Court name
Commercial Court of Uganda
Judgment date
19 November 2014

Spencon Services Ltd v Roofings Rolling Mills Ltd (Miscellaneous Application-2014/619) [2014] UGCommC 156 (19 November 2014);

Cite this case
[2014] UGCommC 156

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 619 OF 2014

(ARISING FROM HCCS NO 462 OF 2014)

SPENCON SERVICES LTD}....................................................................APPLICANT

VERSUS

ROOFINGS ROLLING MILLS LTD}.....................................................RESPONDENT

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

This ruling arises from an application of the Applicant under rules 3 (1) and 4 of Order 36 of the Civil Procedure Rules and section 98 of the Civil Procedure Act for unconditional leave to defend the Respondent’s summary suit No 462 of 2014 and for costs to be provided for.

There are five grounds of the application disclosed in the Notice of Motion set out herein below:

  1. The supply of construction materials by the Respondent to the Applicant was not made on "payable on demand terms".
  2. The supply of construction materials by the Respondent to the Applicant was made on open extended credit terms based on past dealings between the Applicant and the Respondent;
  3. Late payment for the goods was caused by a frustrating event;
  4. The Respondents current demands are contrary to the usages of trade in the construction industry and was wholly uncharacteristic of the previous conduct between the Applicant and the Respondent;
  5. The Respondent is estopped from making the current demand until it has exhausted its remedies under the contract; and
  6. It is in the interest of justice, equity, and fairness that the suit is heard on the merits since the Applicant has a good defence and has a reasonable cause to appear and defend the suit.

The application is supported by the affidavit of Raghava Reddy Munnamgi the Accountant of the Applicant Company and referred to as the affidavit in support. He deposes that on 8 July 2014 the Applicant was served with summons in a summary suit for recovery of a liquidated sum of US$187,583.79 as payment for construction materials supplied and for costs of the suit. Upon perusal of the plaint and annexure thereto together with the affidavit in support of the summary suit deposed to by the Respondent’s Company Sales Manager Mr Edwin Kwesiga, he is of the belief that the Applicant has a meritorious defence going to the root of the Respondent’s claim in the main suit and has a reasonable cause to appear and defend the suit.

Dealings in construction reinforcement materials made out of steel in different sizes, between the Applicant and the Respondent, begun as far back as 1996. Unfortunately, the Applicant's records were manual at the time and were not computerised and the present accounting records dated back only as far as the last eight years. From the start of the business the relationship between the Applicant and the Respondent was that dealings were on credit which allowed for an extended period of payment for the materials supplied. It was an understanding between the parties that payment for the goods sold would be effected within a reasonable period. In the past the Respondent allowed a delayed payment period deferring between 60 days, 90 days and 120 days after delivery of the invoice advising payment.

During this business relationship which has lasted the past 18 years, the Applicant has always honoured its payment commitments to the Respondent and paid all the monies owed by it under various sales invoices. In recognition of this good relationship, the Respondent extended to the Applicant a customer credit line up to a limit of Uganda shillings 1,200,000,000/= for purchasing construction materials. Pursuant to the usual past practices in the year 2013 the Applicant purchased construction materials from the Respondent with the bona fide intention of paying for the same in due time. The Applicant's ability to pay timely was contingent on anticipated release of funds by the government of Uganda and that it was in the bona fide belief that it would receive timely payment that the Applicant issued cheques to the Respondent to clear the balance. The Applicant’s diligent efforts to secure the release of funding from the government of Uganda were frustrated. Subsequently in accordance with the good business relationship between the parties, the General Manager of the Applicant Mr Mrutunjay Pani kept the Respondent updated about the unfortunate developments and affirmed the Applicant's intention to pay.

On the basis of information from his lawyers the deponent believes that the doctrine of estoppels applies to this matter and the Respondent is bound to grant the Applicant additional time to make payment of the monies owed. The tax invoice provided by the Respondent stipulates that the remedy for late payment is the imposition of an interest of 2% per month on the outstanding amount and therefore delays in payment would not amount to breach of contract. The Applicant has always been willing to settle the dues amicably and expeditiously and recourse to the court was unnecessary. The deponent believes that it is in the interest of justice; equity and fairness that the Applicant is granted unconditional leave to defend the suit.

