Court name
Commercial Court of Uganda
Judgment date
24 April 2012

Nelson Dhibikirwa v Agro Management (U) Ltd (Miscellaneous Application-2010/651) [2012] UGCommC 33 (24 April 2012);

Cite this case
[2012] UGCommC 33

The Republic of Uganda

In the High Court of Uganda at Kampala

(COMMERCIAL DIVISION)

 

misc application no. 651 of 2010

arising from Civil Suit No.281 of 2004

 

NELSON DHIBIKIRWA …………………………………….…..Plaintiff/ JUDGMENT CREDITOR

VERSUS

AGRO- MANAGEMENT (U) LTD…………….........................Defendant/ JUDGMENT DEBTOR

 

                                                                                                      BEFORE:    THE HON. JUSTICE GEOFFREY KIRYABWIRE

 

                                                                                                                                                  R U L I N G

This application was brought by Notice of Motion under s. 33 of the Judicature Act Cap 13, S. 38(f) and 98 of the Civil Procedure Act Cap71, O. 22 r 38(b) and (c) and O. 52 r 1 and 3 of the Civil Procedure Rules ( S. I 71-1) for orders that;

  1.    The court orally examines the judgment debtor’s Directors namely; International Finance Corporation, East African Development Bank, Development Finance Company of Uganda Ltd and Agro Management Group Inc. (USA) or their officials as to whether any and/ or what debts are owing to the judgment Debtor.

 

  1.   The court orally examines the judgment debtor’s Directors namely; International Finance Corporation, East African Development Bank, Development Finance Company of Uganda Ltd and Agro Management Group Inc. (USA) or their officials as to whether the judgment debtor has any property or means of satisfying the decree or in default of production of any books or documents regarding debts owing to the judgment debtor to disclose its properties for attachment or means of satisfying the decretal sums all totaling to Ushs 24,028,508/=.

 

 

  1.   Costs of the application be provided for.

 

The motion is supported by the affidavit of Nelson Dhibikirwa the applicant.

 

The brief background to this application is that the applicant sued the respondent or judgment debtor vide HCCS  No. 281 of 2003, and the court ordered that the respondent pays to the applicant a sum of Ushs 24,028,508/=, but to date the respondent has not made any payment on the decretal sum.

 

In the affidavit in support of the application, the applicant deponed that he obtained an order of Notice to show cause why execution should not issue, but the same was also ignored by the respondent. The applicant in his affidavit further stated that the respondent has no known property which can be attached by the applicant, to sale and recover the decretal sum. In addition to this, the applicant stated that the respondent has no known business premises or registered office.

 

The applicant however further deponed, that it subsequently conducted a search at the Uganda Registration Services Bureau, and discovered that the Directors of the applicant are International Finance Corporation (IFC), East African Development Bank (EADB), Development Finance Company of Uganda Ltd (DFCU) and Agro Management Group Inc. (USA). The applicant further deponed that the said directors are the only persons in the effectual and constant control of the company, and therefore can disclose any books or documents regarding the respondent’s debts and any properties or means of satisfying the decretal sum. This is why the applicant now sought to have the said directors examined by Court.

 

In reply on behalf of the EADB and IFC as directors of the respondent company Mr. Julius Ojok an advocate with Sebalu and Lule Advocates representing East African Development Bank deponed an affidavit and stated that; East African Development Bank is one of the directors of the respondent but that the respondent company was put under receivership and there was no more money to pay the judgment debt. He further stated that the person best suited to explain or render a true account of the respondent’s financial position is the receiver who dealt with the property of the respondent company.

 

On file is also an affidavit in reply by DFCU, sworn by Ms. Agnes Tibayeita Isharaza, it was deponed that DFCU Bank ltd had never had any dealings with the respondent and as thus, it was not aware of any money or property belonging to the applicant as a judgment creditor.

 

The court made an order for the oral examination of the Respondent’s Directors namely; International Finance Corporation (IFC) and East African Development Bank (EADB) and Development Finance Company of Uganda Ltd (DFCU) on the 14th of September 2011.   

 

At the hearing of this application, counsel for EADB and IFC raised a preliminary objection, that EADB and IFC and its officers are immune from actions against the bank in member states.

 

In this application, the applicant was represented by Mr. Mafabi while the respondent was represented by Ms. Nalwoga.

