Court name
Commercial Court of Uganda
Judgment date
18 March 2014

Bassaja & 9 Ors v Standard Chartered Bank & 2 Ors (Miscellaneous Application-2013/234) [2014] UGCommC 26 (18 March 2014);

Cite this case
[2014] UGCommC 26
Coram
Obura, J

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL COURT DIVISION)

MISC. APPLICATION NO. 234 OF 2013

(Arising from Civil Suits No. 571 & 572 of 2012)

  1. HASSAN BASAJJA                                
  2. MUSA BASAJJA
  3. IDDI BASAJJA
  4. HAJJI ABBAS KANGAVE
  5. MARY BASAJJA
  6. SHAMIM BASAJJA
  7. AISHA BASAJJA
  8. YUDAYA INTERNATIONAL LIMITED
  9. HABA GROUP (U) LIMITED                                             
  10. AZIDA BASAJJA..............................................................]APPLICANTS

VERSUS

  1. STANDARD CHARTERED BANK (UGANDA) LIMITED
  2. STANBIC BANK (UGANDA) LIMITED
  3. BANK OF UGANDA………………………………….]RESPONDENTS

 

BEFORE: HON. JUSTICE HELLEN OBURA

 

RULING

The applicants brought this application under the provisions of Article 119 of the Constitution, Section 13 and 14 of the Judicature Act Cap. 13, Section 10 of the Government Proceedings Act Cap. 77, Sections 7 and 98 of the Civil Procedure Act, Order 7 rule 11 (a) and (d), Order 6 rule 30 and Order 52 rules 1 and 3 of the Civil Procedure Rules seeking for orders that Civil Suits No. 571 and 572 of 2012 be struck out and costs of the application and the main suits be paid to the applicants and any other reliefs as court deems appropriate. 

The grounds of the application as stated in the notice of motion are firstly that the respondents have filed HCCS No. 571 and 572 against the applicants to enforce claims by the Government of the Republic of Uganda (GOU). Secondly, that the respondents do not have a cause of action against the applicants. Thirdly, that the respondents have no legal capacity to file and conduct HCCS No. 571 and 572 of 2012 to recover a debt claimed by the GOU. Fourthly, that the suit is bad in law, barred by law, frivolous and vexatious and should be struck out with costs. Lastly, that it is just and equitable for this court to grant the orders prayed for.

The application was supported by an affidavit deposed by Hassan Basajjabalaba, the 1st applicant who is also the Chairperson Board of Directors of the 9th applicant, and a Director in the 8th applicant on his behalf and on behalf of the other applicants. The respondent filed an affidavit in reply deposed by Ms. Margaret Kasule, the 3rd respondent’s Legal Counsel. There is no affidavit in rejoinder on court record.  

When this application came up for hearing on 01/07/2013, the applicants were represented by Mr. Kavuma Kabenge and Mr. Fred Muwema while Mr. Zimula Stephen represented the respondents. Counsel for the parties filed written submissions in the matter which have been considered in this ruling.

The brief history of this case as gathered from the pleadings and annextures is that by a facility letter dated 5th November 2002 M/S Basajjabalaba Hides and Skins Limited (hereinafter called BHSL) borrowed money from the 1st respondent and as at the 23rd of January 2004, the unpaid amount was stated to be US $ 18,300,000.  The 1st to 7th applicants executed personal guarantee deeds while the 8th & 9th applicants executed corporate guarantee deeds by which they undertook, upon demand, to pay to the 1st respondent all sums that may be due and owing to it by BHSL.

By “Deed of Assignment of Debts and Securities” dated 30th March 2006 the 1st respondent assigned to the 3rd respondent all its estate and interest in the debt due and owing to it by BHSL as well as the benefit of all the securities held in relation to the debt, in consideration of payment by the 3rd respondent to the 1st respondent of the discounted sum of US$ 9,150,000.

In another transaction, by a facility letter dated 14th March 2002 BHSL also borrowed money from the 2nd respondent and as at the 1st of April 2003 the unpaid amount was stated to be US$ 3,464,467. The 1st, 5th & 10th applicants executed personal guarantee deeds by which they undertook, upon demand, to pay to the 2nd respondent all sums that may be due and owing to it by BHSL.

Following a negotiated bail out by GOU upon BHSL failing to pay the debt, a “Deed of Assignment of Debts and Securities” dated 13th of June 2008 was executed by which the 2nd respondent assigned to the 3rd respondent all its estate and interest in the debt due and owing to it by BHSL as well as the benefit of all the securities held in relation to the debt, in consideration of payment by the 3rd respondent to the 2nd respondent of the discounted sum of US$ 2, 425,500.

The GOU through the 3rd respondent paid the 1st and 2nd respondents the agreed discounted sums under the two deeds of Assignments. It is the applicant’s case that it also paid the debt due to GOU but the 1st and 2nd respondents retained securities given by BHSL. Consequently, BHSL filed HCCS No. 9 of 2005 against the respondents to retrieve its securities. A consent judgment was entered in that suit whereby it was agreed that BHSL would pay US $ 11,575,000 to the 3rd respondent for the benefit of GOU within six months from the date of the consent judgment failure of which the 3rd respondent would be at liberty to realize and enforce recovery pursuant to the assignment against the securities mortgaged to the 1st and 2nd respondent.