In the affidavit in opposition to the application the Sales Manager of the Plaintiff/Respondent to this application Mr SURAJ Kumar Malhotra deposes that the Applicant’s affidavit in support of the application admits that the Applicant purchased the materials from the Respondent and payments for the goods sold would be effected within a reasonable period. Furthermore the Applicant admitted having purchased the construction materials from the Respondent with a bona fide intention of paying for it in due time but this has not been done up to date. The Applicant is not barred by the doctrine of estoppels in any way from paying the debt that it rightfully acknowledges and admits. On the basis of the affidavit in support of the application, there are no triable issues which have been advanced and no defence to the summary suit is disclosed. Therefore the Applicant's application was filed in bad faith and is aimed at buying time so as to defeat the Respondent's interest. In the circumstances the Respondent prays that it is just and equitable that the application is denied.

In rejoinder Gollpalli Narayan Ramchander Reddy, the Regional Head of Business Development for Uganda of the Applicant deposes that on the question of estoppels, it is the Respondent and not the Applicant that is barred by the doctrine of estoppels from falsely claiming that the goods were sold on "payable on demand" terms rather than on "extended credit" terms as has being the parties mutually established practice in the course of previous dealings over time. On the question of triable issues, the Applicant raised bona fide triable issues in respect of the application of the legal doctrine of estoppels and frustration. The Applicant is acting in utmost good faith in its dealings with the Respondent and not in bad faith. The Respondent’s uncharacteristic behaviour of commencing an action was done in the mistaken belief that the Applicant was ceasing business in Uganda and was on the brink of disposing of all its assets and disappearing. The basis of the Applicant’s conclusion is the Respondent’s application to this court by chamber summons in Miscellaneous Application No 704 of 2014 arises out of the summary suit. In ground two of that application the Respondent avers that the Applicant had "ceased business in Uganda, and is in the process of closing its offices and disposing of all is movable properties and assets."

In the reply the deponent deposed that the Applicant had neither ceased business in Uganda or harboured any intention of doing so and was not undergoing a sale. On 29 September 2014 the registrar dismissed the application with costs for being without any merit. On the basis of the Respondent’s application in Miscellaneous Application No 704 of 2014 the deponent firmly believes that there was a mistaken belief and fear that the Applicant was about to windup business in Uganda.

On the other hand the Applicant’s behaviour is in accord with its past commercial dealings with the Respondent and it will settle the matter of payment of dues amicably and with reasonable expedition taking into account the current impasse with government of Uganda. It is in the interest of justice, equity and fairness that the Applicant is granted unconditional leave to appear and defend the suit. Both Counsels filed written submissions.

Applicant’s submissions:

Briefly the Applicant admits that the outstanding amount claimed by the Respondent in the summary suit for construction materials supplied to it amounts to US$187,583.79. The facts giving rise to HCCS 462 of 2014 are that sometime in 2013 the Respondent supplied the Applicant with various construction materials on credit and allegedly with the express undertaking that the Applicant would pay upon demand. Demands were made by the Respondent upon the Applicant and were allegedly not satisfied. The cheques issued by the Applicant in satisfaction of the sum outstanding were dishonoured when the Respondent presented them for payment. The Applicant’s Counsel relies on the grounds for leave to defend as contained in the notice of motion as well as the affidavit in support of the motion and affidavit in rejoinder set out above.

The major ground of opposition to the application is contained in the affidavit of Suraj Kumar Malhotra, the Respondent’s Sales Manager and is to the effect that the Applicant is not estopped from paying the debt it acknowledges and therefore the application raises no triable issue, was brought in bad faith with the aim of buying time so as to defeat the Respondent’s interest.

The legal principles in applications of this nature are that the Applicant must show by affidavit or otherwise that there is a triable issue or an arguable point of law or fact which the court ought to determine between the parties to the suit. Additionally leave to appear and defend will not be given merely because there are several allegations of fact or law made in the Applicant’s affidavit. The Applicant must satisfy the court that the allegation so raised amount to a plausible defence. The only issue therefore is whether there are triable issues of fact or law which the court ought to determine between the parties to the suit.