 

The objections

 

Counsel for EADB an IFC (herein after referred to as counsel for the banks) argued the case for immunity for the said banks separately. With regard to EADB, counsel submitted that the immunity is provided for under Art 43 of the East African Community Treaty (EAC) Treaty. She further submitted that the said treaty is incorporated into Ugandan law by S. 3 of the EADB Act (Cap 52). Counsel argued that further immunity is extended by Art 45 of the treaty which covers both process and securities.  Counsel for the banks submitted that Art 45 of the treaty provides the limits to actions that can be brought against the Bank. She submitted that the Act provides immunity from civil process against the bank and not on the other hand where the bank is commencing the process, Furthermore, Art. 49 1(a) of the treaty provides that directors, officers and employees of the bank are immune from all civil proceedings for acts performed in their official capacity.  Counsel submitted that the court order which requires the Directors of EADB to appear in court for oral examination amounts to a civil process for which they are immune.

 

With regard to the immunity of IFC counsel for the banks submitted that the relevant law in Uganda is provided for under S. 4 of the IFC Act (Cap 190) which incorporates the IFC agreement in the schedule to the Act. Counsel submitted that Art 6 Section 3 of the IFC agreement extends immunity to IFC where IFC has issued or guaranteed securities. Art 6 of Section 8 further extends immunity to Directors, officers and employees against all legal process. Counsel submitted that appearance in court by the directors of IFC for oral examination with documents is legal process, for which there is immunity.  

 

Counsel for the banks submitted that the suit does not involve transactions by EADB and IFC, in which they are benefitting directly.

 

Counsel for the banks submitted that there are other remedies available to the applicant such as calling the receiver or manager to testify on behalf of the company, or that the company can testify for its self if need be.

 

Arguments against objection

 

Counsel for the applicants on the other hand submitted that Art. 44 of the EABD Act created legal personality over EADB and that Art. 45 of the EAC treaty did not bar cases where the bank brings legal proceedings and in such situations it brings itself within legal process. Counsel further submitted that Art 2(2) of the Constitution provides that the Constitution is the supreme law of Uganda and that Art 21 of the Constitution provides for equality of all persons before the law. In this regard I believe Counsel for the applicants took the view that the EADB Act created inequality between the parties in relation to legal process. Counsel further submitted that Art. 126 of the Constitution provides for administration of substantive justice without regard to technicalities. I believe here Counsel for the applicants wanted Court to apply substantive justice in this case and allow the application. Counsel for the applicant submitted that where a law is inconsistent with the constitution, then it is repugnant and in this case Art. 49 of the EAC treaty is contrary to the Constitution as it made the officers of the EADB to be above the law. Counsel observed that EADB has filed several suits in court in which its officers came to court. He cited cases such as EADB v. Begumisa (HCCS No. 2568 of 2010), EADB v. Sarngadaharan & 2 ors. Counsel for the applicants submitted that the court order for oral examination of the directors of EADB did not in any case not stem from a court action against the bank and as thus, the bank can not hide under Art 49 of the EAC treaty.

 

Counsel for the applicant took the view that if the court were to rule otherwise, this would become a question for constitutional interpretation to determine whether the directors of EADB as directors of the respondent claiming immunity does not infringe Art 2, 20,21,23,26,43(c) 51 and 126 of the Constitution. Counsel submitted that these same arguments also apply to IFC. Counsel for the applicant submitted that that immunity should not be abused.

 

In reply to the plaintiff’s submissions, Ms. Nalwoga submitted that with regard to the Act being inconsistent with the constitution, this is a remedy to be obtained by way of reference to the constitutional court, and that the said Acts were passed by Parliament in the exercise of its constitutional mandate

 

I have considered the submissions of both counsel for which I am grateful.

 

 I shall start by addressing the objection of immunity in so far as it relates to the EADB and what the law of Uganda provides. Section 3 of the EADB Act provides that,

“The provisions of the charter annexed to the treaty of 1980 and set out in the schedule to this Act have the force of law in Uganda.”

 

 Article 43 of the annexed to the EAC treaty (set out in the schedule to the EADB Act) provides for the purpose of the charter, and provides as follows;

 

“To enable the Bank effectively to fulfill its objectives and carry out the functions with which it is entrusted, the status, immunities, exemptions and privileges set forth in this charter shall be accorded to the Bank in the territories of the Member States.”

 

Article 44 in the schedule to Act provides for the legal Status of EADB. It provides that:

 

“The Bank shall possess full juridical personality and, in particular, full capacity: —

(a) to contract;

(b) to acquire, and dispose of, immovable and movable property; and

(c) to institute legal proceedings.”

 

According to Article 45 in the schedule to Act further provides that;

 

1. Actions may be brought against the Bank in the territories of the Member States only in a court of competent jurisdiction in a Member State in which the Bank has an office, has appointed an agent for the purposes of accepting service or notice of process, or has issued or guaranteed securities.