It is the respondents’ case that the said sum was not paid. The 2nd and 3rd respondents filed Civil Suits No. 571 by which they claimed payment of US$ 3,464,467 plus interest and costs from the 1st, 5th & 10th applicants as guarantors of the indebtedness of BHSL to the 2nd respondent. The 1st & 3rd respondent also filed HCCS No. 572 of 2012 by which they claimed payment of US$ 34,637,238 plus interest and costs of the suit from all the applicants as guarantors of the debt of BHLS to the 1st respondent. Both suits were later consolidated as the issues were basically the same.

The applicants contended that the respondents have filed HCCS No. 571 and 572 of 2012 against the applicants when they have no cause of action against the applicant. The respondents’ case is that the two suits involve claims by the 1st and 2nd respondents for recovery of sums said to be owed to them under lending agreements comprised in the facility letters between the lenders and BHSL when the same had already been assigned to the GOU. The capacity of the 3rd respondent to sue on behalf of its principal the GOU is also being challenged. It is also contended by the applicants that both suits are res judicata the issues having been conclusively determined by the consent judgment.

In their submissions counsel for the applicant raised three issues to be resolved by this court, namely:

  1. Whether the respondents have the capacity to commence Civil Suits No. 571 and 572 of 2012 on behalf of the Government of the Republic of Uganda.
  2. Whether the plaints in Civil Suits No. 571 and 572 of 2012 disclose any cause of action.
  3. Whether the suits are res judicata.

On the first issue it was contended for the applicants that under the Deeds of Assignment the 3rd respondent was acting as an agent of the GOU who is the principal creditor as confirmed by the Governor of the 3rd respondent in annexture B1 to the affidavit in support.

Counsel for the applicants submitted that Civil Suits No. 571 and 572 of 2012 are barred by Article 119 (4) of the Constitution and the Government Proceedings Act since the 3rd respondent’s obligation toward government is financial in nature and when it comes to enforcement of those financial obligations in courts of law, the role is for the Attorney General. The applicants’ counsel cited Article 119(4) (c) of the Constitution which provides one of the functions of the Attorney General as being a representative of Government in Courts in any legal proceedings to which the GOU is party. He argued that the same position was confirmed the Constitutional Court in the case of Parliamentary Commission vs Twinobusingye Severino & AG Constitution Application No. 53 of 2011. The applicants therefore argued that the right to sue or be sued on behalf of Government must be expressly provided for by law and in the absence of such an express provision a party has no right to sue on behalf of GOU.

Without prejudice to the above submission, counsel for the applicants argued that the respondents have no capacity to institute Civil Suits No. 571 and 572 of 2012 in their own names as agents of the GOU. It was contended for the applicants that where there is a disclosed principal no suit can be filed or maintained by or against the agent. The only party to sue on the claim is the principal which in this case is the GOU through the Attorney General and not the respondents and therefore the suits are a nullity in law.  For this position counsel for the applicants relied on the case of Dr. James Kashagyera & Anor vs Sir Willie Magara &  Anor HCCS No. 576 of 2004 where Bamwine, J (as he then was) held that an agent is a person employed to act on behalf of another. Thus an act of an agent, done within the scope of his authority binds the principal. The case of M/s Ayigihugu & Co. Advocates vs Mary Muteteri Munyakindi (1988-1990) HCB 161 was also cited for the principle that a holder of power of attorney ought to take proceedings in the name of the owner of the property, the donor of power of attorney, and further that a judgment deciding the rights of the parties cannot be based on a plaintiff who shows no cause of action. 

It is the applicants’ submission that once an agent has brought his principal into contractual relations with another, he drops out and his principal sues or is sued on the contract. This court was also referred to the decision in Mohammed Allibhai vs Bukenya SCCA No. 59 of 1996 where it was held that the appellant did not have locus to bring an application for review in his own name since he was merely an attorney who had to commence proceedings in the name of the donor.

In addition to that counsel for the applicants submitted that the plaints filed in Civil Suits No. 571 and 572 of 2012 by the respondents do not disclose a cause of action against the applicants and ought to be rejected under Order 7 rule 11(a) and (d) of the CPR. Counsel referred to the law on disclosure of a cause of action as was considered in Auto Garage vs Motokov [1971] EA 514 AT 519, Baku Raphael Obudra & Obiga Kania vs Attorney General SC Constitution Appeal No. 1 of 2003 and Attorney General vs Maj. General Tinyefuza SC Constitutional Appeal No. 1 of 1997.

