Court name
Commercial Court of Uganda
Judgment date
16 August 2013

Transtrack Ltd v Damco Logistics (U) Ltd (Miscellaneous Application-2012/608) [2013] UGCommC 144 (16 August 2013);

Cite this case
[2013] UGCommC 144

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 608 OF 2012

(ARISING FROM CIVIL SUIT NO 161 OF 2010 AND MISCELLANEOUS APPLICATION NO 348 OF 2012)

TRANSTRACK LTD}............................................................................ APPLICANT

VERSUS

DAMCO LOGISTICS (U) LTD}....................................................................... RESPONDENT

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The Applicants application is for an order of stay of execution of the decree in High Court (Commercial Division) civil suit number 161 of 2010 against the applicant pending appeal. It is also for an order that the costs of the application are provided for.

The grounds of the application are that the applicant is a third party in civil suit number 161 of 2010 and is desirous of appealing against the judgement and decree in the said suit and has filed a notice of appeal and applied for typed record of proceedings with service on counsel for the respondent. Secondly the respondent seeks to execute the decree before the intended appeal is heard and disposed off. Thirdly the plaintiff will suffer irreparable damage in the event that the respondent executes the decree before the intended appeal is heard and determined. The applicant promptly filed the application for stay of execution and finally that it is just and fair and equitable that an interim order of stay of execution is granted by this honourable court.

The application is further supported by the affidavit of Geoffrey Bihamaiso Baitwa, the Managing Director of the applicant. The gist of the facts in support of the application are that the applicant is the third-party in civil suit number 161 of 2012 and had appealed against the judgement and decree in that suit. The respondent pursuant to the decree served the applicant with a statutory demand in a letter dated 25th of September 2012 and has threatened to windup the applicant unless it satisfies its liability to the respondent under the decree. The applicant is a going concern with a fleet of more than 170 Trucks with many contracts with the Government, corporations or other business entities in Eastern Africa, Southern Sudan and the Democratic Republic of the Congo. The decreed sum of US$303,330 is a substantial amount of money which if directly paid to respondent will affect the applicants business of transport which is a capital intensive business with high operational costs and thereby visit irreparable damage on the applicant in the event of a successful appeal. The deponent avers that with the prevailing financial crisis, there is a very high possibility that the respondent will not be able to pay back to the applicant US$303,330 and costs in the event of a successful appeal. Last but not least, the deponent reiterates the grounds in the notice of motion.

The affidavit in reply to the application is sworn by one Brenda Ntambirweki; an advocate of the High Court of Uganda authorised to depose to the facts and practising with Messieurs Sebalu and Lule Advocates, counsels for the respondent in High Court civil suit number 161 of 2010. She has additionally read the affidavit in support of the obligation and responds thereto in the affidavit in reply. First of all the respondent is a subsidiary company of a bigger AB Muller Maesk Group of Companies which is known both nationally and internationally as part of a solid international conglomerate. The conglomerate has been in existence since 1906. Furthermore the respondent which is a subsidiary company has been operating in Uganda for over 12 years and is a solvent company. On the above basis, the respondent is able to pay monies that would be adjudged due to the applicant if the Applicant were to win their appeal. Furthermore, the respondent has fully settled all sums that were decreed as due to the plaintiff in civil suit number 161 of 2010 and because the court determined that the respondent is entitled to indemnification, it would be most unfair to hold back what is due to it. Annexure "A" and annexure "B" to the affidavit indicate that the respondent paid its indebtedness to the plaintiff pursuant to garnishee proceedings.

At the hearing of the application, the applicant was represented by Counsel Dan Wegulo while the respondent was represented by Counsel Barnabas Tumusingize. Counsels addressed the court in written submissions.

The applicant's case as contained in the written submissions by the applicants counsel is that the applicant was dissatisfied with the judgement and decree in civil suit number 161 of 2012 which was delivered on 17 February 2012. The applicant filed a notice of appeal on 23 February 2012 and applied for a typed and certified record of proceedings.

