Court name
Commercial Court of Uganda
Judgment date
22 February 2013

MMK Engineering Ltd v Mantrust (U) Ltd (Miscellaneous Application-2012/796) [2013] UGCommC 34 (22 February 2013);

Cite this case
[2013] UGCommC 34

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 796 OF 2012

(ARISING FROM CIVIL SUIT NO. 89 OF 2012)

MMK ENGINEERING LTD}........................................................ APPLICANT

VS

MANTRUST U LIMITED}................................................. RESPONDENT

BEFORE HON JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The Applicants application is for review under section 82 (1) (b) of the Civil Procedure Act and order 46 (1) (b) and (8) of the Civil Procedure Rules for orders that the court order made in MA No. 123 of 2012 granting conditional leave for the applicant to appear and defend a summary suit by depositing 50,000,000/= is reviewed. It is also for orders that the judgment entered against the applicant upon default of deposit of the above amount is set aside and for leave to file a defence to the suit unconditionally.

The grounds of the application are that there is an error apparent on the face of the record because the appellant paid the respondent a sum of Uganda shillings 203,827,000/= and agreed upon in the contract. Secondly that the money the applicant paid to the respondent was not taken into account when making the order. Thirdly that the money the applicant was ordered to deposit in court as a condition is far above the balance of the money owed to the respondent. Fourthly that the applicant had shown by way of counterclaim that it is owed more money than the respondent is claiming. Additionally the applicant contends that the conditions for the deposit of 50,000,000/= is not only burdensome and onerous but bars the applicant access to justice. The applicant is willing and ready to provide other forms of security such as an Insurance Guarantee.

The application is supported by the affidavit of Mike Owori the Managing Director of the applicant which attaches payment vouchers in support of the contention that the applicant paid the sum of Uganda shillings 203,827,000/= at the time of filing the suit. The rest of the averments support the grounds in the notice of motion.

The affidavit in reply deposed to by Ratib Muyomba, a director in Mantrust Uganda Ltd opposes the application on the ground that it does not satisfy the conditions for review under the Civil Procedure Act and rules made there under. The respondent obtained a final judgment against the applicant unchallenged upon the applicants failure to deposit the sum of Uganda shillings 50,000,000/= ordered by court. The respondent avers that the application is an afterthought because the respondent was in the process of executing the extracted decree against the applicant, after having its bill of costs taxed. That the respondent has never received a sum of Uganda shillings 203,827,000/= from the applicant and evidence was never adduced by the applicant in court at the time of its application. Consequently the deponent avers that the application is meant to deprive the respondent from enjoying the fruits of its litigation against the applicant and that the application is an abuse of court process and should be dismissed.

At the hearing of the application the applicant was represented by Counsel Cranmer Tayebwa while the respondent was represented by Counsel Dennis Kanabi.

Counsel for the applicant submitted that out of a contract price of Uganda shillings 240 million, the applicant had paid about Uganda shillings 213 million and the order of the court deposit 50 million was well above the balance owed the respondent. In the application for leave to file a defence the court found that there were triable issues and the applicant intended to address the question of payment in the main suit. Counsel submitted that the security ordered by the court was too final. Instead the applicant seeks to deposit another kind of security in order to be heard in defence of the action he prayed that the order of deposit of 50 million is reviewed and substituted with an order for unconditional leave to defend.

In reply the respondents counsel submitted that the application was brought as an afterthought because the respondent was in the process of levying execution after taxation of its bill of costs. He relied on the affidavit in reply where it is averred that the sum of Uganda shillings 203,827,000/= was never received from the applicant and in any case no evidence was adduced at the time of filing the application for leave to appear and defend the suit. Counsel submitted that the applicant suggests that upon payment of 203,827,000/=, when the contract sum was 232,000,000/=, there is an implication that what is owed to the respondent is slightly above 30,000,000/=. Counsel submitted that the sum of Uganda shillings 50,000,000/= ordered by the court was simply a condition given by the court for the applicant to defend the summary suit. The applicant never complied with the condition. The application was brought under order 46 rules 1 (3) and falls short of the standard. The application does not indicate whether the matter is a new or important matter of evidence unknown to the applicant. It was never mentioned in the earlier application that some information was out of reach of the applicant. Secondly counsel for the respondent submitted that there was no error apparent on the face of the record. Finally the condition to deposit a sum of money was not a final order of the court. The destination of the money would be determined by the final order in the main suit.

In rejoinder the applicants counsel contended that since the application for leave to appear and defend the summary plaint was brought, additional facts had emerged. Secondly he submitted that there was an error apparent on the face of the record because the court only considered the respondents matter but did not consider the counterclaim of the applicant. He prayed that the court should order another security such as an Insurance Guarantee, a land title etc or even a personal guarantee by the managing director of the applicant.