The applicants’ counsel contended that the respondents in this case are not owed any money and if any money is owed it is to the GOU and not the respondents so these plaints do not disclose any cause of action. It was the applicants’ submission that in line with the case of Auto Garage (supra) the respondents do not enjoy any right which has been violated since the 1st and 2nd respondent were paid and their debt was discharged. It was further argued that the only person who can enforce any rights by suit, if at all, is the GOU but not through the 3rd respondent its agent in connection with financial matters. It was contended that the functions of the 3rd respondent as set out in section 4 of the Bank of Uganda Act Cap. 51 grant it no right, duty and /or obligation and by extension the 1st and 2nd respondents to sue or be sued on behalf of GOU and any attempt to do so is an illegality.

Counsel also submitted that the applicants are being sued as guarantors as per annexture B (i)–(ix)  but their contracts of guarantee to the 1st and 2nd respondents were extinguished when the respondents assigned the debts to the GOU and received full payment. They argued that Civil Suits No. 571 and 572 of 2012 are res judicata since the matter was settled by Annexture D to the affidavit in support, being the consent judgment in HCCS No. (OS) No. 9 of 2005 Basajjabalaba Hides and Skins vs Standard Chartered Bank where it was agreed that BHSL shall pay the sum of US$ 11,575,000 to the respondent for the benefit of the GOU under the Deeds of Assignment. It is the contention of the applicants that the debt was settled by consent judgment and no other suit can be brought with regard to the same debt and all that remains is execution of the judgment.

The applicants’ counsel relied on section 7 of the CPA which bars litigation of a matter which has already been determined in a former suit between the same parties or between parties under which they claim litigating under the same title in a court of competent jurisdiction. Counsel for the applicants also cited Kamunye vs Pioneer Assurance [1971] EA 263 at 265, Chris Tushabe vs Cooperative Bank HCCS No. 35 of 2009 for the test of res judicata.

The applicants cited Mitchell Cotts Ltd vs Mulira MS 249 of 2012 for the position that the effect of a consent judgment is the same as that of a judgment given after exercise of discretion. It was then contended that the consent judgment in HCCS (OS) No. 9 of 2005 is still valid and the respondents are barred by section 7 of the CPA and the doctrine of estoppel from filing a fresh suit.

In reply, counsel for the respondents sought to address two issues, namely

  1. To whom does the cause of action in this suit belong in law and was Bank of Uganda properly added as co-plaintiff
  2. Whether Civil Suits No. 571 and 572 are res judicata.

As to whom the cause of action in the suit belongs and whether Bank of Uganda was properly added as co-plaintiff, counsel for the respondents submitted that Civil Suits No. 571 and 572 of 2012 are based on a claim in contract by the lending banks (Standard Chartered Bank and Stanbic Bank) seeking recovery of monies said to be owed to them under facilities granted by the said banks to BHSL and guaranteed by the applicants.

The respondents’ counsel submitted that the facility letters upon which the suits are based are annexed as “A” to each of the plaints and the bank ledgers indicate the respective balances due to the lending banks on these loans the sum being US$ 34,637,238 in the case of Standard Chartered Bank and US$ 5,623,782 in the case of Stanbic Bank) as shown by annexture E to each of the plaints. It was argued for the respondents that the question as to whether these debts will be proved as owing by BHSL to the lending bank is a question of evidence that can only be entered into at the trial and cannot be dealt with as a preliminary point of law.

The respondents’ counsel submitted that as a matter of privity of contract only persons that are party to a contract can derive rights and enforce it and therefore the claim for recovery of these debts belongs to the 1st and 2nd respondents who are plaintiffs in both suits. Counsel for the respondents contended that the assignment for consideration by the 1st and 2nd respondent of their rights under both the debt and securities held does not as a matter of law change the position as to whom the cause of action in contract is vested notwithstanding that by reason of the assignment contracts, the ultimate beneficiary of the recovery will be the assignee. According to the respondents the assignment merely introduces a separate entitlement between the lending banks and the assignee (the 3rd respondent) as to the benefit of the recoveries made but does not and cannot change the entitlement to enforce the contract which remains with the lending banks.

Counsel for the respondent submitted that basing on the Deeds of Assignment the monies paid by the 3rd respondent were consideration for the assignment of the full debt owed to the 1st and 2nd respondents by BHSL not a donation of taxpayer’s money to the latter. It is the respondents’ contention that the 1st and 2nd respondents are the proper parties to the suits for recovery of the debts albeit for the benefit of the 3rd respondent and the GOU.

In addition to that counsel for the respondents relied on Halsbury’s Laws of England 4th Edition Volume 6 paragraphs 6, 9, 10, 26, 30 and 69 to argue that a debt is a legal chose in action and as a matter of common law there can only be an equitable assignment of a legal chose in action. It was argued for the respondents that where there has been an equitable assignment of a legal chose in action, the assignee is required to bring the action in both the assignor’s name and the owner of the claim plus his/her own name. According to counsel for the respondent the 3rd respondent as assignee was properly joined to the action as a necessary and proper party and so the question of GOU being added as a party to the suit does not arise as it is not the assignee and in any event the proper claimants are the lending banks.

