Court name
Commercial Court of Uganda
Judgment date
10 May 2013

Kavuma & Anor v Stanbic Bank (U) Ltd (Miscellaneous Application-2013/149) [2013] UGCommC 85 (10 May 2013);

Cite this case
[2013] UGCommC 85

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 149 OF 2013

(ARISING FROM CIVIL SUIT NO 050 OF 2010)

  1. STEVEN KAVUMA}
  2. CELLULOR GALORE LTD} .....................................................APPLICANTS

VERSUS

STANBIC BANK (U) LTD}............................................................RESPONDENTS

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The applicant's application is for orders to allow the 1st and 2nd defendants amend their written statement of defence in civil suit number 050/2010 and for costs of the application to be in the cause.

The grounds of the application are that the applicants are the first and second defendants in civil suit number 050 of 2010 and seek to amend their written statement of defence and raise a counterclaim against the plaintiff. The intended counterclaim arises out of the same facts or transaction upon which the plaintiff instituted the suit. The amendments sought by the applicants are necessary for purposes of determining the real questions in controversy between the parties and ensure justice is done. Lastly that it is in the interest of justice that the applicant is allowed to amend the written statement of defence and raise the intended counterclaim.

The application is supported by the affidavit of the first applicant. The facts in support of the application are that the first applicant and the second applicant company are defendants in the main suit. They seek to amend the written statement of defence and lodge a counterclaim against the respondent who is the plaintiff in the main suit. The amendment is necessary for purposes of determining the real questions in controversy between the parties and to ensure justice. On the information of his counsel's the first applicant believes that the amended written statement of defence dated 2 July 2012 and on court record omitted to include a counterclaim which clearly arises out of the same facts and transactions upon which the plaintiff instituted HCCS number 050 of 2010. Generally the deponent repeats the averments in the chamber summons. The chamber summons was taken out under order 1 rule 10 (2) and (4), rule 13 and order 6 rule 19 and 31 of the Civil Procedure Rules.

The affidavit in reply is sworn by Hilda Kamugisha a legal officer responsible for advising the respondent internally on matters concerning the suit. She avers that following the order granting the applicant leave to defend the suit, a written statement of defence was on 15 March 2011 filed in court on the applicant's behalf. Subsequently on 2 July 2012 and without the leave of court an amended written statement of defence was filed on court record by the applicant’s lawyers. The competence of the amended written statement of defence was raised in paragraph 1 of the respondents reply to the defence and the court is due to determine the competence of the defence. Consequently the applicant ought to have sought leave of court before filing the amended written statement of defence and having failed to do so the applicant's amended written statement of defence and the application for further amendment of the amended written statement of defence is improperly before the court. Secondly she contends that a defendant who intends to counterclaim against the plaintiff is required to file the counter claim within the time allowed for filing a defence. Following the order of the court granting the applicant leave to appear and defend the suit, the court granted the applicant time within which to file the written statement of defence and the defence was subsequently filed without a counterclaim. Consequently the application to amend the applicant's written statement of defence introduces a counterclaim outside the time for filing a counterclaim and is incompetent and prejudicial to the respondent and the application ought to be dismissed.

In rejoinder the first applicant avers that upon perusal of the record by his lawyers Messieurs Kintu Nteza and company advocates, discovered that his former lawyers had by omission, inadvertence or negligence filed an amended defence without following the rightful procedures. Secondly the amended written statement of defence filed on court record without leave has been withdrawn for being improperly on the court record. Consequently the application is intended to amend the defence filed and 15th of March 2011. He further avers that the intended amendment is meant to capture the counterclaim of the applicant against the plaintiff in HCCS number 050/2010. That if the application is allowed, the applicant can automatically raise a counterclaim and there is no need to apply for leave to extend time to file a counterclaim. That the respondent would not be prejudiced or suffer injustice and in any case damages would be an adequate remedy.

At the hearing of the application John Fisher Kanyemibwa represented the respondent while Felix Kintu represented the applicant. Both counsels addressed the court in written submissions.

The gist of the applicant’s written submission is first of all that it withdraws the amended defence on court record filed on 2nd of July 2012 and the respondent would not be prejudiced or suffer injustice for that purpose. The filing of the amended written statement of defence was occasioned by the omission, mistake, inadvertence or negligence on the part of the former counsel of the applicant.

Secondly the quotation of order 1 rules 10 (2) and (4) and rules 13 of the Civil Procedure Rules was an error which has not occasioned any prejudice to the respondent. In other words counsel has withdrawn reference to order 1 rule 10 quoted above.