Ruling

I have duly considered the pleadings of the parties and the evidence in support of and opposition of the application. The first matter that arises and which confronts the court is a question of procedure.

The applicant is aggrieved by the Court order for deposit of 50,000,000/= within the time stipulated in the order. The ruling of the court was delivered on 1 June 2012 wherein the respondent was given leave to amend the plaint within seven days from that date and serve the applicant. Conditional leave to appear and defend the claim in the plaint was granted. The applicant was ordered to deposit a sum of Uganda shillings 50,000,000/= in court as security for payment of the plaintiff/respondent within 30 days from the date of the ruling. The applicant was further given leave to file a written statement of defence within 21 days from the date of the ruling.

This application was filed in court on 4 December 2012. Whereas the words “conditional leave” are used by the court in the ruling of 1st of June 2012, the filing of the defence was supposed to be made within 21 days from 1 June 2012. Security for payment of the plaintiff was supposed to be deposited within 30 days from the date of the ruling. In other words, the applicant ought to have filed its defence within 21 days after the ruling of the court and that is by 22 June 2012. The deposit of security was not a condition precedent to the filing of a defence which could have been made earlier than the time provided for the deposit of security. In other words, the security ordered by the court was for payment of the plaintiff/respondent. There is no explanation in the applicants application and supporting affidavits as to why the applicant did not file a defence within 21 days as ordered by the court even if it had not deposited Uganda shillings 50,000,000/= within 30 days as ordered.

Rule 8 of order 36 of the Civil Procedure Rules which is the applicable rule provides that leave to defend may be conditional. It provides as follows:

"Leave to appear and defend the suit may be given unconditionally, or subject to such terms as to the payment of monies in court, giving security, or time or mode of trial or otherwise, as the court may think fit.

Order 36 rule 8 therefore envisages two kinds of leave to appear and defend the suit. The first one is unconditional leave to appear and defend the suit. The second category is conditional leave to appear and defend the suit. I have carefully considered the rule and the ruling of the court. For emphasis the portion of the ruling is hereby quoted for ease of reference:

"In the premises, the Respondent is given leave to amend the plaint within seven days from date and serve the Applicant. Conditional leave to appear and defend the claim in the plaint is granted. The Applicant shall deposit a sum of Uganda shillings 50,000,000/= in court as security for payment of the Plaintiff/Respondent to this application under the contract within 30 days from the date of this ruling. The Applicant is given leave to file a written statement of defence within 21 days from the date of this ruling. Costs abide the outcome of the main suit.

Ruling delivered in open court this first day of June 2012."

The conclusions that can be made from the ruling of the court is that the deposit of a sum of Uganda shillings 50,000,000/= as directed by the court was not a condition precedent to the filing of a written statement of defence. Secondly order 36 rules 8 of the Civil Procedure Rules gives the court wide discretion as to the giving of security, and the terms of payment of monies in court, the time or mode of trial. The fact that leave to defend may be conditional does not mean that deposit of money is necessarily a condition precedent to the filing of the defence. Consequently the applicant's application to a great degree proceeded on wrong premises that the filing of a defence by the applicant had to be preceded by the deposit of Uganda shillings 50,000,000/=. The glaring question therefore is why the applicant did not file its written statement of defence? Paragraph 2 of the affidavit in support is therefore false to the extent that it avers that the deposit of 50 million Uganda shillings was a condition precedent to the filing of a defence. The deposit of Uganda shillings 50,000,000/= was clearly a deposit of security in terms of order 36 rule 8 of the Civil Procedure Rules. The time for the deposit of security is independent of the time for the filing of a written statement of defence. The terms ordered by the court as a condition did not have to be a condition precedent to the filing of the defence but may be conditions for the defence. The applicant did not comply with the order of the court to file its defence within 21 days from 1 June 2012. No grounds for the omission to file a written statement of defence have been advanced in the application or supporting affidavits. Additionally the averment in the affidavit in support that the condition to deposit a sum of Uganda shillings 50,000,000/= in the court is an error apparent on the face of the record because the respondent is not entitled to payment of the said sum in any event cannot be an error because the suit was to be heard on the merits. It is not a contention that the condition created hardship on the applicant. The plaintiff had claimed Uganda shillings 99,630,000/= in the summary plaint. The security ordered was about 50% of the entire claim of the plaintiff. The court had already established that there were triable issues for the determination of the issue of liability of the applicant.