As to whether Civil Suits No. 571 and 572 of 2012 are res judicata, counsel for the respondents first pointed out that this objection was neither pleaded in the Notice of Motion nor the supporting affidavit and therefore cannot be considered in this application. However, he referred to section 7 of the CPA and argued that for the former suit to render a latter suit res judicata the parties to the former suit and the latter suit must be the same because judgments of this nature are binding in personam and not in rem. It is the respondents’ submission that none of the 10 applicants were party to the former suit as it only involved BHSL which is not party to this suit.

The respondents’ counsel further submitted that the former suit and the consent judgment was against BHSL, as principal debtor for recovery of the loan sum which was agreed would be US $ 11,575,000 but the said sums were not paid by the due date yet clause 3 of the consent judgment empowered the 3rd respondent to enforce recovery in default of payment of US $ 11,575,000. In that regard the respondents contended that enforcement of a personal or corporate guarantee can only be by suit against the guarantors and so by bringing the suits against the applicants as guarantors the enforcement cannot be res judicata.

In rejoinder to the above submissions, counsel for the applicants reiterated their earlier submissions and added that a look at the plaint and the documents annexed thereto are clear that the debts, if at all, belong to the GOU, Standard Chartered Bank and Stanbic Bank having sold the debts to the Government through its agent, Bank of Uganda. The applicants’ counsel also cited section 14(2) of the Judicature Act as to the application of the principles of equity and argued that in this case the law allows only the Attorney General to sue on behalf of GOU and so Bank of Uganda cannot sue. It was also argued for the applicants that from the Deeds of Assignment the 1st and 2nd respondents sold and transferred all the debt to the GOU through its agent the Bank of Uganda without any recourse including all remedies arising out of it and rights under applicable law and therefore when it comes to enforcing the securities it is the Attorney General to exercise that right under the applicable laws. Counsel referred to the case of Uganda Performing Rights Society vs MTN (U) Ltd HCCS 287 of 2010 where it was held that the court has to determine the intent of the parties as expressed in the Deed of Assignment rather than to the formality of using a term assignee in defining rights and liabilities.

I have carefully considered the submissions of counsel on the preliminary points raised and the authorities cited. I have also considered the consent judgment, pleadings together with the annextures and I will determine the three issues raised by the applicant in the order in which they were framed.

The first issue is about the capacity of the respondents to bring this suit. The respondents brought this suit jointly to claim the sums of money owed to the 1st and 2nd respondent which were assigned to the 3rd respondent as agent of GOU under separate Deeds of Assignment. The validity of the assignments is not in dispute. According to counsel for the applicants however, none of the respondents has capacity to sue for recovery of the debts for reasons that the 1st & 2nd   respondents had already assigned the debts to GOU and they do not have any right to again sue in respect of the same while the 3rd respondent has no capacity to sue on behalf of GOU. I prefer to deal with the issue in two parts. The first part will deal with the 1st & 2nd respondents’ capacity to bring this suit and the 2nd part will deal with the 3rd respondent’s capacity.

It is imperative that the relationship between the 1st & 2nd respondent as assignors on the one part and the Bank of Uganda as assignee and GOU as the owner of the debt on the other part is understood from the onset. This will require defining the term assignment and the context in which it is used in the two Deeds of Assignment. Black’s Law Dictionary defines the term assignment to mean “the transfer of rights or property”. Further that, “an assignment is a transfer or setting over of property, or of some right or interest therein, from one person to another, the term denoting not only the act of transfer, but also the instrument by which it is effected”.   

Meanwhile the term assign is also defined in Black’s Law Dictionary as “to convey; to transfer rights or property” and “assignee” as one to whom property rights or power is transferred”. The author then explains that courts recognize the protean nature of the term and are therefore often forced to look to the intent of the assignor and assignee in making the assignment rather than to the formality of using the term assignee in defining rights and responsibilities.

An assignment can either be absolute or partial. This is determined by the intent of the parties which is a question of fact derived from the instruments and the surrounding circumstances.  According to Black’s Law Dictionary, an absolute assignment leaves the assignor no interest in the assigned property or right. It also defines a partial assignment as the immediate transfer of part but not all of the assignor’s right.

In the instant case, I have looked at the terms of the two Deeds of Assignment and I find that there were absolute assignments of both debts to the 3rd respondent as agent of GOU for a consideration which was received by the assignors. Under the Deed of Assignment executed between the 1st respondent & the 3rd respondent, the 1st respondent handed over all documents including those that relate to the securities to the 3rd respondent and under clause 4 thereof for purposes of giving effect to the assignment duly appointed the 3rd respondent its attorney to demand, sue for, recover, receive and enforce payment or take such action as are necessary to collect the assigned debt. In clause 5, the 1st respondent undertook to provide reasonable assistance to enable the assignee (3rd respondent) in providing such witnesses or other evidence to prove the debt, its right to recover it and or its rights to recover the securities as may be required in any court of law or tribunal.