As far as the application is concerned the applicant summarised the application and affidavits in support as already set out above. The applicant's application is that the written statement of defence dated 15th of March 2011 paragraphs 1 – 6 does not answer in specific material terms the averments in the plaint. The amended written statement of defence seeks to respond to each allegation of fact in the plaint. Secondly the intended counterclaim is not a new cause of action intended to substitute an earlier cause of action and does not seek to change the subject matter of the suit. For the proposition that upon leave to file an amended written statement of defence, a counterclaim can automatically be included counsel referred to order 8 rules 2 and 7 of the Civil Procedure Rules and the case of Eastern Bakery versus Castelino [1958] EA 461 – 462. The counterclaim is an attempt to seek a remedy for breach of duty owed by the respondent to applicant based on and arising from the same facts and transactions as pleaded in the plaint. The counterclaim is based on the contractual relationship between a banker and its clients and the main suit arises out of the said relationship. Counsel relied on the case of Mobil (U) Ltd versus Uganda Commercial Bank (1982) HCB 64. The application is intended to avoid a multiplicity of suits and the counterclaim arises out of the relationship between the respondent bank and applicants. Any injustice can be compensated by an award of costs. Counsel further relied on the case of Banco Arabe Espanol versus Bank of Uganda SCCA number 8 of 1998 for the proposition that unless the other party will be greatly prejudice, or cannot be taken care of by an award of costs, hearing and determination of disputes should be fostered rather than hindered. The intended amendment is not barred by any law and does not in any way deprive the respondent of any legal defences. Counsel further referred to several authorities on the principles governing amendment of pleadings.

In reply the respondent raised a preliminary objection. The first contention of the respondent is that the affidavit sworn by the first applicant and paragraph 4 thereof shows that the application relates to the applicants defence which was filed on 2 July 2012 which is the amended written statement of defence improperly filed in court and without the leave of court. Further the result of paragraphs 3, 4, and 5 of the applicant's draft amended written statement of defence demonstrate that it is intended to amend the amended written statement of defence filed on 2 July 2012 without leave of court. The written statement of defence filed on 11 March 2011 is not raise any allegations of fraud at all. Fraud was pleaded for the first time in paragraph 5 (g) of the amended written statement of defence filed on the 2 July 2012. Consequently the applicants application intends to amend the written statement of defence on the 2 July 2012 filed on court record without the leave of court. This submission that the applicant is seeking to amend the defence of 11th of March 2011 is a deliberate falsehood. Consequently since the amended written statement of defence is a nullity, an application for amendment thereof is improperly before the court and should collapse.

Secondly the applicants brought the application for leave to amend the defence principally to introduce a counterclaim. It is trite law that a counterclaim is another suit procedurally presented with the defence. A defendant who has not previously filed a counterclaim cannot legitimately invoke order 6 rules 19 of the Civil Procedure Rules to introduce a counterclaim. Order 6 rule 19 deals with amendment of existing pleadings. Counterclaims which are on record can be amended under the provisions of order 6 rule 21 of the Civil Procedure Rules.

Thirdly, the option is open to the defendant who is desirous of introducing the counterclaim out of time to apply to the court for extension of time to do so. There is no motion by the applicant before the court for enlargement of time within which to file a counterclaim. The authorities relied on by the applicant are distinguishable and inapplicable to the application before the court. The sum total of the submissions is that the applicant’s application is incurably defective and counsel prayed that it is dismissed with costs.

In rejoinder the applicants counsel submitted that the application was properly before the court. This is because paragraph 4 of the affidavits in support of the application can be expunged from the affidavit of the applicant in support of the application. Counsel relied on the case of Dr Kizza Besigye vs. Yoweri Kaguta Museveni Supreme Court Election Petition number 1/2001. Counsel maintained that the application for amendment relates to the written statement of defence filed in court on 11th of March 2011. Secondly, irregularities pointed out by the Counsel can be adequately compensated for by costs and counsel has not pointed out any injustice or prejudice that the respondent would suffer in the event that the amendment is allowed.

Counsel further submitted that there was no need to apply to enlarge time for filing a counter claim because the law does not provide for that option and order 8 rule 1 (2) of the Civil Procedure Rules does not apply to the facts of the applicant’s case. Counsel submitted that once an application for amendment of the written statement of defence is permitted by the court, the defendant cannot raise a counterclaim within the time allowed for filing such an amended written statement of defence.

