Court name
Commercial Court of Uganda
Judgment date
26 July 2017

Oburu & Anor v Equity Bank (U) Ltd (Miscellaneous Application-2015/809) [2017] UGCommC 146 (26 July 2017);

Cite this case
[2017] UGCommC 146
Short summary:

CL, Affidavit, Service of Process, Default Judgment

                                        

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

[COMMERCIAL DIVISION]

MISCELLANEOUS APPLICATION No. 809 of 2015

(Arising Out Of Civil Suit No. 301 of 2014)

  1. OBURU AMOS
  2. MUSIME LOYCE  :::::::::::::::::::::::::::::::::::  APPLICANTS/ DEFENDANTS

                                                             VERSUS

      EQUITY BANK (U) LTD ::::::::::::::::::::::::::::::::::: RESPONDENT/PLAINTIFF

BEFORE:   HON. MR.  JUSTICE B. KAINAMURA

RULING

The applicants brought this application by Notice of Motion under Order 9 rule 12, Order 52 rule 1 & 3 of the CPR and Section 98 of the CPA for orders that the exparte judgment entered in favour of the respondent/plaintiff in Civil Sui No. 301 of 2014 against the applicants be set aside for good cause, the applicants be granted leave to appear and defend the suit and costs of the application be provided for.

The grounds of the application are contained in a joint affidavit in support of the application deposed by Oburu Amos and Musiime Loyce who stated that they were not served with summons and therefore were unable to file an application for leave to appear and defend, the applicants are not indebted to the respondent as alleged in the plaint and that the applicants have a plausible defence which includes that the respondent’s pleadings disclose no cause of action.

Arocha Joseph deponed an affidavit in reply in which he deposed that he was assigned to follow up all recovery cases which included Civil Suit No. 390 of 2014 , the respondent’s clerk carried out due diligence to effect personal service of summons but failed, the clerk swore an affidavit for substituted service and included the fact that he tried contacting the applicants but the first applicant did not pick the phone calls and the second one’s numbers were not available, the summons were published in the Observer Newspaper of the 11th-12th  June 2014 on page 27 and an affidavit of service filed in Court on 23rd June 2014, the applicants failed to apply for leave to appear and defend in the prescribed time, the respondent failed to realise the mortgaged property comprised in Kibuga Plot 168 Plot 29 Kanjokya Street because the proprietor created and sold various interests out of the land, the applicants have not shown any plausible defence that would warrant setting aside of the proceedings, the applicants have not in any way contested the debt outstanding, due and owing to the principle debtor and the guarantors, the applicants have admitted in their affidavits to have guaranteed the credit facility advanced to the 1st defendant in the main suit and have not in their application challenged the guarantee which should be enforced by court and finally that the decree should not be set aside especially where the debt and guarantee are not contested by the applicants.

Applicants’ submissions

Counsel for the applicants raised two issues which were;

Whether the respondent’s affidavit in reply was filed within time

Whether the exparte judgment in Civil Suit No. 301 of 2014 should be set aside and the applicants be granted leave to appear and defend the suit

Regarding issue one; whether the respondent’s affidavit in reply was filed within time, Counsel submitted that the law on filing affidavits in reply was discussed in the case of Springwood Capital Partners Ltd Vs Twed Consulting Company Limited Misc App. No. 746 of 2014 wherein reference was made to the case of Stop & See (u) Ltd Vs Tropical Bank (U) Ltd HCMA No.333 of 2010 in which Court held that a reply or defence to an application must be filed within 15 days of service of the application and where out of time, the party out of time must seek leave. Counsel pointed out that Counsel for the respondent filed and served their reply on 22nd January 2016 which was two and a half months outside the 15 days prescribed under the CPR. Counsel argued that opposite Counsel did not seek leave to file the reply within the prescribed time and therefore prayed that the court finds that the reply was filed out of time and the affidavit be struck out.

