Court name
Commercial Court of Uganda
Judgment date
20 September 2013

Bbumba v Tropical Bank Ltd (Miscellaneous Application-2013/157) [2013] UGCommC 161 (20 September 2013);

Cite this case
[2013] UGCommC 161

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 157 OF 2013

(ARISING OUT OF CIVIL SUIT NO. 43 OF 2013)

BBUMBA ABBEY}............................................................................ APPLICANT

VERSUS

TROPICAL BANK LIMITED}........................................................... RESPONDENT

BEFORE HON MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The Applicants application is an application filed by virtue of order 36 rules 3 (1) and 4 of the Civil Procedure Rules for leave to defend civil suit number 43 of 2013 and for costs of the application to be provided for.

It is an application for leave to defend a summary suit brought under the provisions of order 36 rule 2 of the Civil Procedure Rules for the recovery of Uganda shillings 140,793,732/= as money due and owing, principal, penalty interest under the loan facility, interest and costs. 

There are three grounds of the application contained in the notice of motion.  These grounds are firstly that the Applicant is not indebted to the Respondent as averred in the pleadings. Secondly the Applicant has a good defence to the Respondents claim and thirdly that it is in the interest of justice that the application is allowed and unconditional leave to appear and defend the suit is granted.

The application is supported by the affidavit of the Applicant whose defence is that the Uganda shillings 25,000,000/= was never credited to his account as alleged.  Secondly that he had never defaulted on any monthly payments as alleged by the Respondent and the allowed temporary excess was duly terminated after all the monies were offset from the deposits on his account.  Thirdly annexure “E” to the summary plaint was erroneously written under the mistaken belief and in the good spirit of settlement. He is however not indebted to the Respondent as alleged.  The Applicant asserts that he has a good defence to the Respondents claim according to the written statement of defence attached in draft to his affidavit.  Finally he avers that it is in the interest of justice that the application is allowed and he is permitted to file a defence and defend the main suit.

The Plaintiff/Respondents affidavit in opposition to the application is sworn to by Edward Kiweewa, the Senior Manager Credit Recovery and Monitoring, Tropical Bank Ltd.  He deposes that the Applicant applied for an overdraft facility which was approved and granted on 7 March, 2009 for a period of 45 days upon which the facility agreement was executed between the parties and annexed to his affidavit.  The overdraft being an excess facility, allowed the Applicant to overdraw his account up to the agreed excess limit of Uganda shillings 25,000,000/= and could not be reflected as money credited to his account but was a loan to the Applicant.  Upon the facility expiring, the Applicant applied for another excess facility which was approved and granted on the 23rd of February, 2010 and allowed the Applicant to draw his account up to the tune of Uganda shillings 70,000,000/= for a duration of 12 months, which the Applicant accepted by executing another agreement with the Respondent.

On 23rd December 2010, the Respondents through its officials wrote to the Applicant reminding him to renew his credit facility and make payments on the outstanding amounts totalling Uganda shillings 82,950,311/=.  Further to the said communication the Respondent on the 1st of November, 2011, wrote another letter to the Applicant reminding him to renew his facility which had expired with a total overdrawn amount of Uganda shillings 94,498,541/=.  Upon receipt of the demand, the Applicant responded by making a payment proposal wherein he undertook to pay 50% of the outstanding amount by the end of December 2011 which promised he never fulfilled.  The Applicant never made any deposits towards clearing the outstanding amount and upon demand by the Respondents lawyers made a proposal to repay the outstanding amounts and was an admission of the debt so demanded.  On the basis of information supplied by the defence lawyers, he avers that the Applicant’s application does not raise any plausible defence and was only a sham calculated to delay the course of justice and waste the time of court.

The Applicant’s affidavit in rejoinder to the affidavit in opposition of Edward Kiweewa avers that the facility of Uganda shillings 70,000,000/= was a competently different transaction from the Respondents claim in the plaint and the said facility was itself extinguished on 19 September 2012. Furthermore the correspondences related relied upon by the Respondent concern a completely different facility of Uganda shillings 70,000,000/= which was settled. Thirdly he avers from the information of his lawyers that the Respondent was trying to sneak in other claims which do not form part of the pleadings by way of a reply to the Applicant's application.