Similarly, I have looked at the Deed of Assignment executed between the 2nd respondent & the 3rd respondent and the terms are also quite explicit.  Indeed the assignor in the wordings of the deed “absolutely and forever and without recourse” assigned, sold and transferred to the assignee for its own use and benefits the debt and the monies owed to the assignor by BHSL. All the securities and documents relating to the debts were ceded to the assignee. It was expressly stated in clause 1.3 of the Deed of Assignment that the assignor shall hereafter have no right to or liability in respect of the debt and the security assigned. In clause 4.2 the assignor undertook to provide all assistance reasonably requested by the assignee that may be necessary for the assignee to prove the debt and its rights under the Deed of Assignment to enforce the security.

To my mind the intent of the assignor in both Deeds of Assignment was to absolutely assign the debts to the 3rd respondent and that is exactly what was done. The pertinent question to be answered is therefore whether the two assignors can again sue in respect of the assigned debts, albeit on behalf of the beneficiary GOU. This court is alive to the fact that common law prohibits an equitable assignee from suing in his/her own name to enforce the assigned obligation as argued by counsel for the respondents. However, there are exceptions where an assignor absolutely assigns his/her rights to property to another party like in the instant case where the assignor even expressly gave the assignee power to sue for recovery. In such a case there would be no need to join the assignor as party since the assignee has authority under the Deed of Assignment to sue in his/her name.

I therefore find that the 1st and 2nd respondents having absolutely assigned the debts for a valuable consideration and transferred the securities and all the related documents to the 3rd respondent and given the assignee express power to sue for recovery do not now have any cause of action against the applicants. Neither can it purport to sue on behalf of GOU. All they can do is provide assistance by way of evidence as undertaken in the Deeds of Assignment. To that extent I agree with counsel for the applicants that the 1st & 2nd respondents have no capacity to commence Civil Suits Nos. 571 & 572 on behalf of GOU. They also do not have any cause of action against the applicants as the right that is alleged to have been breached was already assigned. I uphold that aspect of the objection with the result that the names of the 1st & 2nd respondents are struck out in accordance with the provisions of Order 1 rule 10 (2) of the CPR as they were improperly joined to the suit.

I now turn to determine the 3rd respondent’s capacity to bring the two suits on behalf of GOU. It is not in dispute that the 3rd respondent is empowered to act as an agent of GOU in financial matters as provided in section 4 (2) (g) of the Bank of Uganda Act. It is the applicants’ case that since the assigned debts is for the named principal GOU, the 3rd respondent as its agent cannot sue on its behalf because after all it does not have power to sue. I agree with that argument to the extent that the debt belongs to GOU but I do not agree that the 3rd respondent cannot sue for its recovery on behalf of GOU.

My view is fortified by the express provisions of the Deeds of Assignment that gave power to sue for recovery of the debt to the 3rd respondent and the fact that section 2 (2) of the Bank of Uganda Act provides that the 3rd respondent shall be a body corporate with perpetual succession and a common seal and may sue or be sued in its corporate name. Section 5 of the same Act also provides that Bank of Uganda shall have all the powers pertaining to a legal person and may do all things necessary for better carrying out its functions.

It was strongly argued for the applicant that it is the Attorney General that has power to sue or be sued on behalf of GOU in all civil suits. I also agree with that argument but hasten to add that in this particular transaction the intention of the parties was that the 3rd respondent would sue on behalf of GOU and since the law empowers it to do so I find nothing irregular or illegal with that arrangement.

I must also observe at this juncture that the principle stated by the applicants that an agent of a named principal cannot sue in its name for recovery of a debt belonging to the principal is not applicable in this case because the principal–agent relationship between the GOU and Bank of Uganda is regulated by statute. That principle as stated in the authorities relied upon by the applicant to support its arguments can only be applied where there are no express provisions of the law. Since the law gives Bank of Uganda power to sue it is my firm view that the relationship is more specifically regulated by that statue as opposed to the general principles that govern principal-agent relationship.

It is also noteworthy that whatever Bank of Uganda does is for the benefit of GOU and it is the intention of the legislature that BOU as an agent of GOU in financial matters would have power to sue where need arises as well as have all the powers pertaining to a legal person and may do all things necessary for better carrying out its functions. I am therefore not convinced by the applicants’ argument that Bank of Uganda cannot sue on behalf of GOU for recovery of the assigned debts. Instead it is the finding and conclusion of this court on the 2nd leg of the 1st issue that Bank of Uganda as the assignee with full power to sue for recovery under the Deeds of Assignment has capacity to commence Civil Suits No. 571 & 572 of 2012 on behalf of GOU.

Be that as it may, this court has discretion under Order 1 rule 10 (2) of the CPR either upon or without the application of either party to order that the name of any person improperly joined be struck out or the name of any person who ought to have been joined, whose presence before the court may be necessary in order to enable the court to effectually and completely to adjudicate upon and settle all questions involved in the suit be added. Much as the Bank of Uganda has capacity to bring the two suits, I have found that the presence of Attorney General before this court is necessary as it would enable it effectually and completely to adjudicate upon and settle all questions involved in the suit. Subject to my finding on the last issue, I would order that the name of Attorney General be added as the 2nd plaintiff.

