Court name
Commercial Court of Uganda
Judgment date
21 June 2013

Crown Beverages v Half London Enterprises Ltd & 2 Ors (Miscellaneous Application-2013/97) [2013] UGCommC 122 (21 June 2013);

Cite this case
[2013] UGCommC 122

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 97 OF 2013

ARISING FROM CIVIL SUIT NO 218 OF 2010

CROWN BEVERAGES} ...................................................................APPLICANT

VERSUS

  1. HALF LONDON ENTERPRISES LTD}
  2. LIZ BEVERAGES LIMITED }
  3. DEO MANIRAGUHA}....................................................... RESPONDENT

BEFORE HON MR. JUSTICE CHRISTOPHER MADRAMA

RULING

The Applicant commenced this application under the provisions of sections 19 and 98 of the Civil Procedure Act, Order 1 rule 10 and 13 of the Civil Procedure Rules for addition of the 2nd and 3rd Respondents as co-Defendants in civil suit number 218 of 2012 filed by the Applicant/Plaintiff against the first Respondent/Defendant. The Applicant also prays that costs of the application are provided for.

The grounds of the application are that on 14 January 2010 the Applicant filed HCCS No 218 of 2012 against the Respondent/Defendant. The orders sought in that suit would bind and legally affect the business interests of the 2nd and 3rd Respondents. Thirdly the presence of the second and third Respondents is necessary for the effective and complete settlement of all questions involved in this would. Fourthly it is desirable to have the second and third Respondents joined as co-Defendants to avoid a multiplicity of suits. Lastly that it is in the interest of justice that the application is granted.

The application is supported by the affidavit of Simon Lugoloobi, the Chief Executive Officer of the Applicant/Plaintiff in the main suit. The deponent avers that on 15 June 2010 the Applicant filed HCCS 218 of 2010 against the first Respondent for payment of 160,165,000/= being the outstanding amount on bounced cheques that the first Respondent/Defendant issued to the Applicant for products supplied. The second Respondent is a sister company to the fourth Respondent Company and the third Respondent is the Chairman/Director of both the first Respondent Company and the second Respondent Company. The money the first Respondent Company claims to have paid to the Applicant/Plaintiff was paid towards the settlement of money owed by the second Respondent for goods supplied to it on credit by the Applicant. The first Respondent and second Respondent companies share the same management and both are owned by the third Respondent. Because both companies are indebted to the Applicant/Plaintiff company operating under the same management/directorship of the third Respondent as director of both companies who instructed the Applicant/Plaintiff to credit the second Respondents account with the monies he sent since the monies accumulated for a longer period of time. For monies owed by the first Respondent/Defendant company, cheques in the sum of Uganda shillings 160,165,000/= were issued to the Plaintiff/Applicant which cheques bounced and became the basis of HCCS number 218 of 2010. The first Respondent declined to include the second Respondent in an audit reconciliation exercise on the ground that it was not a party to the suit. The audit process would therefore only be successful if the second and third Respondents are added as parties to this suit to properly reconcile the accounts. Finally that it is in the interest of substantive justice that the application is granted.

The application was filed on 18 February 2013 and issued by the registrar of the court on 21 February 2013. An affidavit of service sworn by one Naika Edward Gabula is to the effect that he served the first Respondents Counsel on 15 March 2013. Indeed the received stamp of the first Respondents Counsel is dated 15th of March 2013.

The record of proceedings of the court shows that this matter was mentioned on 21 February 2013 on the matter of reconciliation of accounts in the main suit between the parties. The first Respondent's Counsel informed court that the Managing Director of the first Respondent was indisposed and admitted in hospital. The court was notified about an application to add the second and third Respondents whereupon it was fixed for hearing on 21 March 2013 at 2:30 PM. On 21 March 2013 the court was again informed that the fourth Respondents Managing Director was indisposed because he was hospitalised and the Respondent could not file a reply. The application was adjourned with costs in the cause and application fixed for the 8th of May 2013 for hearing. Subsequently on 5 June 2013 the court was notified that the Respondents Counsel was indisposed.

The court directed the parties to file written submissions. The Applicant was to file written submissions on 10 June 2013 and serve the Respondents Counsel the same day. The Respondents Counsel was directed to file written submissions by 17 June 2013 and serve the Applicants Counsel the same day. Any rejoinder was supposed to be filed by 19 June 2013.

The Applicant duly filed their written submissions on 10 June 2013. The Respondents Counsel filed written submissions in reply on 18 June 2013. When the matter came for mention on 19 June 2013, the Applicant’s Counsel Caroline Kintu objected to an affidavit in reply filed on 18 June 2013 by the first Respondent. She prayed that the affidavit in reply is disregarded. Counsel Alex Rezida who appeared for the first Respondent maintained that because the Managing Director of the first Respondent was admitted in the Nairobi hospital, it was impossible for them to file an affidavit in reply. However on the initiative of the first Respondents Counsel's, they filed an affidavit in reply and also filed submissions.

I have carefully considered the question of the belated affidavit in reply. The affidavit in reply was filed on the same day as the submissions of the Respondent. The Applicant's Counsel never had an opportunity to address the court on the affidavit in reply when it filed its written submissions. This application was filed in February 2013 and affidavits in reply filed in June 2013 in contravention of order 12 rule 3 (2) of the Civil Procedure Rules. The said rules gives a period of 15 days within which to file a reply to an interlocutory application duly served. Whereas the affidavits in reply can be filed out of time, leave of the court needs to be sought. Most importantly the Applicant has been prejudiced in its submissions which have not taken into account the affidavit in reply. In those circumstances, the affidavit in reply would not be considered in this ruling.