 

2.    No action shall be brought against the Bank by members or persons acting for or deriving claims from members. However members shall have recourse to such special procedures for the settlement of controversies between the Bank and its members as may be prescribed in this Charter, in the regulations of the Bank or in contracts entered into with the Bank.”

 

Article 49 (1) (a) further provides for Personal Immunities and Privileges, and provides that;

 

“1. All directors, alternates, officers and employees of the Bank:—

 

(a) shall be immune from civil process with respect to acts performed by them in their official capacity;”

 

I shall now also review the objection as to immunity for the IFC and what the law of Uganda provides. The IFC Act Cap 190, under Section 2 provides for the legal status of the Corporation as follows;

 

“The Corporation shall possess full juridical personality and, in particular, the capacity—

(i) to contract;

(ii) to acquire and dispose of immovable and movable property;

(iii) to institute legal proceedings.”

 

Section 3 of the IFC Act which provides for the position of the Corporation with regard to Judicial Process, provides that,

 

“Actions may be brought against the Corporation only in a court of competent jurisdiction in the territories of a member in which the Corporation has an office, has appointed an agent for the purpose of accepting service or notice of process, or has issued or guaranteed securities. No actions shall, however, be brought by members or persons acting for or deriving claims from members. The property and assets of the Corporation shall, wheresoever located and by whomsoever held, be immune from all forms of seizure, attachment or execution before the delivery of final judgment against the Corporation.”

 

Section 8(i) of the IFC Act further provides for immunities and privileges of officers and employees, as follows;

 

“All Governors, Directors, Alternates, officers and employees of the Corporation—

 

(i) shall be immune from legal process with respect to acts performed by them in their official capacity;”

 

The issue for determination raised in this objection is whether the directors of EADB and IFC can be orally examined in court in respect of the affairs of the respondent, in light of the immunity from legal process which is provided in the provisions of the Acts set out above. I think it is not in doubt that an oral examination of both the EADB and IFC as directors of the respondent is a form of legal process because it is done before the court itself under the rules.

 

The issue of immunity for sovereigns and international organizations has been the basis for many a litigation in the courts of law. Parties like the applicants in this case have had pass this huddle in order to obtain redress from states and other state actors in the courts of law. There is no general legislation in Uganda on immunity in relation to sovereign countries, state actors or international organizations. This court will thus have to look to common law and other authorities of good persuasion in order to determine this objection.

 

There are several authorities have dealt with the issue of immunity. Perhaps the most widely quoted case on the subject today is that of TRENDTEXCORPORATION V. CENTRAL BANK OF NIGERIA [1977] 368 2 W.L.R. (C.A.) whereLord Denning M.R . (as he then was) discusses the issue of immunity at length. Lord Denning distinguishes the concepts of absolute immunity and restrictive immunity. According to Lord Denning,

"If the dispute brings into question, for instance, the legislative or international transactions of a foreign government, or the policy of its executive, the court should grant immunity if asked to do so, because it does offend the dignity of a foreign sovereign to have the merits of such a dispute canvassed in the domestic courts of another country: but, if the dispute concerns, for instance, the commercial transactions of a foreign government (whether carried on by its own departments or agencies or by setting up separate legal entities), and it arises properly within the territorial jurisdiction of our courts, there is no ground for granting immunity."

 

The question then arises whether with respect to oral examination the EADB and IFC (in particular reference to their officers as these are corporate bodies) have absolute or qualified immunity.

 

Perhaps the most recent case on the matter which is relevant to the application at hand is the Tanzanian Court of Appeal decision in East African Development Bank v Blueline Enterprises Ltd Civil Appeal No 110 of 2009 {2011} TZCA (of the 22nd December 2011).

 

In that case, the appellant Bank entered into a loan agreement with the respondent Blueline Enterprises Ltd. In all, the respondent was advanced a loan of Special Drawing Rights (SDRs) 2,279,000.00. The loan was secured by a floating debenture. In case of default in payment, the Bank was to appoint a Receiver for the charged properties.

 

When subsequently, a dispute arose over the loan agreements between the two parties, the appellant exercised its right to appoint a Receiver Manager to enforce the debenture. Eventually the parties mutually consented to resolve their disputes through arbitration. The Arbitrator (one Mr. A. T. H. Mwakyusa), after hearing the parties, made his Award which he caused to be filed in the High Court at Dar es salaam and thereafter registered.

