Court name
Commercial Court of Uganda
Judgment date
26 May 2015

Uganda National Roads Authority v Vivo Energy Uganda Ltd (Miscellaneous Application-2014/209) [2015] UGCommC 126 (26 May 2015);

Cite this case
[2015] UGCommC 126
Coram
Kainamura, J

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

[COMMERCIAL DIVISION]

MISCELLANEOUS APPLICATION No. 209 OF 2014

[ARISING OUT OF CIVIL SUIT NO. 184 OF 2014]

UGANDA NATIONAL ROADS AUTHORITY ::::::::::::::::::::::::::::::::::::::: APPLICANT

VERSUS

VIVO ENERGY UGANDA LIMITED :::::::::::::::::::::::::::::::::::::::::::::::: RESPONDENT

BEFORE HON. MR. JUSTICE B. KAINAMURA

RULING

This applicant applied to court by Notice of Motion under Order 36 rule 2 of the CPR for unconditional leave to appear and defend Civil Suit No. 184 of 2014 and for costs. The ground of the application is that there is a verification exercise pending and as such, there is no sum due to the respondent from the applicant until the reconciliation of accounts is completed.

The application was supported by an affidavit deponed by John Bosco Ssejemba the Administration Officer of the applicant who averred that:-

The applicant entered into a contract with the respondent wherein the applicant was permitted to obtain fuel from the respondent on credit using fuel cards and pay later. The applicant received invoices in March 2013 which were full of discrepancies and are the subject of the suit. A joint verification exercise was conducted by the parties which revealed that for the period of July 2012 to May 2013 the applicant had paid over UGX 1,595,405,485/=. There is evidence of suspect transactions appearing on the respondent’s transactions statements during that period. The matter is under review by the criminal investigation and intelligence of police as well as Internal Security Organisation by virtue of fact that the applicant is a public body. The verification process is still underway because it involves many players who include the staff at the headquarters and numerous substations. The application raises triable issues of fact and law that merit determination after a full consideration of evidence of both parties. Additionally, the applicant has a complete and total defence to the respondent’s claim in the suit. Finally that it is in the interest of justice that unconditional leave to appear and defend Civil Suit No. 184 of 2014 be granted. 

In an affidavit in reply, Emmanuel Wamala the Card Sales Manager of the respondents apposed the application stating that the applicant consumed fuel using an agreed fuel card and a driver pin system by authorized persons or those acting on the applicant’s behalf. He added that the applicant consumed fuel and fuel products valued at UGX 3,520,229,452/= which was invoiced and stands due to date. He contended that the applicant refused to pay the amounts outstanding without any lawful justifiable reason. He stated that there was no independent verification carried out and the allegation of overpayment or over invoicing is used as a pretext not to pay the respondent the money that is due.

In reply to the affidavit in reply, Mr. John Bosco Ssejemba, the Administration Officer of the applicant deposed that the fuel supply process was marred with grave irregularities and involved fraudulent dealings on the part of the respondent which resulted into invoicing for fuel that had not been supplied. He stated that the verification exercise is still ongoing and the amounts alleged to be owing have not yet been ascertained nor are the supplies consumed. He stated that the applicant has been dealing with the respondent since 2008 and has been paying. He added that due to the ongoing verification process the applicant has halted payment.

Counsel for the applicant submitted that the respondent filed a summary suit to recover UGX 3,520,229,452/= interest at a rate of 25% and general damages. He stated that the applicant fully paid for the fuel it consumed and therefore does not owe the respondents any money. He added that the law on application for leave to appear and defend is governed by Order 36 Rule 3(1) and 4 of the CPR. He stated that to fall under the order the applicant must have a good defence which courts have held to mean that the applicant has a triable issue of fact or law (see Maluku Interglobal Trade Agency Ltd Vs Bank of Uganda [1985] HCB 65). He stated that this application contains both issues of fact and law which cannot be resolved without being put to trial for parties to adduce evidence. He raised a point of law contending that an application for summary procedure cannot stand against a government agency such as the applicant. According to Regulation 17(2) of the Government Proceedings Regulations, Order 36 CPR shall not apply in the case of civil proceedings against government. He therefore prayed that H.C.S.S 184 of 2014 be dismissed since the applicant is a scheduled corporation and therefore part of government (see Heritage Oil & Gas Vs Commissioner General H.C.C.A 14 of 2011).

