Court name
Commercial Court of Uganda
Judgment date
6 June 2014

Nuwagira v Otage (Miscellaneous Application-2013/1009) [2014] UGCommC 70 (06 June 2014);

Cite this case
[2014] UGCommC 70

THE REPUBLIC OF UGANDA,

IN THE HIGH COURT OF UGANDA AT KAMPALA

(COMMERCIAL DIVISION)

MISCELLANEOUS APPLICATION NO 1009 OF 2013

[ARISING FROM HCCS NO 362 OF 2013]

NUWAGIRA SILVER}...........................................................................APPLICANT

VS

JULIE OTAGE}..................................................................................RESPONDENT

BEFORE HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA

RULING

The Applicant filed this application seeking orders to set aside the decree obtained ex parte in the main suit against him and for the warrant of arrest issued in execution of the decree to be set aside. The Applicant applies for unconditional leave to appear and defend the suit and for costs of the application to be provided for.

The grounds of the application are contained in the affidavit of the Applicant and additionally set out in the notice of motion. The first ground is that the Applicant is not indebted to the Plaintiff/Respondent in the amount claimed or at all and the plaint discloses no cause of action against the Applicant. The Applicant has a good defence to the whole of the Plaintiffs claim. Secondly summons were deliberately or intentionally not served upon the Applicant/Defendant who thereby did not have the opportunity of seeing it advertised in the Monitor Newspaper and hence it was impossible for him to apply for leave to appear and defend the suit. Thirdly the Applicant is not a party to the agreement the basis of the suit. The agreement is an illegality as it charges interest when the Respondent does not have any lawful basis for charging interest. Fourthly the suit is wrongly brought under summary procedure because the plaint includes a prayer for interest which is not contractual. Fifthly if the decree is not set aside, the Applicant will suffer irreparable loss and gross injustice. Lastly the Applicant avers that it is in the interest of justice that the decree and execution are set aside.

The facts disclosed in the affidavit in support of the application are that on the 18 November 2013 the Applicant was arrested by court bailiffs pursuant to a warrant of execution issued by the Execution Division of the High Court for his arrest. While at the Execution Division of the High Court and upon perusal of the warrant of arrest, the Applicant for the first time became aware that the Plaintiff had filed HCCS No. 362 of 2013 against him and four other persons said to jointly owe the Plaintiff a sum of US$14,930 plus costs of this suit taxed at Uganda shillings 5,483,500/=. Through his advocates the Applicant applied to the court and was discharged to enable him file an application to set aside the decree. After his discharge, the Applicant traced the suit file containing the claim against him and the four other persons sued in this suit.

From the record the Applicant established that Plaintiff’s claim arose from an investment agreement that the Plaintiff claimed to have executed with the Defendants. It is indicated in the plaint that the Plaintiff invested US$5000 and was supposed to get US$14,930 at the end of a six-month period from the Defendants. The Applicant deposes that he never entered into any agreement with the Plaintiff nor has he ever borrowed money from the Plaintiff/Respondent. The Applicant only witnessed an agreement as a director of Messieurs Spot light Investments Ltd to whom the money had been advanced. US$5000 was lent to Messieurs Spot Light Investments Ltd and the Plaintiff has no claim against him. Secondly the plaint discloses that the Respondent was issued a cheque upon which she brought her action against Messieurs Spot Light investments Ltd but the Applicant never issued any cheque to the Plaintiff/Respondent, the basis of the summary suit. The Plaintiff is well known to the Applicant but ensured that summons were served and advertised in the Monitor Newspaper. Moreover the Plaintiff knows the Applicant's home. The Applicant neither read the monitor newspaper containing the summons nor was he aware of any suit until the time of his arrest. On the basis of information from his Counsel the Applicant also deposes that the agreement which forms the basis of the suit made provision for interest whereas the Plaintiff does not have a money lender's licence and she is not entitled to any interest. Secondly the plaint includes interest which is not contractual. In the premises the Applicant deposes that he has a very good defence to the Plaintiff’s claim against him.

The Applicant is represented by Messieurs Mutabingwa and Company Advocates while the Respondent in the main suit has Messieurs Sekabanja and Company Advocates as Counsel on record. They however never participated in these proceedings.

The evidence of service is that the application was served on Messieurs Sekabanja and Company Advocates on 2 December 2013 when it had been fixed for 22 February 2014 at 9:30 am which was a Saturday and had been erroneously fixed for that day. Apparently the hearing of the application did not take off and another date of 12th of March 2014 was fixed and the affidavit of service and acknowledgement on the hearing notice shows that it was served on Messieurs Sekabanja and Company Advocates on 24th of January 2014. Subsequently the application was fixed for the 21st of May 2014 and was again served on 20 March 2014, on Messieurs Sekabanja and Company Advocates. The application proceeded ex parte and the Applicant’s Counsel filed skeleton arguments in support thereof.

In support of the facts disclosed in the application the Applicants Counsel submitted that the Applicant was not indebted to the Respondent in the amount claimed or at all. This is because the Applicant is not a party to the agreement upon which the suit is founded. The agreement is between Messieurs Spot Light Investments Ltd and one Julie Otage. The Applicant is not a party to the agreement and the averments in the plaint in paragraph 5 (a) and (b) to the effect that the Plaintiff signed an investment agreement with the Applicant is false. Counsel relied on the case of Standard Chartered Bank of Uganda Ltd versus Ben Kavuya and Barclays Bank (U) Ltd [2006] HCB 134 where Honourable Justice Kasule applied the principle of company law that an incorporated company is a separate legal person from its shareholders and its liability cannot be enforced against individual shareholders or directors.

Counsel further argued that the summons was deliberately and intentionally not served on the Applicant. It was served in the Daily Monitor Newspaper and the Applicant got to learn about the suit when he was arrested in execution proceedings.

