Court name
Commercial Court of Uganda
Judgment date
4 September 2012

Unique Holdings Ltd v Business Skills Trust Ltd (Miscellaneous Application-2012/402) [2012] UGCommC 116 (04 September 2012);

Cite this case
[2012] UGCommC 116

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 402 OF 2012

 

UNIQUE HOLDINGS LTD…...........................................................                                                                                                                                 APPLICANT

                                        VS.

BUSINESS SKILLS TRUST LIMITED)…................................................                                                                                                                          RESPONDENT

 

BEFORE HON. JUSTICE CHRISTOPHER MADRAMA

RULING

This ruling arises from an objection raised by the respondent’s Counsel against the hearing of miscellaneous application number 402 of 2012 for stay of execution pending appeal. Miscellaneous application number 402 of 2012 is an application for stay of execution of the judgment and Decree in High Court Civil Suit No. 778 of 2006 pending determination of the applicants intended appeal against judgment and decree.

The hearing of the main application for stay of execution pending appeal came for hearing on the 29th of August 2012 when learned counsel for the respondent Mr. Henry Kunya objected to the hearing of the application on the ground that execution had already been completed and there was nothing to stay. Counsel Henry Kunya represented the Respondent while Counsel Alice Nalwoga represented the Applicant.

Counsel Kunya Henry submitted that a garnishee absolute order had been pronounced by court following the garnishee nisi which had been issued by the court.  Following the garnishee order absolute, the garnishee bank was duly served and made a transfer of the decreed sum from the applicants account.

Counsel submitted that the spirit of a consent order between the parties dated 23rd of July 2012 ordering an interim stay of execution in MA403   of 2012 arising from the main application for stay of execution pending appeal MA 402 of 2012 was very clear and provided that the interim order of stay of execution would remain in force pending the hearing either of the garnishee proceedings on 20th of August 2012 or the main application for stay for execution whichever event came earlier. On 20th day of August 2012, the main application for stay of execution was not heard nor had it been fixed for hearing, and as a result a garnishee absolute order was issued. The interim order of stay of execution had been secured in the course of the court vacation. Counsel contended that the Applicant’s Counsel was vigilant enough to have secured an interim order of stay of execution in the course of the vacation and ought to have proceeded to have a certificate of urgency for hearing the main application during court vacation which wasn’t done and as a result the garnishee absolutes was issued on the 20th of August 2012 and served on the bank under the Order 23 rule 2 of the Civil Procedure Rules.  The Garnishee bank on been duly served did not make any representation to the court opposing the proceedings hence the pronouncement of the garnishee absolute. Counsel relied on the case of Francis Xavier Makumbi V. Nic [1979] HCB-230 to support the procedure for obtaining garnishee absolute.  Following the order, the bank was duly served and it transferred the funds to the respondents account.  The credited amount includes costs of the garnishee proceedings. It is contended for respondent company that the execution which the judgment debtor seeks to stay has already been completed and funds fully transferred.

As far as the freezing of the account of the respondent pursuant to an interim order of stay issued on the 22nd of August 2012 is concerned learned counsel contended that the account of the judgment creditor has already been credited and the freezing of the account is something alien to garnishee proceedings. Furthermore the applicants concede that funds have already been transferred and upon admission of that fact there is nothing left for the applicant to say. 

In reply counsel Nalwoga submitted that by the time the interim order of the 22/08/2012 was issued, the garnishee order had not yet been acted upon.  And court had the powers to stay the execution of the garnishee absolute.  The issue for determination is therefore whether or not execution had taking place. This question is addressed in paragraphs 5 – 6 of the affidavit in rejoinder. Shs 27,987,325 million was transferred to the respondent’s account but it is also clear that that same amount was frozen on the account of interim order issued on the 22nd of August 2012.  The bank implemented both court orders and money was put on the Respondent’s account but was frozen due to the second interim order.  The question therefore is whether that the transfer of money amounts to the completion of execution. Counsel contended that it does not because the essence of the garnishee absolute is for payment of money to the respondent and no payment has so far been made.

Applicants Counsel referred to Paget’s Law of Banking and the statement at page 117 that:

“The proceeds so received are not to be held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them”. 

Secondly, at page 118 states that:

“It is an implied term of the contract that the banker is not liable to pay the customer until demand is made.  Until then, there is no presently due debt owed by the banker to his customer.” 