At the hearing of the application, the Applicant was represented by Counsel Muhammad of Sekaana Associated Advocates while the Respondents were represented by Counsel Brian Kalule of Messrs. AF Mpanga and Company Advocates.  On 26th of June, 2013 Counsels agreed to file written submissions.

The Applicant’s written submissions

Counsel for the Applicant submitted that the application arose out of Civil Suit Number 43 of 2013 where the Respondent/Plaintiff is demanding a total of Uganda Shillings 140,793,732/= inclusive of interest and costs.  There is no evidence that the Respondent/Plaintiff ever advanced the said monies.  The bank statement attached to the plaint does not show any where that the monies were ever credited on the Applicants account.

The alleged sums as stated by the Respondent in the affidavit in reply amount to another suit for which Counsel prayed that the court grants the Applicant leave to respond to the allegations contained therein.  The Applicants Counsel submits that the essence of summary procedure is that there should be points of law that require serious arguments.

The Applicant contests the entire claim in the plaint and the annexes attached to the plaint.  The affidavits in reply raise fresh matters that require court to grant the Applicant leave to respond thereto.  Counsel invited the court to peruse the case of Home And Overseas Company Ltd vs. Mentor Insurance Company UK Ltd.  [1989] All ER 74 attached to the submissions where it was held that summary procedure will not apply where there are matters of law to be argued like in the instant Applicant’s case.  In the premises he prayed that the Applicant’s application for leave to defend the suit is granted.

Respondent’s submissions in reply

The Respondent opposed application on the sole ground that the application does not disclose any good credible defence to the suit. Counsel relied on the facts averred in the affidavit in reply.

As far as the law is concerned, the Respondents Counsel submits that applications for leave to defend a summary suit are governed by very well settled law.  In the case of Sembule Investments Ltd vs. Uganda Baati Ltd Miscellaneous Application number 664 of 2009 arising out of civil suit number 410/2009, honourable Lady Justice Mulyagonja summarised the rationale for Order 36 of the Civil Procedure Rules and followed the case of Zola and another vs. Rali Brothers Ltd. [1969] EA 691 at page 694 for the statement that summary procedure is intended to enable the Plaintiff with a liquidated claim to which there is clearly no good defence, to obtain a quick and summary judgment without being unnecessary kept from what is due to him by delaying tactics of a Defendant.  Where the court finds that there is any reasonable ground of defence to the claim, the Plaintiff is not entitled to summary judgment.  The Defendant who wishes to resist the entry of a summary judgment should disclose through evidence that there are some reasonable ground of defence.  The Applicant must show a good defence to the suit.  The requirement for the Applicant to show a good defence to the suit was in line with the decision of Graham Paul VP of the East African Court of Appeal in the case of Churanjilal and Co. Vs A.H Adam [1950] 17 EACA at page 92 that: "it is desirable and important that the time of creditors and of courts should not be wasted by investigations of bogus defences".

Counsel submitted that the Applicants defence is a bogus defence within the principle stated in the Churanjilal case (Supra). In the case of Corporate Insurance Company Ltd versus Nyali Beach Hotel [1995 – 1998] EA at page 7 that leave to defend will not be granted merely because there are several allegations of fact or law made in the Defendant's affidavit. The allegations are to be investigated in order to decide whether leave should be granted.

On the assertion of the Applicant that no money was ever credited on the account of the Applicant, the Applicant avers paragraph 3 of his affidavit that he has never defaulted on any monthly payments and the excess facility was duly terminated after all the money was offset from his deposits in the bank. The statement that any loan was paid back cancels out of the statement that no money was ever credited to the Applicants account. What was the Applicant paying back through his deposits if no loan was outstanding?