Notwithstanding failure to file a written statement of defence within the time stipulated by the court, the applicant's contention is that the court did not take into account the counterclaim indicated in its application for leave to appear and defend the action. The claim of the plaintiff in the main suit is Uganda shillings 99,630,000/=. On the other hand, the liquidated demand of the applicant/defendant in the counterclaim is Uganda shillings 17,000,000/= together with a claim for general damages and interests. The liquidated amount itself if subtracted from the principal claim of the plaintiff leaves a balance of over 70,000,000/= owing to the plaintiff/respondent to this application. The security payment ordered of Uganda shillings 50,000,000/= is much less than the amount that would remain owing to the plaintiff after offsetting the counterclaim. Even if an award of Uganda shillings 10,000,000/= was ordered against the plaintiff in the counterclaim, there is a high possibility on the face of the pleadings that if the plaintiff proves its claim, about Uganda shillings 50,000,000/= would still be owing to the plaintiff after offsetting any counterclaim. The contention that the court did not take into account the counterclaim of the applicant/defendant is without merit.

In the ruling of the court, the court held that the applicant’s application for leave to appear and defend was rumbling and imprecise. I have carefully considered the previous application for leave to defend the summary suit. On the one hand the applicant averred that it was not indebted to the respondent/plaintiff in the sum of Uganda shillings 99,630,000/= at all. The pleading is vague in that it does not indicate whether the applicant/defendant was indebted to the plaintiff/respondent to this application for some monies at all. This is made clearer by the further averments of the applicant in the application for leave to appear and defend. In paragraph 7 of the notice of motion, the applicant averred that the payment of the contract sum was dependent on the final pay from the client, which up to that time had not been done making the plaintiffs claim premature. The averment that the plaintiffs claim was premature is an admission that some monies owe from the applicant/defendant to the plaintiff.

In paragraph 13 of the affidavit in support of the application it is averred by the applicant's director that the agreement was affected by force majeure and the delay of payments by the Uganda Roads Authority thereby discharging the applicant from any further obligations. As indicated above, the court ruled that there were several triable issues that had arisen.

Order 36 rule 8 gives the court wide discretionary powers. It is not averred in the applicant’s application that the court did not exercise its discretion judicially. In any case such an averment would be a ground for appeal.

A further scrutiny of the matter shows that the applicant ought to have moved under order 36 rules 11 of the Civil Procedure Rules which reads as follows:

"After the decree the court may, if satisfied that the service of the summons was not effective, or for any other good cause, which shall be recorded, set aside the decree, and if necessary stay or set aside execution, and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the court to do so, and on such terms as the court thinks fit."

Order 36 rules 11 is wide enough to accommodate an application to set aside the decree for any other good cause. Hardship or failure to raise money for the security for sufficient reasons may be a good cause for setting aside the decree and reviewing the terms or the conditions for leave to appear and defend the suit.

I have carefully considered the matter and would have been inclined to dismiss the applicant’s application for having been brought for review when there are no grounds for review. In the first place the applicant never complied with the court order to file a written statement of defence within 21 days. Secondly there are no grounds for review. The judgment in default of filing a defence is not on the merits. On the other hand the applicant has all along expressed interest to defend the action and file a counterclaim. It is further erroneous for the applicant to aver that it was prevented by the conditions from filing a defence. Had the applicant filed a defence, there would have been no default judgment. If this suit was to be dismissed, it would have been on some other ground such as failure to deposit security. The applicant in an application to have this suit dismissed on the grounds of failure to deposit security would have had an opportunity to address the court on the matter.

Nevertheless the High Court retains inherent jurisdiction to make such orders as are necessary for the ends of justice. Section 98 of the Civil Procedure Act provides that nothing in the Act shall be deemed to limit or otherwise affect the inherent power of the court to make such necessary orders. Additionally, the Judicature Act section 33 thereof permits the High Court as far as possible to make necessary orders and grant such remedies as would avoid multiplicities of legal proceedings. An application under order 36 rules 11 of the Civil Procedure Rules would have been made by notice of motion as in this case. However the gist of the applicant’s grievance is the failure to raise security ordered by the court and the court in this application can consider the issue.

In light of the above and to avoid multiplicity of judgments and in view of the fact that the judgment is not on the merits when the applicant has made efforts to defend the suit, the default judgment of the High Court is set aside. The order for deposit of security of shillings 50,000,000/= is also set aside. In lieu of thereof, the registrar shall accept for deposit in court any other form of security such as insurance guarantee or appropriate security for the payment of cash as prayed for by the applicant.

Time is enlarged for the applicant to file its written statement of defence within 14 days from the date of this order. The applicants shall pay the costs of the application in any event.

Ruling delivered on the 22nd of February 2013

 

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Dennis Kanabi for the respondent,

Benson Tusasirwe for the Applicant

Charles Okuni: Court Clerk

 

Christopher Madrama Izama

Judge

22nd February 2013