Counsel contended that though the money was transferred to the respondent’s account, he cannot access it unless he demands for it and in any case the account is frozen and any demand cannot be adhered to. The applicants application seeks to maintain the status quo as it is, so that the respondent cannot access his monies as execution of the garnishee absolute is not yet complete until payment is made. Counsel contended that the garnishee absolute is only completed when payment is made is order 23 rule 7 of the Civil Procedure Rules. She prayed that the respondent’s objection is overruled and the court proceeds to hear the application for stay of execution on its merits.

In rejoinder Counsel Henry Kunya submitted that under order rule 7 of order 23, payment was effected when the transfer of funds was made from the account of the judgment debtor to the account of judgment creditor and in so doing the garnishee absolute was completed as well.  The bank on receipt of the garnishee absolute affected this transfer. The applicants conceded that the transfer had been made.  Had there been no transfer of the money, there would be merit in their proposal to pursue the stay of execution. Counsel therefore reiterated his earlier submissions and prayers.

Ruling

I have carefully considered the oral submissions of learned counsels and have reviewed the background to this matter.

The background to the application is that the High Court ordered the applicant to pay 17,353,600/= as special damages, general damages of Uganda shillings 4,000,000/=, interest at court rate from the date of judgment till payment in full and 70% of taxed costs of the suit.  Judgment was delivered on the 3rd of July, 2012 but it is averred by the applicants directors that they were unable to access the court file in time and when they perused the judgment they were dissatisfied with the decision and intended to appeal but the time for filing the appeal had passed.  The applicant subsequently applied for extension of time to file the appeal out of time and filed the current application in the high court seeking for stay of execution of the decree.  The applicant further applied for an interim stay of execution pending the hearing of miscellaneous application number 402 of 2012.  The application for an interim order of stay of execution was heard during court vacation.  Before the application for an interim order of stay of execution was heard, the respondent had applied to garnishee the account of the respondent with Diamond Trust Bank Uganda Ltd.  The application for an interim order of stay of execution was heard on the 23rd of July, 2012.  By consent of Parties Counsels appearing before the registrar of this court his worship John Ochepa Arutu, the following order was entered:

  1. “That an interim order of stay of execution is hereby granted and shall remain in force until 20th August, 2012 or until the final determination of miscellaneous application number 402 of 2012 for stay of execution, whichever event comes earlier.
  2. That the garnishee order nisi granted by this honourable court on the 12th of July, 2012 vide miscellaneous application number 369 of 2012 shall be and is hereby varied as follows:

That the applicant maintains a minimum balance on its bank account number 0104081081 of Uganda shillings 25,000,000/= held with Diamond Trust Bank until, the 20th of August, 2012 or until the final determination of miscellaneous application number 402 of 2012 for stay of execution, whichever event comes earlier.

  1. That Diamond Trust Bank is accordingly ordered to block funds on the applicants said account only to the extent of Uganda shillings 25,000,000/=.
  2. That the applicant is free to operate its account normally in respect of any sums beyond the above stated amount.
  3. That the costs shall abide the cause.”

In a letter written by the applicants counsel dated 16th of August, 2012 and addressed to the registrar of the High Court of Uganda/Commercial Division the applicants Counsel informed the court in writing that the application for the garnishee order absolute had been fixed for the 20th of August, 2012 for hearing but the application for stay of execution was fixed for the 22nd of August, 2012 before Justice Madrama Christopher.  Counsel noted that the application for extension of time within which to appeal had also been fixed for 6th of September, 2012. The applicants counsel requested the court/the registrar to extend the hearing of the garnishee absolute to a date after the pending application for stay of execution is heard and determined. This letter is attached to the supplementary affidavit of Andrew Munanura filed in support of the application.

By consent of counsels for the parties an interim order of stay of execution was made to last until the 20th of August, 2012 when the garnishee order nisi would become absolute or until the hearing of the application for stay of execution.  However the applicant’s main application for stay of execution was not fixed for hearing by the 20th of August, 2012 and the decree nisi was pronounced absolute by the registrar.  Thereafter the respondent on the request of Messrs Diamond Trust Bank Ltd opened an account with the bank and the sum of Uganda shillings 27,987,325/= was transferred from the applicants account to the respondents account.