Ruling

I have carefully considered the submissions of counsels for the parties. The first question to be considered is a question of fact. There is no dispute that there are two defences which had been filed on the court record. The first defence was filed on 11th of March 2011. It was filed within time. The second defence was filed on the second July 2012 and was an amended written statement of defence filed without the leave of court. The third point to be considered is that both counsels agree that the defence of 2 July 2012 was filed without the leave of court and is improperly before the court. To emphasise the impropriety of the defence of 2 July 2012, counsel for the first applicant has formally applied for withdrawal of the amended written statement of defence filed on court record without leave. That application has not been opposed by the respondent and should be taken for granted that the amended written statement of defence filed on court record on 2 July 2012 is improperly on court record and has been withdrawn. Consequently with regard to the first objection of the respondent, the question is whether the application of the applicant for leave to amend the written statement of defence relates to or purports to amend the amended written statement of defence of 2 July 2012. This is a question of fact.

It is further an agreed fact that paragraph 4 of the affidavits in support of the application makes reference to the second defendants namely the defence of 2 July 2012 and the applicant’s counsel had prayed that the offending paragraph of the affidavit be struck off or severed from the affidavit. After perusal of the affidavit in support I am certain that counsels intended to refer to paragraph 5 and not 4. Paragraph 5 of the affidavit in support of the application by the first applicant clearly indicates that the amended written statement of defence dated second of July 2012 on court record omitted to capture the counterclaim of the applicants. If paragraph 5 of the affidavits in support of the application is severed from the affidavit in support of the application, then what remains does not have the necessary facts for the amendment. First of all the intended amendment is not attached to the affidavit. The only averment is that the amendments sought are necessary for purposes of determining the real questions in controversy between the parties and to ensure justice. Secondly paragraph 3 which would remain is an averment that the second applicant now seeks to amend the written statement of defence and counterclaim against the respondent who is the plaintiff in the main suit. A careful perusal of the remaining application shows that the affidavit in support only deals with the introduction of a counterclaim against the respondent. This also comes out strongly in the grounds set out in the chamber summons. Ground two indicates that the applicant seeks to amend the written statement of defence and raise a counterclaim against the plaintiff. In ground 3 they aver that the intended counterclaim arises out of the same facts and transactions upon which the plaintiff instituted civil suit number 050/2010.

Apart from the submissions of counsel for the applicant the intended amendment is unknown. The only logical conclusion is that the applicant intended to amend the amended written statement of defence dated second of July 2012. This is the only reference to any material in the applicant’s application. To strike this paragraph out (paragraph 5 of the affidavit in support) would render the applicants application without supporting material facts in support of the application. The applicant has sought to strike out this paragraph and therefore even if the striking out is permitted; the court will have to rely on the remaining paragraphs of the affidavit which only deal with the question of counterclaim.

Notwithstanding the failure of the applicant to attach the intended amended written statement of defence of the first and second defendants, a copy of the intended amendment has been availed on court record. The two written statement of defence filed on court record namely on 15 March 2011 under 2 July 2012 have been attached to the affidavit in reply sworn by Hilda. First of all the intended amendment in the draft amended written statement of defence were underlined. A perusal of the underlined parts of the amendment shows that the first amendment is to paragraph 5 (a). There is no corresponding number in the first written statement of defence filed on court record on 15 March 2012. The intended amendment in subparagraph (a) of paragraph 5 intends to add the sum 200,000,000/= Uganda shillings. The only reference to paragraph 5 (a) is in the first and second defendants amended written statement of defence filed on court record on the 2 July 2012. Paragraph 5 of the intended amendment has several paragraphs ranging from (b) to paragraph (l). These subparagraphs to paragraph 5 are contained in the purported amended written statement of defence filed on 2 July 2012 without leave. Consequently all the intended amendments to paragraph 5 relate to or are concerned with an amendment of the amended written statement of defence filed on 2 July 2012. I have also compared paragraph 6 of the intended amendment sought to be introduced by this application. Paragraph 6 of the intended amendment though not numbered deals with particulars of fraud. Paragraph 6 of the original written statement of defence of the first and second defendants filed on court record on 15 March 2011 deals with a completely different matter. On the other hand the amended written statement of defence filed on court record on the 2 July 2012 also deals with a completely different matter. The intended amendment introduces for the first time particulars of fraud and a counterclaim. The attempt of the applicants counsel to withdraw the amended written statement of defence filed on court record on 2 July 2012 only proves that there is no amended written statement of defence even if filed without leave of court. It is therefore my conclusion that the amendment sought in this application deals with a pleading which is not on court record. An amendment it is supposed to make specific reference to the paragraph that it is amending and should distinguish between paragraphs or sentences which have not been amended and those which have been amended. This would enable the parties have of notice of what is being amended and whether to oppose the application for amendment or not. It will also enable the court to determine whether the amendment should be allowed by examining what the amendment purports to do. Fortunately the applicant has underlined the intended amendments. The intended amendments clearly demonstrate that they cannot purport to amend the applicant’s written statement of defence filed on the court record on 15 March 2011 and signed by counsel on 11 March 2011. The application therefore purport to amend an amended written statement of defence which has since been withdrawn by the applicants counsel and in any case has not been relied upon by the applicants counsel and the application is a nullity since it is amending nothing. Notwithstanding I have considered the second point as to whether the introduction of the counterclaim which should be taken to be separate and severable from a defence offends the rules for filing counterclaims.

