Court name
Commercial Court of Uganda
Judgment date
24 June 2013

Nakanyonyi Development Association Ltd & 2 Ors v Stanbic Bank (U) Ltd & Anor (Miscellaneous Application-2013/389) [2013] UGCommC 124 (24 June 2013);

Cite this case
[2013] UGCommC 124

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA

 AT KAMPALA

(COMMERCIAL DIVISION)

COMMERCIAL DIVISION

MISCELLANEOUS APPLICATION NO 389 OF 2013

(ARISING FROM CIVIL SUIT NO 137 OF 2013)

  1. NAKANYONYI DEVELOPMENT ASSOCIATION (NADA) LTD}
  2. ALI KIRUNDA }
  3. NAMUTEBI MARTHA}............................................................... APPLICANTS

VERSUS

  1. STANBIC BANK (U) LIMITED}
  2. NABUSOBA IRENE (T/A AUTOMOBILE

ASSOCIATION OF UGANDA}.................................................... RESPONDENTS

BEFORE HON MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The Applicants commenced this application under the provisions of order 1 rule 10 (2) of the Civil Procedure Rules and section 98 of the Civil Procedure Act for addition of the second Respondent as a party to the main suit and for costs of the application.

The grounds of the application are that the second Respondent carried out valuation of the Drilling Machine/Rig and made the valuation report for and upon the instructions of the first Respondent. Secondly the valuation of the said equipment by the second Respondent was way below the reasonable price for the drilling rig. Thirdly the second Respondent's undervaluation of the drilling rig was to the detriment of the Applicants and was tantamount to fraud. The first Respondent basing on the valuation report of the second Respondent sold the drilling rig at an unbelievably cheap price to the detriment of the Applicant. The addition of the second Respondent as a party to the main suit is necessary to enable the court to effectually and completely adjudicate upon and settle all issues/questions involved in the suit. Lastly the Applicants assert that it is just and equitable that the application is granted.

The affidavit in support of the application is deposed to by Ali Kirunda a director in the first Respondent company and also the second Respondent. He avers that the facts are that the Applicants acquired a finance lease facility from the first Respondent for the purchase of Ashok Leyland Water Drilling Rig which costs Uganda shillings 250,000,000/=. Before purchase of the rig it was valued by one Raymond Mugisha c/o Automobile Association of Uganda at a market value of Uganda shillings 300,000,000/= on 1 September 2008. There it was duly purchased and the Applicants started repaying the loan until after some time they defaulted. Upon default, the first Respondent appointed the second Respondent to value the machine for purposes of sale which the second responded did and came up with an unreasonable market value of Uganda shillings 30,000,000/=. The valuation by the second Respondent was way below a reasonable price for the Drilling Rig. The valuation by the second Respondent was to the detriment of the Applicant and was tantamount to connivance and fraud on the part of the Respondents. The deponent avers that basing on the valuation report of the second Respondent, the first Respondent sold the drilling machine at an unbelievably cheap price of Uganda shillings 25,000,000/= to the detriment of the Applicants. Consequently the addition of the second Respondent as a party to the main suit is necessary for effectual and complete adjudication and settlement of all issues and questions involved in the suit.

At the hearing of the Application the Applicants were represented by Counsel Godfrey Himbaza while the first Respondent was represented by Counsel Isaac Bakayana.

Submissions of Counsels

Counsel Godfrey Himbaza summarised the grounds and facts in support of the application set out above and argued that the first Respondent contracted the second intended Defendant Nabusooba Irene t/a Automobile Association of Uganda to carry out a valuation of the drilling rig for purposes of its sale. The second Respondent valued the rig barely two years down the road upon its purchase at 30,000,000/= shillings. The valuation was far below a reasonable value to the detriment of the Applicant and was tantamount to fraud on the part of the 2nd Respondent. The first Respondent on the basis of said valuation report sold the rig at 25,000,000/= shillings to the detriment of the Applicant who had co financed it with 100,000,000/= shillings. It is imperative that the second Respondent is added as a party to explain how she arrived at the valuation amount under the provisions of Order 1 rule 10 (2) which empower the court to add necessary parties.