Counsel pointed out the facts in disagreement stating that in the affidavit in rejoinder there were discrepancies in relation to the use of fuel cards multiple times in different locations by the same person at the same time. He stated that the test as to whether court should grant leave is that it ought to be shown that there is a dispute as to the facts, (see Kotetcha Vs Mohammed [2002] 1 EA 112). He added that there was fraud by the respondents who claimed supplies of fuel that was never consumed by the applicant. He cited the case of Niko Insurance Vs Attorney General H.C.M.A 389 of 2012 where it was held that the applicant should not be shut out from arguing its case since fraud can only be established after a trial. He prayed that leave be granted to the applicant to appear and defend. Counsel stated that regarding interest of 25% per annum prayed for by the respondent, the interest sought had never been agreed upon by the parties. He cited the case of Haji Arjabu Kasule Vs F.T Kawesa [1957] EA 611 where it was held that unless it is based on an agreement for interest in the document sued on, or on a statute, interest cannot be claimed in a suit under Order 33 (now 36). In regard to interest as prayed for by the respondent, Counsel submitted that Order 36 can only be confined to the liquidated demand. He cited the case of Uganda Transport Co. Ltd Vs Count De la Pasture (1954) EACA 163 at 168 where it was held that the word only under the rule meant that anything added to the liquidated demand would not come within the claims as defined. Counsel further stated that general damages cannot be prayed for in summary procedure and ought to be discarded. He concluded by praying that the applicant be granted unconditional leave to appear and defend H.C.C.S 184 of 2014.

Counsel for the respondent submitted that the applicant and the respondent executed a corporate Fuel Card Application Form and Contract Agreement on 17th November 2008 and 14th January 2009. They agreed that the respondent would supply fuel and fuel products to the applicant through the use of fuel cards. He stated that invoices were made on a monthly basis and settlement was expected. He submitted that for the months of March, April, May and June 2013, invoices totaling UGX 3,520,229,452/= were not paid and are now subject of the claim in the suit. He summarized the law on leave to appear and defend as follows:-

The applicant must disclose bonafide tiable issues (Muluku Interglobal Agency Ltd Vs Bank of Uganda).

There should be a plausible defence (Abubaker Kato Kasule Vs Tomson Muhwezi [1992-93] H C B 12).

Where court is in doubt whether the defence is made in good faith, the court may order the defendant to deposit money in court before leave is granted (Milter Investments Limited Vs East African Portland Cement Agency Ltd MA 336 of 2012).

Regarding the point of law raised as to whether this application can be brought under order 36 of the CPR, Counsel submitted that while he agrees with the fact that there is such a legal position in the Government Proceeding Regulations, it is not correct in law because the 1995 Constitution gives all persons equality under the law in all spheres. He also added that it is not logical that while the government can bring suits under the same procedure, proceedings cannot be instituted against it under the same procedure. He cited the case of Attorney General Vs Osotraco Ltd CACA No. 32 of 2002, where the Court of Appeal held that the unjustified discrimination between the state and the person is no longer acceptable under the 1995 Constitution.  He cited the case of Kabandize & 20 others Vs KCCA No.28 of 2011 where it was held that in view of Article 21(1) of the Constitution, a law cannot impose a condition on one party and exempt the other from the same and still be in conformity with Article 21(1). He further submitted that the applicant is a body that was established by separate legislation and has capacity to sue and be sued in its own right. He therefore prayed that the objection be dismissed. As to the facts, Counsel argued that the applicant consumed that respondent’s products but refuses to pay for them without just cause. He added that there is no verification exercise to be completed because there was never any such exercise being undertaken in the first place. Regarding the issue of fraud raised, counsel insisted that it was an after thought and does not represent a genuine position meriting consideration by court. He stated that the case of Niko Insurance (supra) the trial Judge held that taking into account a belated allegation of fraud, conditional leave will be granted. He added that there is no evidence of fraud. On the issue of interest Counsel stated that the respondent had reserved the right to charge interest on the amounts that remain outstanding after the expiry of the agreed date at the going commercial bank rate for overdraft facilities pro rated. He added that this interest was agreed by the parties and therefore payable. Addressing the issue of general damages, Counsel submitted that general damages are discretionary and there is no justification as to why the respondent should not be awarded general damages.

In conclusion, Counsel submitted that the conditions that need to be considered before leave to appear and defend is granted have not been met. He therefore prayed that the judgment be entered in the respondent’s favour and the application be dismissed with costs or in the alternative conditional leave be granted subject to a deposit of monies in court.

In rejoinder, Counsel for the applicant on the point of law reiterated that the respondent cannot bring a summary suit against the applicant. He added that the High Court cannot delve into issues of interpreting the Constitution. He stated that it is the preserve of the Constitutional Court according to Article 137(1) of the Constitution. He stated that since Regulation 17(1) of the Government Proceedings Act had not been declared unconstitutional by the Constitutional Court, the court is bound by the regulation and as such should dismiss H.C.C.S 184 of 2014. Regarding the points of fact, Counsel submitted that there is a dispute as to the facts and the applicant should be granted unconditional leave to defend. He cited the case of Kotecha Vs Mohammed (supra) in which court stated that court is mandated to grant leave to appear and defend in the event that there is a dispute as to the facts. He also cited the case of Photo Focus (U) vs. Group Four Security Ltd C/A Civil Appeal No. 30 of 2000 (unreported), where the Court of Appeal held that a denial of indebtness was a defence that was good enough for obtaining leave to appear and defend a suit under a summary procedure. He submitted that the denial of indebtness is enough for court to grant unconditional leave to appear and defend.

