Court name
Commercial Court of Uganda
Judgment date
26 September 2014

Asiimwe v Air Uganda & 2 Ors (Miscellaneous Application-2014/740) [2014] UGCommC 144 (26 September 2014);

Cite this case
[2014] UGCommC 144

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 740 OF 2014

(ARISING FROM HCCS NO 44 OF 2012)

FAITH ASIMWE

TRADING AS FAITH SOLUTIONS}...............................................................APPLICANT

VS

  1. AIR UGANDA
  2. AIR MALI
  3. AIR BURKINA (ALL TRADING AS GROUP CELESTAIR)}......................................................................................RESPONDENTS

 

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The Applicant’s applied for the issuance of a Mareva injunction against the Respondents preventing them from further dissipating their company assets until the final determination of the main suit. Secondly without prejudice and in the alternative the Applicant prays that the court makes an order against the Respondents directing them to deposit security for costs before judgment in this honourable court and for costs of the application to be provided for.

The grounds of the application are that there is a pending civil suit HCCS No. 44 of 2012 between the Applicant and the Respondents with a high likelihood of success. Secondly that Air Uganda is in the course of winding up business in Uganda and they are in the process of liquidating their assets. Thirdly it is in the interest of justice that an interim order issues to freeze the said operations until the determination of the main suit. Fourthly if the application is not granted, the suit will be rendered nugatory. Finally that it is just and equitable that the application is granted.

The application is supported by the affidavit of Asiimwe Faith, the Applicant herein. She deposes that in 2012 she filed HCCS No. 44 of 2012 with a high likelihood of success according to a copy of the amended plaint attached to the affidavit. In this suit she prayed for orders for the payment of unpaid arrears for work done, special and general damages arising from breach of contract by the Respondents. By virtue of the a letter by Uganda Air to its employees, she has been informed that the Respondents are in the course of winding up business in Uganda and are in the process of liquidating their assets. It is therefore in the interest of justice that a Mareva injunction issues to freeze the said operations until the determination of the main suit. She has further been advised by her lawyers that a Mareva injunction is the appropriate remedy in the circumstances. Secondly that an order can be issued by this court against the Respondent directing them to deposit security for costs before judgment as a way of ensuring payment in the event that judgment is passed in its favour.

The affidavit in reply to the application is that of Noah Edwin Mwesigwa, an advocate practising with Messieurs Shonubi, Musoke and Company Advocates and the desk officer of the first Respondent duly authorised to make a reply on behalf of the first Respondent.

He deposes that the application is tainted with blatant falsehoods and therefore has no merit. Contrary to the averments in paragraph 2 of the affidavit in support of the application, the main suit has no merit and the Respondents in the amended written statement of defence intend to raise a preliminary objection which would dispose of the entire suit. Consequently all allegations that the suit has a likelihood of success have no merit. All allegations of breach of contract in the underlying suit are without merit and it is the Applicant who fundamentally breached the contract with the Respondents who acted within their rights to terminate the contract.

Contrary to the averments of the Applicant in paragraph the Respondent is not in the course of winding up. The correct position is that the first Respondent merely ceased operations following the cancellation of its Air Operators’ Certificate. The winding up process referred to by the Applicant is an elaborate procedure that involves notification of the public by way of the Gazette notice and no Gazette notice or such other information has been produced in the media and none exists and any allegations of winding up are without merit, unfounded and baseless.

Annexure "B" which is the letter relied upon by the Applicant makes no reference to any liquidation of assets and is the termination letter addressed to the first Respondent's employees. Consequently the affidavit in support of the application is tainted with falsehoods as all allegations of asset liquidation are baseless and ought to be struck out on those grounds. Furthermore all the allegations of winding up and asset liquidation are hearsay and ought to be dismissed as such as the Applicant does not disclose from whom the information was received or addressed.

A Mareva injunction cannot be granted in the circumstances because the Applicant has failed to show any evidence of any liquidation of assets by the first Respondent. In the premises the application is without merit and a waste of courts time as the injunction would be in vain and courts ought not to issue orders in vain.

The application for security for costs is without merit as the Respondent’s remain reputable companies with known physical addresses whose representatives have always been in attendance at the court. In the event that the court passes judgment in favour of the Applicant, the Respondents are able to pay any decretal amount. Furthermore the Respondents have property within the jurisdiction of court and remain able to meet any financial obligations as and when they fall due.

Subsequently the court was addressed in written submissions because of a clog in the dairy. The Applicant is represented by Rachel Sheila Tumwabaze while Respondents are represented by Byarugaba Kusiima.