 

In the Award, the respondent was granted USD 61,386,853.00. The appellant was dissatisfied. It petitioned the High Court to set it aside on the ground of misconduct on the part of the Arbitrator. The petition was eventually dismissed on the sole ground of having been lodged out of time.

 

On its part the respondent commenced the execution process. The High Court, as the executing court granted  a garnishee order nisi in the amount of USD 68,546,653 and Tshs. 5,000/= and “thereafter a garnishee order absolute” against the appellant, in respect of the latter’s Account at the Standard Chartered Bank in Dar es Salaam.  In a later application to set aside the said garnishee order interalia on the grounds that the issuance of the garnishee order nisi had contravened the provisions of the EADB Act, 1984, (as amended), “as it enjoyed absolute immunity in relation to all of its assets and property against execution or interference”, High Court found that money on an account was not assets as which immunity applied as this was not a physical asset.  The learned Judge, any view contrary to his, would be fatal to the Respondent’s right as the latter would “be left with nothing to attach”. He was of this view because going by the provisions of the Act, “all physical properties and assets of the Applicant are absolutely immune from interference by executive or legislative or judicial or administrative action”. He accordingly dismissed the first ground of complaint.

 

 

On further appeal to the Court of Appeal of Tanzania the Court relying on The EADB Act (of Tanzania articles 44 and 45 of their schedule) held

 

“… In Tanzania, we do not have any law containing a provision similar to the one in the U.S. International Organizations Immunities Act … On the contrary, we have Articles 44 and 45 which, unarguably, confer absolute immunity to the appellant Bank from any legal process in cases arising out of its exercise of its lending powers and qualified immunity in respect of cases arising out of its exercise of borrowing powers as correctly postulated by counsel for the appellant…”

 

 

The Court went on to find that with regard to court process under Art 44 of the EADB Act (TZ)

“… that Article 44, in as far as the EADB enters a transaction in the exercise of its lending powers as was the case here, provides it with absolute immunity from every form of legal process. In our considered judgment, the term “legal process” includes execution proceedings …“

The Court further held that

“… For the foregoing reasons we have no lurking presentiment in holding that via Article 44 of the schedule to the Act, the EADB, has been granted absolute immunity from all forms of legal process in all cases arising out of the exercise of its lending powers. Equally, all its properties and assets and business premises enjoy absolute immunity under Article 45 except when exercising its borrowing powers. A contrary construction, in our respectful view, would necessarily lead to a blatant breach of the terms of the Charter and the Treaty establishing the East African Community. Such an eventuality will not augur well for the country in its relationship with the Partner States and the international community

 

Having held that the immunity claimed by the appellant in these legal proceedings was not based on the traditional doctrine of sovereign immunity, as mistakenly held by counsel for the respondent, we hold without any demur that the TRENDTEX case has no relevance to this appeal…”  

 

I find that the above case is persuasive even though the wording of the Tanzanian Art 44 is not exactly the same as the Ugandan Art 49. To my mind however the import of the two relating to immunity is the same. To determine the immunity of the EADB one must look to the Act which domesticates the Treaty. Both provide absolute immunity to all directors’ officers and employees from civil process in their official capacity.  I find that an oral examination of EADB as a director of the Agro-Management (u) Ltd would involve examining the said bank’s officials for matters relating to their official and not private work for which they have immunity.

 

The same argument would hold for the IFC under section 8 (1) of the IFC Act as its Governors, directors, alternates, officers and employees are immune from legal process of which in my findings includes oral examination by Court as contemplated by this application.

 

Counsel for the applicant has submitted that this result would not allow for equality before by the law as provided by the Constitution. I am unable see how as this immunity is granted by law through Acts of Parliament. However should the applicant wish to seek Constitutional interpretation of this then as counsel for the banks has submitted that he shall have to do this before the Constitutional Court and not this Court.

 

All in all the Court finds its hands tied to proceed any further by reason of the immunity of both banks and accordingly uphold the preliminary objection and dismiss the application.

 

As to costs given the far reaching effect of this immunity which puts the respondent in a very privileged position it would not be fair to award costs against the applicant and so I under section 27 (1) of the Civil Procedure Act.

 

 

 

Justice Geoffrey Kiryabwire

JUDGE

Date:  24/04/12

 

 

 

 

 

 

 

 

 

24/04/12

9:21 a.m.

 

Ruling read in open court and signed in the presence of;

 

-        A. Nalwoga for Respondent 

 

In Court

-        None

-        Rose Emeru – Court Clerk

 

 

 

……………………………

Geoffrey Kiryabwire

JUDGE

Date:  24/04/2012