I have further considered the first Respondent written submissions. In the two issues raised in the submissions, the first is whether the addition of the second and third Respondents is legally tenable. Secondly whether the Respondent can be added as a party?

In the submissions on the first question, the Respondents Counsel relies on the information contained in the affidavit in reply. Consequently the submissions cannot be entertained. On the other hand the Applicant's case in the written submissions is that the presence of the second and third Respondents will be necessary if the court is to effectually and competently adjudicate upon and settle all questions involved in the case and carry out an audit and reconciliation exercise successfully. The Applicants Counsel relies on order 1 rule 10 (2) of the Civil Procedure Rules which provides as far as is relevant that:

"The court may at any stage of the proceedings either upon or without the application of either party and on such terms as may appear to the court to be just…and the name of any person who ought to have been joined, whether as a Defendant or Plaintiff, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit, be added."

The Applicant’s submission is that the presence of the party sought to be added is necessary for the complete and effectual adjudication of all questions involved in the suit. The questions involved in the suit relate to the reconciliation of accounts in which payments could have been made by or to the second Respondent. Because the second Respondent is not a party to the suit, the first Respondent objected to including it in the audit effort. In other words it is an assertion that the presence of the second Respondent is necessary because some transactions in the reconciliation between the parties to the suit, involve the second Respondent.

To the ground that the first Respondent company and the second Respondent company are sister companies operating under the same management, that is a question of fact which may or may not be disproved at the trial. It is not necessary to consider that question because the provision relied upon under order 1 rule 10 of the Civil Procedure Rules deals with whether the presence of the party sought to be added is necessary.

In that regard the Respondent strongly objected to the addition of the third Respondent who is stated to be a director of the first and second Respondents upon the principle of separate corporate personality from the members of a corporation or company. Counsel relied on the case of Salmon vs. Salmon and Company Limited (1897) AC at page 22, a decision of the House of Lords where it was held that the company is in law a different person altogether from the subscribers to its Memorandum of Association. The company is not in law the agent of the subscribers, the trustees of them in law nor are subscribers as members liable in any form or shape except to the extent and in the manner provided for by the Act. The Applicant abandoned its right to make a rejoinder to the Respondent’s submissions. I agree with the Respondent Counsel’s submission that a company is a separate entity from its members. In as much a director of the company may be heard liable on behalf of the company i.e. in cases of criminal responsibility of the company, this is a civil matter and no grounds have been advanced by the Applicant for the addition of the third Respondent who is merely a director of the first and second Respondents.

Finally I have considered the case of Departed Asians Property Custodian Board versus Jaffer Brothers Ltd civil appeal number 9 of 1998 where honourable justice Mulenga JSC held that for a person to be added on the ground that his presence in the suit is necessary for the effectual and complete settlement of all questions involved in the suit, two things have to be shown. One is that it has to be shown that the orders which the Plaintiff seeks in the suit would legally affect the interest of that person and secondly that it is desirable for the avoidance of multiplicity of suits to have such person joined so that he or she is bound by the decision of the court in that suit. Counsel further relied on the case quoted therein of Amon vs. Raphael Tuck Limited [1956] 1 All ER at page 273 where it was held that a party may be added to the suit not because there is a cause of action against it, but because his or her presence is necessary in order to enable the court effectually and competently adjudicate upon and settle all questions involved in the cause or matter. In the case of Departed Asian Property Custodian Board versus Jaffer Bros Ltd Supreme Court civil appeal number 9 of 1998 the relevant part in the judgment of Justice Mulenga JSC reads as follows:

“For a person to be joined on the ground that his presence in the suit is necessary for effectual and complete settlement of all questions involved in the suit, one of two things has to be shown. It has to be shown that the orders which the Plaintiff seeks in the suit would legally affect the interest of that person and it is desirable to avoid multiplicity of suits to have such person joined so that he is bound by the decision in that suit. Alternatively a person qualifies on application of  a Defendant to be joined as a co-Defendant where it is shown that the Defendant cannot effectively set up a defence he desires to set up unless that person is joined, or unless the order is made to bind that person.”

The two ingredients in the above suit are proved in this case. It has been shown that the reconciliation of accounts between the Applicant and the first Respondent reveals the necessity of having the second Respondent claimed to have been involved in some transactions. On that basis, the legal interests of the second Respondent can be affected if the court determines questions of fact in the relation to the liability of the parties in the suit. Secondly it would be unnecessary for the Applicant to sue the second Respondent in a separate suit so that the question of the accounts and thereby the liability of the parties or their rights in regard to the transactions involved in the suit can be finally and effectually determined in the suit and a multiplicity of suits are avoided. Last but not least this is an application brought by the Plaintiff to add another Defendant. A Plaintiff generally has a right of choice on whom to sue. If there is no cause of action against the second Respondent in case the Applicant has any claim against it, it would be the Applicant who will suffer the costs. The first Respondent has not demonstrated how it would be prejudiced by the addition of the second Respondent. In any case the presence of the second Respondent is necessary for purposes of reconciliation of accounts, between the three parties, namely the Applicant, the first Respondent and the second Respondent. In the premises, the second Respondent is added as a Defendant to the suit and the costs of this application shall abide the outcome of the main suit.

Ruling this 21st day of June 2013

 

Christopher Madrama Izama

Judge

Ruling read in the presence of:

Bwayo Richard holding brief for Alex Rezida Counsel for the Respondent

No body for the Applicant.

Charles Okuni: Court Clerk

 

Christopher Madrama Izama

Judge

21st June 2013