This now brings me to the 2nd issue as to whether the plaints in Civil Suits No. 571 & 572 disclose any cause of action. I have considered the arguments of the parties and the authorities on how to determine whether or not a plaint discloses a cause of action. Indeed that is the well settled position of the law. It was argued for the applicants that the debts, if at all, are owed to the GOU and not the respondents. However, following my finding on the 2nd part of issue one that the 3rd respondent has capacity to sue on behalf of GOU,  I do find that the plaints in Civil Suits No. 571 & 572 disclose a cause of action by the 3rd respondent against the applicants who guaranteed the assigned debts.

Finally, I now turn to address the submission on the last issue regarding the plea of res judicata. But before I delve into it, I wish to first address the concern raised by the respondents’ counsel that the applicants did not plead that the suits are res judicata in the Notice of Motion or the supporting affidavit and so it cannot be considered in this application. The applicants’ counsel in their submissions in rejoinder made no response to that concern. 

Order 6 rule 28 of the CPR provides that a party is entitled to raise any point of law by his or her pleading. Law J.A in Mukisa Biscuit Manufacturing Co vs West End Distributors Ltd [1968] EA 696 observed that a preliminary objection consists of a point of law which has been pleaded, or should arise by clear implication out of the pleadings, and which if argued as a preliminary point, may dispose of the suit. As such the preliminary point of law should have been pleaded.

In the instant case the applicants in their respective written statements of defence did  plead that the matter was already determined by the consent judgment in HCCS (OS) 9 of 2005 BHSL vs Standard Chartered Bank (U) Ltd and Stanbic Bank (U) Ltd  followed by the payments indicated in the WSD. The same position was repeated in the notice of motion and the affidavit in support.

It is therefore the view of this court that the allegation in the WSD, notice of motion and the supporting affidavit that the consent judgment conclusively dealt with the matter in dispute is adequate pleading which entitles the applicant to raise a preliminary point of law based on the defence of res judicata.

I must also point out at this juncture that as I was preparing this ruling a letter from M/S Alaka & Company Advocates one of the applicants’ counsel was brought to my attention. Attached to that letter were a letter from the Minister of Justice & Constitutional Affairs and a ruling by Hon. Justice Wilson Kwesiga in Miscellaneous Application No. 738 of 2011 between Basajjabalaba Hides and Skins Ltd vs. Bank of Uganda and Commissioner for Land Registration. That application sought for a consequential order for the rectification of the register to reflect M/S BHSL and her transferees in the title on the register of some listed titles.

The letter was to the effect that the ruling in that application confirmed among others that Bank of Uganda was duly paid. It was further stated in the letter that the Minister of Justice & Constitutional Affairs had also confirmed that indeed that debt had been paid in full. A prayer was then made that this court abates this matter as the same is res judicata and has been overtaken by events.

I expected counsel for the respondents to react to that letter by either protesting the approach used or addressing the issues raised as it was indicated that the same was copied to them. However, there was no such response which prompted me to invite both parties to appear before me in chambers. After some discussions it turned out that the letter was not served on counsel for the respondents and so they were not aware of its content. I strongly felt that both parties needed to address me on the matter and so I directed them to file supplementary submissions and attach all the documents they thought were relevant to enable this court independently evaluate the evidence as it determines the issue of res judicata. Both counsel complied by filing supplementary submissions which I have considered together with the attachments in addition to the earlier submissions.

It was argued for the applicants that the issues in the two suits were already conclusively determined by the consent judgment in HCCS (OS) 9 of 2005 Basajjabalaba Hides and Skins Ltd vs Standard Chartered Bank (U) Ltd, Stanbic Bank (U) Ltd and Bank of Uganda.  It was also strongly argued based on the ruling  in Miscellaneous Application No. 738 of 2011 and the letter of the Minister of Justice & Constitutional Affairs that the applicant in that case discharged its debt obligations to the tune of United States Dollars Eleven Million Five Hundred Seventy Thousand (US$ 11,575,000), an equivalent of UShs. 21,091, 491,676/= which was due to the GOU. It was further submitted that the applicant also paid costs of the suit (OS 9 of 2005) amounting to Ushs. 590,000,000/= plus the insurance costs of Ushs. 37,215,000/= in addition to receivership costs of US$ 35,000 and the matter considered closed.

 

Counsel for the applicants pointed out that to arrive at that decision court relied on the affidavit of Obed Mwebesa which enumerated the mode and manner of payment and documents attached to the said affidavit (annexure “C” to the supplementary submissions). It was concluded that all the claims and liabilities, if at all, against the GOU were settled and the obligations of the applicants in this application have been discharged. Court was then invited to find so and dismiss and/ or strike out the suits brought against the applicants with costs.

 

Conversely, counsel for the respondents submitted that the letter of the Minister of Justice & Constitutional Affairs and the ruling in Miscellaneous Application No. 738 of 2011 cannot, as a matter of law, be a bar to the suits from which this application arises. They argued that it is clear that res judicata cannot apply in this case as non of the ten applicants in this suit were parties in Miscellaneous Application No. 738 of 2011. They further argued based on a passage in Halsbury’s Laws of England 4th Edition Vol. 17 (1) paragraph 597 that that ruling was a determination in “personam” and not in “rem” therefore it is only binding in matters between the parties to that former suit.