The High Court has inherent jurisdiction to stay any of its orders pending appeal and applications for stay of execution pending appeal are governed by Order 39 (revised order 43) rule 4 (3) of the Civil Procedure Rules. Counsel submitted that under the Order the applicant must show that substantial loss would result if the order is not made, that the application has been made without unreasonable delay and finally that security for costs has been given by the applicant. In support of the grounds for the grant of stay of execution pending appeal the applicant's counsel relied on the case of DFCU Bank Ltd versus Dr Ann Persis Nakate Lussejjere, Court of Appeal Civil Application number 29 of 2003; Sewankambo Dickson versus Ziwa Abby High Court Miscellaneous Application number 178 of 2005 and the case of Tropical Commodities Supplies Ltd and Others versus International Credit Bank (in Liquidation), Miscellaneous Application number 379 of 2003. If execution is levied against the applicant, payment of US$303,330 will affect the applicants business of transport, which is a capital intensive business with high operational costs and therefore cause irreparable damage to the applicant in the event of a successful appeal.

Primarily, the applicants counsel reiterated the grounds in the notice of motion and affidavit in support thereof. Counsel submitted that Hon. Mr. Justice James Ogoola as he then was in the case of Tropical Commodities Supplies Ltd and Others versus International Credit Bank Ltd (In Liquidation), Miscellaneous Application number 379 of 2003, held that substantial loss is a qualitative concept and refers to any loss, great or small that is of real worth or value as distinguished from a loss without value or loss that is merely nominal. The applicant demonstrated that payment of US$303,330 to satisfy a decree will erode its capital base and visit irreparable damage by making it impossible for the applicant to meet its contractual obligations to its customers. Secondly the respondents preferred mode of execution is winding up which would have the effect of having the applicant struck off the register of companies in the event of non-payment of the decretal sum, the subject matter of the intended appeal. The above factors amount to substantial loss which cannot be atoned for in the event of a successful appeal.

Furthermore the applicant’s case is that the application was made without any reasonable delay and the applicant is ready to abide by any order regarding the deposit in court of security for costs. He prayed that the court is guided by the words of honourable Mr Justice Bamwine (Judge of the High Court Commercial Division as he then was) in the case of Sewankambo Dickson vs. Ziwa Abby HCT MA 0178 of 2005 arising from HCCS No. 0498 of 2002 to the effect that under order 39 rule 4 (3) (c) (revised edition order 43) the court should be satisfied that the security has been given by the applicant for the due performance of such decree or order as may be ultimately binding upon him. In such cases it is sufficient that the applicant is willing to give security for costs, rather than security for the entire decretal amount. The court would necessarily determine the amount, depending on the circumstances of each case. Lastly that an order to pay the entire decretal amount is likely to stifle possible appeals especially in the Commercial Court where the amounts are colossal. Counsel prayed that if the court deems it necessary, it should make an order to pay an amount that is not so high as to stifle the intended appeal.

In reply the respondents counsel in the written submissions submitted as follows. The respondent opposes the application on several grounds. Firstly the respondent has already paid the decretal amount of US$405,375.45 and all that is required of the applicant is to indemnify the respondent for money it has already paid out. Consequently the case of the applicant was distinguishable from that of Tropical Commodities Supplies Ltd and Others versus International Credit Bank Ltd (in Liquidation) miscellaneous application number 379 of 2003 which did not address a similar case like that of the applicant where the funds have been paid in satisfaction of the decree.

Secondly, the fact that the respondent has already paid the money in satisfaction of the decree should play a major factor in the court's decision in refusing to stay or in the event of granting the application, of ordering the entire decretal amount to be deposited in court pending appeal.

Thirdly on the point of whether the payment would lead to irreparable loss should the appeal succeeded, the respondents counsel’s submission is that the applicant is under obligation to indemnify the respondent in accordance with its obligation under clause 6.1 of the agreement particularly after the respondent has already made the payment. Fourthly, the applicant indicated that it has 170 trucks and several contracts. The response of the respondent is that the applicant would suffer irreparable loss due to payment of the decretal sum because it has the property referred to in the 170 trucks and several contracts.