Two triable issues are disclosed in this case. The first is whether the construction materials were supplied on payable on demand terms or on open extended credit terms; and secondly whether the Respondent is estopped from making the current demand in light of the previous course of dealings between the parties.

In the summary suit the Respondent alleges that the construction materials were supplied under an express undertaking that the Applicant would pay the same upon demand. The documents cited in support of the Respondent's position do not reflect this view of the dealings between the parties. The tax invoices attached to the plaint explicitly state that the terms of the payment are "credit". The Applicant asserts that the parties had an understanding and course of dealing over time.

The tax invoices expressly require payment after 30 days. The parties had developed a tradition of extended payment periods that varied greatly with the shortest period being 60 days and the longest period up to 120 days after invoicing. The evidence of the Applicant has not been challenged. Furthermore the Respondent had extended the Applicant a customer credit line limit of Uganda shillings 1,200,000,000/= equivalent to about US$450,830. The credit obligation towards the Respondent of US$187,583 is about 41% of the allowable credit line extended to the Applicant by the Respondent.

The Respondent maintained that its demand for payment went unheeded but in the same breath admits that the Applicant had issued it with cheques. The cheques had been issued in the bona fide belief that there were funds forthcoming from the government. The Applicant’s Managing Director was in constant contact with the Respondent and had in fact responded to the demands by issuing cheques. However when the government failed to honour its payment commitments, the Applicant’s General Manager promptly informed the Respondent of this unfortunate frustrating event. The Respondent does not deny receiving this communication. In the premises the Respondent is not entitled to summary judgment on the basis that the Applicant was on 'payable on demand' basis.

The Applicant acquired construction materials on credit in 2013 in accordance with terms of past dealings between the parties. It was a flexible arrangement and the Respondent is estopped from turning around and denying that the construction materials supplied were on open credits terms. The position of the Respondent is very uncharacteristic of previous transactions and seems to be based on the mistaken belief that the Applicant is winding up business operations. This is evidenced from the pleadings in miscellaneous application number 704 of 2014.

There is no allegation in the summary suit that the actions of the Applicant were in breach of contract. Consequently the Applicant's position is reinforced that the parties where dealing as was the custom in previous transactions. In the premises the application ought to be granted with costs in the cause.

Submissions of the Respondent’s Counsel in reply:

The Respondent’s case is that on 3 July 2014 it filed a specially endorsed summary plaint for orders that the Applicant/Defendant pays a liquidated sum of US$187,523.79 for construction materials supplied and for costs of the suit. The Respondent’s brief facts are that the Plaintiff/Respondent supplied the Applicant/Defendant with various construction materials worth the amount of money claimed on credit with the express undertaking that the Applicant would pay the same upon demand. The Respondent made several demands on the Applicant to pay but all in vain. The Applicant/Defendant instead issued two cheques each in the sum of US$50,000 on the 31st day of May 2014 and 15th of June 2014 respectively which were dishonoured upon presentation by the Plaintiff/Respondent for payment. It is an admitted fact that the Applicant purchased the building materials from the Respondent and payments for the goods would be effected within a reasonable period. The Applicant admitted having purchased the construction materials with a bona fide intention of paying in due time but this has never been done up to date.

The Respondent’s Counsel submitted that Order 36 rule 4 requires a Defendant served with summons for leave to appear and defend a suit to state in the affidavit in support whether the defence alleged goes to the whole or part only and if it is part, which part of the Plaintiff’s claim. The Applicant has not raised any triable issues concerning the debt. The Applicant has only admitted by way of affidavits evidence its indebtedness to the Respondent which indebtedness is not disputed.

The Applicant does not deny any indebtedness to the Respondent and efforts by the Respondent to get paid by the Applicant’s have only been in vain. This is evidenced by the Applicant’s conduct. The Respondent made demands on the Applicants and the only attempt that was made was the issuance of two cheques settling only US$100,000 which cheques were dishonoured upon presentation. The issuance of the cheque is indicative that payment was due at that time. The argument that can be deduced by the Applicant’s submission is that payment is not due or was not due at the time of filing this suit. The question is what was the right time to pay? No alternative date has been advanced by the Applicant and the burden of proof is on the Applicant under section 101 of the Evidence Act to prove that the parties agreed to an extended credit period.