 

As regards the content of the letter of the Minister of Justice & Constitutional Affairs that the debt had been paid in full, counsel for the respondents submitted that that letter cannot be said to have determined this matter which is extremely contentious even within the Government itself. They alluded to some two letters which was attached to their supplementary submissions in reply as “C (i)” and “C (ii)”. The first letter was written by the Bank of Uganda to the Minister of Finance upon receipt of the letter of the Minister of Justice & Constitutional Affairs and the second one is a reply thereto by the Permanent Secretary/Secretary to the Treasury who clarified that no payment had been made by BHSL to clear its indebtedness with GOU.

 

Counsel for the respondents concluded that in view of the contention over this matter viva voce evidence needs to be taken and interrogated through a trial process to determine whether the guarantors are liable to pay the sums claimed. They prayed that court ignores the alleged new evidence presented by the applicants and proceeds to determine the points of law canvassed in the earlier submissions or alternatively stays this suit until final disposal of the appeal against Justice Kwesiga’s ruling.

 

In a brief rejoinder counsel for the applicants first of all observed that the respondents based their supplementary submissions in reply on the letter written by M/S Alaka & Co. Advocates contrary to the directive of court that parties put into consideration the documents relied upon by Hon. Justice Kwesiga while arriving at the said decision. They nevertheless reiterated their earlier submissions and invited court to disregard the two letters produced by counsel for the respondents and find that the respondents lack legal capacity to institute the instant suits, cannot bring a suit where there is a consent which they have not executed and finally the question and main issue of payment has been resolved by the Land Division of the High Court and the same cannot be subject to litigation in the Commercial Division of the High Court.

 

Section 7 of the Civil Procedure Act bars court from trying any suit or issue that has already been adjudicated upon by a court of competent jurisdiction. It provides as follows:-

“No court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a court competent to try the subsequent suit or the suit in which the issue has been subsequently raised and has been heard and finally decided by that court.”

In Kamunye v Pioneer Assurance Ltd [1971] EA 263 at page 265, Law, Ag. V-P stated the test to be applied in determining whether a suit is barred by res judicata in the following words:-

“The test whether or not a suit is barred by res judicata seems to me to be-is the plaintiff in the second suit trying to bring before the court, in another way and in the form of a new cause of action, a transaction which he has already put before a court of competent jurisdiction in earlier proceedings and which has been adjudged upon. If so, the plea of res judicata applies not only to points upon which the first court was actually required to adjudicate but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time”.

The rationale for the plea of res judicata is that there must be an end to litigation.

Richard Kuloba in his book titled, “Judicial Hints on Civil Procedure” 2nd Edition, Law Africa states at page 45 that it must be understood by those administering the law that there must be a quieting of actions. Once a man has had his say, has taken his case as far as the law permits him, and has failed, he must be stopped from re-litigating the matter. He also considers res judicata on consent judgments and states at page 48 that the effect of a consent judgment is the same as that of judgment given after exercise of judicial discretion.

In the instant application the applicants relied on two very closely related grounds to support their argument that Civil Suits Nos. 571 & 572 are res judicata. However, they did not address me on the three key elements of res judicata. Nevertheless, I will consider both grounds concurrently. I have perused the consent judgment entered on 3rd February 2010 which states as follows:

“BY CONSENT of the parties hereto it is hereby agreed and ordered as follows;

  1. The second Defendant be added to this suit as a holder of securities mortgaged by the Plaintiff in relation to the debt mentioned below assigned by the second Defendant to the 3rd Defendant.

 

  1. The 1st and 2nd Defendants were owed various sums of money by the Plaintiff which debt were assigned by the 1st and 2nd Defendants to the 3rd Defendant, on account of Government of Uganda (“GOU”) together with the benefit of the securities held, upon payment by GOU through the 3rd Defendant  US$9,150,000.  in respect of the amounts owed to the 1st Defendant and US $2,425,000. in respect of the amounts owed to the second Defendant, being a total sum paid by GOU through the 3rd Defendant of US$11,575,000.

 

  1. It is hereby agreed that the Plaintiff shall pay to the 3rd Defendant for the benefit of G.O.U. the sum of US$11,575,000. paid by it for the afore mentioned assignment within 6 months from the date hereof and in default of payment the 3rd Defendant shall be at liberty to realize and enforce recovery pursuant to the assignment against the securities mortgaged to the 1st and 2nd Defendants by the Plaintiff. For the avoidance of doubt the securities held are those listed as regards the 1st Defendant in the schedule to the assignment deed dated 30th March 2006 annexed hereto as ‘A’ and as regards the 2nd Defendant in preamble B to the assignment deed dated 13th June 2008 annexed hereto as ‘B’.