The Applicant’s case is that there is a pending suit for breach of contract namely HCCS 44 of 2012 between the Applicant and the Respondents with a high likelihood of success. Secondly the Respondents are in the process of winding of their business and have ceased business operations in Uganda. On the other hand and from the affidavit in reply, it is asserted that the application is without merit and may be dismissed. Secondly that the application is full of blatant falsehoods as the company had ceased business operations but was not in the process of liquidating assets or winding up. Thirdly that the Respondents are reputable companies with a physical address and their representatives have always attended court and as such there is no justification for an order granting security for costs before judgment.

The proposed issues by the Applicants Counsel are whether or not the Applicant is entitled to a Mareva injunction? Secondly whether or not, in the alternative the court can give an order for payment of security for costs before judgment? Lastly what other remedies are available to the parties if any.

Whether or not the Applicant is entitled to a Mareva injunction?

The Applicant relies on the letter annexure "B" to the plaint for the contention that the Respondent is in the course of winding up and liquidating assets in Uganda. In response, the Respondents stated that there was no threat of liquidation or winding up as the company had merely ceased business operations. Secondly there was no likelihood of success of the Plaintiff and the Applicant is not entitled to an injunction. Counsel relied on the case of Aetna Financial Services versus Feigelman (1985) 1 SCR 2 where the Supreme Court of Canada considered the two main considerations for the grant of a Mareva injunction. The first consideration is that the Applicant has a strong prima facie case or a good and arguable case. Secondly having regard to all the circumstances, granting the injunction is just and equitable.

As far as the prima facie case is concerned the Applicants Counsel relies on the case of Sauba Nabitindo vs. Umar Nassolo Ssekamate MA 516 of 2011. Though the Applicant has to satisfy court that there is merit in the case, it does not mean that it is one which should succeed. It means that there should be a triable issue which means an issue which raises a prima facie case for adjudication according to the case of Kiyimba Kaggwa versus Katende [1987] HCB 89 and also Devani v Bhadresa and another [1972] 1 EA 22.

The Applicant contends that both parties in their pleadings admit the existence of the contract. The issue in question which remains is whether there was a breach of the contract and if so by which party. This is a triable issue which forms the gist of the suit. The intention to raise a preliminary point of law and have the matter dismissed is not sufficient to show that the Applicant has no prima facie case against the Respondent. In the case of Aetna Financial Services (supra) the Supreme Court of Canada held that a Plaintiff must prove that there is a real risk that the Defendant's assets would be disposed of or dissipated before trial.

The Respondents claim that there is no risk of liquidation of assets or winding up of the company. According to annexure "B" to the Applicant's affidavit and annexure "A", it is not in issue that the Respondents have ceased business operations in Uganda. When a step is taken to cease business operations, the next logical step is to liquidate since those assets are no longer applicable to the business. The Applicant’s Counsel contends that the averment that the Respondents having ceased business operations but are not yet liquidating is just a matter of semantics.

The Applicant’s Counsel agrees that winding up involves a process that requires advertisements, gazetting and holding meetings with directors within a prescribed time and indeed as submitted by the Respondents cannot be done in a short time. This is not the case with liquidating assets of the company. The process is much quicker and unless the honourable court grants the application for a Mareva injunction, then judgment in favour of the Applicants may be in vain. The Applicant would not be a prudent litigant if she did not recognise the danger surrounding cessation of operations and take steps to protect her interests.

Whether or not, in the alternative court can grant an order for payment of security for costs before judgment?

According to the case of Kakooza Jonathan and another versus Kasaala Cooperative Society Ltd Miscellaneous Application 13 of 2011 arising from SCCA 14 of 2013 and with reference to the case of Namboro vs. Kaala [1975] HCB 315 Sekandi J as he then was held among other things that the main considerations in an application for security for costs are whether the Applicant is put to undue expenses by defending a frivolous and vexatious suit. Secondly that he has a good defence to the suit and is likely to succeed. Thirdly that mere poverty of the Plaintiff is not by itself a ground for ordering security for costs because if it were to be so, poor litigants would be deterred from enforcing their legitimate rights through the legal process.

Regarding the circumstances of the Applicant’s case, it is agreed by both parties that the Respondents have ceased business operations in Uganda. It therefore means that they did not have any basis of income in Uganda. According to the case of GM Combined (U) Ltd versus A.K. Detergents (U) Ltd Oder JSC was of the view that the determining factor in allowing or not allowing such an application was the prospect of success, whether or not the Applicant was likely to succeed in the substantive case. It may be a denial of justice to order a Plaintiff to give security for costs of the Defendant who has no defence to the claim. The judge has discretion whether to order security or not. It is the discretion to be exercised in all circumstances of the case if there is reason to believe that the company cannot pay the costs, and then security may be ordered. Consequently and without prejudice if the circumstances do not warrant the grant of a Mareva injunction, this honourable court should be pleased to grant an order for security for costs.