The bank statement of account shows that the funds were transferred on the 23rd of August, 2012.  On the part of the applicant, on the 22nd of August, 2012 Alice Nalwoga Counsel for the applicant appeared before me in the absence of the respondents and I granted an interim order of stay of execution pending the hearing of the application for stay of execution after service of a hearing notice/the application on the respondents.  From the affidavit of Andrew Munanura the applicant extracted the order on the 23rd of August, 2012 and served it upon Diamond Trust Bank on the same date.  The order of the court which was extracted reads as follows:

  1. “That an interim order for stay of execution is hereby granted and shall remain in force until the hearing and determination of miscellaneous application number 402 of 2012 for stay of execution.
  2. That counsel for the applicant must serve upon the respondents the notice of motion for miscellaneous application number 402 of 2012 and a hearing notice for 29th of August, 2012 at 12.30 PM.”

Furthermore the affidavit of Andrew shows that Diamond Trust Bank on being served implemented both court orders. It transferred the money to the respondents account but went ahead to freeze the account pursuant to the second interim order issued on the 22nd of August.  They indicated in their E mail attached to the affidavit in rejoinder of Andrew Munanura that they now await the courts final order.   

I agree with learned counsel for the applicant that the issue for determination is whether the transfer of money from the applicants account to the respondents account pursuant to the garnishee order absolute completed the process of execution and there was nothing left for the court to consider in terms of maintaining the status quo by an order of stay of execution.

The beginning point for resolution of this controversy is the consideration of the nature of execution proceedings and specifically the nature and effect of a garnishee order absolute.  According to Words and Phrases Legally Defined volume 2 and 3rd edition London and Butterworth’s 1989 at page 195-196 the word “execution” in its widest sense signifies the enforcement of or giving effect to the judgments or orders of courts of justice.  Denning MR considered the word “execution” and completion of execution in the case of Re Overseas Aviation Engineering (GB) Ltd [1962] 3 All ER 12 at page 16. In that case he considered the effect of section 325 of the Companies Act 1948 on what was meant by completion of execution under that section. The section reads:

“(1) Where a creditor has issued execution against the goods or lands of a company or has attached any debt due to the company, and the company is subsequently wound up, he shall not be entitled to retain the benefit of the execution or attachment against the liquidator in the winding-up of the company unless he has completed the execution or attachment before the commencement of the winding-up: …

“(2) For the purposes of this section, an execution against goods shall be taken to be completed by seizure and sale, and an attachment of a debt shall be deemed to be completed by receipt of the debt, and an execution against land shall be deemed to be completed by seizure or by the appointment of a receiver.”

He held that a “when a judgment creditor obtains a judgment charge on specific land of a company, he thereby issues “execution” against the land of the company”. He goes on to say:

“The word “execution” is not defined in the Act. It is, of course, a word familiar to lawyers. “Execution” means, quite simply, the process for enforcing or giving effect to the judgment of the court: and it is “completed” when the judgment creditor gets the money or other thing awarded to him by the judgment. That this is the meaning is seen by reference to that valuable old book “Termes de la Ley”, where it is said:

“Execution is, where judgment is given in any action, that the plaintiff shall recover the land, debt, or damages, as the case is; and when any writ is awarded to put him in possession, or to do any other thing whereby the plaintiff should the better be satisfied his debt or damages, that is called a writ of execution; and when he hath the possession of the land, or is paid the debt or damages, or hath the body of the defendant awarded to prison, then he hath execution.”

The same meaning is to be found in Blackman v Fysh ([1892] 3 Ch at p 217), when Kekewich J said that execution means the “process of law for the enforcement of a judgment creditor’s right and in order to give effect to that right”. In cases when execution was had by means of a common law writ, such as fieri facias or elegit, it was legal execution: when it was had by means of an equitable remedy, such as the appointment of a receiver, then it was equitable execution. In either case it was “execution” because it was the process for enforcing or giving effect to the judgment of the court. Applying this meaning of the word “execution”, I should have thought it plain that when a judgment creditor gets a charge on the debtor’s property, it is a form of “execution”, for it is a means of enforcing the judgment.”

From his definition the question of whether execution has been completed would depend on the wording of the statutory provision and the action taken by the judgment creditor.  In this particular case we have to consider the provisions of order 23 of the Civil Procedure Rules.  We have to first of all consider order 23 rule 2 which gives the effect of a garnishee order in the following words:

“Service of an order that debts due to a judgment debtor liable under a decree be attached, or notice of the order to the garnishee in such manner as the court may direct, shall bind such debts in his or her hands”

The rule operates as soon as a service of the garnishee order nisi is served upon the bank.  It attaches the money in the account of the judgment debtor with the garnishee bank pending proceedings to determine whether the garnishee order should be made garnishee absolute.  Rule 2 deals with the attachment of debts.  Attachment of debts of is a procedure for enforcement of execution provided for under section 38 (c) of the Civil Procedure Act.  Section 38 of the Civil Procedure Act provides as follows:

Subject to such conditions and limitations as may be prescribed, the court may, on the application of the Decree holder, order execution of the Decree –...