In paragraphs 5, 6, 7 and 8 of the affidavit in reply the Respondent wrote several times to the Defendant/Applicant demanding for payment of outstanding sums. The Defendant has never contested the sums demanded or suggested that no credit facilities where extended to him. On the contrary, he wrote back on two occasions suggesting a payment plan to clear the debt. To deny the said indebtedness cannot stand as a defence. The Applicant never challenged his bank account statements in which the outstanding sums are reflected.

The Applicant further avers that annexure "C" (and not annexure "E") was erroneously written under a mistaken belief and in a good spirit of settlement. The annexure is dated 24th of July 2012 wherein the Defendant proposed to pay outstanding amounts. There was an earlier letter dated 22nd of December 2011 in which the Applicant also suggested a repayment scheme. (See annexure "E" to the affidavit in reply to the application). Counsel contended that issues of money in today's highly commercialised world are matters of life and death. It is very difficult, to the point of impossibility to imagine that anyone would admit indebtedness of over 100,000,000/= Uganda shillings in error let alone in the spirit of settlement. It was further incredible to suggest that such a person would make the same erroneous or benevolent admission of indebtedness twice. The admission was made on 22 December 2011 and second admission made seven months later on 24 July 2012 without realising the alleged error. The question is what the Applicant was trying to settle if he was not indebted at all?

Counsel further submitted that the Defendant/Applicant failed to adduce affidavits evidence in support of the submission that he has a good defence to the suit. The general denial of liability and excuse that the admission was made in error and in the spirit of settlement cannot be sustained. The Applicant could not explain the outstanding sums reflected in his account statement attached as annexure "D" to the plaint.

In the affidavit in rejoinder, the Applicants case is that the facility of Uganda shillings 25,000,000/= was different from that of Uganda shillings 70,000,000/= which he paid back and further suggested that the Respondent is trying to sneak in other claims into the pleadings. However Counsel contended that the Applicant is mistaken for two reasons. Both facilities where extended to the Applicant through one account namely account number 0010137926. Secondly the figures indicated as balance on the statement of account are compounded and the cumulative indication of all accrued unpaid amounts on the account. Counsel submitted that whether the two facilities are different or not, what matters is that the compounded amounts remained outstanding and the Applicant does not put forward any evidence to challenge the sums nor does he give any reasons why he should not pay the outstanding sums. Moreover when demands were made for the money, the Applicant did not contest the sums but instead suggested a payment plan and has now failed to explain away his indebtedness.

Finally Counsel commented on the authority cited of Home and Overseas Insurance Company Ltd versus Mentor Insurance Company (UK) Ltd (In Liquidation) [1989] All ER 74. He submitted that the case does not take his case any further. To the contrary it supports the Respondent’s case and reaffirms the submissions of the Respondent. Counsel quoted the statement of Parker LJ to the effect:

"The purpose of Order 14 is to enable the Plaintiff to obtain a quick judgement where there is plainly no defence to the claim. If the Defendant's only suggested defence is a point of law and the court can at once see that the point is misconceived, the Plaintiff is entitled to judgement. If at first sight the point appears to be arguable but with relatively short argument can be shown be plainly unsustainable, the Plaintiff is also entitled to judgement."

The statement echoes the quotation of the Respondent in the case of Zola Brothers (supra).

The Applicant having failed to show that he has a good defence to the suit and his application ought to be dismissed with costs. Where such an application is dismissed, the court is obliged to enter judgement for the Plaintiff under order 36 rule 5 of the Civil Procedure Rules for the sum of Uganda shillings 140,793,732/=, penalty interest at 30% per annum and interest on the decretal sum of 30% per annum from the date of judgement till payment in full and costs of the suit. Alternatively if leave to defend is granted, it should be conditional upon the Applicant depositing the contested sums in the court or security of equivalent value.

Ruling

I have carefully considered the Plaintiff's pleadings in the summary suit, the Applicant’s application and affidavits evidence attached to the application and in opposition thereof, the submissions of Counsel and authorities cited.