As far as remedies are concerned they have been considered in the first two issues addressed by the Applicants Counsel.

In the reply the Respondent’s Counsel submitted that the application was brought under the wrong rule of procedure. Where there is an alleged breach of contract by the Respondent the specific procedure provided for is under Order 41 of the Civil Procedure Rules which gives the instances and the form of application by chamber summons and not notice of motion under Order 52 rules 1, 2 and 3 of the Civil Procedure Rules as the Applicant did.  In the premises the Applicant’s application ought to be dismissed.

The first Respondent further asserts that the application is against a nonexistent person and is therefore a nullity.  The Applicant relies on the case of the Trustees of Rubaga Miracle Centre versus Mulangira Ssimbwa (H SCMA 576 of 2006 and Mulangira Ssimbwa A.K.A. Afidra Milton versus the Board of Trustees, Miracle Centre and Pastor Robert Kayanja (HCMA 655 of 2005). A plaint was rejected on the ground that it purported to sue a party that was non-existent at law. The onus remained on the Applicant to conduct the necessary due diligence to determine the proper party at law to sue which it failed to do so in this case. On that basis the application should be dismissed.

Thirdly the first Respondent without prejudice avers that the affidavit in support of the application has blatant falsehoods which make it incurably defective as it goes to the root of the application. The first Respondent relies on paragraph 5 of the affidavit in reply which is in response to paragraph 4 of the application. Reference was made therein by the Applicant of winding up and liquidation of assets in a termination letter whose recipient has been deleted and the document tampered with. The letter is not addressed to the deponent and amounts to hearsay. The annexure ought to have been tendered by the party to whom it was addressed rather than the Applicant who was never an employee of the first Respondent. Moreover the Applicant does not disclose how this information was obtained. The letter also makes no reference to any winding up/liquidation of assets. In the circumstances not only are the allegations baseless but also contrary to principles for using affidavit evidence. The affidavit is defective in as far as it failed to disclose from whom this information was obtained and contains hearsay information, falsehoods and ought to be struck out with costs. Counsel relies on the case of Nathan Katamba versus Stephen Kabugyema [2000] KALR 777 at page 780 where Honourable Justice Musoke Kibuuka held that affidavits are serious documents. Once it contains a falsehood in one part, the whole becomes suspect. An application supported by a false affidavit is bound to fail. The Applicant has not come to court with clean hands and the affidavit in support should be struck out. In those circumstances the motion remains unsupported by any kind of evidence and therefore fails. In the premises the Applicant's affidavit in support ought to be struck out.

The first Respondent raises a preliminary objection that the application against the second and third Respondents is frivolous and vexatious as they are not in any way concerned with the alleged winding-up /asset liquidation of the first Respondent. The application is specific to the first Respondent rather than the three Respondents in their entirety and to that end the Applicant ought to be condemned to costs for putting all the Respondents to undue expense when relief is only sought against the first Respondent. In the premises the application ought to be dismissed against the two other Respondents with costs.

Furthermore the Applicant seeks to apply for remedies it is not entitled to under the law. The first Respondent asserts that the remedy of security for costs as stipulated in Order 26 rule 1 of the Civil Procedure Rules is specific to Defendants who are put to undue expense by way of defending frivolous suits filed against them. The case relied upon of Namboro versus Kaala [1975] HCB provides that the main consideration to be taken into account in an application for security for costs are whether the Applicant is being put to undue expense by defending a frivolous and vexatious suit. The second case relied upon by the Applicant of GM Combined (U) versus A.K Detergents (U) Ltd holds that it may be a denial of justice to order a Plaintiff to give security for costs of a Defendant who has no defence to the claim. It is the Respondents who are being put to undue expense by defending a frivolous and vexatious suit and they are the ones entitled under the law to apply for security for costs and not the Plaintiff. In the premises the application for security for costs should be dismissed.

Without prejudice to the preliminary objections the first Respondent’s Counsel submits on the question of whether the Applicant is entitled to a Mareva injunction that the letter relied upon as evidence of winding up/liquidation of assets is specific to the employees of the first Respondent. It terminates the employment in accordance with its obligations and the prevailing labour legislation following the cancellation of the first Respondents Air Operators’ Certificate by the Civil Aviation Authority. As a result of the said cancellation individual contracts of employment were frustrated making the first Respondent unable to keep up these employees in its employment. This is clearly stated in the Applicant's annexure "A" and the Applicant is merely importing words into its allegations that remain unsupported at law.