Fifthly as far as the threat to windup the respondent is concerned; all that the applicant needs to do is to effect payment of the sum to indemnify the respondent in order to avert the threat. Sixthly in as far as the applicant submitted that it is ready to abide by any order regarding the deposit in court of security for costs, the respondents counsel submitted that security deposit should not be for costs but for the total decretal amount. Counsel relied on the case of Uganda Posts Ltd versus Anna Magezi, MA No. 88/2012 wherein honourable lady Justice Maria Senoga Anglin held that in deciding the amount payable as security, the court should take into consideration the circumstances of the case to determine what is considered adequate. According to the respondent, the circumstances of the case require full security to be paid because the respondent has already parted with the money.

On the submission of the applicant that the application was made without any undue delay, the respondent submits that because proceedings are recorded in audio, there is no plausible explanation as to the failure of the applicant to obtain the proceedings by the time of writing the submissions. There is no evidence that there was any diligent follow-up of the matter after filing a notice of appeal. Counsel prayed that the application is dismissed with costs.

Ruling

I have carefully considered the applicants application. Both counsels agree that the considerations for the grant of an order of stay of execution pending appeal from the High court are developed or derived from order 43 rules 4 of the Civil Procedure Rules. Order 43 rule 4 (1) of the Civil Procedure Rules provides that the High Court may for sufficient reason order stay execution of a decree pending an appeal. Order 43 deals with appeals to the High Court. The applicant’s intended appeal is an appeal to the Court of Appeal and is not expressly governed by order 43 of the Civil Procedure Rules.

Notwithstanding the fact that order 43 does not specifically apply to appeals from the High Court to the Court of Appeal, case law has established that the considerations for the grant of an order of stay of execution under order 43 rule 4 of the Civil Procedure Rules are applicable to stay of execution pending appeal from the High Court to the Court of Appeal. The relevant consideration is found under order 43 rules 4 (3) whose provisions are couched in mandatory language. It provides as follows:

"No order for stay of execution shall be made under sub rule (1) or (2) of this rule unless the court is satisfied –

(a) that substantial loss may result to the party applying for stay of execution unless the order is made;

(b) that the application has been made without an unreasonable delay; and

(c) that security has been given by the applicant for the due performance of the decree or order as may ultimately be binding upon him or her.…"

In the written submissions, Counsels submitted on all the three considerations reflected in order 43 rule 4 (3) of the Civil Procedure Rules.

The first consideration is whether substantial loss would results to the party applying for stay of execution unless the order is made.

As far as this ground is concerned, the applicant’s submissions relate to the fact that the Applicants transport business is capital intensive. The applicant owns 170 trucks and has many contracts with the government and other corporations and business entities in East Africa, Southern Sudan and the DRC. Payment of US$330,330 would result in irreparable damage due to the high operational costs involved in the transport business. The assertion is supported by the affidavit of the applicant's managing director. Secondly the respondent commenced execution proceedings against the applicant by serving it with a demand notice and has threatened to have the company wound up. I was referred to a discussion of the term “substantial loss” by Hon. Justice James Ogoola in the case of Tropical Commodities Supplies Ltd and others versus International Credit Bank Ltd (in Liquidation) Miscellaneous Application Number 379 of 2003. In that case, honourable Mr Justice James Ogoola (Judge of the High Court Commercial Division as he then was) reviewed a number of decisions where order 43 rule 4 (3) of the Civil Procedure Rules was considered as applicable to appeals from the High Court to the Court of Appeal. He noted that the heading of the order clearly indicates that it governs appeals to the High Court.  Consequently the appeals contemplated in the rules are appeals from lower courts to the High Court and not appeals from the High Court itself to a higher court.  The hon. Judge concluded that the Supreme Court conclusively held in Lawrence Musitwa Kyazze vs. Eunice Busingye Civil Application Number 18 of 1990 that there is no provision in any legislation for stay of execution pending appeal from the High Court. Therefore there is a glaring lacuna in the law. However the High Court has inherent jurisdiction to stay any of its orders. The rule of practice for stay of execution pending appeals from the high court is derived from order 43 of the Civil Procedure Rules in the exercise of that inherent jurisdiction. The honourable judge held that “substantial loss” should not be determined on the basis of a mathematical formula. "Substantial loss" does not represent any particular amount or size. It cannot be quantified by any particular mathematical formula. Rather, it is a qualitative concept and refers to any loss, great or small, that is of real worth or value as distinguished from a loss without value or loss that is merely nominal.