I do not wish to repeat the various authorities, which give guiding principles for the exercise of the jurisdiction of the court to grant a Defendant leave to file a defence and defend a summary suit. The summary of the principles is that the Applicant’s application must demonstrate that there is an arguable point which merits consideration by the court before a final decision can be reached on the Defendant’s liability.  Counsels also addressed the court on the purpose of order 36 of the Civil Procedure Rules which gives a creditor a right to obtain summary judgement without having to go through a lengthy trial procedure. I will refer to the authority relied on by both Counsel namely the case of Home and Overseas Insurance Co Ltd v Mentor Insurance Co (UK) Ltd (In Liquidation) [1989] 3 All ER 74. Reference was made by Counsels to the decision of Parker LJ on the purpose of Order 14 of the Civil Procedure Rules of the UK. At page 77 Parker LJ considered the purpose of a summary suit and specifically Order 14 of the UK rules which provides the procedure for summary suits:

“The purpose of Order 14 is to enable a Plaintiff to obtain a quick judgment where there is plainly no defence to the claim. If the Defendant’s only suggested defence is a point of law and the court can see at once that the point is misconceived the Plaintiff is entitled to judgment. If at first sight the point appears to be arguable but with a relatively short argument can be shown to be plainly unsustainable the Plaintiff is also entitled to judgment. But Order 14 proceedings should not in my view be allowed to become a means for obtaining, in effect, an immediate trial of an action, which will be the case if the court lends itself to determining on Order 14 applications points of law which may take hours or even days and the citation of many authorities before the court is in a position to arrive at a final decision.”

The above principles are relevant to our Order 36 of the Civil Procedure Rules which also provides for summary procedure. I will summarise the above quoted principles applicable to applications for leave to defend a summary suit:

  1. In considering an application for leave to defend a summary suit, where there is plainly or on the face of it no defence, the Plaintiff is entitled to summary judgement. The flip side of the argument is that where there is plainly an arguable case or a plausible defence to the action, the Plaintiff is not entitled to a summary judgement.

 

  1. Secondly where the Defendant raises a point of law and the court can clearly see that it is misconceived the Plaintiff is entitled to a summary judgement. The flipside again is where the point of law is plainly arguable or plausible as a defence, it should be considered and the Plaintiff is not entitled to summary judgement.

 

  1. Thirdly, in applications for leave to defend a summary suit, the court should not involve itself in lengthy arguments involving points of law which would take hours or days before it can make up its mind or arrive at a decision. Obviously in such cases, the issue of whether the Plaintiff is entitled to a summary judgement is not plain and such a case is not appropriate for the entry of a summary judgement.

I have carefully considered the Applicants application. Starting with the summary suit, paragraph 4 of the plaint provides that the Defendant/Applicant was at all material times a customer of the Plaintiff bank operating account number 0010137926.

It is alleged in the summary plaint that the Defendant applied for a credit facility of Uganda shillings 25,000,000/= which was approved on the 7th of March, 2009 whereupon the parties executed a credit facility agreement.  Under an express term of the facility letter, the credit facility was repayable in 45 days and the first instalment was due within one month from the date of execution.  The Plaintiff was authorised to debit the instalments from the Defendants account with the Plaintiff on the due dates.  It is alleged that the Defendant was required to issue two undated cheques as security for repayment of the loan and that in the event of default in payment the Plaintiff was entitled to charge penalty interest at the rate of 30% per annum and recall the facility and demand immediate payment of the facility loan in full.  It is further alleged that the Defendant/Applicant breached the terms of the agreement and defaulted on the payment of his monthly instalments whereupon the Plaintiff on the 17th of July, 2012 demanded for settlement of the amount owing failure for which the Plaintiff would take the necessary legal action.  Last but not least it is alleged that the Applicant/Defendant admitted the debts on demand and submitted a proposal to pay the monies owing in instalments and the first instalment was supposed to be paid by the 27th of July, 2012.  The Defendant/Applicant defaulted on his own proposals and by the 19th of December, 2012 the unpaid amount inclusive of interest was Uganda shillings 140,793,732/=.

