Court name
Commercial Court of Uganda
Judgment date
9 September 2014

Busitema Multi-Purpose Farmers Co. Ltd & 9 Ors v stanbic Bank Ltd & 2 Ors (Miscellaneous Application-2013/1081) [2014] UGCommC 138 (09 September 2014);

Cite this case
[2014] UGCommC 138
Coram
Obura, J

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL COURT DIVISION)

MISC. APPLICATION NO.1081 OF 2013

(Arising out of civil suit No. 452 of 20012)

 

  1. BUSITEMA MULTI- PURPOSE FARMERS CO. LTD                       ]
  2. MASAFU MULTI-PURPOSE FARMERS CO. LTD                           ]
  3. NAMAKA CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD   ]
  4. BULUMBI MULTI -PURPOSE FARMERS   CO. LTD                       ]
  5. SERE GENERAL FARMERS’ ASSOCIATION LTD} :::::::::::::::::::::::::::::::::::::::APPLICANTS                               
  6. BUHEHE MULTI - PURPOSE CO. LTD                                           ]
  7. BUTEBA MULTI - PURPOSE CO. LTD                                           ]
  8. MASABA MULTI - PURPOSE FARMERS CO. LTD                        ]
  9. LUMINO MULTI - PURPOSE ASSOCIATION LTD                         ]
  10. LUNYO MULTI – PURPOSE FARMERS  ASSOCIATION LTD          ]                                                  

VERSUS

 

  1. STANBIC BANK UGANDA LTD                                                                 ]
  2. NIKO INSURANCE (U) LTD}                                 :::::::::::::::::::::::::::::::::::::RESPONDENTS
  3. BUSIA PRODUCE DEALERS MULTI-PURPOSE 

CO-OPERATIVE SOCIETY LTD                                                                   ]

 

BEFORE HON. LADY JUSTICE HELLEN OBURA

 

RULING

 

This application was brought under section 98 of the Civil Procedure Act (CPA) Cap 71, Order 1 rules 1, 10 (2) & (4), and 13 of the Civil Procedure Rules (CPR) for orders that; the 1st to the 10th applicants be joined as plaintiffs to High Court Civil Suit No. 452 of 2012, the 2nd respondent be joined as defendant to the suit and the costs of this application be provided for. The grounds for this application are stated in the notice of motion and the different affidavits in support sworn by all the applicants. The gists of the grounds are as follows:-

 

The 1st to the 10th applicants entered into a partnership with the 3rd respondent to engage in commercial production of soya beans. The applicants secured funds from the 1st respondent through the 3rd respondent to finance the commercial production of soya beans.

 

The officer of the first respondent gave the applicants a reputable foreign insurance company called SANTAM S.A a South African insurance company to sale the farmers a Weather Index Insurance Policy to help them cover against loss of the crop due to adverse weather conditions and also help the farmers with the loan payment in such an event. This company in turn appointed a local insurance company called NIKO Insurance (U) Ltd which signed the insurance cover with each of the applicant companies.

 

Due to heavy rain fall, most of the soya bean crop was destroyed which facts were made known to the 1st and 2nd respondents who refused to pay the applicants and the 3rd respondent. The applicants believe that the 2nd respondent being the insurer who issued the cover note is liable to make good the loss as a result of the adverse weather conditions that affected the crop. It is contended by the applicants that joining them as plaintiffs and the 2nd respondent as defendant would lead to effective adjudication of the dispute and avoid multiplicity of suits.

 

An affidavit in reply opposing the application was sworn by an official of the 1st respondent who stated that the 1st respondent agreed to avail an agricultural loan facility to the 3rd respondent in four separate facilities. This facility was secured by a mortgage over property comprised in FRV606 Folio 10 Block 8 Plot 222 Samia Bugwe Land at Namaubi. The loan was further secured with a Weather Index Insurance Policy by SANTAM Limited (RSA).

 

It is contended by the 1st respondent that the loan agreement was made between the 1st respondent and the 3rd respondent in a relationship of lender and borrower to which contractual agreement the applicants were not party and therefore can not join now. Furthermore, that the allegations of the applicants having partnered with the 3rd respondent to engage in commercial farming have no bearing on the contractual obligation of the 1st respondent and the 3rd respondent.

 

The deponent further averred that all the cover notes were signed by the 1st respondent as the insured and issued by the 2nd respondent and none of the insurance cover notes was signed by any of the applicants, therefore the applicants are not party to the Insurance Policy and cannot as a matter of law be joined in as plaintiffs. Hence the application is without basis and should be dismissed.

 

At the hearing, Mr. Peter Mugimba who was holding brief for Mr. Richard Okallany appeared for the applicants and Mr. David Semakula Mukiibi appeared for the 1st and 2nd respondents. They agreed to file written submissions which was done and have been considered in this ruling.

 

In his submissions, counsel for the applicant argued that the applicants also known as the farmer groups entered into agreement with the 3rd respondent to secure funds from the 1st respondent to finance the commercial production of soya beans. During the negotiations, the 1st respondent gave the applicant companies an assurance that they would purchase a Weather Index Insurance Policy to provide insurance cover against loss of the crop due to adverse weather conditions. This was to allay the farmers’ fear about repayment of the loan.