The Applicant’s authority of Aetna Financial Services versus Feigelman (1985) 1 SCR at page 2 has the holding of the Supreme Court of Canada that the gist of the Mareva action is the right to freeze eligible assets when filed within jurisdiction, wherever the Defendant may reside, providing, of course, there is a cause between the Plaintiff and the Defendant which is justiciable in the courts of England. However, unless there is a genuine risk of disappearance of assets, either inside or outside jurisdiction, the injunction will not issue.

The Applicant's affidavit evidence fails fundamentally by not disclosing any real or imagined disappearance of assets, either inside or outside jurisdiction of the High Court. In the premises the application lacks merit and ought to be dismissed.

On whether there is a prima facie case, the first Respondent in its written statement of defence intends to raise a preliminary objection which may dispose of the Plaintiff's suit. There are no triable issues and Applicant seeks to mislead this honourable court. The first Respondent in the written statement of defence avers that the termination of the contract was lawful following fundamental breaches of the Applicant's obligations therein. Because there is no reply to the written statement of defence, the averments in it remain unchallenged and there is no merit in the suit filed by the Applicant.

On whether it is just and equitable to grant the application, annexure "A" relied upon by the Applicant as evidence of winding up/liquidation of assets or to be struck off the court record for failure to meet basic requirements of affidavit evidence. The letter fails to disclose to whom it was addressed and the Applicants failed to disclose from whom this information was obtained. Secondly it is a known fact which has been published widely in the newspapers of both local and international circulation that the first Respondent’s Air Operators’ Certificate was withdrawn by the Civil Aviation Authority forcing it to cease operations. It is speculative for the Applicant to allege that following the cessation of operations, the next logical step would be the selling of assets. The assertion in such a matter as the one before this court is inadequate without supporting evidence. The application is a fishing expedition because there are no facts to support it.

Whether or not, in the alternative court can give an order for payment of security for costs.

Counsel reiterates submissions in the preliminary objection on the application for security for costs.

In rejoinder the Applicant’s Counsel submits that this was an omnibus application and the procedure used was appropriate. The procedure for an application for a Mareva injunction is by way of notice of motion and that for security for costs is by chamber summons. In this case the rule does not provide for the procedure for commencing the application and the Applicant moved under the provisions of section 98 of the Civil Procedure Act and Order 52 rules 1 and 2 of the Civil Procedure Rules. In any case the procedure is not prejudicial and has not occasioned any miscarriage of justice. Counsel invokes article 126 (2) (e) of the Constitution for the principle of fundamental justice that substantial justice should not be unduly impeded by technicalities.

This suit is based on a contract a copy of which is attached. The contract was made between Celestair Group for Air Mali, Air Uganda and Air Bukina for the supply of uniforms. The contracting parties brought themselves within the ambit of the law of contract as a group and they should be considered as such. The submissions of the Respondents are intended to defeat the Applicant in obtaining a remedy considering that the contracting party is the party who is subject to the suit. The application arises out of the main suit of which all the three airlines are parties. The Respondents have not denied the existence of the contract which forms the basis of the substantive suit. The Respondents have all times held out as Group Celestair and enjoyed the trust of all contracting parties. If not the Respondents did not have clean hands from the beginning and the court should consider equitable principles.

The letter the Respondent seeks to exclude as hearsay is relied on by the Respondents themselves as evidence that there is no liquidation but a cessation of operations in Uganda. The contents of the document have been admitted by virtue of the fact that the Respondents are relying on the same document. Exclusion of the document would be an application of double standards.

Whether the Applicant is entitled to a Mareva injunction?

In rejoinder the submission that due to the cancellation of the Operator’s Licence the only step taken by the Respondent is termination of employment contracts is false. The first paragraph of the letter states "unfortunately, this decision means that the company has no choice but to cease operations." The contents have been admitted by the Respondents themselves and as such they cannot deny parts of the said annexure.

On the issue of whether or not the alternative remedy of security for costs before judgment should be given, the remedy is a discretionary remedy and the court may exercise its discretion to ensure that the Applicant’s remedies at trial are not in vain.

Ruling

I have carefully considered the Applicant’s application, the affidavit evidence the laws cited and the preliminary objections raised by the Respondent’s Counsel on the competence of the application as well as the authorities which have been cited.

The Applicant’s application in ground one of the Notice of Motion is for a Mareva injunction to issue against the Respondents preventing them from further dissipating of the company's assets of the Respondent until the final determination of the main suit. Secondly the Applicant seeks an order without prejudice to the above order sought directing the Respondents deposit security for costs before judgment in this honourable court.