In reply the first Respondents Counsel Mr. Isaac Bakayana opposed the application on three grounds: Firstly he submitted that there is no evidence at all in the affidavit in support to challenge the value of the property. The Applicant argues in paragraphs 5, 6, and 7 of that affidavit that the value of the property was unreasonably low but attaches no proof of a different value. Sections 101 – 103 of Evidence Act are to the effect that a litigant who wants a court to belief a fact must proof it and the Applicants have failed to prove their assertion.

The first Respondent has adduced evidence of an advertisement of the assets and responses to the advert. They reveal an offer for 25 million shillings while another offer was for 20 million shillings. In the absence of any evidence the issue of values is settled and there is nothing more the 2nd Respondent will bring to the court by adding her as a party to the suit.

Secondly the Applicants are seeking to join a wrong party namely the second Respondent Irene Namusooba because the institute that valued the drilling rig is Automobile Association of Uganda. Paragraph 1 of annexure “B” clearly indicates that the appointment was to them. The right party should have been the association and not its employee.

The third ground of objection is that there is no necessity to add the second Respondent. There are no questions between the second Respondent and the Applicant that need the 2nd Respondent in this suit. In the case of Uganda Electoral Commission vs. Sebuliba Mutumba and 2 others MA 30 of 2012 it was held that the Applicant has to show that any orders in the suit would legally affect the interest of the party sought to be joined. There is no proof that it would be in her interest. Counsel further argued that the Applicants concede that they are indebted to the first Respondent.

The Applicant has not made out a case to join the second Respondent and prayed that the application is dismissed with costs.

In rejoinder Counsel Godfrey Himbaza submitted that annexure A to the application is a valuation by the same company showing that they valued the property at Uganda shillings 300,000,000/= when contrasted with the valuation report of the second Respondent valuing the rig at Uganda shillings 30,000,000/= she should explain the depreciation. Secondly it was not a question of indebtedness but the question of how much would that debt would have been had the equipment been sold at the right value?  Consequently the presence of the second Respondent is important to determine that question.

Ruling

The Applicant's application was commenced under order 1 rule 10 (2) of the Civil Procedure Rules which provides 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, order that the name of any party improperly joined, whether as Plaintiff or Defendant, be struck out, and that the name of any person who ought to have been joined, whether as Plaintiff or Defendant, 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."

Order 1 rule 3 further provides that:

"All persons may be joined as Defendants against whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions is alleged to exists, whether directly, severally or in the alternative, where, if separate suits were brought against those persons, any common questions of law or fact would arise.

Order 1 rule 3 gives a prerogative to a party to join any Defendant against whom any right to relief arising from the same transaction or a series of transactions exists. It would have been easy to join the 2nd Respondent as a second Defendant to a counterclaim if any right to relief against the second Respondent exists. In this case the Applicant is the Defendant and has not brought a counterclaim or cross action against anybody.

The Respondent/Plaintiff’s Counsel has strongly objected to the application of the Applicant/Defendant to add that the second Respondent on three grounds.

The first ground is that there no affidavit evidence which gives an alternative valuation of the drilling rig. This ground is however on the merits of the suit. What is material is that the Applicant has alleged that the property had been valued for Uganda shillings 250,000,000/= and was sold for a paltry 25,000,000/= Uganda shillings which is 10% of its original value. The question of the appropriate value is a matter for trial by the court and cannot be a basis for refusing the Applicants application to add that the second Respondent as a party.

The second ground of objection was that the second Respondent is the wrong party to be sued. The ground being that the second Respondent was an employee of Automobile Association of Uganda and issued the report in that capacity. However in this particular application I have not been able to trace an affidavit in reply of the first Respondent. The available evidence is contained in the affidavit in support of the application. There is a letter annexure "A" addressed to the first Respondent on the subject of “Inspection, Assessment and Valuation Report for Water Drilling Equipment”. In that the report the date of inspection is 30 September 2008 and the date of the letter is 1st of September 2008. The fair market value of the water drilling equipment was valued therein at Uganda shillings 292,700,000/=. Secondly its forced sale value was assessed at Uganda shillings 205,000,000/=. They noted that a brand-new drill equipment costs about US$550,000 which is equivalent at the time to Uganda shillings 900,000,000/=. The report was written by Raymond Mugisha an Engineer/Valuation Surveyor. A subsequent valuation report addressed to the first Respondent is dated 9th of April 2011 annexure "B" written by the second Respondent/Engineer/Valuer which indicates that the fair market value of the vehicle plus the full set of accessories is in the range of Uganda shillings 30,000,000/= and the forced sale value was assessed at Uganda shillings 21,000,000/=.