 

Furthermore, that SANTAM S.A appointed NIKO Insurance (U) Ltd as its local insurer who in turn advised the applicants on the planting window and average rainfall data for both excess and low rainfall. Hence the applicants are entitled to hold the 2nd respondents liable to compensate them for their loss.

 

Counsel for the applicant cited the case of Kololo Curing Co. Ltd vs West Mengo Co-op Union Ltd (1981) HCB 60 where court observed that the main purpose of joining parties is to enable Court to deal with the matter before it and to avoid multiplicity of suits. Court further observed that, it is a fundamental consideration that before a party can be joined as a party, it must be established that the party has high interest in the suit. In addition it must also be clearly demonstrated that the orders sought in the main suit would directly legally affect the party seeking to be added. Hence the joinder of applicants as co-plaintiffs is relevant for the proper and effective adjudication of the main suit.

 

Counsel for the 1st& 2nd respondents submitted that the loan facility extended to the 3rd respondent is basically a contractual relationship between the 1st respondent as the lender and the 3rd respondent as the borrower which was secured by a mortgage over the property comprised in FRV 606 Folio 10 Block 8 Plot 222 Samia Bugwe Land at Namaubi registered in the names of the 3rd respondent and a Weather Index Insurance Policy by SANTAM Limited S.A. Therefore the applicants’ partnership with the 3rd respondent has no bearing on the contractual obligations of the 1st and 3rd respondent.

 

The 1st & 2nd respondents’ counsel cited the case of Kayanja vs. New India Association Co. Ltd [1968] EA 295 which was cited in the case of Lunco Construction Ltd vs. A.G & Anor at page 3 for the legal principle that a stranger to a contract cannot sue upon the contract unless given a statutory right. Thus, the 1st respondent is the only insured therefore the 2nd respondent cannot be joined in the suit as the applicants never signed any cover note and neither can the applicants be joined in the suit as they are not party to the contract between the 1st and the 3rd respondents.

 

I have carefully addressed my mind to the submissions of both counsels as well as looked at the grounds advanced in support and opposition of this application and the pleadings in the main suit to which the applicants seek to be added with the 2nd respondent. I have also perused the documents provided by all the parties to this application. I must point out from the onset that it is not disputed that the loan agreement which is the basis of the claim in H.C.C.S. No. 452 of 2012 is between Stanbic Bank (U) Ltd, the 1st respondent/defendant and M/S Busia Produce Dealers Multi-Purpose Co-operative Society Ltd, the 3rd respondent/plaintiff. It is also not disputed that the insured under the Weather Index Insurance Policy is the 1st respondent.

 

However, the applicants seek to be added to the suit as plaintiffs and also bring on board the 2nd respondent as defendant on the premises that both the loan facility taken by the 3rd respondent and the insurance policy taken by the 1st respondent were for their benefit. According to the applicants’ arguments, they are entitled in law to hold the 2nd respondent liable to compensate them for the loss they suffered due failure of the crops as a result of adverse weather condition which was covered by the insurance policy.

 

It is indeed true that the insurance policy covered loss of soya bean crops that would be occasioned by shortfall in or excess rainfall. According to the affidavits in support of the application and the different insurance cover notes attached thereto as well as the allegations in the plaint and the arguments by counsel, the applicant farmer groups were the ones to grow the soya bean crops. Be that as it may, would the applicants be entitled to claim under the insurance policy to which they were not party? To my mind the answer to this question would determine the necessity to add both the applicants and the 2nd respondent as parties to the main suit.

 

To answer the question I have looked at the Weather Index Insurance Policy Number NIKO/WE/0022/11 (Master Policy) attached to the affidavit in support sworn by Betty Ajambo as annexture “D”. It is stated in the schedule thereto that the insured is Stanbic Bank (Uganda) Limited whose business is described as banking, including provision of agricultural loans to small scale farmers. Clause 12 of the policy which provides for settlement of claims clearly states that claims will be paid to the “insured” within 30 (thirty) working days after written acceptance of claims report by the insured, provided that all premiums are paid in full. In other words, as is the normal practice, it is the insured that was to be paid under that policy and not any other 3rd party. I therefore would answer the above question in the negative and find untenable the applicants’ argument that they are entitled in law to hold the 2nd respondent liable to compensate them for the loss they suffered. The only party who can claim from the 2nd respondent is the 1st respondent who is at liberty to proceed against the 2nd respondent in the current suit by seeking leave to issue a 3rd party notice.

 

As regards the loan agreement between the 1st respondent and the 3rd respondent, I do not also find any merit in the applicants’ argument that they should be made a party to the suit so as to present their case since they were the beneficiary of the loan. The allegations in the plaint and the prayers for relief are all based on the loan agreement to which the applicants are not party. I therefore do not find any cause of action by the applicants against the 1st respondent. I believe the applicants can be more useful in the case by providing the evidence required to prove the plaintiff’s case against the defendant without being added as parties to the suit.

 

For the above reasons, I do not find necessary the addition of the applicants as plaintiffs and the 2nd respondent as defendant to H.C.C.S. No. 452 of 2012. In the result, I decline to grant the orders sought by this application and I accordingly dismiss it with costs.

I so order.

Dated this 9th day of September 2014.

 

Hellen Obura

JUDGE

Ruling delivered in chambers at 3.00pm in the presence of Mr. Richard Okallany for the applicants whose officials were also present and Mr. Mukiibi Semakula for the 1st and 2nd respondents.

 

JUDGE

09/09/14