Court name
Commercial Court of Uganda
Judgment date
22 May 2014

Nayingidde & Anor v Zhang Ci Quing (Miscellaneous Application-2013/1091) [2014] UGCommC 193 (22 May 2014);

Cite this case
[2014] UGCommC 193

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCEALLANEOUS  APPLICATION NO. 1091 OF 2013

(ARISING FROM HCCS NO 740 OF 2013)

 

SAIDI NAYINGIDDE   :::::::::::::::::::::: APPLICANTS/DEFENDANTS

  And                        

KAGAME ROBERT       

                                         VERSUS

 

ZHANG CI QUING::::::::::::::::::::::::::::: RESPONDENT/ PLAINTIFF

 

BEFORE THE HON. JUSTICE HENRY PETER ADONYO

 

RULING

 

This application was brought by way of Notice of Motion filed on the 29thof December, 2013 under Order 36 Rules 3 and 4, Order 52 Rules 1, 2 and 3 of the Civil Procedure Rules and Section 98 of the Civil Procedure Act seeking for Orders that the Second defendant/Applicant aforementioned be granted unconditional leave to appear and defend Civil Suit No. 740/2013 and for costs of the Application to be provided. The application was supported by the affidavit of Saidi Nayingidde, the Applicant/ 2nd Defendant.

The Applicant’s case which can be garnered from his sworn affidavit in support of this Application is that he had neither signed nor taken any consideration for any contract of guarantee for the First Defendant in respect of any transaction between the First Defendant and the Plaintiff. He further avers that the alleged document of guarantee attached to the main suit was null and void for illegality as it was obtained through an illegality and that if there was any guarantee contract then the Applicant was discharged of any obligation and was not liable at all and finally that it was just, fair and equitable that he be allowed the opportunity to defend the main suit.

On the other hand, the Respondent/Plaintiff opposes this Application through his affidavit in reply, where he states that the Applicant did execute an individual unlimited guarantee in favour of the First Defendant, Mr. Kagame Robert, guaranteeing repayment of Uganda Shillings One Hundred Twenty Five Million Four Hundred Thousand Only (Ug. Shs. 125,400,000/=) for shoes purchased in bulk on credit to be paid for in four equal installments as shown by a guarantee agreement dated 11th February, 2013, a copy of which was annexed to his affidavit in reply. The Respondent/Plaintiff further stated that the Applicant/Second Defendant, as guarantor to the 1st Defendant, was indeed indebted to the Respondent/ Plaintiff and had no defence to the suit.

 

Resolution

 

This matter, upon the direction of this Honourable Court, was argued by way of written submissions filed by the parties. These submissions are on record with the Applicant having had additional opportunity to file a rejoinder which I carefully considered.

I have perused the pleadings in this Application together with the affidavits in its support, the Affidavit in reply and the in rebuttal together with their attachments.

This Application was brought under Order 36 of the Civil Procedure Rules. In my opinion therefore, I find it proper to deal first with the rationale of the said order. The Kenyan decision in Zola & Another versus Ralli Brothers Ltd. & Another [1969] EA 691 at 694, which is a decision equivalent of our then Order 33 Civil Procedure Rules is most appropriate. In that case, it was held that “Order 35 is intended to enable a plaintiff with a liquidated claim, to which there is clearly no good defence, to obtain a quick and summary judgment without being unnecessarily kept from what is due to him by the delaying tactics of the defendant. If the judge to whom the application is made considers that there is any reasonable ground of defence to the claim the plaintiff is not entitled to summary judgment. … Normally a defendant who wishes to resist the entry of summary judgment should place evidence by way of affidavit before the judge showing some reasonable ground of defence”. I find this decision most appropriate and would add for clarity that the sooner a plaintiff or the one is owed any liquidated sums, the better for business, as this would factor into reducing the cost of doing business greatly.

With that in mind, I would turn to the issue whether a defendant of such liquidated sum should be allowed to defend a matter such as this. It is now a settled principle of law that before leave to appear and defend is granted, a defendant/applicant must show by way affidavit or otherwise that there is a bonafide triable issue of law and fact. This principle has been variously held and confirmed in the case of Hasmani versus Banque Du Congo [1938] EACA 88, and Twenstche Overseas Trading Co. Ltd versus Bombay Garage Ltd [1958] EA 741.

Indeed while considering this provision, the court, in the case of Kotecha versus Mohammed [2002] 1 EA 112, gave scenarios under which such leave would be granted and these included circumstances such as to whether  the defendant was able to show that he/ she had a defence which was on the merit(s) or that there a difficult point of law involved or that there was a dispute as to the facts which ought to be tried or that any other circumstances showing reasonable grounds of a bona fide defense.

My reading of the instant Application shows that there are two things which the Aplicant must answer in order for leave to appear to file a defence is granted. These include an answer to whether the applicant’s affidavit raises a good defence to the suit and secondly whether there are bona fide triable issues for the determination by this court.