In addition the only way the Respondent has been able to secure payment from the Applicant was through court at the beginning of the year by instituting HCCS No 10 of 2014 between the ROOFINGS versus SPENCON SERVICES LTD. The unwillingness of the Applicant to settle the debt is demonstrated by its filing of the application for leave to appear and defend with no bona fide triable issue of law or fact.

The Applicant also averred that payment for the goods was supposed to be effected within a reasonable period. The Respondent in the past allowed the delayed payment with delays ranging for 60 days, 90 days and 120 days of delivery of the invoice advising payment. The last invoice that was advanced by the Respondent was on 9 June 2013. The Applicant only attempted to pay on the 31st of May 2014 and 15th of June 2013 by way of cheques which bounced. This was way beyond the 120 days and is now close to one year and three months. The period cannot be a reasonable time.

Counsel further relied on principles governing applications for leave to appear and defend in the cases of Maluku Interglobal Trade Agencies Ltd versus Bank of Uganda [1985] HCB 66; Kasule vs. Muhwezi [1992 – 1990] HCB 213 and Tororo District Administration versus Andalalapo Industries Ltd HCMA 12/1997. The principles in the cases are firstly that the Defendant must show by affidavit or otherwise that there are triable issues of fact or law. Where there is a reasonable ground of defence to the claim, the Plaintiff is not entitled to summary judgment. The defence must be a plausible one and not a sham defence. The defence should be stated with sufficient particularity so as to appear genuine.

The Applicant/Defendant has not advanced any bona fide triable issues. On the issue of anticipation of funds from the government, the long period of waiting is not a ground to deny the Respondent its money but only an explanation as to why the payment delayed beyond the agreed period. The particulars of the delayed payment were not given and the court ought not to believe the assertion at face value without evidence. It is the practice that the Defendant’s proposed defence ought to be attached. No proposed defence has been attached. Since the debt is admitted, what is raised is a matter of execution and not triable issues. There is no supporting documentary evidence.

As far as the question of estoppels by past conduct is concerned, there is no supporting documentary evidence to the effect that the parties had opening credits terms. (Part of the Respondents submissions are missing and what the court has received goes up to page 4 which shows a missing continuation).

Ruling

I have carefully considered the Applicant’s application for leave to defend the Respondent’s suit. I have also considered the reply, pleadings in HCMA No 704 of 2014 as well as the summary suit pleadings together with the submissions of Counsel and applicable law.

The principles governing applications for leave to defend a summary suit are not contentious and are summarised in the submissions of both Counsel and there is no need to restate what is already referred to in the submissions. I will in due course consider further principles governing defences based on a point of law.

Order 36 rule 2 of the Civil Procedure Rules provides that where a Plaintiff seeks only to recover a debt or liquidated demand in money payable by the Defendant, with or without interest arising upon a contract, express or implied, he or she may at the option of the Plaintiff, institute a suit by presenting a plaint in the prescribed form accompanied by an affidavit made by the Plaintiff or by any other person who can swear positively to the facts, verifying the cause of action, the amount claimed, if any and stating that in his or her belief that there is no defence to the suit.

Under Order 36 rule 3 (1) of the Civil Procedure Rules, a Defendant cannot be heard in defence except after applying for and obtaining leave from the court. An application is made under Order 36 rule 4 of the Civil Procedure Rules which provides that the application for leave shall be supported by an affidavit which shall state whether the defence alleged goes to the whole or part only and if so what part of the Plaintiff’s claim.

I agree with Counsel for the Respondent that in this case the Applicant does not contest liability to pay the Respondent. The Applicant admits that the goods were supplied and also admits that it is indebted in the sum claimed in the summary suit. The Applicant’s case is novel and I have not found any Ugandan precedent where the Applicant admits liability claimed in the plaint but contends that it has a defence as to the timing of the claim.

The possible issues to be considered are whether this is an appropriate suit to be filed by way of summary procedure and whether the suit is premature. The Applicant advances two grounds in the submissions namely that the money owing is not payable on demand and the Respondent is barred by the doctrine of estoppels from asserting that the goods supplied to the Applicant is payable on demand and therefore due. Secondly the Applicant advances another ground of frustration that payments were envisaged to be made after the government of Uganda had paid the Applicant. There cannot be a defence to the claim itself since it is admitted that the Applicant owes the Respondent US$187,483.79 being payment for construction materials supplied by the Respondent to the Applicant.