The concept of substantial loss is problematic and has been held to be a qualitative concept, which definition is clear enough and there are no grounds to depart from in the absence of any other definitive text or authority. I agree that the concept is not only qualitative but hasten to add that the concept is also subjective or relative and its application should be examined in the circumstances of each case. For instance what may be substantial loss for one party may not be substantial for another. It is therefore difficult to develop an objective test to arrive at a universally acceptable definition of what is meant by "substantial loss". Substantial loss is assessed in relation to the subjective circumstances of the party likely to suffer or suffering it. The applicant's contention is based on the fact that it has a capital intensive business which may suffer. The respondent on the other hand argues that the applicant was meant to indemnify it under the relevant contract and it has already paid the decreed amount to the plaintiff. The applicant is a third-party and was found liable under an indemnity clause for the amount owing to the judgement creditor against the respondent.

As far as the qualitative nature of the concept of substantial loss is concerned, I readily agree with the respondents counsel that the applicant undertook under clause 6 of the relevant contract which was considered in the main suit to indemnify the respondent upon the occurrence of certain matters. However, the applicant has appealed that judgment. The question would be whether the factors for application of the indemnity clause were present and correctly applied by the court in the Applicant’s case. The Court of Appeal has guided the High Court in the case of DFCU Bank Ltd versus Dr Ann Persis Nakate Lusejjere in Civil Application Number 29 of 2003 arising from civil suit number 242 of 2002 for the considerations applicable for the exercise of its inherent jurisdiction and discretion in applications for stay of execution pending appeal. Most importantly the Court of Appeal held in that case that judges should be guided in considering an application for stay of execution pending appeal by the statement of the Akuto-Addo the former Chief Justice of Ghana in the case of Joseph versus Jebeile (1963) 1 GLR at page 387. The Chief Justice advised that:

"... generally when such an application is considered in a case involving, inter alia, the payment of money, the main consideration should be not so much that the victorious party is being deprived of the fruits of his victory, as what the position of a defeated party would be who had had to pay up or surrender some legal right only to find himself successful on appeal. In this respect it is wholly immaterial what view the trial judge takes of the correctness of his own judgement or the would – be appellant's chances on appeal, if the position is that the victorious party is unlikely to be able to refund amount paid to him, or the defeated party to be restored to the status quo ante, in the event of a successful appeal, then it would be palpably unjust to refuse stay of execution, or, when stay of execution is refused, not to order the judgement creditor to give good, substantial and realisable security for the refund of the money involved."