The Applicant’s answer to these questions can mainly be garnered from his submissions. The Applicant makes reference on the fact that the contract of guarantee in Uganda has been codified under the Contracts Act No. 7 of 2010 and that in the said law, one of the conditions to prove the existence of a contract of guarantee was that consideration must flow in the favour of the guarantor. The Applicant argues that this was not the case in the instant matter.  

The Applicant further avers that that the Plaintiff’s claim does not comply with Sections 2, 10 (1) (5) and (6), 20 and 68 to 86 of the Contracts Act.

I have had the occasion to examine this claim. My perusal of the Affidavits in this respect show that the Respondent relied on previous dealings he had with the Applicant in order to enable his agreeing to offer to the first defendant credit facilities. Indeed in Paragraph 8 of the Respondent’s Affidavit alludes to this. This position is not denied by the Applicant.  Also a look at Annexture A attached to the Plaint that is the guarantee agreement; shows that it has very clear provisions and it terms are not disputed. This is a fact which is not challenged in the Affidavit in support of this Application.  

In my view a guarantee contract existed and according to the Encyclopedia of Form and Precedents 4th Ed at Page 761, a guarantee is defined as a contract whereby one person contracts with another to pay a debt owed by a third party who notwithstanding remains primarily liable for such payment.

It is a cardinal principal of law that in interpreting the meaning apportioned to the construction of a guarantee document, the ordinary rules relating to construction of contracts are applicable. Therefore, the courts when doing so will it in such a way so as to reflect what may reasonably be inferred to have been the parties’ real intentions. The guarantee would  therefore be looked as a whole with natural meaning given to the words in it taking into account the surrounding circumstances and the intention of parties if the guarantee were to require some explanation. See: Halsbury’s Law of England 4th Edition paragraphs 143 and 147.

The court in Bank of Credit & Commerce Int. SA (In liquidation) versus Ali [2001] I All ER 961 Lord Bingham of Cornhill, had this to say that: “… in constructing contractual provisions, the object of the Court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the Court reads the terms of the contract as a whole , giving the words used their natural and ordinary meaning in the context of the agreement, the parties relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties intentions the Court does not of course inquire into the parties subjective states of mind but makes an objective judgment based on the materials already identified.”

I take note of these interpretations and find that they apply equally to the instant matter.

The Applicant relied heavily in submissions on several sections of the Contracts Act as not having been complied with. These included Sections 10(1) which provides that a contract is an agreement made with the free consent of parties with capacity to contract, for a lawful consideration and with a lawful object, with the intention to be legally bound, Section 10(5) which states that a contract whose subject matter exceeds twenty five currency points to be in writing and Section 10(6) which provides that a contract of guarantee or indemnity shall be in writing.

However, when all these sections are related to the guarantee in dispute, my  reading of it shows all these attributes were considered in the drafting of the guarantee signed by both parties. The Applicant further argues that even if there was consideration, then it was not adequate but this argument is shot down by Section 20(3) which provides that in an agreement to which the consent of a promisor is freely given cannot be void merely because the consideration is inadequate.

I find from what is before me that the Applicant freely gave his consent to the consent agreement knowing clearly its consequences and this is evidenced by his signature which he does not dispute though he simply disputes the circumstances.

When the circumstances of the signing of the guarantee is taken as a whole , it would show that, the respondent was only willing to advance credit to the First Defendant on the basis of  his previous dealings with the Applicant. That is reflected clearly from the guarantee document itself as well as the Affidavit in reply to this Application.

From the look of everything, it is clear that the Applicant signed the document as a guarantor freely and the fact of their previous dealings was what the Respondent relied on to advance goods on credit to the 1st Defendant.

Indeed I find that while the Applicant’s affidavit in support of the Application states that the alleged document of guarantee was null and void, the Applicant does not provide reasons for stating so and is evasive. On the other hand, Counsel for the Applicant submitted that the annexed intended statement of defence raised questions of fact and law. A brief perusal of the intended written statement of defence show that it hinges majorly on the issue of the Applicant being illiterate and therefore did not understand the contents of the guarantee document which were misrepresented to him. I find that while the Applicant raises this interesting he makes no mention of his illiteracy in his affidavit to support this application for leave to appear and defend which would have acted in his favour. If he wanted to rely on Section 2 of the Illiterates’ Protection Act Cap 78, he should have similarly annexed a statement to the bottom of his affidavit in support of this Application to illustrate this point of illiteracy to show that even the contents of the same had been read to him in a language of his understanding. There is no such statement. Similarly since he did not do so for this Application, he cannot raise the issue of being illiterate when he signed the guarantee. He is estopped from raising illiteracy only when the circumstances suit him. That position must be manifested throughout. The legal maxim that one must come to equity with clean hands clearly applies here. The Applicant cannot choose now to state that he was illiterate when he signed the guarantee and yet he does not manifest that illiteracy while making this Application. One cannot have his cake and eat it at the same time.

From the above, I would conclude this Application is merely an attempt to delay justice and I would find that Applicant raises no triable issues for this court to consider. He has no credible defence at all.

I would therefore dismiss this Application is accordingly with costs.

 

Henry Peter Adonyo

Judge

22nd May 2014