On the 7th of March 2009 the parties executed a credit facility agreement annexed to the plaint as annexure "A". Annexure "A" is dated 7th of March 2009 and is signed by the Plaintiff on 7 March 2009. The facility is called a "Temporary Excess". Interest rates on the facility was to be charged on the daily overdrawn balances and debited with the transactional account at the end of each month at 6.5% over and above the lenders prime lending rate which was then at 18.5% per annum. In case of default by the Applicant by the expiry date or exceeding the limit, the transactional account was automatically to be subject to a penalty interest rate of 30% per annum. The security for the facility was an undated cheque in the value of the facility plus interest for the period which was 45 days.

On 17 July 2012 the Plaintiffs/Respondents lawyers wrote to the Applicant demanding payment of Uganda shillings 121,096,858/=. It is alleged that the Applicant subsequently defaulted in payment and on 16 July 2012 the claimed amount was outstanding. Annexure "C" is a letter dated 24th of July 2012 addressed to Tropical Bank (U) Ltd. It is not a direct reply to Counsel's letter and is addressed to the Plaintiff/Respondent and is not the lawyers. Annexure "D" is the bank statement for account number 01 – 013796 and the date of the statement of account is 16 January 2013.

The Applicant's case in paragraph 2 of the affidavit in support of the application is that the sum of Uganda shillings 25,000,000/= was never credited to his account. Consequently he never defaulted on any monthly payments and the allowed temporary excess was duly terminated after all the amounts were offset from the deposits on the account. In reply the affidavit of Edward Kiweewa, the Senior Manager Credit Recovery and Monetary of the Respondent is that the overdraft facility was approved and granted on 7 March 2009 for a period of 45 days upon which the facility agreement was executed. The excess facility allowed the Applicant to overdraw his account up to the agreed extra limit of Uganda shillings 25,000,000/= and therefore the amount cannot be reflected as money credited to his account, but is a loan to the Applicant.

I have carefully considered the bank statement commencing on the period of 7th of March 2009. On 9 March 2009, the Applicants credit stood at Uganda shillings 430,602/=. On 9 March 2009, 23,117,650/= was paid out of the Applicants account. The Applicants account immediately went into a debit position which was reflected in the negative as Uganda shillings 22,687,048/=. On 13 March 2009, the Applicants account was credited with an inward RTGS payment of Uganda shillings 30,988,954/=. The amount standing to the credit of the Applicants account immediately went to Uganda shillings 6,146,756/= on the positive side. On the face of the record one may think that the credit facility extended to the Applicant had been extinguished. I am however mindful of the fact that the credit facility was for a period of 45 days and commenced on the 7th of March 2009. On 14 March 2009 subsequent to another withdrawal on 13th March 2009, the Applicant withdrew 21,000,000/= leaving his account in the negative in the amount of Uganda shillings 17,353,244/=. By 24 April 2009, the Applicants account was overdrawn by up to Uganda shillings 25,570,607/=.

Subsequently there were credits but the overdraft facility had not on the face of it been paid within a period of 45 days. In other words the Applicant after extinguishing the first overdrawn amount continued to use the facility and over drew his account by 24 April 2009. By the 7th of May 2009, the Applicant had overdrawn his account by shillings 16,638,831/=. By 29 March 2010, the Applicant’s account was overdrawn by Uganda shillings 77,923,877 (possibly inclusive of interest on the overdrawn amounts). There are many more other transactions which include payments by the Applicant and withdrawals leading to an overdrawn position of Uganda shillings 140,793,732/= by 23rd of November 2012.

I have further carefully considered the argument of the Applicants Counsel that the Plaintiff/Respondents Counsel is trying to weave in or factor in other transactions which were not part of the facility approved on 7 March 2009 for Uganda shillings 25,000,000/=.