I would therefore also determine the question of whether a counterclaim can be raised out of time upon an application for amendment of a written statement of defence.

The second objection of the respondent is that the application to introduce a counterclaim would be out of time. The first written statement of defence filed on the court record on the 15th of March 2011 and signed by counsel on 11 March 2011 does not have a counterclaim. The second written statement of defence namely the amended written statement of defence filed on court record without leave of court on second of July 2012 also did not have a counterclaim.

Order 8 rule 2 of the Civil Procedure Rules provides that a defendant in an action may set off or set up by way of counterclaim against the claims of the plaintiff any claim of right. Order 8 rule 7 of the Civil Procedure Rules provides that where any defendant seeks to rely upon any grounds as supporting a right of counterclaim, he or she shall in his or her statement of defence state specifically that he or she does so by way of counterclaim. A reply to a counterclaim is supposed to be delivered within 15 days after service of the counterclaim. The applicants counsel relied on the case of Eastern Bakery versus Castelino (1958) EA 461 – 462. The Court of Appeal held that they did not find any authority for addition of a counterclaim to a defence by way of amendment. But because the trial judge had exercised discretion to allow an amendment, they would not interfere with the discretion provided the principles for amendment of pleadings had not been transgressed. In that particular case, the question of limitation within which to raise a counterclaim had not been raised.

I have carefully considered the issue of the limitation within which to file a counterclaim. Order 6 rule 19 of the civil procedure rules allows the court at any stage of the proceedings to allow either party to alter or amend his or her pleadings in such manner and on such terms as may be just and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties. A counterclaim is not a defence. It is a separate suit and an application for amendment can be made. However, there was no counterclaim in the first place and therefore; there can be no alteration or amendment to a non-existent pleading. The defendant was going to introduce a counterclaim for the very first time and did not need leave to amend but leave to file a counterclaim out of time. A defendant is required to include the counterclaim in the defence. Paragraph 7 provides that where any defendant seeks to rely upon any grounds as supporting a right of counterclaim, he was to show in his or her statement of defence specifically that he or she does so by way of counterclaim. In the previous written statement of defence, the defendant did not indicate that he intended to rely upon any grounds as supporting a right of counterclaim. Moreover under order 8 rule 8 a defendant is required where he or she sets up any counterclaim in cases where another party is included to the counter claim to entitle it and service on the other parties within the time required to file his or her defence. Consequently the correct procedure for the applicant is not to apply for amendment of the defence since a defence is not a separate suit but a defence to an action. A counterclaim is a suit on its own right and if it is brought by way of counterclaim against the plaintiff or another party and has to be filed together with the defence. If it is not filed within the time limited for filing of a defence, the defendant can apply for leave to file it out of time. Counsel for the defendant did not agree that he needed leave to file a counterclaim out of time. He insisted that what was only needed was leave to amend the defence. I do not agree. Because a counterclaim is a separate action and can be struck out as being more appropriate to be filed as a separate suit on application by the plaintiff or any defendant to the counterclaim under order 8 rule 12 of the Civil Procedure Rules without prejudice to the defence, the submissions of the applicants counsel are untenable. The applicant requires leave to file the counterclaim out of time. Because such leave has not been sought and learned counsel for the applicant insisted that he did not require that leave, the application is incompetent and is hereby dismissed with costs.

Ruling delivered on the 10th May 2013

 

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Felix Kintu for the first and second Applicants

Michael Balimunkubo on holding brief for John Fisher Kanyemibwa for the Respondent

Charles Okuni Court Clerk

 

Christopher Madrama Izama

Judge

10th May 2013