Counsel further submitted that if this court upholds the first objection regarding time, the court should set aside the judgment and grant the applicants leave to appear and defend the suit. Counsel submitted that the law grants Court unfettered discretion to set aside or vary exparte judgment under Order 9 rule 12 of the CPR. Counsel argued that the respondent did not ensure the effective service of summons on them. Counsel cited the case of Remco Ltd Vs Miistray Jadbra Ltd (2002) (1) EA pg 233 where court held that if there is improper service of summons to enter appearance, the resultant exparte judgment is irregular and must be set aside by court. Counsel argued that the respondent did not exhaust all possible means to find the applicants and serve them in person like seeking their address from their own records or from AM (U) Ltd the debtor before applying for substituted service. Making reference to the case of Geoffrey Gatete Vs William Kyobe SCCA No. 7 of 2005, Counsel submitted that though service was legal, it was not effective as the Newspaper used for the substituted service (The Observer) is not in wide circulation in Uganda. Counsel therefore contended that as the service of summons was not effective and proper; the resultant exparte judgment was irregular.

Counsel argued further that regarding having a plausible defence which was defined in Remco Ltd Vs Miistray (supra) to mean bonafide triable issues in the suit, the applicants have a plausible defence to the suit and it would be in the interest of justice if the suit is heard on its merits.

That the grounds of the application are set out in the affidavit in support of the application.  Counsel for the applicant argued that the applicants were not personally served and the newspaper used for substituted service is not of wide circulation

Counsel submitted that the suit discloses no cause of action against the applicants and this matter goes to the root of the claim. Counsel thus prayed that the applicants be granted leave to appear and defend the suit and also prayed that the affidavit in reply of the application be struck out and costs be awarded to the applicants.

Respondent’s submissions

In response to the first issue, Counsel for the respondent prayed for leave to file the affidavit in reply out of time pursuant to Order 51 rule 6 of the CPR and the affidavit thereof be validated. In support of this, Counsel relied on the case of Elias Waziri & 2 others Vs Opportunity Bank (U) Ltd H.C.M.A No. 599 of 2013 where court overruled the preliminary objection to the affidavit in reply and extended the time at this stage in the interest of substantive justice pursuant to Article 126 (2) (e) of the Constitution

Addressing the issue of setting aside the exparte judgment, Counsel submitted that Counsel for the applicants inappropriately cited Order 9 rule 12 of the CPR as being the law applicable yet the law applicable is Order 33 rule 11 of the CPR which provides for setting aside a decree where court is satisfied that service of summons was not effective.  Counsel argued that the facts in Gatete (supra) are distinguishable from the facts of this case due to the fact that the court was dealing with service of summons on a partnership while in this case court is dealing with service on individuals. Counsel added that in the case of David Ssesanga Vs Greenland Bank Ltd H.C.M.A No. 406 of 2010, court held that substituted service can be rightly ordered and can produce the desired results when the defendant is within jurisdiction.  Counsel submitted that the Observer was a newspaper of wide circulation where the summons was advertised before the default judgment and decree were passed. Counsel further argued that according to the case of Nganda Kaweesi Vs R.L Jain Misc App. No. 512 of 2008 Court held that there is no rule that the creditor must avail himself of the other securities which the debtor may have himself given before turning to the guarantor. Counsel submitted that there is unrebutted evidence that the Bank failed to realize the mortgage because it was encumbered which gives the Bank the right to demand for the payment of the debt due and owing from the applicants.

Decision of the Court

This application was brought under Order 9 rule 12 of the CPR. The facts are that a default judgment was entered against the applicants for Ugx 110,872,000/= as guarantors for a credit facility of Ugx 100,000,000/= offered to AM (U) Ltd. A decree was extracted and a bill of costs filed. The applicants filed this application seeking to set aside the judgment and decree. I have critically analysed the submissions of both Counsel. I will address the issues of procedure that came up in submissions first.

Counsel for the applicant raised an objection to the effect that the affidavit in reply was filed out of time and the same should be struck out.  Counsel for the applicants argued that the reply was filed two and a half months out of time.

Order 12 rule 3(2) of the CPR provides that;

“Service of an interlocutory application to the opposite party shall be made within fifteen days from the filing of the application, and a reply to the application by the opposite party shall be filed within fifteen days from the date of service of the application and be served on the applicant fifteen days from the date of filing of the reply.”

I agree with Counsel for the applicants that the reply was filed out of time. However Counsel for the respondent prayed in his submissions that court extends the time and considers the reply.