(c) by attachment of debts;”

Order 23 of the Civil Procedure Rules is entitled “Attachment of Debts”.  In the words of section 38 of the Civil Procedure Act, it is the procedure for enforcement of execution as provided for or prescribed by the Civil Procedure Rules.

 Two further rules of order 23 of the Civil Procedure Rules have to be considered.  These are order 23 rules 3 and 7 of the Civil Procedure Rules.  Rule 3 provides that where the garnishee does not appear the court may levy execution against the person or goods of the garnishee to levy the amount due from him or her or so much of the amount due as may be sufficient to satisfy the decree together with the costs of the garnishee proceedings.  Rule 7 provides as follows:

“Payment made by or execution levied upon the garnishee under any such proceedings as aforesaid shall be a valid discharge to him or her as against the judgment debtor to the amount paid or levied, although such proceedings or order may be set aside or the decree reversed.”

In this particular case execution was levied upon the garnishee for the amount equivalent to the decreed amount plus costs of the garnishee proceedings and the garnishee bank paid the same to the account of the judgment creditor/respondent.  Under the above rule the payment to the account of the judgment creditor/respondent was a valid discharge of the garnishee as against the applicant/judgment debtor to the extent of the amount levied or paid out under the garnishee order absolute.  Secondly, such proceedings or order may be set aside or the decreed reversed.  The latter part of the rule is inapplicable in that there are no such proceedings to set aside the garnishee order absolute or the proceedings therefore.

A garnishee order absolute may only be set aside on specific grounds. Denning MR considered the procedure of garnishee in Choice Investments Ltd v Jeromnimon (Midland Bank Ltd, garnishee) [1981] 1 All ER 225 at page 227 where he said:

“The word ‘garnishee’ is derived from the Norman-French. It denotes one who is required to ‘garnish’, that is, to furnish, a creditor with the money to pay off a debt. A simple instance will suffice. A creditor is owed £100 by a debtor. The debtor does not pay. The creditor gets judgment against him for the £100. Still the debtor does not pay. The creditor then discovers that the debtor is a customer of a bank and has £150 at his bank. The creditor can get a ‘garnishee’ order against the bank by which the bank is required to pay into court or direct to the creditor, out of its customer’s £150, the £100 which he owes to the creditor.

There are two steps in the process. The first is a garnishee order nisi. Nisi is Norman-French. It means ‘unless’. It is an order on the bank to pay the £100 to the judgment creditor or into court within a stated time unless there is some sufficient reason why the bank should not do so. Such reason may exist if the bank disputes its indebtedness to the customer for one reason or other. Or if payment to this creditor might be unfair by preferring him to other creditors: see Pritchard v Westminster Bank Ltd [1969] 1 All ER 999, [1969] 1 WLR 547 and Rainbow v Moorgate Properties Ltd [1975] 2 All ER 821, [1975] 1 WLR 788. If no sufficient reason appears, the garnishee order is made absolute, to pay to the judgment creditor, or into court, whichever is the more appropriate. On making the payment, the bank gets a good discharge from its indebtedness to its own customer, just as if he himself directed the bank to pay it. If it is a deposit on seven days’ notice, the order nisi operates as the notice.

As soon as the garnishee order nisi is served on the bank, it operates as an injunction. It prevents the bank from paying the money to its customer until the garnishee order is made absolute, or is discharged, as the case may be. It binds the debt in the hands of the garnishee, that is, creates a charge in favour of the judgment creditor: see Joachimson v Swiss Bank Corpn [1921] 3 KB 110 at 131, [1921] All ER Rep 92 at 102, per Atkin LJ. The money at the bank is then said to be ‘attached’, again derived from Norman-French. But the ‘attachment’ is not an order to pay. It only freezes the sum in the hands of the bank until the order is made absolute or is discharged. It is only when the order is made absolute that the bank is liable to pay.”

According to Halsbury’s laws of England volume 17 (1) fourth edition (reissue) paragraph 265:

            “A final third party debt order is enforceable as an order to pay money.”