In response to the application and submissions of the Applicant’s Counsel in support of the application, the Respondent’s Counsel raised several preliminary objections on the competence of the application. The first one being that there is no entity known as Air Uganda and therefore the Applicant’s application is against a nonentity and incompetent and according to authorities cited. On the other hand the Applicant’s Counsel maintains that the Respondents have been sued as trading in the names “Group Celestair”. Secondly the Applicant’s Counsel contends that the contracts forming the basis of the main suit were made in the names of the Group Celestair and the Respondents are barred by the doctrine of estoppels from asserting that such an entity does not exist.

I have carefully considered this objection and the affidavit of Noah Edwin Mwesigwa in reply to the application do not contain any evidence about the status of the Respondents. I have duly considered the pleadings of the parties. In the summons to file a defence as well as the plaint all the three Respondents are indicated as trading as "Group Celestair". The first Defendant filed a separate written statement of defence in which it denies paragraph 2 of the plaint where it is averred that the first Defendant is a limited liability company dealing in the business of aircraft and administered under the collective entity called Group Celestair. The second and third Respondents/Defendants also denied paragraph 2 of the plaint which describes the Defendants as trading under an entity called ‘Group Celestair’. No further evidence was provided in the affidavit in reply and the assertion in the objection that the Respondents are non-entities is not supported by any evidence and therefore the objection on the competence of the application on the first ground is premature and in any case is not yet supported by any evidence and is therefore stayed.

Secondly the Respondent’s Counsel submitted that the application was brought under the wrong law and procedure. That the application ought to have been filed by way of chamber summons and not by notice of motion as was done in this case. However the Respondent filed an affidavit in reply and does not demonstrate how the form used by the Applicant has prejudiced the defence of the Respondents. It is now well established that the use of the wrong procedure or the citation of wrong law does not necessarily invalidate the proceedings so long as it does not go to the jurisdiction of the court and has not occasioned any prejudice to the opposite side. In the Ugandan Court of Appeal in Saggu v Roadmaster Cycles (U) Ltd [2002] 1 EA 258  Mpagi-Bahigeine JA who delivered the judgment of the court held at page 262 that citation of a wrong rule was not fatal if it did not go to the jurisdiction of the Court. She said:

“Regarding the second point in objection that the notice of motion did not cite the law under which it was being brought. The general rule is that where an application omits to cite any law at all or cites the wrong law, but the jurisdiction to grant the order sought exists, then the irregularity or omission can be ignored and the correct law inserted.

The court cited with approval earlier decisions of the East African Court of Appeal. In the case of Boyes vs. Gathure [1969] 1 EA 385 proceedings are commenced by chamber summons which is an interlocutory application form and not by originating summons and objection was taken to the procedure. Sir Charles Newbold P held at page 389:

“Did this erroneous procedure result in the whole proceedings being a nullity as is urged by Mr. da Gama Rose? In my view the concept of treating something which has been done and acted upon as a nullity is a concept which should be used with the greatest caution. May I repeat some words I used in Nanjibhai Prabhudas & Co. Ltd. v. The Standard Bank Ltd., [1968] E.A. 670. I said in that case (at p. 683 B):

“The courts should not treat any incorrect act as a nullity, with the consequence that everything founded thereon is itself a nullity, unless the incorrect act is of a most fundamental nature. Matters of procedure are not normally of a fundamental nature.”

Using an incorrect form of procedure which has, in fact, brought the parties before the court and has, in fact, enabled the parties to present their respective cases to the court is not an incorrect act of such a fundamental nature that it should be treated as if it, and everything consequent upon it, did not exist and never had existed.”

By using admittedly the incorrect form i.e. by notice of motion instead of chamber summons it does not invalidate the proceedings or render them incompetent so long as the High Court has jurisdiction in the matter and no prejudice has been occasioned to the opposite side. The objection on the ground that application had been brought under the wrong law and procedure is overruled.

I have considered the other objections which go to the merits of the Applicant's application as being incurably defective because the Applicant relies on a letter which does not give evidence of a winding up or liquidation of the assets of the Respondents. Secondly the order sought does not pray for any remedy against the second and third Respondents. As far as the application for a Mareva injunction is concerned, I will deal with the application on the merits since the question of lack of evidence goes to the merits of the application and is not a preliminary point. Secondly the question of a false affidavit does not arise since the document relied upon for making the assertion about the impending liquidation or dissipation of assets by the Respondents is attached. It is not a question of falsehood but that of whether the interpretation of the Applicant deponent is correct.

