Medicines, Half Price Supermarket and Royal Care Pharmaceuticals Ltd (the 1st & 2nd defendants and the plaintiff in HCCS No. 393 of 2010) was sent by the applicant from its headquarters in Nairobi to Dr. Gilbert Ohairwe to sign for purposes of covering rent for the rest of the tenancy period.

Mr. Rutisya contended that Dr. Gilbert Ohairwe never signed the rent agreement and therefore rent for the period after 13th July 2010 is not due because the applicant and the respondent have never formalized the landlord-tenant relationship and as such the quantum has never been agreed upon. He submitted that there is no proof before court to show that the terms of the tenancy agreement between the respondent and G.K.O. Medicines Ltd trading as Half/Miniprice Supermarket that the respondent is basing its claim on applies to the applicant who is not party to it.

He also pointed out that his client carried out some renovations on the building which should be offset from the rent due to the respondent by way of counter claim in the main suit if this application is granted.

He submitted that there are triable issues that have been raised in the affidavit in support of this application which court should determine. That the triable issues are: whether the tenancy agreement relied upon by the respondent applies to the current relationship between the applicant and the respondent; whether rent is due and in the alternative but without prejudice that if rent is due, then cost of renovation needs to be offset from the amount claimed by way of counter claim.

He concluded his submission by citing the case of HASMANI –V- BANQUE DU CONGO [1938] EACA 88 where it was held that all the defendant has to show is that there is a triable issue of law and fact. Similarly, he cited the case of TWNTSHAE OVERSEAS TRADING CO. LTD –VS- BOMBAY GARAGE LTD [1958] EA 741, where it was held that the defendant must by affidavit disclose a triable issue in order for an application for leave to appear and defend to succeed.
 

Mr. Osinde on the other hand based his submission on the affidavit in reply and contended that by taking over business of G.K.O Medicines Ltd trading as Half/Miniprice Supermarket and occupying the business premises, the applicant took over rent payment for the said business premises as well and is bound to pay rent as per the terms of the tenancy agreement that was entered into by the said business.

Mr. Osinde submitted that all the documents attached by the applicant as proof of payment of rent from March to July 2010 have nothing to do with rent and the respondent was not party to them. That the MOU was for good will payment to Good Meat (U) Ltd while the invoices were for payments to G.K.O. Medicines, a separate entity.

He concluded that this application is only intended to waste court’s time because the applicant has failed to show in any way in the affidavit in support that there is a triable issue to justify grant of leave to appear and defend the main suit.

He prayed that court finds it expedient and dismiss this application with cost to the respondent and enter judgment for the sum prayed.
 

The law is now settled 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. (See HASMANI –V- BANQUE DU CONGO [1938] EACA 88 ,TWNTSHAE OVERSEAS TRADING CO. LTD –VS- BOMBAY GARAGE LTD [1958] EA 741 (both cited by counsel for the applicant but photocopies thereof not availed to court), MALUKU INTERGLOBAL TRADE AGENCY LTD V BANK OF UGANDA [1985] HCB 66 which was cited with approval by Justice Stella Arach Amoko in SOUTHERN INVESTMENTS LTD V. MUKABURA FOUNDATIONS INVESTMENTS LTD MA. NO. 105 OF 2004, ARISING FROM HCCS NO. 79 OF 2004 [2002-2004] UCLR 440).

The main issue for determination in this application is therefore whether the defendant/applicant has by affidavit or otherwise disclosed a triable issue.
 

The tenancy agreement upon which the plaintiff/respondent has based its claim under summary procedure is being challenged by the defendant/applicant who claims that it is not a party to it. While the respondent contended that by virtue of the applicant taking over the businesses of its (respondent’s) tenants within the same business premises, it also took over tenancy with the same terms as was entered into by those businesses, the applicant disputes that the said agreement is binding upon it.

I agree with the submission of counsel for the applicant that the contention of the applicant raises a triable issue of law, that is, whether the tenancy agreement relied upon by the respondent to bring its claim applies to the current relationship between the applicant and the respondent.
 

As was held in MALUKU INTERGLOBAL TRADE AGENCY LTD (Supra), 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.
 
Secondly, it was contended in paragraphs 4 and 5 of the affidavit in reply that the applicant carried out renovations on the premises. Counsel for the applicant submitted in the alternative and without prejudice that if rent is found due from the applicant, then the cost of renovations would have to be offset from the amount due by way of counter claim.

This contention in the affidavit regarding renovation was never rebutted by the affidavit in reply. Counsel for the respondent did not also address the issue when he was responding to the submission by counsel for the applicant on the issue. This implies that it is not disputed that the applicant carried out some renovations. I am satisfied that this also raises a triable issue of counter claim in the main suit which cannot be ignored.

However, since it is not in dispute that the applicant has been in occupation of the respondent’s premises with effect from March, 2010, it follows that eventually rent will have to be paid when the issues of tenancy and the period for which rent is due are determined by this court. In the circumstances, I will grant the applicant conditional leave to appear and defend the main suit.

In the result, I order that 50% of the U.Shs. 400,000,000= claimed in the plaint in summary suit be deposited in court before the applicant/defendant files its Written Statement of Defence which must be filed within fifteen days from the date of this ruling.

 
Hellen Obura (Mrs)
Judge
14/02/2011
 
Ruling delivered in open court in the presence of:
1.      
Mr. Paul Rutisya for the applicant
2.       Mr. Nathan Osinde for the respondent
3.       Ms. Ruth Naisamula Court Clerk
14/02/2011