Thirdly the suit was wrongly brought as a summary suit because it includes a prayer for interest which is not contractual. Consequently the Plaintiffs claim in the summary suit is not a liquidated sum properly brought by summary procedure under Order 36 of the Civil Procedure Rules. Additionally Counsel argued that the agreement contravened section 2 of the Money Lenders Act cap 273 because the Respondent lent money and is claiming interest without a Money Lender’s licence. Furthermore the Applicants Counsel contended that the interest claimed is harsh and unconscionable and contravenes section 12 of the Money Lenders Act.

Counsel further submitted that it was in the interest of justice that the application is granted because the Applicant would suffer injustice to be forced to pay a debt that he does not owe to the Plaintiff plus costs of Uganda shillings 5,483,500/= with interest at the rate of 25% per annum from the date of judgment till payment in full on the principal claim of US$14,930.

Ruling

I have duly considered the facts, the laws cited and submissions of Counsel. The application is brought under Order 36 rule 11 of the Civil Procedure Rules. Order 36 rules 11 (supra) gives the court wide discretion and permits the filing of an omnibus application to set aside the decree or to stay execution or set aside execution and it provides as follows:

"After the decree the court may, if satisfied that the service of the summons was not effective, or for any other good cause, which shall be recorded, set aside the decree, and if necessary stay or set aside execution, and may give leave to the Defendant to appear to the summons and to defend the suit, if it seems reasonable to the court so to do, and on such terms as the court thinks fit."

The question of whether service of summons was effective would have been sufficient to set aside the proceedings. The Applicant avers that the Respondent knows him and where he lives. In those circumstances substituted service would have been inappropriate without attempts to serve the Applicant at his residence. In the affidavit of service in the main suit paragraph 2 thereof Batanda Moses, a court process server of the High Court, deposes that he received copies of court summons dated 16th of September 2012 from this court for service upon the Defendant by way of substituted service. The court order was issued on 16 September 2013. The order attached orders that the Respondent/Defendants are to be served by substituted service through advertising in the newspapers and affixing a copy of the summons on the notice board of the court. Time for service of summons was also extended in the same order. As to whether the service produced the desired effect or was effective is unnecessary for me to determine since Order 36 rule 11 gives the court wide discretionary powers to set aside the decree on other just grounds. It is sufficient to conclude that since Applicant’s residence is known to the Respondent, service ought to have been attempted on him personally first. In those circumstances there was no proper service of summons on the Applicant.

I have also considered the argument that the agreement in paragraph 5 of the plaint annexure "A" is an investment agreement between Spot Light Investments Ltd and Julie Otage, the Plaintiff in the main suit and not the Applicant. In paragraph 5 (a) of the plaint the Respondent avers as follows:

"On the 6th day of February 2012, the Plaintiff signed an investment Agreement with the Defendants where she agreed to invest US$5000 for six months. A copy of the Agreement is attached hereto and marked "A".

In paragraph 5 (b) the Plaintiff further avers as follows:

"Following the said agreement, the Plaintiff released US$5000 to the Defendants which was duly received and acknowledged. A copy of the receipt of payment is attached hereto and marked "B".

The affidavit in support of the summary suit deposed to by Julie Otage confirms on oath that the facts in the plaint are true. The agreement annexure "A" referred to in paragraph 5 of the plaint is between Messieurs Spot Light Investments Ltd and the Plaintiff. Spot Light investments limited is described as a private company business duly incorporated in the Republic of Uganda. The agreement itself is signed by certain directors of Spot Light investments Ltd whose names are not disclosed. Secondly the receipts referred to as annexure "B" was also issued by Spot Light investments Ltd. Thirdly a cheque issued to the Plaintiff for US$14,930 was issued by Spot Light Investments Ltd. The entire claim of US$14,930 is not only reflected in the attached cheque leaf annexure "C" to the plaint and paragraph 5 (c) thereof, issued by Spot Light investments Ltd but it is averred therein that the Defendants issued a post dated cheque in favour of the Plaintiff to secure the sum and which cheque bounced on presentation of the same.

The connection between Spot Light investments Ltd and the Applicant in this application are not clear from the documentation attached to the plaint.

There is a good cause disclosing a triable issue that the Applicant was sued in his individual capacity and he may be able to avoid liability on the ground that he has no agreement with the Respondent/Plaintiff. In other words without considering the merits of the Plaintiffs claim, the Applicant alleges that he is a stranger to the contract sued upon and ought not to have been sued. In the premises there is a good cause for setting aside the decree in order to permit the Applicant to file a defence and defend himself. Lastly there are several affidavits of service proving that the Respondent was served through her advocates Messieurs Sekabanja and Company Advocates who are Counsel on record as representing her in the summary suit. The application seeks to set aside a decree issued in the summary suit. She however did to file an affidavit in reply or opposition or indeed defend against the Applicant’s application.

In the premises the Applicant’s application succeeds. The decree in civil suit number 362 of 2013 in so far as affects Nuwagira Silver, the Applicant to this application is set aside. For emphasis the decree is set aside only as far as relates to the Applicant and remains valid and enforceable as against the other Defendants.

The decree having been set aside against the Applicant only, the warrant of arrest and execution of the decree are also set aside as against the Applicant only and the Applicant is granted unconditional leave to defend the suit. The Applicant is given 15 days from the date of this order to file a defence to the suit.

The costs of the application shall abide the outcome of the main suit.

Ruling delivered in open court this 6th day of June 2014

 

Christopher Madrama Izama

Judge

Ruling delivered in the presence of:

Maxim Mutabingwa counsel for the applicant

Applicant in court

Respondent absent

Charles Okuni: Court Clerk

 

Christopher Madrama Izama

Judge

6/6/2014