The statement of account of the Applicant produced by the Plaintiff and annexed to the plaint has not been denied by the Applicant. Furthermore the nature of the transaction entered into on 7 March 2009, did not preclude the Applicant from withdrawing further monies from his account provided interest and penalties are paid. In other words so long as the facility was in operation, the Respondent only gave him a limit within which to operate within the time period. At the end of the period of 45 days, the Applicant was indebted to the Respondent. In any case the Applicant was allowed to continue overdrawing his account whatever the subsequent arrangement. What is apparent is that the Plaintiff relies on the facility letter of 7 March 2009 as the foundation of the relationship.

The Applicant has additionally acknowledged being indebted to the Plaintiff/Respondent in the letter annexure "E" to the affidavit in reply. This is in the response to the averment and evidence of the Respondent as contained in the affidavit in rejoinder that the correspondences relate to a completely different facility. Secondly, he argues that the Respondent is trying to sneak in other claims which do not form part of the pleadings in the summary suit.

I find this argument an argument that does not deny liability per se but the basis of the liability only. The defence that I see is not based on denial of indebtedness but the rules of pleading and is a point of law based on the fact that there was another facility letter according to annexure "B" to the affidavit in reply of Edward Kiweewa dated 23rd of February 2010. In that subsequent facility the Applicant was advanced Uganda shillings 70,000,000/=. The facility was an overdraft facility. The terms of the facility and particularly the terms of repayment and interest rates thereon are different from the facility of 7 March 2009. The interest rate to the credit facility dated 23rd of February 2010 annexure "B" to the affidavit in reply on daily overdrawn balances charged on the transactional account at the end of each month is at the rate of 4% per annum above the lenders prime lending rate which was at 19% p.a. at the time of the facility. The penalty interest rate in case of any default remained at 30% which is the same as that of the original facility. It becomes a complex issue as to how to calculate interest on the basis of the two transactions. Did the second transaction extinguish the first transaction? If that is the case, what arises would be the basis of an audit query.

The Plaintiff would have been entitled to summary judgement had the subsequent transactions been pleaded in the summary suit. Order 36 rules 2 of the Civil Procedure Rules requires that upon presentation of a specially endorsed summary plaint, it should be accompanied by an affidavit made by the Plaintiff or any other person who can swear positively to the facts, verifying the cause of action, the amount claimed, and stating that in his or her belief there is no defence to the suit. The affidavits in support of the summary plaint paragraphs 3, 4, 5, 6, 7, 8, 9, 10 and 11 sworn by one Edward Kiweewa only relate to the credit facility to the Defendant/Applicant of Uganda shillings 25,000,000/= and approved on the 7th of March 2009.

I agree with the Applicant’s Counsel that the Respondent’s Counsel and the Respondent are not entitled to raise other transactions which do not form part of the summary plaint. Order 6 rules 7 of the Civil Procedure Rules requires all new grounds of pleadings to be raised only through amendments. The Respondent having raised new grounds of claim (I.e. the new facility of 70,000,000) different from the summary plaint entitles the Applicant to assert that the money claimed does not relate to the transaction pleaded in the summary suit. In any case as demonstrated above, the contractual provisions and amounts therein vary.

Perusal of the account by the 23rd of February 2012 shows that the Applicants account was overdrawn by about 103 million Uganda shillings (That is by 31st January 2012). This amount was subsequently paid off and the account was on the credit side on the 18th of September 2012. A question may be raised as to whether the subsequent facility extinguished the former facility. Nonetheless the Respondent is not prejudiced and has a right to amend the pleadings without leave of court after a written statement of defence has been filed and thereby amend the Plaint within 14 days thereof under order 6 rule 20 of the Civil Procedure Rules.

In the circumstances, the Applicant is entitled to unconditional leave to appear and defend the suit. Leave is granted for the Applicant to file a defence to the Plaintiff’s plaint within 14 days from the date of this order and costs shall be in the cause.

Ruling delivered in open court on 20 September 2012.

 

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Brian Kalule for the Respondent/Plaintiff

Muhammad Mwanga for the Applicant

Charles Okuni: Court Clerk

 

Christopher Madrama Izama

Judge

20 September 2013