From the statement, it is clear that the principle is consistent with that summarised by the Court of Appeal that it is the paramount duty of the court to which an application for stay of execution pending an appeal is made to see that the appeal, if successful, is not rendered nugatory. On the other hand the judgment creditor should be assured through substantial security that in the event the appellant loses the appeal, he or she is able to pay. In other words a successful litigant should not be deprived of the fruits of the litigation without security. From the principles, the likelihood of success of the appeal is not a relevant factor to be taken into account. To consider whether clause 6 of the contract between the parties entitles the respondent to indemnity upon payment of the decreed sum to the plaintiff, would be to prejudge the intended appeal by the appellant. Indeed the court held in the main judgement that under clause 6 of the contract (see page 48 of the judgment) the carrier was responsible to the respondent for any loss, damage or delay caused by the loss, theft or damage to any goods, containers or documents during the period the goods were in the custody of the applicant. The applicant was the carrier mentioned in the contract. Furthermore clause 6 provided that the carrier would indemnify the respondent for the full replacement value of any goods or containers which are lost or damaged while under its custody or control. The applicant was aggrieved by the judgement. The nature of the appeal would be whether the court was right to find it liable under that clause of the contract. However because the clause is explicit, the appeal will revolve around whether the conditions for the indemnity of the respondent were present in the plaintiffs case so as to make the applicant liable to indemnify the respondent. If the applicant was found liable, the question of substantial loss would not arise because it is its contractual duty to indemnify the respondent if the conditions stipulated in clause 6 of the contract between the parties are fulfilled. Particularly clause 6.4 provides that the carrier shall assume liability for, defend, indemnify and hold harmless the customer (the respondent) from any liability incurred as a consequence of any action of carrier, its employees, agents or subcontractors or employees of such agents or subcontractors etc. The basis of the suit is the loss of cargo while in custody of the Applicant who had been subcontracted by the respondent to carry the goods of the Plaintiff.

The consideration of whether the applicant would suffer substantial loss is only in relation to the payment of the money in the intended execution proceedings by the respondent. It cannot be on the basis of the merits of the appeal which includes the fact that the respondent would in certain circumstances be entitled to indemnity by the applicant. The question as to whether the High Court was correct to hold that the applicant was liable in the circumstances of the case is the subject matter of an appeal and ought not to influence the court in deciding whether substantial loss would be suffered by the appellant pending appeal.

That notwithstanding, the payment of a substantial amount of money is not by itself a test for establishing whether the loss would be substantial or not. This is because as held in the case of Tropical Commodities Supplies Ltd and Others (supra), a mathematical formula should not be applied. Assuming that the payment of the sum of money would amount to substantial loss notwithstanding the provisions of an indemnity clause under which the applicant was found liable, the effect of the payment of the money on the applicants business was not clearly established. The applicants managing director merely alleged that the applicant manages a capital intensive business with high operational costs and payment of US$303,330 would visit irreparable damage to the applicant in the event of a successful appeal. The irreparable damage would apparently only occur if the appeal was successful. In other words if the appeal was unsuccessful, there would be no irreparable damage. I find this to be illogical and not proof of substantial loss. Substantial loss in the context of the applicant’s case must be loss that is not contemplated by the contract of the parties.

Notwithstanding, I agree with the judgement in Tropical Commodities Supplies Ltd and Others (supra) that the provisions of order 43 are inapplicable to the High Court and it is only the principles derived from the rules as contained in judgments of the Appellate Courts which are applicable and binding. Furthermore, the High Court exercises inherent jurisdiction in the grant of an application for stay of execution pending appeal. That jurisdiction is exercised for the ends of justice. To that end, the relevant consideration in my view is whether the respondent would be able to refund the money paid out to the Respondent by the applicant if the applicants appeal was successful. The concept of irreparable damage submitted on by the applicants counsel is principally a concept that the applicant’s money would not be able to be redeemed if the applicant wins the case on appeal. The addition of the concept of irreparable damage or loss by necessary implication adopts the concept that the respondent would be unable to pay if the applicant succeeds in the appeal.

The evidence of the respondent is that it is able to pay and this evidence has not been rebutted. The respondent has also demonstrated that it has already paid the plaintiff the decretal sum.

Last but not least and according to the decision of honourable Justice Bamwine, judge of the High Court Commercial Division (as he then was) in the case of Sewankambo Dickson vs. Ziwa Abby High Court miscellaneous application number 178 of 2005 arising from HCCS number 498 of 2002, following the judgement in DFCU bank Ltd versus Dr Ann Persis Nakate civil appeal number 29 of 2003, the Court of Appeal has established that the paramount duty of the court to which an application for stay of execution pending appeal is made is to see that the appeal if successful is not rendered nugatory.