As far as the first order sought is concerned there are four main grounds that may be considered the fifth one being that there is a pending suit namely HCCS No. 44 of 2012 between the parties. As far as the first substantive ground is concerned it is averred in ground two of the notice of motion that Air Uganda is in the process of winding up business in Uganda and also in the process of liquidating their assets. The other grounds are corollary to the question of whether the first Respondent is in the process of liquidating assets or winding up business in Uganda. It is averred in the second major ground which is ground three that it is in the interest of justice that an interim order issues to freeze the said operations until the determination of the main suit. Ground number four is also subsidiary to the issue of winding up and liquidation of assets. It provides that if the application is not granted, this suit will be rendered nugatory. Lastly ground five is also dependent on ground two which is on the question of winding up business in Uganda and the process of liquidation of assets. It provides that it is just and equitable that this application is granted.

The first ground is not contentious because it avers that there is a pending suit namely HCCS No 44 of 2012 between Faith Asiimwe trading as Faith Fashions Solutions versus Air Uganda and 2 others. Without considering whether the Applicant's suit has a high probability or likelihood of success, a matter that is in contention, the issue of the pending suit is admitted by the Respondents and this application arises from the pending suit. The question of likelihood of success of the application is tied up with a question of fact as to whether there is evidence of a winding up process or business in Uganda and the process of liquidation of assets by the first Respondent.

The application is complex because on the one hand the Applicant purports to seek remedies against ‘Group Celestair’ but also names the Respondents comprising that group as the individual Respondent's numbers 1, 2 and 3. If the contract upon which the Applicant has sued the Respondents was in the names of ‘Group Celestair’, how does the allegation of the course of winding up business in Uganda and the process of liquidation of assets of Air Uganda demonstrate prejudice the Applicant’s suit? Does ‘Group Celestair’ have its own assets, considering the fact that the Applicant’s case is that they were able to execute a contract on their own as a group?

The Applicant avers in paragraph 3 of the affidavit in support that in the main suit she prayed for orders for payment of unpaid arrears for the work done, special and general damages arising from the breach of contract by the Respondents. In that paragraph the Respondents are considered in a group or jointly. The Applicant however relies on annexure "B" to the affidavit in support which is a letter by Uganda Air. In paragraph 4 of the affidavit in support of the application the Applicant avers as follows:

"That by virtue of the letter by Uganda Air to the employees, I have been informed that the Respondents are in the course of winding up business in Uganda and are in the process of liquidating their assets. (A copy of the letter is attached hereto and marked annexure "B")"

The paragraph is explicit about the source of information of the Applicant and I do not agree with the Respondents submissions that the source of information of the Applicant is not disclosed. The Applicant clearly deposes that it is by virtue of the letter by Uganda Air to the employees that she has been informed. In other words basing on the letter annexure "B" she has come to the conclusion that the Respondents are in the course of winding up business in Uganda and are in the process of liquidating their assets.

I have carefully considered annexure "B" and it is a letter dated 30th of July 2014 written on behalf of Air Uganda. It is also entitled "Private & Confidential." The letter is addressed to an unknown employee of Air Uganda. The photocopy of the letter indicates that the name of the person to whom it is addressed has been concealed by using a white out. The letter reads inter alia that it proposes to advise the unknown employee that the company would be terminating "your employment" contract as a result of the unfortunate events with effect from 31 July 2014. The letter commenced by explaining that an audit of the Uganda Civil Aviation Authority policies and procedures conducted between the 11th and 17th of June 2014 by the International Civil Aviation Organisation revealed shortcomings in their oversight and regulatory capacities. On 17 June 2014 Civil Aviation Authority regrettably opted to withdraw the Air Operators’ Certificate for all international Commercial Air Operators registered in the country, including that of Air Uganda. He goes on to write:

"Unfortunately, this decision means that the company has no choice but to cease operations and to terminate the services of its employees."

I agree with the Respondent’s Counsel that the letter does not make any reference to the liquidation of assets. The letter furthermore writes that the company has no choice but to cease operations and terminate the services of its employees. Ceasing of operations does not mean and as deposed to by the Applicant that the Respondents are in the course of winding up business in Uganda and are in the process of liquidating their assets. The conclusion of the Applicant in paragraph 4 of her affidavit in support of the application is the only evidence and is based on a misinterpretation of annexure "B". In other words the application cannot be based on an allegation that the first Respondent is in the course of winding up business in Uganda or that the first Respondent is in the process of liquidating its assets. There is absolutely no evidence for either case assertion of fact. It follows from the letter itself notwithstanding the hiding of the addressee by a white out, that it is international commercial air operations which were affected. There is no evidence as to domestic air operations. It cannot be concluded that the first Respondent Company is in the process of winding up business without any further evidence.

