THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA
MISCELLANEOUS APPLICATION No.46 OF 2001
(Arising out of Civil Suit No. 64 of 2001)
JABIL LUSWATA t/a
JACO COMMERCIAL AGENCIES ………………………………APPLICANT/DEFENDANT
BEFORE: THE HONOURABLE MR. JUSTICE JAMES OGOOLA
Miscellaneous Application-application for leave of court –defend a summary suit-order 33 of the civil procedure rules-whether failure of notification of the dishonoured cheque was a triable issue.
Held-Court was not satisfied that the defendant had a triable issue since he had only one issue to which its merits and demerits had been discussed in the application and thus for leave to be granted would be a waste of resources.Application was denied.
This is an application for leave of court to enable Defendant to defend a summary suit under 0.33 of the Civil Procedure Rules (CPR). Both counsel agree that the application presents one and only one issue for Court’s determination, namely: whether Plaintiff’s failure to notify Defendant promptly, concerning the bouncing of Defendant’s cheques, has vitiated Plaintiff’s claim under the underlying contract between the two parties? Accordingly, both parties admit all the facts in the case. For Defendant, it is conceded that there was an agreement to transport certain goods, that Defendant issued cheques therefore, and that those cheques were dishonoured. For Plaintiff, it is conceded that upon the dishonouring of the cheques, Plaintiff did not notify Defendant promptly, but did so belatedly, after two months.
Learned counsel for Defendant submitted that under the Bills of Exchange Act (Cap. 76), when a bill has been dishonoured, notice must be given to endorser/drawer within 24 hours, otherwise the latter is discharged from the obligation — see sections 48 and 50 of Cap. 76, and Nanji Khodabhai v. Singh  EA 291. Counsel added that in the instant case, Plaintiff’s 2-month delay in notifying Defendant of the cheques’ dishonour did not fall within the circumstances permitted for delay under section 50 of Cap.76. In short, Counsel concluded, Defendant has raised a triable issue, to be adjudicated upon in the context of the application for leave to defend. For his part, learned counsel for Plaintiff submitted that the requirement for notice can be dispensed with under section 50 (2) (c) (iv) of Cap. 76, where the drawee Bank “is under no obligation to pay the bill”. Counsel contended that in the instant case, drawee Bank endorsed on all the cheques the words “Not arranged for”, by which it meant that it was under no obligation to pay those cheques. Moreover, added counsel, the cheques were merely the medium of payment, completely outside the antecedent transaction (i.e. transport of goods). Only if Plaintiff was suing on the dishonoured cheques themselves, would sections 48, 49 and 50 of Cap. 76 be invoked. In other words, counsel emphasized, these provisions of Cap. 76 apply only to claims arising out of the Bills of Exchange Act. They do not overflow into other jurisdictions — such as contract, tort, etc.
Given the single issue raised by this application, Court can be very brief in disposing of this matter. It is quite evident that this application (and indeed the underlying suit) stands or falls on the determination of the legal issue of whether or not the provisions of the Bills of Exchange Act are dispositive of the underlying contract (for transportation of goods) that was entered into between the parties? When the parties entered into that contract, their expectations were that upon performance of the contract (i.e. transportation of Defendant’s goods), Plaintiff would be entitled to payment. As matters have turned out, Plaintiff did indeed ship Defendant’s goods. Indeed, in his supporting affidavit, dated 9/02/2001, Mr. Luswata (the Defendant) depones as follows:
2. That the suit has been filed against me by M/s Emirates for the sum of US $14,175.20 on cheques that were dishonoured on presentation for payment.
3. That notice of the said dishonour was not communicated to me in time to enable me make good the indebtedness.
4. That I issued four cheques in payment of the consignments to honour the air way bills annexed hereto ………..which indicate that the shipments were duly paid for”.
From the above, it is equally clear that Defendant considers himself absolved from his obligation to effect payment under the underlying contract, by reason of having issued the four cheques in question. He expressly concedes that the cheques were dishonoured upon presentation for payment. Nonetheless, he avers that Plaintiff’s delay in notifying him of the dishonoured cheques discharged him from his obligation to pay on the contract.
I cannot agree. To succumb to these technical gymnastics of the Defendant would be to do untold violence to the very essence of contractual obligations. The ancient and venerable principle: pacta sunt servanda requires those entering into contracts to honour their obligations and to be bound in “enslavement” of them. For this Court to blithely agree to the tantalising arguments of learned counsel for the Defendant, would be to make absolute nonsense of the sanctity of contractual obligations. Reduced to its barest minimum, counsel’s argument is tantamount to: “Yes, I made an effort to pay the Plaintiff under our mutual contract. That effort did not succeed. Plaintiff delayed to tell me about it. Now I am absolved from any obligation to pay him”.