The subject matter of the appeal and the application is a sum of money the basic minimum of which is US$303,330 being part of the decree of the High Court in the original suit from which this application springs. The submission of the respondents counsel is persuasive to the end that the applicant who owns over 170 trucks and various contracts from which it is likely to earn money, is able to raise the money. The respondent’s counsel further submitted that winding up of the company for failure to pay debts is a lawful procedure of execution. All that the respondent needs to do to avert a winding up is to pay the sum involved.

I accept the position of law that a Court can always stay any petition for winding up pending determination of the indebtedness of the judgment creditor. In such a case, the appeal would not be rendered nugatory except if the applicant is extinguished or wound up and deregistered as an entity and has no property from which the decreed sum can be realised. The applicant’s application amounts to an attempt or application to stay the winding up of the applicant as a company. The respondent has not denied the attempt to have the applicant wound up. Section 38 of the Civil Procedure Act permits execution of a decree by the appointment of a receiver. Bankruptcy proceedings on the other hand are considered under the Bankruptcy Act or the Insolvency Act as soon as it comes into operation. If bankruptcy proceedings are commenced, all that the applicant needs to do is to pay up. The court cannot however assume that the applicant has the liquidity to meet its obligations to the extent contained in the decree without upsetting its other operations. For the moment, let the applicant have the benefit of doubt.

 The applicant has therefore raised a threat of being wound up before its appeal can be heard. The respondent has not rebutted the threat to windup the applicant for its indebtedness. The applicant has on the balance of probabilities proved that it is likely to suffer substantial loss if the application for stay of execution pending appeal is not granted.

In those circumstances, the court will consider the remaining grounds as to whether the applicant’s application has been made without undue delay and Secondly whether the applicant should deposit security for the due performance of the decree as would be payable if the appeal goes against it.

On the question of whether the application was made without undue delay, I have duly considered the submissions and I find that there is no sufficient evidence either way. I must emphasise that the record of proceedings is prepared by the court and applicant has demonstrated that it has applied for the record of proceedings. Secondly this is the second application brought by the applicant and it cannot be held that the applicant is not vigilant enough. The application was filed on 10 October 2012. On 23 February 2012, the applicant applied for the record of proceedings. It is to be wondered why since 23 February 2012 the record of proceedings has not been availed. The record of proceedings is availed by court. Nevertheless there is no evidence to suggest that the applicant has not been vigilant enough. The application for stay of proceedings was made pursuant to a statutory demand issued by the respondents counsel in a letter dated 25 September 2012. The application was made soon thereafter. As far as the attempted execution proceedings are concerned, the application for stay of execution was made promptly.

I have further taken into consideration the fact that execution proceedings were commenced against the respondent initially by the plaintiff. The applicant is a third party under the decree dated 17th of February 2012. Under the decree it is the respondent was ordered to pay the plaintiff a sum of US$303,330 together with another sum of US$45,500 as general damages. The order against the applicant is that the third-party is liable to indemnify the defendant for the full replacement value of the lost goods. Costs of the suit were to be borne equally between the defendant and the third-party. Subsequently the applicant filed an application on 25 June 2012 seeking the correction of the judgement in civil suit number 161 of 2012. In that application, the applicant contested the quantum of the indemnity and application was meant to decide that the dispute. This was in miscellaneous application number 348 of 2012. The application was argued in December 2012 and the ruling delivered on 22 February 2013. I have also noted that the costs ordered in this suit were taxed in April 2012. Subsequently the affidavits in response to this application shows that the plaintiff in June 2012 had brought garnishee proceedings against the defendant. By letter dated 7th of June 2012, it is shown that the defendant/respondent to this application paid the decretal sum. It is only after payment to the plaintiff that the respondent sought to enforce the indemnity clause as decreed by the court against the applicant. The applicant’s application was subsequently filed in October 2012 after a statutory demand in September 2012 and is not unreasonably delayed. Have considered the wording of order 43 rule 4 (3) (b) of the Civil Procedure Rules to the effect that: "that the application has been made without an unreasonable delay;" what is an unreasonable delay should be perceived from the circumstances of the case. It is therefore my finding that in the circumstances, there was no unreasonable delay by the applicant in filing this application. The court would therefore proceed to consider the third ground.