In terms of Order 36 rule 2 (a) of the Civil Procedure Rules, one of the questions is whether there is a debt or liquidated demand in money payable by the Defendant with or without interest. A liquidated demand is a sum certain in money. There is no doubt that there is a sum certain in money in this case. The sum is US$187,483.79 and is even not in dispute as money owing to the Respondent. The second question would be whether the money owing is due for payment. I have considered the submission of the Respondent’s Counsel that the only matter is whether execution should issue and it cannot be a question of whether there is a liability to pay. Liability to pay is admitted. In terms of order 36 rule 2 (a) of the Civil Procedure Rules the Plaintiff seeks to recover a debt or liquidated demand in money payable by the Defendant.

On the face of it the Respondent fulfils the requirements of the rule. What the Applicant has done is to raise a point of law as to frustration of the payment and estoppels as well as customs and usage on the timing of the claim. As far as the point of law is concerned, the frustration pleaded does not relate to a complete frustration of the contract but can be said to be a partial frustration by failure to pay in time due to the claim allegedly being contingent upon the government of Uganda fulfilling its payment obligations to the Applicant. As far as the doctrine of estoppels is concerned, it is an equitable doctrine and it relates to the past practice between the parties which the Applicant claims is customary according to the usages of the trade. It is an assertion to the effect that the goods were supplied on open credit terms and payment was delayed. Secondly, that the penalty for delays is prescribed as 2% interest chargeable against the Applicant on the amount due. Thirdly the Applicant gives facts suggesting that delayed payments were customarily provided for to cater for delays of between 60 days, 90 days and 120 days. This is two months, three months and four months respectively.

The Respondent attacks the ground of frustration on the basis that no documentary proof has been advanced and the burden is on the Applicant under section 101 of the Evidence Act to prove their assertion of frustration. As far as delays by up to 120 days of the demands is concerned, the goods were supplied in July 2013 and the suit was filed about one year later and therefore the customary demand period had been exceeded and there was no reasonable delay period.

I have carefully considered the evidence in support of the application and in opposition. In this case the Plaintiff seeks payment of US$187,583.79 from the Applicant for goods supplied in 2013. The summary suit was filed on 7 July 2014. The Applicant/Defendant applied for unconditional leave to defend on 18 July 2014. The grounds were that the supply of the construction materials by the Respondent/Plaintiff to the Applicant was not on 'payable on demand terms'. Secondly it was made on open extended credit terms based on past dealings between the Applicant and the Respondent. Thirdly late payment for the goods was caused by a frustrating event. The Respondent's current demands are contrary to the usages of trade in the construction industry and wholly uncharacteristic of the previous conduct between the Applicant and the Respondent. Lastly the Respondent is barred by the doctrine of estoppels from making the demand until after it has exhausted its remedies under the contract.

Unfortunately for the court there is no written contract in evidence to interpret. Nonetheless the doctrine of estoppels gives an equitable defence and the High Court also administers the doctrines of equity in conformity with written law under section 14 of the Judicature Act.

In paragraph 11 of the affidavit in support of the application, it is asserted that the Applicant's ability to pay was contingent on the anticipated release of funds by the government of Uganda. The Respondent does not contest this evidence in the affidavit in reply of its Sales Manager Mr. Suraj Kumar Malhotra. As noted there is no dispute about the amount of the debt. In paragraph 7 of the affidavit in support of the application it is asserted that payment was supposed to be made within a range of timelines ranging between 60 days, 90 days and 120 days after delivery of the invoice advising payment. Secondly the Applicant had been extended a customer credit line limited to Uganda shillings 1,200,000,000/= by the Respondent. It is further asserted that the Applicant purchased the construction materials with a bona fide intention of paying for it in due time. There is no dispute as to the amount owing or the supply of materials by the Respondent to the Applicant. I agree with the Respondent that the period of 120 days has been exceeded.  However the terms of the credit arrangement are said to be based on usages of trade.