Both valuations are written on the letterhead of Automobile Association of Uganda. At the bottom of the letterhead are lists of the Council being some engineers whose names are written therein. The name of the second Respondent is not included. There is no evidence about the status of the second Respondent in Messrs Automobile Association of Uganda. It is therefore premature to conclude that the second Respondent is an employee of the Automobile Association of Uganda. The written evidence is that she wrote the report giving the valuation of the equipment at Uganda shillings 30,000,000/= as the fair market value and the forced sale value as Uganda shillings 21,000,000/=. It is therefore the assertion of the Applicant that the second Respondent was trading as Automobile Association of Uganda. Thirdly, the capacity in which the second Respondent is being sued cannot prejudice the first Respondent. In any case the points raised about her status with regard to her relationship to Automobile Association Uganda would be her defence to the action. The Applicant alleges that the valuation was fraudulent. At this material point, there is no need to give particulars of fraud. The Applicant only indicates the intended ground of claim against the second Respondent.

Thirdly the Respondents Counsel argued that it was not necessary to join the second Respondent. His argument is that there are no questions between the Plaintiff and the first Respondent that require the presence of the second Respondent.

The joining of a necessary party was considered in the case of Departed Asians Property Custodian Board v Jaffer Brothers Ltd [1999] 1 EA 55 by Mulenga JSC and pages 67 and 68 where he held:

“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. Either it has to be shown that the orders, which the Plaintiff seeks in the suit would legally affect the interests of that person, and that it is desirable, for avoidance of multiplicity of suits, to have such person joined so that he is bound by the decision of the court 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 effectually set up a defence he desires to set up unless that person is joined in it, or unless the order to be made is to bind that person.”

Initially the Applicant applied for amendment of pleadings to include a counterclaim, but withdrew the application in order to file another application for extension of time to include a counterclaim. In the main suit it is the first Respondent who is the Plaintiff. The second Respondent can only be joined in those circumstances as a necessary party. In this application the criteria set up in the case of Departed Asians Property Custodian Board (supra) has not been met because it has not been shown that the presence of the second Respondent is necessary for the complete and effectual resolution of all questions in the suit. It has not been demonstrated that the second Respondent would be affected by the orders that the Plaintiff seeks to obtain against the Applicant. If anything the Plaintiff relies on the evidence of the report of the second Respondent. I agree with Counsel for the Respondent that the second Respondent is not a necessary party for a complete and effectual adjudication of all questions in the suit.

It would appear from the application of the Applicant itself that the Applicant is aggrieved by the valuation report of the second Respondent. The Applicant also alleges fraud as against the Respondents and collusion on the question of valuation of the property. The nature of the claim in the Applicant’s application discloses a counterclaim against the Plaintiff and the second Respondent.

In those circumstances, it is not necessary to add the second Respondent since the Applicant intends to file an application for extension of time to include a counterclaim. The Applicant’s intention can be considered in that application. As far as counterclaims are concerned, order 8 rule 9 of the Civil Procedure Rules permits a counterclaimant to include in the counterclaim any other party not already before the court.

In those circumstances, the Applicant’s application is more of a claim against the second Respondent and the need to include the second Respondent as a Defendant to the action. Currently it is the first Respondent who is the Plaintiff and the Applicant is the Defendant with no counterclaim against the Plaintiff. The Applicant’s application to add the second Respondent as a necessary party is disallowed with costs in the cause. If the Applicants so wishes to join the second Respondent, this can be considered in the Applicant’s intended application to counterclaim against the Plaintiff in the main suit. Costs shall be in the cause.

Ruling delivered in open court on 24th day of June 2013.

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Isaac Bakayana for the respondent

Applicants Absent

Charles Okuni: Court Clerk

Christopher Madrama Izama

Judge

24th June 2013