Whether the applicant should deposit security pending appeal?

On this question the applicants counsel submitted that if the court was inclined to order for the payment of security as clearly provided for by order 43 (4) (c) of the Civil Procedure Rules, then the court should order security for costs and not security for the entire decretal amount which in his opinion would stifle the applicants right of appeal. On the other hand, the respondents counsel submitted that security be given for due performance of the entire decretal sum and not just costs. He further submitted that the case should be handled on the basis of its own circumstances.

I have carefully considered the submissions on the question of security deposit and there is no need to repeat the submissions of counsel. Starting with the express wording of the rule, order 43 rule 4 (3) (c) of the Civil Procedure Rules provides as follows: "that security has been given by the applicant for the due performance of the decree or order as may ultimately be binding upon him or her."

It is the express provision of the rule that security has been given for the due performance of the decree or order as may ultimately be binding. The rule has been interpreted to mean that the applicant shall deposit the entire decreed sum. On the other hand, it is also been interpreted to the extent that deposit of security for costs may be adequate. This controversy was critically analysed and discussed by honourable justice James Ogoola (Judge of the High Court as he then was) in the case of Tropical Commodities Suppliers Ltd and others v International Credit Bank Ltd (In Liquidation) [2004] 2 EA 331. In that case the honourable judge observed that the language of the rule seems to embrace the entire decretal amount rather than security for the costs of the appeal. He was critical of the conflicting holding of the Supreme Court that Order 39 rule 4 was applicable to applications for stay of execution but that order 39 (revised order 43) rule 4 (3) (c) of the Civil Procedure Rules prescribes security for costs in the case of Kampala Bottlers versus Uganda Bottlers Ltd Supreme Court civil application number 25 of 1995. I have not had the benefit of reading Kampala Bottlers vs. Uganda Bottlers (supra). I must say that the wording of the rule is explicit and therefore I need not refer to any judgement referred to in another case which I have not read. Apparently, in that particular case, security for costs was considered to be adequate. This is because in the previous case, the Supreme Court in Mugenyi and Co Advocates v National Insurance Corporation Supreme Court civil application number 3 of 1984 held that there are no rules governing applications for stay of execution pending appeal from the High Court and therefore the High Court uses its inherent powers under section 101 (Now 98 revised edition) of the Civil Procedure Act to grant the order. Justice James Ogoola observed in Tropical Commodities Suppliers Ltd and others v International Credit Bank Ltd (In Liquidation) [2004] 2 EA 331 that insistence on the entire decretal amount is likely to stifle appeals especially in a Commercial Court where the underlying transactions tend to lead to colossal decretal amounts. In my opinion the decisions of the Supreme Court in the case of Kampala Bottlers vs Uganda Bottlers (supra) was not meant to saddle or restrict the discretionary powers of the High Court in the exercise of its inherent jurisdiction but to give guidance. The fact that the entire decretal amount is likely to stifle appeals does not mean that it cannot be ordered in appropriate cases. From my reading of the ruling in Tropical Commodities Supplies Ltd and Others (supra), the High Court still retains its discretionary and inherent jurisdiction under which all applications for stay of execution pending appeal are handled. I am fortified in this view by the guidance of the Court of Appeal in the case of DFCU Bank Ltd versus Dr Ann Persis Nakate Lusejjere, civil application number 29 of 2003 which decisions came subsequent to that of the Supreme Court in Kampala Bottlers (supra). In that case, the Court of Appeal commended the statement of the former Chief Justice, Akuto- Addo, the Chief Justice of Ghana and agreed with the statement on security deposits generally. The said Chief Justice is said:

"Generally speaking it is not our view that the policy of the law in this country should be against staying execution pending appeal especially where large sums of money are involved, and we would urge that when execution is stayed it should, where the circumstances permit, be on the condition that the judgement debtor pays into court the amount of money involved, or when refused, on the condition that the judgement creditor gives security as aforesaid and approved by the judge.