In the affidavit in rejoinder the Applicant asserts that contrary to the usual practice, the Respondent was under a mistaken belief that the Applicant was winding up its businesses in Uganda and therefore filed a summary suit however the Applicant is not about to wind up its business in Uganda. The Applicant also relies on an application by the Respondent in Miscellaneous Application No. 704 of 2014 for attachment of several vehicles and equipment before judgment. In ground two thereof it is written that the Applicant has ceased its business in Uganda and is in the process of closing its offices and disposing of all its movable properties and assets. That if the application is not granted, the Respondent will suffer irreparable loss as it will have no property to resort to in case the matter is determined in its favour. I have duly considered HCMA No. 704 of 2014 filed on the 12th of August 2014 in this suit. The case of the Respondent in paragraph 2 of the affidavit in support is that the construction materials were supplied on credit with an express undertaking to pay on demand made by the Applicant.

According to Odgers' Principles of Pleading and Practice in Civil Actions in the High Court of Justice 22nd edition at pages 75 and 76 whenever a genuine defence, either in fact or law, sufficiently appears, the Defendant is entitled to unconditional leave to defend. “The Defendant is not bound to show a good defence on the merits.” “The court should be satisfied that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial.” The defence should be made in good faith. The defence must be stated with sufficient particularity, as appear to be genuine. It should not be a vague suggestion of fraud or other misconduct on the part of the Plaintiff. General allegations however strongly may be the words in which they are used are insufficient to amount to an averment of fraud of which the court ought to take notice. I entirely agree with the principle at page 76 quoted below that:

"An affidavit merely pleading poverty, or showing hardship, or a remedy against a third person, will not avail, though it may be a ground for stay of execution."

The principles in Odgers (supra) pages 75 and 76 have been followed in Uganda in the cases of Maluku Interglobal Trade Agencies Ltd versus Bank of Uganda [1985] HCB 65; Tororo District Administration versus Andalalapo Industries HCM 8/2/1997 and Kasule vs. Muhwezi [1992 – 1993] HCB 212.

The Applicant’s defence of frustration does not go to the root of the claim but to the timeliness of the claim and allegation that the parties understood that payment depended on another payment from Government of Uganda. It may also be a ground for stay of execution because a third party namely the government of the Republic of Uganda has not paid up. However the Respondent has not denied the assertion that payment was conditional upon the Government of Uganda paying the Applicant as a matter of fact and the issue is whether this is a sufficient defence to the timing of the summary suit? Secondly the Applicant advances trade and usage to suggest that the payment demanded is premature and supports this with evidence that the Respondent is labouring under a mistaken belief that it is winding up business in Uganda. Obviously this puts a different face to the intention of the Respondent in filing the summary suit as alleged owing to the usages of trade. Is the Respondent barred by the doctrine of estoppels from making this claim now?

As far as the defence of estoppels is concerned, it also relates to the contractual terms between the parties. In the affidavit in support of the summary suit, the Plaintiff attaches tax invoices which have terms and conditions of sale. Paragraph 3 of the terms and conditions of sale in the tax invoice provides as follows:

"An interest of 2% per month would be charged on outstanding amount not paid within the valid credit period."

The credit period is not defined and can only be discerned from the affidavit in support. The Applicant alleges that there is an open credit period but surprisingly waters this down by asserting that that the credit period ranges from 60 days, 90 days and 120 days. This is the only evidence of the customary period of delay between the parties. Secondly it seems to be over one year since the money became due according to the alleged demands made by the Respondent in the summary plaint. However cheques were issued in May 2014 and June 2014 respectfully. The loading invoices annexure “A” to the plaint was issued in July 2013. Secondly there is a charge of 2% per month on any outstanding amount not paid within the credit period.

The Respondents counsel included evidence of another Civil Suit No 10 of 2014 which is not before court and I have disregarded this evidence. In paragraph 5 of the affidavit in support of the plaint, the Sales Manager of the Plaintiff/Respondent Mr Edwin Kwesiga deposes that upon demand for payment of the outstanding amount, the Defendant issued two cheques in the sum of US$50,000 each dated 31st of May 2014 and 15th of June 2014 respectively in the names of the Plaintiff company. However the cheques bounced when presented for payment and copies of the cheques were attached and marked as annexure "B". A perusal of the cheques shows that the cheques were dishonoured because in the words written on the cheque, "payment stopped". In other words the payment of the cheques was stopped. No reasons were given as to why the payment was stopped. The reasons given by the Applicant is that the payment depended on another payment to be received from the government which was frustrated.  Additionally the Applicant submitted that payment was pegged to receipt of payment from the government by the Applicant.