The garnishee order absolute is an order to pay money.  By that the garnishee bank was ordered to pay the respondent.  This it did by transferring the money it had from the applicants account to the respondents account.  From the above authorities I am persuaded that execution is a process.  How that process operates to give effect or enforce the decree of the court is provided for by the law.  In this case the process of execution is completed when the garnishee bank complies with a garnishee order absolute.  The garnishee bank had complied with the order of the bank by asking the respondent to open an account and transferring the money to the respondents account.

Counsel for the applicant contended that the respondent had not yet received the money because the bank was not obliged to pay it.  I find this a strange argument because money can be paid to an account of the payee and evidence of deposit of the money is sufficient discharge of the person obliged to make that payment. Similarly payment by cheque is sufficient discharge of the drawer though the payee has in fact not yet received the cash on their account or cashed the cheque.  The liability of the garnishee ended with the transfer of the money to the respondents account.  The garnishee can only dispute his or her liability in court by applying to be heard in the manner provided for under order 23 rules 4 of the Civil Procedure Rules which it had not done because it does not dispute its liability of being indebted to the Applicant.

Last but not least, the court had on the 22nd of August 2012 issued an interim order of stay of execution erroneously believing that the process of execution was incomplete.  By the 20th of August, 2012 the process of execution stipulated under order 23 was made complete by the issuance of a garnishee order absolute.  The garnishee order absolute or the proceedings of the garnishee order can only be set aside upon the application of the applicant to set aside the order or proceedings under order 23 rule 7 of the Civil Procedure Rules.  There is no such application before the court.  To be precise, there was an application for stay of execution which had been fixed for the 29th of August, 2012. When the parties executed a consent agreement which was entered as an interim order of stay of execution on the 23rd day of July 2012 before the registrar they made binding terms of that stay order.  I agree with learned counsel for the respondent that the process of execution was complete upon the occurrence of the events stipulated in the consent order dated 23rd of July 2012.  The applicant is contractually bound by the consent order of the 23rd of July, 2012 whose terms make it explicitly clear that either the interim order of stay would last until the 20th of August, 2012 when the court would finally determine the garnishee order absolute or until the hearing of the application for the stay of execution (which is this application) whichever application came earlier.  It was anticipated by the parties in that agreement that the application for stay of execution would be heard before the 20th of August, 2012.  It was also anticipated that if it was not heard on the 20th of August, 2012, the garnishee order absolute hearing would be conducted.  In those circumstances it was incumbent upon the applicant to have the application for stay of execution heard before the 20th of August, 2012 in order to forestall the operation of the consent order dated 23rd of July, 2012.  Buy some unfortunate events which the court does not have to consider the applicant did not fix the application for stay of execution before the 20th of August 2012.  The applicant was contractually bound to comply with the terms of the consent order dated 23rd of July, 2012 which it executed knowingly. Consequently, the garnishee proceedings terminated with a garnishee order absolute on the 20th of August, 2012.  The subsequent interim order of this court issued on the 22nd of August 2012 was issued in vain because the law envisages the termination of the garnishee proceedings by the issuance of the garnishee order absolute, whereupon the process is deemed complete.  Thereafter the law deems the execution to have been completed.  There is no application to set aside the proceedings.  The consent order of the parties is enforceable as a contract and provided that the garnishee proceedings would be heard on the 20th of August, 2012.  The court cannot set aside the consent of the parties except on grounds that would invalidate a contract.

In those circumstances, the only option of the applicant is to apply to set aside the garnishee proceedings on any grounds by which they may be set aside if at all such grounds exist.  By operation of the consent order of this court dated 23rd of July 2012, the garnishee proceedings terminated on the 20th of August, 2012 by a garnishee order absolute and the interim order of the court dated 22nd of August, 2012 was erroneously issued and is hereby set aside.  The application for stay of execution has been overtaken by events and is hereby disallowed. The respondent’s preliminary objection succeeds with each party to bear its own costs. Ruling delivered on the 4th of September 2012 at 2.30 pm

Hon. Mr. Justice Christopher Madrama

Ruling delivered in the presence of:

Counsel Henry Kunya for the respondent

MD of the Respondent company Nelson Ndibikirwa

Counsel Alice Nalwoga counsel for applicant

Charles Okuni: Court Clerk

Hon. Mr. Justice Christopher Madrama

4th September 2012