The deposition of the Applicant is in paragraph 5 and provides that it is in the interest of justice that a Mareva injunction is issued to freeze the threatened action/operations until the determination of this suit. A Mareva injunction cannot be issued to freeze imaginary operations of winding up of business in Uganda and the process of liquidation without evidence. A Mareva injunction is a common law remedy developed by the courts of England with a statutory basis. According to Odgers' Principles of Pleading and Practice in Civil Actions in the High Court of Justice 22nd Edition the term "Mareva injunction" gets its name from the case of Mareva Campania Naviera SA vs. International Bulkcarriers SA [1980] 1 All E.R. 213 where Lord Denning considered a statutory provision which seems to enable it namely section 45 of the Supreme Court of Judicature (Consolidation) Act 1925, and which repeats s 25(8) of the Judicature Act 1873:

“A mandamus or an injunction may be granted or a receiver appointed by an interlocutory Order of the Court in all cases in which it shall appear to the Court to be just or convenient …”

Lord Denning held at page 215:

" In my opinion that principle applies to a creditor who has a right to be paid the debt owing to him, even before he has established his right by getting judgment for it. If it appears that the debt is due and owing, and there is a danger that the debtor may dispose of his assets so as to defeat it before judgment, the court has jurisdiction in a proper case to grant an interlocutory judgment so as to prevent him disposing of those assets."

Subsequently Lord Denning MR in applications by a Plaintiff for a Mareva injunction against a Defendant within the jurisdiction of the court set out some guidelines for the Plaintiff to satisfy before a Mareva injunction can be granted. This was in the case of Third Chandris Shipping Corporation and others v Unimarine SA The Pythia, The Angelic Wings, The Genie [1979] 2 All ER 972, per Lord Denning M.R. at 984 – 985.

            “The guidelines

In endeavouring to set out some guidelines, I have had recourse to the practice of many other countries which have been put before us. They have been most helpful. These are the points which those who apply for it should bear in mind. (i) The Plaintiff should make full and frank disclosure of all matters in his knowledge which are material for the judge to know... (ii) The Plaintiff should give particulars of his claim against the Defendant, stating the ground of his claim and the amount thereof, and fairly stating the points made against it by the Defendant. (iii) The Plaintiff should give some grounds for believing that the Defendants have assets here. ... The existence of a bank account in England is enough, whether it is in overdraft or not. (iv) The Plaintiff should give some grounds for believing that there is a risk of the assets being removed before the judgment or award is satisfied. The mere fact that the Defendant is abroad is not by itself sufficient. No one would wish any reputable foreign company to be plagued with a Mareva injunction simply because it has agreed to London arbitration. But there are some foreign companies whose structure invites comment. We often see in this court a corporation which is registered in a country where the company law is so loose that nothing is known about it, where it does no work and has no officers and no assets. Nothing can be found out about the membership, or its control, or its assets, or the charges on them. Judgment cannot be enforced against it. There is no reciprocal enforcement of judgments. It is nothing more than a name grasped from the air, as elusive as the Cheshire cat. In such cases the very fact of incorporation there gives some ground for believing there is a risk that, if judgment or an award is obtained, it may go unsatisfied. Such registration of such companies may carry many advantages to the individuals who control them, but they may suffer the disadvantage of having a Mareva injunction granted against them. The giving of security for a debt is a small price to pay for the convenience of such a registration. Security would certainly be required in New York. So also it may be in London. Other grounds may be shown for believing there is a risk. But some such should be shown. (v) The Plaintiffs must, of course, give an undertaking in damages, in case they fail in their claim or the injunction turns out to be unjustified. In a suitable case this should be supported by a bond or security: and the injunction only granted on it being given, or undertaken to be given.”

The basis of the above Mareva injunction and guidelines discussed in the two cases has a similar statutory basis as section 37 (1) and (2) of the Judicature Act cap 13 laws of Uganda which provides that:

"(1) The High Court may grant an order of mandamus or an injunction or appoint a receiver by an interlocutory order in all cases in which it appears to the High Court to be just or convenient to do so.

(2) An order may be made under this section unconditionally or on such terms and conditions as the High Court thinks just."