It to be noted that it is now November 2014 more than three months or 120 days since the summary suit was filed and since the cheque payments were stopped. The summary suit followed on the heels of stoppage of the two cheques of US$100,000. The Applicant’s application raises points of law on the timeliness of the demand only. The cheques stoppage support a plausible defence of frustration because the anticipated payment from Government of Uganda was not released according to paragraphs 11, 12, 13 and 14 of the affidavit in support to the application.

In Halsbury's laws of England fourth edition reissue volume 12 (1) paragraph 1065 at page 486:

"The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in default shall pay a stipulated sum of money to the other. ... then it represents the agreed damages, called liquidated damages, and it is recoverable without the necessity of proving the actual loss suffered."

In Suisse Atlantique Société D’armement Maritime S A v N V Rotterdamsche Kolen Centrale [1966] 2 All ER 61 a judgment of the House of Lords, Viscount Dilhorne said at page 69 that:

“Here the parties agreed that demurrage at a daily rate should be paid in respect of the detention of the vessel and, on proof of breach of the charter party by detention, the appellants are entitled to the demurrage payments without having to prove the loss which they suffered in consequence. In my view, the appellants cannot avoid the operation of these provisions and cannot recover more than the agreed damages for the detention of their vessel...”

From the above principles, the Respondent would be entitled to sue for its money and the question of delays is remedied by the payment of 2% per month on outstanding sums. However the Plaintiff/Respondent has not claimed the 2% in the summary suit. The defence is not on the merits of the claim but on the timing bases on alleged customs and usages in the construction industries.

Finally I have duly considered the case of Home and Overseas Insurance Co Ltd v Mentor Insurance Co (UK) Ltd (In Liquidation) [1989] 3 All ER 74 which considers the effect of a point of law even when there is no dispute as to the amount i.e. whether the dispute should be referred to arbitration.  In that case Parker LJ considered the effect of a defence raised on a point of law. At pages 77 and 78 he gave the principles where a defendant raises a point of law as a defence for the court to consider:

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

The question to be considered is whether the points of law which only relate to the timeliness of the demand are frivolous and do not require further consideration or whether at first sight the point of law is misconceived.  According to Parker L.J in case of arbitration clauses the parties will be referred to their contracted tribunal even if the claim seems obvious to get the benefit of the expertise of the arbitral tribunal.  The court should consider whether the claim is unsustainable before concluding. At page 78 Parker LJ held that:

“The observations which have been made were however not intended, in my judgment, to indicate any more than that it was insufficient for the defendant to raise an arguable point of law if that point could be readily demonstrated to be unsustainable. They cannot be taken as granting to a plaintiff the right to an accelerated and lengthy trial on a difficult point of law.”

From my understanding the applicant has raised a plausible defence to immediate payment which is the purpose of a summary suit but not to liability. The cause of immediate payment is serious and is likely to affect the Applicant in light of the evidence showing an attempt to attach numerous vehicles on the ground of its winding up business. The Applicant maintains that it is not winding up business and its payment efforts were frustrated by Government. In other words it is alleged that the Respondent went outside the usual trade practices to file the suit. Let the narrow issue of the trade and usage, estoppels and frustration be considered on the merits because they raise a plausible defence on the timeliness of the summary suit and the motive thereof. They also affect the question of costs of the suit where it is alleged to be premature.

In the premises Applicant is granted unconditional leave to file a defence within 14 days from the date of this order and the costs of the application shall abide the outcome of the suit.

Ruling delivered in open court on 19 November 2014

 

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Charles Okuni: Court Clerk

Brian Kwame Emurwon for SPENCON Services Ltd

No representatives for SPENCON

Hon. Segona Medard Counsel for the Respondent is absent.

 

Christopher Madrama Izama

Judge

19/11/2014