Any situation created by a judicial act, done either inadvertently or callously, which makes it impossible for a successful appellant to recover money paid, or any interest in property or other legal rights surrendered, under a judgement vacated on appeal does a disservice to the course of justice, if only because it undermines public confidence in the administration of justice."

The Court of Appeal therefore recommended a balanced approach that takes into account both the likelihood that the appellant may succeed in the appeal and the surrender of the rights of a successful litigant to a stay of execution order of a decree which may be affirmed on appeal. In either case, the court should ensure that there is no disservice to the course of justice by making the final result nugatory.

Secondly, I do not agree that security for costs is appropriate in the circumstances of this case. The applicant has admitted that it has over 170 trucks and several contracts both with government and private entities in Eastern Africa and Southern Sudan. The applicant admittedly runs a capital intensive business. Secondly the respondent has already paid the plaintiff the entire decretal sum under the decree appealed. The respondent seeks to rely on an indemnity clause which is the subject matter of the appeal. The issue is whether the respondent should be indemnified by the applicant. The court had answered the question in the affirmative. In the cases referred to where security for costs only was ordered, there was no execution against the defendant for the entire decreed sum as in this case. Secondly it was not a case of indemnity by the applicant of stay of the defendant. Thirdly and in all fairness, the respondent has already been executed against and has paid the entire decreed sum under garnishee proceedings of the court.

One factor which plays a crucial role is the applicants intended appeal to the Court of Appeal. In the notice of appeal, the applicant clearly intends to appeal against part of the decision of the court dated 17th of February 2012. The part of the decision intended to be appealed against is the liability of the applicant as a third party to indemnify the defendant and the extent of such liability. In other words, the applicant as a third party does not intend to appeal against the liability of the defendant to the plaintiff. It was therefore appropriate for the plaintiff to execute against the defendant/respondent as it indeed for the entire decretal sum. In other words the applicant has no quarrel with the liability of the respondent to the plaintiff. In most cases, third parties bound by indemnity clauses such as Insurance Companies would insure that the defendant they are liable to indemnify is not found liable because their liability is corollary to the main liability of the defendant. The question of whether the loss which the Applicant agrees to that the defendant/respondent should pay falls within the indemnity clause is a very narrow area of appeal whatever the merits. In those circumstances, it would be unjust to order security for costs only because the respondent/defendant incurred the entire decretal sum and execution proceedings were completed against the Respondent/Defendant without any objection from the Applicant.

In the circumstances therefore it would be just for the applicant to furnish security for the due performance of US$303,330 in the event that it loses the intended appellant. This would be consistent with the express wording of order 43 rules 4 (3) (c) of the Civil Procedure Rules which presumes that security has been given by the applicant for the due performance of the decree or order as may be ultimately binding upon him or her. This ruling does not purport to limit the inherent and discretionary power of the Court to order security for costs only in appropriate cases. The rule guides in the provision for security for the due performance of the decree and in the circumstances of this case, the only adequate security would be security for the due performance of the decreed sum and not costs which were equally shared between the Applicant and the Respondent.

The applicant shall furnish security to the satisfaction of the registrar of the commercial court division by way of alternative security deposit to cash and in equivalent security such as a bank guarantee or insurance bond equivalent to the sum of US$303,330 pending determination of the applicants appeal. The security shall be furnished within a period of 45 days from the date of this order.

The stay of execution is conditional upon the furnishing of security. Consequently a conditional order issues staying execution of the decree of this court in so far as orders the applicant to indemnify the respondent pending determination of the applicants intended appeal to the Court of Appeal. In the circumstances of this case, the Applicant shall pay the costs of this application to the Respondent.

Ruling delivered in open court this 16th day of August 2013.

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Alice Nalwoga holding fried for Barnabas Tumusingize for the respondent

Applicant not represented.

Charles Okuni: Court Clerk

 

Christopher Madrama Izama

Judge

16th of August 2013