Counsel for the respondent relied on the case of Elias Waziri & 2 Others (supra) in which court faced with a similar case of a reply filed out of time overruled the objection.  I agree with the holding in Waziri’s case that;

“While it is true that Order 51 rule 6 of the CPR gives this court power to enlarge the time for doing any act or taking any proceedings under the Rules, it is my considered view that the application should have been made before the affidavit was filed. Be as it may, i will exercise my discretion and validate the affidavit in reply by extending the time at this stage for the interest of substantive justice to be served and it is accordingly done. Consequently, the preliminary objection is overruled.”

Accordingly i will allow the affidavit in reply at this stage. I now move on to address the second objection.

The applicant’s Counsel proceeded under Order 9 rule 12 of the CPR. Counsel for the respondent objected to this submitting that Order 33 rule 11 of the CPR was the proper procedure. This was an error too for it is under Order 36 rule 11 of the CPR. In the case of Kingstone Enterprises Ltd & 2 others Vs Metropolitan Properties Ltd HCT-CC-CS-129-2011(arising from HCT-CC-CS-129-2011) a similar question on procedure arose and court had this to say;

“ Be that as it may, looking at the orders sought for in this application, there is no doubt that the applicant intended to set aside the decree, stay execution and seek leave to appear and defend the suit as provided for by Order 36 rule 11 of the CPR . While I agree that the procedure adopted by bringing this application Under Order 9 rule 27 and 29 of the CPR was a mistake on the part of the applicant’s Counsel, i do not find that it is fatal.....see Kinyanjui & Another Vs Thande & Another [1995-98] E.A 159....”

Further i will refer to the Supreme Court decision in Re Christine Namatovu Tebajjukira [1992-93] HCB 85 where court held that;

“The administration of justice should normally require that the substance of disputes should be investigated and decided on their merits and that lapses should not necessarily debar a litigant from the pursuit of his rights”

Accordingly, it is my considered opinion that the procedural error in this application is not fatal and the matter should be heard on its merits.

The grounds of the application are set out in the affidavit in support of the application. Counsel for the applicant argued that the applicants were not personally served and the newspaper used for substituted service is not of wide circulation. Further Counsel for the applicant argued that the respondent carried out no due diligence to serve the applicants. Counsel for the respondent argued that attempts were made to contact the applicants which the applicants did not deny. I however note that in the affidavit of service on record Richard Idella Jorem deposed that;

On the 10th day of June 2014 he received fresh summons after an application for substituted service vide Miscellaneous Application No. 389 of 2014 was made after several attempts to serve the defendant in the ordinary way had not been successful.”

However the affidavit is silent on which those several attempts were. I also do not think that trying the numbers alone was due diligence in itself to justify the quick application for substituted service as Counsel for the applicant argued.

Service of summons is provided for under Order 5 of the CPR specifically rule 10 which is to the effect that service wherever practicable shall be on the defendant in person or his agent.

The facts in this case are not proved to a place that justified the substituted service to lead to a default judgment.

Mulenga JSC (RIP) in Geoffrey Gatete and Angela Maria Nakigonya Vs William Kyobe S.C. C.A No. 7 of 2005 stated that the words “effective service” means having the desired effect of making the defendant aware of the summons.

The respondent placed the advertisement of service in the Observer Newspaper which the applicants argue is not of wide circulation.

In the Indian case of Arun Kumar Vs SMT Kamla Rani & Others S.B. Civil Writ Petition No. 3601/2007, (which though not building is persuasive) court with reference to the decisions of the Indian Supreme Court addressing the issue of substituted service in Newspapers stated that;

On the question of substituted service by way of publication in a local paper other than the one indicated by court, the Honourable Supreme Court held that if both the local dailies are widely circulated in the area the change of the name of the local daily from Dainik Bhaskar to Aacharan would not SBCWP No. 3601/2007 materially affect the service of notice by way of substituted service.’’

 Accordingly in my view the argument that the Observer was not a Newspaper of wide circulation is not a ground alone to grant this application. In my view the pertinent question to ask here is whether there was any due diligence done before the application for substituted service was made. Since I have found wanting the affidavit relied on to grant the application for substituted service I am inclined to grant this application.

Accordingly this application is granted. The exparte judgment entered in fevour of the respondent/plaintiff in Civil Suit No. 301 of 2014 against the applicants/defendants is set aside.

The applicants are granted leave to appear and defend the suit.

They should file a defence within 10 days of this ruling.

Costs will be in the cause

 

 

B. Kainamura

Judge

26.07.2017