Regarding fraud, Counsel submitted that fraud can best be determined in an open trial and not with affidavit evidence in a summary suit.

Counsel submitted that regarding interest, the interest rate being claimed was not a liquidated demand and therefore could not be upheld.

Counsel also maintained that general damages are not a liquidated claim and as such cannot be entertained under a summary suit.

He cited the case of Hasmani Vs Banque du Congo Belge( 1938)5 E.A.C.A at 89, where Sheridan CJ held that if there is one triable issue contained in the affidavit in support of the application, then the defendant is entitled to leave to appear and defend unconditionally.

RULING

I have read through the pleadings of the parties and submissions of both Counsel. The plaintiff’s case is for recovery of UGX 3,520,229,452/= being money owing under a contract of supply of fuel and fuel products. Both parties entered into a Shell Uganda Limited Corporate fuel card application and Contract Agreement wherein the applicant was permitted to obtain fuel on credit using fuel cards and pay later.

The plaintiff/respondent claims that the applicant consumed fuel and fuel products for the months of December 2012, March, April, May and June 2013 for the total amount of UGX 3,520,229,452/= which has not been paid. The plaintiff/respondent brought a summary suit against the defendant/applicant for which the applicant now seeks leave to appear and defend.

Counsel for the applicant raised a point of law in regard to Regulation 17(2) of the Government Proceedings Regulations which bars bringing suits against the government by summary procedure under Order 36 of the CPR and prayed that the suit be dismissed. In reply, Counsel for the respondent argued that the Constitution 1995 in Article 21 provides for equality of all persons. Counsel for the applicant also submitted that the Court of appeal is the proper forum to address this issue.

I agree with the role of the Constitutional Court as submitted by Counsel for the applicant. However, the matter before this court does not need reference to the Constitutional Court for determination.

The Court of Appeal has expressed its stand regarding the applicability of some provisions in the Government Proceedings Act.

In the case of Attorney General Vs Osotraco Ltd Civil Appeal No. 32 of 2002, the Court of Appeal had this to say:

“................. since the 1995 Constitution, the rights, powers and immunities of the State are not Immutable anymore. Article 20(2) enjoins everybody including Government agencies to protect and respect individual fundamental human rights. The Constitution has primacy over all other laws and the historic common law doctrine restricting the liability of the state should not be allowed to stand in the way of constitutional protection of fundamental rights.”   

I am therefore in agreement with Counsel for the respondents that unjustified discrimination between the state and an individual is no longer tenable in view of the provisions of Chapter Four of the Constitution 1995.

For the above reason the point of law raised by Counsel for the respondents fails.  

I now proceed to consider the other grounds of the application.

Application for leave to appear and defend is provided for under Order 36 Rule 4 of the CPR. The conditions that ought to first be met before leave is granted have long been settled. In Kotecha Vs Mohammed [2002]1 EA 112, court held that,

“Where a suit is brought under summary procedure on a specially endorsed plaint, the defendant is granted leave to appear and defend if he was able to show that he had a good defence on merit, or that there is a difficult point of law involved; or a dispute as to the facts which ought to be tried; or real dispute as to the amount claimed which requires taking into account to determine; or any other circumstances showing reasonable grounds of bonafide defence........”

In the case of Maluku Interglobal Trade Ltd Vs Bank of Uganda [1995] HCB 65, court held that;

“Before leave to appear and defend is granted the defendant must show by affidavit or otherwise that there is a bonafide triable issue of fact or law........the defendant is not bound to show a good defence on the merits but satisfy court that there is an issue in dispute which ought to be tried........”

It is the respondent’s assertion that the applicant refused to pay for the fuel and the fuel products it consumed and therefore has no plausible defence. In the affidavit by Emmanuel Wamala in opposition of the application, it was stated that the applicant consumed fuel using an agreed fuel card and driver pin system by authorised persons or those acting on the applicant’s behalf. He added that all the supplies were invoiced which makes clear the outstanding balance.

On the other hand, the applicant, through John B. Ssjemba in the affidavit in reply, averred that the process of supplying fuel was marred by grave irregularities and involved fraudulent dealings on the part of the respondent which resulted in the respondent involving for fuel it had not supplied.   

The facts as set out primarily show that there is a dispute in the facts which is a substantial condition to necessitate the grant of leave to appear and defend. Secondly, the applicant firmly denies being indebted to the respondent which in itself is a condition enough to guarantee the grant of leave to appear and defend. In the case of Photo Focus (U) Vs Group Four Security Ltd (supra) the court of Appeal held that a denial of indebtness was a defence that was good enough for obtaining leave to appear and defend a suit under a summary suit.

The issues of interest, fraud, and damages which are raised in the affidavits in support equally requires a full trial.

I therefore hold that the application merits the grant of unconditional leave to appear and defend the suit.

I so hold.

The applicant shall file a written statement of defence within ten days from the date of this ruling.

Costs of the application shall be in the cause.

 

B. Kainamura

Judge

26.05.2015