The exercise of powers under the UK section 45 of the Supreme Court of Judicature (Consolidation) Act 1925, and which repeats s 25(8) of the Judicature Act 1873 as reported in the case of Mareva Campania Naviera SA vs. International Bulkcarriers SA (supra) has a similar statutory basis as the Ugandan section 37 of the Judicature Act. The relevant section was quoted by Lord Denning as follows:

“A mandamus or an injunction may be granted or a receiver appointed by an interlocutory Order of the Court in all cases in which it shall appear to the Court to be just or convenient …”

The provision is in pari materia with section 37 (1) of the Judicature Act of Uganda and the above two authorities interpret this section and is therefore very persuasive. Consequently the guidelines by Lord Denning which forms part of the common law of England in the interpretation of a similar provision is part of the common law of Uganda under the provisions of section 14 (2) (a) and (b) of the Judicature Act as well as the interpretation of the term "common law" by the Interpretation Act Cap 3 laws of Uganda and section 1 (3) (n) thereof. Section 1 (3) (n) provides that:

            "'common law' means the common law of England;"

On the other hand section 14 (5) of the Judicature Act provides that for purposes of section 14 the expression "common law" and "doctrines of equity" mean the part of the law of Uganda, other than the written law, the applied law or the customary law, observed and administered by the High Court as the common law and doctrines of equity respectively. This means that the common law applied by the High Court before the enactment of the Judicature Statute in 1996 included the wealth of judicial precedents of the East African court as well as the common law of England by the time of enactment of the Judicature Act. The guidelines of Lord Denning for the grant of Mareva injunctions are therefore persuasive.

In this case the Plaintiff has not made a full and frank disclosure of all matters within her knowledge which are material for the judge to know. There is no addressee to the letter relied upon namely annexure "B". Secondly there are no material disclosures about whether these any other source of information to reach the conclusion that the first Respondent is winding up its business operations because annexure "B" does not lead to this inference of fact. Secondly there is absolutely no evidence anywhere about whether the first Respondent is about to liquidate its assets. The Plaintiff has given particulars of the claim against the Defendant by attaching the plaint as indicated in the guidelines for the grant of Mareva injunctions but has not stated the grounds for believing that the Defendants have assets in Uganda. Secondly the Plaintiff has not giving the grounds for believing that there is a risk of the assets been removed before judgment or award in this suit.

In the premises the Applicant does not satisfy the basic requirements for the grant of a Mareva injunction and therefore the application for the grant of a Mareva injunction is disallowed.

In the alternative the Applicant seeks for an order for the Defendants to furnish security for the payment of all costs.

It is the Plaintiff who commenced the action against the Defendants and who has incurred costs and induced the other Defendants to incur costs. The authorities relied upon deal with Order 26 of the Civil Procedure Rules. Order 26 rule 1 of the Civil Procedure Rules which is the only rule applicable for the payment of all costs incurred by any Defendant provides as follows:

            "1. Security for the costs of a Defendant.

The court may if it deems fit order a Plaintiff in any suit to give security for the payment of all costs incurred by any Defendant."

In this application the Applicant quotes section 98 of the Civil Procedure Act. However applications for security for costs and the authorities relied upon by the Applicant namely the cases of Kakooza Jonathan and another versus Kasaala Cooperative Society Ltd Supreme Court Civil Application Number 13 of 2011 considers an application for security for costs under the Supreme Court rules. In that case the court considered the High Court case of Namboro versus Kaala [1975] HCB 315. I agree that in the cases quoted deal with Order 26 rule 1 of the Civil Procedure Rules. Secondly the case of GM Combined (U) Ltd versus A.K. Detergents (U) Ltd and the part relied upon by the Applicant’s Counsel: "it may be a denial of justice to order a Plaintiff to give security for costs of the Defendant who has no defence to the claim" deals with security being furnished by a Plaintiff. Finally the situation at an appellate level is different from the situation in the High Court. At an appellate level where the Plaintiff has won in the High Court and the Defendant appeals, the Plaintiff can apply for the Defendant/appellant to the appeal to furnish security for costs. I restrict myself to Order 26 rule 1 of the Civil Procedure Rules whose wording is clear enough and provides that the court may order the Plaintiff to furnish security for the payment of all costs incurred by the Defendant. The rule only caters for applications by the Defendant for the furnishing of security for costs by the Plaintiff. I do not need to consider the rational for having the Plaintiff furnish security for costs. The rule does not cater for the Defendant furnishing security for costs of the Plaintiff. In the premises the Applicant's application for the Defendants/Respondents to furnish security for costs cannot be sustained and is accordingly disallowed.

In the premises the Applicant's application lacks merit and is dismissed with costs.

Ruling delivered in open court this 26th day of September 2014

 

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Byarugaba Kusiima for the Respondents

Respondents not in court

The Plaintiffs counsel is absent

Plaintiff is in court

Charles Okuni: Court Clerk

Christopher Madrama Izama

Judge

26/09/2014