 

4.The Plaintiff shall pay the 1st, 2nd and 3rd Defendants costs of Miscellaneous       Application 566 of 2008 arising from HCCS 320 of 2007 plus the insurance and receivership costs incurred by the 3rd Defendant in the Receivership of the Plaintiff and in the insuring the said Receiver of the said securities held.”

 

It is indeed true that the consent judgment was in respect of the debts that were assigned to the 3rd respondent as agent of GOU which were discounted to the total sum of US$11,575,000. It was agreed in paragraph 3 of the consent judgment that the plaintiff in that suit would pay the 3rd defendant who is the 3rd respondent herein that “sum of US$11,575,000 within 6 months from the date of the consent and in default of payment the 3rd Defendant shall be at liberty to realize and enforce recovery pursuant to the assignment against the securities mortgaged to the 1st and 2nd Defendants by the Plaintiff.” (Emphasis added).

 

I have put the last part of that clause in italics because to my mind therein lies the pertinent questions whose answer would determine whether or not the two suits are res judicata. First of all it is noteworthy that the payment was to be effected within 6 months in default of which payment the 3rd respondent would be at liberty “to realize and enforce recovery pursuant to the assignment against the securities mortgaged” to the 1st and 2nd Defendants by the Plaintiff. My understanding of the words in bold is that the realization and enforcement of recovery upon default would be in accordance with the assignment and not merely by executing the consent judgment. If the parties had intended that the consent judgment be executed upon default there is nothing that would have prevented them from expressly stating so therein. If indeed the payment of US$11,575,000 was made to the 3rd respondent within the agreed six months then in my view the claims in Civil Suits No. 571 & 572 would undoubtedly be res judicata.

 

However, if payments were not made as agreed then it is my considered view that it would not be res judicata because the issues for determination in the current two suits would be much wider. They would include the amount owed in view of the terms of the consent judgment on realization and enforcement of recovery upon default and liability of the guarantors which has nothing to do with the consent judgment. All these can be clearly seen from the pleadings especially the plaint which indicates that the plaintiffs in the two suits are seeking recovery of the full amounts from the guarantors after the principal debtor allegedly failed to pay the discounted sum as per the terms of the consent judgment.

 

I have also perused the ruling of Hon. Justice Wilson Kwesiga in Miscellaneous Application No. 738 of 2011 and I must point out from the onset firstly that the parties in that application save for one are different from the parties before this court. Under section 7 of the CPA for res judicata to apply the former suit and the current suit must have the same parties, or parties under whom they or any of them claim, litigating under the same title. In Miscellaneous Application No. 738 of 2011 it was the principle debtor who was the applicant while in the case before me it is the guarantors who are sued and they are the applicants in the instant application. To my mind the key element of same parties or parties under whom they or any of them claim is lacking.

 

Secondly, the civil suits before this court that this application seeks to strike out have wider issues as indicated above than the issue of payment of the discounted US$11,575,000 which was considered by Hon. Justice Kwesiga in an interlocutory application arising from an Originating Summons. I therefore find that the issues in the two suits before me were not directly and substantially in issue in that application. It therefore follows that another key element of res judicata is again lacking. In the premises, I am of the firm view that the absence of those two key elements removes this application from the ambit of cases that can benefit from the plea of res judicata and I so find.

 

Finally, I did request the parties in this application to bring the relevant documents before this court for an independent analysis to see whether it is apparent that the payments were made as alleged. I am convinced that as a judge seized with the matter I reserve the right to independently evaluate the evidence before me and come to my own conclusion especially when I am not bound to follow another decision. To that end, I have looked at all the documents including the two letters produced by the respondent and I am unable to conclusively say the debts were fully paid without hearing additional oral evidence.

 

This is because while the applicants contend based on correspondences from the relevant Government offices that the debt was cleared I have instead found the correspondences by the relevant Government Officials on the subject so contradictory that I cannot safely rely on them to conclude that the money was paid. I would rather have those officials appear before me to testify on the matter and harmonize their position other than rely on their contradictory letters to strike out the two suits.

 

For the above reasons, this application succeeds on the first leg of the first issue but fails on the rest of the issues. In the result it is ordered as follows:-

  1. The 1st and 2nd respondents are struck out of Civil Suits Nos. 571 & 572 of 2012 for lacking capacity to sue.
  2. The Attorney General is added as the 2nd plaintiff in the consolidated suits.
  3. The pleadings be amended to capture the proper parties and consolidate the claims.
  4. Costs of this application shall be in the cause.

 

I so order.

 

Dated this 18th day of March 2014.

 

 

 

Hellen Obura

JUDGE

 

Ruling delivered in open court at 3.30 pm in the presence of:

  1. For the applicants;

 

  1. Mr. John Mary Mugisha
  2. Mr. Caleb Alaka
  3. Mr. Gooloba Mohamed h/b for Mr. Kavuma Kabenge
  4. Mr. Kizza Aaron h/b for Mr. Obed Mwebesa

 

  1. For the respondents;
  1. Mr. Masembe Kanyerezi
  2. Mr. Zimula Steven

 

  1. The 1st applicant Mr. Hassan Basajja.

 

 

JUDGE

18/03/14