Two considerations come to Court’s mind at this juncture. First, and foremost, can Defendant be allowed — nay assisted by Court — to seek refuge under the technical morass of the Bills of Exchange Act? Court must assume that when he issued those four cheques, Defendant intended that the cheques would be fully honoured. To assume otherwise would be to cast criminal aspersions on the Defendant — in as much as the case of dishonoured cheques is a serious crime under our law (section 364 of the Penal Code). The cheques were not honoured. Thus, Defendants’ intentions to effect the payment to Plaintiff were not executed/implemented. More importantly, Defendant’s intentions were not implemented, precisely because of his own failure to make the necessary prior arrangements for the drawee Bank to be able to honour those cheques. In this regard, it is to be recalled that the Bank endorsed each and every one of these cheques with the statement: “Not arranged for”. In short, Defendant issued the cheques with all the intentions to pay, but without making necessary arrangements with which to effect the payment. How can this Court — which is established to buttress the integrity of commercial transactions — possibly condone Defendant’s attempt to hide from his clear contractual obligation? That question is even more pertinent, given that the, particular refuge now sought by Defendant is one tainted by serious criminal repercussions (see. section 364 of the Penal Code Act).
Second, Court is not at all persuaded that the Bills of Exchange Act is pertinent to the issue at hand. Plaintiff’s cause of action is clearly grounded in contract — that is to say the contract for the shipment of Defendant’s goods. The plaint is extremely clear and unambiguous about this point. It states as follows:
“3. The plaintiff’s claim against the defendant is for a total sum of US$n14,175.20... arising out of an agreement between the plaintiff and defendant for the transportation of fresh fruits and vegetables from Entebbe to London and a promise by the defendant to make payments for the said shipment by way of cheques dated on the said dates of shipment.”
Paragraph 4 of the plaint elaborates on the mode of payment promised by the Defendant, namely:
“(e) That the defendant issued cheques in respect of each consignment to the plaintiff as payments for the shipments [of 5th 7th 14th and 17th April] that were later dishonoured.
It is quite clear from the above, and Court is fully satisfied, that Plaintiff’s cause of action is based on the parties’ contract of shipment of fruits and vegetables — and not on the cheques as such. It is made abundantly clear in the plaint that the cheques were simply the mode and medium for effecting payments under the contract — but the cause of action is not at all grounded on those cheques. The subject matter of Plaintiff’s suit is not the dishonoured cheques, but the non-performance of Defendant’s contractual obligation to pay. Accordingly, the applicable law to the underlying contract must be the ordinary law of contract — and not the law governing cheques and bills of exchange.
As stated earlier, Defendant concedes to all the facts of Plaintiff’s case. In particular, Defendant concedes to the amount of Plaintiff’s claim of $14,175.20, arising out of the parties’ contract of transportation of goods.
Defendant further concedes that the cheques that he issued in an effort to repay Plaintiff’s above claim were dishonoured by the drawee bank. It is quite clear, therefore, that Plaintiffs claim against Defendant remains unpaid; and Defendant expressly concedes to that fact. Pursuant to 0.33, r.6 of the CPR, Court must enter judgment for the Plaintiff — in as much as Defendant admits that claim. That would have effectively disposed of this case. However, Defendant has raised the ingenious argument to the effect that Plaintiff’s failure to promptly notifying the Defendant concerning the dishonour of his cheques is a triable issue. In the above paragraphs of this judgment, I have dealt, exhaustively, with the merits of Defendant’s above argument. However, that argument raises yet another, more technical, dimension — namely, whether Court should at this stage grant Defendant’s application on the ground that there is a triable issue. In that event, Court would then reserve its judgment, pending hearing the merits of the argument. I agree entirely that in the ordinary cause of events, a Defendant’s argument of a triable issue normally requires Court to reserve its judgment of the merits of the argument. In the instant case, however, I decline to do so, on the following grounds:
I am not at all satisfied that Defendant has raised a triable issue. First, the legal argument raised by Defendant is tainted by a serious criminal element — in as much as issuance of a cheque that is subsequently dishonoured constitutes a serious offence under section 364 of the Penal Code. To that extent, this Court cannot condone an illegality, under the guise of a triable issue.
(2) Plaintiffs cause of action is grounded in breach of contract — not in dishonoured cheques. Cap 76 is inapplicable to the present suit.
(3) Even if Defendant’s argument were held to be a triable issue, and Defendant was therefore allowed an opportunity to argue his case on the merits, he would argue one and only one single issue (i.e. delayed notification concerning his dishonoured cheques) — since the parties have agreed all other issues of fact and law. In the event, Defendant’s arguments on the merits would be exactly identical to the arguments made in the present application. In the Court’s view, that would be a complete waste of time and resources to argue the same point twice.
(4) In novel matters of this kind, this Court has ample discretion under section 101 of the Civil Procedure Act and section 35 of the Judicature Statute, to dispose of the particular point at this stage — rather than reserve it for yet another stage of hearings on the merits. [see also 0.13 r 2 CPR].
In light of all the above, the application for leave to defend is denied.
Pursuant to the summary procedure of 0.33, r.3 of the CPR, Defendant’s failure or inability to defend, entitles Plaintiff to a decree for the amount of the claim. Accordingly, judgment is hereby entered for the Plaintiff:
(a) in the amount of $14,175.20 (or its equivalent in Uganda shillings);
(b) costs of this suit;
(c) interest on the decretal amount at the Court rate from the date of this judgment, until payment in full.
DELIVERED IN OPEN COURT, BEFORE:
Ebert Byenkya, Esq — Counsel for the Respondent/Plaintiff
Gilbert Nuwagaba, Esq — Counsel for the Applicant/Defendant
J.M. Egetu — Court Clerk